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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 2)
Filed by the Registrant ý | ||
Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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ý | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
EMERGENCY MEDICAL SERVICES CORPORATION | ||||
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(1) | Title of each class of securities to which transaction applies: Class A common stock, par value $0.01 per share ("Class A common stock"), Class B common stock, par value $0.01 per share ("Class B common stock", and together with the Class A common stock, the "common stock"). |
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(2) | Aggregate number of securities to which transaction applies: 30,473,219 shares of Class A and Class B common stock, 1,395,028 options to purchase shares of Class A common stock, 293,004 restricted shares of Class A common stock, 90,343 restricted share units and 13,724,676 exchangeable limited partnership interests of Emergency Medical Services L.P. ("LP exchangeable units"). |
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(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): $64.00 per share. |
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(4) | Proposed maximum aggregate value of transaction: $2,912,474,228 |
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(5) | Total fee paid: $338,139 As of February 25, 2011, there were 30,420,991 shares of Class A common stock outstanding, 293,004 restricted shares of Class A common stock and 90,343 restricted share units, 52,228 shares of Class B common stock and 13,724,676 shares of Class B common stock issuable upon exchange of LP exchangeable units. The maximum aggregate value was determined based upon the sum of (A) 44,197,895 shares of common stock (which includes Class A common stock, Class B common stock, and Class B common stock issuable upon exchange of LP exchangeable units) multiplied by the $64.00 per share merger consideration; (B) 1,395,028 options to purchase shares of Class A common stock multiplied by $42.49 per share (which is the difference between the $64.00 per share merger consideration and the weighted average exercise price of $21.51 per share); and (C) $24,534,208, the amount expected to be paid to holders of restricted shares of common stock and restricted share units ((A), (B) and (C) together, the "Total Consideration"). The filing fee, calculated in accordance with Exchange Act Rule 0-11(c) and the Securities and Exchange Commission Fee Rate Advisory #5 for Fiscal Year 2011, was determined by multiplying the Total Consideration by .00011610. |
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Fee paid previously with preliminary materials. |
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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. |
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(1) |
Amount Previously Paid: |
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(2) | Form, Schedule or Registration Statement No.: |
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(3) | Filing Party: |
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(4) | Date Filed: |
PRELIMINARY COPYSUBJECT TO COMPLETION, DATED APRIL 18, 2011
6200 South Syracuse Way, Suite 200
Greenwood, Colorado 80111
April [ ], 2011
Dear Emergency Medical Services Corporation Stockholder:
We cordially invite you to attend the special meeting of stockholders of Emergency Medical Services Corporation, a Delaware corporation, which we refer to as the Company, at on , 2011, at a.m., local time.
At the special meeting, you will be asked to consider and vote upon a proposal to adopt an Agreement and Plan of Merger, dated as of February 13, 2011, which we refer to as the "merger agreement", by and among the Company, CDRT Acquisition Corporation, a Delaware corporation, which we refer to as Parent, and CDRT Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent, which we refer to as Merger Sub. Parent and Merger Sub were formed by Clayton, Dubilier & Rice Fund VIII, L.P., a Cayman Islands exempted partnership. Under the terms of the merger agreement, Merger Sub will be merged with and into the Company, which we refer to as the "merger", with the Company continuing as the surviving corporation.
If the merger is completed, each share of the Company's Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share (which we refer to collectively as common stock), other than as provided below, will be converted into the right to receive $64.00 in cash, without interest and less any applicable withholding taxes. We refer to this consideration per share of common stock to be paid in the merger as the "merger consideration". The following shares of Company common stock will not be converted into the right to receive the merger consideration in connection with the merger: (a) shares held by any of our stockholders who are entitled to and who properly exercise appraisal rights under the Delaware General Corporation Law, (b) treasury shares and (c) shares held by Parent or Merger Sub.
Our board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, has determined that the merger agreement is advisable, fair to and in the best interest of our stockholders, and recommends that you vote "FOR" the adoption of the merger agreement.
In considering the recommendation of the board of directors, you should be aware that some of the Company's directors and executive officers have interests in the merger that are different from, or in addition to, the interests of its stockholders generally.
Certain affiliates of Onex Corporation, a corporation existing under the laws of Canada (which we refer to as Onex, and which affiliates we collectively refer to as the Onex Affiliates), own all of the outstanding exchangeable limited partnership units of Emergency Medical Services L.P. (which we refer to as EMS LP), and hold approximately 81.5% of the total voting power of the Company's capital stock. The Onex Affiliates have entered into an agreement with Parent, Merger Sub, the Company, EMS LP, and Onex pursuant to which they have agreed to vote in favor of the adoption of the merger agreement.
The accompanying proxy statement provides you with detailed information about the proposed merger and the special meeting. We encourage you to read the entire proxy statement and the merger agreement carefully. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement. You may also obtain more information about the Company from documents we have filed with the U.S. Securities and Exchange Commission.
Whether or not you plan to attend the special meeting, we urge you to submit a proxy for your shares by completing, signing, dating and returning the enclosed proxy card as promptly as possible in the postage-paid envelope or submitting your proxy by telephone or the Internet prior to the special meeting. If your shares of common stock are held in "street name" by your broker, bank or other nominee, you should instruct your broker, bank or other nominee on how to vote your shares of common stock using the instructions provided by your broker, bank or other nominee. If you attend the special meeting, you may vote in person by ballot even if you have already submitted a proxy by proxy card, telephone or the Internet. Such vote by ballot will revoke any proxy you previously submitted. However, if you hold your shares through a broker, bank or other nominee, you must provide a legal proxy issued by such nominee in order to vote your shares in person at the special meeting.
Our board of directors appreciates your continuing support of the Company and urges you to support the merger.
Sincerely,
William
A. Sanger
Chairman, President and Chief Executive Officer
Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document or the accompanying proxy statement. Any representation to the contrary is a criminal offense.
The proxy statement is dated [ ], 2011 and is first being mailed to stockholders on or about [ ], 2011.
PRELIMINARY COPYSUBJECT TO COMPLETION, DATED APRIL 18, 2011
6200 South Syracuse Way, Suite 200
Greenwood, Colorado 80111
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON [ ], 2011
Dear Emergency Medical Services Corporation Stockholder:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Emergency Medical Services Corporation, a Delaware corporation, which we refer to as the Company, will be held on [ ], 2011 at [ ] a.m., local time, at [ ] to:
(1) consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of February 13, 2011, as it may be amended from time to time (which we refer to as the merger agreement), by and among the Company, CDRT Acquisition Corporation, a Delaware corporation (which we refer to as Parent), and CDRT Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (which we refer to as Merger Sub), attached as Annex A to the accompanying proxy statement; and
(2) approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement.
Only stockholders of record of our Class A common stock, par value $0.01 per share (which we refer to as Class A common stock), Class B common stock, par value $0.01 per share (which we refer to as Class B common stock, and together with the Class A common stock, as the common stock) and our Class B Special Voting Stock, par value $0.01 per share (which we refer to as the Class B special voting share), at the close of business on March 21, 2011 are entitled to notice of and to vote at the special meeting and at any and all adjournments or postponements thereof.
Only stockholders of record and their proxies are invited to attend the special meeting in person.
The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the voting power of the Company's outstanding common stock and the Class B special voting share, voting together as a single class of capital stock. Certain affiliates of Onex Corporation, a corporation existing under the laws of Canada (which we refer to as Onex, and which affiliates we collectively refer to as the Onex Affiliates), own all of the outstanding exchangeable limited partnership units of Emergency Medical Services L.P. (which we refer to as EMS LP), and hold approximately 81.5% of the total voting power of the Company's capital stock. The Onex Affiliates have entered into an agreement with Parent, Merger Sub, the Company, EMS LP, and Onex pursuant to which they have agreed to vote in favor of the adoption of the merger agreement.
Whether or not you plan to attend the special meeting, we urge you to submit a proxy for your shares by completing, signing, dating and returning the proxy card as promptly as possible in the postage-paid envelope or submitting your proxy by telephone or the Internet prior to the special meeting to ensure that your shares will be represented at the special meeting. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the adoption of the merger agreement and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. If you fail to return your proxy card or fail to submit your proxy by telephone or the Internet and do not vote in person at the special meeting, it will have the
same effect as a vote against the adoption of the merger agreement for purposes of the stockholder approval, but will have no effect for purposes of any vote regarding adjournment of the special meeting. If your shares of common stock are held in "street name" by your broker, bank or other nominee, you should instruct your broker, bank or other nominee on how to vote your shares of common stock using the instructions provided by your broker, bank or other nominee. Any stockholder attending the special meeting may vote in person by ballot even if he or she has already submitted a proxy by proxy card, telephone or the Internet. Such vote by ballot will revoke any proxy previously submitted. However, if you hold your shares through a bank or broker or other nominee, you must provide a legal proxy issued from such custodian in order to vote your shares in person at the special meeting.
Any stockholders of the Company who do not vote in favor of the adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares of our common stock in lieu of the per share merger consideration if the merger contemplated by the merger agreement is completed, but only if they submit a written demand for appraisal of their shares before the taking of the vote on the merger agreement at the special meeting and they comply with all requirements of the Delaware General Corporation Law for exercising appraisal rights, which are summarized in the accompanying proxy statement.
By Order of the Board of Directors, | ||
Todd G. Zimmerman Secretary |
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[ ], 2011 |
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK CERTIFICATES.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement and the documents to which we refer you in this proxy statement include statements based on estimates and assumptions that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. There are forward-looking statements throughout this proxy statement, including, under the headings "Summary Term Sheet", "Questions and Answers about the Merger and the Special Meeting", "The Merger", "The MergerOpinion of Goldman, Sachs & Co.", "The MergerCertain Effects of the Merger", "The MergerCertain Projections", "The MergerGovernmental and Regulatory Approvals", and "The MergerLitigation Related to the Merger", and in statements containing words such as "believes", "plans", "estimates", "anticipates", "intends", "continues", "contemplates", "expects", "may", "will", "could", "should" or "would" or other similar words or phrases. These statements reflect management's current views with respect to future events and are not guarantees of the underlying expected actions or our future performance and may involve risks and uncertainties that could cause our actual growth, results of operations, performance and prospects to materially differ from those expressed in, or implied by, these statements. These and other factors are discussed in the documents that are incorporated by reference in this proxy statement, including our annual report on Form 10-K for the fiscal year ended December 31, 2010, as amended. In addition to other factors and matters contained or incorporated in this document, these statements are subject to risks, uncertainties, and other factors, including, among others:
Many of the factors that will determine our future results are beyond our ability to control or predict. We cannot guarantee any future results, levels of activity, performance or achievements. In light of the significant uncertainties inherent in the forward-looking statements, readers should not place undue reliance on forward-looking statements, which speak only as of the date on which the statements were made and it should not be assumed that the statements remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.
You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent forward-looking statements that may be issued by us or persons acting on our behalf.
i
EMERGENCY MEDICAL SERVICES CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD [
], 2011
PROXY STATEMENT
This proxy statement contains information related to a special meeting of stockholders of Emergency Medical Services Corporation which will be held at [ ] a.m., local time, on [ ], 2011, at [ ] and any adjournments or postponements thereof, which we refer to as the special meeting. We are furnishing this proxy statement to stockholders of Emergency Medical Services Corporation as part of the solicitation of proxies by the Company's board of directors for use at the special meeting. This proxy statement is dated [ ], 2011 and is first being mailed to stockholders on or about [ ], 2011.
This Summary Term Sheet, together with the "Questions and Answers About the Merger and the Special Meeting", highlights selected information in this proxy statement and may not contain all of the information about the merger that is important to you. We encourage you to read carefully this entire proxy statement, its annexes and the documents we refer to or incorporate by reference in this proxy statement. Each item in this Summary Term Sheet includes a page reference directing you to a more complete description of that topic. See "Where You Can Find More Information" beginning on page 94. In this proxy statement, the terms "EMSC", the "Company", "we", "our" and "us" refer to Emergency Medical Services Corporation and its subsidiaries, unless the context requires otherwise. We refer to CDRT Acquisition Corporation as Parent, and CDRT Merger Sub, Inc. as Merger Sub. We refer to Clayton Dubilier & Rice Fund VIII, L.P., a Cayman Islands exempted limited partnership, as CD&R Fund VIII. We refer to Clayton, Dubilier & Rice, LLC, a Delaware limited liability company, as CD&R. We refer to Emergency Medical Services L.P., a Delaware limited partnership, as EMS LP. We refer to Onex Corporation, a corporation existing under the laws of Canada, as Onex, and to its affiliates that own all of the exchangeable limited partnership interests of EMS LP as the Onex Affiliates. When we refer to the merger agreement, we mean the Agreement and Plan of Merger, dated as of February 13, 2011, among Parent, Merger Sub and the Company.
The Parties to the Merger (page 19)
EMSC, a Delaware corporation headquartered in Greenwood Village, Colorado, is a leading provider of emergency medical services in the United States. EMSC operates two business segments: American Medical Response, Inc., which we refer to as AMR, the Company's medical transportation services segment, and EmCare Holdings Inc., which we refer to as EmCare, the Company's outsourced facility-based physician services segment. AMR is the leading provider of ambulance services in the United States. EmCare is a leading provider of outsourced physician services to healthcare facilities. In 2010, EMSC provided services in approximately 14 million patient encounters in more than 2,000 communities nationwide.
Parent is currently a wholly-owned subsidiary of CD&R Fund VIII, an affiliate of CD&R. Merger Sub is a wholly-owned subsidiary of Parent. Both Parent and Merger Sub were formed solely for the purpose of entering into the merger agreement described below and consummating the transactions
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contemplated by the merger agreement. Neither Parent nor Merger Sub has engaged in any business except activities incidental to its formation and in connection with the transactions contemplated by the merger agreement.
The Onex Affiliates own all of the exchangeable limited partnership interests of EMS LP, which we refer to as LP exchangeable units. These LP exchangeable units represent approximately 31.0% of the Company's total equity and approximately 81.5% of the total voting power of the Company's capital stock. The Onex Affiliates have entered into an agreement with Parent, Merger Sub, the Company, EMS LP and Onex in which they have agreed to vote all of their interests in favor of the adoption of the merger agreement.
You are being asked to adopt the merger agreement. The merger agreement provides for the merger of Merger Sub with and into EMSC, which we refer to as the merger. After the merger, EMSC will continue as the surviving corporation and as a wholly-owned subsidiary of Parent. Upon completion of the merger, EMSC will cease to be a publicly traded company, and you will cease to have any rights in EMSC as a stockholder.
Following and as a result of the merger, Company stockholders (other than any members of our management team who may have the opportunity to invest in Parent and who choose to make this investment) will no longer have any interest in, and will no longer be stockholders of, the Company, and will not participate in any of the Company's future earnings or growth. Shares of our Class A common stock, par value $0.01 per share, which we refer to as the Class A common stock will no longer be listed on the New York Stock Exchange, or NYSE, price quotations with respect to shares of the Class A common stock will no longer be available, and the registration of shares of the Class A common stock under the Securities Exchange Act of 1934, as amended, or the Exchange Act, will be terminated.
Merger Consideration (page 61)
If the merger is completed, each share of Class A common stock, and of our Class B common stock, par value $0.01 per share, which we refer to as the Class B common stock, and together with the Class A common stock, as the common stock, other than as provided below, will be cancelled and converted into the right to receive the $64.00 per share merger consideration in cash, without interest and less any withholding or other applicable taxes. We refer to this consideration per share of common stock to be paid in the merger as the merger consideration. As provided in the unitholders agreement (as defined and described below under "The MergerUnitholders Agreement"), the holders of LP exchangeable units will exchange their LP exchangeable units for shares of Class B common stock immediately prior to the effective time of the merger. The single issued and outstanding share of EMSC's Class B special voting stock, which we refer to as the Class B special voting share, will be converted into the right to receive $1.00 in cash, without interest and less any applicable withholding taxes. The following shares of common stock will not be converted into the right to receive the merger consideration in connection with the merger: (a) shares held by any of our stockholders who are entitled to and who properly exercise appraisal rights under the Delaware General Corporation Law, which we refer to as the DGCL, (b) treasury shares and (c) shares held by Parent or Merger Sub.
When the Merger is Expected to be Completed (page 60)
We currently anticipate that the merger will be completed in the second quarter of 2011. However, there can be no assurances that the merger will be completed at all or, if completed, that it will be completed in the second quarter of 2011.
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Vote Required for Adoption of the Merger Agreement (page 56)
The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the voting power of the Company's outstanding common stock and the Class B special voting share voting together as a single class of capital stock, at a stockholders' meeting or any adjournment or postponement thereof or acting by written consent, which we refer to as the stockholder approval. The Company does not expect to seek the stockholder approval of the merger agreement by written consent.
The Onex Affiliates have agreed to vote their interests, which represent approximately 81.5% of the voting power of our capital stock, "FOR" the adoption of the merger agreement.
Unitholders Agreement (page 46)
On February 13, 2011 the Onex Affiliates, as the holders of all of the LP exchangeable units, entered into a unitholders agreement, which we refer to as the unitholders agreement, with Parent, Merger Sub, EMS LP, and Onex, as trustee on behalf of the Onex Affiliates. Pursuant to the unitholders agreement, the Onex Affiliates, among other things, (i) agreed to direct the vote of their respective interests in the Class B special voting share in favor of the adoption of the merger agreement, (ii) agreed to take all actions necessary to exchange all of the LP exchangeable units into Class B common stock immediately prior to the effective time of the merger and (iii) agreed, subject to certain exceptions, not to sell, transfer or encumber the LP exchangeable units, except by exchanging the LP exchangeable units into shares of Class B common stock immediately prior to the effective time of the merger.
The unitholders agreement will terminate upon the earliest to occur of (i) termination of the merger agreement, (ii) the effective time of the merger or (iii) the mutual written consent of Parent and the Onex Affiliates.
No fee or other consideration is being paid to Onex or any of its affiliates by Parent, Merger Sub, the Company, CD&R or any of their affiliates in connection with the transactions contemplated by the merger agreement, other than the payment of the merger consideration to the Onex Affiliates.
The special meeting will be held at [ ] on , 2011 starting at [ ], local time. At the special meeting, you will be asked to, among other things, adopt the merger agreement. See "Questions and Answers About the Merger and the Special Meeting" beginning on page 13 and "The Special Meeting" beginning on page 55.
Recommendation of Our Board of Directors (page 55)
Our board of directors unanimously:
For a discussion of the material factors considered by our board of directors in making its recommendation, see "The MergerPurpose and Reasons for the Merger; Recommendation of Our Board of Directors", beginning on page 26.
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Our board of directors recommends that you vote "FOR" the proposal to adopt the merger agreement and "FOR" the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.
Interests of the Company's Directors and Executive Officers in the Merger (page 47)
In considering the recommendation of our board of directors, you should be aware that some of our directors and executive officers have interests in the merger that may be different from, or in addition to, your interests as a stockholder and that may present actual or potential conflicts of interest. These interests include, among others:
Our board of directors was aware of these interests and considered them, among other matters, prior to making their determination to recommend the adoption of the merger agreement to our stockholders.
Opinion of Goldman, Sachs & Co. (page 30)
Goldman, Sachs & Co., which we refer to as Goldman Sachs, delivered its opinion to the Company's board of directors that, as of February 13, 2011 and based upon and subject to the factors and assumptions set forth therein, the $64.00 per share of common stock in cash to be paid to the holders of outstanding shares of common stock (which, for purposes of the opinion, included shares of Class B common stock for which outstanding LP exchangeable units are to be exchanged prior to the effective time of the merger pursuant to the unitholders agreement) pursuant to the merger agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated February 13, 2011, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this proxy statement as Annex B. Goldman Sachs provided its opinion for the information and assistance of the Company's board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of the Company's common stock or other securities should vote with respect to the merger or any other matter. Pursuant to an engagement letter between the Company and Goldman Sachs, the Company has agreed to pay Goldman Sachs a transaction fee currently estimated to be approximately $12.95 million, $500,000 of which was payable upon execution of the merger agreement and the balance of which is payable upon completion of the merger.
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We encourage our stockholders to read Goldman Sachs' opinion carefully and in its entirety. For a further discussion of Goldman Sachs' opinion, see "The MergerOpinion of Goldman, Sachs & Co." beginning on page 30.
Treatment of Stock Options, Restricted Shares and Restricted Share Units (page 47)
Stock Options. Under the merger agreement, we have agreed to adopt such resolutions and take such other actions as may be required so that each unexercised option granted under our equity incentive plans that represents the right to acquire our Class A common stock, whether vested or unvested, that is outstanding immediately prior to the effective time of the merger shall be canceled, and the holder thereof will be entitled to receive, with respect to each such option, on the date on which the effective time of the merger occurs, an amount in cash equal to (i) the excess, if any, of (A) the $64.00 per share merger consideration over (B) the exercise price per share of Class A common stock subject to the option, multiplied by (ii) the number of shares of Class A common stock subject to the option, without interest and less any applicable withholding taxes.
In lieu of the cashout provision described in the preceding paragraph, and if mutually agreed by Parent and the holder of any stock option, such stock option shall cease, at the effective time of the merger, to represent a right to acquire shares of Class A common stock and shall be converted at the effective time of the merger into a fully vested and exercisable option to purchase common stock of Parent, pursuant to the terms more fully described on pages 47 and 48.
Restricted Shares and RSUs. Under the merger agreement, we have agreed to adopt such resolutions and take such other actions as may be required so that each outstanding share of restricted Class A common stock granted under our equity incentive plans, which we refer to as a restricted share, and each "phantom" or notional restricted share unit, which we refer to as an RSU, granted under our equity plans, that is outstanding immediately prior to the effective time of the merger shall be fully vested and, at the effective time of the merger, canceled and extinguished, and, in consideration thereof, the holder thereof will be entitled to receive, on the date on which the effective time of the merger occurs, with respect to each such restricted share or RSU, an amount in cash equal to $64.00, without interest and less any applicable withholding taxes.
Financing of the Merger (page 40)
Parent has obtained an equity financing commitment from CD&R Fund VIII and Merger Sub has obtained debt financing commitments from the initial lenders (identified below under "Debt Financing") in connection with the transactions contemplated by the merger agreement in an aggregate amount of approximately $3.2 billion. These funds, in addition to the Company's cash, are expected to be sufficient to pay merger consideration in the amount of approximately $2.9 billion to our stockholders (including holders of the LP exchangeable units, which are exchangeable into shares of Class B common stock), to repay outstanding indebtedness and to pay fees and expenses in connection with the merger, the financing arrangements and the related transactions. These equity and debt financings are subject to the satisfaction of the conditions set forth in the commitment letters pursuant to which the financings will be provided.
We believe that the amounts committed under the commitment letters will be sufficient to complete the merger, but we cannot assure you of that. Those amounts might be insufficient if, among other things, one or more of the parties to the commitment letters fails to fund the financing or if the conditions to such commitments are not met. Although obtaining the proceeds of any financing, including financing under the commitment letters, is not a condition to the completion of the merger, the failure of Parent and Merger Sub to obtain any portion of the committed financing (or alternative financing) is likely to result in the failure of the merger to be completed. In that case, Parent may be
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obligated to pay the Company a fee of $203,884,000, as described under "The Merger AgreementTermination Fees".
Equity Financing. Parent has received an equity commitment letter from CD&R Fund VIII to purchase common equity securities (or other equity interests permitted by the debt commitment letter) of Parent for an aggregate purchase price up to $900 million. In the event that Parent does not require all of the equity for which CD&R Fund VIII made a commitment, the $900 million equity commitment shall be reduced accordingly. CD&R Fund VIII expects to assign a portion of its equity funding obligations to one or more co-investment vehicles, which CD&R expects to form and manage for the purposes of this transaction. In addition, Parent expects the Company's management to make an equity investment at the effective time of the merger; while there has been no agreement as to the amount of any equity interests to be acquired by the Company's management, Parent estimates that this amount is likely to be between $20 million and $35 million. Any acquisition of equity interests by the Company's management would have the effect of reducing the amount of the equity financing required to be funded by CD&R Fund VIII.
Debt Financing. Merger Sub has received a debt commitment letter for debt financing in an aggregate principal amount of up to $2,675 million from Barclays Bank PLC, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley Senior Funding, Inc., Royal Bank of Canada, RBC Capital Markets, UBS Loan Finance LLC, UBS Securities LLC, Citigroup Global Markets, Inc. and Natixis, comprised of a $1,375 million senior secured term loan facility (which amount may be increased by $65 million as more fully described in "The MergerFinancing of the Merger" below), a $350 million senior secured asset-based revolving credit facility, which is not currently expected to be drawn at the effective time of the merger other than with respect to the rolling or replacement of existing letters of credit, and up to $950 million of senior unsecured increasing rate loans under a senior unsecured credit facility.
Financing Cooperation. The Company has agreed to, and has agreed to cause its subsidiaries to, use reasonable best efforts to cause its and their representatives to, provide to Parent such cooperation reasonably requested by Parent and that is reasonably customary to assist Parent in obtaining debt financing in accordance with the terms of the debt commitment letter, as more fully described in "The MergerFinancing of the Merger" below. Parent has agreed to (i) reimburse the Company for its and its affiliates' documented reasonable out-of-pocket costs and expenses (including accountants' fees and reasonable attorneys' fees) incurred by the Company and its affiliates in connection with their cooperation with Parent's arrangement of financing and (ii) indemnify the Company, its subsidiaries, the Onex Affiliates, its controlled affiliates and its and their respective directors, officers, advisors and representatives, subject to certain exceptions, for any and all liabilities incurred by them in connection with the arrangement of financing and/or provision of certain information utilized in connection therewith, to the fullest extent permitted by applicable law.
Governmental and Regulatory Approvals (page 54)
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the HSR Act, the merger may not be completed until the Company and Parent each file a notification and report form under the HSR Act with the Federal Trade Commission, or the FTC, and the Antitrust Division of the Department of Justice, or the DOJ, and the applicable waiting period has expired or been terminated. The notification and report forms under the HSR Act were filed with the FTC and DOJ on February 28, 2011 and the FTC granted early termination of the HSR waiting period on March 7, 2011.
Due to the indirect change of ownership of EMCA Insurance Company, Ltd., which we refer to as EMCA Insurance, the Company's indirect subsidiary and captive insurance company, approval is also
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required by EMCA Insurance's domestic insurance regulator, the Cayman Islands Monetary Authority. Application for such approval was filed on February 24, 2011. The Cayman Islands Monetary Authority granted approval on March 1, 2011.
Accounting Treatment (page 43)
The merger will be accounted for as a purchase transaction for financial accounting purposes.
Material United States Federal Income Tax Consequences (page 44)
For U.S. federal income tax purposes, your receipt of cash in exchange for your shares of Company common stock in the merger generally will result in your recognizing gain or loss measured by the difference, if any, between the cash you receive in the merger (plus the amount, if any, of taxes withheld) and your tax basis in your shares of Company common stock. You should consult your tax advisor for a complete analysis of the effect of the merger on your U.S. federal, state, local and/or foreign taxes.
Restrictions on Solicitations of Other Offers and Change in Recommendation (page 68)
The Company has agreed to cease and terminate any previous discussions or negotiations with respect to any "acquisition proposal" (as defined in "The Merger AgreementRestrictions on Solicitations of Other Offers"). Subject to certain exceptions described below, we have agreed that we will not, nor will we authorize or permit any of our subsidiaries to, and we will direct our and their representatives not to, and we will not permit our officers, directors or the Onex Affiliates to, directly or indirectly:
Notwithstanding the restrictions described above, if prior to obtaining the stockholder approval:
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In addition, neither our board of directors nor any committee thereof is permitted to (i) withdraw or modify or publicly propose to withdraw or modify its recommendation that our stockholders adopt the merger agreement, (ii) approve or recommend or publicly propose to approve or recommend an acquisition proposal or (iii) approve or recommend or publicly propose to approve or recommend, or execute any letter of intent or other agreement relating to, any acquisition proposal; except that, at any time prior to the stockholder approval, our board of directors may take such actions in certain circumstances, if it determines in good faith (after consultation with independent financial advisors and outside legal counsel) that the failure to take such action would be inconsistent with the fiduciary duties of the board of directors under Delaware law (in each case subject to certain conditions as more fully described in "The Merger AgreementRestrictions on Solicitations of Other Offers").
Conditions to the Completion of the Merger (page 77)
The completion of the merger is subject to, among other things, the following conditions:
Termination of the Merger Agreement (page 79)
The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after receipt of the stockholder approval:
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notified Parent in writing that it stands and will stand ready, willing and able to consummate the merger at such time and (d) the Company has given Parent written notice at least one business day prior to such termination stating the Company's intention to terminate the merger agreement and the basis for such termination.
If the merger agreement is terminated by Parent for a triggering event as described above or by the Company to accept a superior proposal, we will be obligated to pay CD&R or its designated affiliate a break-up fee in the amount of $116,505,000, which we refer to as the break-up fee.
If the merger agreement is terminated by the Company for either (i) Parent's uncured breach of representations or warranties or uncured failure to perform any of its covenants, which would give rise to, if continuing at the effective time of the merger, the failure of any of the conditions to the Company's obligation to close the transactions contemplated by the merger agreement (as described above) or (ii) the reasons described in the last paragraph above under "Termination of the Merger Agreement" as a result of Parent's failure to consummate the merger as contemplated by the Merger Agreement, then Parent will be obligated to pay us a termination fee of $203,884,000, which we refer to as the termination fee.
Limitations on Remedies; Limited Guarantee (page 46)
Parent and Merger Sub are, and subject to certain exceptions the Company is, entitled to seek an injunction, specific performance and other equitable relief to prevent breaches under the merger agreement, and to enforce specifically its terms and provisions. Upon the satisfaction of certain conditions, we will be entitled to seek specific performance to cause the equity financing to be funded to fund the merger consideration and to consummate the merger. However, while we may pursue both a grant of specific performance or other equitable remedy and the payment of the termination fee, we may not receive both a grant of specific performance of the obligation to consummate the merger and monetary damages in connection with the merger agreement or any termination thereof (including any portion of the termination fee).
Concurrently with the execution of the merger agreement, CD&R Fund VIII entered into a limited guarantee in our favor pursuant to which it irrevocably guaranteed certain of Parent's obligations under the merger agreement, including payment of the termination fee, if and when due, and payment of certain reimbursement and indemnification obligations of Parent in connection with our cooperation with the arrangement of the financing. However, in no event will CD&R Fund VIII's liability under the limited guarantee exceed $203,884,000, the amount of the termination fee. The limited guarantee is our sole recourse against CD&R Fund VIII, its affiliates and related parties, including CD&R, for any damages we may incur in connection with the merger agreement and the transactions contemplated by the merger agreement.
Under the DGCL, holders of our common stock who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares of our common stock as determined by the Court of Chancery of the State of Delaware if the merger is completed, but only if they comply with all requirements of the DGCL for exercising appraisal rights (including Section 262 of the DGCL, the text of which can be found in Annex C to this proxy statement), which are summarized in this proxy statement. This appraisal amount could be more than, the same as or less than the $64.00 per share merger consideration. Any holder of our common stock intending to exercise appraisal rights must, among other things, submit a written demand for an appraisal to us prior to the vote on the adoption of the merger agreement at the special meeting and must not vote or otherwise submit a
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proxy in favor of adoption of the merger agreement. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of your appraisal rights.
Market Price of the Company's Class A Common Stock (page 91)
The closing sales price of our Class A common stock on the NYSE on December 13, 2010, the day immediately prior to our public acknowledgment that we were reviewing strategic alternatives to enhance stockholder value, was $53.86 per share. The closing sales price of our Class A common stock on the NYSE on February 11, 2011, the last trading day prior to our public announcement that we had entered into the merger agreement, was $70.66 per share. On April 15, 2011, the most recent practicable trading date prior to the date of this proxy statement, the closing sale price of our Class A common stock on the NYSE was $63.76 per share.
Litigation Related to the Merger (page 42)
Eleven purported shareholder class actions relating to the transactions contemplated by the merger agreement have been filed in state court in Delaware and federal and state courts in Colorado against various combinations of the Company, the members of our board of directors, CD&R, Parent, Merger Sub, Onex, Onex subsidiaries, Goldman, Sachs & Co., Bank of America Corporation and BofA Merrill Lynch, which we refer to as the Actions. The Actions consist of the following: Seven actions were filed in the Delaware Court of Chancery beginning on February 22, 2011, which have since been consolidated into one action entitled In re Emergency Medical Services Corporation Shareholder Litigation, Consolidated C.A. No. 6248-VCS. On April 4, 2011, the Delaware plaintiffs filed their consolidated class action complaint. Two actions, entitled Scott A. Halliday v. Emergency Medical Services Corporation, et al., Case No. 2011CV316 (filed on February 15, 2011), and Alma C. Howell v. William Sanger, et. al., Case No. 2011CV488 (filed on March 1, 2011), were filed in the District Court, Arapahoe County, Colorado. Two other actions, entitled Michael Wooten v. Emergency Medical Services Corporation, et al., Case No. 11-CV-00412 (filed on February 17, 2011), and Neal Greenberg v. Emergency Medical Services Corporation, et. al., Case No. 11-CV-00496 (filed on February 28, 2011), were filed in the U.S. District Court for the District of Colorado.
