SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
Under Section 13(e) of the Securities Exchange Act of 1934
CONNECTURE, INC.
(Name of Issuer)
Connecture, Inc.
FP Healthcare Holdings, Inc.
FP Healthcare Intermediate, LLC
FP Healthcare Merger Sub Corporation
Francisco Partners IV, L.P.
Francisco Partners IV-A, L.P.
Francisco Partners GP IV, L.P.
Francisco Partners GP IV Management Limited
Chrysalis Ventures II, L.P.
Chrysalis Partners II, LLC
David A. Jones, Jr.
(Name of Persons Filing Statement)
Common Stock, par value $0.001 per share
(Title of Class of Securities)
20786J106
(CUSIP Number of Class of Securities)
Jeffery A. Surges Chief Executive Officer Connecture, Inc. 18500 West Corporate Drive, Suite 250 Brookfield, Wisconsin 53045 (262) 432-8282 |
Ezra Perlman Co-President Francisco Partners One Letterman Drive, Building C Suite 410 San Francisco, California 94129 (415) 418-2900 |
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Persons Filing Statement)
With copies to:
Joseph G. Silver, Esq. Samer M. Zabaneh, Esq. DLA Piper LLP (US) 1251 Avenue of the Americas New York, New York 10020 (212) 335-4500 |
Adam D. Phillips, P.C. Robert E. Goedert, Esq. Kirkland & Ellis LLP 3330 Hillview Avenue Palo Alto, California 94304 (650) 859-7000 |
This statement is filed in connection with (check the appropriate box):
☒ | The filing of solicitation materials on an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-(c) under the Securities Exchange Act of 1934. |
☐ | The filing of a registration statement under the Securities Act of 1933. |
☐ | A tender offer. |
☐ | None of the above. |
Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: ☒
Check the following box if the filing is a final amendment reporting the results of the transaction: ☐
CALCULATION OF FILING FEE
Transaction Valuation* | Amount of Filing Fee** | |
$5,491,078 | $683.64 | |
|
* | The maximum aggregate value was determined based upon the sum of: (1) 15,408,871 shares of common stock multiplied by $0.35 per share, (2) 279,992 shares of common stock subject to vested restricted stock units under Connecture, Inc.s 2014 Equity Incentive Plan multiplied by $0.35 per share. |
** | The filing fee was calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, by multiplying the transaction value by 0.0001245. |
☒ | Check the box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule, and the date of its filing. |
Amount previously paid: | $683.64 | Filing Party: | Connecture, Inc. | |||
Form or Registration No.: | Schedule 14A | Date Filed: | February 1, 2018 |
Introduction
This Rule 13E-3 Transaction Statement on Schedule 13E-3, together with the exhibits thereto (this Transaction Statement), is being filed with the Securities and Exchange Commission (the SEC) pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the Exchange Act), jointly by the following persons (each, a Filing Person, and collectively, the Filing Persons): Connecture, Inc., a Delaware corporation (the Company) and the issuer of the common stock, par value $0.001 per share (the Common Stock), that is subject to the Rule 13e-3 transaction; FP Healthcare Holdings, Inc. (Parent); FP Healthcare Intermediate, LLC (Intermediate), a Delaware limited liability company and a wholly owned subsidiary of Parent; FP Healthcare Merger Sub Corporation, a Delaware corporation (Merger Sub) and a wholly owned subsidiary of Intermediate; Francisco Partners IV, L.P. and Francisco Partners IV-A, L.P. (collectively, the FP Investors); Francisco Partners GP IV, L.P.; Francisco Partners GP IV Management Limited; Chrysalis Ventures II, L.P. (Chrysalis); Chrysalis Partners II, LLC; and David A. Jones, Jr.
This Transaction Statement relates to the Agreement and Plan of Merger, dated as of January 4, 2018 (the Merger Agreement), by and among Parent, Merger Sub and the Company. Pursuant to the Merger Agreement, if the conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into the Company (the Merger), the separate corporate existence of Merger Sub will cease, and the Company will continue its corporate existence under Delaware law as the surviving corporation in the Merger. At the effective time of the Merger, each share of Common Stock issued and outstanding at the effective time of the Merger (other than shares held by (a) Parent or Merger Sub, (b) the Company in treasury or any wholly owned subsidiary of the Company, (c) holders of Common Stock who have properly demanded appraisal rights under Delaware law, and (d) the FP Investors, Chrysalis and certain affiliates of Chrysalis (collectively, the Rollover Investors)) will be canceled and converted into the right to receive $0.35, in cash, without interest and less any required withholding taxes. The Rollover Investors have entered into a Rollover Agreement pursuant to which the Rollover Investors have agreed to contribute all shares of the Companys Common Stock and preferred stock held by the Rollover Investors (the Rollover Shares) to Parent (the Rollover Agreement). Upon completion of the Merger, the Companys Common Stock will no longer be publicly traded, and the Companys stockholders (other than Intermediate directly and Parent and the Rollover Investors indirectly) will cease to have any ownership interest in the Company.
The board of directors of the Company, based in part on the unanimous recommendation of a special committee of directors (who are independent for purposes of serving on the special committee) that was established to evaluate and negotiate a potential transaction (as described more fully in the Proxy Statement (as defined below)) has unanimously (a) determined that the Merger Agreement and the related transactions contemplated thereby are substantively and procedurally fair to and in the best interests of the Company and the stockholders who are not Rollover Investors (and accordingly, all of the Companys unaffiliated security holders); (b) approved and adopted the Merger Agreement and the related transactions contemplated thereby; and (c) resolved to recommend that the stockholders of the Company approve the adoption of the Merger Agreement and the related transactions contemplated thereby. The Merger remains subject to the satisfaction or waiver of the conditions to closing provided for in the Merger Agreement, including obtaining the affirmative vote of holders of a majority of the outstanding shares of the Companys capital stock entitled to vote on the matter, voting together as a single class on an as-converted basis, in favor of the adoption of the Merger Agreement.
Concurrently with the filing of this Transaction Statement, the Company is filing with the SEC a preliminary proxy statement (the Proxy Statement) under Regulation 14A of the Exchange Act, pursuant to which the Companys board of directors is soliciting proxies from shareholders of the Company in connection with the Merger. The Proxy Statement is attached hereto as Exhibit (a)(2)(i). A copy of the Merger Agreement is attached to the Proxy Statement as Annex A-1 and is incorporated herein by reference.
Pursuant to General Instruction F to Schedule 13E-3, the information in the Proxy Statement, including all annexes thereto, is expressly incorporated by reference herein in its entirety, and responses to each item herein are qualified in their entirety by the information contained in the Proxy Statement. The cross-references below are being supplied pursuant to General Instruction G to Schedule 13E-3 and show the location in the Proxy Statement of the information required to be included in response to the items of Schedule 13E-3. As of the date hereof, the Proxy Statement is in preliminary form and is subject to completion or amendment.
All information concerning the Company contained in, or incorporated by reference into, this Transaction Statement and the Proxy Statement was supplied by the Company, and none of the other Filing Persons takes responsibility for the accuracy of such information. Similarly, all information concerning each other Filing Person contained in, or incorporated by reference into, this Transaction Statement and the Proxy Statement was supplied by such Filing Person. No Filing Person, including the Company, is responsible for the accuracy of any information supplied by any other Filing Person.
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Item 1. | Summary Term Sheet |
The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Item 2. | Subject Company Information |
(a) Name and Address. The Companys name and the address and telephone number of its principal executive offices are as follows:
Connecture, Inc.
18500 West Corporate Drive, Suite 250
Brookfield, Wisconsin 53045
(262) 432-8282
(b) Securities. The class of securities to which this Transaction Statement relates is the Companys common shares, par value $0.001 per share, of which 23,112,063 shares were issued and outstanding as of January 16, 2018.
(c) Trading Market and Price. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
Important Information Regarding ConnectureMarket Price of the Companys Common Stock
(d) Dividends. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
Important Information Regarding ConnectureDividends
(e) Prior Public Offerings. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
Important Information Regarding ConnecturePrior Public Offerings
(f) Prior Stock Purchases. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
Important Information Regarding ConnectureTransactions in Common Stock
Item 3. | Identity and Background of Filing Person |
(a)(c) Name and Address; Business and Background of Entities; Business and Background of Natural Persons. Connecture, Inc. is the subject company. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
The Parties to the Merger
Important Information Regarding Connecture
Important Information Regarding the Purchaser Filing Persons
Item 4. | Terms of the Transaction |
(a) Material Terms.
(1) Tender Offers. Not applicable.
(2) Mergers or Similar Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
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Questions and Answers About the Special Meeting and the Merger
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
Special FactorsPurposes and Reasons of the Company for the Merger
Special FactorsPlans for the Company After the Merger
Special FactorsCertain Effects of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsMaterial U.S. Federal Income Tax Consequences of the Merger
The Special MeetingRequired Vote
The Merger AgreementThe Merger
The Merger AgreementPer Share Merger Consideration
The Merger AgreementTreatment of Options, Restricted Stock Units, Restricted Shares and ESPP
The Merger AgreementPayment of Per Share Merger Consideration and Surrender of Stock Certificates
The Merger AgreementConditions to Completion of the Merger
(c) Different Terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsCertain Effects of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsVoting and Support Agreement
Special FactorsRollover Agreement
The Merger AgreementThe Merger
Voting and Support Agreement
(d) Appraisal Rights. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsRights of Stockholders Who Seek Appraisal
The Merger AgreementAppraisal Rights
Appraisal Rights
Annex BSection 262 of the Delaware General Corporation Law
(e) Provisions for Unaffiliated Security Holders. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
Provisions for Unaffiliated Stockholders
(f) Eligibility for Listing or Trading. Not applicable.
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Item 5. | Past Contacts, Transactions, Negotiations and Agreements |
(a) Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsBackground of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsVoting and Support Agreement
Special FactorsRollover Agreement
Special FactorsFinancing
Special FactorsGuarantee
The Merger Agreement
Voting and Support Agreement
Important Information Regarding ConnectureTransactions in Common Stock
Important Information Regarding ConnecturePrivate Placement Transactions
Important Information Regarding ConnectureDividends
Annex A-1Agreement and Plan of Merger
Annex A-2Voting Agreement
(b)(c) Significant Corporate Events; Negotiations or Contacts. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPosition of the Purchaser Filing Parties As to the Fairness of the Merger
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
Special FactorsPurposes and Reasons of the Company for the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsVoting and Support Agreement
Special FactorsRollover Agreement
The Merger Agreement
Voting and Support Agreement
Annex A-1Agreement and Plan of Merger
Annex A-2Voting Agreement
(e) Agreements Involving the Subject Companys Securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsBackground of the Merger
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Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsCertain Effects of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsFinancing
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsVoting and Support Agreement
Special FactorsRollover Agreement
The Special MeetingRequired Vote
The Merger Agreement
Voting and Support Agreement
Annex A-1Agreement and Plan of Merger
Annex A-2Voting and Support Agreement
Item 6. | Purposes of the Transaction, and Plans or Proposals |
(b) Use of Securities Acquired. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsCertain Effects of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
The Merger AgreementThe Merger
The Merger AgreementPayment of Per Share Merger Consideration and Surrender of Stock Certificates
The Merger AgreementTreatment of Options, Restricted Stock Units, Restricted Shares and ESPP
Annex A-1Agreement and Plan of Merger
(c)(1)(8) Plans. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPosition of the Purchaser Filing Parties As to the Fairness of the Merger
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
Special FactorsPurposes and Reasons of the Company for the Merger
Special FactorsPlans for the Company After the Merger
Special FactorsCertain Effects of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsFinancing
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The Merger AgreementThe Merger
The Merger AgreementTreatment of Options, Restricted Stock Units, Restricted Shares and ESPP
Important Information Regarding ConnectureDividends
Annex A-1Agreement and Plan of Merger
Item 7. | Purposes, Alternatives, Reasons and Effects |
(a) Purposes. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
Special FactorsPurposes and Reasons of the Company for the Merger
Special FactorsPlans for the Company After the Merger
(b) Alternatives. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPurposes and Reasons of the Purchaser Filing Parties for the Merger
Special FactorsPurposes and Reasons of the Company for the Merger
Special FactorsPlans for the Company After the Merger
(c) Reasons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPosition of the Purchaser Filing Parties As to the Fairness of the Merger
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
Special FactorsPurposes and Reasons of the Company for the Merger
Special FactorsPlans for the Company After the Merger
Special FactorsCertain Effects of the Merger
(d) Effects. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsBackground of the Merger
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
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Special FactorsPurposes and Reasons of the Company for the Merger
Special FactorsPlans for the Company After the Merger
Special FactorsCertain Effects of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsFinancing
Special FactorsMaterial U.S. Federal Income Tax Consequences of the Merger
Special FactorsFees and Expenses
The Merger AgreementThe Merger
The Merger AgreementTreatment of Options, Restricted Stock Units, Restricted Shares and ESPP
Appraisal Rights
Annex A-1Agreement and Plan of Merger
Annex BSection 262 of the Delaware General Corporation Law
Item 8. | Fairness of the Transaction |
(a)(b) Fairness; Factors Considered in Determining Fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPosition of the Purchaser Filing Parties As to the Fairness of the Merger
Special FactorsOpinion of the Special Committees Financial Advisor
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
Special FactorsPurposes and Reasons of the Company for the Merger
Special FactorsProjected Financial Information
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Important Information Regarding Connecture
Annex COpinion of Houlihan Lokey Capital, Inc.
(c) Approval of Security Holders. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsPosition of the Purchaser Filing Parties As to the Fairness of the Merger
The Special MeetingRecord Date and Quorum
The Special MeetingRequired Vote
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The Merger AgreementConditions to Completion of the Merger
Annex A-1Agreement and Plan of Merger
(d) Unaffiliated Representative. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
(e) Approval of Directors. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPosition of the Purchaser Filing Parties As to the Fairness of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
(f) Other Offers. Not applicable.
Item 9. | Reports, Opinions, Appraisals and Negotiations |
(a)(c) Report, Opinion or Appraisal; Preparer and Summary of the Report, Opinion or Appraisal; Availability of Documents. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPosition of the Purchaser Filing Parties As to the Fairness of the Merger
Special FactorsOpinion of the Special Committees Financial Advisor
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
Where You Can Find Additional Information
Annex COpinion of Houlihan Lokey Capital, Inc.
Presentation to the Special Committee of the Board of Directors of the Company on January 4, 2018, and preliminary discussion materials dated December 15, 2017; December 13, 2017; and December 10, 2017, are filed as Exhibits (c)(2)(5), respectively, and are incorporated herein by reference.
The reports, opinions or appraisals referenced in this Item 9 will be made available for inspection and copying at the principal executive offices of the Company during its regular business hours by any interested equity security holder of the Company or representative who has been so designated in writing.
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Item 10. | Source and Amounts of Funds or Other Consideration |
(a)(b), (d) Source of Funds; Conditions; Borrowed Funds. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsRollover Agreement
Special FactorsFinancing
Special FactorsGuarantee
The Merger AgreementCooperation with the Debt Financing
(c) Expenses. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsFees and Expenses
The Merger AgreementTermination Fees and Expenses
Item 11. | Interest in Securities of the Subject Company |
(a) Securities Ownership. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Important Information Regarding ConnectureSecurity Ownership of Management and Certain Beneficial Owners
(b) Securities Transactions. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
Important Information Regarding ConnectureTransactions in Common Stock
Item 12. | The Solicitation or Recommendation |
(d) Intent to Tender or Vote in a Going-Private Transaction. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
Questions and Answers About the Special Meeting and the Merger
(e) Recommendations of Others. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsPosition of the Purchaser Filing Parties As to the Fairness of the Merger
Special FactorsPurposes and Reasons of Purchaser Filing Parties for the Merger
Special FactorsPurposes and Reasons of the Company for the Merger
The Merger Proposal (Proposal 1)
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Item 13. | Financial Statements |
(a) Financial Information. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Important Information Regarding ConnectureHistorical Selected Financial Information
Important Information Regarding ConnectureRatio of Earnings to Fixed Charges and Preferred Stock Dividends
Important Information Regarding ConnectureBook Value Per Share
Where You Can Find Additional Information
The audited financial statements set forth in Item 8 of the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and the financial statements set forth in Item 1 of the Companys Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, are incorporated herein by reference.
(b) Pro Forma Information. Not applicable.
Item 14. | Persons/Assets, Retained, Employed, Compensated or Used |
(a)(b) Solicitations or Recommendations; Employees and Corporate Assets. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Questions and Answers About the Special Meeting and the Merger
Special FactorsBackground of the Merger
Special FactorsReasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board of Directors; Fairness of the Merger
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsFees and Expenses
The Special MeetingSolicitation of Proxies
Item 15. | Additional Information |
(a) Golden Parachute Compensation. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
Summary Term Sheet
Special FactorsInterests of the Companys Directors and Executive Officers in the Merger
Special FactorsGolden Parachute Compensation
The Merger AgreementTreatment of Options, Restricted Stock Units, Restricted Shares and ESPP
The Compensation Proposal (Proposal 3)
(b) Other Material Information. The entirety of the Proxy Statement, including all annexes thereto, is incorporated herein by reference.
Item 16. | Exhibits |
(a)(2)(i) | Preliminary Proxy Statement of Connecture, Inc. (incorporated by reference to the Schedule 14A filed concurrently with this Transaction Statement with the Securities and Exchange Commission). | |
(a)(2)(ii) | Form of Proxy Card (incorporated herein by reference to the Proxy Statement). | |
(a)(2)(iii) | Letter to Stockholders (incorporated herein by reference to the Proxy Statement). |
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(a)(2)(iv) | Notice of Special Meeting of Stockholders (incorporated herein by reference to the Proxy Statement). | |
(a)(2)(v) | Press Release issued by the Company, dated January 4, 2018, incorporated by reference to Exhibit 99.3 to the Companys Current Report on Form 8-K filed with the SEC on January 4, 2018. | |
(a)(2)(vi) | Email from Jeffery A. Surges to employees of the Company, transmitted on January 5, 2018, incorporated by reference to the Companys Schedule 14A Information filed with the SEC on January 5, 2018. | |
(a)(2)(vii) | Presentation provided to employees of the Company on January 5, 2018, incorporated by reference to the Companys Schedule 14A Information filed with the SEC on January 5, 2018. | |
(a)(2)(viii) | Email from Jeffery A. Surges to customers, prospects and partners of the Company, transmitted beginning January 5, 2018, incorporated by reference to the Companys Schedule 14A Information filed with the SEC on January 5, 2018. | |
(b)(1) | Debt Commitment Letter, dated as of January 4, 2018, by and among PNC Bank, National Association, Francisco Partners IV, L.P. and FP Healthcare Merger Sub Corporation. | |
(c)(1) | Opinion of Houlihan Lokey Capital, Inc., dated January 4, 2018 (incorporated herein by reference to Annex C of the Proxy Statement). | |
(c)(2) | Presentation of Houlihan Lokey Capital, Inc. to the Special Committee of the Board of Directors of the Company, dated January 4, 2018. | |
(c)(3) | Preliminary discussion materials of Houlihan Lokey Capital, Inc. for the Special Committee of the Board of Directors, dated December 15, 2017. | |
(c)(4) | Preliminary discussion materials of Houlihan Lokey Capital, Inc. for the Special Committee of the Board of Directors, dated December 13, 2017. | |
(c)(5) | Preliminary discussion materials of Houlihan Lokey Capital, Inc. for the Special Committee of the Board of Directors, dated December 10, 2017. | |
(d)(1) | Agreement and Plan of Merger, dated as of January 4, 2018, by and among FP Healthcare Holdings, Inc., FP Healthcare Merger Sub Corporation and the Company (incorporated herein by reference to Annex A-1 of the Proxy Statement). | |
(d)(2) | Voting and Support Agreement, dated as of January 4, 2018, by and among the stockholders listed on the signature pages thereto and the Company, incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed with the SEC on January 4, 2018. | |
(d)(3) | Rollover Agreement, dated as of January 4, 2018, by and among FP Healthcare Holdings, Inc. and the Rollover Investors set forth on the signature page thereto, incorporated by reference to Exhibit 99.2 to the Companys Current Report on Form 8-K filed with the SEC on January 4, 2018. | |
(f)(1) | Section 262 of the Delaware General Corporation Law (incorporated herein by reference to Annex B of the Proxy Statement). | |
(g) | None. |
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SIGNATURES
After due inquiry and to the best of each of the undersigneds knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated as of February 1, 2018
CONNECTURE, INC. | ||||
By: | /s/ Brian D. Lindstrom | |||
Name: | Brian D. Lindstrom | |||
Title: | Chief Financial Officer | |||
FP HEALTHCARE HOLDINGS, INC. | ||||
By: | /s/ Ezra Perlman | |||
Name: | Ezra Perlman | |||
Title: | President | |||
FP HEALTHCARE INTERMEDIATE, LLC | ||||
By: | /s/ Ezra Perlman | |||
Name: | Ezra Perlman | |||
Title: | President | |||
FP HEALTHCARE MERGER SUB CORPORATION | ||||
By: | /s/ Ezra Perlman | |||
Name: | Ezra Perlman | |||
Title: | President | |||
CHRYSALIS VENTURES II, L.P. | ||||
By: | CHRYSALIS PARTNERS II, LLC, its General Partner | |||
By: | /s/ David A. Jones, Jr. | |||
Name: | David A. Jones, Jr. | |||
Title: | Member | |||
CHRYSALIS PARTNERS II, LLC | ||||
By: | /s/ David A. Jones, Jr. | |||
Name: | David A. Jones, Jr. | |||
Title: | Member | |||
/s/ David A. Jones, Jr. | ||||
David A. Jones, Jr. |
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FRANCISCO PARTNERS IV, L.P. | ||||
By: | FRANCISCO PARTNERS GP IV, L.P., its General Partner | |||
By: | FRANCISCO PARTNERS GP IV MANAGEMENT LIMITED, its General Partner | |||
By: | /s/ Ezra Perlman | |||
Name: | Ezra Perlman | |||
Title: | Managing Director | |||
FRANCISCO PARTNERS IV-A, L.P. | ||||
By: | FRANCISCO PARTNERS GP IV, L.P., its General Partner | |||
By: | FRANCISCO PARTNERS GP IV MANAGEMENT LIMITED, its General Partner | |||
By: | /s/ Ezra Perlman | |||
Name: | Ezra Perlman | |||
Title: | Managing Director | |||
FRANCISCO PARTNERS GP IV, L.P. | ||||
By: | FRANCISCO PARTNERS GP IV MANAGEMENT LIMITED, its General Partner | |||
By: | /s/ Ezra Perlman | |||
Name: | Ezra Perlman | |||
Title: | Managing Director | |||
FRANCISCO PARTNERS GP IV MANAGEMENT LIMITED | ||||
By: | /s/ Ezra Perlman | |||
Name: | Ezra Perlman | |||
Title: | Managing Director |
13
Exhibit (b)(1)
January 4, 2018
Francisco Partners IV, L.P.
