Item 4 is
hereby amended by supplementing such section with the following:
Agreement for the
Acquisition of the Issuer by SXC Health Solutions Corp.
On
February 25, 2008, the Issuer entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with SXC Health Solutions Corp., a corporation organized
under the laws of Yukon Territory, Canada (“SXC”), SXC Health Solutions, Inc., a
Texas corporation and wholly-owned subsidiary of SXC (“US Corp.”), and Comet
Merger Corporation, a Delaware corporation that is a newly-formed, wholly-owned
subsidiary of US Corp. and an indirect subsidiary of SXC (“Merger
Sub”). Pursuant to the Merger Agreement, and upon the terms and
subject to the conditions thereof, Merger Sub will commence an exchange offer
(the “Offer”) to acquire all of the outstanding shares of Common Stock, in which
Offer each share of Common Stock validly tendered and not properly withdrawn
will be exchanged for (a) $7.70 in cash, without interest, and (b) 0.217 of a
validly issued, fully paid and non assessable share of common stock of SXC (“SXC
Common Stock”) (such amount of cash and SXC Common Stock, the “Offer
Price”). As soon as practicable following the consummation of the
Offer, Merger Sub will merge with and into the Issuer, and the Issuer will
become an indirect, wholly-owned subsidiary of SXC (the “Second Step
Merger”).
In the
Second Step Merger, stockholders of the Issuer whose shares were not purchased
in the Offer (other than stockholders who validly exercised their appraisal
rights under the Delaware General Corporation Law) will become entitled to
receive the Offer Price for each of their shares of Common Stock.
If more
than 9,600,000 shares of Common Stock (including shares of Common Stock issuable
upon conversion of outstanding shares of the Series A Preferred Stock) (the
Common Stock, together with the Series A Preferred Stock, the “Issuer Stock”),
but fewer than 90% of the outstanding shares of Common Stock, are validly
tendered and not withdrawn pursuant to the Offer, and assuming all of the other
conditions of the Offer have been satisfied or waived, Merger Sub must accept
for exchange the tendered shares and may elect to provide a subsequent offering
period to achieve ownership of 90% of the outstanding shares, in order to effect
the Second Step Merger as a short-form merger pursuant to Section 253 of the
Delaware General Corporation Law. In addition, subject to certain
conditions and limitations, the Issuer has granted Merger Sub an option to
purchase that number of shares of Common Stock as would enable Merger Sub upon
exercise of such option (after taking into account all of the shares purchased
in the Offer) to achieve ownership of 90% of the outstanding shares of Common
Stock. Merger Sub is required to exercise the option if doing so
would enable it to effect a short-form merger. If, at the end of the
initial offering period (or such later date as the parties may agree), either
less than 9,600,000 shares of Common Stock are validly tendered and not
withdrawn, or Merger Sub would not be able to effect a short-form merger
pursuant to Section 253 of the Delaware General Corporation Law without the
acquisition of additional shares of Common Stock (other than through the
exercise of the option) or any reduction in the number of shares of Common Stock
outstanding, then Merger Sub will terminate the Offer and the parties will
instead, in accordance with the terms of the Merger Agreement, seek to
consummate the acquisition of the Issuer by SXC by means of a one-step merger of
Merger Sub with and into the Issuer following the adoption of the Merger
Agreement by the Issuer’s stockholders at a special stockholders meeting (the
“One Step Merger”), in which case the merger consideration would be the same as
the Offer Price. The One Step Merger and the Second Step Merger are
each sometimes referred to herein as the “Merger”.
Consummation
of the Offer and the Merger are subject to the conditions set forth in the
Merger Agreement.
The
foregoing description of the Merger Agreement does not purport to be complete
and is qualified in its entirety by reference to the full text of such
agreement, a copy of which is filed as an exhibit to the Form 8-K filed by the
Issuer with the Securities and Exchange Commission on February 27, 2008, and is
incorporated herein by reference.