The Actions generally allege that the directors of the Company, Onex and/or the Onex subsidiaries breached their fiduciary duties by, among other things: approving the transactions contemplated by the Merger Agreement, which allegedly were financially unfair to the Company and its public stockholders; agreeing to provisions in the merger agreement that will allegedly prevent the board from considering other offers; permitting the unitholders agreement and failing to require a provision in the merger agreement requiring that a majority of the public stockholders approve the transactions contemplated by the merger agreement; and/or making allegedly materially inadequate disclosures. The Actions further allege that certain defendants aided and abetted these breaches. In addition, the two actions filed in the U.S. District Court for the District of Colorado contain individual claims brought under Section 14(a) and Section 20(a) of the Exchange Act pertaining to the purported dissemination of allegedly misleading proxy materials. The Actions seek unspecified damages and equitable relief, including an injunction halting the transaction or rescission of the transaction as applicable. The Company has filed a motion to dismiss the federal claims in the Wooten action and to dismiss or stay the other claims in that case. The Company believes that all of the allegations in the Actions are without merit and intends to vigorously defend these matters.
One of the conditions to the closing of the merger is that no law, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction shall be in effect enjoining or otherwise preventing or prohibiting the consummation of the merger. As such, if any one of the plaintiffs is successful in obtaining an injunction prohibiting the completion of the merger on the agreed-upon terms, then such injunction may prevent the merger from becoming effective, or from becoming effective within the expected timeframe.
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Additional Information (page 94)
You can find more information about the Company in the periodic reports and other information we file with the U.S. Securities and Exchange Commission, or the SEC. The information is available at the SEC's public reference facilities and at the website maintained by the SEC at www.sec.gov. For a more detailed description of the additional information available, see "Where You Can Find More Information" beginning on page 94.
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
The following questions and answers address briefly some questions you may have regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you as a stockholder of EMSC. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to or incorporate by reference in this proxy statement.
Q: Why am I receiving these materials?
A: You are receiving this proxy statement and proxy card because you own shares of our common stock. Our board of directors is providing these proxy materials to give you information for use in determining how to vote in connection with the special meeting.
The Merger and Related Transactions
Q: What is the proposed transaction?
A: The proposed transaction is the acquisition of the Company by Parent pursuant to the merger agreement. Under the terms of the merger agreement, if the merger agreement is adopted by the Company's stockholders and the other closing conditions under the merger agreement have been satisfied or waived (other than those which, by their nature, are satisfied upon the closing of the merger or are non-waivable), Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation as a wholly-owned subsidiary of Parent. After the merger, shares of the Class A common stock will cease to be traded on the NYSE.
Q: What will I receive for my shares of EMSC common stock in the merger?
A: Upon completion of the merger, you will receive the $64.00 per share merger consideration in cash, without interest and less any applicable withholding taxes, for each share of our common stock that you own. This does not apply to (i) shares held by any of our stockholders who are entitled to and who properly exercise, and do not properly withdraw, their appraisal rights under the DGCL, (ii) treasury shares and (iii) shares held by Parent or Merger Sub. Upon the effective time of the merger, you will not own shares in EMSC or Parent.
See "The MergerMaterial United States Federal Income Tax Consequences" beginning on page 44 for a more detailed description of the U.S. tax consequences of the merger. You should consult your own tax advisor for a full understanding of how the merger will affect your federal, state, local and/or foreign taxes.
Q: What vote of the Company's stockholders is required to adopt the merger agreement?
A: The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the voting power of the Company's outstanding common stock and the Class B special voting share voting together as a single class of capital stock. A failure to vote your shares of common stock, abstention from the vote or a "broker non-vote" will have the same effect as voting "AGAINST" the adoption of the merger agreement for purposes of the stockholder approval. A "broker non-vote" occurs when a broker does not have discretion to vote on the matter and has not received instructions from the beneficial holder as to how such holder's shares are to be voted on the matter.
The Onex Affiliates have agreed to vote their interests, which represent approximately 81.5% of the voting power of our capital stock, "FOR" the adoption of the merger agreement.
Q: How will the Company's stock options be treated in the merger?
A: We have agreed to take all action necessary so that each unexercised Company stock option will be fully vested and cancelled and the holder thereof will be entitled to receive, with respect to each
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such stock option, on the date the effective time of the merger occurs, an amount in cash equal to (i) the excess, if any, of (A) the $64.00 merger consideration over (B) the exercise price per share of Class A common stock subject to such stock option, multiplied by (ii) the number of shares of Class A common stock subject to such stock option, without interest and less any applicable withholding taxes. In lieu of the payment described in the immediately preceding sentence, if mutually agreed by Parent and any holder of Company stock options, Company stock options may be converted into fully vested and exercisable options to purchase common stock of Parent.
Q: How will the restricted shares be treated in the merger?
A: We have agreed to take all action necessary so that all outstanding restricted shares will be fully vested and cancelled. Each holder of restricted shares will receive an amount in cash equal to (i) the $64.00 merger consideration multiplied by (ii) the number of restricted shares held by the holder, without interest and less any applicable withholding taxes.
Q: How will the RSUs be treated in the merger?
A: We have agreed to take all action necessary so that all outstanding RSUs will be fully vested and cancelled. Each holder of RSUs will receive an amount in cash equal to (i) the $64.00 merger consideration multiplied by (ii) the number of shares of Class A common stock subject to such RSUs held by such holder, without interest and less any applicable withholding taxes.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible, and we anticipate that it will be completed in the second quarter of 2011. In order to complete the merger, we must obtain the stockholder approval and the other closing conditions under the merger agreement must be satisfied or waived (to the extent such conditions are waivable). In addition, the closing date could be affected, among other things, by the marketing period for Merger Sub's debt financing. See "The Merger AgreementFinancing" beginning on page 72 and "The Merger AgreementEffective Time; Marketing Period" on page 60. Neither we nor Parent and Merger Sub are obligated to complete the merger unless and until the closing conditions in the merger agreement have been satisfied or waived (to the extent such conditions are waivable); these conditions are described in "The Merger AgreementConditions to the Completion of the Merger" beginning on page 77.
Q: What effects will the proposed merger have on the Company?
A: Upon completion of the proposed merger, EMSC will cease to be a publicly traded company and will be a wholly-owned subsidiary of Parent. As a result, you will no longer have any interest in our future earnings or growth, if any. Following completion of the merger, the registration of our Class A common stock and our reporting obligations with respect to our Class A common stock under the Exchange Act are expected to be terminated. In addition, upon completion of the proposed merger, shares of our Class A common stock will no longer be listed on the NYSE or any other stock exchange or quotation system.
Q: What happens if the merger is not completed?
A: If the merger agreement is not adopted by our stockholders, or if the merger is not completed for any other reason, our stockholders will not receive any payment for their shares pursuant to the merger agreement. Instead, EMSC will remain a public company and our Class A common stock will continue to be registered under the Exchange Act and listed for trading on the NYSE. Under specified circumstances, we may be required to pay Parent's designee a "break-up fee", or Parent may be required to pay us a "termination fee", in each case as described in "The Merger AgreementTermination Fees" beginning on page 80.
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The Special Meeting
Q: Where and when is the special meeting?
A: The special meeting will be held on [ ], 2011 at [ ] at [ ] a.m., local time.
Q: What matters will be voted on at the special meeting?
A: You will be asked to consider and vote on the following proposals:
Q: Does our board of directors recommend that our stockholders vote "FOR" the adoption of the merger agreement?
A: Yes. After careful consideration, our board of directors, by a unanimous vote, recommends that you vote:
You should read "The MergerPurpose and Reasons for the Merger; Recommendation of Our Board of Directors" beginning on page 26 for a discussion of the factors that our board of directors considered in deciding to recommend the adoption of the merger agreement. In addition, in considering the recommendation of our board of directors with respect to the merger agreement, you should be aware that some of the Company's directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally. See "The MergerInterests of the Company's Directors and Executive Officers in the Merger" beginning on page 47.
Q: How do the Onex Affiliates and the directors and executive officers of the Company intend to vote?
A: In the aggregate and as of April 7, 2011, the Onex Affiliates and the directors and executive officers of the Company hold approximately 82.5% of the total voting power of our capital stock.
The Onex Affiliates, who as of April 7, 2011 hold approximately 81.5% of the total voting power of our capital stock, have entered into the unitholders agreement pursuant to which they have agreed with Parent to exercise all of their voting rights in favor of the adoption of the merger agreement. Our directors and executive officers, who hold approximately 1.0% of the total voting power of our capital stock, have informed us that they intend to vote all of their shares of common stock "FOR" the adoption of the merger agreement because they believe that the merger and the merger agreement are in the best interests of the Company's stockholders. None of our executive officers or directors has made a recommendation with respect to the merger other than as set forth in this proxy statement.
Q: Are all stockholders of the Company as of the record date entitled to vote at the special meeting?
A: Yes. All stockholders who own our common stock at the close of business on March 21, 2011, the record date for the special meeting, will be entitled to vote (in person or by proxy) the shares of our common stock they hold on that date at the special meeting, or any adjournments of the special meeting.
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At the close of business on March 21, 2011, the record date, 30,482,075 shares of Class A common stock (which have one vote per share) and 52,228 shares of Class B common stock (which have ten votes per share) were outstanding and entitled to vote at the special meeting. In addition, at the close of business on March 21, 2011, 13,724,676 LP exchangeable units were issued and outstanding. The LP exchangeable units are exchangeable on a one-for-one basis for shares of Class B common stock. Through the Class B special voting share, the holders of the LP exchangeable units will be able to exercise the same voting rights at the special meeting as they would have after the exchange into Class B common stock.
Q: What constitutes a quorum for the special meeting?
A: The presence at the special meeting, in person or by proxy, of the holders of a majority of the voting power of our outstanding common stock and the Class B special voting share entitled to vote at the special meeting as of the close of business on the record date for the special meeting will constitute a quorum for purposes of the special meeting.
Q: What information do I need to attend the special meeting?
A: Only stockholders and their proxies may attend the special meeting. As a result, you will need an admission ticket to attend the special meeting. If you are a record stockholder who received a paper copy of this proxy statement, an admission ticket is included with the mailing and is attached to the proxy card. If you hold your shares in "street name" through a broker, bank or other nominee, or if you have received your proxy materials electronically, you may obtain an admission ticket in advance by sending a written request, along with proof of ownership, such as a voter instruction card or a bank or brokerage account statement, to us at Corporate Secretary at Emergency Medical Services Corporation, 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111. If you arrive at the special meeting without an admission ticket, we will admit you only if we are able to verify that you were an actual stockholder of EMSC as of the record date for the special meeting.
Q: What vote of the Company's stockholders is required to adjourn the special meeting for the purpose of soliciting additional proxies to adopt the merger agreement?
A: Adjournment of the special meeting to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement requires the affirmative vote of the holders of at least a majority of the voting power of the Company's capital stock that are present, in person or by proxy, and entitled to vote at the special meeting, whether or not a quorum is present.
A failure to vote your shares of common stock or a broker non-vote will have no effect on the outcome of the vote to approve the proposal to adjourn the special meeting. An abstention will have the same effect as voting "AGAINST" any proposal to adjourn the special meeting.
Q: How do I vote my shares without attending the special meeting?
A: If you hold shares in your name as a stockholder of record on the record date, then you received this proxy statement and a proxy card from us. You may submit a proxy for your shares by the Internet, telephone or mail without attending the special meeting. To submit a proxy by the Internet or telephone twenty-four hours a day, seven days a week, follow the instructions on the proxy card. Please be aware that if you submit a proxy over the Internet or by telephone, you may incur costs such as telephone and Internet access charges for which you will be responsible. To submit a proxy by mail, complete, sign and date the proxy card and return it in the accompanying postage-paid envelope. The Internet and telephone proxy facilities for stockholders of record will close at 11:59 p.m., Eastern Time, on [ ], 2011, the day prior to the special meeting. If you hold shares in "street name" through a broker, bank or other nominee, then you received this proxy statement from the nominee, along with the nominee's voting instructions. You should instruct your broker, bank or other nominee on how to vote your shares of common stock using the voting instructions.
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With respect to stockholders submitting a proxy card, if you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted "FOR" the proposal to adopt the merger agreement and "FOR" the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
Q: How do I vote my shares in person at the special meeting?
A: If you hold shares in your name as a stockholder of record on the record date, you may vote those shares in person at the special meeting by giving us a signed proxy card or ballot before voting is closed. If you would like to do that, please bring proof of identification and an admission ticket with you to the special meeting. Even if you plan to attend the special meeting, we strongly encourage you to submit a proxy for your shares in advance as described above, so your vote will be counted if you later decide not to attend.
If you hold shares in "street name" through a broker, bank or other nominee, you may vote those shares in person at the meeting only if you obtain and bring with you a signed proxy from the necessary nominee giving you the right to vote the shares and proof of identification. To obtain a signed proxy prior to the special meeting, you should contact your nominee.
Q: If my shares are held in "street name" by my broker, will my broker vote my shares for me?
A: Your broker will not vote your shares on your behalf unless you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct it to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting "AGAINST" the adoption of the merger agreement for purposes of the Company stockholder approval, but will have no effect for purposes of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
Q: Can I revoke or change my vote?
A: Yes. If you hold your shares through a broker, bank, or other nominee, you have the right to change or revoke your proxy at any time before the vote is taken at the special meeting by following the directions received from your broker, bank or other nominee to change or revoke those instructions. If you hold your shares in your name as a stockholder of record, you have the right to change or revoke your proxy at any time before the vote is taken at the special meeting by (i) delivering to our Corporate Secretary at 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111, a signed written notice of revocation, bearing a date later than the date of the proxy, stating that the proxy is revoked, (ii) attending the special meeting and voting in person (your attendance at the meeting will not, by itself, change or revoke your proxyyou must vote in person at the meeting to change or revoke a prior proxy), (iii) submitting a later-dated proxy card or (iv) submitting a proxy again at a later time by telephone or Internet prior to the time at which the telephone and Internet proxy facilities close by following the procedures applicable to those methods of submitting a proxy.
Q: What does it mean if I get more than one proxy card or voting instruction form?
A: If your shares are registered differently and are in more than one account, you may receive more than one proxy card or voting instruction form. Please complete, sign, date and return separately all of the proxy cards and voting instruction forms you receive regarding this special meeting (or submit your proxy for all shares by telephone or Internet) to ensure that all of your shares are voted.
Q: Are appraisal rights available?
A: Yes. As a holder of common stock of the Company, you are entitled to appraisal rights under Section 262 of the DGCL if (i) you do not vote in favor of adopting the merger agreement, (ii) you
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deliver to us a written demand for appraisal prior to the vote at the special meeting and (iii) you satisfy certain other conditions. See "Appraisal Rights" beginning on page 83.
Q: Will any proxy solicitors be used in connection with the special meeting?
A. Yes. To assist in the solicitation of proxies, the Company has engaged Alliance Advisors, LLC.
Q: Who will count the votes cast at the special meeting?
A: A representative of our transfer agent, American Stock Transfer & Trust Company, LLC, will count the votes and act as an inspector of election. Questions regarding stock certificates or other matters pertaining to your shares may be directed to our Corporate Secretary at 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111, or by telephone at (303) 495-1200.
Q: Should I send in my stock certificates now?
A: NO. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES WITH YOUR PROXY.
If you hold your shares in your name as a stockholder of record, then shortly after the merger is completed you will receive a letter of transmittal with instructions informing you how to send in your stock certificates to the paying agent in order to receive the merger consideration in respect of your shares of our common stock. You should use the letter of transmittal to exchange your stock certificates for the merger consideration which you are entitled to receive as a result of the merger. If you hold your shares in "street name" through a broker, bank or other nominee, then you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your "street name" shares in exchange for the merger consideration.
Q: What should I do if I have lost or misplaced my stock certificate?
A: You may contact our transfer agent, American Stock Transfer & Trust Company, LLC, by telephone at (800) 937-5449 if you have lost your stock certificate.
Q: Who can help answer my other questions?
A: If you have more questions about the merger, need assistance in submitting your proxy or voting your shares, or need additional copies of this proxy statement or the enclosed proxy card, you should contact Corporate Secretary in writing at Emergency Medical Services Corporation, 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111, or by telephone at (303) 495-1200. You may also contact the Company's proxy solicitor:
Alliance
Advisors, LLC
200 Broadacres Drive, 3rd Floor
Bloomfield, NJ 07003
Email: ems@allianceadvisorsllc.com
Toll-Free: (877) 777-4575
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The Company
Emergency
Medical Services Corporation
6200 South Syracuse Way, Suite 200
Greenwood Village, Colorado 80111
(303) 495-1200
The Company is a Delaware corporation and is a leading provider of emergency medical services in the United States. We operate two business segments: AMR, our medical transportation services segment, and EmCare, our outsourced facility-based physician services segment. AMR is the leading provider of ambulance services in the United States. EmCare is a leading provider of outsourced physician services to healthcare facilities. In 2010, we provided services in approximately 14 million patient encounters in more than 2,000 communities nationwide.
For more information about us, please visit our website at www.emsc.net. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference. Detailed descriptions about our business and financial results are contained in our annual report on Form 10-K for the fiscal year ended December 31, 2010, which we incorporate into this proxy statement by reference. See "Where You Can Find More Information" beginning on page 94.
Our Class A common stock is publicly traded on the NYSE under the symbol "EMS".
Parent and Merger Sub
CDRT
Acquisition Corporation
CDRT Merger Sub, Inc.
c/o Clayton, Dubilier & Rice, LLC
375 Park Avenue, 18th Floor
New York, New York 10152
(212) 407-5200
Parent is a Delaware corporation that was organized and is currently owned by CD&R Fund VIII, a private investment fund managed by CD&R. Merger Sub is a Delaware corporation and a wholly-owned subsidiary of Parent. Both Parent and Merger Sub were formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement, including the merger. Neither Parent nor Merger Sub has engaged in any business except activities incidental to their formation and in connection with the transactions contemplated by the merger agreement. Upon the completion of the merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation.
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Our board of directors and management have periodically reviewed and assessed strategic alternatives for the Company. During July and August 2010, various directors had informal discussions concerning the exploration of strategic and financial options and determined to invite legal and financial advisors with an existing relationship with the Company to attend the next board of directors meeting for the purpose of discussing these matters with the full board of directors. Although the Company's results of operations met expectations in the second fiscal quarter of 2010, and the Company was projecting growth in revenues and earnings over the next five years (projections prepared later in the year and used in connection with the sale process showed the Company doubling its net income by 2015 and approximately doubling its revenues during that period), the board of directors had concerns about near-term and long-term business trends that could adversely affect the Company's ability to achieve those results. In particular, the board of directors considered the following:
The board of directors also believed that the current favorable financing environment would make a recapitalization feasible and could increase the price a buyer would pay to acquire the Company, while uncertainty in the public markets as to the impact of healthcare reform could result in an increased volatility for healthcare stocks, including the Company's Class A common stock.
On August 16, 2010, the board of directors held a meeting by telephone conference, together with the Company's financial advisors, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which we refer to as BofA Merrill Lynch, and Goldman Sachs, and the Company's counsel, Kaye Scholer LLP, which we refer to as Kaye Scholer, at which the board discussed a variety of strategic and financial options that could be undertaken by the Company, including a possible sale of the Company. The board of directors selected BofA Merrill Lynch and Goldman Sachs as financial advisors based on their reputation, experience and familiarity with the Company and its business. Goldman Sachs and BofA Merrill Lynch each assisted the Company in its sale process. There was no distinction between their respective roles, except that the board of directors contemplated that Goldman Sachs would deliver a fairness opinion and requested that BofA Merrill Lynch serve as a potential source of debt financing, as described below. Kaye Scholer had represented the Company in significant transactional and other matters for more than five years. The board of directors was aware that Kaye Scholer would also be acting as counsel to Onex in connection with the strategic and financial options under consideration and that Kaye Scholer was representing Onex and its other portfolio companies in a variety of matters and had done so for more than 20 years. As the board of directors considered the interest of Onex in any potential transaction to be aligned with the interests of the other stockholders, it did not view Kaye Scholer's concurrent representation of the Company and Onex as presenting a conflict of interest.
On August 20, 2010, the board of directors held a meeting by telephone conference at which it reviewed and discussed the Company's five-year model, which had been prepared by management. On August 22, 2010, the board of directors held a meeting by telephone conference at which it reviewed a revised model that included a "high" case (the model presented at the August 20 meeting), a "base" case and a "low" case. The board of directors determined to use the base case for planning purposes going forward, as it incorporated what it believed were reasonably conservative assumptions with
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respect to growth in volumes, rates and margins. The board of directors also discussed a potential sale process, including the timing of inviting strategic bidders to participate, and discussed the respective merits of different transaction structures with Kaye Scholer.
On September 15, 2010, the board of directors held a meeting at the offices of Kaye Scholer at which the Company's financial advisors discussed with the board of directors various strategic alternatives for the Company, including a leveraged recapitalization (which could involve a special dividend or stock repurchases), strategic acquisitions by the Company, a spin-off to separate the AMR and EmCare businesses and a sale of the entire Company. The board also discussed the possibility of selling the Company's AMR and EmCare units separately, but recognized that this approach could involve substantial additional tax costs. The board of directors determined to continue a review of a possible sale of the entire Company, which it believed was the strategic alternative most likely to maximize value for the Company's stockholders. The board of directors decided it would revisit other strategic alternatives discussed at the meeting only if the entire Company could not be sold at a price the board of directors believed to be in the stockholders' best interests.
On October 14, 2010, the board of directors held a meeting by telephone conference at which it discussed the Company's financial results for the quarter ended September 30, 2010. The board of directors again discussed whether to pursue a sale of the Company, and determined that any decision with respect to a sale process should be deferred until after the Company released its financial results for that quarter.
On November 2, 2010, the Company announced its results for the quarter and nine months ended September 30, 2010.
On November 5, 2010, the board of directors held a meeting by telephone conference at which it discussed the potential sale process with the Company's financial advisors and authorized them to invite a group of well capitalized financial sponsors selected by the board of directors to participate in a process that would lead to their providing indications of interest in acquiring the Company. The board of directors was concerned about disclosing confidential information to potential industry competitors that might use that information to compete with the Company (whether the Company continued as a stand-alone entity or was acquired by a third party), and therefore decided not to invite potential strategic purchasers to participate in the process until after the Company received initial indications of interest and the board of directors determined to continue to pursue a sale of the Company. In addition, to enhance the confidentiality of the process by reducing the number of financial institutions involved before the board of directors determined whether to proceed with a formal sale process, the board of directors determined not to allow potential purchasers to disclose information to possible equity or debt financing sources. Rather, the board of directors requested that BofA Merrill Lynch provide potential purchasers with its preliminary views as to the possible financing for an acquisition and, if requested by qualified purchasers, to arrange and/or provide for such financing (however, potential purchasers were advised that they would not be required to use BofA Merrill Lynch financing for any transaction). Subsequent to this meeting, the Company provided its written consent to permit BofA Merrill Lynch and its affiliates to serve as a potential source of debt financing, if requested by qualified purchasers, which consent outlined certain information and communication barriers that would be put in place between BofA Merrill Lynch's financial advisory team providing services to the Company and the bank's financing teams that would be established in connection with potential financing to qualified purchasers.
On November 15, 2010, at the direction of the board of directors, the Company's financial advisors invited nine potential purchasers that had been selected by the board of directors to participate in the sale process, and interested parties were provided with a form of non-disclosure agreement. Given the substantial commitment of management time and attention to each potential purchaser involved in the sale process in facilitating their due diligence review of the Company, the board of directors determined to focus its sale process on these financial sponsors based on their perceived interest in
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investments in the healthcare industry and, based on the size of their respective private equity funds, their perceived ability to fund the entire equity contribution necessary to acquire the Company.
On November 19, 2010, the board of directors held a meeting by telephone conference, together with the Company's legal and financial advisors, at which the Company's financial advisors updated the board of directors as to the sale process. Kaye Scholer discussed various transaction structures.
During the week of November 22, 2010, CD&R, having learned of the sale process, contacted the Company, through Goldman Sachs, to indicate its interest in participating. The board of directors concluded that CD&R would be a credible participant in the sale process. On November 23, 2010, the Company's financial advisors, at the direction of the board of directors, invited CD&R to participate in the sale process, and CD&R was provided with the form of non-disclosure agreement that had been provided to other potential purchasers.
On November 24, 2010, Debevoise & Plimpton LLP, which we refer to as Debevoise & Plimpton, counsel to CD&R, provided comments on the proposed non-disclosure agreement to the Company's general counsel. During November 26 through 28, 2010, Kaye Scholer and Debevoise & Plimpton negotiated the form of non-disclosure agreement and it was executed by CD&R and the Company on November 28, 2010.
On November 30, 2010 and December 1, 2010, preliminary due diligence discussions were held between the Company's management and the various potential purchasers, including a discussion with CD&R on November 30, 2010.
On December 1 and 2, 2010, a first round process letter with invitations for submission of indications of interest was sent to potential purchasers. The letter instructed potential purchasers to base their indications of interest on a financing structure proposed by BofA Merrill Lynch. The letter stated that potential purchasers were not required to use BofA Merrill Lynch financing for an acquisition of the Company and would have the opportunity to work with other sources of financing in preparing final bids.
On December 6, 2010, the board of directors held a meeting by telephone conference at which Mr. Sanger provided the board of directors an overview of management's meetings with various financial sponsors. A follow-up meeting of the board of directors was scheduled to consider any indications of interest received by the Company, at which neither Mr. Sanger nor other members of management of the Company would be present.
On December 10, 2010, the board of directors held a meeting by telephone conference at which the Company's financial advisors reviewed the sale process. Nine potential bidders had signed non-disclosure agreements and seven had participated in initial meetings with Company management. On December 8, 2010, the Company received indications of interest from six potential purchasers, including CD&R. CD&R's indication of interest included a purchase price range of $60 to $63 per share. CD&R expressed a strong preference to partner with Onex or with another financial sponsor. (Onex has not had any discussions with CD&R regarding any such potential partnership.) The indications of interest received from other potential purchasers included purchase price ranges from as low as $59 per share to as high as $65 per share. The board of directors determined to continue the process with five of the six potential purchasers that submitted indications of interest. The sixth party's indicated value was not competitive with ranges of value of the other potential purchasers. At the direction of the board of directors, the Company's financial advisors informed the sixth party that its indicated value was not competitive. This party thereafter declined to revise its proposal. The board of directors also authorized the Company's financial advisors to invite three additional parties to participate in the sale process, including two financial sponsors that control portfolio companies regarded by the board of directors as potential strategic purchasers and one other potential strategic purchaser; the board of directors selected only those strategic purchasers it believed had sufficient financial resources to complete an acquisition of the Company.
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At the December 10 meeting, the board of directors also formed a special committee, which we refer to as the special committee, consisting of Robert Le Blanc (a Managing Director of Onex), James Kelly and Michael Smith. The board of directors concluded that a special committee consisting of a select group of board members who had the appropriate experience and could meet as frequently as the board believed would be necessary, often with limited advance notice, could most effectively direct the Company's financial advisors and manage the sale process, reporting to the board of directors as appropriate. Mr. Le Blanc was appointed to the special committee because of his considerable expertise in mergers and acquisitions. The board of directors believed that Onex's interests were aligned with the interests of the Company's other stockholders; Onex had advised the board of directors that Onex was not a potential purchaser of the Company, and it would not seek to receive additional or different consideration from that received by public stockholders. The board of directors also recognized that, because of Onex's ownership of approximately 81.6% of the voting power of the Company, no transaction could be completed without Onex's approval.
Given that the special committee was formed to deal with logistics, and not because of any conflict among stockholders' interests, all board members other than Mr. Sanger were invited to participate in all meetings of the special committee, other than a meeting held on January 15, 2011 to review in detail the proposed terms of the draft merger agreement to be provided to potential purchasers and a meeting held on January 24, 2011 on short notice. The draft merger agreement had been provided to all the board members (other than Mr. Sanger) in advance of the January 15 meeting, and all members had an opportunity to comment on the draft. However, the special committee believed that a small working group would provide a more effective and efficient means of providing input to counsel on the proposed draft. With this exception and the January 24 process update meeting, other members of the board of directors (other than Mr. Sanger) participated frequently and fully in special committee meetings.
On December 10, 2010 and December 13, 2010, at the direction of the board of directors, the Company's financial advisors contacted the additional three potential purchasers authorized by the board of directors at its December 10, 2010 meeting. Two of these potential purchasers entered into non-disclosure agreements; only one of them submitted an indication of interest and it terminated its participation in the process in January 2011.
On December 14, 2010, the Company, in response to unusual market activity in its Class A common stock, issued a press release in which it announced that it was reviewing various strategic alternatives to enhance stockholder value. The closing sale price of the Class A common stock that day was $63.00 per share, an increase of $9.14 per share from the $53.86 closing sale price on the previous day. The closing sale price of the Class A common stock on November 12, 2010, the last trading day before the board of directors authorized the Company's financial advisors to invite potential purchasers to participate in a sale process, was $50.85 per share.
During the weeks of December 13, 2010 and December 20, 2010, meetings were held between Company management and potential purchasers, including a meeting with CD&R on December 20, 2010.
On December 23, 2010, the special committee held a meeting by telephone conference to review the progress of the sale process. In addition to the members of the special committee, Mr. Benson, Mr. Epstein, Dr. Iannini and Dr. Riggs participated in the meeting.
During January 2011, numerous diligence meetings and telephone calls were held between Company management and potential purchasers, together with their respective advisors, including meetings and calls with CD&R from January 19, 2011 through January 26, 2011.
On January 8, 2011, the special committee authorized CD&R and another bidder, which we refer to as Party A, to submit a joint bid; CD&R initially had indicated a strong preference to partner with another financial sponsor, and the special committee believed that CD&R could strengthen Party A's
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bid. In addition to the members of the special committee, Mr. Epstein participated in the January 8 meeting. On January 10, 2011, a form of agreement permitting that conduct was provided to CD&R and Party A; it was negotiated and signed on January 12, 2011.
On January 14, 2011 and January 17, 2011, two of the parties that had submitted indications of interest advised the Company that they were no longer interested in submitting a bid.
On January 15, 2011, the special committee held a meeting by telephone conference to review with Kaye Scholer a proposed form of merger agreement.
On January 21, 2011, the three remaining potential purchasers, CD&R, Party A and another bidder, which we refer to as Party B, were provided with a proposed form of merger agreement and the related Company disclosure schedules and were instructed to provide any requested changes to those documents with their bid.
On January 24, 2011, the special committee held a meeting by telephone conference at which it discussed recent developments in the sale process.
On January 26, 2011, the three remaining potential purchasers were provided with a proposed form of unitholders agreement and instructed to provide any requested changes to that document with their bid.
On January 28, 2011 and January 31, 2011, Kaye Scholer and Debevoise & Plimpton discussed some initial comments concerning the proposed form of merger agreement and possible transaction structures.
On January 30, 2011, Party A, which was the potential purchaser that had submitted an indication of interest with $65.00 per share at the upper end of its range and had been authorized to submit a joint bid with CD&R, advised the Company, through the Company's financial advisors, that it was no longer interested in submitting a bid, either alone or jointly with CD&R.
On January 31, 2011, the special committee held a meeting by telephone conference to review developments in the sale process, including Party A's decision not to proceed in the process. The special committee was informed that CD&R had requested permission to partner and submit a joint bid with another potential purchaser. The special committee denied that request because it believed it would negatively impact the sale process by providing information to the remaining potential purchasers as to their reduced number. In addition to the members of the special committee, Mr. Benson, Mr. Epstein, Dr. Iannini and Dr. Riggs participated in the meeting.
After subsequent discussion with its potential debt financing sources, and weighing the likely interest of equity co-investors in the proposed transaction whose participation could be arranged after execution of a merger agreement, CD&R determined to make its bid for the Company without partnering with another financial sponsor.
On February 4, 2011, bids were received from CD&R and Party B. The CD&R bid proposed a purchase price of $63.00 per share and was accompanied by specific proposed changes to the merger agreement and unitholders agreement, and proposed forms of limited guarantee, equity commitment letter and debt financing commitments. As anticipated and authorized by the board of directors, CD&R's debt financing commitment letters contemplated the participation of BofA Merrill Lynch and certain of its affiliates in the proposed debt financing for the merger as one of six potential debt financing sources. CD&R's proposed changes to the merger agreement contemplated a structure in which Onex entities holding more than a majority of the voting power of the Company's outstanding stock would approve the merger agreement by written consent immediately after the merger agreement was signed, which would have had the effect of eliminating the board of directors' ability to terminate the merger agreement if it were to receive a superior proposal. (See "The Merger AgreementChange in Board Recommendation; Termination in Connection with a Superior Proposal.") That change was not
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acceptable to the board of directors. Party B's bid proposed a price below that offered by CD&R and included commitment letters for debt financing from multiple financing sources, including BofA Merrill Lynch.