One Letterman Drive
Building C, Suite 410
San Francisco, California 94129
Attention: | Ms. Megan Karlen | |
Mr. Leonid Rozkin |
$47,000,000 Senior Secured Credit Facility for Acquisition of Connecture, Inc.
Commitment Letter
Ladies and Gentlemen:
You have advised PNC Bank, National Association (PNC, we, us, and together with any Lender described in the Summary of Terms referred to below, the Lenders) that you and certain affiliates (collectively the Sponsor or you) have formed FP Healthcare Intermediate, LLC, a a Delaware limited liability company (Holdings) and its wholly-owned subsidiary, FP Healthcare Merger Sub Corporation, a Delaware corporation (AcquisitionCo), for the purpose of acquiring (the Acquisition) Connecture, Inc. (the Target) from its shareholders (collectively, the Seller) pursuant to the terms of that certain Stock Purchase Agreement dated on or around January 4, 2018 (the Acquisition Agreement) by and among AcquisitionCo and the Seller. After giving effect to the Acquisition, Holdings will be a holding company that directly or indirectly owns, and the sole asset of which is, a controlling interest in the equity interests in the Target.
You have also advised the Lenders that you intend to finance the Acquisition, costs and expenses related to the Transaction (as hereinafter defined) and the ongoing working capital and other general corporate purposes of the Target and its subsidiaries after consummation of the Acquisition from the following sources (and that no financing other than the financing described herein will be required in connection with the Transaction): (a) $10,000,000 of cash of equity (the Equity Contribution) to Holdings, and (b) up to $47,000,000 in senior secured credit facilities (the Senior Credit Facilities) of the Borrower (as defined in the Summary of Terms referred to below), comprised of (i) a term loan facility of up to $42,000,000 (Term Loan Facility), and (ii) a revolving credit facility of up to $5,000,000 (the Revolving Credit Facility). The Acquisition, the Equity Contribution, the entering into and funding of the Senior Credit Facilities, and all related transactions are hereinafter collectively referred to as the Transaction.
In connection with the foregoing, the Lenders are pleased to provide you with this commitment letter (this Commitment Letter) and the annexes attached hereto, including the Summary of Terms and Conditions (Summary of Terms) which Commitment Letter and Summary of Terms establish the terms and conditions under which the Lenders commit to provide the Senior Credit Facilities to the Borrower. Subject to the terms and conditions set forth in this Commitment Letter, PNC is committing to provide 100% of the Term Loan Facility and the Revolving Credit Facility. The commitment of each Lender under this Commitment Letter is several and not joint and several. PNC shall serve as the sole
administrative agent (in such capacity, the Administrative Agent) for the Senior Credit Facilities, all upon and subject to the terms and conditions set forth in this Commitment Letter and the Summary of Terms. You hereby agree that, effective upon your acceptance of this Commitment Letter and continuing through the date that is ninety (90) days from the date hereof (the Exclusivity Period), you shall not solicit any other bank, investment bank, financial institution, person or entity to provide, structure, arrange or syndicate any component of the Senior Credit Facilities or any other senior financing similar to or as a replacement of any component of the Senior Credit Facilities and that you shall not solicit any competing offering, placement or arrangement of any debt securities or bank financing by or on behalf of Holdings or AcquisitionCo.
The several commitments of the Lenders in respect of the Senior Credit Facilities are only subject to the satisfaction of each of the following conditions precedent: (a) the payment of all fees payable on the date of the initial borrowing under the Senior Credit Facilities (the Closing Date) as set forth in the Summary of Terms and the Fee Letter; (b) the negotiation, execution and delivery of customary definitive documentation, including a credit agreement, notes, security agreements, guaranties, a funds flow agreement and officers certificates (but excluding any agreement among lenders), for the Senior Credit Facilities consistent with the Summary of Terms (the Definitive Debt Documents), the Definitive Debt Documents will (i) be negotiated in good faith within a reasonable time period to be determined based on the expected closing of the Acquisition, and (ii) will be based on and substantially similar to, and unless otherwise set forth herein no less favorable to the Borrower than, that certain Credit Agreement, dated May 17, 2017, by and among, among others, Qgenda Intermediate Holdings, LLC, Qgenda, LLC the lenders party thereto and PNC Bank, National Association, as agent (the Precedent Documentation), as modified by the terms set forth herein and in the Summary of Terms with (i) changes necessary to effect and/or permit the Transactions, (ii) negotiation of baskets, thresholds and exceptions in light of the financial condition of Holdings and its subsidiaries (after giving effect to the Transactions), (iii) other modifications to negotiated to reflect the operational and strategic requirements of Holdings and its subsidiaries (after giving effect to the Transactions) in light of their size, industry (and risks and trends associated therewith), geographic locations, businesses, business practices, operations, financial accounting and the Projections, (iv) modifications to reflect changes in law or accounting standards since the date of the Precedent Documentation, (v) modifications to reflect administrative, agency and operational requirements of the Administrative Agent and (vi) contractual bail in language (but no representation with respect thereto) consistent with the LSTA recommended language (the Documentation Principles); provided, that, the Definitive Debt Documents will contain only those representations, events of default and covenants referenced in the Summary of Terms and such other terms (but no other conditions to closing) as the Borrower and the Lenders shall reasonably agree; and (d) additional conditions described under the headings Conditions Precedent to Closing in the Summary of Terms. Notwithstanding anything in this Commitment Letter, the exhibits hereto, the Fee Letter, or any other letter agreement or other undertaking concerning the financing of the Transaction (including any Definitive Debt Document) to the contrary, (i) the only representations and warranties relating to the Target, the Seller and their business, the accuracy and completeness of which in all material respects (or, if qualified by materiality, in all respects) shall be a condition to availability of the Senior Credit Facilities on the Closing Date shall be (A) such of the representations and warranties made by the Target, the Seller (or any of their respective affiliates or subsidiaries) in the Acquisition Agreement to the extent that Sponsor, Holdings, AcquisitionCo (or any of their affiliates or subsidiaries) have the right not to consummate the Acquisition or the right to terminate (or cause the termination of) your or their obligations under the Acquisition Agreement (giving effect to materiality qualifiers contained in the Acquisition Agreement) as a result of a breach of such representations in the Acquisition Agreement (the Acquisition Agreement Representations) and (B) the accuracy in all material respects of the Specified Representations (as defined below) as of the Closing Date and (ii) the terms of the Definitive Debt Documents shall be in a form such that they do not impair the availability of the Senior Credit Facilities on the Closing Date if the conditions set forth in this paragraph and conditions described under the
headings Conditions Precedent to Closing and Conditions Precedent to All Extensions of Credit in the Summary of Terms are satisfied (it being understood that, to the extent any security interest in Collateral (other than the pledged stock of AcquisitionCo on which our lien shall be perfected by possession, United States registered intellectual property on which our lien shall be perfected by filing with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, and other assets pursuant to which a lien may be perfected by the filing of a financing statement under the Uniform Commercial Code) is not perfected on the Closing Date after your use of commercially reasonable efforts to do so, the perfection of such security interest shall not constitute a condition precedent to the availability of the Senior Credit Facilities, but shall be required to be delivered or effected after the Closing Date pursuant to arrangements to be mutually agreed). For the purposes hereof, Specified Representations means, with respect to Holdings, the Target, and the guarantors of the Senior Credit Facilities (the Guarantors), the representations and warranties relating to due organization, existence, corporate power and authority, the due authorization, execution, delivery, validity and enforceability of the Definitive Debt Documentation, non-contravention of the Definitive Debt Documents with (i) the charter documents of the Borrower and the Guarantors or (ii) applicable law, perfection of and priority of security interests (subject to the limitations on perfection set forth herein and in the Term Sheet), solvency, use of proceeds, Federal Reserve margin regulations, Investment Company Act, PATRIOT Act, anti-terrorism, anti-money laundering and international trade compliance laws (collectively, AML Laws).
You represent, warrant and covenant that, to the best of your knowledge, (a) all financial projections concerning the Target and its subsidiaries that have been or are hereafter made available to the Administrative Agent or the Lenders by you or any of your representatives (or on your or their behalf) or by the Target or any of its subsidiaries or representatives (or on their behalf) (the Projections) have been or will be prepared in good faith based upon reasonable assumptions (it being recognized by the Administrative Agent and the Lenders that Projections provided in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such Projections may differ from the projected results and such differences may be material) and (b) all information, other than Projections, which has been or is hereafter made available to the Administrative Agent or any Lender by you or any of your representatives (or on your or their behalf) or by the Target or any of its subsidiaries or representatives (or on their behalf) in connection with any aspect of the Transaction, as and when furnished, taken as a whole, is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading. You agree to furnish us with further and supplemental information from time to time until the Closing Date so that the representation, warranty and covenant in the immediately preceding sentence are correct on the Closing Date as if the information were being furnished, and such representation, warranty and covenant were being made, on such date. In issuing its commitment for the Senior Credit Facilities, each Lender is and will be using and relying on such information without independent verification thereof.
By executing this Commitment Letter, you agree to reimburse each Lender from time to time on demand for all reasonable and documented out-of-pocket fees and expenses (limited, in the case of legal expenses, to (a)(x) the reasonable fees and disbursements of Blank Rome LLP, as counsel to the Administrative Agent, and (y) the reasonable fees and disbursements of any special and local counsel to the Lenders retained by the Administrative Agent and (b) reasonable and documented out-of-pocket due diligence expenses) incurred in connection with the Senior Credit Facilities and the preparation of the definitive documentation therefor, and with any other aspect of the Transaction and any of the other transactions contemplated hereby. Without limiting the foregoing, it is understood and agreed that the Lenders shall be entitled to reimbursement from the Borrower for expenses related to obtaining a credit rating with respect to the Borrower and/or the Senior Credit Facilities from one or more Nationally Recognized Statistical Rating Organizations.
You agree to indemnify and hold harmless the Administrative Agent, each Lender and each of their affiliates and their respective officers, directors, employees, agents, advisors and other representatives (each an Indemnified Party) from and against (and will reimburse each Indemnified Party as the same are incurred for) any and all claims, damages, losses, liabilities and expenses (including, without limitation, the reasonable fees, disbursements and other charges of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (a) any aspect of the Transaction and any of the other transactions contemplated hereby or (b) the Senior Credit Facilities and any other financings, or any use made or proposed to be made with the proceeds thereof, except to the extent such claim, damage, loss, liability or expense is found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Partys gross negligence or willful misconduct or material breach of this Commitment Letter or disputes arising solely among Indemnified Persons (other than a claim against an Indemnified Party solely in its capacities as an arranger, agent or similar role). In the case of an investigation, litigation or proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by you, your equityholders, creditors or affiliates, the Seller or any of its affiliates, an Indemnified Party or any other person, whether or not an Indemnified Party is otherwise a party thereto and whether or not any aspect of the Transaction is consummated. You also agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to you or your subsidiaries or affiliates or to your or their respective equity holders or creditors arising out of, related to or in connection with any aspect of the Transaction, except to the extent of direct, as opposed to special, indirect, consequential or punitive, damages determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Partys gross negligence or willful misconduct or material breach of this Commitment Letter. Notwithstanding any other provision of this Commitment Letter, no Indemnified Party shall be liable for any damages arising from the use by others of information or other materials obtained through electronic telecommunications or other information transmission systems, other than for direct or actual damages resulting from the gross negligence or willful misconduct of or material breach of this Commitment Letter by, such Indemnified Party as determined by a final and nonappealable judgment of a court of competent jurisdiction.
This Commitment Letter and the fee letter among you and the Administrative Agent of even date herewith (the Fee Letter) and the contents hereof and thereof are confidential and, except for disclosure hereof or thereof on a confidential basis to your accountants, attorneys and other professional advisors retained by you in connection with the Transaction or as otherwise required by law, may not be disclosed in whole or in part to any person or entity without our prior written consent; provided, however, it is understood and agreed that you may disclose this Commitment Letter (including the Summary of Terms) but not the Fee Letter (a) on a confidential basis to the board of directors and advisors of the Seller and the Target in connection with their consideration of the Transaction, and (b) after your acceptance of this Commitment Letter and the Fee Letter, in filings with the Securities and Exchange Commission and other applicable regulatory authorities and stock exchanges. The Administrative Agent hereby notifies you that pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the Act), the Administrative Agent and each Lender is required to obtain, verify and record information that identifies you, which information includes your name and address and other information that will allow the Administrative Agent and each Lender to identify you in accordance with the Act.
You acknowledge that either Lender or its affiliates may be providing financing or other services to parties whose interests may conflict with yours. The Administrative Agent and the Lenders agree that they will not furnish confidential information obtained from you to any of their other customers and that they will treat confidential information relating to you, the Target and your and its respective affiliates
with the same degree of care as they treat their own confidential information. In connection with the services and transactions contemplated hereby, you agree that the Administrative Agent and each Lender is permitted to access, use and share with any of its bank or non-bank affiliates, agents, advisors (legal or otherwise) or representatives who are directed to treat it as confidential in accordance with the terms of this Commitment Letter, any information concerning you, Holdings, the Target or any of your or its respective affiliates that is or may come into the possession of the Administrative Agent, any Lender or any of their affiliates.
In connection with all aspects of each transaction contemplated by this Commitment Letter, you acknowledge and agree, and acknowledge your affiliates understanding, that: (a) (i) the services described herein regarding the Senior Credit Facilities are arms-length commercial transactions between you and your affiliates, on the one hand, and the Administrative Agent and the Lenders, on the other hand, (ii) you have consulted your own legal, accounting, regulatory and tax advisors to the extent you have deemed appropriate, and (iii) you are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated hereby; (b) (i) the Administrative Agent and the Lenders have been, are, and will be acting solely as principals and, except as otherwise expressly agreed in writing by the relevant parties, have not been, is not, and will not be acting as an advisor, agent or fiduciary for you, any of your affiliates or any other person or entity and (ii) neither the Administrative Agent, either Lender nor their affiliates have any obligation to you or your affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein; and (c) the Administrative Agent, each Lender and their affiliates may be engaged in a broad range of transactions that involve interests that differ from yours and those of your affiliates, and the Administrative Agent, the Lenders and their affiliates have no obligation to disclose any of such interests to you or your affiliates. To the fullest extent permitted by law, you hereby waive and release any claims that you may have against the Administrative Agent, either Lender and their affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated by this Commitment Letter.
The provisions of the immediately preceding five paragraphs shall remain in full force and effect regardless of whether any definitive documentation for the Senior Credit Facilities shall be executed and delivered, and notwithstanding the termination of this Commitment Letter or any commitment or undertaking of the Administrative Agent or either Lender hereunder. Notwithstanding anything to the contrary herein, the Administrative Agent and the Lenders hereby agree that your obligations under this Commitment Letter will automatically terminate upon the execution of the Definitive Debt Documents.
This Commitment Letter and the Fee Letter may be executed in counterparts which, taken together, shall constitute an original. Delivery of an executed counterpart of this Commitment Letter or the Fee Letter by telecopier, facsimile, email, .pdf file or other similar form of electronic transmission shall be effective as delivery of a manually executed counterpart thereof.
This Commitment Letter (including the Summary of Terms) and the Fee Letter shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the conflict of law rules thereof (other than Section 5-1401 of the New York general obligations law); provided that, notwithstanding the foregoing, it is understood and agreed that (a) the interpretation of the definition of Material Adverse Effect (as defined in the Acquisition Agreement) (and whether or not a Material Adverse Effect has occurred), (b) the determination of the accuracy of any Specified Acquisition Agreement Representation and whether as a result of any inaccuracy thereof you (or your affiliate) have the right (taking into account any applicable cure provisions) to terminate your obligations under the Acquisition Agreement or decline to consummate the Acquisition and (c) the determination of whether the Acquisition has been consummated in accordance with the terms of the Acquisition Agreement, in each case shall be governed by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each of you, the Administrative Agent and each Lender, hereby irrevocably waives any and all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter (including the Summary of Terms), the Fee Letter, the Transaction and the other transactions contemplated hereby and thereby or the actions of the Administrative Agent and the Lenders in the negotiation, performance or enforcement hereof.
This Commitment Letter (including the Summary of Terms) and the Fee Letter embody the entire agreement and understanding among the Administrative Agent and the Lenders, you, Holdings and your and its affiliates with respect to the Senior Credit Facilities and supersedes all prior agreements and understandings relating to the specific matters hereof. However, please note that the terms of the several commitments of the Lenders hereunder are not limited to those set forth herein or in the Summary of Terms (except that all conditions to each Lenders commitments hereunder are expressly set forth herein and in the Summary of Terms). Those matters that are not covered or made clear herein or in the Summary of Terms or the Fee Letter are subject to mutual agreement of the parties. No party has been authorized by the Administrative Agent or either Lender to make any oral or written statements that are inconsistent with this Commitment Letter.
This Commitment Letter is not assignable by you without our prior written consent and is intended to be solely for the benefit of the parties hereto and the Indemnified Parties.
This Commitment Letter and all commitments and undertakings of the Administrative Agent and each Lender hereunder will expire at 11:59 p.m. (California time) on January 4, 2018 unless you execute this Commitment Letter and the Fee Letter and return them to us prior to that time (which may be by telecopier, facsimile, email, .pdf file or other similar form of electronic transmission), whereupon this Commitment Letter (including the Summary of Terms) and the Fee Letter (each of which may be signed in one or more counterparts) shall become binding agreements. Thereafter, all commitments and undertakings of the Administrative Agent and each Lender hereunder will expire on the earliest of (a) June 4, 2018 (the Drop Dead Date), unless the Closing Date occurs on or prior to such date, (b) the closing of the Acquisition without the use of the Senior Credit Facilities and (c) the acceptance by the Seller or any of its affiliates of an offer for all or any substantial part of the capital stock or property and assets of the Target and its subsidiaries other than as part of the Transaction.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
We are pleased to have the opportunity to work with you in connection with this important financing.
Very truly yours, | ||
PNC BANK, NATIONAL ASSOCIATION | ||
By: | /s/ Avineet Punhani | |
Name: Avineet Punhani | ||
Title: Vice President |
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN:
FRANCISCO PARTNERS IV, L.P.
By: | Francisco Partners GP IV, L.P. | |
Its: | General Partner | |
By: | Francisco Partners GP IV Management Limited | |
Its: | General Partner |
By: | /s/ Ezra Perlman | |
Name: Ezra Perlman | ||
Title: Co-President |
FP HEALTHCARE MERGER SUB CORPORATION
By: | /s/ Ezra Perlman | |
Name: Ezra Perlman | ||
Title: President |
SUMMARY OF TERMS AND CONDITIONS
$47,000,000 SENIOR CREDIT FACILITIES
Capitalized terms not otherwise defined herein have the same meanings
as specified therefor in the commitment letter (the Commitment Letter) to which
this Summary of Terms and Conditions is attached.