Stockholder
Agreements
As an
inducement to enter into the Merger Agreement, and in consideration thereof,
each of the Purchasers entered into a Stockholder Agreement, dated as of
February 25, 2008, with SXC and the Issuer (the “Stockholder
Agreements”). Pursuant to the Stockholder Agreements, the Purchasers
have agreed to tender in the Offer all shares of Common Stock issuable upon the
conversion of their shares of Series A Preferred Stock. The
Purchasers also have agreed, if a stockholder vote is required by applicable
law, to vote all of their shares of Issuer Stock in favor of the Merger and
against any acquisition proposal or any action that would be adverse to the
Offer or the Merger. In the event that the Merger Agreement is
terminated by the Issuer in order to accept a “superior proposal”, the
Purchasers’ tender and voting obligations will terminate. In the
event that the Board makes a “change in recommendation” with respect to the
Merger Agreement or the transactions contemplated thereby, other than in
connection with a superior proposal, the Purchasers will be obligated to tender
in the Offer only shares representing 30% of the outstanding shares of Issuer
Stock at that time and to vote in favor of the Merger only shares representing
30% of the total vote of the shares of Issuer Stock entitled to vote on such
matter.
Pursuant
to the Stockholder Agreements, the Purchasers also agreed that, except as
specified by the Stockholder Agreements, for a period of one year following
SXC’s first acceptance for payment of shares tendered in the Offer (if the
transaction is effected by means of the Offer followed by the Second Step
Merger) or the effective time of the Merger (if the transaction is effected as a
One Step Merger), they will not sell or otherwise transfer any shares of SXC
Common Stock acquired pursuant to the Merger Agreement, except to participate in
a transaction that has been approved by the board of directors of
SXC.
The
Purchasers have further agreed, except in the circumstances specified in
the Stockholder Agreements, that they will not solicit third-party proposals,
provide information or engage in discussions with third parties relating to
alternative business combination transactions. In the event the
Merger Agreement is terminated under circumstances in which a termination fee is
payable by the Issuer to SXC, the Purchasers have agreed to pay SXC 50% of the
Purchasers’ profit (determined in accordance with the valuation provisions set
forth in the Stockholder Agreements) in excess of $11.50 per share from the sale
of their shares of Common Stock pursuant to another acquisition proposal that is
consummated within 12 months of the termination of the Stockholder
Agreements.
The
Stockholder Agreements will terminate upon the termination of the Merger
Agreement. Additionally, the Purchasers may terminate the Stockholder
Agreements in the event that the amount of the Offer Price or the merger
consideration is reduced, or the form of the Offer Price or the merger
consideration is changed, or the proportion of cash to SXC Common Stock is
reduced, in each case, without the Purchasers’ consent.
The
foregoing description of the Stockholder Agreements does not purport to be
complete and is qualified in its entirety by reference to the full text of such
agreements, copies of which are attached hereto as Exhibits
99.7
and
99.9
, respectively,
and are incorporated herein by reference.
Proxies
In
connection with the Stockholder Agreements, each of the Purchasers have executed
a Proxy, dated as of February 25, 2008, relating to the voting of their shares
of Issuer Stock (the “Proxies”).
The
foregoing description of the Proxies is not complete and is qualified in its
entirety by reference to the full text of the Proxies, copies of which are
attached hereto as Exhibits
99.8
and
99.10
, respectively,
and are incorporated herein by reference.
SXC Registration Rights
Agreement
In
connection with the Stockholder Agreements, the Purchasers also have entered
into a Registration Rights Agreement, dated as of February 25, 2008, with SXC
(the “SXC Registration Rights Agreement”). The SXC Registration
Rights Agreement grants the Purchasers one demand registration right with
respect to the SXC Common Stock issued to them in connection with the Offer or
the One Step Merger, exercisable during the period specified in the SXC
Registration Rights Agreement if the trading volume of SXC Common Stock is below
100,000 shares in the aggregate on certain specified exchanges during
agreed-upon measurement periods. The Purchasers were also granted
“piggyback” registration rights with respect to their SXC Common Stock,
exercisable during the period specified in the SXC Registration Rights
Agreement, subject to the terms and conditions set forth therein.
The
foregoing description of the SXC Registration Rights Agreement is not complete
and is qualified in its entirety by reference to the full text of such
agreement, a copy of which is attached hereto as Exhibit
99.11
and is
incorporated herein by reference.