On February 5, 2011, Kaye Scholer and Debevoise & Plimpton had a preliminary telephone conversation concerning CD&R's mark-up of the merger agreement. Later that day, the special committee held a meeting by telephone conference, together with the Company's legal and financial advisors, at which the bids that had been received from CD&R and Party B were reviewed. The special committee directed the Company's financial advisors to seek improved terms from CD&R and Party B. In addition to the members of the special committee, Mr. Benson, Mr. Epstein, Dr. Iannini and Dr. Riggs participated in the meeting.
Following the February 5, 2011 special committee meeting, at the direction of the special committee, the Company's financial advisors held discussions with CD&R and Party B to seek improvements to the terms and conditions of their bids. On February 7, 2011, CD&R advised the Company's financial advisors that it was prepared to improve its bid to $63.75 per share and provide for a break-up fee and reverse termination fee each equal to 5% of transaction equity value.
On February 6, 2011, Kaye Scholer and Debevoise & Plimpton discussed the transaction structure and other aspects of the proposed merger agreement. Debevoise & Plimpton conveyed CD&R's view that the Onex Affiliates should commit to vote in favor of the adoption of the merger agreement, unless the merger agreement was terminated to accept a superior proposal prior to receipt of stockholder approval.
On February 7, 2011, the board of directors held a meeting, together with the Company's legal and financial advisors, for an update as to the bids that had been received from CD&R and Party B and subsequent conversations with such bidders. Goldman Sachs also presented a preliminary financial analysis of the proposed merger consideration. The board of directors discussed the bids and financial analysis and whether to proceed with a transaction at a price that was likely to be below the then current market price of the Class A common stock. The board of directors concluded that, if the sale process were terminated without a transaction, the market price of the Class A common stock, which had risen following deal-related speculation, would decline to substantially below the levels reached during the sale process and would not be likely to rise again to reach the purchase price offered by CD&R for a significant period of time. The board of directors instructed the Company's financial advisors to inform each of CD&R and Party B as to the improvements in its bid that would be required before the board of directors would be prepared to authorize final negotiation of a proposed transaction.
The closing sale price of the Class A common stock during the period from August 2010 through November 12, 2010, the last trading day before the board of directors authorized the Company's financial advisors to invite potential purchasers to participate in a sale process, generally had been in the low $50's per share. In the six trading days before the Company issued a press release on December 14, 2010 stating that the Company was reviewing strategic alternatives, the closing sale price ranged from $53.14 per share on December 6, 2010 to $54.91 per share on December 8, 2010, with a closing sale price of $53.86 per share on December 13, 2010; the closing sale price of the Class A common stock on December 14, 2010 increased $9.14 per share from the prior day's close. The members of the board of directors were generally aware of reports issued by equities research analysts in November and December 2010, prior to December 14, 2010, with price targets up to $74.00 per share, and on December 14, 2010 and thereafter, with price targets (including sale price targets) up to $80.00 per share, in each case for periods that ranged from 12 to 18 months.
Following the board of directors' meeting on February 7, 2011, at the direction of the board of directors the Company's financial advisors communicated to CD&R the board's proposed purchase price of $65.00 per share, a break-up fee equal to 2% of transaction equity value and a reverse
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termination fee equal to 10% of transaction equity value. CD&R was unwilling to increase its proposed purchase price, but proposed a break-up fee equal to 4.5% of transaction equity value and a reverse termination fee equal to 5.5% of transaction equity value.
On February 8, 2011, at the direction of the board of directors the Company's financial advisors communicated to CD&R the board of directors' proposal of a purchase price of $64.50 per share, a break-up fee equal to 4% of transaction equity value and a reverse termination fee equal to 7% of transaction equity value. CD&R agreed to increase the proposed purchase price to $64.00 per share and accepted the break-up fee and reverse termination fee proposed by the board of directors. At the direction of the board of directors, the Company's financial advisors contacted Party B to advise Party B that it needed to raise its proposed purchase price to be competitive. Party B increased its proposed price; however, the increased purchase price remained below that offered by CD&R. At the direction of the board of directors, Party B was advised by the Company's financial advisors that, absent an increased bid by Party B, the Company would be sold to another bidder. Party B stated that it was unwilling to increase its price and there was no further contact with Party B.
On February 9, 2011, Kaye Scholer provided revised drafts of the merger agreement and other transaction documents to Debevoise & Plimpton. Commencing that evening, Kaye Scholer and Debevoise & Plimpton negotiated the proposed merger agreement and other transaction documents. On February 12, 2011, Kaye Scholer and Debevoise & Plimpton agreed upon proposed execution forms of the merger agreement and other transaction documents.
On February 13, 2011, the board of directors held a meeting by telephone conference, together with the Company's legal and financial advisors, at which the proposed merger agreement and other transaction documents were reviewed. At the meeting, Goldman Sachs gave a presentation to the board of directors on its financial analyses of the merger consideration. At the end of its presentation, and at the request of the board of directors, Goldman Sachs then orally rendered its opinion to the board of directors (subsequently confirmed in writing) that, as of such date and based upon and subject to the factors and assumptions set forth in the written opinion, the $64.00 per share of common stock in cash to be paid to the holders of outstanding shares of common stock (which, for purposes of the opinion, included Class B common stock for which outstanding LP exchangeable units are to be exchanged prior to the effective time of the merger pursuant to the unitholders agreement) pursuant to the merger agreement was fair from a financial point of view to such holders. The full text of the opinion of Goldman Sachs, dated February 13, 2011, which sets forth assumptions made, procedures followed, matters considered and limitations of the review undertaken by Goldman Sachs in connection with such opinion, is attached hereto as Annex B. Following discussions and the presentation by Goldman Sachs, the board of directors approved, and authorized the execution and delivery of, the merger agreement and other transaction documents in the forms presented to the board of directors. The merger agreement and other transaction documents were executed and delivered by the parties later the same day.
On February 14, 2011, the Company issued a press release announcing the proposed merger.
Purpose and Reasons for the Merger; Recommendation of Our Board of Directors
The purpose of the merger is to enable the Company's stockholders to realize the value of their investment in the Company through their receipt of the $64.00 per share merger consideration in cash, without interest. The board of directors believes that the current interest in healthcare companies and robust acquisition finance market result in a favorable environment in which to pursue a sale; the $64.00 per share merger consideration is in excess of the highest price at which the Class A common stock ever traded prior to December 14, 2010, the date on which the Company announced that it was reviewing various strategic alternatives to enhance stockholder value. The board of directors also considered separate sales of the Company's AMR and EmCare businesses, but determined that such a
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transaction would result in tax costs that are not applicable to a sale of the entire Company in a single transaction.
Our board of directors, with the assistance of the Company's legal and financial advisors, evaluated the proposed merger, including the terms and conditions of the merger agreement. At a meeting on February 13, 2010, our board of directors unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger and the unitholders agreement, are in the best interests of the Company and our stockholders, (ii) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable in all respects, (iii) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to and in the best interests of our stockholders, (iv) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger and the unitholders agreement, upon the terms and conditions contained in the merger agreement, and (v) determined to recommend that the Company's stockholders vote to adopt the merger agreement.
The members of the board of directors were generally aware that equities research analysts had issued reports during the period from November 1, 2010 through December 14, 2010 (the date the Company announced that it was exploring strategic alternatives) with price targets of up to $74.00 per share over periods that ranged from twelve to eighteen months; they were also generally aware that the equity analyst reports issued after December 14, 2010 had target sale prices in excess of $64.00 per share. The board of directors reviewed the Company's prospects and the near-term and long-term business trends that could affect the Company's ability to achieve its projected results. The board of directors concluded that the merger, at the price of $64.00 per share, is in the best interests of the Company's stockholders; the board of directors did not consider equities research analysts' trading price targets or sale price targets to be of significance in the board's analysis.
In the course of reaching its determination and recommendation, our board of directors considered the following factors as being generally positive or favorable, each of which our board of directors believed supported its determinations and recommendations:
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negotiations with, third parties regarding unsolicited acquisition proposals after the date the merger agreement was entered into, as well as the Company's ability, under certain circumstances, to terminate the merger agreement in order to enter into a definitive agreement related to a superior proposal, subject to paying a break-up fee of $116,505,000 (equal to approximately 4.0% of the equity value of the transaction); recognizing that, as a result of the commitment by the Onex Affiliates in the unitholders agreement to vote in favor of the adoption of the merger agreement (which CD&R insisted upon as a condition of its bid), stockholder approval would be obtained at the special meeting unless the merger agreement is terminated in order to accept a superior proposal prior to the special meeting;
The board of directors did not believe that the Company's current financial situation or near-term future prospects indicated a need to sell the Company. However, it believed that the proposed merger is fair to and in the best interests of all of the Company's stockholders, including those not affiliated with Onex, for the foregoing reasons.
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In the course of reaching its determinations and recommendations, our board of directors also considered the following risks and other factors concerning the merger agreement and the merger as being generally negative or unfavorable:
In addition, our board of directors was aware of and considered the interests that certain of our directors and executive officers have with respect to the merger that differ from, or are in addition to, their interests as stockholders of the Company, as described in "Interests of the Company's Directors and Executive Officers in the Merger" beginning on page 47.
In the course of reaching its determination and recommendation regarding the fairness of the merger to the stockholders of the Company and its decision to recommend that the stockholders adopt the merger agreement, the board of directors considered financial analyses presented by Goldman Sachs to the board of directors on February 13, 2011 concerning EMSC, which analyses are summarized below under "Opinion of Goldman, Sachs & Co."
The foregoing discussion of the information and factors considered by our board of directors is not intended to be exhaustive, but includes the material factors considered by our board of directors. In view of the wide variety of factors considered by our board of directors in evaluating the merger agreement and the merger, our board of directors did not find it practicable, and did not attempt, to quantify, rank or otherwise assign relative weights to the foregoing factors in reaching its conclusion. In addition, individual members of our board of directors may have given different weights to different factors and may have viewed some factors more positively or negatively than others. The board of directors' determinations and recommendations described above were based upon the totality of the information considered.
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Our board of directors recommends that you vote "FOR" the adoption of the merger agreement and "FOR" the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.
Opinion of Goldman, Sachs & Co.
Goldman Sachs rendered its opinion to the Company's board of directors that, as of February 13, 2011 and based upon and subject to the factors and assumptions set forth therein, the $64.00 per share of common stock in cash to be paid to the holders of outstanding shares of common stock (which, for purposes of the opinion and this section of the proxy statement, included shares of Class B common stock for which outstanding LP exchangeable units are to be exchanged prior to the effective time of the merger pursuant to the unitholders agreement) pursuant to the merger agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated February 13, 2011, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. Goldman Sachs provided its opinion for the information and assistance of the Company's board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of the Company's common stock or other securities should vote with respect to the merger, or any other matter.
In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:
Goldman Sachs also held discussions with members of the senior management of the Company regarding their assessment of the past and current business operations, financial condition and future prospects of the Company; reviewed the reported price and trading activity for the Class A common stock; compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the outsourced emergency medical services industry and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.
For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by it and it does not assume any responsibility for any such information. In that regard, Goldman Sachs assumed with the consent of the board of directors of the Company that the Forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. Goldman Sachs did not make an independent evaluation or
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appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries, nor was any evaluation or appraisal of the assets or liabilities of the Company or any of its subsidiaries furnished to Goldman Sachs. For the purpose of rendering its opinion, Goldman Sachs treated the LP exchangeable units and the Class B common stock as equivalent to the Class A common stock from a financial point of view. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on the expected benefits of the merger in any way meaningful to its analysis. Goldman Sachs has also assumed that the merger will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.
Goldman Sachs' opinion does not address the underlying business decision of the Company to engage in the merger, or the relative merits of the merger as compared to any strategic alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs' opinion addresses only the fairness from a financial point of view, as of the date of the opinion, of the $64.00 per share of common stock in cash to be paid to the holders of outstanding shares of common stock pursuant to the merger agreement. Goldman Sachs' opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger, including, without limitation, the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the Company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company or class of such persons, in connection with the merger, whether relative to the $64.00 per share of common stock in cash to be paid to the holders of outstanding shares of common stock pursuant to the merger agreement or otherwise. Goldman Sachs does not express any opinion as to the impact of the merger on the solvency or viability of the Company or Parent or the ability of the Company or Parent to pay their respective obligations when they come due. Goldman Sachs' opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs' advisory services and its opinion were provided for the information and assistance of the Company's board of directors in connection with its consideration of the merger and its opinion does not constitute a recommendation as to how any holder of common stock or other securities should vote with respect to such merger or any other matter. Goldman Sachs' opinion was approved by a fairness committee of Goldman Sachs.
The following is a summary of the material financial analyses delivered by Goldman Sachs to the board of directors of the Company in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs' financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before February 11, 2011 and is not necessarily indicative of current market conditions.
Selected Companies Analysis. Goldman Sachs reviewed and compared certain financial information for the Company to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the outsourced medical services industry:
Selected Hospital Outsourcing Companies
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Selected Ambulance Response Services Companies
Although none of the selected companies is directly comparable to the Company, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of the Company.
Goldman Sachs calculated and compared various financial multiples and ratios for the selected companies based on financial data as of February 11, 2011, information it obtained from SEC filings (including the most recent publicly available balance sheets for the selected companies), IBES estimates and other Wall Street research. The multiples and ratios for the Company were based on the Company's balance sheet as of December 31, 2010 provided by the Company's management, information obtained from SEC filings, IBES estimates and other Wall Street research, and calculated using both the Class A common stock closing share price on February 11, 2011 and December 13, 2010 (the "Undisturbed Date"), the trading day immediately prior to the Company's announcement stating that it was considering strategic alternatives. With respect to the selected companies and the Company, Goldman Sachs calculated:
For purposes of this analysis, EBITDA of the Company represents net income before equity in earnings of unconsolidated subsidiary, income tax expense, loss on early debt extinguishment, interest and other income, realized gain on investments, interest expense, and depreciation and amortization, or Adjusted EBITDA (as used in the Company's SEC filings, IBES estimates and Wall Street research referenced above as well as "Certain Projections" below).
The multiples observed for each of the selected companies are as follows:
|
Multiples | ||||||
---|---|---|---|---|---|---|---|
|
2011E EV/EBITDA | 2011E Price/EPS | |||||
Selected Hospital Outsourcing Companies |
|||||||
IPC The Hospitalist Company, Inc. |
11.8x | 21.9x | |||||
Team Health Holdings, Inc. |
9.4x | 15.8x | |||||
Mednax, Inc. |
8.3x | 14.2x | |||||
Selected Ambulance Response Services Companies |
|||||||
Rural/Metro Corporation |
8.1x | 18.7x | |||||
Air Methods Corporation |
7.4x | 16.1x |
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The results of these analyses are summarized as follows:
|
Selected Hospital Outsourcing Companies |
Selected Ambulance Response Services Companies |
The Company | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
As of 12/13/10 |
As of 02/11/11 |
||||||||||
Multiple
|
Range | Median | Range | Median | ||||||||
2011E EV/EBITDA |
8.3x-11.8x | 9.4x | 7.4x-8.1x | 7.7x | 7.1x | 9.4x | ||||||
2011E Price/EPS |
14.2x-21.9x | 15.8x | 16.1x-18.7x | 17.4x | 14.4x | 18.9x |
This analysis was undertaken in order to assist Goldman Sachs and the Company's board of directors in understanding how the various companies within the Hospital Outsourcing or Ambulance Response Services industries were then currently trading with respect to certain commonly used financial metrics and in understanding if the shares of the Company were trading at a relative premium or discount to such companies.
Illustrative Discounted Cash Flow Analysis. Goldman Sachs performed an illustrative discounted cash flow analysis on the Company using the Forecasts prepared by the Company's management in January 2011. Goldman Sachs calculated indications of net present value of free cash flows for the Company for the years 2011 through 2014 using discount rates ranging from 9.5% to 10.5%, reflecting estimates of the Company's weighted average cost of capital. In deriving discount rates ranging from 9.5% to 10.5% for the purposes of this analysis, Goldman Sachs utilized the capital asset pricing model, which took into account certain financial metrics, including betas for the Company and selected companies which exhibited similar business characteristics to the Company, as well as certain financial metrics for the United States financial markets generally. Goldman Sachs then calculated illustrative terminal values in the year 2015 based on perpetuity growth rates of free cash flow ranging from 1.5% to 2.5% and discount rates ranging from 9.5% to 10.5%, which implied terminal value Adjusted EBITDA multiples ranging from 6.4x to 8.3x based on estimated 2015 Adjusted EBITDA. The range of perpetuity growth rates was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account the Forecasts and market expectations regarding long-term growth of gross domestic product and inflation. Goldman Sachs also cross-checked such estimates of perpetuity growth rates against the range of Adjusted EBITDA multiples of 6.4x to 8.3x that are implied by such growth rates and the range of discount rates to be applied to the Company's future unlevered cash flow forecasts. Goldman Sachs then added the present values of the free cash flows for the years 2011 through 2014 to the present value of the illustrative terminal value, in each case discounted to December 31, 2010 using a mid-year convention and, at the instruction of the Company's management, a 38.5% marginal tax rate. In the Illustrative Discounted Cash Flow Analysis described in this paragraph, unlevered free cash flow was calculated using the Forecasts. Unlevered free cash flow represents the Company's projected Adjusted EBITDA, minus taxes (calculated by multiplying the tax rate contained in the Forecasts by the Company's projected EBITA), minus projected capital expenditures, minus the projected increase in net working capital, minus certain adjustments to the Company's insurance collateral, minus acquisition expenses, plus depreciation and plus certain insurance accruals. Stock-based compensation expense was treated as a cash expense for purposes of calculating unlevered free cash flow. This analysis resulted in a range of illustrative per share indications from $55.49 to $72.16.
Selected Transactions Analysis. Goldman Sachs analyzed certain information relating to the following selected transactions in the outsourced emergency medical services industry since December 2004:
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For each of the selected transactions, Goldman Sachs calculated and compared enterprise value as a multiple of latest twelve months EBITDA, using publicly available data, and then calculated the median of these multiple values for all of the selected transactions. While none of the companies that participated in the selected transactions are directly comparable to the Company, the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of the Company's results, market size and product profile.
The multiples observed for each of the selected transactions are as follows:
Selected Transactions (Acquiror / Target)
|
Enterprise Value as a Multiple of LTM EBITDA |
|||
---|---|---|---|---|
Virtual Radiologic Corp. / NightHawk Radiology Holdings, Inc. |
6.9x | |||
Bain Capital / Air Medical Group Holdings |
* | |||
Leonard Green & Partners L.P.'s / Prospect Medical Holdings, Inc. |
6.2x | |||
Vestar Capital Partners / Health Grades, Inc. |
8.2x | |||
Providence Equity Partners / Virtual Radiologic Corp. |
8.3x | |||
TPG Capital, Carlyle Group and The Blackstone Group / Healthscope Ltd. |
7.6x | |||
Hellman & Friedman / Sheridan Healthcare, Inc. |
* | |||
The Blackstone Group / Team Health Holdings, Inc. |
8.9x | |||
Onex Partners LP / AMR and EmCare |
5.8x |
The following table presents the results of this analysis:
|
Selected Transactions | |
||||||
---|---|---|---|---|---|---|---|---|
|
Proposed Transaction |
|||||||
Enterprise Value as a Multiple of:
|
Range | Median | ||||||
LTM EBITDA |
5.8x-8.9x | 7.6x | 9.7x(1) |
This analysis was undertaken in order to assist Goldman Sachs and the Company's board of directors in understanding how the EV/LTM EBITDA multiples for the various selected transactions compared with the same multiple implied by the proposed transaction.
Illustrative Present Value of Future Share Price Analysis. Goldman Sachs performed an illustrative analysis of the implied present value of the Company's future price per share of Class A common
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stock, which is designed to provide an indication of the present value of a theoretical future value of a company's equity as a function of such company's estimated future earnings and its assumed price to future earnings per share multiple. For this analysis, Goldman Sachs used certain financial information from the Forecasts prepared by the Company's management in January 2011 for each of the fiscal years 2011 to 2014. Goldman Sachs first calculated the implied values per share of Class A common stock for each of the fiscal years 2011 to 2014, by applying price to forward earnings per share multiples of 14.4x, based on the closing trading price per share of Class A common stock on the Undisturbed Date, and 16.5x, based on historical one-year average forward earnings per share multiples for the Company, to estimated earnings per share of Class A common stock for each of the fiscal years 2011 to 2014, and then discounted those values back to December 31, 2010, using illustrative discount rates of 10.5% and 11.5%, reflecting estimates of the Company's cost of equity. In deriving discount rates ranging from 10.5% to 11.5% for the purposes of this analysis, Goldman Sachs utilized the capital asset pricing model, which took into account certain financial metrics, including betas for the Company and selected companies which exhibited similar business characteristics to the Company, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of implied present values per share of Class A common stock of $52.45 to $67.17.
Goldman Sachs also calculated the implied values per share of Class A common stock for each of the fiscal years 2011 to 2014, by applying forward Adjusted EBITDA multiples of 7.1x, based on the closing trading price per share of Class A common stock on the Undisturbed Date, and 7.5x, based on historical one-year average forward Adjusted EBITDA multiples for the Company, to estimates of the applicable forward Adjusted EBITDA for each of the fiscal years 2011 to 2014, and then discounted those values back to December 31, 2010, using illustrative discount rates of 10.5% and 11.5%, reflecting estimates of the Company's cost of equity. This analysis resulted in a range of implied present values per share of Class A common stock of $55.63 to $66.35.
Illustrative Leveraged Buyout Analysis. Goldman Sachs performed an illustrative leveraged buyout analysis using the Forecasts prepared by the Company's management in January 2011 and publicly available historical information. In performing the illustrative leveraged buyout analysis, Goldman Sachs assumed (i) a purchase price per share of common stock of $64.00 in cash; (ii) a pro forma debt to financeable pro forma 2010 Adjusted EBITDA ratio of 6.7x; (iii) the retirement of certain debt of the Company; and (iv) debt financing of approximately $2.3 billion. For purpose of this analysis, financeable pro forma 2010 Adjusted EBITDA provided by Company management and used by Goldman Sachs is calculated by adding back annualized results from acquisitions completed in 2010 and pending acquisitions and stock based compensation expense to Adjusted EBITDA. Based on a range of illustrative one year forward exit Adjusted EBITDA multiples of 7.1x to 7.5x (as described above) and a range of pro forma leverage of 6.5x to 6.75x for the assumed exit at the end of 2014, which reflect illustrative implied prices at which a hypothetical financial buyer might exit its investment through a sale transaction, this analysis resulted in illustrative internal rate of equity returns to a hypothetical financial buyer ranging from 18.1% to 22.6%.
General. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs' opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or the contemplated merger.
Goldman Sachs prepared these analyses for purposes of Goldman Sachs' providing its opinion to the Company's board of directors as to the fairness from a financial point of view of the $64.00 per
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share of common stock in cash to be paid to the holders of outstanding shares of common stock pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.
The merger consideration was determined through arm's-length negotiations between the Company and Parent and was approved by the Company's board of directors. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or its board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.
As described above, Goldman Sachs' opinion to the Company's board of directors was one of many factors taken into consideration by the Company's board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B.
Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, commercial banking, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of the Company, Parent and any of their respective affiliates or third parties, including Onex, CD&R and any of their respective affiliates and portfolio companies or any currency or commodity that may be involved in the merger for their own account and for the accounts of their customers. Goldman Sachs acted as financial advisor to the Company in connection with, and participated in certain of the negotiations leading to, the merger. Goldman Sachs has also provided certain investment banking services to the Company and its affiliates from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as joint bookrunner with respect to a public offering of 9,200,000 shares of Class A common stock in August 2009 and as joint bookrunner with respect to a public offering of 9,200,000 shares of Class A common stock in November 2009. Goldman Sachs also provided certain investment banking services to Onex and its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as dealer-manager with respect to a tender offer for outstanding debt securities of Hawker Beechcraft Acquisition Company, LLC, a portfolio company of Onex (aggregate principal amount $275,000,000), in May 2009; as joint lead arranger with respect to a term loan financing of Hawker Beechcraft Acquisition Company, LLC (aggregate principal amount $200,000,000) in November 2009; as joint bookrunner with respect to the issuance of senior notes of SITEL, LLC, a portfolio company of Onex (aggregate principal amount $300,000,000), in March 2010; and as financial advisor to the Special Committee of the board of directors of Res-Care, Inc., an affiliate of Onex, with respect to Onex's acquisition of the shares of Res-Care, Inc.'s common stock that Onex did not already own, in December 2010. Goldman Sachs also provided certain investment banking services to CD&R and its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as joint bookrunner with respect to an offering by Hertz Global Holdings, Inc., a portfolio company of CD&R, of its 5.250% Convertible Senior Notes due 2014
36
(aggregate principal amount $450,000,000) and with respect to a public offering of 46,000,000 shares of common stock of Hertz Global Holdings, Inc. in May 2009; as joint bookrunner with respect to an offering by Graphic Packaging Holding Company, a portfolio company of CD&R, of its 9.50% Senior Notes due 2017 (aggregate principal amount $245,000,000) in June 2009; as joint bookrunner with respect to an offering by Diversey, Inc. (formerly named JohnsonDiversey, Inc.), a portfolio company of CD&R, of its 10.50% Senior Unsecured Notes due 2020 (aggregate principal amount $250,000,000) and its 8.250% Senior Notes due 2019 (aggregate principal amount $400,000,000) in November 2009; and as joint bookrunner with respect to an offering by Graphic Packaging Holding Company of its 7.875% Notes due 2018 (aggregate principal amount $250,000,000) in September 2010. Goldman Sachs may also in the future provide investment banking services to the Company, Onex, CD&R, Parent, their respective affiliates, and portfolio companies of Onex and CD&R, for which its Investment Banking Division may receive compensation. During the two years prior to February 13, 2011 (the date on which Goldman Sachs delivered its opinion to the Company's board of directors), CD&R and certain of its affiliates and portfolio companies paid the Investment Banking Division of Goldman Sachs for investment banking services fees that are in the aggregate in excess of the fee that Goldman Sachs is expected to receive in connection with its services as the Company's financial advisor with respect to the merger (described below). Affiliates of Goldman Sachs also may have co-invested with Onex, CD&R and their respective affiliates from time to time and may have invested in limited partnership units of affiliates of Onex and CD&R from time to time and may do so in the future. Certain funds managed by Goldman Sachs affiliates (the "GS Managed Funds") own an approximately 1.8% interest in CD&R Fund VIII and, in connection with the proposed merger, it is expected that existing CD&R Fund VIII investors, including the GS Managed Funds, will make mandatory capital contributions to the fund on a pro rata basis. Affiliates of Goldman Sachs and employees of Goldman Sachs and its affiliates hold certain of the equity interests of the GS Managed Funds (resulting in such affiliates and employees of Goldman Sachs and its affiliates holding interests totaling less than 0.1% in CD&R Fund VIII).
The board of directors of the Company selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement dated December 14, 2010, the Company engaged Goldman Sachs to act as its financial advisor in connection with the contemplated merger. Pursuant to the terms of this engagement letter, the Company has agreed to pay Goldman Sachs a transaction fee currently estimated to be approximately $12.95 million, $500,000 of which was payable upon execution of the merger agreement and the balance of which is payable upon completion of the merger. In addition, the Company has agreed to reimburse Goldman Sachs for its expenses, including attorneys' fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
Engagement of Merrill Lynch, Pierce, Fenner & Smith Incorporated
As further discussed above (see "Background of the Merger"), the Company retained BofA Merrill Lynch as one of its financial advisors in connection with the merger. Given that BofA Merrill Lynch and certain of its affiliates had been requested by the Company to offer (and, if requested by qualified purchasers, to arrange and/or provide for), and ultimately participated in, the debt financing for the merger, BofA Merrill Lynch was not requested to, and it did not, deliver an opinion in connection with the merger.
37
In connection with BofA Merrill Lynch's services as the Company's financial advisor, the Company has agreed to pay BofA Merrill Lynch an aggregate fee currently estimated to be approximately $12.95 million, $500,000 of which was payable upon execution of the merger agreement and the balance of which is payable upon completion of the merger. The Company also has agreed to reimburse BofA Merrill Lynch for its reasonable expenses, including fees and disbursements of BofA Merrill Lynch's counsel, incurred in connection with BofA Merrill Lynch's engagement and to indemnify BofA Merrill Lynch, any controlling person of BofA Merrill Lynch and each of their respective directors, officers, employees, agents and affiliates against certain liabilities, including liabilities under the federal securities laws, arising out of BofA Merrill Lynch's engagement. BofA Merrill Lynch and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of business, BofA Merrill Lynch and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of the Company, CD&R, Onex and certain of their respective affiliates and/or portfolio companies. BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to the Company, CD&R, Onex and/or certain of their respective affiliates and portfolio companies and have received or in the future may receive compensation for the rendering of these services. During the two years prior to February 13, 2011 (the date on which the board of directors approved the merger), CD&R and certain of its portfolio companies paid BofA Merrill Lynch for certain investment banking and commercial banking services fees that are in the aggregate in excess of the fee payable to BofA Merrill Lynch in connection with its services as the Company's financial advisor with respect to the merger (described above).
BofA Merrill Lynch has agreed to act as an arranger for, and Bank of America, N.A. has committed to provide 15% of, the aggregate debt financing to be obtained by Merger Sub at the closing of the merger, subject to specified conditions as set forth under "Financing of the MergerDebt Financing." In connection with arranging and providing such debt financing, BofA Merrill Lynch and Bank of America, N.A. expect to receive an aggregate fee of approximately $11.8 million, which fee may be increased to up to approximately $17.25 million depending on, among other factors, the total debt amount and success of the syndication of certain debt facilities.
Certain Effects of the Merger
If the merger agreement is adopted by our stockholders and the other conditions to the closing of the merger are either satisfied or waived and the merger is consummated as contemplated by the merger agreement, Merger Sub will be merged with and into EMSC with EMSC continuing as the surviving corporation and a wholly-owned subsidiary of Parent.
Following the merger, the entire equity in the surviving corporation will be indirectly owned by CD&R Fund VIII, certain CD&R-sponsored co-investment vehicles, and any members of management and other key employees of EMSC who make an indirect investment in EMSC. If the merger is completed, such parties will be the sole beneficiaries of our future earnings and growth, if any, and will be entitled to vote on corporate matters affecting EMSC following the merger. Similarly, such parties will also bear the risks of ongoing operations, including the risks of any decrease in our value after the merger and the operational and other risks related to the incurrence by the surviving corporation of significant additional debt as described below under "Financing of the Merger".
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In connection with the merger, certain members of the Company's management will receive benefits and be subject to obligations in connection with the merger that are different from, or in addition to, the benefits and obligations of our stockholders generally, as described in more detail under "Interests of the Company's Directors and Executive Officers in the Merger". The incremental benefits may include, among others, continuing as executive officers or key employees of the surviving corporation, the receipt of equity interests of Parent and entry into new employment arrangements with the surviving corporation or its affiliates.
Our Class A common stock is currently registered under the Exchange Act and is quoted on the NYSE under the symbol "EMS". As a result of the merger, EMSC will be a privately-held corporation, and there will be no public market for its common stock. After the merger, our Class A common stock will cease to be quoted on the NYSE and price quotations with respect to sales of shares of Class A common stock in the public market will no longer be available. In addition, registration of our Class A common stock under the Exchange Act is expected to be terminated.
At the effective time of the merger, the directors of Merger Sub will become the directors of the surviving corporation and the current officers of EMSC will become the officers of the surviving corporation. The certificate of incorporation and by-laws of EMSC will be amended as a result of the merger to be the same as those of Merger Sub immediately prior to the effective time of the merger, except that the name of the corporation will not be amended, so that the name of the surviving corporation will be "Emergency Medical Services Corporation". The certificate of incorporation and by-laws of EMSC as so amended will be the certificate of incorporation and by-laws of the surviving corporation.
Effects on the Company if the Merger is Not Completed
If the merger agreement is not adopted by our stockholders or if the merger is not completed for any other reason, our stockholders will not receive any payment for their shares of our common stock pursuant to the merger agreement. Instead, we will remain a public company and our Class A common stock will continue to be registered under the Exchange Act and quoted on the NYSE. In addition, if the merger is not completed, we expect that our management will operate our business in a manner similar to that in which it is being operated today and that our stockholders will continue to be subject to the same risks and opportunities to which they currently are subject, including, among other things, the nature of the industry on which our business largely depends, and general industry, economic, regulatory and market conditions.
If the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of our common stock. In the event the merger is not completed, our board of directors will continue to evaluate and review our business operations, prospects and capitalization, make such changes as are deemed appropriate and seek to identify acquisitions, joint ventures or strategic alternatives to enhance stockholder value. If the merger agreement is not adopted by our stockholders, or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely impacted.