BORROWER: | AcquisitionCo, initially, and, after giving effect to the Acquisition, Target (the Borrower). | |
SPONSOR: | Francisco Partners IV, L.P. and its affiliates (collectively, the Sponsor). | |
HOLDINGS: | FP Healthcare Intermediate, LLC, a limited liability company (Holdings). | |
GUARANTORS: | The obligations of the Borrower and its subsidiaries under the Senior Credit Facilities will be guaranteed by the parent holding company of the Borrowers, Holdings and each of the direct and indirect wholly-owned, domestic subsidiaries (other than (i) domestic subsidiaries of foreign subsidiaries of the Borrower and (ii) any wholly-owned domestic subsidiary of the Borrower, substantially all of the assets of which constitute equity of foreign subsidiaries), whether now existing or hereafter acquired or formed (jointly and severally, the Guarantor, and together with the Borrower, the Loan Parties). All guarantees will be guarantees of payment and not of collection. | |
Notwithstanding anything to the contrary, the loan documentation shall include customary exclusions consistent with the Documentation Principles for Guarantors that are not eligible contract participants (as defined in the Commodity Exchange Act (7 U.S.C. section 1 et seq., as amended from time to time), and any successor statute) from guaranteeing obligations of any Loan Party that relate to the hedging arrangements or any other swap or other hedge obligations or arrangements. | ||
ADMINISTRATIVE AND |
||
COLLATERAL AGENT: | PNC Bank, National Association (PNC) will act as sole administrative and collateral agent (the Administrative Agent). | |
LENDERS: | PNC and other banks, financial institutions and institutional lenders reasonably acceptable to the Administrative Agent and reasonably satisfactory to the Borrower (collectively, the Lenders). | |
SENIOR CREDIT | ||
FACILITIES: | An aggregate principal amount of $47,000,000 will be available through the following facilities: |
Term Loan Facility: a term loan facility consisting of a term loan in the initial principal amount of $42,000,000 (the Term Loan Facility) funded by PNC on the Closing Date. | ||
Revolving Credit Facility: a revolving credit facility, provided by PNC as of the Closing Date, available from time to time after the Closing Date and until the 5th anniversary of the Closing Date (the Revolving Credit Facility) provided that advances under the Revolving Credit Facility shall not at any time exceed $5,000,000 (the Maximum Revolving Credit Facility Amount). | ||
Advances under the Revolving Credit Facility shall be subject at all times to the absence of a default or event of default. | ||
The Revolving Credit Facility will include a sublimit of $1,500,000 for the issuance of letters of credit (each a Letter of Credit). Letters of Credit will be issued by PNC (in such capacity, the Fronting Bank), and each of the Lenders under the Revolving Credit Facility will purchase an irrevocable and unconditional participation in its pro rata share of each Letter of Credit. | ||
PURPOSE: | The proceeds of the Senior Credit Facilities shall be used to (i) finance in part the Acquisition; (ii) pay fees and expenses incurred in connection with the Transaction; and (iii) provide ongoing working capital and for other general corporate purposes (including permitted acquisitions subject to terms and conditions to be mutually agreed) of the Borrower and its subsidiaries. | |
CLOSING DATE: | The execution of definitive loan documentation (the Closing Date). | |
INTEREST RATES: | As set forth in Addendum I. | |
MATURITY: | The Term Loan Facility shall be subject to repayment according to the Scheduled Amortization (as hereinafter defined), with the final payment of all amounts outstanding, plus accrued interest, being due five (5) years after the Closing Date (the Maturity Date). | |
The Revolving Credit Facility shall terminate and all amounts outstanding thereunder shall be due and payable in full on the Maturity Date. | ||
SCHEDULED | ||
AMORTIZATION/ | ||
AVAILABILITY: | Term Loan Facility: The Term Loan Facility will be subject to quarterly amortization of principal in equal installments paid to PNC (i) beginning on the last day of the first calendar quarter commencing after the Closing Date and continuing on the last day of each calendar quarter thereafter, payable as provided below until the Maturity Date, at which time the entire principal balance plus accrued interest shall be due and payable (the foregoing amortization of the Term Loan Facility, the Scheduled Amortization). Amounts repaid in respect of the Term Loan Facility may not be re-borrowed. |
Year 1 = 1.0% | ||
Year 2 = 1.75% | ||
Year 3 = 2.5% | ||
Year 4 and Year 5 = 5.0% | ||
Revolving Credit Facility: The Revolving Credit Facility shall be undrawn on the Closing Date. Loans under the Revolving Credit Facility may be made, and Letters of Credit may be issued, on a revolving basis up to the full amount of the Revolving Credit Facility subject to satisfaction of all conditions precedent to all extensions of credit. | ||
MANDATORY PREPAYMENTS AND COMMITMENT | ||
REDUCTIONS: | In addition to the amortization set forth above, (a) for each fiscal year commencing with the fiscal year ending December 31, 2019, on the earlier of (i) the date that is ten days after delivery to the Administrative Agent of the audited financial statements of the Loan Parties for such fiscal year and (ii) the date that is 10 days after the due date for delivery to Agent of the audited financial statements of the Loan Parties for such fiscal year, 50% (which percentage shall be reduced to (x) 25% and 0% if Borrowers Consolidated Total Leverage Ratio at the end of such fiscal year is equal to or less than 3.0x and 2.0x, respectively) of Excess Cash Flow (to be defined in a mutually agreed upon manner consistent with the Documentation Principles) less voluntary prepayments of the Term Loan Facility and the Revolving Credit Facility (with a corresponding commitment reduction), (b) 100% of all net cash proceeds from sales of property and assets of the Borrower and its subsidiaries (in each case, excluding sales of inventory in the ordinary course of business and other customary exceptions to be agreed, and subject to customary reinvestment rights (to the extent committed to be reinvested within 180 days and actually reinvested within 270 days) and other exceptions to be agreed upon in the loan documentation), (c) 100% of all net cash proceeds from the issuance of equity interests in the Borrower or any of its subsidiaries from an initial public offering, (d) 100% of all Cure Proceeds, (e) 100% of all net cash proceeds from the issuance or incurrence after the Closing Date of additional debt of the Borrower or any of its subsidiaries not permitted under the loan documentation, and (f) 100% of all net cash proceeds received on account of insurance or condemnation proceeds by the Borrower and its subsidiaries (excluding business interruption insurance and certain other exceptions to be agreed upon in the loan documentation) shall be applied (x) with respect to all such prepayments other than pursuant to clause (d) above, (i) first, to the Term Loan Facility (x) to the extent the Consolidated Total Leverage Ratio is equal to or less than 4.0x, first to the next four installments and then pro rata across the remaining installments until paid in full, |
otherwise (y) pro rata across the remaining installments until paid in full and (ii) second, to the Revolving Credit Facility (subject to Borrowers ability to re-borrow any such amounts in accordance with the terms of the Definitive Debt Documentation) advances, until paid in full and (y) with respect to such prepayment pursuant to clause (d) above, (i) first, to the Term Loan Facility (x) to the extent the Consolidated Total Leverage Ratio is equal to or less than 4.0x, first to the next four installments and then pro rata across the remaining installments until paid in full, otherwise (y) pro rata across the remaining installments until paid in full and (ii) to the Revolving Credit Facility (subject to Borrowers ability to re-borrow any such amounts in accordance with the terms of the Definitive Debt Documentation) advances, until paid in full. | ||
OPTIONAL PREPAYMENTS | ||
AND COMMITMENT | ||
REDUCTIONS: | Term Loan Facility: The Term Loan Facility may be prepaid in whole or in part at any time subject to the payment of the applicable Prepayment Fee, and subject to reimbursement of the Lenders breakage and redeployment costs in the case of prepayment of Eurodollar Base Rate Loan borrowings. Each such prepayment of the Term Loan Facility shall be applied, to the scheduled installments of principal in respect of the Term Loan Facility in the direct order of maturity; provided that the full, un-prepaid amounts of such payments shall remain included in fixed charges for purposes of calculation of the Fixed Charge Coverage Ratio. | |
Revolving Credit Facility: The loans under the Revolving Credit Facility may be repaid at any time without premium or penalty, subject to reimbursement of the Lenders breakage and redeployment costs in the case of prepayment of Eurodollar Base Rate Loan borrowings. The unutilized portion of the commitments under the Revolving Credit Facility may be irrevocably reduced or terminated by the Borrower at any time subject to the payment of the applicable Prepayment Fee and other customary terms. | ||
Prepayment Fee means with respect to (i) any voluntary or mandatory prepayment of the Term Loan Facility (other than payment of Excess Cash Flow and other mandatory prepayments from the net proceeds of insurance, casualty or condemnation events, assets sales or Cure Proceeds unless with respect to each of the foregoing, the entire amount of the Term Loan Facility is prepaid from such net proceeds, and, for the avoidance of doubt, scheduled amortization), 1.0% of the aggregate principal amount of the Term Loan Facility prepaid in whole at any time prior to the first anniversary of the Closing Date, and 0% at all times thereafter, provided, that the Prepayment Fee shall be waived in the event that such prepayment is made with proceeds of a new or refinancing loan from a syndicate of lenders arranged by PNC and (ii) with respect to the reduction or termination of the commitments under the Revolving Credit Facility, 1.0% of the aggregate principal amount of the commitment so reduced or terminated at any time prior to the first anniversary of the Closing Date, and 0% at all times thereafter, provided, that the Prepayment Fee owing to PNC shall be waived in the event that such reduction or termination is made in connection with a new or refinancing loan from a syndicate of lenders arranged by PNC. |
SECURITY: | The Borrower and each Guarantor shall grant the Administrative Agent and the Lenders valid and perfected first priority (subject to certain exceptions to be mutually agreed and set forth in the loan documentation) liens and security interests in all of the following (collectively, the Collateral): | |
(a) All present and future shares of capital stock of (or other ownership or profit interests in) each of its present and future directly owned subsidiaries (limited, in the case of any subsidiary of the Borrower that is an entity that is a controlled foreign corporation under Section 956 of the Internal Revenue Code and any wholly-owned, domestic subsidiary of the Borrower substantially all of the assets of which constitute equity of foreign subsidiaries, to a pledge of 65% of the capital stock (or other ownership interest) of each such first-tier foreign subsidiary or domestic subsidiary), including, without limitation, all of the equity interests in the Borrower owned or otherwise held by Holdings. | ||
(b) All present and future intercompany debt of the Borrower and each Guarantor. | ||
(c) All of the present and future property and assets, real (to the extent having a fair market value greater than $500,000) and personal, of the Borrower and the Guarantors, including, but not limited to, machinery and equipment, inventory and other goods, accounts receivable, owned real estate (subject to the exclusion above), fixtures, deposit accounts and securities accounts, general intangibles, financial assets, investment property, license rights, patents, trademarks, tradenames, copyrights, chattel paper, insurance proceeds, contract rights, hedge agreements, documents, instruments, indemnification rights, tax refunds and cash. | ||
(d) All proceeds and products of the property and assets described in clauses (a), (b) and (c) above. | ||
The Collateral shall secure the Borrowers and each Guarantors obligations in respect of the Senior Credit Facilities and any cash management products and services, interest rate protection or foreign currency hedging arrangements (including without limitation, any swap agreements) entered into with a Lender (or an affiliate thereof). Notwithstanding anything to the contrary herein, the Collateral shall not include (A) leasehold interests in real property, (B) motor vehicles, (C) any rights or interest in any contract, lease, permit, license, or license agreement covering real or personal property of any Loan Party if under the terms of such contract, lease, permit, license, or license agreement, or applicable law with respect thereto, the grant of a security interest or lien therein is prohibited as a matter of law or under the terms of such |
contract, lease, permit, license, or license agreement and such prohibition or restriction has not been waived or the consent of the other party to such contract, lease, permit, license, or license agreement has not been obtained (provided, that, the exclusions set forth in this clause (C) shall in no way be construed (I) to apply to the extent that any described prohibition or restriction is unenforceable under Section 9-406, 9-407, 9-408, or 9-409 of the Uniform Commercial Code or other applicable law, (II) to apply to the extent that any consent or waiver has been obtained that would permit Administrative Agents security interest or lien notwithstanding the prohibition or restriction on the pledge of such contract, lease permit, license or license agreement, or (III) to limit, impair, or otherwise affect Administrative Agents or any Lenders continuing security interests in and liens upon any rights or interests of any Loan Party in or to (1) monies due or to become due under or in connection with any described contract, lease, permit, license, or license agreement (including any accounts receivable, or proceeds of inventory), or (2) any proceeds from the sale, license, lease, or other dispositions of any such contract, lease, permit, license, or license agreement), and (D) any intent-to-use application trademark application prior to the filing of a Statement of Use or Amendment to Allege Use with respect thereto. Further, the Borrower and Guarantors shall not be required to provide documentation to create or perfect, as applicable, the Administrative Agents Lien on (X) assets where the cost of obtaining a security interest therein exceeds the practical benefit to the Lenders afforded thereby, as reasonably determined by the Lenders, (Y) other than with respect to the equity interests of foreign subsidiaries which generate a material portion of the revenue of the Loan Parties and their subsidiaries on a consolidated basis, any non-U.S. assets or assets that require action under the law of any non-U.S. jurisdiction to create or perfect a security interest in such assets, including any intellectual property registered in any non-U.S. jurisdiction (and no security agreements or pledge agreements governed under the laws of any non-U.S. jurisdiction) or (Z) certain other assets and property to be mutually and reasonably agreed. | ||
CONDITIONS PRECEDENT | ||
TO CLOSING: | In addition to the conditions precedent set forth in the Commitment Letter, the closing and the initial extension of credit under the Senior Credit Facilities will be subject to satisfaction of the following conditions precedent: | |
(i) PNC shall have received endorsements naming the Administrative Agent, on behalf of the Lenders, as an additional insured or lender loss payee, as the case may be, under all insurance policies to be maintained with respect to the Collateral; provided that, notwithstanding the foregoing, such endorsements shall be permitted to be delivered post-closing (post-closing period to be determined by mutual agreement of Borrower and Administrative Agent) in the event that Borrower is unable to obtain the same using commercially reasonable efforts prior to closing. |
(ii) The Administrative Agent shall have received (A) customary opinions of counsel to the Borrower and the Guarantors (which shall cover, among other things, authority, legality, validity, binding effect and enforceability of the Definitive Debt Documents) and corporate resolutions, certificates and other documents customary for credit facilities of this type and size, and (B) evidence (including any applicable lien releases from the secured lender to the Seller (the effectiveness of which may be conditioned on the payoff of such secured lender) that the Administrative Agent (on behalf of the Lenders) shall have a valid and perfected first priority (subject to certain exceptions to be set forth in the Definitive Debt Documents) lien and security interest in the Collateral; provided that to the extent any security interest in the Collateral is not granted or perfected on the Closing Date after your commercially reasonable efforts to do so (other than (x) with respect to the properties of the Borrower and the Guarantors forming part of the Collateral subject to the Uniform Commercial Code, with respect to which the delivery of Uniform Commercial Code financing statements in form for filing shall be required, (y) with respect to United States registered intellectual property, with respect to which the delivery of executed intellectual property security agreements shall be required and (z) pledged stock and intercompany notes that are part of the Collateral, with respect to which delivery of certificates for such stock and delivery of such intercompany notes shall be required), the grant or perfection of such security interest shall not constitute a condition precedent to the availability of the Senior Credit Facilities on the Closing Date, but shall be granted or perfected, as the case may be, within a mutually agreed upon number of days after the Closing Date (which in the case of deposit account control agreements shall not be less than 60 days, with any extensions thereof permitted with the consent of the Administrative Agent) pursuant to arrangements to be mutually agreed upon by the parties acting reasonably. | ||
(iii) The Administrative Agent shall have received (A) a pro forma consolidated balance sheet of Holdings and its subsidiaries giving effect to all elements of the Transaction to be effected on or before the Closing Date, and (B) forecasts prepared by management of Holdings of balance sheets, income statements and cash flow statements on a monthly basis for the first year following the Closing Date and on an annual basis for each year thereafter during the term of the Senior Credit Facilities. | ||
(iv) The Administrative Agent shall have received a certificate from the chief financial officer or similar officer of Holdings certifying that Holdings, the Borrower and each Guarantor (immediately after giving effect to the Transaction and the incurrence of indebtedness related thereto), on a consolidated basis, are solvent. |
(v) The Administrative Agent shall have received (certified by an officer of Borrower as true, correct and complete copies) the Acquisition Agreement (including all schedules and exhibits thereto), all amendments, waivers and modifications thereto, and all other material agreements, instruments, and documents relating to the Acquisition (collectively, the Acquisition Documents). The Acquisition Documents shall not be altered, amended or otherwise changed or supplemented or any condition therein waived, in each case, in a manner materially adverse to the Lenders without the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld, conditioned or delayed), it being understood and agreed that any adverse change to the definition of Material Adverse Effect is materially adverse to the Lenders). The Acquisition shall have been consummated in accordance with the terms of the Acquisition Agreement (as such terms may be amended, waived or modified in a manner not prohibited hereunder). | ||
(vi) The Borrower shall have received, or substantially concurrently with the initial funding of the Senior Credit Facilities will receive, the Equity Contribution. | ||
(vii) As of the Closing Date, immediately after giving effect to the Transaction, the Borrower shall have no less than $10,000,000 of Liquidity (to be defined in a manner to be mutually agreed consistent with the Documentation Principles). | ||
(viii) Substantially concurrently with the consummation of the Transaction, all accrued fees and expenses of the Administrative Agent (including the fees and expenses of counsel (including any local counsel) for the Administrative Agent. | ||
(ix) The Lenders shall have received, by the Closing Date, all documentation and information requested by them within five (5) business days prior to the anticipated Closing Date with respect to the Borrower and all Guarantors and members of management disclosed to the Lenders as of such time and, with respect to the Borrower and all Guarantors or members of management disclosed to the Lenders after such time, the Lenders shall have received all documentation and information required to be requested by them with respect to such persons, in each case, required by it to satisfactorily complete all applicable background and know your customer compliance checks. | ||
(x) The accuracy in all material respects of the Specified Representations and the Acquisition Agreement Representations. | ||
(xiii) The Borrower shall have complied with the administrative provisions of the Definitive Debt Documents as to the requesting of advances. |
CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT (OTHER THAN ON |
||
THE CLOSING DATE: | Each extension of credit under the Senior Credit Facilities will be subject to satisfaction of the following conditions precedent: (i) all of the representations and warranties in the loan documentation shall be true and correct in all material respects as of the date of such extension of credit, except that any representations and warranties subject to materiality, Material Adverse Effect or similar materiality qualifiers shall be true and correct in all respects as of the date of such extension of credit; (ii) no event of default under the Senior Credit Facilities or incipient default shall have occurred and be continuing or would result from such extension of credit; (iii) in the case of any extension of credit under the Revolving Credit Facility, (A) the aggregate principal amount of all loans outstanding under the Revolving Credit Facility and the aggregate undrawn amount of all Letters of Credit outstanding on such date, after giving effect to the applicable borrowing or issuance or renewal of a Letter of Credit, shall not exceed the applicable limits on such advances under the Definitive Debt Documents and (B) the Borrower shall have established a bank account at PNC for the receipt of proceeds of such loans; and (iv) the Borrower shall have complied with the administrative provisions of the Definitive Debt Documents as to the requesting of advances. | |
REPRESENTATIONS AND | ||
WARRANTIES: | Subject to the limitations set forth in the fourth paragraph of the Commitment Letter with respect to the availability of the Senior Credit Facilities on the Closing Date, usual and customary for transactions of this type, including the following: (i) legal existence, qualification and power; (ii) due authorization and no contravention of law, contracts or organizational documents; (iii) governmental and third party approvals and consents; (iv) enforceability; (v) accuracy and completeness of specified financial statements and other information and no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a material adverse effect; (vi) no material litigation; (vii) no default; (viii) ownership of property; including disclosure of liens, properties, leases and investments; (ix) insurance matters; (x) environmental matters; (xi) tax matters; (xii) ERISA compliance; (xiii) identification of subsidiaries, equity interests and loan parties; (xiv) use of proceeds and not engaging in business of purchasing/carrying margin stock; (xv) status under Investment Company Act; (xvi) accuracy of disclosure; (xvii) compliance with laws; (xviii) intellectual property; (xix) solvency; (xx) insurance and no casualty; (xxi) labor matters; and (xxii) collateral documents, validity, perfection and priority of liens on the Collateral and other customary representations and warranties relating to the Collateral. | |
COVENANTS: | Those affirmative, negative and financial covenants (applicable to the Borrower, Guarantors and their subsidiaries) customarily found in transactions of this type (in each case, subject to customary exceptions to be mutually agreed), including the following: |
(a) Affirmative Covenants - (i) delivery of financial statements, budgets and forecasts as set forth in the Reporting Requirements section below; (ii) delivery of certificates and other information; (iii) delivery of notices of adverse events (including any default, material adverse effect or ERISA event); (iv) updates as to certain information; (v) payment of taxes and other obligations; (vi) preservation of existence, licenses and permits; (vii) maintenance of properties; (viii) maintenance of insurance; (ix) compliance with laws; (x) maintenance of books and records; (xi) inspection and access rights, including the obligation to use commercially reasonable efforts to provide a lien waiver and access agreement for the chief executive office of the Borrower and any other location of material books and records, including servers; (xii) use of proceeds; (xiii) covenant to guarantee obligations and give security and customary keepwell requirements in respect of swaps; (xiv) compliance with environmental laws; (xv) further assurances; and (xvi) maintenance of Borrowers primary operating accounts and investments accounts as set forth in the Banking Relationships section below; | ||
(b) Negative Covenants - Restrictions on (i) liens, including restriction on registration of material intellectual property outside of the United States if not also registered in the United States; (ii) indebtedness, (including guarantees and other contingent obligations); (iii) investments (including loans, advances and acquisitions; provided that acquisitions shall be permitted (such acquisitions, Permitted Acquisitions) subject to customary limitations to be mutually agreed, including, among other conditions, that such acquisitions are in exchange for consideration (exclusive of any equity interests of Holdings issued to the Seller and working capital adjustments, but including Earn-Out Obligations (to be defined in a manner to be agreed) and DP Amounts (to be defined in a manner to be agreed) (which Earn-out Obligations and DP Amounts shall be calculated in accordance with GAAP as the estimated amount thereof on the closing date for the applicable Permitted Acquisition, which determination shall be made on the date the definitive documentation for the applicable Permitted Acquisition is entered into) not in excess of $30,000,000 in the aggregate for all Permitted Acquisitions during the term of this Agreement plus the net cash proceeds received from the contribution of equity to Holdings or the issuance of capital stock by Holdings substantially contemporaneously with such acquisition and any cash or cash equivalents purchased or acquired in such Permitted Acquisition(s)); (iv) mergers and other fundamental changes; (v) sales and other dispositions of property or assets; (vi) payments of dividends and other distributions with exceptions to include tax distributions; (vii) changes in the nature of business; (viii) transactions with affiliates (including, without limitation, restrictions on the payment of management and consulting fees and modification of management or consulting agreements); (ix) burdensome agreements; (x) use of proceeds; (xi) capital |