Amendment of Certificate of
Designations; Dividends
In
connection with the execution of the Merger Agreement, the Issuer amended its
Certificate of Designations, Preferences and Rights of Series A 7% Convertible
Preferred Stock (the “Amendment”). The Amendment excludes the
transactions contemplated by the Merger Agreement and the Stockholder Agreements
from the definitions of “change in control” and “liquidation” and provides that
shares of Series A Preferred Stock, upon their conversion into shares of Common
Stock, will have the right only to receive the Offer Price per share (if the
transaction is effected by means of the Offer followed by the Second Step
Merger) or, if the transaction is effected as a One Step Merger, to receive only
the merger consideration per share. The Amendment also provides that,
unless and until the Merger Agreement is terminated, shares of Series A
Preferred Stock will convert into shares of Common Stock on a one-to-one
basis. Under the Merger Agreement, the Issuer is permitted to pay the
Purchasers all accrued and unpaid dividends on the Series A Preferred
Stock. The Board has declared a dividend on the Series A Preferred
Stock, payable in cash immediately prior to the earlier of SXC’s first
acceptance of shares of Common Stock tendered in the Offer or the effective time
of the Merger, in an amount equal to all accrued and unpaid dividends to the
date of payment.
The
foregoing description of the Amendment does not purport to be complete and is
qualified in its entirety by reference to the full text of the Amendment, a copy
of which is attached hereto as Exhibit
99.12
and is
incorporated herein by reference.
Item 5 is
hereby amended and restated to read as follows:
(a).
Based on the
Merger Agreement filed as an exhibit to the Form 8-K filed by the Issuer with
the Securities and Exchange Commission on February 27, 2008, as of February 25,
2008, there were 5,863,713 shares of Common Stock issued and
outstanding.
As of
February 6, 2008, Mr. Klinsky and NM may be deemed to beneficially own an
aggregate of 6,956,522 shares of Common Stock consisting of the 6,956,522 shares
of Common Stock that may be deemed to be beneficially owned by the Purchasers,
as described below, representing, in the aggregate, approximately 54.3% of the
issued and outstanding shares of Common Stock, based on calculations made in
accordance with Rule 13d-3(d) of the Securities and Exchange Act of 1934, as
amended (the “Exchange Act”).
Mr.
Klinsky and NM disclaim beneficial ownership of the shares of Common Stock
beneficially owned by the Purchasers and NMI to the extent that partnership
interests in the Purchasers and NMI are held by persons other than Mr. Klinsky
or NMI.
As of
February 25, 2008, NMI may be deemed to beneficially own an aggregate of
6,790,797 shares of Common Stock that may be deemed to be beneficially owned by
New Mountain, representing approximately 53.7% of the issued and outstanding
shares of Common Stock, based on calculations made in accordance with Rule
13d-3(d) of the Exchange Act. NMI disclaims beneficial ownership of
the shares of Common Stock beneficially owned by the New Mountain to the extent
that partnership interests in New Mountain are held by persons other than New
Mountain.
As of
February 25, 2008, New Mountain may be deemed to beneficially own an aggregate
of 6,790,797 shares of Common Stock, representing approximately 53.7% of the
issued and outstanding shares of Common Stock, based on calculations made in
accordance with Rule 13d-3(d) of the Exchange Act
As of
February 6, 2008, NMAI may be deemed to beneficially own an aggregate of 165,725
shares of Common Stock, representing approximately 2.7% of the issued and
outstanding shares of Common Stock, based on calculations made in accordance
with Rule 13d-3(d) of the Exchange Act.
(b).
Subject to the
Stockholder Agreements and the Proxies, each Reporting Person may be deemed to
share the power to vote or direct the vote and to dispose or to direct the
disposition of the shares of Common Stock that the Reporting Person may be
deemed to beneficially own as described above.
(c).
There have
been no purchases or sales by any of the Reporting Persons of Common Stock
during the last 60 days.
(d).
No person is
known by any Reporting Person to have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, any
shares of Common Stock that may be deemed to be beneficially owned by any
Reporting Person, except as set forth in the Stockholder
Agreements.
(e).
Not
applicable.