If the merger agreement is terminated under certain circumstances, we will be obligated to pay CD&R or its designee the break-up fee of $116,505,000. Parent will have to pay us the termination fee of $203,884,000 if the merger agreement is terminated under certain circumstances. For a description of the circumstances triggering payment of these break-up and termination fees, see "The Merger AgreementTermination Fees".
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Parent has obtained an equity financing commitment from CD&R Fund VIII and Merger Sub has obtained debt financing commitments from the initial lenders (identified below under "Debt Financing") in connection with the transactions contemplated by the merger agreement in an aggregate amount of approximately $3.2 billion. These funds, in addition to the Company's cash on hand, are expected to be sufficient to pay merger consideration in the amount of approximately $2.9 billion to our stockholders (including holders of the LP exchangeable units, which are exchangeable into shares of Class B common stock), to repay outstanding indebtedness and to pay fees and expenses in connection with the merger, the financing arrangements and the related transactions.
We believe that the amounts committed under the commitment letters will be sufficient to complete the merger, but we cannot assure you of that. Those amounts might be insufficient if, among other things, one or more of the parties to the commitment letters fails to fund the financing or if the conditions to such commitments are not met. Although obtaining the proceeds of any financing, including financing under the commitment letters, is not a condition to the completion of the merger, the failure of Parent and Merger Sub to obtain any portion of the committed financing (or alternative financing) is likely to result in the failure of the merger to be completed. In that case, Parent may be obligated to pay the Company a fee of $203,884,000, as described under "The Merger AgreementTermination Fees".
On February 13, 2011, CD&R Fund VIII entered into an equity commitment letter with Parent pursuant to which CD&R Fund VIII committed to purchase on the merger closing date common equity securities (or other equity security interests permitted by the debt commitment letters) of Parent for an aggregate purchase price of up to $900 million. The equity commitment of CD&R Fund VIII is conditioned upon the consummation of the merger following the satisfaction or waiver of the conditions to the obligations of Parent and Merger Sub to consummate the transactions contemplated by the merger agreement and the substantially contemporaneous funding of the debt financing. CD&R Fund VIII shall not, under any circumstances, be obligated to contribute to Parent more than the amount of such commitment. In the event that Parent does not require all of CD&R Fund VIII's equity commitment, such commitment shall be reduced accordingly.
The obligation of CD&R Fund VIII to fund the equity commitment will terminate upon the earliest to occur of (i) the termination of the merger agreement and (ii) the Company or any of its affiliates asserting in any litigation or other proceeding any claim under the limited guarantee given by CD&R Fund VIII to the Company. Upon any such termination of the equity commitment letter, any obligations thereunder will terminate and none of the parties thereto shall have any liability whatsoever to the other party.
CD&R Fund VIII's obligations under the equity commitment letter may not be assigned, except that CD&R Fund VIII may assign all or a portion of such obligations to its affiliates or affiliated funds or to entities governed by an affiliate or an affiliated fund. However, any such assignment shall not relieve CD&R Fund VIII of its obligations under the equity commitment letter. CD&R Fund VIII expects to assign a portion of its equity funding obligations to one or more co-investment vehicles, which CD&R expects to form and manage for purposes of this transaction. In addition, Parent expects the Company's management will make an equity investment at the effective time of the merger; while there has been no agreement as to the amount of any equity interests to be acquired by the Company's management, Parent estimates that this amount is likely to be between $20 million and $35 million. Any acquisition of equity interests by the Company's management would have the effect of reducing the amount of the equity financing required to be funded by CD&R Fund VIII.
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In connection with the execution and delivery of the merger agreement, Merger Sub has received a debt commitment letter for up to $2,675 million aggregate principal amount of debt financing from Barclays Bank PLC, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., Bank of America, N.A., BofA Merrill Lynch, Morgan Stanley Senior Funding, Inc., Royal Bank of Canada, RBC Capital Markets, UBS Loan Finance LLC, UBS Securities LLC, Citigroup Global Markets Inc. and Natixis, (referred to collectively as the initial lenders) consisting of (i) a $1,375 million senior secured term loan facility (referred to as the term loan facility), (ii) a $350 million senior secured asset-based revolving credit facility (referred to as the ABL loan facility), which is not currently expected to be drawn at the effective time of the merger other than with respect to the rolling or replacement of existing letters of credit, and (iii) up to $950 million of senior unsecured increasing rate loans under a senior unsecured credit facility (referred to as the bridge facility and collectively with the term loan facility and the ABL facility, referred to as the senior debt facilities). The initial lenders are seeking to syndicate an additional $65 million of borrowing under the term loan facility; if this effort is successful, the aggregate borrowing under the term loan facility at the effective time will be $1,440 million. If this additional amount is not made available under the term loan facility, Merger Sub expects to draw such amount under the ABL loan facility at the effective time. This additional borrowing takes into account changes in the Company's available cash since December 31, 2010 due to, among other things, cash paid for acquisitions including the acquisition of Best Practices, Inc. on April 8, 2011.
The debt financing commitments are conditioned on the consummation of the merger in accordance with the merger agreement, as well as other customary conditions, including, but not limited to:
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The final termination date for the debt commitment letter is the earliest of (i) August 19, 2011, unless the initial lenders in their discretion agree to an extension, (ii) the date on which the merger is consummated with or without the funding of the senior debt facilities, and (iii) the date on which definitive documentation for the acquisition, including the merger agreement, is validly terminated in accordance with its terms.
If any portion of the debt financing becomes unavailable on the terms and conditions contemplated by the debt commitment letter, Parent will be required to use its reasonable best efforts to arrange or obtain alternative financing on no less favorable terms in an amount sufficient to consummate the merger. In the event that Parent and Merger Sub are required to do so, it may be difficult, or impossible, for Parent and Merger Sub to obtain alternative financing on such terms.
Except as described herein, there is no plan or arrangement regarding the refinancing or repayment of the debt financings.
Litigation Related to the Merger
Eleven purported shareholder class actions relating to the transactions contemplated by the merger agreement have been filed in state court in Delaware and federal and state courts in Colorado against various combinations of the Company, the members of our board of directors, CD&R, Parent, Merger Sub, Onex, Onex subsidiaries, Goldman, Sachs & Co., Bank of America Corporation and BofA Merrill Lynch, which we refer to as the Actions. The Actions consist of the following: Seven actions were filed in the Delaware Court of Chancery beginning on February 22, 2011, which have since been consolidated into one action entitled In re Emergency Medical Services Corporation Shareholder Litigation, Consolidated C.A. No. 6248-VCS. On April 4, 2011, the Delaware plaintiffs filed their consolidated class action complaint. Two actions, entitled Scott A. Halliday v. Emergency Medical Services Corporation, et al., Case No. 2011CV316 (filed on February 15, 2011), and Alma C. Howell v. William Sanger, et. al., Case No. 2011CV488 (filed on March 1, 2011), were filed in the District Court, Arapahoe County, Colorado. Two other actions, entitled Michael Wooten v. Emergency Medical Services Corporation, et al., Case No. 11-CV-00412 (filed on February 17, 2011), and Neal Greenberg v. Emergency Medical Services Corporation, et. al., Case No. 11-CV-00496 (filed on February 28, 2011), were filed in the U.S. District Court for the District of Colorado.
The Actions generally allege that the directors of the Company, Onex and/or the Onex subsidiaries breached their fiduciary duties by, among other things: approving the transactions contemplated by the Merger Agreement, which allegedly were financially unfair to the Company and its public stockholders; agreeing to provisions in the merger agreement that will allegedly prevent the board from considering other offers; permitting the unitholders agreement and failing to require a provision in the merger agreement requiring that a majority of the public stockholders approve the transactions contemplated by the merger agreement; and/or making allegedly materially inadequate disclosures. The Actions further allege that certain defendants aided and abetted these breaches. In addition, the two actions filed in the U.S. District Court for the District of Colorado contain individual claims brought under Section 14(a) and Section 20(a) of the Exchange Act pertaining to the purported dissemination of allegedly misleading proxy materials. The Actions seek unspecified damages and equitable relief,
42
including an injunction halting the transaction or rescission of the transaction as applicable. The Company has filed a motion to dismiss the federal claims in the Wooten action and to dismiss or stay the other claims in that case. The Company believes that all of the allegations in the Actions are without merit and intends to vigorously defend these matters.
The claims in the Actions that the transactions contemplated by the merger agreement are financially unfair to the Company and its public stockholders are based on, among other things, the following allegations:
One of the conditions to the closing of the merger is that no law, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction shall be in effect enjoining or otherwise preventing or prohibiting the consummation of the merger. As such, if any one of the plaintiffs is successful in obtaining an injunction prohibiting the completion of the merger on the agreed-upon terms, then such injunction may prevent the merger from becoming effective, or from becoming effective within the expected timeframe.
The merger will be accounted for as a "purchase transaction" for financial accounting purposes.
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Material United States Federal Income Tax Consequences
The following is a summary of certain material U.S. federal income tax consequences of the merger that are relevant to beneficial holders of the Company's common stock whose shares will be converted to cash in the merger and who will not own (actually or constructively) any shares of the Company's common stock after the merger. The following discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to beneficial holders of the Company's common stock. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, existing, proposed, and temporary regulations promulgated under the Code, and rulings, administrative pronouncements, and judicial decisions as in effect on the date of this proxy statement, changes to which could materially affect the tax consequences described below and could be made on a retroactive basis.
The discussion applies only to beneficial holders of the Company's common stock in whose hands the shares are capital assets within the meaning of Section 1221 of the Code and does not apply to beneficial holders who (i) acquired their shares (a) pursuant to the exercise of stock options or otherwise in connection with the performances of services to the Company or any of its affiliates; or (b) in exchange for LP exchangeable units held by such beneficial owner before the merger; or (ii) hold their shares as part of a hedge, straddle, conversion or other risk reduction transaction or who are subject to special tax treatment under the Code (such as dealers in securities or foreign currency, insurance companies, other financial institutions, regulated investment companies, tax-exempt entities, former citizens or long-term residents of the United States, S corporations, partnerships and investors in S corporations and partnerships, and taxpayers subject to the alternative minimum tax). In addition, this discussion does not consider the effect of any state, local, or foreign tax laws.
If a partnership (or other entity taxed as a partnership for U.S. federal income tax purposes) holds shares of the Company's common stock, the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partnership. Accordingly, partnerships that hold shares of the Company's common stock and partners in such partnerships are urged to consult their tax advisors regarding the specific U.S. federal income tax consequences to them of the merger.
For purposes of this discussion, the term "U.S. holder" means a beneficial owner of the Company's common stock that is, for U.S. federal income tax purposes, any of the following:
For purposes of this discussion, the term "non-U.S. holder" means a beneficial owner of the Company's common stock that is for U.S. federal income tax purposes a nonresident alien individual, a foreign corporation, or a trust or estate that is not a U.S. holder.
U.S. Holders
The receipt of cash in exchange for the Company's common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder who receives cash in
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exchange for shares pursuant to the merger will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received (plus the amount, if any, of taxes withheld) and the U.S. holder's adjusted tax basis in the shares surrendered pursuant to the merger. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same price per share in a single transaction) surrendered for cash pursuant to the merger. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. holder's holding period for such shares is more than one year at the time of consummation of the merger. For non-corporate taxpayers, long-term capital gains are generally taxable at a reduced rate. Deduction of capital losses may be subject to certain limitations.
Non-U.S. Holders
A non-U.S. holder generally will not be subject to U.S. federal income tax with respect to gain recognized pursuant to the merger unless one of the following applies:
We believe we are not and have not been a "United States real property holding corporation" for U.S. federal income tax purposes.
Information Reporting and Backup Withholding
Cash payments made pursuant to the merger will be reported to the recipients and the Internal Revenue Service to the extent required by the Code and applicable U.S. Treasury Regulations. In addition, certain non-corporate beneficial owners may be subject to backup withholding at a 28% rate on cash payments received in connection with the merger. Backup withholding will not apply, however, to a beneficial owner who (i) furnishes a correct taxpayer identification number and certifies that he, she or it is not subject to backup withholding on Form W-9 or successor form, (ii) provides a certification of foreign status on Form W-8 or successor form or (iii) is otherwise exempt from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.
The discussion set forth above is included for general information only. Each beneficial owner of shares of the Company's common stock should consult his, her or its own tax advisor with respect to the specific tax consequences of the merger to him, her or it, including the application and effect of state, local and foreign tax laws.
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Limitation on Remedies; Limited Guarantee
In no event will we be entitled to monetary damages from Parent and Merger Sub in excess of $203,884,000, including any payment by Parent of the termination fee described in the section of this proxy statement titled "The Merger AgreementTermination Fees", if applicable, for all losses and damages suffered as a result of the failure of the merger to be consummated or for any breach or failure to perform by Parent and Merger Sub under the merger agreement or otherwise. In addition, the Company can seek specific performance to require Parent and Merger Sub to complete the merger under certain circumstances.
Concurrently with the execution of the merger agreement, CDR Fund VIII entered into a limited guarantee in our favor pursuant to which it irrevocably guaranteed certain of Parent's obligations under the merger agreement, including payment of the termination fee, if and when due, and payment of certain reimbursement and indemnification obligations of Parent in connection with our cooperation with the financing. The limited guarantee will terminate on the earliest of (i) the effective time of the merger, (ii) the first anniversary of any termination of the merger agreement, except as to a claim for payment of any obligations thereunder presented by the Company to Parent or CD&R Fund VIII by such first anniversary or (iii) the termination of the merger agreement under circumstances where Parent would not be obligated to pay any obligations under the limited guarantee. However, if the Company asserts a claim other than as permitted under the limited guarantee, including a claim or claims in excess of $203,884,000, the limited guarantee will terminate immediately and become null and void by its terms, CD&R Fund VIII will be entitled to recover any payments previously made pursuant to the limited guarantee and neither CD&R Fund VIII nor certain of its related parties will have any liability under the limited guarantee or with respect to the transactions contemplated by the merger agreement.
The limited guarantee is our sole recourse against CDR Fund VIII, its affiliates and related parties, including CD&R, for any damages we may incur in connection with the merger agreement and the transactions contemplated by the merger agreement.
Concurrently with the execution of the merger agreement, on February 13, 2011, Parent, Merger Sub, EMSC, EMS LP, the Onex Affiliates and Onex, solely in its capacity as trustee under the Voting and Exchange Trust Agreement, dated as of December 20, 2005, among EMSC, EMS LP and Onex, which we refer to as the trust agreement, entered into a unitholders agreement. The Onex Affiliates own all of the outstanding LP exchangeable units, which are exchangeable on a one-for-one basis for shares of Class B common stock at any time at the option of the holder. Under the trust agreement, the trustee holds the Class B special voting share. Each Onex Affiliate is a beneficiary under the trust agreement, with voting rights in respect of the LP exchangeable units which would attach to the Class B common stock receivable upon exchange of the LP exchangeable units. All of these voting rights together are represented by the Class B special voting share and represent approximately 81.6% of the voting power of the Company's capital stock. In the unitholders agreement, among other things, the Onex Affiliates agree:
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The unitholders agreement will terminate upon the earliest to occur of (i) the termination of the merger agreement in accordance with its terms, (ii) the effective time of the merger and (iii) the mutual written consent of Parent and the Onex Affiliates.
No fee or other consideration is being paid to Onex or any of its affiliates by Parent, Merger Sub, the Company, CD&R or any of their affiliates in connection with the transactions contemplated by the merger agreement, other than the payment of the merger consideration to the Onex Affiliates.
Interests of the Company's Directors and Executive Officers in the Merger
In considering the recommendation of our board of directors with respect to the merger agreement, you should be aware that certain of the Company's directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our stockholders generally, as more fully described below. Our board of directors was aware of these interests and considered them, among other matters, in reaching its decision to approve the merger agreement and recommend that the Company's stockholders vote in favor of adopting the merger agreement. See "Background of the Merger" and "Purpose and Reasons for the Merger; Recommendation of Our Board of Directors" for a further discussion of these matters.
New Arrangements with EMSC Executive Officers and Other Key Employees
As of the date of this proxy statement, none of the Company's executive officers or other key employees has entered into any amendments or modifications to his or her existing employment agreement with the Company in connection with the merger, nor has any entered into any employment or other agreement with Parent or its affiliates. In addition, while it is expected that executive officers and other key employees will hold equity interests in Parent following the merger, none of these individuals has reached any agreement with the Company or Parent as to the amount, terms or conditions of any such equity interests.
As of April 7, 2011, there were approximately 934,602 shares of common stock of the Company issuable pursuant to stock options granted under our equity incentive plans to our executive officers. Our non-employee directors do not hold stock options. Under the merger agreement, we have agreed to adopt such resolutions and take such other actions as may be required so that:
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the stock option exchange ratio) (subject to adjustment), and such Parent stock option shall have an exercise price per share equal to the per share exercise price applicable to such converting stock option immediately prior to the effective time of the merger divided by the stock option exchange ratio (subject to adjustment).
The following table sets forth, for each of our executive officers holding stock options as of April 7, 2011, (i) the aggregate number of shares of Class A common stock subject to vested stock options, (ii) the value of such vested stock options on a pre-tax basis, calculated by multiplying (a) the excess, if any, of the $64.00 per share merger consideration over the respective per share exercise prices of those stock options by (b) the number of shares of Class A common stock subject to those stock options, (iii) the aggregate number of unvested stock options that will vest as of the effective time of the merger, assuming the director or executive officer remains employed by the Company at that date, (iv) the value of those unvested stock options on a pre-tax basis, calculated in the same manner as with respect to vested stock options, (v) the aggregate number of shares of Class A common stock subject to vested stock options and unvested stock options and (vi) the aggregate amount of consideration we expect to pay for all such options upon consummation of the merger (assuming, for this purpose, that none of these individuals agrees to convert his stock options into Parent stock options as described above).
|
Vested Stock Options | Unvested Stock Options | Aggregate Cash Consideration for All Stock Options |
||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||
William A. Sanger |
516,918 | 29,204,034 | 63,750 | (1) | 988,763 | 580,668 | 30,192,796 | ||||||||||||
Randel G. Owen |
139,917 | 7,806,004 | 28,125 | (2) | 465,656 | 168,042 | 8,271,660 | ||||||||||||
Todd G. Zimmerman |
48,492 | 2,564,609 | 34,375 | (3) | 513,531 | 82,867 | 3,078,140 | ||||||||||||
Mark E. Bruning |
14,375 | 488,719 | 30,000 | (4) | 691,813 | 44,375 | 1,180,531 | ||||||||||||
Steve W. Ratton, Jr. |
9,125 | 485,794 | 10,125 | (5) | 160,964 | 19,250 | 646,758 | ||||||||||||
R. Jason Standifird |
1,250 | 42,938 | 3,250 | (6) | 58,258 | 4,500 | 101,195 | ||||||||||||
Dighton C. Packard, M.D. |
23,900 | 1,341,462 | 3,250 | (6) | 58,258 | 27,150 | 1,399,720 | ||||||||||||
Steven G. Murphy |
625 | 21,469 | 3,250 | (6) | 58,258 | 3,875 | 79,726 | ||||||||||||
Kimberly Norman |
625 | 21,469 | 3,250 | (6) | 58,258 | 3,875 | 79,726 | ||||||||||||
All executive officers as a group (9 persons) |
755,227 | 41,976,496 | 179,375 | 3,053,756 | 934,602 | 45,030,253 |
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Treatment of Restricted Shares
As of April 7, 2011, there were approximately 150,836 outstanding restricted shares subject to vesting criteria, all of which were held by our executive officers. Under the merger agreement, we have agreed to adopt such resolutions and take such other actions as may be required so that each outstanding restricted share granted under our equity incentive plans that is outstanding immediately prior to the effective time of the merger shall be fully vested and, at the effective time of the merger, canceled and extinguished, and, in consideration thereof, the holder thereof will be entitled to receive, with respect to each such restricted share, on the date on which the effective time of the merger occurs, an amount in cash equal to $64.00, without interest and less any applicable withholding taxes.
The following table identifies, for each of our executive officers holding restricted shares, the aggregate number of unvested restricted shares of the Company as of April 7, 2011, and the pre-tax value of such restricted shares that will become fully vested in connection with the merger as calculated by multiplying $64.00 by the number of restricted shares.
Name
|
Aggregate Number of Shares of Unvested Restricted Shares |
Value of Unvested Restricted Shares ($) |
|||||
---|---|---|---|---|---|---|---|
William A. Sanger |
57,500 | (1) | 3,680,000 | ||||
Randel G. Owen |
25,000 | (2) | 1,600,000 | ||||
Todd G. Zimmerman |
31,250 | (3) | 2,000,000 | ||||
Mark E. Bruning |
16,666 | (4) | 1,066,624 | ||||
Steve W. Ratton, Jr. |
9,084 | (5) | 581,376 | ||||
R. Jason Standifird |
2,834 | (6) | 181,376 | ||||
Dighton C. Packard, M.D. |
2,834 | (6) | 181,376 | ||||
Steven G. Murphy |
2,834 | (6) | 181,376 | ||||
Kimberly Norman |
2,834 | (6) | 181,376 | ||||
All executive officers as a group (9 persons) |
150,836 | 9,653,504 |
Treatment of Restricted Share Units
As of April 7, 2011, there were approximately 90,340 outstanding RSUs subject to vesting criteria, all of which were held by our non-employee directors. Under the merger agreement, we have agreed to adopt such resolutions and take such other actions as may be required so that each RSU awarded under our equity plans that is outstanding immediately prior to the effective time of the merger shall,
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at the effective time of the merger, be vested and canceled and extinguished, and, in consideration thereof, the holder thereof will be entitled to receive, with respect to each such RSU, on the date on which the effective time of the merger occurs, an amount in cash equal to (i) the $64.00 per share merger consideration multiplied by (ii) the number of shares of Class A common stock subject to such RSU held by the holder immediately prior to the effective time of the merger, without interest and less any applicable withholding taxes.
Name
|
Aggregate Number of Shares of Unvested Restricted Share Units |
Value of Unvested Restricted Share Units ($) |
|||||
---|---|---|---|---|---|---|---|
Robert M. Le Blanc |
| | |||||
Steven B. Epstein |
2,325 | 148,800 | |||||
Paul B. Iannini, M.D. |
2,325 | 148,800 | |||||
James T. Kelly |
2,325 | 148,800 | |||||
Michael L. Smith |
2,325 | 148,800 | |||||
Kevin E. Benson |
2,325 | 148,800 | |||||
Leonard Riggs, Jr., M.D. |
1,854 | 118,656 | |||||
All non-employee directors as a group (7 persons) |
13,479 | 862,656 |
Payments Upon Termination Following Change-in-Control
The following is a summary of the provisions of the employment agreements of our executive officers applicable upon a qualifying termination of employment following a change of control. Messrs. Sanger, Owen, Zimmerman and Ratton are parties to employment agreements under which they receive severance if they terminate their employment with good reason following a change in control, in addition to being entitled to severance upon a termination without cause. Under the employment agreements, good reason is defined as (i) the Company's failure to maintain the executive's office or position; (ii) a significant adverse change in the executive's powers, duties or responsibilities; (iii) a reduction in the aggregate level of the executive's salary; (iv) a substantial reduction in the aggregate level of the executive's benefits; or (v) the failure of the surviving corporation to assume all the rights and responsibilities of the Company under the employment agreement upon completion of the merger. There are no payments to the executive officers pursuant to the merger that would trigger Section 280G of the Code. The employment agreements of Messrs. Mark E. Bruning, R. Jason Standifird, Dighton C. Packard, M.D., Steven G. Murphy and Ms. Kimberly Norman do not confer any additional rights or benefits upon a change of control. However, such officers are entitled to severance in the ordinary course upon a termination by the Company without cause.
William A. Sanger. If Mr. Sanger elects to terminate his employment for good reason following a change in control of the Company, the Company is required to pay him his base salary for a period of 24 months following such termination and continue to provide him with medical, dental and term life insurance for the 24-month period (or an equivalent lump sum cash payment). Additionally, if the performance targets for the year in which his employment has been terminated have been met, Mr. Sanger will be entitled to a pro rata portion of his bonus. Mr. Sanger's employment agreement contains non-competition and non-solicitation provisions pursuant to which he agrees not to compete with AMR or EmCare, or solicit or recruit our employees, for the 24-month period following termination of his employment. Upon the effective time of the merger, all of Mr. Sanger's unvested options and restricted shares will become fully vested and exercisable.
Randel G. Owen. If Mr. Owen elects to terminate his employment for good reason following a change in control of the Company, the Company is required to pay him his base salary for a period of
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24 months following such termination and continue to provide him with medical, dental and term life insurance for the 24-month period. The salary continuation is payable on regularly scheduled payroll dates. Additionally, if the performance targets for the year in which his employment has been terminated have been met, Mr. Owen will be entitled to a pro rata portion of his bonus. Mr. Owen's employment agreement contains non-competition and non-solicitation provisions pursuant to which he agrees not to compete with AMR or EmCare, or solicit or recruit our employees, for the 24-month period following termination of his employment. Upon the effective time of the merger, all of Mr. Owen's unvested options and restricted shares will become fully vested and exercisable.
Todd G. Zimmerman. If Mr. Zimmerman elects to terminate his employment for good reason following a change in control of the Company, he will be entitled to receive all salary earned to the date of termination and his base salary for a period of 24 months following such termination, and the Company is required to continue to provide him with medical, dental and term life insurance for the 24-month period. The salary continuation is payable on regularly scheduled payroll dates. Additionally, if the performance targets for the year in which his employment has been terminated have been met, Mr. Zimmerman will be entitled to a pro rata portion of his bonus. Mr. Zimmerman's employment agreement contains non-competition and non-solicitation provisions pursuant to which he agrees not to compete with AMR or EmCare, or solicit or recruit our employees, for the 24-month period following termination of his employment. Upon the effective time of the merger, all of Mr. Zimmerman's unvested options and restricted shares will become fully vested and exercisable.
Steve W. Ratton, Jr. If Mr. Ratton elects to terminate his employment for good reason following a change in control of the Company, he will be entitled to receive all salary earned to the date of termination and his base salary for a period of 12 months following such termination, and the Company is required to continue to provide him with medical, dental and term life insurance for the 12-month period. The salary continuation is payable on regularly scheduled payroll dates. Mr. Ratton's employment agreement contains non-competition and non-solicitation provisions pursuant to which he agrees not to compete with the Company, or solicit or recruit our employees, for the 24-month period following termination of his employment. Upon the effective time of the merger, all of Mr. Ratton's unvested options and restricted shares will become fully vested and exercisable.
The information in the chart below quantifies certain compensation, including the cash severance pay, that would become payable to our executive officers under their employment agreements if the executive officer's employment terminates in a qualifying termination immediately following a change in control (assuming, for this purpose, that the change in control occurred on February 1, 2011). These benefits are in addition to benefits available generally to salaried employees, such as distributions under the Company's 401(k) savings plans, disability benefits and accrued vacation benefits. This chart does not address the effect of the termination on equity compensation; for information related to equity compensation held by the executive officers, please see the charts above.
Name
|
Severance (Salary) ($) |
Severance (Bonus) ($)(1) |
Other Benefits ($) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
William A. Sanger |
1,951,298 | | 67,383 | (2) | ||||||
Randel G. Owen |
927,000 | | 25,868 | (2) | ||||||
Todd G. Zimmerman |
1,133,000 | | 22,338 | (2) | ||||||
Steve W. Ratton |
315,275 | 103,076 | 10,687 | (3) |
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2010 bonus period. Messrs. Sanger, Owen and Zimmerman's did not receive bonuses in respect of the 2010 bonus period because the performance targets applicable to such bonus period were not met.
We do not, as a matter of course, publicly disclose projections as to our future financial performance due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, we are including certain prospective financial information in this proxy statement to provide our stockholders access to certain non-public unaudited prospective financial information we made available to Goldman Sachs for use in connection with its financial analyses summarized above (and referred to above as the Forecasts; see "Opinion of Goldman, Sachs & Co."). This information was also made available to CD&R, CD&R Fund VIII, Parent, Merger Sub, other potential purchasers and the financing sources of Parent and Merger Sub in connection with their due diligence review of the Company. The prospective financial information included financial forecasts of our operating performance for fiscal years 2011 through 2015 prepared by our management, which we refer to as the Projections. The Projections were prepared by our management in November 2010 and revised in January 2011 to take into account the actual results for fiscal year 2010 and changes to certain assumptions relating to acquisitions that were expected to be completed in fiscal year 2011. The Projections were prepared on a basis consistent with the accounting principles used in our historical financial statements.
The Projections were not prepared with a view toward public disclosure, and are not being provided in this proxy statement to influence your decision whether to vote for or against the proposal to adopt the merger agreement, and the inclusion of this information should not be regarded as an indication that the Company, CD&R, CD&R Fund VIII, Parent, Merger Sub, Goldman Sachs, their respective representatives or any other recipient of this information considered, or now considers, the Projections to be necessarily predictive of actual future results, nor should this information be relied on as such. Neither the Company nor any of its affiliates or representatives assumes any responsibility for the accuracy of this information. The Projections were not prepared with a view to compliance with published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Furthermore, Ernst & Young LLP, our independent auditor, has not examined, reviewed, compiled or otherwise applied procedures to the Projections and, accordingly, assumes no responsibility for, and expresses no opinion on them.
The Projections are subjective in many respects. In compiling the Projections, our management took into account historical performance, combined with estimates regarding revenues, operating income, EBITDA, as defined below, and capital spending and acquisitions. Although the Projections are presented with numerical specificity, they reflect numerous assumptions and estimates as to future events made by our management that our management believed were reasonable at the time the Projections were prepared. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. In addition, factors such as industry performance, the market for our existing and new services, the competitive environment, expectations regarding future acquisitions and general business, economic, regulatory, market and financial conditions and other factors described or referenced under "Cautionary Statement Concerning Forward-Looking Information" beginning on page i, all of which are difficult to predict and beyond the control of our management, may cause the Projections or the underlying assumptions not to be reflective of actual future results. In addition, the Projections do not take into account any circumstances or events
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occurring after the date that they were prepared and, accordingly, do not give effect to the merger. As a result, there can be no assurance that the Projections will be realized, and actual results may be materially better or worse than those contained in the Projections.
In preparing the Projections, our management made the following material assumptions for the period from 2011 through 2015:
We believe the assumptions that our management used as a basis for the Projections were reasonable at the time our management prepared the Projections, given the information our management had at the time.
We do not intend, and expressly disclaim any responsibility to, update or otherwise revise the Projections to reflect circumstances existing after the date when prepared or to reflect the occurrence of future events even in the event that any of the assumptions underlying the Projections are no longer appropriate.
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Initial Management Projections (dollars in millions except per share amounts)
Prepared by Our Management in November 2010
The following are the initial projections prepared by our management in November 2010.
November 2010
|
2010E | 2011E | 2012E | 2013E | 2014E | 2015E | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue |
$ | 2,868.2 | $ | 3,167.4 | $ | 3,418.9 | $ | 3,770.0 | $ | 4,141.6 | $ | 4,546.8 | |||||||
Adjusted EBITDA(1) |
313.7 | 363.3 | 398.3 | 442.0 | 487.0 | 537.6 | |||||||||||||
Net Income |
128.9 | 165.9 | 186.5 | 217.3 | 244.3 | 286.3 | |||||||||||||
Diluted Earnings Per Share |
2.88 | 3.67 | 4.09 | 4.72 | 5.25 | 6.09 | |||||||||||||
Acquisitions and Capital Expenditures |
181.1 | 146.7 | 100.9 | 103.8 | 106.9 | 110.2 | |||||||||||||
Free Cash Flow(2) |
$ | 157.6 | $ | 207.3 | $ | 238.7 | $ | 239.9 | $ | 265.7 | $ | 303.3 |
Revised Management Projections (dollars in millions except per share amounts)
Prepared by Our Management in January 2011
The following are the revised projections prepared by our management in January 2011 to take into account actual results for fiscal year 2010 and to adjust the timing of acquisitions that were projected to be completed in fiscal year 2011.
January 2011
|
2010A | 2011E | 2012E | 2013E | 2014E | 2015E | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue |
$ | 2,859.3 | $ | 3,161.1 | $ | 3,412.9 | $ | 3,764.5 | $ | 4,136.7 | $ | 4,542.7 | |||||||
Adjusted EBITDA(1) |
314.4 | 361.8 | 396.8 | 440.5 | 485.6 | 536.3 | |||||||||||||
Net Income |
131.7 | 163.6 | 184.7 | 215.4 | 242.4 | 284.3 | |||||||||||||
Diluted Earnings Per Share |
2.95 | 3.63 | 4.06 | 4.69 | 5.23 | 6.07 | |||||||||||||
Acquisitions and Capital Expenditures |
168.8 | 159.8 | 102.2 | 105.2 | 108.3 | 111.6 | |||||||||||||
Free Cash Flow(2) |
$ | 146.6 | $ | 212.2 | $ | 232.2 | $ | 235.7 | $ | 261.4 | $ | 298.8 |
Governmental and Regulatory Approvals
Under the HSR Act, the merger may not be completed until we and Parent each file a notification and report form under the HSR Act with the FTC, and the DOJ, and the applicable waiting period has expired or been terminated. The notification and report forms were filed with the FTC and DOJ on February 28, 2011 and the FTC granted early termination of the HSR waiting period on March 7, 2011.