expenditures; (xii) amendments of organizational documents; (xiii) payments of subordinated indebtedness; (xiv) payments of permitted seller debt, permitted Earn-Out Obligations and permitted DP Amounts, except in each case, to the extent that (A) no Event of Default has occurred and is continuing, (B) the Loan Parties have Qualified Cash (to be defined in a manner to be agreed) in an amount to be agreed and no advances are outstanding under the Revolving Credit Facility; (xv) modification or termination of (A) documents related to the Transaction in a manner materially adverse to the interests of the Lenders or (B) subordinated indebtedness in a manner not permitted under the related subordination agreement; (xi) changes in activities of Holdings, in each case, with such exceptions as may be agreed upon in the loan documentation; (xii) changes in fiscal year; and (xiii) compliance with AML Laws. | ||
(c) Financial Covenants Beginning with the first full fiscal quarter after the Closing Date, (i) a minimum Consolidated Fixed Charge Coverage Ratio to be agreed, to be tested quarterly on a trailing four quarter basis and (ii) a maximum Consolidated Total Leverage Ratio to be agreed, to be tested quarterly on a trailing four quarter basis. The financial covenant definitions for such financial covenants are to be defined in a manner to be agreed and the financial covenants levels for such financial covenants are set forth on Addendum I hereto. | ||
REPORTING | ||
REQUIREMENTS: | The Borrower shall provide to the Administrative Agent the following and comply with the following provisions: | |
Monthly, beginning with the month ending July 31, 2018, financial statements within 30 days of month-end (other than a month-end that is also a quarter-end). | ||
Quarterly, beginning with the fiscal quarter ending June 30, 2018, financial statements (including quarterly and year-to-date results), a churn/attrition analysis for such quarter, a report as to bookings and a Compliance Certificate within 45 days of quarter-end. | ||
Annual audited financial statements prepared in accordance with GAAP, and an opinion of the financial statements prepared by an independent certified public accounting firm reasonably acceptable to the Administrative Agent, within 120 days after year end, with qualification exemptions to be mutually agreed upon, together with, a management discussion and analysis comparing such financial statements to the prior year and to the business forecast for such year. | ||
Commencing with the 2019 fiscal year, a business forecast for the immediately succeeding fiscal year, including quarterly projected balance sheets, income statements and cash flow statements, within sixty (60) days after the end of each fiscal year. | ||
Within ten (10) days after the delivery of the annual audited financial statements, at the request of Administrative Agent or any Lender, and upon reasonable prior notice, at a mutually agreeable location and time or, at the option of Borrower, by conference call, hold a meeting open to all Lenders to review such financial statements and the business forecast delivered for the fiscal year then commenced. |
Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower, any Guarantor or any of their subsidiaries, or compliance with the terms of the Definitive Debt Documents, as the Administrative Agent may reasonably request. | ||
EVENTS OF DEFAULT: | Usual and customary in transactions of this type, including the following (subject to such customary grace periods and materiality thresholds as are mutually agreed by the Borrower, the Administrative Agent): (i) nonpayment of principal, interest, fees or other amounts; (ii) failure to perform or observe covenants set forth in the Definitive Debt Documents within, where customary and appropriate, a specified period of time, after such failure; (iii) any representation or warranty proving to have been incorrect in any material respect when made or confirmed; (iv) cross-default to other indebtedness in an amount to be agreed; (v) bankruptcy and insolvency defaults (with grace period for involuntary proceedings); (vi) inability to pay debts; (vii) monetary judgment defaults in an amount to be agreed and material nonmonetary judgment defaults; (viii) customary ERISA defaults; (ix) actual or asserted invalidity or impairment of any Definitive Debt Document or Administrative Agents lien on the Collateral; and (x) change of control. | |
Notwithstanding any of the foregoing, Holdings shall have the right within ten (10) days after the day on which financial statements are required to be delivered for the applicable fiscal quarter (the Cure Period) to issue equity interests to Sponsor and other holders of the equity of Holdings for cash or otherwise receive cash contributions (all such amounts Cure Proceeds), directly or indirectly, to the capital of Holdings (collectively, the Cure Right) in such amounts as are necessary to be in compliance with such Financial Covenants (the Cure Amount) as recalculated below. In no event shall the Cure Proceeds used to make such cure exceed the amount required for purposes of complying with the Financial Covenants as set forth in the Definitive Debt Documents. The Cure Amount will be used solely to prepay the Term Loan Facility. The Cure Right may be exercised not more than twice in any four consecutive fiscal quarter period and may not be exercised more than three times prior to the Maturity Date. Upon Administrative Agents receipt of the Cure Amount, solely for purposes of determining compliance with the Financial Covenants, the Financial Covenants shall be recalculated for such period (the Cure Quarter) giving effect to the following pro forma adjustments: (i) with respect to any breach of the minimum Consolidated Fixed Charge Coverage Ratio and/or Consolidated Total Leverage Ratio covenant, Consolidated EBITDA for the Cure Quarter and each subsequent measurement period that includes the Cure Quarter shall be increased by an amount equal to the Cure Amount; provided, that, the prepayment of the Term Loan Facility shall be disregarded for the purpose of measuring the Consolidated Total Leverage Ratio in the Cure Quarter (but not for any |
quarter thereafter), (ii) if, after giving effect to the foregoing calculations, Holdings is in compliance with the Financial Covenants, then Holdings shall be deemed to have satisfied such Financial Covenants as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of the Financial Covenants that occurred shall be deemed cured for the purposes of Definitive Debt Documents, and (iii) until the expiration of the Cure Period, so long as Holdings has timely notified the Administrative Agent that it intends to exercise the Cure Right, neither the Administrative Agent nor any Lender shall accelerate the obligations or otherwise exercise any remedies available to it during the continuance of a default or event of default arising as a result of the failure to comply with the financial covenants; provided, for the avoidance of doubt, that no Lender shall have any obligation to fund advances under the Revolving Credit Facility during such Cure Period. | ||
ASSIGNMENTS AND | ||
PARTICIPATIONS: | Revolving Credit Facility Assignments: Subject to the consents described below (which consents will not be unreasonably withheld or delayed), each Lender will be permitted to make assignments to other financial institutions in respect of the Revolving Credit Facility in a minimum amount equal to $1,000,000. | |
Term Loan Facility Assignments: Subject to the consents described below (which consents will not be unreasonably withheld or delayed), each Lender will be permitted to make assignments to other financial institutions in respect of the either of the Term Loan Facility in a minimum amount equal to $5,000,000, it being understood that such minimum amounts shall not apply with respect to assignments made to affiliates of a Lender. | ||
Assignments Generally: So long as no event of default is continuing, assignments shall require the consent of the Borrower (which consent will not be unreasonably withheld or delayed); provided that in no event shall the consent of the Borrower be required in connection with any assignment (a) to a Lender or an affiliate of a Lender or an Approved Fund (as defined in the Precedent Documentation, or (b) in connection with a sale of all or a substantial portion of a Lenders loan portfolio. Notwithstanding anything herein to the contrary, (x) no assignment of any portion of the Senior Credit Facilities may be made to Holdings, Borrower, Sponsor or any of their respective Affiliates or (y) unless an event of default has occurred and is continuing, a Disqualified Institution. Disqualified Institution shall mean (i) certain banks, financial institutions and other institutional lenders (or related funds of such institutional lenders) identified to us by you or the Sponsor in writing prior to the date hereof, (ii) competitors of the Borrower and its subsidiaries that have been specified to us by you or the Sponsor in writing from time to time and (iii) in the case of clauses (i) and (ii), any of their affiliates (other than, in the case of clause (ii), affiliates that are bona fide debt funds) that are (A) identified by you or the Sponsor in writing from time to time or (B) clearly identifiable on the basis of such |
affiliates name. An assignment fee in the amount of $3,500 will be charged with respect to each assignment unless waived by the Administrative Agent in its sole discretion. Each Lender will also have the right, without consent of the Borrower or the Administrative Agent, to assign as security all or part of its rights under the loan documentation to any Federal Reserve Bank. | ||
Participations: Lenders will be permitted to sell participations (other than to Disqualified Institutions unless an event of default shall have occurred and be continuing) with voting rights limited to customary significant matters such as changes in amount, rate, maturity date and releases of all or substantially all of the collateral securing the Senior Credit Facilities or all or substantially all of the value of the guaranty of the Borrowers obligations made by the Guarantor. | ||
WAIVERS AND AMENDMENTS: | Amendments and waivers of the provisions of the loan agreement and other Definitive Debt Documents will require the approval of Lenders holding loans and commitments representing more than 50% of the aggregate amount of the loans and commitments under the Senior Credit Facilities (the Required Lenders; provided, however, that (x) at any time there are two (2) or more Lenders, Required Lenders must include at least two (2) Lenders (for purposes of this proviso, a Lender and all of its affiliates who are Lenders shall be deemed to be one Lender) and (y) Required lenders shall include PNC to the extent that PNC has not assigned its commitments or Loans (other than to an affiliate of PNC)), except that (a) the consent of each Lender shall be required with respect to (i) the waiver of certain conditions precedent to the initial credit extension under the Senior Credit Facilities, (ii) the amendment of certain of the pro rata sharing provisions, (iii) the amendment of the voting percentages of the Lenders, (iv) the release of all or substantially all of the Collateral securing the Senior Credit Facilities, and (v) the release of the Borrower or all or substantially all of the value of the guaranty of the Borrowers obligations made by the Guarantors; (b) the consent of each Lender affected thereby shall be required with respect to (i) increases or extensions in the commitment of such Lender, (ii) reductions of principal, interest or fees, and (iii) extensions of scheduled maturities or times for payment; and (c) the consent of the Lenders holding more than 50% of the loans and commitments under the applicable Facility shall be required with respect to certain other customary matters. | |
INDEMNIFICATION: | The Borrower will indemnify and hold harmless the Administrative Agent, each Lender, their respective affiliates and their respective partners, directors, officers, employees, agents and advisors from and against all losses, claims, damages, liabilities and reasonable and documented out-of-pocket expenses arising out of or relating to the Senior Credit Facilities, any other aspect of the Transaction, the Borrowers use of loan proceeds or the commitments, including, but not limited to, reasonable attorneys fees (including the allocated cost of internal counsel) and settlement costs, in each case, subject to customary |
limitations relating to any indemnified partys gross negligence or willful misconduct or material breach of the Definitive Debt Documents. This indemnification shall survive and continue for the benefit of all such persons or entities. | ||
GOVERNING LAW: | State of New York. | |
PRICING/FEES/EXPENSES: | As set forth in Addendum I. | |
COUNSEL TO THE ADMINISTRATIVE | ||
AGENT: | Blank Rome LLP. | |
OTHER: | ||
Each of the parties shall (i) waive its right to a trial by jury and (ii) submit to New Yorks jurisdiction. The loan documentation will contain customary increased cost, withholding tax, capital adequacy and yield protection provisions. |
ADDENDUM
FINANCIAL MAINTENANCE COVENANT LEVELS:
Test Period Ended1 |
Consolidated Leverage Ratio |
Fixed Charge Coverage Ratio | ||
June 30, 2018 |
7.10 to 1.00 | 1.40 to 1.00 | ||
September 30, 2018 |
7.60 to 1.00 | 1.30 to 1.00 | ||
December 31, 2018 |
6.20 to 1.00 | 1.40 to 1.00 | ||
March 31, 2019 |
6.60 to 1.00 | 1.40 to 1.00 | ||
June 30, 2019 |
6.70 to 1.00 | 1.40 to 1.00 | ||
September 30, 2019 |
6.50 to 1.00 | 1.40 to 1.00 | ||
December 31, 2019 |
6.30 to 1.00 | 1.40 to 1.00 | ||
March 31, 2020 |
6.00 to 1.00 | 1.40 to 1.00 | ||
June 30, 2020 |
5.80 to 1.00 | 1.40 to 1.00 | ||
September 30, 2020 |
5.60 to 1.00 | 1.40 to 1.00 | ||
December 31, 2020 |
5.40 to 1.00 | 1.40 to 1.00 | ||
March 31, 2021 |
5.30 to 1.00 | 1.40 to 1.00 | ||
June 30, 2021 |
5.00 to 1.00 | 1.40 to 1.00 | ||
September 30, 2021 |
4.60 to 1.00 | 1.40 to 1.00 | ||
December 31, 2021 |
4.40 to 1.00 | 1.40 to 1.00 | ||
March 31, 2022 |
4.30 to 1.00 | 1.40 to 1.00 | ||
June 30, 2022 |
4.00 to 1.00 | 1.40 to 1.00 | ||
September 30, 2022 |
3.80 to 1.00 | 1.40 to 1.00 | ||
December 31, 2022 |
3.70 to 1.00 | 1.40 to 1.00 |
1 | First test date to be the first full fiscal quarter ending after the Closing Date. |
Exhibit (c)(2)
Project Cure PRESENTATI O N T O T H E S P E C I A L C O M M I T T E E J A N U A R Y 4 , 2 0 1 8 | C O N F I D E N T I A L
Table of Contents Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 Weighted Average Cost of Capital 18 Observed Data 22 Illustrative Selected Transactions 25 Certain Observations 27 4. Disclaimer 35
Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 4. Disclaimer 35
Summary of Selected Transaction Terms1 ï,¡ Parties to the Transaction: ï,¡ FP Healthcare Holdings, Inc. (Acquiror), an affiliate of Francisco Partners (FP)ï,¡ FP Healthcare Merger Sub Corporation (Merger Sub), a wholly-owned subsidiary of Acquirorï,¡ Cure (Company) ï,¡ Form of Transaction2: ï,¡ Merger ï,¡ Form of Consideration2: ï,¡ Cash ï,¡ Transaction Consideration2: ï,¡ $0.35 per share of Company common stock ï,¡ Treatment of Options: ï,¡ Unvested options will be cancelled and terminated without any cash paymentï,¡ Holders of unexercised, vested options will receive an amount in cash equal to the product of (a) the excess, if any, of the Transaction Consideration over the exercise price per share of such vested option and (b) the number of shares of Company common stock underlying such option ï,¡ Treatment of Restricted Stock Units (RSUs): ï,¡ Unvested RSUs will be cancelled and terminated without any cash paymentï,¡ Holders of vested RSUs will receive an amount in cash equal to the product of (a) the Transaction Consideration and (b) the number of shares of Company common stock subject to such RSU ï,¡ Go-Shop Period: ï,¡ 45 days after the date of the Transaction Agreement ï,¡ Termination Fee: ï,¡ In the event that the Transaction Agreement is terminated by the Company in favor of a superior proposal, then the Company shall pay Acquiror an amount equal to Acquirors reasonable and documented expenses in an amount not to exceed $2,000,000, payable upon the closing of the transaction that is the subject of the superior proposal ï,¡ Certain Closing Conditions: ï,¡ Receipt of regulatory approvals ï,¡ Receipt of Company stockholder approvalï,¡ No Company material adverse effect ï,¡ Contribution by certain stockholders of the Company of shares of Company common stock and preferred stock to Acquiror pursuant to rollover agreement ï,¡ Related Agreements: ï,¡ Voting and Support Agreement ï,¡ Amendment to existing credit facility to provide for sufficient liquidity through Transaction closingï,¡ Rollover Agreementï,¡ FP Guarantee 1. This summary is intended only as an overview of selected terms and is not intended to cover all terms or details of the Transaction. 2. Merger Sub will be merged with and into the Company as a result of which Acquiror will acquire the Company and each outstanding share of the common stock of the Company, not held or beneficially owned directly or indirectly by Acquiror, Merger Sub or their respective affiliates, will be converted into the right to receive $0.35 in cash (the Transaction Consideration). Source: Draft, dated December 28, 2017, of Agreement and Plan of Merger (the Transaction Agreement) and Company management.
Updates Since December 15, 2017 Preliminary Discussion Materials ï,¡ Since the preliminary Special Committee discussion materials dated December 15, 2017, the following updates have been made: ï,¡ Stock prices and other publicly available financial information for the selected companies updated to market close as of January 2, 2018 (selected revenue multiple ranges unchanged) ï,¡ Stock prices, betas, risk-free rate and other publicly available information utilized in the weighted average cost of capital calculation updated to market close as of January 2, 2018 (computed WACC of 19.8% and selected range of discount rates of 18.0% to 22.0% unchanged) ï,¡ Company management has provided updated weekly cash flow projections through the end of March 2018, reflecting an ending cash position of approximately $1.4 million as compared to -$0.4 million in managements previously provided weekly cash flow projections1, largely reflecting collection of pipeline billings previously identified by Company management but omitted from managements prior weekly cash flow projections for conservatism (see following page)ï,¡ Company management has advised that the Company is still expected to be in breach of the minimum liquidity covenant under its existing senior credit facility starting on or prior to April 1, 2018 ï,¡ Company management has prepared sensitivities to managements long-term going concern financial projections reflecting certain projected dynamics in a bankruptcy process, including: (i) limited to no acquisition of new customers; (ii) limited retention of existing customers (~10% to 50% estimated attrition range); and (iii) some ability to manage costs to offset top-line declines (see page 7) ï,¡ Company management has confirmed that there are no changes to the long-term going concern financial projections attributable to changes in the weekly cash flow projections 1. In each case assuming receipt of $4.1 million of payments from the Polaris project prior to March 30, 2018.
Near-Term Liquidity Constraints and Financial Covenant Breach ï,¡ Management currently projects that the Company likely will not have sufficient available cash to fund operations beyond March 2018, even assuming an expected 1Q 2018 cash payment of $4.1 million related to the Polaris project (Statement of Work has been signed)ï,¡ Management projects that, absent a substantial capital infusion, the Company will be in breach of the minimum liquidity covenant under its existing senior credit facility with Wells Fargoï,¡ Under its existing senior credit facility, the Company is subject to a minimum liquidity covenant of $1.5 million through March 31, 2018 and $15 million starting April 1, 20181ï,¡ Management is uncertain as to Wells Fargos willingness to amend the existing senior credit facility absent the Transaction or a similar transactionï,¡ FP has declined a request to submit a financing proposal in addition to its proposal to acquire the shares of Company common stock not held or beneficially owned directly or indirectly by FP Company Management Near-Term Weekly Cash Flow Projections2 (dollars in thousands) 12/29 1/5 1/12 1/19 1/26 2/2 2/9 2/16 2/23 3/2 3/9 3/16 3/23 3/30 Begin Cash $ 9,225 $ 7,594 $ 6,542 $ 4,862 $ 5,380 $ 5,568 $ 3,127 $ 5,744 $ 4,786 $ 4,326 $ 2,510 $ 2,079 $ 1,188 $ 1,193 AR Collection 1,060 916 723 1,664 471 600 3,093 1,765 40 435 40 1,663 455 101 AP Payment (1,635) (600) (821) (248) (940) (300) (737) (290) (240) (300) (815) (240) (240) Payroll/Benefits (1,872) (160) (1,787) (265) (35) (1,928) (160) (1,987) (210) (1,838) (155) (1,738) (210) (1,838) Rent (173) (16) (173) (16) (173) (16) -Pub. Co. (61) -Debt ServicePrincipal (1,300) Debt ServiceInterest (660) (660) Other (160) -Net Operating Change (1,632) (1,051) (1,681) 518 188 (2,441) 2,617 (958) (460) (1,816) (431) (891) 5 (3,937) Ending Cash $ 7,594 $ 6,542 $ 4,862 $ 5,380 $ 5,568 $ 3,127 $ 5,744 $ 4,786 $ 4,326 $ 2,510 $ 2,079 $ 1,188 $ 1,193 $ (2,745) Additional Collections from Polaris Project 4,100 $ 1,355 Minimum liquidity covenant of $15 million starting on 4/1/18 1. Liquidity is defined as the sum of Availability and Qualified Cash (Availability refers to amount available under revolving loans; Qualified Cash refers to amount of unrestricted cash and cash equivalents). 2. Excludes transaction costs that have not yet been incurred. Source: Company management. 6
Bankruptcy Sensitivities ï,¡ Company management believes that, absent a substantial financing to maintain compliance with the existing debt agreements and fund operations or absent an acceptable financing to shareholders and lender(s) accompanied by an amendment/replacement to the existing debt agreements that would allow for the Company to fund operations and be in compliance with amended/new debt agreements, there would be substantial doubt about the Companys ability to continue as a going concern. ï,¡ Company management has developed sensitivities (the Bankruptcy Sensitivities) to managements long-term going concern financial projections (described on the following page) that would account for the following projected dynamics in a bankruptcy process: ï,¡ Limited to no acquisition of new customers ï,¡ Limited retention of existing customers (~10% to 50% estimated attrition range) ï,¡ Some ability to manage costs to offset top-line declines (~45% variable costs with some ability to right-size fixed costs) ï,¡ Potential for eventual resumption of top-line growth in event of emergence ï,¡ The Bankruptcy Sensitivities indicate substantially less favorable financial results than the long-term going concern financial projections across all scenarios Summary of Bankruptcy Sensitivities Total Adjusted Billings Cash EBITDA (dollars in millions) Fiscal Year Ended December 31, Fiscal Year Ended December 31, 2018E 2019E 2020E 2021E 2022E 2023E 2018E 2019E 2020E 2021E 2022E 2023E 10% Attrition Scenario $ 61.8 $ 48.6 $ 48.9 $ 52.6 $ 57.8 $ 65.1 $ 3.2 $ 1.4 $ 1.3 $ 2.6 $ 3.5 $ 5.1 20% Attrition Scenario 56.0 38.8 38.6 41.5 45.7 51.4 1.1 (2.9) (3.3) (2.5) (2.2) (0.4) 30% Attrition Scenario 50.3 30.2 29.6 31.8 35.0 39.4 (1.1) (6.7) (6.3) (5.8) (5.1) (4.0) 40% Attrition Scenario 44.5 22.7 21.7 23.4 25.7 28.9 (4.2) (10.8) (9.6) (9.5) (9.2) (8.8) 50% Attrition Scenario 38.8 16.4 15.1 16.2 17.8 20.1 (6.4) (12.3) (12.3) (12.4) (12.5) (12.6) Source: Company management.
Certain Business and Financial Matters Long-Term Going Concern Financial Projections ï,¡ Managements long-term going concern financial projections assume the Company is able to raise sufficient external financing required to continue to operate as a going concernï,¡ Absent sufficient financing, Company management believes that the Company faces significant operating challenges that are not reflected in managements long-term going concern financial projections, including that (i) acquisition of new customers will be unlikely and (ii) retention of existing customers will be more difficultï,¡ Financial projections methodology: ï,¡ Detailed 2018 budget bottoms up top-line build, detailed expense buildï,¡ High-level estimates for 2019 2023 based on mid- to high-teen growth rates for the Medicare business (Over 65 segment) and, after an initial decline in the other business segment (Under 65 segment), mid-single digit to low-teen growth rates for the rest of the business Support for Financial Analyses ï,¡ Review of near-term weekly cash flow forecast and Bankruptcy Sensitivities ï,¡ Given uncertainty regarding the particulars of a bankruptcy process and associated operating challenges, we have utilized managements long-term going concern financial projections for purposes of our analyses but note the Companys circumstances, the near-term weekly cash flow forecast and the Bankruptcy Sensitivities Certain Business Considerations ï,¡ Revenue contributions of Over 65 and Under 65 platforms ï,¡ Macro factors driving growth in Medicare platform (i.e., demographics, demand for drug comparison tool) ï,¡ Macro dynamics driving softer demand and increased churn in Under 65 market (i.e., health plan carriers withdrawing from the Individual and Family Plans (IFPs) market)ï,¡ Weaker / slower than expected adoption to date of customer-centric decision-making model ï,¡ Changes to go-to-market strategyï,¡ Benefits of scale in large payor marketplace Source: Company management.
Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 4. Disclaimer 35
Financial Analyses Summary Illustrative Going Concern Scenario Implied Per Share Equity Value Reference Range $1.00 $0.51 $0.42 $0.44 $0.50 $0.39 Per Share Transaction Consideration: $0.35 Cure Closing Stock $0.00 Price: $0.19 [1] ($0.50) ($1.00) ($1.02) ($1.04) ($1.10) ($1.12) ($1.50) Selected Companies Analysis Selected Companies Analysis Selected Companies Analysis Discounted Cash Flow Analysis LTM Ended 9/30/17 GAAP Revenue FY 2017E GAAP Revenue FY 2018E GAAP Revenue Discount Rate: 1.00x1.50x 1.00x1.50x 1.00x1.50x 18.0%22.0% Terminal Multiple: 1.25x1.75x Notes: Based on 23.0 million outstanding common shares and 2.1 million outstanding RSUs projected as of December 31, 2017, per Company management. Does not include performance-based RSUs or out-of-the-money options. Assumes projected Total Debt of $32.6 million as of 12/31/2017, liquidation preference of Series A Preferred Stock of $52.0 million and projected accrued dividends as of 12/31/17 of $6.9 million, and liquidation preference of Series B Preferred Stock of $17.5 million and projected accrued dividends as of 12/31/17 of $2.2 million, per Company management. Negative equity numbers shown to reflect magnitude of out-of-the-money equity; however, equity cannot be below $0.00 (absent outside instruments, such as guarantees of debt). 1. Based on Cures closing stock price on January 2, 2018. E refers to Estimated. FY refers to Fiscal Year. LTM refers to Latest 12 Months.