At any time before or after effective time of the merger, notwithstanding the early termination of the waiting period under the HSR Act, the DOJ, the FTC or state or foreign antitrust and competition authorities could take such action under applicable antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the merger or seeking divestiture of substantial assets of EMSC or Parent. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.
Due to the indirect change of ownership of EMCA Insurance, the Company's indirect subsidiary and captive insurance company, approval is also required by EMCA Insurance's domestic insurance regulator, the Cayman Islands Monetary Authority. Application for such approval was filed on February 24, 2011. The Cayman Islands Monetary Authority granted approval on March 1, 2011.
There can be no assurance that the regulatory approvals described above will be obtained and, if obtained, there can be no assurance as to the timing of any approvals, the ability of Parent or the Company to obtain the approvals on satisfactory terms or the absence of any litigation challenging such approvals.
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Time, Place and Purpose of the Special Meeting
This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on [ ] starting at [ ], local time, at [ ], or at any postponement or adjournment of the meeting. The purpose of the special meeting is for our stockholders to consider and vote upon the following proposals:
A copy of the merger agreement is attached as Annex A to this proxy statement. This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about [ ].
Our board of directors unanimously (i) approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the merger, and the unitholders agreement, (ii) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are fair to and in the best interests of our stockholders and (iii) resolved to recommend that the stockholders of the Company adopt the merger agreement. For a discussion of the material factors considered by our board of directors in reaching its conclusions, see "The MergerPurpose and Reasons for the Merger; Recommendation of Our Board of Directors".
Our board of directors recommends that you vote "FOR" the proposal to adopt the merger agreement and "FOR" the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.
We have fixed the close of business on March 21, 2011 as the record date for the special meeting, and only holders of record of our common stock on the record date are entitled to vote at the special meeting. On March 21, 2011, there were 30,482,075 shares of our Class A common stock, 52,228 shares of our Class B common stock and one Class B special voting share entitled to be voted at the special meeting (which is held by a trustee for the benefit of the holders of LP exchangeable units, of which there were 13,724,676 outstanding as of the record date). Each share of Class A common stock outstanding on the record date entitles its holder to one vote, each share of Class B common stock outstanding entitles its holder to ten votes, and the one Class B special voting share entitles its holder to the number of votes that would attach to the Class B common stock receivable upon the exchange of LP exchangeable units outstanding on the record date (an aggregate of 137,246,760 votes), on all matters properly coming before the stockholders at the special meeting. For more information regarding the LP exchangeable units, see "The Merger AgreementUnitholders Agreement".
The presence at the special meeting in person or by proxy of the holders of a majority of all of the votes represented by the outstanding shares of our common stock and the Class B special voting share entitled to vote at the special meeting as of the close of business on the record date will constitute a quorum for the purpose of considering the proposals at the special meeting. Shares of our common stock and the Class B special voting share represented at the special meeting but not voted, including shares of capital stock for which we have received proxies indicating that the submitting stockholders have abstained, will be treated as present at the special meeting for purposes of determining the
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presence of a quorum for the transaction of all business. In the event that a quorum is not present, or if there are insufficient votes to adopt the merger agreement at the time of the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies.
The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the voting power of the Company's outstanding common stock and the Class B special voting share voting together as a single class of capital stock. Pursuant to the unitholders agreement, the Onex Affiliates, who hold, as of the record date, approximately 81.5% of the voting power of the Company's capital stock, have agreed, among other things, to direct the vote of their respective interests in the Class B special voting share in favor of the adoption of the merger agreement and approval of the merger.
For the proposal to adopt the merger agreement, you may vote FOR or AGAINST or ABSTAIN. Abstentions will not be counted as votes cast or shares voting on the proposal to adopt the merger agreement, but will count for the purpose of determining whether a quorum is present. If you abstain, it will have the same effect as a vote "AGAINST" the adoption of the merger agreement for purposes of the stockholder approval. Any signed proxies received by us for which no voting instructions are provided will be voted "FOR" the proposal to adopt the merger agreement and "FOR" the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
If your shares of common stock are held in "street name", you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares voted. Under rules applicable to the NYSE, brokers who hold shares in "street name" for customers have the authority to vote on "routine" proposals when they have not received instructions from beneficial owners. However, brokers are precluded from exercising their voting discretion with respect to approving non-routine matters such as the adoption of the merger agreement and, as a result, absent specific instructions from the beneficial owner of the shares, brokers are not empowered to vote those shares, referred to generally as "broker non-votes". These "broker non-votes" will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote "AGAINST" the adoption of the merger agreement for purposes of the stockholder approval.
Adjournment of the special meeting to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement requires the affirmative vote of the holders of at least a majority of the voting power of the Company's capital stock that are present, in person or by proxy, and entitled to vote at the special meeting, whether or not a quorum is present.
A failure to vote your shares of common stock or a broker non-vote will have no effect on the outcome of any vote to adjourn the special meeting. An abstention will have the same effect as voting "AGAINST" any proposal to adjourn the special meeting.
If you submit a proxy by telephone or the Internet or by returning a signed proxy card by mail, your shares will be voted at the special meeting as you indicate on your proxy card or by such other method. If you sign your proxy card without indicating your vote, your shares will be voted "FOR" the adoption of the merger agreement, "FOR" the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, and in accordance with the recommendations of our board of directors on any other matters properly brought before the stockholders at the special meeting for a vote.
As discussed above, holders of LP exchangeable units are entitled to vote at meetings of holders of our common stock through a voting trust arrangement. If you hold LP exchangeable units as of the
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record date, pursuant to the unitholders agreement, you have provided voting instructions to Onex, as trustee, to vote "FOR" the adoption of the merger agreement.
Proxies received at any time before the special meeting, and not changed or revoked before being voted, will be voted at the special meeting. You have the right to change or revoke your proxy at any time before the vote is taken at the special meeting if you hold your shares in your name as a stockholder of record by:
If you hold your shares through a broker, bank or other nominee, you may change or revoke your proxy at any time before the vote is taken at the special meeting by following the directions received from your broker, bank or other nominee to change or revoke those instructions.
PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD. IF THE MERGER IS COMPLETED, A SEPARATE LETTER OF TRANSMITTAL WILL BE MAILED TO YOU IF YOU ARE A STOCKHOLDER OF RECORD THAT WILL ENABLE YOU TO RECEIVE THE MERGER CONSIDERATION IN EXCHANGE FOR YOUR EMSC STOCK CERTIFICATES.
Adjournments and Postponements
Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment may be made without notice, other than by an announcement made at the special meeting of the time, date and place of the adjourned meeting. Adjournment of the special meeting to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement requires the affirmative vote of the holders of at least a majority of the voting power of the Company's capital stock that are present, in person or by proxy, and entitled to vote at the special meeting, whether or not a quorum is present.
Any signed proxies received by us for which no voting instructions are provided on this matter will be voted "FOR" an adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies. In addition, when any meeting is convened, the presiding officer, if directed by our board of directors, may adjourn the meeting if (i) no quorum is present for the transaction of business or (ii) our board of directors determines that adjournment is necessary or appropriate to enable the stockholders to consider fully information which our board of directors determines has not been made sufficiently or timely available to stockholders or otherwise to exercise effectively their voting rights. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow our stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.
Rights of Stockholders Who Object to the Merger
Stockholders are entitled to statutory appraisal rights under the DGCL in connection with the merger. This means that you are entitled to have the value of your shares of our capital stock
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determined by the Court of Chancery of the State of Delaware, and to receive payment based on that valuation instead of receiving the $64.00 per share merger consideration. The ultimate amount you would receive in an appraisal proceeding may be more than, the same as or less than the amount you would have received under the merger agreement.
To exercise your appraisal rights, you must submit a written demand for appraisal to us before the vote is taken on the merger agreement and you must NOT vote in favor of the adoption of the merger agreement. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of your appraisal rights. See "Appraisal Rights" beginning on page 83 and the text of the Delaware appraisal rights statute, Section 262 of the DGCL, which is reproduced in its entirety as Annex C to this proxy statement.
This proxy solicitation is being made by us on behalf of our board of directors and will be paid for by the Company. In addition, we have engaged Alliance Advisors, LLC to assist in the solicitation of proxies for the special meeting and we estimate that we will pay Alliance Advisors, LLC a fee of $9,800 plus certain costs associated with additional services, if required. We also have agreed to reimburse Alliance Advisors, LLC for out of pocket expenses and to indemnify them against certain losses arising out of its proxy solicitation services. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional compensation for their efforts. We will also request brokers, banks and other nominees to forward proxy solicitation material to the beneficial owners of our shares of common stock that the brokers, banks and nominees hold of record. Upon request, we will reimburse them for their reasonable out-of-pocket expenses related to forwarding the material.
We do not know of any other business that will be presented at the special meeting. Should any business other than that set forth in the notice of special meeting of stockholders properly come before the special meeting, the enclosed proxy confers discretionary authority to vote with respect to only such matters that our board of directors does not know, a reasonable time before proxy solicitation, are to be presented at the special meeting. If any of these matters are presented at the special meeting, then the proxy holders named in the enclosed proxy card will vote in accordance with their judgment.
Questions and Additional Information
If you have more questions about the merger, need assistance in submitting your proxy or voting your shares, or need additional copies of this proxy statement or the enclosed proxy card, you should contact us in writing at Corporate Secretary, Emergency Medical Services Corporation, 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111, or by telephone at (303) 495-1200. You may also contact the Company's proxy solicitor:
Alliance
Advisors, LLC
200 Broadacres Drive, 3rd Floor
Bloomfield, NJ 07003
Email: ems@allianceadvisorsllc.com
Toll-Free: (877) 777-4575
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This section of the proxy statement describes the material provisions of the merger agreement, but does not purport to describe all of the terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. This summary does not purport to be complete and may not contain all of the information about the merger agreement important to you. We urge you to read the full text of the merger agreement because it is the legal document that governs the merger.
The merger agreement is included to provide you with information regarding its terms. Factual disclosures about the Company contained in this proxy statement or in the Company's public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement. The representations, warranties and covenants made in the merger agreement by the Company, Parent and Merger Sub were qualified and subject to important limitations agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue because of a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in the disclosure schedules that the Company and Parent delivered in connection with the merger agreement, which disclosures were not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement.
The merger agreement provides for the merger of Merger Sub, a wholly-owned subsidiary of Parent, with and into EMSC upon the terms and subject to the conditions set forth in the merger agreement. After the merger, EMSC will continue as the surviving corporation and as a wholly-owned subsidiary of Parent, and all properties, rights, privileges, powers and franchises of the Company and Merger Sub, and all claims, obligations, liabilities, debts and duties of the Company and Merger Sub shall become the claims, obligations, liabilities, debts and duties of the surviving corporation.
The surviving corporation will be a privately held corporation and our current stockholders, other than any EMSC executive officers and other key employees who will hold an ownership interest in the surviving corporation, will cease to have any ownership interest in the surviving corporation or rights as our stockholders. Therefore, such current stockholders will not participate in any future earnings or growth of the surviving corporation and will not benefit from any appreciation in value of the surviving corporation.
Upon consummation of the merger, the directors of Merger Sub will be the initial directors of the surviving corporation, and the officers of EMSC will be the initial officers of the surviving corporation. All directors and officers of the surviving corporation will hold their positions until their successors are duly elected or appointed and qualified or their earlier resignation or removal. The certificate of incorporation and by-laws of EMSC will be amended as a result of the merger to be the same as those of Merger Sub immediately prior to the consummation of the merger, except that the name of the
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corporation will not be amended, so that the name of the surviving corporation will be "Emergency Medical Services Corporation". The certificate of incorporation and by-laws as so amended will be the certificate of incorporation and by-laws of the surviving corporation. Following the completion of the merger, our shares of Class A common stock will be delisted from the NYSE and deregistered under the Exchange Act, and cease to be publicly traded.
EMSC or Parent may terminate the merger agreement prior to the effective time of the merger in some circumstances, whether before or after the adoption by our stockholders of the merger agreement. Additional details on termination of the merger agreement are described in "Termination of the Merger Agreement" below.
Effective Time; Marketing Period
The merger will be effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware (or at such later time as is agreed upon by the parties to the merger agreement and specified in the certificate of merger), which we refer to as the effective time. We expect to complete the merger as promptly as practicable after our stockholders adopt the merger agreement (assuming the prior satisfaction of the other closing conditions to the merger and the end of the marketing period as described below). Unless otherwise agreed to by the parties to the merger agreement, the closing of the merger will occur two business days after the satisfaction or waiver of the closing conditions (described in "Conditions to the Completion of the Merger" below), unless another time, date or place is agreed to in writing by Parent and the Company. However, if the marketing period (as defined below in the next paragraph) has not ended at the time of the satisfaction or waiver of such closing conditions, the merger will instead occur on the date following the satisfaction or waiver of such conditions that is the earlier to occur of (i) any business day before or during the marketing period, as may be specified by Parent on no less than two business days' prior notice, and (ii) the second business day immediately following the final business day of the marketing period.
The term "marketing period" means the first period of 20 business days after February 13, 2011 and after (i) the SEC has confirmed that it has no further comments on this proxy statement, and the proxy statement has been mailed to the holders of common stock and the Class B special voting share as of the record date established for the stockholders' meeting to vote upon the merger and (ii) completion of the 50-calendar day period in which Parent has access to the Company's information necessary in connection with obtaining an asset-based loan facility (as described above) (or, if earlier, Parent has received a completed field audit and appraisal of the Company's and its subsidiaries' accounts receivable and inventory), throughout and at the end of which Parent shall have received the information from the Company referred to below as the required information (see "-Financing") and certain conditions to closing have been satisfied (or would reasonably be expected to be satisfied in advance of closing of the merger, assuming such closing were to be scheduled for any time during such 20-business day period).
Notwithstanding the foregoing:
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commence until five business days after a new unqualified audit opinion is issued with respect to such financial statements by Ernst & Young LLP or another nationally-recognized independent public accounting firm; or
Except as noted below, each share of our common stock issued and outstanding immediately prior to the effective time (including shares of Class B common stock that will be issued immediately prior to the effective time in exchange for LP exchangeable units) will be automatically cancelled and converted at the effective time into the right to receive $64.00 in cash, without interest and less any applicable withholding taxes. In addition, the Class B special voting share will be cancelled and converted into the right to receive $1.00 in cash, without interest and less any applicable withholding taxes. The following shares of common stock will not receive the merger consideration:
At the effective time of the merger, each holder of a certificate formerly representing any shares of common stock (or evidence of shares in book-entry form) (other than shares for which appraisal rights have been properly demanded, perfected and not withdrawn or lost under Section 262 of the DGCL) will no longer have any rights with respect to the shares, except for the right to receive the merger consideration upon surrender thereof. See "Appraisal Rights" below.
Prior to the effective time, Parent will designate a paying agent reasonably acceptable to the Company to receive the aggregate merger consideration for the benefit of the holders of shares of our common stock. At or prior to the effective time, Parent will deposit with the paying agent an amount in cash equal to the aggregate merger consideration.
As promptly as reasonably practical after the effective time, Parent will cause the paying agent to mail to each holder of record of our shares a letter of transmittal and instructions advising such holders how to surrender their certificates or book-entry shares for the merger consideration. The paying agent will pay each holder of record the per share merger consideration upon its receipt of (i) surrendered certificates or book-entry shares and (ii) a signed letter of transmittal and any other items specified by the paying agent. Interest will not be paid or accrue in respect of the merger consideration. The surviving corporation will reduce the amount of any merger consideration paid to you by any applicable
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withholding taxes. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
At the effective time of the merger, we will close our stock transfer books. After that time, there will be no further transfer of shares of our common stock that were outstanding immediately prior to the effective time of the merger.
If any cash deposited with the paying agent is not claimed within 6 months following the effective time of the merger, such cash will be returned to the Parent, upon demand, and any holders of certificates or book entry shares who have not complied with the share certificate exchange procedures in the merger agreement may thereafter only look to Parent for, and Parent will remain liable for, payment of their claims for the merger consideration.
If the paying agent is to pay some or all of a stockholder's merger consideration to a person other than the person in whose name the certificate surrendered is registered in the transfer records of the company, then (i) in the case of a stock certificate, the certificate must be properly endorsed or otherwise be in proper form for transfer, and (ii) the person requesting payment must pay any transfer or other similar taxes payable by reason of the payment of the merger consideration to a person other than the registered holder or establish to the Parent's reasonable satisfaction that the taxes have been paid or are not required to be paid.
The letter of transmittal will include instructions if the stockholder has lost the share certificate or if it has been stolen or destroyed. The stockholder will have to provide an affidavit to that fact and, if required by the Parent, post a bond in an amount that Parent reasonably directs as indemnity against any claim that may be made against it in respect of the share certificate in order for the paying agent to deliver applicable merger consideration.
Treatment of Stock Options, Restricted Shares and Restricted Share Units
The merger agreement provides that, as soon as reasonably practicable following the date of the merger agreement, the Company will adopt such resolutions and take such other actions as may be required so that:
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adjustment), and such Parent stock option shall have an exercise price per share equal to the per share exercise price applicable to such converting stock option immediately prior to the effective time of the merger divided by the stock option exchange ratio (subject to adjustment);
Representations and Warranties
In the merger agreement, the Company has made customary representations and warranties to the Company with respect to, among other things:
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In the merger agreement, Parent and Merger Sub have made customary representations and warranties to the Company with respect to, among other things:
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The representations and warranties contained in the merger agreement of each of the Company, Parent and Merger Sub will terminate upon the consummation of the merger or the termination of the merger agreement pursuant to its terms.
Company Material Adverse Effect Definition
Many of our representations and warranties are qualified by a Company Material Adverse Effect standard. For the purpose of the merger agreement, "Company Material Adverse Effect" means any change, effect, event, state of facts, development or occurrence that, individually or in the aggregate with all other changes, effects, state of facts, developments or occurrences, is, or would be reasonably expected to be materially adverse to the business, assets, condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole.
Notwithstanding the foregoing, none of the following shall either alone or in combination constitute, or be taken into account in determining whether there has been a Company Material Adverse Effect. Any change, effect, event, state of facts, development or occurrence that arises out of or results from:
except in the cases of the first five bullets above, to the extent that the Company and its subsidiaries, taken as a whole, are materially disproportionately affected by such item as compared with other participants in the industries in which the Company and its subsidiaries primarily operate (in which case the incremental materially disproportionate impact or impacts may be taken into account in determining whether there has been, or is reasonably expected to be, a Company Material Adverse Effect).
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Conduct of Business Prior to Closing
We have agreed in the merger agreement that, until the effective time, subject to certain exceptions in the Company's disclosure schedule, except as expressly required or permitted by the merger agreement or required by law or consented to in writing by Parent (which consent will not be unreasonably withheld or delayed), we will, and will cause our subsidiaries to:
We have also agreed in the merger agreement that, until the effective time of the merger, subject to certain exceptions in the Company's disclosure schedule, except as expressly permitted or required by the merger agreement or required by applicable law or consented to in writing by Parent (which consent cannot be unreasonably withheld or delayed), the Company will not, and will not permit our subsidiaries to:
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Restrictions on Solicitations of Other Offers
We have agreed that we will, and will cause our subsidiaries to, and we will use our reasonable best efforts to cause our and their representatives to, immediately cease and terminate any solicitation, knowing encouragement, discussion or negotiation or cooperation with, or assistance or participation in, or facilitation of any inquires, proposals, discussions or negotiations with any persons or entities conducted prior to the date of the merger agreement with respect to any acquisition proposal (as defined below).
Subject to certain exceptions described below, we and our subsidiaries are required not to (and are required to direct our representatives not to, and cannot permit our officers, directors or the Onex Affiliates to), directly or indirectly:
In addition, we have agreed not to grant, after the date of the merger agreement, any waiver, amendment or release under any standstill agreement without the prior written consent of Parent.
However, notwithstanding the restrictions above, if prior to obtaining the stockholder approval, (i) the Company receives an unsolicited written acquisition proposal from a third party that our board of directors determines in good faith to be bona fide, (ii) such acquisition proposal did not result from a breach of the covenant not to solicit under the merger agreement, (iii) the board of directors determines in good faith, after consultation with its financial advisors and outside legal counsel, that
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such acquisition proposal constitutes or would be reasonably expected to result in a "superior proposal" (as defined below) and that the failure to take the action described immediately below with respect to the third party making such an acquisition proposal would be inconsistent with its fiduciary duties under Delaware law, then the Company may (upon written notice to Parent after any such determination by the board of directors):
We will notify Parent in writing, within 24 hours, of our receipt of an acquisition proposal, or any request for non-public information concerning the Company or any of its subsidiaries related to, or that could reasonably be expected to be related to or from any person, entity or group who could reasonably be expected to make any acquisition proposal, or any request for discussions or negotiations related to an acquisition proposal. The Company will keep Parent reasonably informed on a current basis of any material developments in the status and terms of such acquisition proposal, including whether such acquisition proposal has been withdrawn or rejected, or the material terms thereof have changed.
An "acquisition proposal" means any inquiry, offer or proposal from any person, entity or group that is structured to permit such person, entity or group (other than Parent, Merger Sub or their respective affiliates) to acquire, directly or indirectly and in a single transaction or a series of related transactions,
A "superior proposal" means any bona fide written acquisition proposal that the board of directors of the Company determines in good faith (after consultation with its outside legal counsel and financial advisors) (i) is reasonably likely to be consummated in accordance with its terms and the financing of
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which is fully committed or reasonably likely to be obtained and (ii) if consummated, would be more favorable to the stockholders of the Company from a financial point of view than the merger, taking into account all terms and conditions thereof (including all financial, legal, financing, regulatory and other aspects of such acquisition proposal (including the person or group making the acquisition proposal and the conditions for the completion of such acquisition proposal)) and of the merger agreement (including any changes to the terms of the merger agreement proposed by Parent and Merger Sub); provided, that for purposes of the definition of "superior proposal," the references to "15%" in the definition of acquisition proposal shall be deemed to be references to "75%".
Change in Board Recommendation; Termination in Connection with a Superior Proposal
Until the earlier of the effective time or the termination of the merger agreement, neither our board of directors nor any committee thereof is permitted to:
Notwithstanding these restrictions, at any time prior to the stockholder approval, our board of directors may, if it determines in good faith (after consultation with independent financial advisors and outside legal counsel) that the failure to take such action described above with respect to its recommendation would be inconsistent with the fiduciary duties of the board of directors to the Company's stockholders under Delaware law, (i) change its recommendation that our stockholders adopt the merger agreement, (ii) if the Company receives an unsolicited acquisition proposal after February 13, 2011 which our board of directors concludes in good faith, after consultation with outside legal counsel and its financial advisors, constitutes a superior proposal after giving effect to all of the adjustments to the terms of the merger agreement which may be offered by Parent, approve or recommend such superior proposal, and/or (iii) only in the case of the foregoing clause (ii), terminate the merger agreement after or concurrently with payment of the "break-up fee" (as defined in "Termination Fees" below), to enter into a definitive agreement with respect to such superior proposal. The board of directors may not take any of the foregoing actions unless the Company has:
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The Company is also required to deliver a new written notice to Parent and Merger Sub and again comply with the foregoing requirements in the event of any material revision to the terms of any such superior proposal or any acquisition proposal that the Company's board of directors determines no longer constitutes a superior proposal, including any change in any price term thereof.
In order to enter into an acquisition agreement with respect to a superior proposal, we must terminate the merger agreement in accordance with the terms of the merger agreement. See "Termination of the Merger Agreement" and "Termination Fees" below.
Notwithstanding these restrictions, subject to certain conditions, our board of directors may make certain disclosures contemplated by the securities laws or other applicable laws.
Obligations with Respect to Proxy Statement
The merger agreement provides that, as soon as practicable after February 13, 2011 (and in any event within 15 business days of February 13, 2011), the Company will prepare and file with the SEC in preliminary form a proxy statement relating to the stockholders' meeting to be held for purposes of voting upon the adoption of the merger agreement, which shall include our board of directors' recommendation that the stockholders adopt the merger agreement, the opinion of Goldman Sachs (if not withdrawn and subject to the consent of Goldman Sachs) and a copy of Section 262 of the DGCL.
In addition, the Company is required to, as promptly as practicable after the SEC confirms that it has no further comments on the proxy statement, (i) establish a record date for and give notice of a meeting of its stockholders for the purpose of voting upon the adoption of the merger agreement and (ii) mail to the holders of shares of Company common stock and the Class B special voting share as of the record date established for the stockholders' meeting the proxy statement. This proxy statement fulfills such obligation.
Agreement to Use Reasonable Best Efforts
Each of the Company, Parent and Merger Sub have agreed to use their reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate, as promptly as reasonably practicable, the merger and the other transactions contemplated by the merger agreement. In furtherance of the foregoing, the parties have agreed to:
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In addition, the Company is required to cooperate fully with Parent in connection with, and consult with and permit Parent and its representatives to participate in, the defense, negotiations or settlement of any litigation related to the transactions contemplated by the merger agreement and give consideration to Parent's advice with respect to any such litigation. The Company cannot, and will not permit any of its subsidiaries nor any of its or their representatives to, compromise, settle, come to a settlement arrangement regarding any such litigation or consent thereto unless Parent otherwise consents in writing (which shall not be unreasonably withheld or delayed).
Parent and Merger Sub have agreed to use their reasonable best efforts (taking into account the timing of the marketing period, as defined below) to arrange and obtain the debt financing and equity financing, which we refer to collectively as the financing, on the terms and conditions described in the debt commitment letter and the equity commitment letter, which we refer to collectively as the commitment letters, and they will use their reasonable best efforts to:
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See "The MergerFinancing of the Merger," for a discussion of the commitment letters.
If any portion of the debt financing becomes unavailable on the terms and conditions set forth in the debt commitment letter, Parent must immediately notify us and use its reasonable best efforts to obtain alternative debt financing no later than August 19, 2011 in an amount such that the aggregate funds that would be available to Parent and Merger Sub at the merger closing under such alternative debt financing (when combined with the equity financing and cash on hand of the Company) would be sufficient to pay all amounts contemplated by the merger agreement, provided that neither Parent nor Merger Sub is required to obtain any such alternative debt financing on terms and conditions less favorable to their interests than the terms set forth in the debt commitment letter.
Parent is required to give the Company prompt notice of any breach by any party to any of the financing commitments of which Parent or Merger Sub becomes aware, or any termination of any of the financing commitments, and will provide to the Company, upon our request, copies of the definitive documents related to the debt financing and the equity financing.
Parent and Merger Sub may not permit any amendment or modification to be made to, or waiver of any provision or remedy under, or replace, either of the commitment letters, except that Parent and Merger Sub may (i) modify the terms and conditions of the debt financing commitment so long as such modifications would not be expected to adversely impact the ability of Parent and Merger Sub to timely consummate the transactions contemplated by the merger agreement or the likelihood of consummation of the transactions contemplated by the merger agreement and (ii) replace or amend the debt commitment letter to add lenders, arrangers, bookrunners, syndication agents or similar entities who had not executed the debt commitment letter as of February 13, 2011, or otherwise so long as such replacement or amendment would not be reasonably expected to adversely impact or delay in any material respect the ability of Parent or Merger Sub to consummate the transactions contemplated by the merger agreement or the likelihood of the consummation of the transactions contemplated by the merger agreement.
Notwithstanding the foregoing, Parent and Merger Sub are not required to:
The Company has agreed to, and has agreed to cause its subsidiaries to, use its reasonable best efforts to cause its representatives to, provide to Parent all cooperation reasonably requested by Parent that is reasonably customary in connection with the arrangement of the debt financing in accordance with the terms and conditions of the debt commitment letter, including:
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Notwithstanding the foregoing, in connection with the Company and its subsidiaries' cooperation with Parent's arrangement of financing:
Parent has agreed to reimburse our and our affiliates' reasonable out-of-pocket costs and expenses (including accountants' fees and reasonable attorneys' fees) incurred in connection with our cooperation with Parent's arrangement of financing. Parent has agreed to indemnify us, our subsidiaries, the Onex Affiliates, our controlled affiliates and our and their respective directors, officers, advisors and representatives (which we refer to as the indemnitees) for any and all liabilities incurred by any of the foregoing in connection with the arrangement of financing and/or the provision of information utilized in connection therewith (other than information provided in writing specifically for such use by or on behalf of the Company or its subsidiaries), to the fullest extent permitted by applicable law, other than to the extent any of the foregoing arises from willful misconduct, gross negligence or material breach of our or their obligations (unless it results from an action taken, or not taken, by the indemnitees at the request of Parent or Merger Sub in order to comply with the merger agreement and the financing commitments, in which case this exclusion will not apply) or any information provided by or on behalf of us or our affiliates in connection with the debt financing to the extent such information would constitute a breach of any of the representations and warranties made by us under the merger agreement.
In the merger agreement, Parent has stated its current intention:
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Notwithstanding anything to the contrary set forth above, nothing shall preclude the surviving corporation from amending or terminating any benefit plan; changing the current levels of compensation and employee benefits or related terms and conditions following the effective time in its discretion; or terminating the employment of any employee at any time.
The merger agreement further provides that the surviving corporation will assume certain employment agreements of those employees of the Company whose agreements require such assumption.
All rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger and rights to advancement of expenses relating thereto now existing in favor of certain indemnitees as provided in the respective certificate of incorporation or by-laws or other organizational documents of the Company or any subsidiary or any indemnification agreement between such indemnitee and the Company or any of its subsidiaries will survive the merger and will not be amended, repealed or otherwise modified in any manner that would adversely affect any right thereunder of any such indemnitee.
From and after the effective time of the merger, in the event of any threatened or actual claim, suit, action, proceeding or investigation, whether civil, criminal or administrative, based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that the indemnitee is or was a director (including in a capacity as a member of any board committee), or officer of the Company, any of its subsidiaries or any of their respective predecessors or (ii) the merger agreement or any of the transactions contemplated thereby, whether in any case asserted or arising before or after the effective time of the merger, Parent and the surviving corporation will (a) indemnify and hold harmless, to the fullest extent permitted by law, each such indemnitee against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorneys' fees and expenses in advance of the final disposition of any such proceeding), judgments, fines and amounts paid in settlement of or in connection with any such threatened or actual claim, and (b) comply with the terms of each existing indemnification agreement with respect to such claim. None of Parent or the surviving corporation will settle, compromise or consent to the entry of any judgment in any threatened or actual claim for which indemnification has been sought by an indemnitee hereunder, unless such settlement, compromise or consent includes an unconditional release of such indemnitee from all liability arising out of such claim or such indemnitee otherwise consents in writing to such settlement, compromise or consent. Parent and the surviving corporation will cooperate with an indemnitee in the defense of any matter for which such indemnitee has validly sought indemnification under such indemnification agreement. Parent's and the surviving corporation's obligations with respect to indemnification will continue in full force and effect after the effective time.
Directors' and Officers' Insurance
The Company or Parent and the surviving corporation (on behalf of the Company) may obtain, at or prior to the effective time of the merger, prepaid or "tail" directors' and officers' liability insurance policies in respect of acts or omissions at or prior to the effective time of the merger for six years from the effective time of the merger, covering each person who is covered by such tail policies on February 13, 2011 on terms with respect to such coverage and amounts no less favorable than those of such policies in effect on February 13, 2011; such tail policies may not be amended, modified or cancelled or revoked by the Company, Parent or the surviving corporation. If the Company or Parent and the surviving corporation do not obtain such "tail" policies, then for a period of six years from the effective time of the merger, Parent will maintain in effect the Company's current directors' and officers' liability insurance policies, covering each party on terms with respect to coverage and amounts no less favorable than those of the policies in effect on February 13, 2011. Neither Parent nor the
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Company is required to pay an aggregate annual premium for such insurance policy (whether or not a "tail" policy is obtained) in excess of 200% of the annual premium paid by the Company in its last full fiscal year for such insurance coverage. If the annual premium amount exceeds such cap, Parent or the surviving corporation must obtain a policy with the greatest amount of coverage available for a cost not exceeding such amount.
The merger agreement contains additional agreements between the Company and Parent relating to, among other things:
Conditions to the Completion of the Merger
The obligations of the Company, Parent and Merger Sub to consummate the merger are subject to the satisfaction or, to the extent permissible under applicable law, waiver of the following conditions on or prior to the closing date of the merger:
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The obligations of Parent and Merger Sub to complete the merger are further subject to the satisfaction or waiver (if permissible under applicable law) of the following conditions on or prior to the closing date of the merger:
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The Company's obligation to complete the merger is further subject to the satisfaction or waiver (if permissible under applicable law) of the following conditions on or prior to the closing date of the merger:
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after receipt of the stockholder approval:
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If the merger agreement is terminated by Parent for a triggering event as described above in the third bullet under "Termination of the Merger Agreement" or by the Company to accept a superior proposal, we will be obligated to pay CD&R or a designated affiliate a break-up fee in the amount of $116,505,000, which we refer to as the break-up fee.
If the merger agreement is terminated by the Company for either (i) Parent's uncured breach of representations or warranties or uncured failure to perform any of its covenants, which would give rise to, if continuing at the effective time of the merger, the failure of any of the conditions to the Company's obligation to close the transactions contemplated by the merger agreement (as described above) or (ii) the reasons described in the last paragraph above under "Termination of the Merger Agreement" as a result of Parent's failure to consummate the merger as contemplated by the merger
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agreement, Parent will be obligated to pay us a termination fee of $203,884,000, which we refer to as the termination fee.
Liability Cap and Limitation on Remedies
Concurrently with the execution of the merger agreement, CD&R Fund VIII entered into a limited guarantee in our favor pursuant to which it irrevocably guaranteed certain of Parent's obligations under the merger agreement, including payment of the termination fee, if and when due, and payment of certain reimbursement and indemnification obligations of Parent in connection with the Company's cooperation with the arrangement of the financing, as described above. However, in no event will CD&R Fund VIII's liability under the limited guarantee exceed $203,884,000, the amount of the termination fee. The limited guarantee is our sole recourse against CD&R Fund VIII, its affiliates and related parties, including CD&R, for any damages we may incur in connection with the merger agreement and the transactions contemplated by the merger agreement.
If Parent and Merger Sub fail to effect the merger closing (on the terms described above in "Effective Time; Marketing Period") for any or no reason or otherwise breach or fail to perform under the merger agreement, then (except for the right of the Company to seek an injunction, specific performance or other equitable relief as described below) the Company's sole and exclusive remedy against any of Parent, Merger Sub, CD&R Fund VIII, any financing source or any of their affiliates or related parties for any breach, loss or damage will be to terminate the merger agreement, and (to the extent provided in the merger agreement) receive payment of the termination fee (as described above in "Termination Fees"). Following any termination of the merger agreement which triggers Parent's payment of the termination fee (as described above in "Termination Fees") and payment of the termination fee, none of the above parties will have any liability to the Company, its subsidiaries or any of its and their affiliates or any other person or entity for any litigation arising out of the merger agreement, the limited guarantee, the financing commitments, or otherwise.
Upon payment of the termination fee, the Company has agreed to (and cause any subsidiaries or affiliates to) dismiss with prejudice promptly any litigation it or they have against Parent, Merger Sub, CD&R Fund VIII, any financing source, any of their affiliates or related parties . The Company has also agreed not to seek any damages from or bring any litigation against Parent, Merger Sub, CD&R Fund VIII, any financing source or any of their affiliates or related parties in connection with the merger agreement or any of the transactions contemplated thereby other than litigation to recover payment of the termination fee or for specific performance, injunction or other equitable remedy, as described below.
Parent and Merger Sub are, and subject to certain exceptions, the Company is, entitled to seek an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms thereof. In particular (without limited the foregoing), the Company is entitled to seek specific performance to cause the equity financing to be funded to fund the merger consideration and to consummate the merger, only if each of the following conditions has been satisfied:
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The merger agreement may be amended by written agreement of Parent, Merger Sub and the Company at any time before or after receipt of the stockholder approval; provided, that after the stockholder approval has been obtained, there can be no amendment that by law would require further approval by our stockholders without such approval having been obtained.
At any time prior to the effective time, any party to the merger agreement may:
Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of the Company, Parent or Merger Sub to exercise any of its rights under the merger agreement or otherwise will not constitute a waiver by such party of such right.
If a quorum is not present at the special meeting, a majority of the voting power of the shares of capital stock present and entitled to vote at the meeting may adjourn the meeting until a quorum shall be present.
The Onex Affiliates hold approximately 81.5% of the voting power of the Company's capital stock. In the unitholders agreement, among other things, the Onex Affiliates agree to:
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If any record holder of our capital stock does not vote for the adoption of the merger agreement at the special meeting, makes a written demand for appraisal prior to the taking of the vote on the adoption of the merger agreement and otherwise complies with the applicable statutory procedures of Section 262 of the DGCL summarized herein or does not otherwise consent in writing to the adoption of the merger agreement herein, such holder may be entitled to appraisal rights under Section 262 of the DGCL. In order to exercise and perfect appraisal rights, such holder must follow the steps summarized below properly and in a timely manner.
Set forth below is a summary description of Section 262 of the DGCL, which is reprinted in its entirety as Annex C to this proxy statement, and is incorporated herein by reference. The following summary describes the material aspects of Section 262 of the DGCL, and the law relating to appraisal rights and is qualified in its entirety by reference to Annex C. All references in Section 262 of the DGCL and this summary to "stockholder" are to the record holder of shares of our capital stock immediately prior to the effective time of the merger as to which appraisal rights are asserted. FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262 OF THE DGCL WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
Under the DGCL, stockholders who follow the procedures set forth in Section 262 of the DGCL will be entitled to have their shares appraised by the Court of Chancery of the State of Delaware, which we refer to as the Court of Chancery, and to receive payment in cash of the "fair value" of those shares, as determined by the Court of Chancery, which amount is exclusive of any element of value arising from the accomplishment or expectation of the merger, in lieu of receiving the merger consideration that such stockholder would otherwise be entitled to under the merger agreement.
Under Section 262 of the DGCL, where a merger agreement relating to a proposed merger is to be submitted for adoption at a meeting of stockholders, as in the case of the special meeting, the corporation, not less than 20 days prior to such meeting, must notify each of its stockholders who was a stockholder on the record date for notice of such meeting with respect to such shares for which appraisal rights are available, that appraisal rights are so available, and must include in each such notice a copy of Section 262 of the DGCL. This proxy statement constitutes such notice to the holders of our capital stock and Section 262 of the DGCL is attached to this proxy statement as Annex C. Any stockholder who wishes to exercise such appraisal rights or who wishes to preserve his, her or its right to do so should review the following discussion and Annex C carefully, because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights under the DGCL.
If you wish to exercise appraisal rights you must not vote for the adoption of the merger agreement and must deliver to the Company, before the vote on the proposal to adopt the merger agreement, a written demand for appraisal of your shares of our capital stock. If you sign and return a proxy card by mail or vote by submitting a proxy by telephone or through the Internet, without abstaining or expressly directing that your shares of our capital stock be voted against the adoption of the merger agreement, you will effectively waive your appraisal rights because such shares represented by the proxy will be voted for the adoption of the merger agreement. Accordingly, if you desire to exercise and perfect appraisal rights with respect to any of your shares of capital stock, you must either (i) refrain from executing and returning the enclosed proxy card by mail and from voting in person, or submitting a proxy by telephone or through the Internet, in favor of the proposal to adopt the merger agreement; or (ii) vote against or abstain from voting for the adoption of the merger agreement by checking either the "AGAINST" or the "ABSTAIN" box next to the proposal on such card and returning such card by mail, voting in person against the adoption of the merger agreement, submitting a proxy by telephone or through the Internet against the proposal, or registering in person an
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abstention with respect thereto. A vote or proxy against the adoption of the merger agreement will not, in and of itself, constitute a demand for appraisal.
A demand for appraisal will be sufficient if it reasonably informs us of the identity of the stockholder and that such stockholder intends thereby to demand appraisal of such stockholder's shares of capital stock. This written demand for appraisal must be separate from any proxy or vote abstaining from or voting against the adoption of the merger agreement. If you wish to exercise your appraisal rights you must be the record holder of such shares of our capital stock on the date the written demand for appraisal is made and you must continue to hold such shares through the effective time of the merger. Accordingly, a stockholder who is the record holder of shares of capital stock on the date the written demand for appraisal is made, but who thereafter transfers such shares prior to the effective time of the merger, will lose any right to appraisal in respect of such shares.
Only a holder of record of shares of our capital stock is entitled to assert appraisal rights for such shares of our capital stock registered in that holder's name. A demand for appraisal should be executed by or on behalf of the holder of record, fully and correctly, as the holder's name appears on the stock certificates or in the case of uncertificated shares, as the holder's name appears on the stockholder register, and must state that such person intends thereby to demand appraisal of his, her or its shares. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand for appraisal should be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including one for two or more joint owners, may execute the demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for such owner or owners.
Beneficial owners of shares of our capital stock have no right to directly demand appraisal; such demands must be made through the record holder of such shares. Accordingly, a record holder such as a broker or other nominee who holds shares as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of our capital stock held for one or more beneficial owners while not exercising such rights with respect to the shares held for other beneficial owners; in such case, the written demand should set forth the number of shares as to which appraisal is sought. If the number of shares of our capital stock is not expressly stated, the demand will be presumed to cover all shares held in the name of the record owner. If you hold your shares in brokerage accounts or other nominee arrangements and wish to exercise your appraisal rights, you are urged to consult with your broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal.
All written demands for appraisal should be addressed to our Corporate Secretary at EMSC, 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111 or should be delivered to our Corporate Secretary at the special meeting, prior to the vote on the adoption of the merger agreement.
Within ten days after the effective time of the merger, we will notify each stockholder who properly asserted appraisal rights under Section 262 of the DGCL and has not voted for the adoption of the merger agreement. Within 120 days after the effective time of the merger, but not thereafter, we or any stockholder who has complied with the statutory requirements summarized above may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the fair value of the shares held by such stockholder. If no such petition is filed within such 120-day period, appraisal rights will be lost for all stockholders who had previously demanded appraisal of their shares. We are not under any obligation, and we have no present intention, to file a petition with respect to appraisal of the value of the shares. Accordingly, if you wish to exercise your appraisal rights, you should regard it as your obligation to take all steps necessary to perfect your appraisal rights in the manner prescribed in Section 262 of the DGCL.
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Within 120 days after the effective time of the merger, any stockholder who has complied with the provisions of Section 262 of the DGCL will be entitled, upon written request, to receive from us a statement setting forth the aggregate number of shares of our capital stock not voted in favor of adoption of the merger agreement and with respect to which demands for appraisal were received by us, and the number of holders of such shares. Such statement must be mailed within ten days after such stockholder's written request therefor has been received by us or within ten days after expiration of the period for delivery of appraisal demands, whichever is later. A person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such person's own name, file an appraisal petition or request from us the statement described in this paragraph.
If a petition for an appraisal is timely filed and a copy thereof served upon us, we will then be obligated, within 20 days, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of the stockholders who have demanded appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the Court of Chancery, the Court of Chancery is empowered to conduct a hearing on such petition to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded appraisal rights of their shares of capital stock to submit their stock certificates 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 of Chancery may dismiss the proceedings as to such stockholder.
After the Court of Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Court of Chancery shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court of Chancery shall take into account all relevant factors. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment. If you are considering seeking appraisal, you should be aware that the fair value of your shares as determined under Section 262 of the DGCL could be more than, the same as or less than the consideration you are entitled to receive pursuant to the merger agreement if you did not seek appraisal of your shares and that investment banking opinions as to the fairness from a financial point of view of the consideration payable in a merger are not necessarily opinions as to fair value under Section 262 of the DGCL. In determining "fair value" of shares, the Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983), the Delaware Supreme Court has stated that such factors include "market value, asset value, dividends, earning prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of the merger and which throw any light on future prospects of the merged corporation." In Weinberger, the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding.
The Court of Chancery will direct the payment of the fair value of the shares of our capital stock who have perfected appraisal rights, together with interest, if any, by the surviving corporation to the stockholders entitled thereto. The costs of the action may be determined by the Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable. Upon application of a stockholder,
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the Court of Chancery may also order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal, including, without limitation, reasonable attorneys' fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all of the shares entitled to appraisal. In the absence of such determination or assessment, each party bears its own expenses.
Any stockholder who has duly demanded and perfected an appraisal in compliance with Section 262 of the DGCL will not, after the effective time of the merger, be entitled to vote his or her shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of shares of our capital stock as of a date prior to the effective time of the merger.
At any time within 60 days after the effective time of the merger, any stockholder will have the right to withdraw his, her or its demand for appraisal and to accept the cash payment for his, her or its shares pursuant to the merger agreement. After this period, a stockholder may withdraw his, her or its demand for appraisal only with our written consent. If no petition for appraisal is filed with the Court of Chancery within 120 days after the effective time of the merger, a stockholder's right to appraisal will cease and he, she or it will be entitled to receive the cash payment for his, her or its shares pursuant to the merger agreement, as if he, she or it had not demanded appraisal of his, her or its shares. No petition timely filed in the Court of Chancery demanding appraisal will be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be conditioned on such terms as the Court of Chancery deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the merger consideration offered pursuant to the merger agreement within 60 days after the effective time of the merger.
If you properly demand appraisal of your shares of our capital stock under Section 262 of the DGCL and you fail to perfect, or effectively withdraw or lose, your right to appraisal, as provided in the DGCL, your shares will be converted into the right to receive the consideration receivable with respect to such shares in accordance with the merger agreement. You will fail to perfect, or effectively lose or withdraw, your right to appraisal if, among other things, no petition for appraisal is filed within 120 days after the effective time of the merger, or if you deliver to us a written withdrawal of your demand for appraisal. Any such attempt to withdraw an appraisal demand more than 60 days after the effective time of the merger will require our written approval.
If you desire to exercise your appraisal rights, you must not vote for the adoption of the merger agreement and must strictly comply with the procedures set forth in Section 262 of the DGCL.
Failure to take any required step in connection with the exercise of appraisal rights will result in the termination or waiver of such rights.
In view of the complexity of Section 262 of the DGCL, stockholders who may wish to dissent from the merger and pursue appraisal rights should consult their legal advisors.
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IMPORTANT INFORMATION REGARDING EMSC
Ownership of Common Stock by Certain Beneficial Owners and Directors and Executive Officers
Principal Holders of the Company's Stock
The following table sets forth all persons known to us to be the beneficial owners of more than 5% of our Class A and Class B common stock or our Class B special voting share, as well as the beneficial ownership of our Class A common stock by our directors, named executive officers and directors and executive officers as a group as of April 7, 2011.
We report the amounts and percentages of our voting stock, including our common stock, beneficially owned on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power", which includes the power to vote or direct the voting of such security, or "investment power", which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days, including our common stock subject to a stock option or similar security that is exercisable within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of a security.
Our LP exchangeable units are exchangeable on a one-for-one basis for shares of Class B common stock at any time at the option of the holder. Under the unitholders agreement, the Onex Affiliates, as the holders of all of the LP exchangeable units, have agreed to exchange the LP exchangeable units for Class B common stock immediately prior to the effective time of the merger. For these reasons, this table assumes the exchange of all LP exchangeable units for Class B common stock. Until such exchange, the Onex Affiliates have the benefit of the Class B special voting share through which the holders may exercise voting rights as though they held the same number of shares of Class B common stock. As a result, each person identified as a beneficial owner of Class B common stock may also be deemed to own beneficially a percentage of the Class B special voting share approximately equal to that person's percentage ownership of the Class B common stock. Moreover, because our Class B common stock is convertible at any time on a one-for-one basis for shares of Class A common stock at the option of the holder, each holder of Class B common stock may be deemed to own an equal number of shares of Class A common stock. On all matters to be voted on by our stockholders at the special meeting, our Class A common stock has one vote per share and our Class B common stock has ten votes per share.
Except as described above with respect to the shared right to direct the vote of the Class B special voting share, and as we describe in the footnotes to the following table, to our knowledge each of the beneficial owners has sole voting and investment power with respect to the voting securities beneficially owned.
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Ownership of Common Stock by Directors and Certain Executive Officers
Name of Beneficial Owners of Common Stock
|
Shares Beneficially Owned(1) |
Stock Options(2) |
Restricted Shares(2) |
Restricted Share Unit(2) |
Total | Percentage of Class |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-Employee Directors |
|||||||||||||||||||
Robert M. Le Blanc |
56,064 Class B | (3) | | | | 56,064 Class B | * | ||||||||||||
Steven B. Epstein |
13,150 | | | 17,868 | 31,018 | * | |||||||||||||
Paul B. Iannini, M.D. |
| | | 17,868 | 17,868 | * | |||||||||||||
James T. Kelly |
40,000 | | | 17,868 | 57,868 | * | |||||||||||||
Michael L. Smith |
21,845 | (4) | | | 17,868 | 39,713 | * | ||||||||||||
Kevin E. Benson |
| | | 5,392 | 5,392 | * | |||||||||||||
Leonard Riggs, Jr., M.D. |
6,000 | (5) | | | | 6,000 | * | ||||||||||||
Named Executive Officers |
|||||||||||||||||||
William A. Sanger |
141,060 | 528,168 | 15,000 | | 684,229 | 2.2 | % | ||||||||||||
Randel G. Owen |
7,979 | 144,604 | 6,250 | | 158,833 | * | |||||||||||||
Todd G. Zimmerman |
17,470 | 54,742 | 8,333 | | 80,545 | * | |||||||||||||
Mark E. Bruning |
2,854 | 17,500 | 4,166 | | 24,520 | * | |||||||||||||
Steve W. Ratton, Jr. |
10,532 | 10,875 | 2,333 | | 23,740 | * | |||||||||||||
All Directors and Executive Officers (16 persons) |
336,028 Class A |
784,289 Class A |
38,746 Class A |
76,864 Class A |
1,235,927 Class A |
4.0 |
% |
||||||||||||
|
56,064 Class B | | | | 56,064 Class B | * |
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Ownership of Common Stock by Certain Beneficial Owners
Name and Address of Beneficial Owners of Common Stock |
Shares Beneficially Owned(1) | Percentage of class |
Percentage of All Equity Shares |
Percent of Voting Power(2) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Onex Corporation |
1 class B special voting share | 100.0 | % | * | 81.5 | % | |||||||
Onex Corporation |
13,724,721 class B | (3) | 99.6 | % | 31.0 | % | 81.5 | % | |||||
CDRT Acquisition Corporation(4) |
13,724,676 class B | 99.6 | % | 31.0 | % | 81.5 | % | ||||||
Onex Partners LP |
7,363,737 class B | (5) | 53.4 | % | 16.6 | % | 43.8 | % | |||||
Onex Partners LLC |
4,747,767 class B | (6) | 34.5 | % | 10.7 | % | 28.2 | % | |||||
Onex EMSC Co-Invest LP |
1,216,062 class B | (7) | 8.8 | % | 2.7 | % | 7.2 | % | |||||
EMS Executive Investco LLC |
273,425 class B | (8) | 2.0 | % | 0.6 | % | 1.6 | % | |||||
Onex US Principals LP |
123,685 class B | (9) | 0.9 | % | 0.3 | % | 0.7 | % | |||||
The Vanguard Group, Inc.(11) |
1,610,165 class A | 5.3 | % | 3.6 | % | 1.0 | % |
Mr. Gerald W. Schwartz, the Chairman, President and Chief Executive Officer of Onex Corporation, owns shares representing a majority of the voting rights of the shares of Onex
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Corporation and as such may be deemed to own beneficially all of the LP exchangeable units owned beneficially by Onex Corporation. Mr. Schwartz disclaims such beneficial ownership.
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Market Price of the Company Class A Common Stock and Dividend Information
Our Class A common stock is traded on the NYSE under the ticker symbol "EMS". The following table sets forth, for the indicated calendar periods, the reported high and low sale prices per share of our Class A common stock as reported on the NYSE.
|
High | Low | |||||
---|---|---|---|---|---|---|---|
Year Ended December 31, 2010 |
|||||||
Fourth Quarter |
$ | 65.47 | $ | 48.94 | |||
Third Quarter |
53.58 | 42.27 | |||||
Second Quarter |
58.90 | 47.64 | |||||
First Quarter |
61.83 | 50.79 | |||||
Year Ended December 31, 2009 |
|||||||
Fourth Quarter |
$ | 55.50 | $ | 41.50 | |||
Third Quarter |
49.54 | 36.31 | |||||
Second Quarter |
37.38 | 28.90 | |||||
First Quarter |
39.11 | 26.64 | |||||
Year Ended December 31, 2008 |
|||||||
Fourth Quarter |
$ | 38.63 | $ | 26.29 | |||
Third Quarter |
34.83 | 20.75 | |||||
Second Quarter |
26.45 | 20.56 | |||||
First Quarter |
33.03 | 21.17 |
The Company did not pay any dividends during any of the periods set forth in the table above. Under the terms of the merger agreement, the Company cannot establish a record date for, declare, set aside for payment or pay any dividend with respect to any shares of its common stock.
The closing sale price of our Class A common stock on the NYSE on December 13, 2010, the day immediately prior to our public announcement that we were reviewing strategic alternatives to enhance stockholder value, was $53.86 per share. The closing sale price of our Class A common stock on the NYSE on February 11, 2011, the last trading day prior to our public announcement that we had entered into the merger agreement, was $70.66 per share. On April 15, 2011, the most recent practicable trading date prior to the date of this proxy statement, the closing sale price of our common stock was $63.76 per share.
Neither the Company's Class B common stock nor the Class B special voting share is listed on a national securities exchange or traded publicly on a national securities exchange.
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If the merger is completed, we will have no public stockholders and there will be no public participation in any of our future stockholder meetings. We intend to hold the 2011 annual meeting of stockholders, which we refer to as the 2011 Annual Meeting, only if the merger is not completed.
Stockholder Proposals. Any proposal of a stockholder intended to be included in our proxy statement and form of proxy/voting instruction card for the 2011 Annual Meeting of stockholders pursuant to Rule 14a-8 of the Exchange Act and our by-laws, must have been received by us no later than January 18, 2011, provided, that if the date of our 2011 Annual Meeting is more than 30 days before or after May 18, 2011 (the anniversary of our 2010 Annual Meeting), the stockholder proposal must have been received by us within 15 days after our public announcement of the date of the 2011 Annual Meeting.
Any proposal of a stockholder intended to be included in our proxy statement and form of proxy/voting instruction card for a special stockholders meeting must be received by us by the close of business on the 15th day following the date on which notice of such meeting is first given to stockholders or public disclosure of the meeting is made, whichever is earlier.
Stockholders should submit their proposals in writing to our Corporate Secretary at 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111 and shall set forth the nature of and reasons for the proposal in reasonable detail and, as to the stockholder giving notification, (i) the name and address of such stockholder and (ii) the class and series of all shares of the Company that are owned beneficially by such stockholder.
Nomination of Director Candidates. Our by-laws permit stockholders to nominate directors for election at any meeting of stockholders called for the election of directors. To nominate a director, the stockholder must provide a timely notice in writing to our Corporate Secretary at the address set forth above within the time period described under "Stockholder Proposals" above. Such notice must include the information required by, and will be subject to the conditions set forth in, our by-laws.
Copy of By-law Provisions. You may contact our Corporate Secretary at the address set forth above for a copy of the relevant by-law provisions regarding the requirements for making stockholder proposals and nominating director candidates.
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HOUSEHOLDING OF SPECIAL MEETING MATERIALS
In accordance with notices previously sent to eligible record stockholders who share a single address, we are sending only one proxy statement to that address unless we received instructions to the contrary from any record stockholder at that address. This practice, known as "householding", is designed to reduce our printing and postage costs and to reduce waste. However, upon written or oral request, we will deliver promptly a separate copy of the proxy statement to a record stockholder who has been householded. Such requests can be made by contacting Alliance Advisors, LLC, 200 Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003, (877) 777-4575 or by contacting the Corporate Secretary in writing at Emergency Medical Services Corporation, 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111, or by telephone at (303) 495-1200. If you are a record stockholder and would like for your proxy materials to be householded, you can contact our transfer agent, American Stock Transfer & Trust Company, LLC by telephone at (800) 937-5449 and request information on how to participate in householding for future meetings, if any. In addition, if you are a record stockholder who no longer wishes to participate in householding, you can use the above-referenced telephone number and address to notify EMSC that you wish to receive separate annual reports and proxy statement for future meetings, if any.
If you are a "street name" stockholder and own your shares through a broker, bank or other nominee, you can request to participate in householding, or alternatively can request separate copies of our annual reports and proxy statement, by contacting your broker, bank or nominee.
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act. We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC's public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public at the SEC's website at http://www.sec.gov. You also may obtain free copies of the documents we file with the SEC by going to the "SEC Filings" section of our Investor Relations website at www.emsc.net.
The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference herein.
The SEC allows us to "incorporate by reference" information into this proxy statement. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this proxy statement. However, nothing in this proxy statement shall be deemed to incorporate information furnished to, but not filed with, the SEC. Any statement in a document incorporated by reference into this proxy statement will be deemed to be modified or superseded to the extent a statement contained in (1) this proxy statement, or (2) any other subsequently filed document that is incorporated by reference into this proxy statement modifies or supersedes such statement.
The following documents filed with the SEC are incorporated by reference in this proxy statement.
We also incorporate by reference each document we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than Current Reports on Form 8-K filed under Items 2.02 and 7.01) after the date of this proxy statement and before the special meeting.
Any person, including any beneficial owner, to whom this proxy statement is delivered may request copies of proxy statements and any of the documents incorporated by reference in this document or other information concerning us, without charge, by written or telephonic request directed to Emergency Medical Services Corporation, 6200 South Syracuse Way, Suite 200, Greenwood Village, Colorado 80111, Attn: Corporate Secretary, telephone (303) 495-1200, or on our website at www.emsc.net or from the SEC through the SEC's website at http://www.sec.gov. Documents incorporated by reference are available without charge, excluding any exhibits to those documents (unless the exhibit is specifically incorporated by reference into this proxy statement).
Parent has supplied all information in this proxy statement pertaining to Parent and Merger Sub, and we have supplied all information in this proxy statement pertaining to us.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT.
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THIS PROXY STATEMENT IS DATED [ ], 2011. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
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EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
among
CDRT Acquisition Corporation
CDRT Merger Sub, Inc.
and
Emergency Medical Services Corporation
Dated as of February 13, 2011
EXECUTION VERSION
|
|
Page | |||
---|---|---|---|---|---|
Article I. DEFINITIONS |
A-1 | ||||
Section 1.01 |
Certain Definitions |
A-1 | |||
|
A-9 |
||||
Section 2.01 |
The Merger |
A-9 | |||
Section 2.02 |
Closing |
A-9 | |||
Section 2.03 |
Effective Time |
A-9 | |||
Section 2.04 |
Effects of the Merger |
A-10 | |||
Section 2.05 |
Certificate of Incorporation and By-Laws |
A-10 | |||
Section 2.06 |
Directors |
A-10 | |||
Section 2.07 |
Officers |
A-10 | |||
Section 2.08 |
Taking of Necessary Action |
A-10 | |||
|
A-10 |
||||
Section 3.01 |
Effect on Capital Stock |
A-10 | |||
Section 3.02 |
Adjustment to Merger Consideration |
A-11 | |||
Section 3.03 |
Exchange Fund |
A-12 | |||
Section 3.04 |
Company Equity Awards |
A-13 | |||
|
A-15 |
||||
Section 4.01 |
Organization; Qualification |
A-15 | |||
Section 4.02 |
Capital Structure |
A-15 | |||
Section 4.03 |
Subsidiaries |
A-17 | |||
Section 4.04 |
Corporate Authority; Board Action |
A-18 | |||
Section 4.05 |
Governmental Authorization; Non-Contravention |
A-18 | |||
Section 4.06 |
SEC Documents and Financial Statements; Internal Controls and Disclosure Controls |
A-19 | |||
Section 4.07 |
No Undisclosed Liabilities |
A-21 | |||
Section 4.08 |
Absence of Certain Changes or Events |
A-21 | |||
Section 4.09 |
Litigation |
A-21 | |||
Section 4.10 |
Governmental Authorizations; Compliance with Law |
A-21 | |||
Section 4.11 |
Material Contracts |
A-22 | |||
Section 4.12 |
Employee Benefit Plans |
A-25 | |||
Section 4.13 |
Labor Matters |
A-27 | |||
Section 4.14 |
Tax Matters |
A-28 | |||
Section 4.15 |
Property |
A-29 | |||
Section 4.16 |
Intellectual Property |
A-29 | |||
Section 4.17 |
Insurance |
A-30 | |||
Section 4.18 |
Healthcare Matters |
A-31 | |||
Section 4.19 |
Affiliate Transactions |
A-32 | |||
Section 4.20 |
Information Supplied |
A-32 | |||
Section 4.21 |
Voting Requirements |
A-32 | |||
Section 4.22 |
Finders or Brokers |
A-32 | |||
Section 4.23 |
Opinion of Financial Advisor |
A-33 | |||
Section 4.24 |
Anti-Takeover Provisions |
A-33 | |||
Section 4.25 |
Government Contracts |
A-33 |
A-i
|
|
Page | |||
---|---|---|---|---|---|
Section 4.26 |
Certain Business Practices |
A-33 | |||
Section 4.27 |
No Additional Representations |
A-33 | |||
|
A-34 |
||||
Section 5.01 |
Organization; Qualification |
A-34 | |||
Section 5.02 |
Authority; No Violation |
A-34 | |||
Section 5.03 |
Financing |
A-35 | |||
Section 5.04 |
Limited Guarantee |
A-36 | |||
Section 5.05 |
Litigation |
A-36 | |||
Section 5.06 |
Information Supplied |
A-36 | |||
Section 5.07 |
Operation and Ownership of Parent and Sub |
A-36 | |||
Section 5.08 |
Brokers and Other Advisors |
A-36 | |||
Section 5.09 |
No Competing Businesses |
A-36 | |||
Section 5.10 |
Ownership of Company Common Stock |
A-36 | |||
Section 5.11 |
Solvency |
A-37 | |||
Section 5.12 |
Certain Arrangements |
A-37 | |||
Section 5.13 |
No Reliance |
A-37 | |||
|
A-37 |
||||
Section 6.01 |
Conduct of Business of the Company |
A-37 | |||
Section 6.02 |
No Solicitation |
A-40 | |||
Section 6.03 |
Preparation of the Proxy Statement; Stockholders' Meeting. |
A-44 | |||
Section 6.04 |
Reasonable Best Efforts; Approvals |
A-46 | |||
Section 6.05 |
Takeover Law |
A-47 | |||
Section 6.06 |
Public Announcements |
A-47 | |||
Section 6.07 |
Indemnification and Insurance |
A-47 | |||
Section 6.08 |
Access; Confidentiality |
A-49 | |||
Section 6.09 |
Financing |
A-49 | |||
Section 6.10 |
Financing Cooperation |
A-50 | |||
Section 6.11 |
Notification of Certain Matters |
A-53 | |||
Section 6.12 |
Rule 16b-3 Matters |
A-53 | |||
Section 6.13 |
Stock Exchange Delisting |
A-54 | |||
Section 6.14 |
FIRPTA Certificates |
A-54 | |||
Section 6.15 |
Employees |
A-54 | |||
Section 6.16 |
Treatment of Stock Purchase Plans |
A-54 | |||
Section 6.17 |
Preservation of Partnership |
A-54 | |||
Section 6.18 |
Termination of Agreements with Principal Stockholders and Affiliates |
A-55 | |||
|
A-55 |
||||
Section 7.01 |
Conditions to Each Party's Obligation to Effect the Merger |
A-55 | |||
Section 7.02 |
Conditions to Obligations of Parent and Sub to Effect the Merger |
A-55 | |||
Section 7.03 |
Conditions to Obligation of the Company to Effect the Merger |
A-56 | |||
Section 7.04 |
Frustration of Closing Conditions |
A-56 | |||
|
A-56 |
||||
Section 8.01 |
Termination |
A-56 | |||
Section 8.02 |
Effect of Termination |
A-58 | |||
Section 8.03 |
Fees and Expenses |
A-58 | |||
|
A-60 |
||||
Section 9.01 |
No Survival of Representations and Warranties; Effect of Knowledge |
A-60 | |||
Section 9.02 |
Amendment |
A-60 |
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|
|
Page | |||
---|---|---|---|---|---|
Section 9.03 |
Counterparts; Effectiveness |
A-60 | |||
Section 9.04 |
Governing Law |
A-60 | |||
Section 9.05 |
Severability |
A-60 | |||
Section 9.06 |
Specific Performance; Jurisdiction; Enforcement |
A-61 | |||
Section 9.07 |
WAIVER OF JURY TRIAL |
A-62 | |||
Section 9.08 |
Notices |
A-62 | |||
Section 9.09 |
Assignment; Binding Effect |
A-63 | |||
Section 9.10 |
Further Assurances |
A-63 | |||
Section 9.11 |
Entire Agreement; Benefit |
A-64 | |||
Section 9.12 |
Extension; Waiver |
A-64 | |||
Section 9.13 |
Disclosure Schedules |
A-64 | |||
Section 9.14 |
Interpretation |
A-64 |
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EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER, dated as of February 13, 2011 (this "Agreement"), among CDRT Acquisition Corporation, a Delaware corporation ("Parent"), CDRT Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), and Emergency Medical Services Corporation, a Delaware corporation (the "Company").
Each of Parent, Sub and the Company are referred to herein as a "party" and together as the "parties". Capitalized terms used and not otherwise defined herein have the meanings set forth in Article I.
R E C I T A L S
The respective boards of directors of each of Parent, Sub and the Company have unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, fair to and in the best interests of their respective stockholders and (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, on the terms and subject to the conditions set forth in this Agreement.