Financial Analyses Summary Illustrative Going Concern Scenario (cont.) (shares outstanding and dollars in millions, except per share values) Selected Companies Selected Companies Selected Companies Discounted Cash Flow Analysis Analysis Analysis Analysis LTM Ended 9/30/17 FY 2017E FY 2018E Terminal Multiple GAAP Revenue GAAP Revenue GAAP Revenue Discount Rate Range: 18.0% 22.0% Corresponding Base Amount [1] $78.0 $76.5 $75.9 Terminal Multiple Range: Selected Multiples Range 1.00x 1.50x 1.00x 1.50x 1.00x 1.50x 1.25x 1.75x Implied Enterprise Value Reference Range $78.0 $117.0 $76.5 $114.7 $75.9 $113.9 $78.5 $115.3 Projected Cash and Cash Equivalents as of 12/31/17 [2] $7.3 $7.3 $7.3 $7.3 $7.3 $7.3 $7.3 $7.3 Implied Total Enterprise Value Reference Range $85.3 $124.3 $83.7 $122.0 $83.2 $121.2 $85.8 $122.6 Severance Run-Off Payment [3] ($0.3) ($0.3) ($0.3) ($0.3) ($0.3) ($0.3) ($0.3) ($0.3) Projected Total Debt as of 12/31/17 [4] ($32.6) ($32.6) ($32.6) ($32.6) ($32.6) ($32.6) ($32.6) ($32.6) Projected Preferred Stock as of 12/31/17 [5] ($78.6) ($78.6) ($78.6) ($78.6) ($78.6) ($78.6) ($78.6) ($78.6) Implied Total Equity Value Reference Range [6] ($26.2) $12.8 ($27.7) $10.5 ($28.2) $9.7 ($25.7) $11.1 Projected Shares Outstanding as of 12/31/17 [7] 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2 Implied Per Share Equity Value Reference Range [6] ($1.04) $0.51 ($1.10) $0.42 ($1.12) $0.39 ($1.02) $0.44 Note: The Companys tax attributes have been taken into account in the discounted cash flow analysis under the assumption that no taxes are paid throughout the projection period. 1. 2017 base amount includes $1.0 million of non-recurring revenue related to the Polaris project, and 2018 base amount includes $10.0 million of non-recurring revenue related to the Polaris project, per Company management. 2. Per Company management. 3. Represents projected severance run-off payments in FY2018 in connection with recently implemented cost reduction initiatives, per Company management. 4. Projected Total Debt accrued at 2.5% PIK rate from 9/30/17 debt balance, per Company management. 5. Represents liquidation preference of Series A Preferred Stock of $52.0 million and projected accrued dividends as of 12/31/17 of $6.9 million, as well as liquidation preference of Series B Preferred Stock of $17.5 million and projected accrued dividends as of 12/31/17 of $2.2 million, per Company management. 6. Negative equity numbers shown to reflect magnitude of out-of-the-money equity; however, equity cannot be below $0.0 (absent outside instruments, such as guarantees of debt). 7. Based on 23.0 million outstanding common shares and 2.1 million outstanding RSUs projected as of December 31, 2017, per Company management. Does not include performance-based RSUs or out-of-the-money options. E refers to Estimated. FY refers to Fiscal Year. LTM refers to Latest 12 Months. Source: Cure public filings, Company management.
Representative Levels (GAAP Basis) (dollars in millions) Projected Fiscal Year Ending Fiscal Year Ended December 31, LTM Ended December 31, CAGR 2012 2013 2014 2015 2016 9/30/17 2017E 2018E 2016 to 2018E Revenue [1] $29.6 $58.3 $84.6 $95.8 $81.9 $78.0 $76.5 $75.9 (3.7%) Growth % 96.9% 45.0% 13.3% (14.6%) (6.6%) (0.7%) Less: Cost of Revenue 22.9 50.2 52.4 50.7 56.9 49.8 46.5 43.6 Gross Profit $6.7 $8.2 $32.1 $45.2 $25.0 $28.2 $30.0 $32.3 Margin % 22.8% 14.0% 38.0% 47.1% 30.5% 36.2% 39.2% 42.6% Less: Research & Development 7.4 11.8 18.1 22.7 22.3 17.7 17.1 14.8 Less: Sales & Marketing 6.6 6.8 7.7 9.5 10.4 9.2 8.9 9.3 Less: General & Administrative 7.5 12.2 10.6 14.4 13.2 12.6 12.1 10.3 Add: Depreciation & Amortization 1.0 4.7 5.1 5.0 4.6 4.5 4.4 4.0 Add: Total Adjustments [2] 0.7 1.2 0.1 4.7 4.5 3.8 2.3 0.0 Adjusted EBITDA ($13.1) ($16.7) $0.9 $8.3 ($11.8) ($3.0) ($1.4) $1.9 NMF Margin % (44.1%) (28.6%) 1.1% 8.6% (14.4%) (3.8%) (1.8%) 2.6% Note: GAAP projections only prepared for 2017 and 2018. Note: Historical financials shown above are not pro forma for DRX and ConnectedHealth acquisitions. 1. 2017 base amount includes $1.0 million of non-recurring revenue related to the Polaris project, and 2018 base amount includes $10.0 million of non-recurring revenue related to the Polaris project, per Company management. 2. Total Adjustments: Stock-Based Compensation [3] $0.7 $0.6 $1.4 $4.7 $2.7 $2.2 $2.3 $0.0 Change in Fair Value of Contingent Consideration 0.0 0.0 (1.0) 0.0 0.0 0.0 0.0 0.0 DRX Acquisition Fees 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 Severance Costs 0.0 0.0 0.0 0.0 1.6 1.6 0.0 0.0 ConnectedHealth Acquisition Fees 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 Other 0.0 0.0 (0.4) 0.0 0.0 0.0 0.0 0.0 Total Adjustments $0.7 $1.2 $0.1 $4.7 $4.5 $3.8 $2.3 $0.0 3. Expenses in 2018 exclude stock-based compensation, so no further adjustment is necessary. Adjusted EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization and Stock-Based Compensation, adjusted for certain non-recurring items. CAGR refers to Compound Annual Growth Rate. E refers to Estimated. LTM refers to Latest 12 Months. NMF refers to not meaningful figure. Source: Cure public filings, Company management.
Representative Levels (Cash Basis) (dollars in millions) Fiscal Year Ended December 31, Projected Fiscal Year Ending December 31, CAGR 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2016 to 2023E Core Billings $ 70.5 $74.7 $69.7 $70.0 $71.3 $76.3 $83.9 $94.4 $106.2 $122.1 8.3% Core Billings Growth % 5.9% (6.7%) 0.5% 1.9% 7.0% 10.0% 12.5% 12.5% 15.0% Add: Polaris Project [1] 1.0 10.0 2.0 Total Billings $ 70.5 $74.7 $69.7 $71.0 $81.3 $78.3 $83.9 $94.4 $106.2 $122.1 8.3% Growth % (29.7%) 5.9% (6.7%) 1.9% 14.5% (3.7%) 7.2% 12.5% 12.5% 15.0% Less: Cash Expenses $ 87.0 $87.5 $94.1 $78.5 $74.3 $70.5 $73.3 $78.8 $85.1 $93.6 Cash EBITDA [2] ($ 16.5) ($12.9) ($24.5) ($7.5) $7.0 $7.8 $10.6 $15.6 $21.1 $28.5 NMF Margin % (23.4%) (17.2%) (35.1%) (10.6%) 8.6% 10.0% 12.6% 16.5% 19.9% 23.3% Growth % NMF NMF NMF NMF 11.3% 36.1% 47.1% 35.2% 35.2% Note: Historical financials shown above are not pro forma for DRX and ConnectedHealth acquisitions. 1. Represents special one-time project with UnitedHealth. 2. Does not reflect adjustments for non-recurring items. CAGR refers to Compound Annual Growth Rate. E refers to Estimated. EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization, and is shown above on a cash only basis (does not reflect deferred revenue or deferred costs). NMF refers to not meaningful figure. Source: Cure public filings, Company management.
Segment Details (GAAP Basis) ï,¡ Company management has indicated that the Enterprise / State segment is in the process of winding down and, as such, revenue and gross profit contributions from that segment after 2017 are expected to be near zero. ï,¡ Company management has indicated that the Private Exchange segment includes sales related to the Companys Under 65 platform (i.e., small group and IFPs), as well as sales related to its Over 65 and DrugCompare platforms (i.e., Medicare). (dollars in millions) Revenue by Segment ($) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial $28.3 $33.0 $40.4 $55.5 $49.1 $41.0 Enterprise / State 0.1 3.2 21.6 13.4 3.5 2.9 Medicare 0.0 15.9 16.2 18.0 18.6 21.7 Private Exchange 1.2 6.2 6.4 9.0 10.8 12.4 Total $29.6 $58.3 $84.6 $95.8 $81.9 $78.0 Revenue by Segment (%) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial 95.7% 56.6% 47.7% 57.9% 59.9% 52.5% Enterprise / State 0.2% 5.4% 25.6% 14.0% 4.2% 3.7% Medicare 0.0% 27.3% 19.1% 18.8% 22.7% 27.8% Private Exchange 4.1% 10.6% 7.6% 9.4% 13.2% 15.9% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Gross Profit by Segment ($) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial $7.2 ($0.7) $10.3 $23.7 $11.9 $12.5 Enterprise / State (0.8) (1.1) 11.0 6.3 1.3 1.9 Medicare 0.0 7.8 9.5 10.7 11.5 14.3 Private Exchange 0.3 2.2 1.3 4.5 0.3 (0.5) Total $6.7 $8.2 $32.1 $45.2 $25.0 $28.2 Gross Margin by Segment (%) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial 25.5% (2.3%) 25.6% 42.7% 24.3% 30.6% Enterprise / State NMF (35.3%) 51.0% 47.1% 38.4% 64.7% Medicare NA 49.2% 58.4% 59.3% 61.7% 65.8% Private Exchange 23.2% 35.3% 20.9% 50.0% 2.9% (3.8%) Total 22.8% 14.0% 38.0% 47.1% 30.5% 36.2% Gross Profit Contribution (%) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial 107.4% (9.2%) 32.1% 52.5% 47.6% 44.4% Enterprise / State (11.6%) (13.7%) 34.3% 13.9% 5.3% 6.7% Medicare 0.0% 96.1% 29.4% 23.6% 45.8% 50.6% Private Exchange 4.2% 26.8% 4.2% 10.0% 1.2% (1.7%) Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Note: Segment financials shown above are based on the Companys reportable segments in SEC filings. LTM refers to Latest 12 Months. NA refers to not available. NMF refers to not meaningful figure. Source: Cure public filings, Company management.
Selected Companies Analysis ï,¡ Size and scale, among other considerations, are factors contributing to observed multiples for the selected companies. As such, the selected companies below with enterprise values above $500 million are shown for informational purposes only. (dollars in millions, except per share values) Share % of Equity Market Enterprise Enterprise Value [1] to GAAP Revenue . Selected Company Price [2] 52-Week High Value [2][3] Value [1][2][3] LTM FY 2017E [4] FY 2018E [5] <$500m EV Castlight Health, Inc. $3.80 74.5% ### $519.2 $437.5 3.52x ## 3.34x ## 2.67x eHealth, Inc. 16.49 57.7% ### 307.1 255.7 1.44x ## 1.50x ## 1.34x Health Insurance Innovations, Inc. 25.55 68.4% ### 351.1 330.4 1.42x ## 1.37x ## 1.21x Hooper Holmes, Inc. 0.44 39.8% ### 11.7 29.9 0.74x ## NA A NA NantHealth, Inc. 3.22 29.6% ### 348.8 469.6 4.60x ## 4.97x ## 3.51x Orion Health Group Limited 0.63 30.2% ### 123.6 117.6 0.94x ## 0.92x ## 0.82x Streamline Health Solutions, Inc. 1.68 59.6% ### 33.6 45.2 1.83x ## 1.86x ## 1.76x Low 0.74x 0.92x 0.82x High 4.60x 4.97x 3.51x Median 1.44x 1.68x 1.55x Mean 2.07x 2.33x 1.89x >$500m EV (Informational) athenahealth, Inc. $135.90 85.7% ### $5,547.1 $5,700.8 4.83x ## 4.70x ## 4.25x Benefitfocus, Inc. 26.75 72.1% ### 850.1 915.3 3.62x ## 3.57x ## 3.27x Care.com, Inc. 18.65 89.3% ### 699.4 603.0 3.48x ## 3.47x ## 3.17x HealthEquity, Inc. 46.47 84.0% ### 2,880.1 2,655.1 12.30x ## 11.68x ## 9.51x HMS Holdings Corp. 17.11 81.9% ### 1,469.6 1,630.1 3.27x ## 3.20x ## 2.90x Inovalon Holdings, Inc. 14.45 81.2% ### 2,114.7 1,833.0 4.25x ## 4.05x ## 3.76x Medidata Solutions, Inc. 64.60 75.2% ### 4,261.7 3,863.9 7.31x ## 7.09x ## 6.03x Omnicell, Inc. 49.50 89.4% ### 1,940.8 2,125.6 3.08x ## 2.94x ## 2.63x Vocera Communications, Inc. 29.96 92.9% ### 898.0 831.3 5.43x ## 5.17x ## 4.44x Low 3.08x 2.94x 2.63x High 12.30x 11.68x 9.51x Median 4.25x 4.05x 3.76x Mean 5.29x 5.10x 4.44x Cure $0.19 7.7% $4.8 $103.2 1.32x NA NA Note: No company used for comparative purposes is identical to the Company. 1. Enterprise Value equals equity market value + debt outstanding + preferred stock + minority interests cash and cash equivalents. 2. Based on closing prices as of 1/2/18. 3. Based on reported fully-diluted shares. 4. FY 2017E refers to the fiscal year ending December 31, 2017 for all selected companies, except HealthEquity, Inc. and Streamline Health Solutions, Inc., for which it refers to the fiscal year ending January 31, 2018, and Orion Health Group Limited, for which it refers to the fiscal year ending March 31, 2018. 5. FY 2018E refers to the fiscal year ending December 31, 2018 for all selected companies, except HealthEquity, Inc. and Streamline Health Solutions, Inc., for which it refers to the fiscal year ending January 31, 2019, and Orion Health Group Limited, for which it refers to the fiscal year ending March 31, 2019. E refers to Estimated. EV refers to Enterprise Value. FY refers to Fiscal Year. LTM refers to the most recently completed 12-month period for which financial information has been made public, other than for the Company, in which case LTM refers to Latest 12 Months. NA refers to not available. Source: Bloomberg, Capital IQ, public filings.
Discounted Cash Flow Analysis ï,¡ Per Company management, utilization of the Companys NOLs is likely to be limited as a result of recent stock issuances driving significant shifts in the Companys equity ownership base. ï,¡ However, Company management expects that the Company will be able to utilize a portion of its NOLs to offset some of the taxable income throughout the projection period. ï,¡ For conservatism, the discounted cash flow analysis shown below assumes a tax rate of 0%. (dollars in millions) Projected FYE December 31, 2018E 2019E 2020E 2021E 2022E 2023E Implied Perpetual Billings [1] $81.3 $78.3 $83.9 $94.4 $106.2 $122.1 Growth Rate [3] Growth % 14.5% (3.7%) 7.2% 12.5% 12.5% 15.0% Discount Rate 1.25x 1.50x 1.75x Less: Cash Expenses 74.3 70.5 73.3 78.8 85.1 93.6 18.0% 0.4% 2.9% 4.8% Cash EBITDA $7.0 $7.8 $10.6 $15.6 $21.1 $28.5 19.0% 1.1% 3.7% 5.7% Margin % 8.6% 10.0% 12.6% 16.5% 19.9% 23.3% 20.0% 1.9% 4.6% 6.5% Less: Taxes at 0.0% [2] 0.0 0.0 0.0 0.0 0.0 0.0 21.0% 2.7% 5.4% 7.4% Less: Change in Net Working Capital 2.5 0.0 2.0 3.0 4.0 5.0 22.0% 3.5% 6.2% 8.2% Less: Capital Expenditures 0.8 1.0 1.1 1.3 1.5 1.8 Unlevered Free Cash Flows $3.7 $6.8 $7.5 $11.3 $15.6 $21.7 Present Value PV of Terminal Value of Cash Flows as a Multiple of Implied Enterprise Value PV of Terminal Value (2018E2023E) 2023E Billings as a % of Enterprise Value Discount Rate 1.25x 1.50x 1.75x 1.25x 1.50x 1.75x Discount Rate 1.25x 1.50x 1.75x 18.0% $36.1 $56.6 $67.9 $79.2 $92.7 $104.0 $115.3 18.0% 61.0% 65.3% 68.7% 19.0% $35.1 $53.8 $64.5 $75.3 $88.8 $99.6 $110.4 19.0% 60.5% 64.8% 68.2% 20.0% $34.1 + $51.1 $61.4 $71.6 = $85.2 $95.4 $105.7 20.0% 60.0% 64.3% 67.7% 21.0% $33.1 $48.6 $58.4 $68.1 $81.8 $91.5 $101.2 21.0% 59.5% 63.8% 67.3% 22.0% $32.2 $46.3 $55.6 $64.8 $78.5 $87.8 $97.0 22.0% 59.0% 63.3% 66.8% Note: Figures shown above do not include stock-based compensation expense (or equivalents), per Company management. Note: Present values as of 12/31/17; mid-year convention applied. 1. Per Company management, Billings is expected to approximate revenue in the long-term. 2. Tax rate assumed to be 0.0%. 3. Implied from corresponding discount rate and 2023E Billings multiple. Calculations assume normalized change in net working capital of $2.0 million, per Company management; shown for informational purposes. E refers to Estimated. EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization, and is shown above on a cash only basis (does not reflect deferred revenue or deferred costs). FYE refers to Fiscal Year End. PV refers to Present Value. Source: Company management.
Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 Weighted Average Cost of Capital 18 Observed Data 22 Illustrative Selected Transactions 25 Certain Observations 27 4. Disclaimer 35
Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 Weighted Average Cost of Capital 18 Observed Data 22 Illustrative Selected Transactions 25 Certain Observations 27 4. Disclaimer 35
Weighted Average Cost of Capital Summary (dollars in millions) Debt to Debt Preferred Preferred Equity Market Preferred Equity Market Total Equity Market to Total Stock to Equity Stock to Total Value to Total Selected Company Debt [1] Stock [2] Value [3] Capitalization [4] Value Capitalization Market Value Capitalization Capitalization <$500m EV Castlight Health, Inc. $5.4 # $0.0 # $519.2 # $524.6 # 1.0% # 1.0% # 0.0% # 0.0% # 99.0% # eHealth, Inc. 0.0 # 0.0 # 307.1 # 307.1 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # Health Insurance Innovations, Inc. 0.0 # 0.0 # 351.1 # 351.1 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # Hooper Holmes, Inc. 19.8 # 0.0 # 11.7 # 31.5 # 168.5% # 62.8% # 0.0% # 0.0% # 37.2% # NantHealth, Inc. 194.3 # 0.0 # 348.8 # 543.1 # 55.7% # 35.8% # 0.0% # 0.0% # 64.2% # Orion Health Group Limited 5.6 # 0.0 # 123.6 # 129.1 # 4.5% # 4.3% # 0.0% # 0.0% # 95.7% # Streamline Health Solutions, Inc. 4.6 # 8.8 # 33.6 # 47.1 # 13.8% # 9.8% # 26.4% # 18.8% # 71.4% # Median $5.4 $0.0 $307.1 $307.1 4.5% 4.3% 0.0% 0.0% 95.7% Mean $32.8 $1.3 $242.2 $276.2 34.8% 16.2% 3.8% 2.7% 81.1% >$500m EV (Informational) athenahealth, Inc. $276.4 # $0.0 # $5,547.1 # $5,823.5 # 5.0% # 4.7% # 0.0% # 0.0% # 95.3% # Benefitfocus, Inc. 119.8 # 0.0 # 850.1 # 969.9 # 14.1% # 12.3% # 0.0% # 0.0% # 87.7% # Care.com, Inc. 0.0 # 0.0 # 699.4 # 699.4 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # HealthEquity, Inc. 0.0 # 0.0 # 2,880.1 # 2,880.1 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # HMS Holdings Corp. 240.0 # 0.0 # 1,469.6 # 1,709.6 # 16.3% # 14.0% # 0.0% # 0.0% # 86.0% # Inovalon Holdings, Inc. 244.0 # 0.0 # 2,114.7 # 2,358.7 # 11.5% # 10.3% # 0.0% # 0.0% # 89.7% # Medidata Solutions, Inc. 0.0 # 0.0 # 4,261.7 # 4,261.7 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # Omnicell, Inc. 192.3 # 0.0 # 1,940.8 # 2,133.1 # 9.9% # 9.0% # 0.0% # 0.0% # 91.0% # Vocera Communications, Inc. 0.8 # 0.0 # 898.0 # 898.8 # 0.1% # 0.1% # 0.0% # 0.0% # 99.9% # Median $119.8 $0.0 $1,940.8 $2,133.1 5.0% 4.7% 0.0% 0.0% 95.3% Mean $119.3 $0.0 $2,295.7 $2,415.0 6.3% 5.6% 0.0% 0.0% 94.4% All Selected Companies Median $5.5 $0.0 $774.8 $799.1 4.7% 4.5% 0.0% 0.0% 95.5% Mean $81.4 $0.6 $1,397.3 $1,479.3 18.8% 10.3% 1.6% 1.2% 88.6% Note: No company is identical to the Company. 1. Debt amount based on most recent public filing as of January 2, 2018. 2. Preferred stock amount as stated in most recent public filing as of January 2, 2018. 3. Equity market value based on closing price on January 2, 2018 and on reported fully-diluted shares as of January 2, 2018. 4. Total capitalization equal to equity market value + debt outstanding + preferred stock. EV refers to Enterprise Value. Source: Bloomberg, Capital IQ, public filings.