The Board of Directors has recommended that the Company's stockholders vote in favor of the adoption of this Agreement.
Concurrently with the execution and delivery of this Agreement, Parent and Sub have entered into a Unitholders Agreement with the Principal Stockholders (the "Unitholders Agreement"), pursuant to which, among other things, the Principal Stockholders agree to take specified actions, exercise certain rights and refrain from taking other actions or exercising other rights in furtherance of the Merger, including to (i) take all actions necessary to exchange all of the LP Exchangeable Units into Class B Common Stock immediately prior to the Effective Time, (ii) agree not to sell, transfer or encumber the LP Exchangeable Units, except by exchanging the LP Exchangeable Units into shares of Class B Common Stock immediately prior to the Effective Time and (iii) direct the vote of their respective interests in the Class B Special Voting Share in favor of the adoption of this Agreement, in each case as set forth in the Unitholders Agreement.
After the Stockholder Approval is obtained, Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the merger (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement, whereby, except as expressly provided in Section 3.01, each issued and outstanding share of Company Common Stock immediately prior to the effective time of the Merger (including shares of Company Common Stock issued upon the exchange of the LP Exchangeable Units, as provided in Section 3.01(c)(i)) will be cancelled and converted into the right to receive the Merger Consideration.
Parent, Sub 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 Merger.
A G R E E M E N T
The parties to this Agreement, intending to be legally bound, agree as follows:
Section 1.01 Certain Definitions. For purposes of this Agreement:
(a) "Acceptable Confidentiality Agreement" means a confidentiality and standstill agreement (including any waivers thereof or amendments thereto) that contains confidentiality and standstill provisions that are no less favorable to the Company and no more favorable to any such third party than those contained in the form of confidentiality agreement included in Section 1.01(a) of the Company Disclosure Schedule.
(b) "Affiliate" means, as to any Person, any other Person that, directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of voting interests, by Contract or otherwise.
(c) "Affiliated Medical Group" means a professional corporation, association, limited liability company or other professional entity owned by one or more physicians for which a Subsidiary of the Company or another Affiliated Medical Group of the Company provides management services pursuant to an Affiliated Medical Group Physician Services Agreement or an Affiliated Medical Group Management Services Agreement and whose physician owners have entered into a Stock Transfer and Option Agreement and an Indemnity Agreement.
(d) "Affiliated Medical Group Management Services Agreement" means an agreement between an Affiliated Medical Group and a Subsidiary of the Company pursuant to which such Subsidiary provides management services to the Affiliated Medical Group for its operations at one or more hospitals and/or other healthcare facilities.
(e) "Affiliated Medical Group Physician Services Agreement" means an agreement between an Affiliated Medical Group and a Subsidiary of the Company pursuant to which the Affiliated Medical Group provides professional medical services at one or more hospitals and/or other healthcare facilities under contract with such Subsidiary and the Subsidiary provides management services to the Affiliated Medical Group.
(f) "Antitrust Laws" means the HSR Act, the Sherman Antitrust Act of 1890, the Clayton Act of 1914, the Federal Trade Commission Act of 1914 and any other Laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.
(g) "Billing Entity" means a partnership, limited liability company or other entity whose only significant activity is invoicing and collecting payments for professional medical services on behalf of an Affiliated Medical Group or a Subsidiary and transfers all of its revenue on a regular basis to such Affiliated Medical Group or Subsidiary.
(h) "Board of Directors" means the Board of Directors of the Company.
(i) "Business Day" means any day other than a Saturday, a Sunday or any other day on which commercial banks in New York, New York are authorized or required by Law or executive order to be closed.
(j) "Class B Common Stock" means the Class B Common Stock, par value $0.01 per share, of the Company.
(k) "Code" means the Internal Revenue Code of 1986, as amended, and regulations issued by the IRS pursuant thereto.
(l) "Collective Bargaining Agreement" means any and all agreements, understandings, contracts, letters, side letters and contractual obligations of any kind, nature and description, oral or written, involving or entered into between any employer and any labor organization, union, employee association, agency or employee committee or plan.
(m) "Company Benefit Plan" means each "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), each bonus, incentive, deferred compensation, vacation, stock purchase, stock option, restricted stock or other equity-based arrangement, severance, employment, change of control, termination, retention or fringe or other benefit or compensation plan, program, arrangement or agreement, whether written, or
A-2
unwritten, formal or informal, that is sponsored, maintained, contributed or required to be contributed to by the Company or any of its Subsidiaries as of the date of this Agreement, in each case for the benefit of their current or former employees, officers, or directors.
(n) "Company Common Stock" means the Class A Common Stock and the Class B Common Stock.
(o) "Company Equity Awards" means the Company's Restricted Shares, RSUs and Stock Options.
(p) "Company Incentive Plans" means the Company's Equity Option Plan, the Company's 2007 Employee Stock Purchase Plan, the Company's 2007 Amended and Restated Long-Term Incentive Plan (as amended on May 18, 2010) and the Non-Employee Director Compensation Program, collectively.
(q) "Company Intellectual Property" means all Intellectual Property used in, held for use in or necessary for the conduct of the businesses of the Company and its Subsidiaries as currently conducted.
(r) "Company Material Adverse Effect" means any change, effect, event, state of facts, development or occurrence that, individually or in the aggregate with all other changes, effects, state of facts, developments or occurrences is, or would be reasonably expected to be, materially adverse to the business, assets, condition (financial or otherwise) or results of operation of the Company and its Subsidiaries taken as a whole; provided, that none of the following shall either alone or in combination constitute, or be taken into account in determining whether there has been, a Company Material Adverse Effect: any change, effect, event, state of facts, development or occurrence that arises out of or results from (i) general economic, credit, capital or financial markets or political conditions in the United States or elsewhere in the world, including with respect to interest rates or currency exchange rates, (ii) any outbreak or escalation of hostilities, acts of war (whether or not declared), sabotage or terrorism, (iii) any hurricane, tornado, flood, volcano, earthquake or other natural or man-made disaster occurring after the date of this Agreement, (iv) any change in applicable Law or GAAP (or authoritative interpretation or enforcement thereof), (v) general conditions in the industries in which the Company and its Subsidiaries primarily operate, (vi) any failure, in and of itself, by the Company to meet any analyst projections or any internal or published projections, forecasts, estimates or predictions of revenue, earnings or other financial or operating metrics before, on or after the date of this Agreement (provided that the underlying factors contributing to such failure shall not be excluded), (vii) any change in the market price or trading volume of the Class A Common Stock or the credit rating of the Company (provided that the underlying factors contributing to such changes shall not be excluded), (viii) other than for purposes of the representations and warranties made in Section 4.05 or, to the extent related to such representations and warranties, Section 7.02(a), the announcement and pendency of this Agreement and the Transactions, (ix) any action taken by the Company or its Subsidiaries required by this Agreement, or (x) the identity of, or any facts or circumstances relating to Parent, Sub or their respective Affiliates, except in the cases of clauses (i), (ii), (iii), (iv) or (v), to the extent that the Company and its Subsidiaries, taken as a whole, are materially disproportionately affected thereby as compared with other participants in the industries in which the Company and its Subsidiaries primarily operate (in which case the incremental materially disproportionate impact or impacts may be taken into account in determining whether there has been, or is reasonably expected to be, a Company Material Adverse Effect).
(s) "Confidentiality Agreement" means the confidentiality agreement, dated as of November 28, 2010 by and between Clayton, Dubilier & Rice, LLC and the Company.
(t) "Contract" means any contract, agreement, license, note, bond, mortgage, guarantee, indenture, commitment, understanding, lease, permit, authorization or other agreement, instrument obligation or binding arrangement, whether written or oral.
(u) "Damages" means any and all losses, liabilities, claims, demands, judgments, damages, fines, suits, actions, costs and expenses.
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(v) "EMS LP" means Emergency Medical Services L.P., a Delaware limited partnership.
(w) "EMS LP Partnership Agreement" means the Second Amended and Restated Agreement of Limited Partnership of EMS LP effective as of January 1, 2008 and identified in Section 1.01(w) of the Company Disclosure Schedule.
(x) "Exchange Act" means the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(y) "Financing Sources" means the Persons that have committed to provide or have otherwise entered into agreements in connection with the Debt Financing Commitment or alternative debt financings in connection with the Transactions and any joinder agreements, indentures or credit agreements entered into pursuant thereto or relating thereto, together with their Affiliates, officers, directors, employees, agents and representatives involved in the Debt Financing and their successors and assigns, including the parties named in Section 5.03.
(z) "Fully Diluted Shares" means, as of any time (i) all shares of Class A Common Stock then issued and outstanding, (ii) all shares of Class A Common Stock issuable upon conversion of the Class B Common Stock then issued and outstanding and (iii) all shares of Class A Common Stock issuable upon conversion of the Class B Common Stock reserved for issuance upon exchange of the LP Exchangeable Units then outstanding.
(aa) "Governmental Entity" means any national, supranational, state, provincial or local, whether domestic or foreign, government, any subdivision, agency, commission or authority thereof, any court of competent jurisdiction or any administrative, regulatory (including any stock exchange) or other agency, commission, or authority.
(bb) "HMO" means a health maintenance organization.
(cc) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(dd) "Indebtedness" means, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, including accrued and unpaid interest, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations of such Person upon which interest charges are customarily paid (other than trade payables incurred in the ordinary course of business consistent with past practice), (iv) all obligations of such Person under conditional sale or other title retention agreements relating to any property purchased by such Person, (v) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding obligations of such Person for raw materials, inventory, services and supplies incurred in the ordinary course of business consistent with past practice), (vi) any obligations of such Person under any lease of property, real or personal, which obligations are required to be classified as capital leases in accordance with GAAP, (vii) all obligations of others secured by a Lien on property or assets owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (viii) all obligations of such Person under interest rate, currency or commodity derivatives or hedging transactions (valued at the termination value thereof), (ix) all letters of credit or performance bonds issued for the account of such Person and (x) all guarantees and keepwell arrangements of such Person of any Indebtedness of any other Person other than a wholly-owned Subsidiary of such Person.
(ee) "Indemnity Agreement" means an agreement between the physician owner(s) of an Affiliated Medical Group and a Subsidiary of the Company pursuant to which the Subsidiary indemnifies the physician owner(s) for any liability arising out of the management services provided by the Subsidiary pursuant to an Affiliated Medical Group Physician Services Agreement or Affiliated Medical Group Management Services Agreement.
(ff) "Intellectual Property" means all intellectual property including such rights in and to: (i) any patent, invention (whether or not reduced to practice or patentable), trademark and service mark
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(including any trade dress, logo and any other indicia of origin and the goodwill of any business symbolized thereby), trade name, Internet domain name, copyright and copyrightable work (whether or not registered), design and trade secret, (ii) application for and registration, issuance and renewals of any of the foregoing, (iii) lists (including customer and vendor lists), data, databases, processes, formulae, methods, specifications, schematics, plans, studies, technology, know-how, trade secrets, designs, ideas, research and development, improvements, web site and other content, computer software programs and related documentation, and other confidential or proprietary data and information, and (iv) computer software, data and databases including, but not limited to, object code, source code, operating and other systems, tools, firmware, related documentation and all copyrights therein.
(gg) "IRS" means the Internal Revenue Service.
(hh) "Knowledge of Parent" or "Knowledge of Parent or Sub" means the actual knowledge of any of the persons set forth in Section 1.01(hh) of the Parent Disclosure Schedule.
(ii) "Knowledge of the Company" means the actual knowledge of any of the persons set forth in Section 1.01(ii) of the Company Disclosure Schedule.
(jj) "Law" means any supranational, federal, national, state, provincial or local statute, law (including common law), ordinance rule or regulation of any Governmental Entity.
(kk) "Liability" means liabilities, debts, claims or obligations of any nature, whether known, unknown, accrued, absolute, direct or indirect, contingent or otherwise, whether due or to become due.
(ll) "Limited Guarantee" means the limited guarantee by the Sponsor, dated as of the date hereof, in favor of the Company with respect to certain obligations of Parent arising under, or in connection with, this Agreement.
(mm) "LP Exchangeable Units" has the meaning set forth in the EMS LP Partnership Agreement.
(nn) "Management Level Employee" means (i) for purposes of this Agreement other than Section 6.01(o), the Chief Executive Officer and President of each of the Company, EmCare, Inc. and American Medical Response, Inc., any employee (excluding administrative personnel) of the Company or any of its Subsidiaries who is a direct report of any such officer, and (ii) for purposes of Section 6.01(o), any employee with a title at the level of Vice President or higher.
(oo) "Marketing Period" means the first period of 20 Business Days after the date hereof and after (x) the SEC shall have confirmed, orally or in writing, that it has no further comments on the Proxy Statement, and the Proxy Statement shall have been mailed to the holders of Company Common Stock and the Class B Special Voting Share as of the record date established for the Stockholders' Meeting and (y) the ABL Access Period has been completed (or, if earlier, Parent shall have received a completed field audit and appraisal of the Company's and its Subsidiaries' accounts receivable and inventory in connection with obtaining an asset-based loan facility pursuant to the Debt Financing Commitment), throughout and at the end of which (a) Parent shall have the Required Information from the Company and (b) the condition set forth in Section 7.01(c) shall be satisfied and nothing has occurred and no condition exists that would be reasonably likely to cause any of the conditions set forth in Section 7.02 to fail to be satisfied assuming the Merger Closing were to be scheduled for any time during such 20 Business Day period; provided that (i) if any financial information for any fiscal period included in the Required Information becomes stale under Regulation S-X promulgated under the Securities Act, the Marketing Period shall be automatically extended for five Business Days following the date on which the Company has furnished the Parent with updated Required Information, and (ii) the Marketing Period shall not be deemed to have commenced if, after the date hereof and prior to the completion of the Marketing Period, (A) Ernst & Young LLP shall have withdrawn its audit opinion with respect to any financial statements contained in the Company's most recently filed
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Annual Report on Form 10-K, in which case the Marketing Period shall not be deemed to commence unless and until five Business Days after a new unqualified audit opinion is issued with respect to such financial statements by Ernst & Young LLP or another nationally-recognized independent public accounting firm, or (B) the Company restates or the Board of Directors has determined to restate any historical financial statements of the Company, in which case the Marketing Period shall not be deemed to commence unless and until five Business Days after such restatement has been completed and the relevant SEC documents have been amended or the Board of Directors subsequently concludes that no restatement shall be required in accordance with GAAP. If the Company in good faith reasonably believes it has provided the Required Information, it may deliver to Parent a written notice to that effect (stating when it believes it completed such delivery), in which case the Company shall be deemed to have provided the Required Information unless Parent in good faith reasonably believes the Company has not completed the delivery of the Required Information and, within five Business Days after the delivery of such notice by the Company, delivers a written notice to the Company to that effect (stating with reasonable specificity which Required Information Parent reasonably believes the Company has not delivered or is not compliant).
(pp) "Medical Professional" means any Person engaged by or otherwise providing professional, clinical services and/or medical administrative services for or on behalf of the Company or any of its Subsidiaries.
(qq) "Medicare and Medicaid Programs" means governmental health insurance programs implemented under Titles XVIII and XIX of the Social Security Act.
(rr) "NYSE" means the New York Stock Exchange.
(ss) "Order" means any writ, judgment, order, injunction, award or decree of any Governmental Entity.
(tt) "Onex Management Agreement" means the Management Agreement, dated February 10, 2005, by and among Onex Partner Manager LP, AMR HoldCo, Inc., and EmCare HoldCo, Inc.
(uu) "Organizational Documents" means (i) the articles or certificate of incorporation and the bylaws of a corporation; (ii) the partnership agreement and any statement of partnership of a general partnership; (iii) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (iv) the operating agreement or limited liability company agreement and the certificate of formation of any limited liability company; (v) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (vi) any amendment or modification to any of the foregoing.
(vv) "Owned Intellectual Property" means all Intellectual Property owned by the Company or any of its Subsidiaries used in, held for use in or necessary for the conduct of the business of the Company or any of its Subsidiaries as currently conducted.
(ww) "person" or "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity, group (as such term is used in Section 13 of the Exchange Act) or organization, including, without limitation, a Governmental Entity.
(xx) "PPO" means preferred provider organization.
(yy) "Principal Stockholders" means the record owners of the LP Exchangeable Units.
(zz) "Representatives" means, when used with respect to a Person, the directors, officers, employees, consultants, accountants, legal counsel, investment bankers, financial advisors, agents and other representatives of such Person and of any Subsidiary of such Person.
(aaa) "Restricted Shares" means the shares of restricted Class A Common Stock granted under the Company Incentive Plans.
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(bbb) "RSU" means each "phantom" or notional restricted share unit awarded pursuant to the Company Incentive Plans.
(ccc) "SEC" means the U.S. Securities and Exchange Commission.
(ddd) "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(eee) "Significant Subsidiary" has the meaning set forth in Rule 1-02 under Regulation S-X promulgated under the Exchange Act.
(fff) "Stock Option" means any option to purchase shares of Class A Common Stock granted under a Company Incentive Plan other than the Company's Employee Stock Purchase Plan.
(ggg) "Stock Transfer and Option Agreement" means an agreement between the physician owner(s) of an Affiliated Medical Group and a Subsidiary of the Company pursuant to which such physician owner(s) agree to transfer the equity interests in the Affiliated Medical Group to a designee of the Subsidiary under certain circumstances.
(hhh) "Subsidiary" of a Person means a corporation, partnership, limited liability company or other entity with respect to which such Person, directly or indirectly, (i) owns in excess of 50% of the outstanding capital stock, (ii) owns a right to more than 50% of the profits of such entity or (iii) possess the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, EMS LP, each of its Subsidiaries and each Affiliated Medical Group is a Subsidiary of the Company. No Billing Entity is deemed to be a Subsidiary of the Company for purposes of this Agreement.
(iii) "Takeover Laws" means "moratorium," "control share acquisition," "business combination," "fair price" or any other form of anti-takeover Laws of any jurisdiction that may purport to be applicable to the Company, Parent, Sub or any of their respective Affiliates as a result of this Agreement or the Transactions (including the Merger), including Section 203 of the DGCL.
(jjj) "Transactions" means the transactions contemplated by this Agreement and the Unitholders Agreement.
(kkk) "Treasury" means the United States Department of the Treasury.
(lll) Each of the following terms is defined in the Section of this Agreement set forth opposite such term:
Defined Terms
|
Section | |||
---|---|---|---|---|
ABL Access Period |
6.10(a)(v) | |||
Acquisition Proposal |
6.02(g)(i) | |||
Affiliate Transaction |
4.19 | |||
Agreement |
Preamble | |||
Alternative Acquisition Agreement |
6.02(e)(i) | |||
Appraisal Shares |
3.01(d) | |||
Authorizations |
4.10(a) | |||
Break-Up Fee |
8.03(e) | |||
Certificate |
3.01(c)(i) | |||
Certificate of Merger |
2.03 | |||
Change of Recommendation |
6.02(e) | |||
Claim |
6.07(b) | |||
Class B Special Voting Share |
4.02(a) | |||
Company |
Preamble |
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Defined Terms
|
Section | |||
---|---|---|---|---|
Company Disclosure Schedule |
Article IV | |||
Company Related Parties |
8.03(b) | |||
Converting Stock Option |
3.04(a) | |||
Credit Facility |
4.03(a) | |||
Cutoff Date |
4.02(a) | |||
Debt Financing |
5.03 | |||
Debt Financing Commitment |
5.03 | |||
Debt Payoff |
6.10(a)(x) | |||
DGCL |
2.01 | |||
Effective Time |
2.03 | |||
Engagement Letter |
5.03 | |||
Environmental Laws |
4.10(b) | |||
Equity Award Amounts |
3.04(d) | |||
Equity Financing |
5.03 | |||
Equity Financing Commitment |
5.03 | |||
ERISA Affiliate |
4.12(c) | |||
Exchange Fund |
3.03(a) | |||
Fairness Opinion |
4.23 | |||
Fee Letter |
5.03 | |||
Financing |
5.03 | |||
Financing Commitments |
5.03 | |||
GAAP |
4.06(b) | |||
Government Contract |
4.25 | |||
Governmental Program |
4.18(b) | |||
Hazardous Materials |
4.10(b) | |||
Health Care Authorizations |
4.18(f) | |||
Health Care Law |
4.18(a) | |||
Indemnified Party |
6.07(a) | |||
Indemnitees |
6.10(c) | |||
Interim Period |
6.01 | |||
Labor Proceeding |
4.13 | |||
Lien |
4.05(b) | |||
Litigation |
4.09 | |||
Material Contract |
4.11(a) | |||
Merger |
Recitals | |||
Merger Closing |
2.02 | |||
Merger Closing Date |
2.02 | |||
Merger Consideration |
3.01(c)(i) | |||
Notice Period |
6.02(e)(i) | |||
Outside Date |
8.01(b)(i) | |||
Parent |
Preamble | |||
Parent Disclosure Schedule |
Article IV | |||
Parent Material Adverse Effect |
5.02(b) | |||
Parent Related Parties |
8.02(b) | |||
Parent Stock Option |
3.04(a) | |||
parties |
Preamble | |||
party |
Preamble | |||
Paying Agent |
3.03(a) | |||
Preferred Stock |
4.02(a) | |||
Proxy Date |
6.03(c) |
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Defined Terms
|
Section | |||
---|---|---|---|---|
Proxy Statement |
6.03(a) | |||
Recommendation |
20 | |||
Reimbursement Obligations |
6.10(c) | |||
Required Information |
6.10(a)(v) | |||
Restraints |
7.01(c) | |||
Sarbanes-Oxley Act |
4.06(a) | |||
SEC Documents |
4.06(a) | |||
Solvent |
5.11 | |||
Sponsor |
5.03 | |||
Stock Option Exchange Ratio |
3.04(a) | |||
Stockholder Approval |
4.21 | |||
Stockholders' Meeting |
6.03(c) | |||
Sub |
Preamble | |||
Superior Proposal |
6.02(g)(ii) | |||
Surviving Corporation |
2.01 | |||
Tax |
4.14(b) | |||
Tax Return |
4.14(b) | |||
Taxes |
4.14(b) | |||
Termination Fee |
8.03(c) | |||
Transaction Litigation |
6.04(c) | |||
Triggering Event |
8.01(e) | |||
Unitholders Agreement |
Recitals |
Section 2.01 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), Sub shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the "Surviving Corporation").
Section 2.02 Closing. The closing of the Merger (the "Merger Closing") will take place at the offices of Debevoise & Plimpton LLP, located at 919 Third Avenue, New York, New York, 10022, at 10:00 a.m., New York City time, on the second business day after satisfaction or (to the extent permitted by Law) waiver of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Merger Closing, but subject to the satisfaction or (to the extent permitted by Law) waiver of those conditions) unless another time, date or place is agreed to in writing by Parent and the Company; provided that if the Marketing Period has not ended at the time of the satisfaction or waiver of conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Merger Closing), then the Merger Closing shall occur instead on the date following the satisfaction or waiver of such conditions that is the earliest to occur of (a) any Business Day before or during the Marketing Period as may be specified by Parent on no less than two Business Days' prior notice to the Company, and (b) the second Business Day immediately following the final Business Day of the Marketing Period. The date on which the Merger Closing occurs is referred to in this Agreement as the "Merger Closing Date".
Section 2.03 Effective Time. Subject to the provisions of this Agreement, as promptly as reasonably practicable on the Merger Closing Date, the parties shall file a certificate of merger or a certificate of ownership and merger, as applicable (the "Certificate of Merger"), in such form as is required by, and executed and acknowledged in accordance with, the relevant provisions of the DGCL,
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and shall make all other filings and recordings required under the DGCL. The Merger shall become effective on such date and time as the Certificate of Merger is filed with the Secretary of State of the State of Delaware or at such other date and time as Parent and the Company shall agree and specify in the Certificate of Merger. The date and time at which the Merger becomes effective is referred to in this Agreement as the "Effective Time".
Section 2.04 Effects of the Merger. The Merger shall have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, from and after the Effective Time, the Surviving Corporation shall possess all properties, rights, privileges, powers and franchises of the Company and Sub, and all of the claims, obligations, liabilities, debts and duties of the Company and Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Corporation.
Section 2.05 Certificate of Incorporation and By-Laws.
(a) At the Effective Time, the certificate of incorporation of the Company shall be amended to read in its entirety as the certificate of incorporation of Sub as in effect immediately prior to the Effective Time and, as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended (subject to Section 6.07(a)) as provided therein or by applicable Law; provided, however, that the name of Company shall not be amended, so that the name of the Surviving Corporation shall be "Emergency Medical Services Corporation", and provided further that the provisions of Sub's certificate of incorporation related to the incorporator of Sub shall be omitted from the certificate of incorporation of the Surviving Corporation.
(b) At the Effective Time, the by-laws of the Company shall be amended to read in their entirety as the by-laws of Sub as in effect immediately prior to the Effective Time and shall be the by-laws of the Surviving Corporation until thereafter changed or amended (subject to Section 6.07(a)) as provided therein or by applicable Law.
Section 2.06 Directors. At the Effective Time, the directors of Sub immediately prior to the Effective Time shall become the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.
Section 2.07 Officers. At the Effective Time, the officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.
Section 2.08 Taking of Necessary Action. If at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Sub, the Surviving Corporation, the board of directors of the Surviving Corporation and officers of the Surviving Corporation shall take all such lawful and necessary action, consistent with this Agreement, on behalf of the Company, Sub and the Surviving Corporation.
ARTICLE III.
EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
Section 3.01 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock, the Class B Special Voting Share, any LP Exchangeable Units or any shares of capital stock of Parent or Sub:
(a) Capital Stock of Sub. Each share of capital stock of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and
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nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation and shall constitute the only outstanding shares of Capital Stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time that is directly owned by the Company as treasury stock, or by Parent or Sub at such time, shall automatically be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock and Class B Special Voting Share.
(i) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding shares to be canceled in accordance with Section 3.01(b) and, except as provided in Section 3.01(d), the Appraisal Shares, but including shares of Class B Common Stock that are issued immediately prior to the Effective Time in exchange for LP Exchangeable Units) shall be converted into the right to receive $64.00 in cash, without interest (the "Merger Consideration"). At the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate (or evidence of shares in book-entry form) that immediately prior to the Effective Time represented any such shares of Company Common Stock (each, a "Certificate") shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration.
(ii) The Class B Special Voting Share shall be converted into the right to receive $1.00 in cash, without interest, and shall no longer be outstanding and shall cease to exist, and the book-entry thereof that immediately prior to the Effective Time represented such share shall cease to have any rights with respect thereto, except the right to receive $1.00.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands appraisal of such shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (the "Appraisal Shares") shall not be converted into the right to receive the Merger Consideration as provided in Section 3.01(c), but instead such holder shall be entitled to payment of the fair value of such shares in accordance with the provisions of Section 262 of the DGCL. At the Effective Time, the Appraisal Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of Appraisal Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such Appraisal Shares in accordance with the provisions of Section 262 of the DGCL. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 of the DGCL or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL, then the right of such holder to be paid the fair value of such holder's Appraisal Shares under Section 262 of the DGCL shall cease and such Appraisal Shares shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration, as provided in Section 3.01(c), without any interest thereon. The Company shall give prompt notice to Parent of any demands for appraisal of any shares of Company Common Stock or written threats thereof, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or agree to do or commit to do any of the foregoing.
Section 3.02 Adjustment to Merger Consideration. Without limiting the other provisions of this Agreement, if at any time during the period between the date of this Agreement and the Effective Time, there shall be any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), cash dividend, reorganization,
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recapitalization, reclassification, combination, exchange of shares or other like change with respect to Company Common Stock occurring on or after the date hereof and prior to the Effective Time, the Merger Consideration as provided in Section 3.01(c)(i) shall be equitably adjusted by Parent to reflect the effect thereof. For the avoidance of doubt, there will be no adjustment to the Merger Consideration to reflect the effect of the exchange of LP Exchangeable Units for Class B Common Stock, the conversion of Class B Common Stock into Class A Common Stock or the exercise of any Stock Option or vesting of any Company Equity Award.
Section 3.03 Exchange Fund.
(a) Paying Agent. Prior to the Merger Closing Date, Parent 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 in accordance with this Article III and, in connection therewith, shall enter into an agreement with the Paying Agent in the form reasonably acceptable to the Company. At or prior to the Effective Time, Parent shall deposit with the Paying Agent cash in an amount sufficient to pay the aggregate Merger Consideration as required to be paid pursuant to this Agreement (such cash being hereinafter referred to as the "Exchange Fund"). Parent shall not be required to deposit with the Paying Agent the $1.00 payable with respect to the Class B Special Voting Share.
(b) Certificate Exchange Procedures. As promptly as reasonably practicable after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate (i) a 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 which shall otherwise be in customary form (including customary provisions with respect to delivery of an "agent's message" with respect to shares held in book-entry form)), and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Each holder of record of a Certificate shall, upon surrender to the Paying Agent of such Certificate, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, be entitled to receive in exchange therefor the amount of cash which the number of shares of Company Common Stock previously represented by such Certificate shall have been converted into the right to receive pursuant to Section 3.01(c), and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, payment of the Merger Consideration may be made to a Person other than the Person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other similar Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of such Certificate or establish to the reasonable satisfaction of Parent that such Tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.03(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration which the holder thereof has the right to receive in respect of such Certificate pursuant to this Article III. No interest shall be paid or will accrue on any cash payable to holders of Certificates pursuant to the provisions of this Article III.
(c) No Further Ownership Rights in Company Common Stock. All cash paid upon the surrender of Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented by such Certificates. At the close of business on the day on which the Effective Time occurs, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any
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Certificate is presented to the Surviving Corporation for transfer, it shall be canceled against delivery of cash to the holder thereof as provided in this Article III.
(d) Termination of the Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the holders of the Certificates for six months after the Effective Time shall be delivered to Parent, upon demand, and any holders of the Certificates who have not theretofore complied with this Article III shall thereafter look only to Parent for, and Parent shall remain liable for, payment of their claims for the Merger Consideration pursuant to the provisions of this Article III.
(e) No Liability. None of Parent, Sub, the Company, the Surviving Corporation or the Paying Agent shall be liable to any person in respect of any cash from the Exchange Fund delivered to a public official in compliance with any applicable state, federal or other abandoned property, escheat or similar Law. If any Certificate shall not have been surrendered prior to the date on which the related Merger Consideration would escheat to or become the property of any Governmental Entity, any such Merger Consideration shall, to the extent permitted by applicable Law, immediately prior to such time become the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest the cash in the Exchange Fund as directed by Parent; provided, however, that such investments shall be in obligations of or guaranteed by the United States of America or any agency or instrumentality thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A 1 or P 1 or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker's acceptances of commercial banks with capital exceeding $5.0 billion (based on the most recent financial statements of such bank that are then publicly available). Any interest and other income resulting from such investments shall be paid solely to Parent. Nothing contained herein and no investment losses resulting from investment of the Exchange Fund shall diminish the rights of any holder of Certificates to receive the Merger Consideration or any holder of a Company Equity Award to receive the holder's Equity Award Amount, in each case as provided herein.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration.
(h) Withholding Rights. Notwithstanding anything in this Agreement to the contrary, Parent, Sub, the Company, the Surviving Corporation and the Paying Agent shall be entitled to deduct and withhold from any amount otherwise payable pursuant to the Merger (or this Agreement) such amounts as they are required to deduct and withhold under the Code, or any other provision of Tax Law, including any payment to a holder of Company Common Stock or a Company Equity Award. To the extent that amounts are so withheld and paid over to the appropriate taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Section 3.04 Company Equity Awards. As soon as reasonably practicable following the date of this Agreement, the Board of Directors (or, if appropriate, any committee administering the Company Incentive Plans) shall adopt such resolutions and take such other actions as may be required to provide that the following actions shall occur:
(a) Except as set forth in the balance of this Section 3.04(a), each unexercised Company Stock Option, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall
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be canceled, with the holder thereof becoming entitled to receive, on the date which the Effective Time occurs, an amount in cash, without interest, equal to (i) the excess, if any, of (A) the Merger Consideration over (B) the exercise price per share of Class A Common Stock subject to such Company Stock Option multiplied by (ii) the number of shares of Class A Common Stock subject to such Stock Option. Notwithstanding the preceding sentence, if mutually agreed by Parent and the holder of any Stock Option (each Stock Option as to which such agreement is made, a "Converting Stock Option"), such Converting Stock Option shall (to the extent outstanding immediately prior to the Effective Time) cease, at the Effective Time, to represent a right to acquire shares of Class A Common Stock and shall be converted at the Effective Time into a fully vested and exercisable option to purchase common stock of Parent (a "Parent Stock Option"), on the same terms and conditions as were then applicable under such Converting Stock Option and such other terms as may be mutually agreed by Parent and the holder thereof. The number of shares of common stock of Parent subject to each such Converting Stock Option shall be equal to the number of shares of Class A Common Stock subject to each such Converting Stock Option immediately prior to the Effective Time multiplied by the Stock Option Exchange Ratio (subject to adjustment in accordance with Section 3.02), rounded down to the nearest whole share of common stock of Parent, and such Parent Stock Option shall have an exercise price per share (rounded up to the nearest cent) equal to the per share exercise price applicable to such Converting Stock Option immediately prior to the Effective Time divided by the Stock Option Exchange Ratio (subject to adjustment in accordance with Section 3.02). Effective not later than the Effective Time, Parent shall have reserved for future issuance a number of shares of common stock of Parent at least equal to the number of shares of common stock of Parent that will be subject to Parent Stock Options as a result of the actions contemplated by this Section 3.04. For purposes of this Section 3.04(a), the "Stock Option Exchange Ratio" shall be that ratio (rounded to four decimal places) obtained by dividing the Merger Consideration by the fair market value of a share of common stock of Parent immediately following the Effective Time.
(b) Each Restricted Share that is outstanding immediately prior to the Effective Time shall be fully vested and, at the Effective Time, canceled and extinguished, and, in consideration thereof, the holder thereof shall become entitled to receive, on the date which the Effective Time occurs, an amount in cash, without interest, equal to (i) the Merger Consideration multiplied by (ii) the number of Restricted Shares held by such holder immediately prior to the Effective Time.
(c) Each RSU that is outstanding immediately prior to the Effective Time shall, at the Effective Time, be vested and canceled and extinguished, and, in consideration thereof, the holder thereof shall become entitled to receive, on the date on which the Effective Time occurs, an amount in cash, without interest, equal to (i) the Merger Consideration multiplied by (ii) the number of shares of Class A Common Stock subject to such RSUs held by such holder immediately prior to the Effective Time.
(d) Payment in respect of all Restricted Shares and RSUs hereunder shall be subject to appropriate withholding for Taxes in accordance with Section 3.03(h) and shall be paid not later than the first payroll date following the date on which the Effective Time occurs. The term "Equity Award Amounts" means, collectively, all amounts payable pursuant to this Section 3.04.
(e) The conversion of the Converting Stock Options to Parent Stock Options pursuant to this Section 3.04 shall be effected in a manner consistent with Treasury Regulation Section 1.409A-1(b)(5)(v)(D) of the Code and Section 424 of the Code. Parent shall take reasonable steps to ensure that the Parent Stock Options will not be treated as the grant of a new stock right for purposes of Section 409A of the Code.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as disclosed in the SEC Documents filed with, or furnished to, the SEC by the Company on or after January 1, 2010 and prior to the date of this Agreement, or incorporated by reference into such document, and publicly available prior to the date of this Agreement, other than any disclosures contained under the captions "Risk Factors" or "Forward Looking Statements" and any other disclosures contained therein that are predictive, cautionary or forward looking in nature, but it being agreed that this clause (i) shall not be applicable to Section 4.02, Section 4.03, Section 4.04, Section 4.20, Section 4.21, Section 4.22, Section 4.23 and Section 4.24, or (ii) subject to Section 9.13, as set forth in the disclosure schedules delivered by the Company to Parent and Sub concurrently with the execution of this Agreement (the "Company Disclosure Schedule"), the Company represents and warrants to Parent and Sub as follows:
Section 4.01 Organization; Qualification.
(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of Delaware. Each Significant Subsidiary is a legal entity duly organized, validly existing and in good standing (where such concept is recognized under applicable Law) under the Laws of its respective jurisdiction of organization. Each Subsidiary other than a Significant Subsidiary is a legal entity duly organized, validly existing and in good standing (where such concept is recognized under applicable Law) under the Laws of its respective jurisdiction of organization except where the failure to be in good standing would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Each of the Company and its Subsidiaries has all requisite corporate, partnership, limited liability company or other entity power and authority to own, lease and operate its properties and to carry on its business as presently conducted by it, except where the failure to have such power or authority would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect.
(b) Each of the Company and its Subsidiaries is qualified or licensed to do business and is in good standing (where such concept is recognized under applicable Law) as a foreign corporation (or other legal entity) in each jurisdiction where the nature of its business or the ownership, leasing or operation of its properties requires such qualification or licensing, except where the failure to be so qualified, licensed or in good standing would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect. The Company has made available to Parent complete and correct copies of the Organizational Documents of the Company and each of its Significant Subsidiaries, each as amended to date, and each as so made available is in full force and effect. A list of the Company's Significant Subsidiaries is set forth in Section 4.01(b) of the Company Disclosure Schedule. Neither the Company nor any Significant Subsidiary is in violation of its Organizational Documents.
Section 4.02 Capital Structure.
(a) The authorized capital stock of the Company consists of 100,000,000 shares of Class A Common Stock, 40,000,000 shares of Class B Common Stock, one share of Class B Special Voting Stock, $0.01 par value per share (the "Class B Special Voting Share"), and 20,000,000 shares of preferred stock, $0.01 par value per share ("Preferred Stock"). At the close of business on February 10, 2011 (the "Cutoff Date"), (i) 30,420,991 shares of Class A Common Stock, 52,228 shares of Class B Common Stock, one share of Class B Special Voting Stock and no shares of Preferred Stock were issued and outstanding, (ii) 30,778 shares of Class A Common Stock were held in treasury, (iii) no shares of Class B Common Stock or Preferred Stock were held in treasury or owned by a Subsidiary of the Company, (iv) (A) (I) 1,399,590 shares of Class A Common Stock were reserved for issuance pursuant to outstanding Stock Options, (II) 292,993 Restricted Shares were issued and outstanding (which
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number is not included as outstanding in clause (i)), (III) 90,340 RSUs were outstanding, (B) 127,084 shares of Class A Common Stock were reserved for issuance under the Company's 2007 Amended and Restated Long-Term Incentive Plan, (C) 167,827 shares of Class A Common Stock were reserved for issuance under the Company's Second Amended and Restated Long-Term Incentive Plan, (D) 90,340 shares of Class A Common Stock were reserved for issuance under the Company's Non-Employee Director Compensation Program, (E) 13,789,728 shares of Class A Common Stock were reserved for issuance upon conversion of the outstanding Class B Common Stock and the Class B Common Stock reserved for issuance upon exchange of LP Exchangeable Units, (v) 13,724,676 shares of Class B Common Stock were reserved for issuance upon exchange of outstanding LP Exchangeable Units and (vi) 13,724,676 LP Exchangeable Units were outstanding. All outstanding shares of Company Common Stock and all shares of Company Common Stock reserved for issuance as noted in clauses (iv) and (v) of the preceding sentence, when issued in accordance with the respective terms thereof, are or will be duly authorized, validly issued, fully paid and non-assessable, free of pre-emptive or similar rights, and issued in accordance with the registration and qualification provisions of applicable securities Laws or pursuant to valid exemptions therefrom.
(b) Section 4.02(b) of the Company Disclosure Schedule sets forth the aggregate Company Equity Awards outstanding as of the Cutoff Date, including the Company Incentive Plan under which each such Company Equity Award was granted, the price at which such Company Equity Award may be exercised (if applicable) and the status of each such Company Equity Award. No outstanding Stock Option or award of Restricted Shares or RSUs was made pursuant to a form of award agreement other than those made available to Parent.
(c) Except as set forth in Section 4.02(c) of the Company Disclosure Schedule and except for any obligations pursuant to this Agreement, the Unitholders Agreement or as set forth in subsections (a) and (b) above, as of the date hereof, (i) the Company does not have any shares of its capital stock issued, outstanding or reserved for issuance and (ii) there are no outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units or other similar rights, agreements, contracts, undertakings or commitments of any kind relating to capital stock or other equity interests of the Company to which the Company is a party obligating the Company to (A) issue, transfer or sell any shares of capital stock or other equity interests of the Company or securities convertible into or exchangeable for such shares or equity interests, (B) grant, extend or enter into any such subscription, option, warrant, call, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units or other similar right, agreement, contract, undertaking or arrangement, (C) redeem, repurchase, or otherwise acquire any such shares of capital stock or other equity interests or (D) pay dividends or distributions to, provide funds or other consideration or value to, or make any investment (in the form of a loan, capital contribution or otherwise) in any Person (other than the funds to or investments in EMS LP or other Subsidiaries of the Company in the ordinary course of business consistent with past practice that are described in Section 4.03(c)(iv) of the Company Disclosure Schedule).
(d) The Company has no outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote (or which are convertible into or exchangeable or exercisable for securities having the right to vote) with the stockholders of the Company or any of its Subsidiaries on any matter.
(e) Other than agreements included in, or incorporated by reference into, the SEC Documents prior to the date hereof and the Unitholders Agreement, there are no stockholder agreements, registration rights agreements, voting trusts or other agreements or understandings to which the Company is a party with respect to the voting or registration of the capital stock or other voting or equity interest of the Company or any preemptive rights with respect thereto.
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Section 4.03 Subsidiaries.
(a) Section 4.03(a) of the Company Disclosure Schedule sets forth a complete and correct list of each Subsidiary of the Company, the jurisdiction of organization of each such Subsidiary and the legal ownership thereof. Except as set forth in Section 4.03(a) of the Company Disclosure Schedule, the Company is the beneficial and record owner, directly or indirectly, of all of the equity securities of each Subsidiary other than any Affiliated Medical Group or any Billing Entity. All equity interests of the Company's Subsidiaries (i) where the Subsidiary is a corporation, are duly and validly issued, fully paid and non-assessable and (ii) where the Subsidiary is not a corporation, are duly created pursuant to the Laws of such Subsidiary's jurisdiction of organization or formation, are issued and paid for in accordance with such Subsidiary's Organizational Documents and are fully paid and non-assessable. Except to the extent pledged to lenders under the Credit Agreement, dated as of April 8, 2010, among the Company and the lenders from time to time parties thereto (the "Credit Facility"), all equity interests owned by the Company or its Subsidiaries are free and clear of Liens, other than restrictions imposed by applicable Law or the Organizational Documents of the Subsidiary.
(b) Except for the Subsidiaries disclosed in Section 4.03(a) of the Company Disclosure Schedule and the joint ventures disclosed in Section 4.03(b) of the Company Disclosure Schedule, the Company does not own, directly or indirectly, any capital stock or other voting or equity securities or interests in any Person. Except as set forth in Section 4.03(c)(iv) of the Company Disclosure Schedule and pursuant to the provisions of the EMS LP Partnership Agreement, neither the Company nor any of its Subsidiaries is obligated to make any contribution to the capital of, make any loan to, or guarantee Indebtedness of any Person (excluding the Company's wholly-owned Subsidiaries). As of January 1, 2011, there is no outstanding Indebtedness of the Company or its Subsidiaries other than as identified in Section 4.03(b) of the Company Disclosure Schedule.
(c) Except as disclosed in Section 4.03(c) of the Company Disclosure Schedule, the Voting and Exchange Trust Agreement, dated as of December 20, 2005, among the Company, EMS LP and Onex Corporation and the EMS LP Partnership Agreement, there are no outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, or other similar rights, agreements, contracts, undertakings or commitments of any kind relating to capital stock or other equity interests of the Company's Subsidiaries to which any of the Subsidiaries is a party obligating any of the Subsidiaries to (i) issue, transfer or sell any shares of capital stock or other equity interests of any of the Subsidiaries or securities convertible into or exchangeable for such shares or equity interests, (ii) grant, extend or enter into any such subscription, option, warrant, call, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, or other similar right, agreement contract, undertaking or arrangement, (iii) redeem, repurchase, or otherwise acquire any such shares of capital stock or other equity interests or (iv) pay dividends or distributions to, provide funds or other consideration or value to, or make any investment (in the form of a loan, capital contribution or otherwise) in any Person.
(d) Except as disclosed in Section 4.03(d) of the Company Disclosure Schedule, each Affiliated Medical Group is owned, directly or indirectly, by a Medical Professional with whom the Company or a Subsidiary of the Company has a Stock Transfer and Option Agreement and an Indemnity Agreement in substantially the forms thereof made available to Parent. The Organizational Documents, Affiliated Medical Group Physician Services Agreements and Affiliated Medical Group Management Services Agreements of each Affiliated Medical Group and Billing Entity are in substantially the forms thereof made available to Parent.
(e) None of the Company's Subsidiaries have outstanding bonds, debentures, notes or other obligations or Indebtedness, the holders of which have the right to vote (or which are convertible into
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or exchangeable or exercisable for securities having the right to vote) with the stockholders of the Company or any of its Subsidiaries on any matter.
(f) Except as set forth in the Organizational Documents of EMS LP and the Organizational Documents of the Affiliated Medical Groups and Billing Entities, there are no stockholder agreements, registration agreements, voting trusts or other agreements or understandings to which any of the Company's Subsidiaries is a party with respect to the voting or registration of the capital stock or other voting or equity interests of the Company or any of its Subsidiaries or any preemptive rights with respect thereto.
Section 4.04 Corporate Authority; Board Action.
(a) The Company has all requisite power and authority to enter into and deliver this Agreement and to consummate the Transactions, subject, in the case of this Agreement and the Merger, to receipt of the Stockholder Approval. The execution, delivery and performance of this Agreement by the Company and the consummation of the Transactions by, and compliance with the provisions of, this Agreement by the Company have been duly and validly authorized by all necessary corporate action on the part of the Company, subject, in the case of this Agreement and the Merger, to receipt of the Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of Parent and Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency and other Laws of general applicability relating to or affecting creditors' rights generally and to general equity principles.
(b) The Board of Directors of the Company, at a meeting duly called and held at which all directors of the Company were present, duly and unanimously adopted resolutions (i) authorizing and approving the execution, delivery and performance of this Agreement and the Transactions, (ii) approving and declaring advisable this Agreement, the Merger and the other Transactions, (iii) declaring that the terms of this Agreement and the Transactions, including the Merger and the other Transactions, on the terms and subject to the conditions set forth herein, are fair to and in the best interests of the stockholders of the Company, (iv) directing that the adoption of this Agreement be submitted to a vote at a meeting of the stockholders of the Company and (v) recommending that the stockholders of the Company adopt this Agreement (this clause (v), the "Recommendation").
Section 4.05 Governmental Authorization; Non-Contravention.
(a) Except as set forth in Section 4.05(a) of the Company Disclosure Schedule, the execution, delivery and performance by the Company of this Agreement does not, and the consummation of the Transactions by the Company and compliance with the provisions hereof by the Company will not, require any consent, approval, order, waiver or authorization or permit of, action by, registration, declaration or filing with or notification to any Governmental Entity with respect to the Company or any of its Subsidiaries, other than (i) the Stockholder Approval, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and of appropriate documents with the relevant authorities of other jurisdictions in which the Company or any of its Subsidiaries is qualified to do business; (iii) the filing of a premerger notification and report form by the Company under the HSR Act, and the filings and receipt, termination or expiration as applicable, of such other approvals or waiting periods as may be required under any other applicable Antitrust Laws specified in Section 4.05(a) of the Company Disclosure Schedule; (iv) compliance with the applicable requirements of the Exchange Act including the filing with the SEC of (x) a Schedule 13D, if required by Law, (y) the Proxy Statement and (z) such other reports or filings under the Exchange Act as may be required in connection with this Agreement and the Transactions; (v) any filings or notices required under the rules and regulations of the NYSE; and (vi) such other consents, approvals, orders, waivers, authorizations, permits, actions, registrations, declarations, filings or notifications the failure of which to make or obtain would not, individually or in the aggregate, (A) have or reasonably be expected to have
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a Company Material Adverse Effect or (B) prevent or materially delay the consummation of the Merger or any of the other Transactions or the Company's ability to observe and perform its material obligations hereunder.
(b) Except as set forth in Section 4.05(b) of the Company Disclosure Schedule, the execution, delivery and performance by the Company of this Agreement do not, and the consummation of the Transactions and compliance with the provisions hereof by the Company will not, (i) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, require consent under, or give rise to, or to a right of, termination, modification, cancellation or acceleration of any obligation or to the loss of any benefit under any (A) Contract to which the Company or any of its Subsidiaries is a party or (B) Authorization applicable to the Company or any of its Subsidiaries, (ii) result in the creation of any pledges, liens, charges, mortgages, encumbrances or assignments of any kind (each, a "Lien") upon any of the properties, assets or rights of the Company or any of its Subsidiaries (other than any such Lien created as a result of any action taken by Parent or Sub), (iii) conflict with or result in any violation of the Company's Organizational Documents or the Organizational Documents of any of its Subsidiaries or (iv) assuming that the consents and approvals referred to in Section 4.05(a) are obtained and assuming the accuracy of the representations and warranties of Parent and Sub set forth in Section 5.09, conflict with or violate any applicable Laws or any judgments, orders, or decrees of any Governmental Entity, in each case applicable to the Company or any of its Subsidiaries other than, in the case of clauses (i), (ii) and (iv), as would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect.
Section 4.06 SEC Documents and Financial Statements; Internal Controls and Disclosure Controls.
(a) Except as set forth in Section 4.06(a) of the Company Disclosure Schedule, the Company has filed all material schedules, forms, statements, reports and other documents required to be filed by it with the SEC pursuant to the Securities Act or the Exchange Act since January 1, 2008 (the schedules, forms, statements, reports and other documents filed with the SEC since January 1, 2008, collectively, the "SEC Documents"). As of their respective effective dates (in the case of SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective dates of filing (in the case of all other SEC Documents), or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the date hereof, the SEC Documents complied, and each of the SEC Documents filed subsequent to the date of this Agreement will comply, in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), as the case may be, and the applicable rules and regulations promulgated thereunder. As of the time of filing with the SEC, none of the SEC Documents so filed or that will be filed subsequent to the date of this Agreement contained or will contain, as the case may be, any untrue statement of a material fact or omitted 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, except to the extent that the information in such SEC Document has been amended or superseded by a later SEC Document filed prior to the date hereof. Except as set forth in Section 4.06(a) of the Company Disclosure Schedule, the Company has made available to Parent correct and complete copies of all material correspondence between the SEC, on the one hand, and the Company and any of its Subsidiaries, on the other hand, occurring since January 1, 2008 and prior to the date hereof. As of the date hereof, there are no outstanding or unresolved comments in comment letters from the SEC staff with respect to any of the SEC Documents. To the Knowledge of the Company, as of the date hereof, none of the SEC Documents is the subject of ongoing SEC review, outstanding SEC comment or outstanding SEC investigation.
(b) Each of the consolidated financial statements (including, in each case, the notes thereto) of the Company included in the SEC Documents, when filed, complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, have been prepared in all
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material respects in conformity with United States generally accepted accounting principles ("GAAP") (except, in the case of unaudited quarterly statements, to the extent permitted by Form 10-Q of the SEC or other rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end adjustments and the absence of footnotes). The unaudited consolidated financial statements of the Company for the fiscal year ended December 31, 2010 made available to Parent (including the notes thereto) comply as to form in all material respects with the published rules and regulations of the SEC as of the date of this Agreement, have been prepared in all material respects in conformity with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of operations and their cash flows for the respective periods then ended (subject to any recognized subsequent event that occurs between the date of this Agreement and the date such financial statements are issued or available to be issued). Except as set forth in Section 4.06(b) of the Company Disclosure Schedule, the Company has not received any written advice or written notification from its independent certified public accountants that it has used any improper accounting practice that would have the effect of not reflecting or incorrectly reflecting in the financial statements or in the books and records of the Company and its Subsidiaries, any properties, assets, liabilities, revenues or expenses in any material respect.
(c) Neither the Company nor any of its Subsidiaries has outstanding (nor has arranged or modified since the enactment of the Sarbanes-Oxley Act) any "extensions of credit" (within the meaning of Section 402 of the Sarbanes-Oxley Act) to any director or executive officer (as defined in Rule 3b-7 under the Exchange Act) of the Company. The Company has been and is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of the NYSE.
(d) The Company has established and maintains a system of internal controls over financial reporting (as defined in and in accordance with the requirements of Rule 13a-15 under the Exchange Act). Such internal controls provide reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of Company financial statements for external purposes in accordance with GAAP. Since January 1, 2008, the Company's principal executive officer and its principal financial officer have disclosed to the Company's auditors and the audit committee of the Board of Directors (i) all known significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect the Company's ability to record, process, summarize and report financial information, (ii) any known fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls and the Company has made available to Parent copies of any material written materials relating to each of the foregoing. The Company has made available to Parent all such disclosures made by management to the Company's auditors and audit committee from January 1, 2008 to the date of this Agreement.
(e) The Company has established and maintains disclosure controls and procedures (as such term is defined in and in accordance with the requirements of Rule 13a-15 under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated Subsidiaries required to be included in reports filed under the Exchange Act is made known to the Company's principal executive officer and its principal financial officer, and such disclosure controls and procedures are effective in timely alerting the Company's principal executive officer and its principal financial officer to material information required to be disclosed by
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the Company in the reports that it files or submits to the SEC under the Exchange Act so that such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
Section 4.07 No Undisclosed Liabilities. Except for matters reflected or reserved against in the most recent consolidated balance sheet of the Company (or the notes thereto) included in the SEC Documents filed prior to the date hereof, neither the Company nor any of its Subsidiaries has any liabilities or obligations (whether accrued, absolute, contingent, fixed or otherwise) of any nature that would be required under GAAP, as in effect on the date of this Agreement, to be reflected on a consolidated balance sheet of the Company (including the notes thereto) except liabilities and obligations that (a) were incurred in the ordinary course of business consistent with past practice since the date of such balance sheet, (b) are incurred in connection with the Transactions or (c) would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect. Other than as disclosed in Section 4.07 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any off balance sheet partnership, joint venture or any similar arrangement (including any Contract relating to any transaction or relationship between or among the Company and/or any of its Subsidiaries, on the one hand, and any other Person, including any structured finance, special purpose or limited purpose Person, on the other hand, or any "off-balance sheet arrangement" (as defined in Item 303(a) of Regulation S-K promulgated under the Securities Act)).
Section 4.08 Absence of Certain Changes or Events. Between September 30, 2010 and the date of this Agreement, except as set forth in Section 4.08 of the Company Disclosure Schedule, (a) the business of the Company and its Subsidiaries has been conducted in the ordinary course of business consistent with past practice, (b) the Company and its Subsidiaries have not taken any other action that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 6.01 and (c) there has not been any change, effect, event, state of facts, development or occurrence that would, individually or in the aggregate, have had or reasonably be expected to have a Company Material Adverse Effect.
Section 4.09 Litigation. Except as set forth in Section 4.09 of the Company Disclosure Schedule there is no suit, complaint filed under seal, action, claim (or counterclaim), litigation, charge or administrative, arbitration, mediation, grievance or other proceeding or governmental or regulatory audit, investigation or proceeding brought, conducted or heard by or before any court or other Governmental Entity, arbitrator or mediator (each a "Litigation") pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries or to which any of their respective properties, assets or rights is subject that would, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect (in each case, if adversely determined, and without regard to whether there is any indemnity, cost sharing or similar agreement or arrangement with any other Person but taking into account the extent to which the defense or liability is insured). There is no Order outstanding against the Company or any of its Subsidiaries or to which any of their respective properties, assets or rights is subject that would, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect. This Section 4.09 does not relate to environmental matters, which are the subject of Section 4.10(b), labor matters, which are the subject of Section 4.13, Tax matters, which are the subject of Section 4.14, or healthcare matters, which are the subject of Section 4.18.
Section 4.10 Governmental Authorizations; Compliance with Law.
(a) Except as set forth in Section 4.10(a) of the Company Disclosure Schedule, each of the Company and its Subsidiaries is, and since January 1, 2008 has been, in compliance with all Laws applicable to its business or operations and has not received any written notice of any default or violation of such Laws, in each case except for instances of noncompliance that would not, individually
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or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect. Except as set forth on Section 4.10(a) of the Company Disclosure Schedule, each of the Company and its Subsidiaries has in effect all approvals, authorizations, registrations, licenses, exemptions, permits and consents of Governmental Entities (collectively, "Authorizations") necessary for it to conduct its business as presently conducted, except for such Authorizations the absence of which would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received notice that any Authorizations will be terminated or modified, are threatened with suspension, or cannot be renewed in the ordinary course of business consistent with past practice, and to the Knowledge of the Company, there is no reasonable basis for any such termination, modification, suspension or nonrenewal, except as would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect. This Section 4.10(a) does not relate to the SEC Documents, financial statements or disclosure controls and procedures, which are the subject of Section 4.06, environmental matters, which are the subject of Section 4.10(b), employee benefit matters, which are the subject of Section 4.12, labor matters, which are the subject of Section 4.13, Taxes, which are the subject of Section 4.14 or healthcare matters, which are the subject of Section 4.18.
(b) The Company and its Subsidiaries are, and have been since January 1, 2008, in compliance with all applicable Laws relating to (i) the protection and restoration of the environment (including ambient and indoor air, soil, surface water, groundwater and natural resources), (ii) the manufacture, transport, use, treatment, storage, disposal or release of Hazardous Materials and (iii) the protection of human exposure to Hazardous Materials ("Environmental Laws"), except for non-compliance that would not, individually or in the aggregate, have or reasonably be expected to result in a Company Material Adverse Effect. Except as set forth on Section 4.10(b) of the Company Disclosure Schedule, each of the Company and its Subsidiaries has in effect, and is in compliance with, all Authorizations required under Environmental Laws and necessary for it to conduct its business as presently conducted, except for such Authorizations the absence of which, or noncompliance with which, would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect. There has been no release of Hazardous Materials on, at, above, under or from any facility or real property currently or formerly owned, leased or operated by the Company, any of its Subsidiaries or their respective predecessors, except as would not reasonably be expected to result, individually or in the aggregate, in a Company Material Adverse Effect. Except as set forth in Section 4.10(b) of the Company Disclosure Schedule, neither the Company nor any Subsidiary has received any written notice alleging non-compliance with or liability under any Environmental Laws, and no claim, action, proceeding or investigation pursuant to Environmental Laws is pending or, to the Knowledge of the Company, threatened, against the Company or any of its Subsidiaries except as would not have or reasonably be expected to have a Company Material Adverse Effect. For purposes of this Section 4.10(b), "Hazardous Materials" means any substance, material or waste that is classified, characterized or regulated by any Governmental Entity in relevant form, quantity, concentrations or condition, as hazardous, toxic, a pollutant or contaminant, or words of similar meaning and effect, or that forms the basis for liability under any applicable Environmental Law.
Section 4.11 Material Contracts.
(a) Except for this Agreement, for Contracts filed as an exhibit to the SEC Documents or as disclosed in Section 4.11 of the Company Disclosure Schedule, as of the date of this Agreement (a) neither the Company nor any of its Subsidiaries is a party to, and (b) none of the Company, any of its Subsidiaries, or any of their respective properties, assets or rights is bound by any:
(i) Contract that is or would be required to be filed by the Company as a "material contract" with the SEC pursuant to Item 601 of Regulation S-K under the Securities Act or disclosed by the Company on a report on Form 8-K;
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(ii) Contract pursuant to which the Company or any Subsidiary provides emergency department, radiology, anesthesia, hospitalist program or any other staffing services to or for any hospital or other healthcare facility that generated revenue to the Company and its Subsidiaries of more than $10 million in the year ended December 31, 2010;
(iii) Contract pursuant to which the Company or any Subsidiary provides management, consulting, billing or other administrative-type services to or for any hospital, other healthcare facility or other Person (other than any Contracts of the type described in clause (iv) below) that generated revenue to the Company and its Subsidiaries of more than $10 million in the year ended December 31, 2010;
(iv) Contract pursuant to which the Company or any Subsidiary provides management, consulting, billing or other administrative-type services to any physician or medical group (excluding Affiliated Medical Groups) that generated revenue to the Company and its Subsidiaries of more than $10 million in the year ended December 31, 2010;
(v) Contract with any municipality or other local agency pursuant to which the Company or any Subsidiary provides emergency 911 response services to such municipality or other local agency that generated revenue to the Company and its Subsidiaries of more than $20 million in the year ended December 31, 2010;
(vi) Contract with any hospital, skilled nursing facility or other healthcare facility pursuant to which the Company or any Subsidiary provides emergency or non-emergency transportation services to such hospital, skilled nursing facility or other healthcare facility that is not terminable by the Company or its Subsidiary's counterparty, upon less than 120 days' notice, that generated revenue to the Company and its Subsidiaries of more than $20 million in the year ended December 31, 2010;
(vii) Contract with any HMO, PPO or other third-party payor pursuant to which the Company or any Subsidiary provides emergency or non-emergency transportation services that generated revenue to the Company and its Subsidiaries of more than $20 million in the year ended December 31, 2010;
(viii) Contract pursuant to which the Company or any Subsidiary provides management, consulting, billing or other administrative type services or other services to or on behalf of any third-party (other than any Contracts of the type described in clause (iii) and (iv) above) that is not terminable by the Company or its Subsidiary's counterparty upon less than 120 days' notice, that generated revenue to the Company and its Subsidiaries of more than $10 million in the year ended December 31, 2010;
(ix) Contract of employment, consulting, management, separation, severance or similar agreement with any (A) Person holding more than 5% of the Fully Diluted Shares at December 31, 2010, (B) director or (C) Management Level Employee (other than any Medical Professional), of the Company or any Subsidiary (other than an Affiliated Medical Group);
(x) Contract of employment, consulting, management, separation, severance or similar agreement with any consultant or independent contractor (other than any Medical Professional) providing for annual compensation from the Company or any Subsidiary in excess of $300,000 and is not terminable by the Company or any Subsidiary upon less than 120 days' notice without severance obligations other than under any applicable Law;
(xi) stock option, share purchase, profit sharing, deferred compensation, bonus or other incentive compensation contract, plan or arrangement, except for any profit sharing, bonus or other incentive compensation contract with any Medical Professional;
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(xii) loan, credit agreement, note, mortgage, indenture, bond, letter of credit or other obligation or agreement or other instrument entered into by the Company or any Subsidiary for or relating to Indebtedness (including capitalized lease obligations), or any guarantee by the Company or any Subsidiary of third-party obligations or any guarantee by a third party of the obligations of the Company or any Subsidiary (other than with an Affiliated Medical Group as described in Section 4.03(c)(iv) of the Company Disclosure Schedule);
(xiii) Collective Bargaining Agreement;
(xiv) Contract for the lease of personal property with an annual base rental obligation of more than $1 million or a total remaining rental obligation of more than $1 million;
(xv) Contract with any Person who owns or holds any equity securities or other ownership interest of any Affiliated Medical Group if such Contract has terms substantially different from the form of Stock Transfer and Option Agreement or Indemnity Agreement made available to Parent;
(xvi) Contract between the Company or any Subsidiary (excluding Affiliated Medical Groups) and any Affiliated Medical Group if such Contract has terms substantially different from the form of Affiliated Medical Group Physician Services Agreement or Affiliated Medical Group Management Services Agreement made available to Parent;
(xvii) joint venture, partnership, limited liability company agreement or similar arrangement with any other Person, other than any Billing Entity;
(xviii) Contract limiting the type of business activity of the Company or any Subsidiary (excluding any Contract that limits the business activities of any Affiliated Medial Group other than the type of business activities it performs for the Company or any of its Subsidiaries and excluding any Contract that is solely for the benefit of the Company or any of its Subsidiaries) or limiting the freedom of the Company or any of its Subsidiaries to engage in any line of business in any geographic area or to compete with any Person (other than the Company or any Subsidiary);
(xix) Contract with a group purchasing organization;
(xx) material Contract containing capitated payment arrangements;
(xxi) Contract (other than any Contracts of the type described in clauses (i)(xx) above, irrespective of the dollar threshold, and other than real or personal property leases) requiring payments by the Company or any Subsidiary in excess of $1 million per year and which are not terminable by the Company or such Subsidiary upon less than 180 days' notice;
(xxii) Contract with respect to a joint venture, partnership, limited liability or other similar agreement or arrangement related to the formation, creation, operation, management or control of any partnership or joint venture (other than those with Affiliated Medical Groups or Billing Entities otherwise described in this Section 4.11) that is material to the business of the Company and its Subsidiaries, taken as a whole, or in which the Company owns more than a 20% voting or economic interest, or with respect to which the Company has obligations, including contingent obligations, of more than $1 million in the aggregate;
(xxiii) Contract relating to an acquisition, divestiture, merger or similar transaction that contains representations, covenants, indemnities or other obligations (including payment, indemnification, purchase price adjustment, "earn-out" or other contingent obligations) of the Company or any of its Subsidiaries that are still in effect and would reasonably be expected to result in payments in excess of $250,000 for any such Contract individually or $1 million in the aggregate for all such Contracts;
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(xxiv) other than an acquisition subject to clause (xxiii) above, Contract that obligates the Company to make any capital commitment or expenditure (including pursuant to any joint venture) in excess of $1 million;
(xxv) Contract that prohibits the payment of dividends or distributions in respect of the capital stock of the Company or any of its Subsidiaries, prohibits the pledging of the capital stock of the Company or any of its Subsidiaries or prohibits the issuance of guarantees by any Subsidiary of the Company;
(xxvi) Contract permitting or restricting the use by the Company or any Subsidiary of Intellectual Property that is material to the conduct of the business of the Company or such Subsidiary (other than licenses to off-the-shelf software requiring payments by the Company or any Subsidiary