Weighted Average Cost of Capital Summary (cont.) (dollars in millions) Levered Unlevered Equity Risk Size Cost of Cost of Cost of Preferred Selected Company Beta [1] Beta [2] Premium [3] Premium [4] Equity [5] Debt [6] Stock [7] WACC [8] <$500m EV Castlight Health, Inc. 1.74 # 1.72 # 6.0% 2.7% 15.8% # 3.5% # NA 15.6% 0 eHealth, Inc. 2.06 # 2.06 # 6.0% 2.7% 17.7% # NA NA 17.7% 0 Health Insurance Innovations, Inc. 1.33 * 1.33 * 6.0% 2.7% 13.3% * NA NA 13.3% * Hooper Holmes, Inc. 1.19 * 0.44 * 6.0% 5.6% 15.4% * 11.8% # NA 13.1% * NantHealth, Inc. 2.08 * 1.33 * 6.0% 2.7% 17.8% * 5.2% # NA 13.3% * Orion Health Group Limited 0.79 * 0.75 * 6.0% 5.6% 13.0% * NA NA 12.4% * Streamline Health Solutions, Inc. 0.36 * 0.26 * 6.0% 5.6% 10.4% * 6.6% # NA NA * Median 1.90 1.89 16.7% 5.9% NA 16.6% Mean 1.90 1.89 16.7% 6.8% NA 16.6% >$500m EV (Informational) athenahealth, Inc. 1.26 # 1.20 # 6.0% 1.0% 11.2% # 1.6% # NA 10.7% 0 Benefitfocus, Inc. 1.63 # 1.43 # 6.0% 2.1% 14.5% # 5.3% # NA 13.3% 0 Care.com, Inc. 1.54 # 1.54 # 6.0% 2.1% 14.0% # NA * NA 14.0% 0 HealthEquity, Inc. 1.67 # 1.67 # 6.0% 1.5% 14.1% # NA * NA 14.1% 0 HMS Holdings Corp. 1.23 # 1.06 # 6.0% 1.7% 11.7% # 3.4% # NA 10.6% 0 Inovalon Holdings, Inc. 0.90 # 0.81 # 6.0% 1.7% 9.7% # 2.5% # NA 8.9% 0 Medidata Solutions, Inc. 1.62 # 1.62 # 6.0% 1.0% 13.3% # NA * NA 13.3% 0 Omnicell, Inc. 1.08 # 0.98 # 6.0% 1.7% 10.8% # 1.9% # NA 10.0% 0 Vocera Communications, Inc. 0.49 * 0.48 * 6.0% 2.1% 7.6% * NA * NA 7.6% * Median 1.40 1.31 12.5% 2.5% NA 12.0% Mean 1.36 1.29 12.4% 2.9% NA 11.9% All Selected Companies Median 1.58 1.48 13.6% 3.5% NA 13.3% Mean 1.47 1.41 13.3% 4.6% NA 12.8% Note: No company is identical to the Company. 1. Based on actual beta per Bloomberg as of January 2, 2018. 2. Unlevered Beta = Levered Beta / (1 + ((1 Tax Rate) * (Debt to Equity Market Value)) + (Preferred Stock to Equity Market Value)). 3. Based on review of studies measuring the historical returns between stocks and bonds, theoretical models such as supply side and demand side models and other materials. 4. 2017 Duff & Phelps Valuation Handbook, Appendix 3 and Exhibit 4.7 (Handbook). 5. Cost of Equity = Risk Free Rate of Return + (Levered Beta * Equity Risk Premium) + Size Premium. Risk Free Rate of Return as of January 2, 2018, based on 20-year U.S. Treasury Bond Yield. 6. Based on selected company weighted average interest rate per most recent public filings. 7. Based on selected company weighted average preferred dividend per most recent public filings. 8. Weighted Average Cost of Capital (WACC) = (Cost of Debt * (1 Tax Rate) * Debt to Total Capitalization) + (Cost of Equity * Equity Market Value to Total Capitalization) + (Cost of Preferred * Preferred Stock to Total Capitalization). EV refers to Enterprise Value. NA refers to not available. * Not included in median and mean data given low R2 correlations (beta indications are not meaningful). Source: Bloomberg, Capital IQ, public filings.
Weighted Average Cost of Capital Summary (cont.) Market Capital Structure Cost of Equity for Assumptions Assumptions Computed WACC Risk-Free Rate of Return [1] 2.64% Debt to Total Capitalization [5] 4.5% Selected Unlevered Beta [6] 1.48 Equity Risk Premium [2] 6.00% Preferred Stock to Total Capitalization [5] 0.0% Computed Levered Beta [7] 1.55 Size Premium [3] 8.64% Equity Market Value to Total Capitalization [5] 95.5% Cost of Equity [8] 20.6% Tax Rate [4] 0.00% Debt to Equity Market Value 4.7% Preferred Stock to Equity Market Value 0.0% Cost of Debt [5] 3.5% Cost of Preferred Stock [5] NA Company Specific Decile Beta 0.00 Computed Weighted Average Cost of Capital [9] 19.8% Selected Weighted Average Cost of Capital Range 18.0% 22.0% 1. Risk-Free Rate of Return as of January 2, 2018, based on 20-year U.S. Treasury Bond Yield. 2. Based on a review of studies measuring the historical returns between stocks and bonds, theoretical models such as supply side and demand side models and other materials. 3. Handbook. 4. Per Company management. 5. Based on review of corresponding metrics of selected companies listed on previous pages. 6. Based on review of selected companies unlevered betas listed on previous pages. 7. Computed Levered Beta = Selected Unlevered Beta * (1 + ((Debt to Equity Market Value) * (1 Tax Rate)) + (Preferred Stock to Equity Market Value)). Based on Market and Capital Structure Assumptions. 8. Cost of Equity = Risk Free Rate of Return + (Computed Levered Beta * Equity Risk Premium) + Size Premium. Based on Market Assumptions. 9. Weighted Average Cost of Capital (WACC) = (Cost of Debt * (1 Tax Rate) * Debt to Total Capitalization) + (Cost of Equity * Equity Market Value to Total Capitalization) + (Cost of Preferred Stock * Preferred Stock to Total Capitalization). Based on Cost of Equity for Computed WACC and Market and Capital Structure Assumptions. NA refers to not available. Source: Bloomberg, Capital IQ, public filings. 21
Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 Weighted Average Cost of Capital 18 Observed Data 22 Illustrative Selected Transactions 25 Certain Observations 27 4. Disclaimer 35
Observed Data Selected Companies (<$500m EV) Size Leverage [1] Liquidity Historical Growth Projected Growth (LTM Revenue, millions) (Debt to EV as of 1/2/18) (Current Ratio as of Latest Filing) (FY 2014 to FY 2016 Revenue) (FY 2016 to FY 2018E Revenue) Health Insurance Innovations, Inc. $232.4 eHealth, Inc. 0.0% eHealth, Inc. 3.0 Castlight Health, Inc. 49.3% Castlight Health, Inc. 26.9% eHealth, Inc. $177.3 Health Insurance Innovations, Inc. 0.0% Health Insurance Innovations, Inc. 2.6 Health Insurance Innovations, Inc. 44.2% Health Insurance Innovations, Inc. 21.8% Orion Health Group Limited $124.8 Castlight Health, Inc. 1.2% NantHealth, Inc. 2.4 Orion Health Group Limited 10.2% NantHealth, Inc. 15.5% Castlight Health, Inc. $124.3 Orion Health Group Limited 4.7% Castlight Health, Inc. 1.9 Hooper Holmes, Inc. 9.6% eHealth, Inc. 0.9% NantHealth, Inc. $102.2 Streamline Health Solutions, Inc. 10.3% Orion Health Group Limited 1.2 eHealth, Inc. 2.0% Orion Health Group Limited 0.7% Cure $78.0 NantHealth, Inc. 41.4% Streamline Health Solutions, Inc. 0.7 Streamline Health Solutions, Inc. (1.0%) Streamline Health Solutions, Inc. (2.7%) Hooper Holmes, Inc. $40.1 Hooper Holmes, Inc. 66.1% Hooper Holmes, Inc. 0.5 Cure (1.6%) Cure (3.7%) Streamline Health Solutions, Inc. $24.6 ######## Cure 0.5 NantHealth, Inc. NA Hooper Holmes, Inc. NA Historical Profitability Projected Profitability Internal Investment Historical Growth Projected Growth (LTM Adjusted EBITDA to LTM Revenue) (FY 2018E Adjusted EBITDA to Revenue) (LTM Capital Expenditures to LTM Revenue) (FY 2014 to FY 2016 Adjusted EBITDA) (FY 2016 to FY 2018E Adjusted EBITDA) Health Insurance Innovations, Inc. 17.1% Health Insurance Innovations, Inc. 17.7% Health Insurance Innovations, Inc. 0.1% Health Insurance Innovations, Inc. 93.1% Health Insurance Innovations, Inc. 38.7% Streamline Health Solutions, Inc. (2.5%) Streamline Health Solutions, Inc. 14.6% Streamline Health Solutions, Inc. 0.1% eHealth, Inc. 3.7% NantHealth, Inc. NMF Cure (3.8%) Cure 2.6% Hooper Holmes, Inc. 0.7% Castlight Health, Inc. NMF Castlight Health, Inc. NMF eHealth, Inc. (5.0%) Orion Health Group Limited (0.4%) Cure 0.8% Cure NMF Cure NMF Hooper Holmes, Inc. (15.1%) eHealth, Inc. (1.5%) Orion Health Group Limited 1.0% Hooper Holmes, Inc. NMF Hooper Holmes, Inc. NMF Castlight Health, Inc. (20.3%) Castlight Health, Inc. (3.4%) Castlight Health, Inc. 1.9% Orion Health Group Limited NMF Orion Health Group Limited NMF Orion Health Group Limited (20.5%) NantHealth, Inc. (10.0%) eHealth, Inc. 2.6% Streamline Health Solutions, Inc. NMF Streamline Health Solutions, Inc. NMF NantHealth, Inc. (93.6%) Hooper Holmes, Inc. NA NantHealth, Inc. 10.9% NantHealth, Inc. NA eHealth, Inc. NA Note: No company used for comparative purposes is identical to the Company. 1. Based on public trading prices of common stock. Adjusted EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization and Stock-based Compensation, adjusted for certain non-recurring items. E refers to Estimated. EV refers to Enterprise Value. FY refers to Fiscal Year. LTM refers to the most recently completed 12-month period for which financial information has been made public, other than for the Company, in which case LTM refers to Latest 12 Months. NA refers to not available. NMF refers to not meaningful figure. Source: Bloomberg, Capital IQ, public filings.
Observed Data Selected Companies (>$500m EV) (Informational) Size Leverage [1] Liquidity Historical Growth Projected Growth (LTM Revenue, millions) (Debt to EV as of 1/2/18) (Current Ratio as of Latest Filing) (FY 2014 to FY 2016 Revenue) (FY 2016 to FY 2018E Revenue) athenahealth, Inc. $1,179.3 HealthEquity, Inc. 0.0% HealthEquity, Inc. 13.0 HealthEquity, Inc. 42.5% HealthEquity, Inc. 25.1% Omnicell, Inc. $690.2 Care.com, Inc. 0.0% Inovalon Holdings, Inc. 5.6 Benefitfocus, Inc. 30.3% Vocera Communications, Inc. 21.1% Medidata Solutions, Inc. $528.8 Vocera Communications, Inc. 0.1% Care.com, Inc. 2.7 Omnicell, Inc. 25.3% Medidata Solutions, Inc. 17.6% HMS Holdings Corp. $498.3 athenahealth, Inc. 4.8% Vocera Communications, Inc. 1.9 Care.com, Inc. 20.9% athenahealth, Inc. 11.3% Inovalon Holdings, Inc. $430.8 Medidata Solutions, Inc. 7.1% athenahealth, Inc. 1.7 athenahealth, Inc. 20.0% Benefitfocus, Inc. 9.5% Benefitfocus, Inc. $252.6 Omnicell, Inc. 9.0% Omnicell, Inc. 1.5 Medidata Solutions, Inc. 17.6% Care.com, Inc. 8.5% HealthEquity, Inc. $215.9 Benefitfocus, Inc. 13.1% Medidata Solutions, Inc. 1.3 Vocera Communications, Inc. 15.7% Omnicell, Inc. 8.0% Care.com, Inc. $173.4 Inovalon Holdings, Inc. 13.3% Benefitfocus, Inc. 1.1 HMS Holdings Corp. 5.1% HMS Holdings Corp. 7.2% Vocera Communications, Inc. $153.1 HMS Holdings Corp. 14.7% HMS Holdings Corp. 0.9 Inovalon Holdings, Inc. 2.3% Inovalon Holdings, Inc. 6.8% Cure $78.0 Cure 0.5 Cure (1.6%) Cure (3.7%) Historical Profitability Projected Profitability Internal Investment Historical Growth Projected Growth (LTM Adjusted EBITDA to LTM Revenue) (FY 2018E Adjusted EBITDA to Revenue) (LTM Capital Expenditures to LTM Revenue) (FY 2014 to FY 2016 Adjusted EBITDA) (FY 2016 to FY 2018E Adjusted EBITDA) HealthEquity, Inc. 36.8% HealthEquity, Inc. 37.3% Care.com, Inc. 0.4% HealthEquity, Inc. 57.6% Vocera Communications, Inc. 113.9% HMS Holdings Corp. 24.7% Inovalon Holdings, Inc. 25.4% Cure 0.8% athenahealth, Inc. 28.2% Care.com, Inc. 55.2% Medidata Solutions, Inc. 24.0% athenahealth, Inc. 25.0% Omnicell, Inc. 1.9% Medidata Solutions, Inc. 19.9% HealthEquity, Inc. 28.8% athenahealth, Inc. 22.2% HMS Holdings Corp. 24.6% HealthEquity, Inc. 2.0% HMS Holdings Corp. 7.8% Omnicell, Inc. 21.8% Inovalon Holdings, Inc. 20.0% Medidata Solutions, Inc. 24.5% Vocera Communications, Inc. 2.1% Omnicell, Inc. 6.9% Medidata Solutions, Inc. 21.4% Care.com, Inc. 11.0% Omnicell, Inc. 17.3% Benefitfocus, Inc. 3.2% Inovalon Holdings, Inc. (18.9%) Inovalon Holdings, Inc. 21.3% Omnicell, Inc. 10.8% Care.com, Inc. 15.9% HMS Holdings Corp. 3.3% Benefitfocus, Inc. NMF athenahealth, Inc. 16.4% Benefitfocus, Inc. 5.5% Vocera Communications, Inc. 10.9% Inovalon Holdings, Inc. 6.0% Cure NMF HMS Holdings Corp. 8.6% Vocera Communications, Inc. 2.6% Benefitfocus, Inc. 9.5% athenahealth, Inc. 7.0% Care.com, Inc. NMF Cure NMF Cure (3.8%) Cure 2.6% Medidata Solutions, Inc. 7.6% Vocera Communications, Inc. NMF Benefitfocus, Inc. NMF Note: No company used for comparative purposes is identical to the Company. 1. Based on public trading prices of common stock. Adjusted EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization and Stock-based Compensation, adjusted for certain non-recurring items. E refers to Estimated. EV refers to Enterprise Value. FY refers to Fiscal Year. LTM refers to the most recently completed 12-month period for which financial information has been made public, other than for the Company, in which case LTM refers to Latest 12 Months. NMF refers to not meaningful figure. Source: Bloomberg, Capital IQ, public filings.
Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 Weighted Average Cost of Capital 18 Observed Data 22 Illustrative Selected Transactions 25 Certain Observations 27 4. Disclaimer 35
Selected Transactions Overview (Illustrative) (dollars in millions) Transaction Adjusted Transaction Value / EBITDA Announced Effective Target Acquiror Value [1] Revenue Revenue [2] Margin % [2] 8/11/17 8/11/17 RemitDATA Inc. eSolutions, Inc. NA N NA N NA A NA NA 3/13/17 4/18/17 Eliza Corporation [3] HMS Holdings Corp. $172.0 # $35.0 # 4.91x # NA NA 1/4/17 4/3/17 Jiff, Inc. [4] Castlight Health, Inc. $155.0 # $25.0 # 6.20x # NA NA 2/18/16 4/7/16 Truven Holding Corp. IBM Watson Health $3,578.6 # $610.7 # 5.86x # 24.5% 0. 2/22/16 4/4/16 Brightree LLC ResMed Corp. $800.0 # $113.2 # 7.07x # 37.3% 0. New Mountain Capital, LLC; New 12/18/15 12/18/15 Aeneas Buyer Corp. $225.0 # NA N NA A NA NA Mountain Partners IV, L.P. 10/30/15 1/4/16 HealthFusion Holdings, Inc. [5] Quality Systems, Inc. $173.1 # $25.0 # 6.93x # 22.0% 0. 10/29/15 1/5/16 Aesynt Incorporated Omnicell International, Inc. $275.0 # $182.0 # 1.51x # 11.0% 0. 8/24/15 9/1/15 Avalere Health LLC Inovalon Holdings, Inc. $131.2 # $49.5 # 2.65x # NMF NMF 7/6/15 8/12/15 Altegra Health, Inc. MediFAX-EDI Holding Company, Inc. $910.0 # $211.8 # 4.30x # 27.4% 0. Emdeon Inc. (nka:Change 11/19/14 11/25/14 Change Healthcare Corporation $185.0 # NA N NA A NA NA Healthcare Holdings, Inc.) 11/3/14 11/25/14 bswift, LLC Aetna Inc. $400.0 # NA N NA A NA NA 11/22/13 11/22/13 Liazon Corporation Towers Watson & Co. $215.0 # NA N NA A NA NA Low $131.2 $25.0 1.51x 11.0% High $3,578.6 $610.7 7.07x 37.3% Median $220.0 $81.4 5.39x 24.5% Mean $601.7 $156.5 4.93x 24.4% Note: No company is identical to the Company, and no transaction is identical to the Transaction. 1. Transaction Value refers to the implied enterprise value of target company based on announced transaction equity price and other public information available at the time of announcement. 2. Based on reported metric for most recent LTM period prior to announcement of transaction. 3. Eliza Corporation revenue represents estimated 2017 figure, per HMS Holdings Corp. press release dated April 18, 2017. 4. Jiff, Inc. revenue represents FY 2017 revenue earnout target of $25.0 million, per Castlight Health, Inc. Form 8-K filed on January 4, 2017. 5. HealthFusion Holdings, Inc. transaction value is on a pre-earnout basis, and revenue is representative of FY 2014, per HealthFusion Holdings, Inc. Form 8-K dated March 11, 2016. Adjusted EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization, adjusted for certain non-recurring items. LTM refers to most recently completed 12-month period for which financial information has been made public. NA refers to not available. NMF refers to not meaningful figure. Source: Capital IQ, public filings.
Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 Weighted Average Cost of Capital 18 Observed Data 22 Illustrative Selected Transactions 25 Certain Observations 27 4. Disclaimer 35
Capital Structure Projected Debt and Preferred Stock Detail as of December 31, 2017 ¹ (dollars in millions) Amount Interest / Dividend Outstanding Rate Notes Lender / Holder Maturity Revolving Credit Facility $0.0 12.25% 9.75% cash plus 2.50% PIK Wells Fargo 6/8/2021 Senior Term Loan 32.6 10.30% 7.80% cash plus 2.50% PIK Wells Fargo 6/8/2021 Total Debt $32.6 Series A Preferred Stock ² $58.9 7.50% PIK â´ FP96.2%, Chrysalis3.8% Redeemable 2023 Series B Preferred Stock ³ 19.7 15.00% PIK â´ FP94.3%, Chrysalis5.7% Redeemable 2023 Total Preferred Stock $78.6 Total Debt and Preferred Stock $111.2 1. Per Company management. 2. Represents liquidation preference of $52.0 million plus projected accrued dividends as of 12/31/17 of $6.9 million, per Company management. 3. Represents liquidation preference of $17.5 million plus projected accrued dividends as of 12/31/17 of $2.2 million, per Company management. 4. The Company may elect to pay in cash following the second anniversary of issuance. Source: Company management, public filings.
Company Ownership Profile Common Equity (Estimated as of 12/31/2017) As-Converted (Estimated as of 12/31/2017) 1) 57.3%Francisco Partners Management LLC 1) 17.9%Great Point Partners, LLC 2) 17.4%Chrysalis Ventures 2) 10.7%Chrysalis Ventures II, L.P. 3) 15.7%Francisco Partners Management LLC 4) 5.9%Rahim, Ahsan 3) 8.6%Great Point Partners I, LP 5) 1.3%Vanguard 41.8%Other 23.4%Other Series A Preferred Stock Series B Preferred Stock Chrysalis Chrysalis Ventures II, L.P. Ventures II, L.P. 3.8% 5.7% Francisco Francisco Partners Partners Management Management LLC LLC 96.2% 94.3% Source: Company management, public filings, Capital IQ.
Summary of Historical Stock Price Performance A Shelf Registration Announced 1H 2015 2H 2015 B Company reports positive Series A Preferred Stock Issuance Announced $16.00 earnings post-IPO Company announces State Exchange business winding down C Series B Preferred Stock Issuance Announced Management revises FY 2015 $14.00 guidance downward Company announces intention to delist from D Company starts experiencing liquidity NASDAQGM constraints by end of 2015 $12.00 2016 Company experiences weakness in under-65 business due to softness in demand and Price $10.00 inability to execute on sales strategy 2017 Management revises FY 2016 revenue and Company management tempers adjusted EBITDA guidance downward mid-year expectations for 2017 and Stock $8.00 from $100mm-$115mm to $85mm-$88mm (revenue) and from $10.5mm-$12mm to $0mm- implements significant cost reduction initiatives (run-rate $2mm (adjusted EBITDA); actual reported 2016 savings of ~$15mm) revenue and adjusted EBITDA was $81.9mm Closing $6.00 and $(13.6)mm, respectively Commercial segment experiences continued macro headwinds (IFPs), Company faces significant liquidity shortfall by while Medicare business benefits end of 2016 from macro tailwinds $4.00 A B $2.00 C D $0.00 Source: Capital IQ, Company management, Wall Street Research.
Recent Stock Trading History Volume Weighted Average Prices High: $0.31, $4.00 $0.35 10/27/2017 A Since Delisting Prior to Delisting $0.30 11/20/2017 B Last 30-Days All Three-Months Six-Months Nine-Months One-Year $0.25 $3.50 $0.20 $0.22 $0.72 $0.72 $0.96 $1.09 $0.20 $3.00 $0.15 E $0.10 Low: $0.12, $2.50 C $0.05 12/6/2017 F $0.00 $2.00 $1.50 $1.00 G D Closing Stock Price $0.50 (1/2/18): $0.19 $0.00 Dec-15 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Historical Stock Price Current Stock Price (1/2/18) Selected Events Event Date Comment Event Date Comment Company files $50 million shelf registration with no disclosed plan Company reports Q2 2016 earnings lowers FY 2016 revenue A 1/8/16 E 8/8/16 guidance by ~$15-20 million and adjusted EBITDA guidance by for use of proceeds ~$10 million Company reports FY 2015 earnings and announces $52 million Company reports FY 2016 earnings adjusted EBITDA decreased B 3/14/16 Series A Preferred Stock investment from FP and Chrysalis by ~$22 million compared to FY 2015; FY 2017 guidance of ~10% Ventures F 3/14/17 decline in revenue and negative adjusted EBITDA; Company also Company reports Q1 2016 earnings revenue and adjusted announces $17.5 million Series B Preferred Stock investment led C 5/9/16 EBITDA both decreased year-over-year and were below Wall by FP Street analyst consensus estimates Company announces acquisition of ConnectedHealth, LLC, a Company announces intention to voluntarily delist from Nasdaq D 6/7/16 G 10/20/17 leading benefits technology company Global Market exchange and list on OTCQX Market Source: Capital IQ, Company management, Wall Street Research.
Relative Stock Price Performance Since Cure IPO 180.0% 12/12/20141/2/2018 Cure (97.9%) S&P 500 34.6% 160.0% Selected Companies <$500m EV¹ (8.8%) Selected Companies >$500m EV² (Informational) 3.5% 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 12/12/2014 4/12/2015 8/12/2015 12/12/2015 4/12/2016 8/12/2016 12/12/2016 4/12/2017 8/12/2017 12/12/2017 1. Includes Castlight Health, Inc.; eHealth, Inc.; Health Insurance Innovations, Inc.; Hooper Holmes, Inc.; NantHealth, Inc.; Orion Health Group Limited and Streamline Health Solutions, Inc. Index constructed using free-float adjusted market-capitalization weighting. 2. Includes athenahealth, Inc.; Benefitfocus, Inc.; Care.com, Inc.; HealthEquity, Inc.; HMS Holdings Corp.; Inovalon Holdings, Inc.; Medidata Solutions, Inc.; Omnicell, Inc. and Vocera Communications, Inc. Index constructed using free-float adjusted market-capitalization weighting. EV refers to Enterprise Value. Source: Capital IQ.
Relative Stock Price Performance Last 12 Months 300.0% 1/2/20171/2/2018 Cure (88.9%) S&P 500 19.4% Selected Companies <$500m EV¹ 55.7% 250.0% Selected Companies >$500m EV² (Informational) 25.6% 200.0% 150.0% 100.0% 50.0% 0.0% 1/2/2017 2/2/2017 3/2/2017 4/2/2017 5/2/2017 6/2/2017 7/2/2017 8/2/2017 9/2/2017 10/2/2017 11/2/2017 12/2/2017 1/2/2018 1. Includes Castlight Health, Inc.; eHealth, Inc.; Health Insurance Innovations, Inc.; Hooper Holmes, Inc.; NantHealth, Inc.; Orion Health Group Limited and Streamline Health Solutions, Inc. Index constructed using free-float adjusted market-capitalization weighting. 2. Includes athenahealth, Inc.; Benefitfocus, Inc.; Care.com, Inc.; HealthEquity, Inc.; HMS Holdings Corp.; Inovalon Holdings, Inc.; Medidata Solutions, Inc.; Omnicell, Inc. and Vocera Communications, Inc. Index constructed using free-float adjusted market-capitalization weighting. EV refers to Enterprise Value. Source: Capital IQ.
Float and Trading Data verage Daily Average Daily Average Daily Average Daily Public Float Basic Shares Public Float / Volume / Volume / Selected Company Volume [1] Value [2] Estimate Outstanding Shares Outstanding Public Float Shares Out <$500m EV Castlight Health, Inc. 0.33 $1.30 60.9 133.7 45.5% 0 0.5% 0 0.2% 0 eHealth, Inc. 0.15 3.32 13.0 18.6 69.9% 1 1.1% 0 0.8% 0 Health Insurance Innovations, Inc. 0.70 15.71 7.8 12.6 62.0% 1 9.0% 0 5.6% 0 Hooper Holmes, Inc. 0.02 0.01 22.7 26.8 84.7% 1 0.1% 0 0.1% 0 NantHealth, Inc. 0.16 0.57 18.7 107.0 17.5% 0 0.9% 0 0.2% 0 Orion Health Group Limited 0.04 0.03 64.6 196.5 32.9% 0 0.1% 0 0.0% 0 Streamline Health Solutions, Inc. 0.28 0.43 9.8 20.0 48.8% 0 2.9% 0 1.4% 0 Low 17.5% 0.1% 0.0% High 84.7% 9.0% 5.6% Median 48.8% 0.9% 0.2% Mean 51.6% 2.1% 1.2% >$500m EV (Informational) athenahealth, Inc. 0.50 $64.22 39.5 40.0 98.6% # 1.3% 0 1.3% # Benefitfocus, Inc. 0.18 5.05 23.0 31.3 73.5% # 0.8% 0 0.6% # Care.com, Inc. 0.33 5.71 19.2 30.1 63.7% # 1.7% 0 1.1% # HealthEquity, Inc. 0.48 23.72 52.4 60.7 86.3% # 0.9% 0 0.8% # HMS Holdings Corp. 0.74 12.81 82.5 84.1 98.1% # 0.9% 0 0.9% # Inovalon Holdings, Inc. 0.48 7.65 61.3 145.9 42.0% # 0.8% 0 0.3% # Medidata Solutions, Inc. 0.53 37.55 56.3 56.7 99.4% # 0.9% 0 0.9% # Omnicell, Inc. 0.24 11.87 36.8 37.9 97.1% # 0.6% 0 0.6% # Vocera Communications, Inc. 0.17 4.73 27.0 29.2 92.4% # 0.6% 0 0.6% # Low 42.0% 0.6% 0.3% High 99.4% 1.7% 1.3% Median 92.4% 0.9% 0.8% Mean 83.5% 1.0% 0.8% All Selected Companies Low 17.5% 0.1% 0.0% High 99.4% 9.0% 5.6% Median 71.7% 0.9% 0.7% Mean 69.5% 1.4% 1.0% Cure [3] 0.14 $0.04 9.9 23.0 43.1% 1.4% 0.6% Note: No company used for comparative purposes is identical to the Company. 1. Shares in millions based on 90-day average trading activity as of January 2, 2018. 2. Dollars in millions based on 90-day average trading activity as of January 2, 2018. 3. Public float for Cure represents total common shares outstanding of 23.0 million, less the number of shares held by Great Point Partners (4.1 million), Chrysalis Ventures (4.0 million), Francisco Partners (3.6 million) and Ahsan Rahim (1.4 million). EV refers to Enterprise Value. Source: Bloomberg, Capital IQ.
Page 1. Executive Summary 3 2. Financial Analyses 9 3. Appendices (Informational) 17 4. Disclaimer 35
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In addition, Houlihan Lokey has relied upon and assumed, without independent verification, that there has been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company or any other participant in the Transaction since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to, discussed with or reviewed by Houlihan Lokey that would be material to its analyses, and that the final forms of any draft documents reviewed by Houlihan Lokey will not differ in any material respect from such draft documents. The materials are not an offer to sell or a solicitation of an indication of interest to purchase any security, option, commodity, future, loan or currency. The materials do not constitute a commitment by Houlihan Lokey or any of its affiliates to underwrite, subscribe for or place any securities, to extend or arrange credit, or to provide any other services. In the ordinary course of business, certain of Houlihan Lokeys affiliates and employees, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, the Company, any Transaction counterparty, any other Transaction participant, any other financially interested party with respect to any transaction, other entities or parties that are mentioned in the materials, or any of the foregoing entities or parties respective affiliates, subsidiaries, investment funds, portfolio companies and representatives (collectively, the Interested Parties), or any currency or commodity that may be involved in the Transaction. Houlihan Lokey provides mergers and acquisitions, restructuring and other advisory and consulting services to clients, which may have in the past included, or may currently or in the future include, one or more Interested Parties, for which services Houlihan Lokey has received, and may receive, compensation. Although Houlihan Lokey in the course of such activities and relationships or otherwise may have acquired, or may in the future acquire, information about one or more Interested Parties or the Transaction, or that otherwise may be of interest to the Company, Houlihan Lokey shall have no obligation to, and may not be contractually permitted to, disclose such information, or the fact that Houlihan Lokey is in possession of such information, to the Company or to use such information on the Companys behalf. Houlihan Lokeys personnel may make statements or provide advice that is contrary to information contained in the materials.
Exhibit (c)(3)
Project Cure D I S C U S S I O N M AT E R I A L S F O R T H E S P E C I A L C O M M I T T E E D E C E M B E R 1 5 , 2 0 1 7 | C O N F I D E N T I A L | P R E L I M I N A R Y | S U B J E C T T O F U R T H E R R E V I E W
Table of Contents Page 1. Overview 3 2. Preliminary Financial Analyses 8 3. Appendices (Informational) 18 Weighted Average Cost of Capital 19 Illustrative Selected Transactions 23 Certain Observations 25 4. Disclaimer 33
Page 1. Overview 3 2. Preliminary Financial Analyses 8 3. Appendices (Informational) 18 4. Disclaimer 33
Discussion Topics Projected liquidity constraints and financial covenant breach Likelihood of bankruptcy absent capital raise or change in control transaction Company management long-term going concern financial projections and bankruptcy sensitivities Preliminary financial analyses Review of Company management near-term cash flow forecasts and bankruptcy sensitivities Preliminary illustrative going concern analyses Selected items subject to further review Near-term cash flow forecast and bankruptcy sensitivities prepared by Company management Limitations on use of NOLs Stock-based compensation
Near-Term Liquidity Constraints and Financial Covenant Breach Management currently projects that the Company likely will not have sufficient available cash to fund operations beyond March 2018, even assuming an expected 1Q 2018 cash payment of $4.1 million related to the Polaris project (Statement of Work has been signed) While the Company may be able to obtain additional short-term funding of ~$1.5 million, including through potential 4Q 2017 and 1Q 2018 pipeline billings, management projects that, absent a substantial capital infusion, the Company will be in breach of the minimum liquidity covenant under its existing senior credit facility with Wells Fargo Under its existing senior credit facility, the Company is subject to a minimum liquidity covenant of $1.5 million through March 31, 2018 and $15 million starting April 1, 20181 Management is uncertain as to Wells Fargos willingness to amend the existing senior credit facility absent a substantial equity capital infusion Francisco Partners (FP) has declined a request to submit a financing proposal in addition to its November 13, 2017 proposal to acquire the shares of Company common stock not owned by FP Company Management Near-Term Weekly Cash Flow Projections2 (dollars in thousands) 12/8 12/15 12/22 12/29 1/5 1/12 1/19 1/26 2/2 2/9 2/16 2/23 3/2 3/9 3/16 3/23 3/30 Begin Cash $10,642 $10,348 $ 8,989 $ 9,197 $ 7,313 $ 6,249 $ 4,350 $ 4,754 $ 4,715 $ 2,046 $ 4,376 $ 3,283 $ 2,813 $ 866 $ 420 $ (316) $ (371) AR Collection 727 759 1,128 861 985 279 1,414 243 431 2,815 1,695 40 313 40 1,826 455 55 AP Payment (735) (270) (735) (126) (1,706) (390) (735) (248) (990) (300) (815) (290) (240) (300) (815) (290) (240) Payroll/Benefits (170) (1,686) (185) (1,809) (170) (1,772) (275) (35) (1,937) (170) (1,972) (220) (1,847) (170) (1,747) (220) (1,847) Rent (16) (173) (16) (173) (16) (173) (16) (173) Debt ServicePrincipal (1,300) Debt ServiceInterest (660) (660) Other (125) (149) -Net Operating Change (194) (1,322) 208 (1,883) (1,064) (1,899) 404 (40) (2,668) 2,329 (1,092) (470) (1,947) (446) (736) (55) (4,165) Total Transaction Costs (100) (38) Ending Cash $ 10,348 $ 8,989 $ 9,197 $ 7,313 $ 6,249 $ 4,350 $ 4,754 $ 4,715 $ 2,046 $ 4,376 $ 3,283 $ 2,813 $ 866 $ 420 $ (316) $ (371) $ (4,536) Additional Collections from Polaris Project 4,100 Minimum liquidity $ (436) covenant of $15 million starting on 4/1/18 1. Liquidity is defined as the sum of Availability and Qualified Cash (Availability refers to amount available under revolving loans; Qualified Cash refers to amount of unrestricted cash and cash equivalents). 2. Excludes transaction costs that have not yet been incurred, as well as ~$1.5 million of cash flows related to potential pipeline billings in 4Q 2017 and 1Q 2018 and other adjustments. Source: Company management.
Company Management Projections Bankruptcy Sensitivities Company management believes that the most likely scenario for the Company absent a substantial capital raise or change in control transaction involves a bankruptcy process Company management is in the process of developing sensitivities (the Bankruptcy Sensitivities) to managements long-term going concern financial projections (described below) that would account for the following projected dynamics in a bankruptcy process: Limited to no acquisition of new customers Limited retention of existing customers (~10% to 50% attrition rate range) Some ability to manage costs to offset top-line declines (~45% variable costs with some ability to right-size fixed costs) Potential for eventual resumption of top-line growth in event of emergence The Bankruptcy Sensitivities are expected to indicate substantially less favorable financial results than the long-term going concern financial projections across all scenarios Long-Term Going Concern Financial Projections Managements long-term going concern financial projections assume the Company is able to raise sufficient external financing (amount to be determined) required to continue to operate as a going concern Absent sufficient financing, Company management believes that the Company faces significant operating challenges that are not reflected in managements preliminary long-term going concern financial projections, including that (i) acquisition of new customers will be unlikely and (ii) retention of existing customers will be more difficult Financial projections methodology: Detailed 2018 budget bottoms up top-line build, detailed expense build High-level estimates for 2019 2023 based on mid- to high-teen growth rates for the Medicare business (over 65 segment) and, after an initial decline in the other business segment (under 65 segment), mid-single digit to low-teen growth rates for the rest of the business Source: Company management.
Certain Business and Financial Matters Support for Financial Analyses Review of near-term cash flow forecast and Bankruptcy Sensitivities Given uncertainty regarding the particulars of a bankruptcy process and associated operating challenges, we also have reflected an illustrative going concern scenario using the long-term going concern financial projections (shown on the following pages) Certain Business Considerations Revenue contributions of Over 65 and Under 65 platforms Macro factors driving growth in Medicare platform (i.e., demographics, demand for drug comparison tool) Macro dynamics driving softer demand and increased churn in Under 65 market (i.e., health plan carriers withdrawing from the Individual and Family Plans (IFPs) market) Weaker / slower than expected adoption to date of customer-centric decision-making model Changes to go-to-market strategy Benefits of scale in large payor marketplace Certain Items Subject to Further Review Near-term cash flow forecast and Bankruptcy Sensitivities Utilization of NOLs The Company had approximately $121 million of federal NOLs and $78 million of state NOLs as of 12/31/2016 and is projected to generate additional losses in 2017 Given a number of recent stock issuances (including the issuances of convertible preferred stock in 2016 and 2017), Section 382 limitations may constrain utilization of NOLs Management and the Companys tax advisors are continuing to review and quantify potential Section 382 limitations Preliminary discounted cash flow analysis based on 0% tax rate for conservatism as Company management has indicated that the Company is projected to be a taxpayer (but will be able to utilize a portion of its NOLs to offset taxable income) Stock-based compensation (or equivalents) Source: Company management.
Page 1. Overview 3 2. Preliminary Financial Analyses 8 3. Appendices (Informational) 18 4. Disclaimer 33
Preliminary Financial Analyses Summary Illustrative Going Concern Scenario Implied Per Share Reference Range $1.00 $0.51 $0.42 $0.44 $0.50 $0.39 Cure Closing Stock Price: $0.13 [1] $0.00 ($0.50) ($1.00) ($1.02) ($1.04) ($1.10) ($1.12) ($1.50) Preliminary Preliminary Preliminary Preliminary Selected Companies Analysis Selected Companies Analysis Selected Companies Analysis Discounted Cash Flow Analysis LTM Ended 9/30/17 GAAP Revenue FY 2017E GAAP Revenue FY 2018E GAAP Revenue Discount Rate: 1.00x1.50x 1.00x1.50x 1.00x1.50x 18.0%22.0% Terminal Multiple: 1.25x1.75x Notes: Based on 23.0 million outstanding shares and 2.1 million outstanding restricted stock units projected as of December 31, 2017, per Company management. Assumes projected Total Debt of $32.6 million as of 12/31/2017, liquidation preference of Series A Preferred Stock of $52.0 million and projected accrued dividends as of 12/31/17 of $6.9 million, and liquidation preference of Series B Preferred Stock of $17.5 million and projected accrued dividends as of 12/31/17 of $2.2 million. Negative equity numbers shown to reflect magnitude of out-of-the-money equity; however, equity cannot be below $0.00 (absent outside instruments, such as guarantees of debt). 1. Based on Cures closing stock price on December 13, 2017. E refers to Estimated. FY refers to Fiscal Year. LTM refers to Latest 12 Months.
Preliminary Financial Analyses Summary Illustrative Going Concern Scenario (cont.) (shares outstanding and dollars in millions, except per share values) Preliminary Preliminary Preliminary Preliminary Selected Companies Selected Companies Selected Companies Discounted Cash Flow Analysis Analysis Analysis Analysis LTM Ended 9/30/17 FY 2017E FY 2018E Terminal Multiple GAAP Revenue GAAP Revenue GAAP Revenue Discount Rate Range: 18.0% 22.0% Corresponding Base Amount [1] $78.0 $76.5 $75.9 Terminal Multiple Range: Selected Multiples Range 1.00x 1.50x 1.00x 1.50x 1.00x 1.50x 1.25x 1.75x Implied Enterprise Value Reference Range $78.0 $117.0 $76.5 $114.7 $75.9 $113.9 $78.5 $115.3 Projected Cash and Cash Equivalents as of 12/31/17 [2] $7.3 $7.3 $7.3 $7.3 $7.3 $7.3 $7.3 $7.3 Implied Total Enterprise Value Reference Range $85.3 $124.3 $83.7 $122.0 $83.2 $121.2 $85.8 $122.6 Severance Run-Off Payment [3] ($0.3) ($0.3) ($0.3) ($0.3) ($0.3) ($0.3) ($0.3) ($0.3) Projected Total Debt as of 12/31/17 [4] ($32.6) ($32.6) ($32.6) ($32.6) ($32.6) ($32.6) ($32.6) ($32.6) Projected Preferred Stock as of 12/31/17 [5] ($78.6) ($78.6) ($78.6) ($78.6) ($78.6) ($78.6) ($78.6) ($78.6) Implied Total Equity Value Reference Range [6] ($26.2) $12.8 ($27.7) $10.5 ($28.2) $9.7 ($25.7) $11.1 Projected Shares Outstanding as of 12/31/17 [7] 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2 Implied Per Share Reference Range [6] ($1.04) $0.51 ($1.10) $0.42 ($1.12) $0.39 ($1.02) $0.44 Note: The Companys NOLs have been taken into account in the preliminary discounted cash flow analysis under assumption that no taxes are paid throughout the projection period. 1. 2017 base amount includes $1.0 million of non-recurring revenue related to the Polaris project, and 2018 base amount includes $10.0 million of non-recurring revenue related to the Polaris project, per Company management. 2. Per Company management. 3. Represents projected severance run-off payments in FY2018 in connection with recently implemented cost reduction initiatives, per Company management. 4. Projected Total Debt has been accrued at a 2.5% PIK rate from the 9/30/17 debt balance, per Company management. 5. Represents liquidation preference of Series A Preferred Stock of $52.0 million and projected accrued dividends as of 12/31/17 of $6.9 million, as well as liquidation preference of Series B Preferred Stock of $17.5 million and projected accrued dividends as of 12/31/17 of $2.2 million, per Company management. 6. Negative equity numbers shown to reflect magnitude of out-of-the-money equity; however, equity cannot be below $0.0 (absent outside instruments, such as guarantees of debt). 7. Based on 23.0 million outstanding shares and 2.1 million outstanding restricted stock units (RSUs) projected as of December 31, 2017, per Company management. Does not include performance-based RSUs or out-of-the-money options. E refers to Estimated. FY refers to Fiscal Year. LTM refers to Latest 12 Months. Source: Cure public filings, Company management.
Representative Levels (GAAP Basis) (dollars in millions) Projected Fiscal Year Ending Fiscal Year Ended December 31, LTM Ended December 31, CAGR 2012 2013 2014 2015 2016 9/30/17 2017E 2018E 2016 to 2018E Revenue [1] $29.6 $58.3 $84.6 $95.8 $81.9 $78.0 $76.5 $75.9 (3.7%) Growth % 96.9% 45.0% 13.3% (14.6%) (6.6%) (0.7%) Less: Cost of Revenue 22.9 50.2 52.4 50.7 56.9 49.8 46.5 43.6 Gross Profit $6.7 $8.2 $32.1 $45.2 $25.0 $28.2 $30.0 $32.3 Margin % 22.8% 14.0% 38.0% 47.1% 30.5% 36.2% 39.2% 42.6% Less: Research & Development 7.4 11.8 18.1 22.7 22.3 17.7 17.1 14.8 Less: Sales & Marketing 6.6 6.8 7.7 9.5 10.4 9.2 8.9 9.3 Less: General & Administrative 7.5 12.2 10.6 14.4 13.2 12.6 12.1 10.3 Add: Depreciation & Amortization 1.0 4.7 5.1 5.0 4.6 4.5 4.4 4.0 Add: Total Adjustments [2] 0.7 1.2 0.1 4.7 4.5 3.8 2.3 0.0 Adjusted EBITDA ($13.1) ($16.7) $0.9 $8.3 ($11.8) ($3.0) ($1.4) $1.9 NMF Margin % (44.1%) (28.6%) 1.1% 8.6% (14.4%) (3.8%) (1.8%) 2.6% Note: GAAP projections only prepared for 2018. Note: Historical financials shown above are not pro forma for DRX and ConnectedHealth acquisitions. 1. 2017 base amount includes $1.0 million of non-recurring revenue related to the Polaris project, and 2018 base amount includes $10.0 million of non-recurring revenue related to the Polaris project, per Company management. 2. Total Adjustments: Stock-Based Compensation [3] $0.7 $0.6 $1.4 $4.7 $2.7 $2.2 $2.3 $0.0 Change in Fair Value of Contingent Consideration 0.0 0.0 (1.0) 0.0 0.0 0.0 0.0 0.0 DRX Acquisition Fees 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 Severance Costs 0.0 0.0 0.0 0.0 1.6 1.6 0.0 0.0 ConnectedHealth Acquisition Fees 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 Other 0.0 0.0 (0.4) 0.0 0.0 0.0 0.0 0.0 Total Adjustments $0.7 $1.2 $0.1 $4.7 $4.5 $3.8 $2.3 $0.0 3. Expenses in 2018 exclude stock-based compensation, so no further adjustment is necessary. Adjusted EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization and Stock-Based Compensation, adjusted for certain non-recurring items. CAGR refers to Compound Annual Growth Rate. E refers to Estimated. LTM refers to Latest 12 Months. Source: Cure public filings, Company management.
Representative Levels (Cash Basis) (dollars in millions) Fiscal Year Ended December 31, Projected Fiscal Year Ending December 31, CAGR 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2016 to 2023E Core Billings $70.5 $74.7 $69.7 $70.0 $71.3 $76.3 $83.9 $94.4 $106.2 $122.1 8.3% Core Billings Growth % 5.9% (6.7%) 0.5% 1.9% 7.0% 10.0% 12.5% 12.5% 15.0% Add: Polaris Project [1] 1.0 10.0 2.0 Total Billings $70.5 $74.7 $69.7 $71.0 $81.3 $78.3 $83.9 $94.4 $106.2 $122.1 8.3% Growth % (29.7%) 5.9% (6.7%) 1.9% 14.5% (3.7%) 7.2% 12.5% 12.5% 15.0% Less: Cash Expenses $87.0 $87.5 $94.1 $78.5 $74.3 $70.5 $73.3 $78.8 $85.1 $93.6 Cash EBITDA [2] ($16.5) ($12.9) ($24.5) ($7.5) $7.0 $7.8 $10.6 $15.6 $21.1 $28.5 NMF Margin % (23.4%) (17.2%) (35.1%) (10.6%) 8.6% 10.0% 12.6% 16.5% 19.9% 23.3% Growth % NMF NMF NMF NMF 11.3% 36.1% 47.1% 35.2% 35.2% Note: Historical financials shown above are not pro forma for DRX and ConnectedHealth acquisitions. 1. Represents special one-time project with UnitedHealth. 2. Does not reflect adjustments for non-recurring items. CAGR refers to Compound Annual Growth Rate. E refers to Estimated. EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization, and is shown above on a cash only basis (does not reflect deferred revenue or deferred costs). NMF refers to not meaningful figure. Source: Cure public filings, Company management.
Segment Details (GAAP Basis) Company management has indicated that the Enterprise / State segment is in the process of winding down and, as such, revenue and gross profit contributions from that segment after 2017 are expected to be near zero. Company management has indicated that the Private Exchange segment includes sales related to the Companys Under 65 platform (i.e., small group and IFPs), as well as sales related to its Over 65 and DrugCompare platforms (i.e., Medicare). (dollars in millions) Revenue by Segment ($) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial $28.3 $33.0 $40.4 $55.5 $49.1 $41.0 Enterprise / State 0.1 3.2 21.6 13.4 3.5 2.9 Medicare 0.0 15.9 16.2 18.0 18.6 21.7 Private Exchange 1.2 6.2 6.4 9.0 10.8 12.4 Total $29.6 $58.3 $84.6 $95.8 $81.9 $78.0 Revenue by Segment (%) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial 95.7% 56.6% 47.7% 57.9% 59.9% 52.5% Enterprise / State 0.2% 5.4% 25.6% 14.0% 4.2% 3.7% Medicare 0.0% 27.3% 19.1% 18.8% 22.7% 27.8% Private Exchange 4.1% 10.6% 7.6% 9.4% 13.2% 15.9% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Gross Profit by Segment ($) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial $7.2 ($0.7) $10.3 $23.7 $11.9 $12.5 Enterprise / State (0.8) (1.1) 11.0 6.3 1.3 1.9 Medicare 0.0 7.8 9.5 10.7 11.5 14.3 Private Exchange 0.3 2.2 1.3 4.5 0.3 (0.5) Total $6.7 $8.2 $32.1 $45.2 $25.0 $28.2 Gross Margin by Segment (%) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial 25.5% (2.3%) 25.6% 42.7% 24.3% 30.6% Enterprise / State NMF (35.3%) 51.0% 47.1% 38.4% 64.7% Medicare NA 49.2% 58.4% 59.3% 61.7% 65.8% Private Exchange 23.2% 35.3% 20.9% 50.0% 2.9% (3.8%) Total 22.8% 14.0% 38.0% 47.1% 30.5% 36.2% Gross Profit Contribution (%) 2012 2013 2014 2015 2016 LTM 9/30/2017 Enterprise / Commercial 107.4% (9.2%) 32.1% 52.5% 47.6% 44.4% Enterprise / State (11.6%) (13.7%) 34.3% 13.9% 5.3% 6.7% Medicare 0.0% 96.1% 29.4% 23.6% 45.8% 50.6% Private Exchange 4.2% 26.8% 4.2% 10.0% 1.2% (1.7%) Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Note: Segment financials shown above are based on the Companys reportable segments in SEC filings. LTM refers to Latest 12 Months. NA refers to not available. NMF refers to not meaningful figure. Source: Cure public filings, Company management.
Preliminary Selected Companies Analysis Size and scale, among other considerations, are factors contributing to observed multiples for the selected companies. As such, the selected companies below with enterprise values above $500 million are shown for informational purposes only. (dollars in millions, except per share values) Share % of Equity Market Enterprise Enterprise Value [1] to Revenue . Selected Company Price [2] 52-Week High Value [2][3] Value [1][2][3] LTM FY 2017E [4] FY 2018E [5] <$500m EV Castlight Health, Inc. $3.80 69.1% ### $519.2 $437.5 3.52x ## 3.34x ## 2.66x eHealth, Inc. 17.83 62.4% ### 332.6 281.2 1.59x ## 1.65x ## 1.48x Health Insurance Innovations, Inc. 25.05 67.0% ### 344.3 323.6 1.39x ## 1.34x ## 1.18x Hooper Holmes, Inc. 0.74 67.3% ### 19.8 38.0 0.95x ## NA A NA NantHealth, Inc. 3.05 25.5% ### 330.4 451.2 4.41x ## 4.77x ## 3.37x Orion Health Group Limited 0.62 28.9% ### 121.6 115.7 0.94x ## 0.92x ## 0.82x Streamline Health Solutions, Inc. 1.67 59.2% ### 33.4 45.0 1.83x ## 1.77x ## 1.64x Low 0.94x 0.92x 0.82x High 4.41x 4.77x 3.37x Median 1.59x 1.71x 1.56x Mean 2.09x 2.30x 1.86x >$500m EV (Informational) athenahealth, Inc. $132.22 83.3% ### $5,396.9 $5,550.6 4.71x ## 4.58x ## 4.15x Benefitfocus, Inc. 26.50 71.4% ### 842.1 907.3 3.59x ## 3.54x ## 3.24x Care.com, Inc. 17.92 85.8% ### 672.1 575.6 3.32x ## 3.31x ## 3.04x HealthEquity, Inc. 44.54 80.5% ### 2,760.5 2,535.4 11.74x ## 11.15x ## 9.09x HMS Holdings Corp. 16.56 79.2% ### 1,422.3 1,582.9 3.18x ## 3.11x ## 2.81x Inovalon Holdings, Inc. 14.85 83.4% ### 2,173.2 1,891.6 4.39x ## 4.18x ## 3.88x Medidata Solutions, Inc. 66.82 77.8% ### 4,408.1 4,010.3 7.58x ## 7.36x ## 6.26x Omnicell, Inc. 51.15 92.3% ### 2,005.5 2,190.3 3.17x ## 3.03x ## 2.71x Vocera Communications, Inc. 27.87 86.5% ### 834.1 767.4 5.01x ## 4.77x ## 4.09x Low 3.17x 3.03x 2.71x High 11.74x 11.15x 9.09x Median 4.39x 4.18x 3.88x Mean 5.19x 5.00x 4.36x Cure $0.13 5.3% $3.3 $101.8 1.30x NA NA Note: No company used for comparative purposes is identical to the Company. 1. Enterprise Value equals equity market value + debt outstanding + preferred stock + minority interests cash and cash equivalents. 2. Based on closing prices as of 12/13/17. 3. Based on reported fully-diluted shares. 4. FY 2017E refers to the fiscal year ending December 31, 2017 for all selected companies, except HealthEquity, Inc. and Streamline Health Solutions, Inc., for which it refers to the fiscal year ending January 31, 2018, and Orion Health Group Limited, for which it refers to the fiscal year ending March 31, 2018. 5. FY 2018E refers to the fiscal year ending December 31, 2018 for all selected companies, except HealthEquity, Inc. and Streamline Health Solutions, Inc., for which it refers to the fiscal year ending January 31, 2019, and Orion Health Group Limited, for which it refers to the fiscal year ending March 31, 2019. E refers to Estimated. EV refers to Enterprise Value. LTM refers to the most recently completed 12-month period for which financial information has been made public, other than for the Company, in which case LTM refers to Latest 12 Months. NA refers to not available. Source: Bloomberg, Capital IQ, public filings.
Observed Data Selected Companies (<$500m EV) Size Leverage [1] Liquidity Historical Growth Projected Growth (LTM Revenue, millions) (Debt to EV as of 12/13/17) (Current Ratio as of Latest Filing) (FY 2014 to FY 2016 Revenue) (FY 2016 to FY 2018E Revenue) Health Insurance Innovations, Inc $232.4 eHealth, Inc. 0.0% eHealth, Inc. 3.0 Castlight Health, Inc. 49.3% Castlight Health, Inc. 27.1% eHealth, Inc. $177.3 Health Insurance Innovations, Inc 0.0% Health Insurance Innovations, Inc 2.6 Health Insurance Innovations, Inc 44.2% Health Insurance Innovations, Inc 21.8% Castlight Health, Inc. $124.3 Castlight Health, Inc. 1.2% NantHealth, Inc. 2.4 Orion Health Group Limited 10.2% NantHealth, Inc. 15.5% Orion Health Group Limited $122.9 Orion Health Group Limited 4.7% Castlight Health, Inc. 1.9 Hooper Holmes, Inc. 9.6% eHealth, Inc. 0.9% NantHealth, Inc. $102.2 Streamline Health Solutions, Inc. 10.3% Orion Health Group Limited 1.2 eHealth, Inc. 2.0% Orion Health Group Limited 0.7% Cure $78.0 NantHealth, Inc. 43.1% Streamline Health Solutions, Inc. 0.7 Streamline Health Solutions, Inc. (1.0%) Streamline Health Solutions, Inc. 0.6% Hooper Holmes, Inc. $40.1 Hooper Holmes, Inc. 52.0% Hooper Holmes, Inc. 0.5 Cure (1.6%) Cure (3.7%) Streamline Health Solutions, Inc. $24.6 ######## Cure 0.5 NantHealth, Inc. NA Hooper Holmes, Inc. NA Historical Profitability Projected Profitability Internal Investment Historical Growth Projected Growth (LTM Adjusted EBITDA to LTM Revenue) (FY 2018E Adjusted EBITDA to Revenue) (LTM Capital Expenditures to LTM Revenue) (FY 2014 to FY 2016 Adjusted EBITDA) (FY 2016 to FY 2018E Adjusted EBITDA) Health Insurance Innovations, Inc 17.1% Health Insurance Innovations, Inc 17.7% Health Insurance Innovations, Inc 0.1% Health Insurance Innovations, Inc 93.1% Health Insurance Innovations, Inc 38.7% Streamline Health Solutions, Inc. (2.5%) Streamline Health Solutions, Inc. 14.4% Streamline Health Solutions, Inc. 0.1% eHealth, Inc. 3.7% NantHealth, Inc. NMF Cure (3.8%) Cure 2.6% Hooper Holmes, Inc. 0.7% Castlight Health, Inc. NMF Castlight Health, Inc. NMF eHealth, Inc. (5.0%) Orion Health Group Limited (0.4%) Cure 0.8% Cure NMF Cure NMF Hooper Holmes, Inc. (15.1%) eHealth, Inc. (1.5%) Orion Health Group Limited 1.0% Hooper Holmes, Inc. NMF Hooper Holmes, Inc. NMF Castlight Health, Inc. (20.3%) Castlight Health, Inc. (3.4%) Castlight Health, Inc. 1.9% Orion Health Group Limited NMF Orion Health Group Limited NMF Orion Health Group Limited (20.5%) NantHealth, Inc. (10.0%) eHealth, Inc. 2.6% Streamline Health Solutions, Inc. NMF Streamline Health Solutions, Inc. NMF NantHealth, Inc. (93.6%) Hooper Holmes, Inc. NA NantHealth, Inc. 10.9% NantHealth, Inc. NA eHealth, Inc. NA Note: No company used for comparative purposes is identical to the Company. 1. Based on public trading prices of common stock. Adjusted EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization and Stock-based Compensation, adjusted for certain non-recurring items. E refers to Estimated. EV refers to Enterprise Value. FY refers to Fiscal Year. LTM refers to the most recently completed 12-month period for which financial information has been made public, other than for the Company, in which case LTM refers to Latest 12 Months. NA refers to not available. NMF refers to not meaningful figure. Source: Bloomberg, Capital IQ, public filings.
Observed Data Selected Companies (>$500m EV) (Informational) Size Leverage [1] Liquidity Historical Growth Projected Growth (LTM Revenue, millions) (Debt to EV as of 12/13/17) (Current Ratio as of Latest Filing) (FY 2014 to FY 2016 Revenue) (FY 2016 to FY 2018E Revenue) athenahealth, Inc. $1,179.3 HealthEquity, Inc. 0.0% HealthEquity, Inc. 13.0 HealthEquity, Inc. 42.5% HealthEquity, Inc. 25.0% Omnicell, Inc. $690.2 Care.com, Inc. 0.0% Inovalon Holdings, Inc. 5.6 Benefitfocus, Inc. 30.3% Vocera Communications, Inc. 21.2% Medidata Solutions, Inc. $528.8 Vocera Communications, Inc. 0.1% Care.com, Inc. 2.7 Omnicell, Inc. 25.3% Medidata Solutions, Inc. 17.6% HMS Holdings Corp. $498.3 athenahealth, Inc. 5.0% Vocera Communications, Inc. 1.9 Care.com, Inc. 20.9% athenahealth, Inc. 11.2% Inovalon Holdings, Inc. $430.8 Medidata Solutions, Inc. 6.8% athenahealth, Inc. 1.7 athenahealth, Inc. 20.0% Benefitfocus, Inc. 9.6% Benefitfocus, Inc. $252.6 Omnicell, Inc. 8.8% Omnicell, Inc. 1.5 Medidata Solutions, Inc. 17.6% Care.com, Inc. 8.2% HealthEquity, Inc. $215.9 Inovalon Holdings, Inc. 12.9% Medidata Solutions, Inc. 1.3 Vocera Communications, Inc. 15.7% Omnicell, Inc. 8.0% Care.com, Inc. $173.4 Benefitfocus, Inc. 13.2% Benefitfocus, Inc. 1.1 HMS Holdings Corp. 5.1% HMS Holdings Corp. 7.2% Vocera Communications, Inc. $153.1 HMS Holdings Corp. 15.2% HMS Holdings Corp. 0.9 Inovalon Holdings, Inc. 2.3% Inovalon Holdings, Inc. 6.8% Cure $78.0 Cure 0.5 Cure (1.6%) Cure (3.7%) Historical Profitability Projected Profitability Internal Investment Historical Growth Projected Growth (LTM Adjusted EBITDA to LTM Revenue) (FY 2018E Adjusted EBITDA to Revenue) (LTM Capital Expenditures to LTM Revenue) (FY 2014 to FY 2016 Adjusted EBITDA) (FY 2016 to FY 2018E Adjusted EBITDA) HealthEquity, Inc. 36.8% HealthEquity, Inc. 37.5% Care.com, Inc. 0.4% HealthEquity, Inc. 57.6% Vocera Communications, Inc. 114.2% HMS Holdings Corp. 24.7% athenahealth, Inc. 25.6% Cure 0.8% athenahealth, Inc. 28.2% Care.com, Inc. 55.2% Medidata Solutions, Inc. 24.0% Inovalon Holdings, Inc. 25.4% Omnicell, Inc. 1.9% Medidata Solutions, Inc. 19.9% HealthEquity, Inc. 29.0% athenahealth, Inc. 22.2% Medidata Solutions, Inc. 24.7% HealthEquity, Inc. 2.0% HMS Holdings Corp. 7.8% Omnicell, Inc. 21.8% Inovalon Holdings, Inc. 20.0% HMS Holdings Corp. 24.6% Vocera Communications, Inc. 2.1% Omnicell, Inc. 6.9% Medidata Solutions, Inc. 21.7% Care.com, Inc. 11.0% Omnicell, Inc. 17.3% Benefitfocus, Inc. 3.2% Inovalon Holdings, Inc. (18.9%) Inovalon Holdings, Inc. 21.3% Omnicell, Inc. 10.8% Care.com, Inc. 15.9% HMS Holdings Corp. 3.3% Benefitfocus, Inc. NMF athenahealth, Inc. 17.8% Benefitfocus, Inc. 5.5% Vocera Communications, Inc. 10.9% Inovalon Holdings, Inc. 6.0% Cure NMF HMS Holdings Corp. 8.6% Vocera Communications, Inc. 2.6% Benefitfocus, Inc. 9.5% athenahealth, Inc. 7.0% Care.com, Inc. NMF Cure NMF Cure (3.8%) Cure 2.6% Medidata Solutions, Inc. 7.6% Vocera Communications, Inc. NMF Benefitfocus, Inc. NMF Note: No company used for comparative purposes is identical to the Company. 1. Based on public trading prices of common stock. Adjusted EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization and Stock-based Compensation, adjusted for certain non-recurring items. E refers to Estimated. EV refers to Enterprise Value. FY refers to Fiscal Year. LTM refers to the most recently completed 12-month period for which financial information has been made public, other than for the Company, in which case LTM refers to Latest 12 Months. NMF refers to not meaningful figure. Source: Bloomberg, Capital IQ, public filings.
Preliminary Discounted Cash Flow Analysis Per Company management, utilization of the Companys NOLs is likely to be limited as a result of recent stock issuances driving significant shifts in the Companys equity ownership base. Company management, together with the Companys tax advisors, is in the process of quantifying annual limitations on the utilization of the Companys NOLs. For conservatism, the preliminary discounted cash flow analysis shown below assumes a tax rate of 0%. This tax rate is under further review and could increase (even net of NOLs), which would result in a decrease in the implied enterprise value ranges shown below. (dollars in millions) Projected FYE December 31, 2018E 2019E 2020E 2021E 2022E 2023E Implied Perpetual Billings [1] $81.3 $78.3 $83.9 $94.4 $106.2 $122.1 Growth Rate [3] Growth % 14.5% (3.7%) 7.2% 12.5% 12.5% 15.0% Discount Rate 1.25x 1.50x 1.75x Less: Cash Expenses 74.3 70.5 73.3 78.8 85.1 93.6 18.0% 0.4% 2.9% 4.8% Cash EBITDA [2] $7.0 $7.8 $10.6 $15.6 $21.1 $28.5 19.0% 1.1% 3.7% 5.7% Margin % 8.6% 10.0% 12.6% 16.5% 19.9% 23.3% 20.0% 1.9% 4.6% 6.5% Less: Taxes at 0.0% [2] 0.0 0.0 0.0 0.0 0.0 0.0 21.0% 2.7% 5.4% 7.4% Less: Change in Net Working Capital 2.5 0.0 2.0 3.0 4.0 5.0 22.0% 3.5% 6.2% 8.2% Less: Capital Expenditures 0.8 1.0 1.1 1.3 1.5 1.8 Unlevered Free Cash Flows $3.7 $6.8 $7.5 $11.3 $15.6 $21.7 Present Value PV of Terminal Value of Cash Flows as a Multiple of Implied Enterprise Value PV of Terminal Value (2018E2023E) 2023E Billings as a % of Enterprise Value Discount Rate 1.25x 1.50x 1.75x 1.25x 1.50x 1.75x Discount Rate 1.25x 1.50x 1.75x 18.0% $36.1 $56.6 $67.9 $79.2 $92.7 $104.0 $115.3 18.0% 61.0% 65.3% 68.7% 19.0% $35.1 $53.8 $64.5 $75.3 $88.8 $99.6 $110.4 19.0% 60.5% 64.8% 68.2% 20.0% $34.1 + $51.1 $61.4 $71.6 = $85.2 $95.4 $105.7 20.0% 60.0% 64.3% 67.7% 21.0% $33.1 $48.6 $58.4 $68.1 $81.8 $91.5 $101.2 21.0% 59.5% 63.8% 67.3% 22.0% $32.2 $46.3 $55.6 $64.8 $78.5 $87.8 $97.0 22.0% 59.0% 63.3% 66.8% Note: The figures shown above do not include stock-based compensation expense (or equivalents), as such projections remain subject to further review, per Company management. Note: Present values as of 12/31/17; mid-year convention applied. 1. Per Company management, Billings is expected to approximate revenue in the long-term. 2. Tax rate assumed to be 0.0%. 3. Implied from corresponding discount rate and 2023E Billings multiple; shown for informational purposes. E refers to Estimated. EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization, and is shown above on a cash only basis (does not reflect deferred revenue or deferred costs). FYE refers to Fiscal Year End. PV refers to Present Value. Source: Company management.
Page 1. Overview 3 2. Preliminary Financial Analyses 8 3. Appendices (Informational) 18 Weighted Average Cost of Capital 19 Illustrative Selected Transactions 23 Certain Observations 25 4. Disclaimer 33
Page 1. Overview 3 2. Preliminary Financial Analyses 8 3. Appendices (Informational) 18 Weighted Average Cost of Capital 19 Illustrative Selected Transactions 23 Certain Observations 25 4. Disclaimer 33
Preliminary Weighted Average Cost of Capital Summary (dollars in millions) Debt to Debt Preferred Preferred Equity Market Preferred Equity Market Total Equity Market to Total Stock to Equity Stock to Total Value to Total Selected Company Debt [1] Stock [2] Value [3] Capitalization [4] Value Capitalization Market Value Capitalization Capitalization <$500m EV Castlight Health, Inc. $5.4 # $0.0 # $519.2 # $524.6 # 1.0% # 1.0% # 0.0% # 0.0% # 99.0% # eHealth, Inc. 0.0 # 0.0 # 332.6 # 332.6 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # Health Insurance Innovations, Inc. 0.0 # 0.0 # 344.3 # 344.3 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # Hooper Holmes, Inc. 19.8 # 0.0 # 19.8 # 39.6 # 99.7% # 49.9% # 0.0% # 0.0% # 50.1% # NantHealth, Inc. 194.3 # 0.0 # 330.4 # 524.7 # 58.8% # 37.0% # 0.0% # 0.0% # 63.0% # Orion Health Group Limited 5.5 # 0.0 # 121.6 # 127.1 # 4.5% # 4.3% # 0.0% # 0.0% # 95.7% # Streamline Health Solutions, Inc. 4.6 # 8.8 # 33.4 # 46.9 # 13.9% # 9.9% # 26.5% # 18.9% # 71.2% # Median $5.4 $0.0 $330.4 $332.6 4.5% 4.3% 0.0% 0.0% 95.7% Mean $32.8 $1.3 $243.0 $277.1 25.4% 14.6% 3.8% 2.7% 82.7% >$500m EV (Informational) athenahealth, Inc. $276.4 # $0.0 # $5,396.9 # $5,673.3 # 5.1% # 4.9% # 0.0% # 0.0% # 95.1% # Benefitfocus, Inc. 119.8 # 0.0 # 842.1 # 961.9 # 14.2% # 12.5% # 0.0% # 0.0% # 87.5% # Care.com, Inc. 0.0 # 0.0 # 672.1 # 672.1 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # HealthEquity, Inc. 0.0 # 0.0 # 2,760.5 # 2,760.5 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # HMS Holdings Corp. 240.0 # 0.0 # 1,422.3 # 1,662.3 # 16.9% # 14.4% # 0.0% # 0.0% # 85.6% # Inovalon Holdings, Inc. 244.0 # 0.0 # 2,173.2 # 2,417.2 # 11.2% # 10.1% # 0.0% # 0.0% # 89.9% # Medidata Solutions, Inc. 0.0 # 0.0 # 4,408.1 # 4,408.1 # 0.0% # 0.0% # 0.0% # 0.0% # 100.0% # Omnicell, Inc. 192.3 # 0.0 # 2,005.5 # 2,197.8 # 9.6% # 8.8% # 0.0% # 0.0% # 91.2% # Vocera Communications, Inc. 0.8 # 0.0 # 834.1 # 834.8 # 0.1% # 0.1% # 0.0% # 0.0% # 99.9% # Median $119.8 $0.0 $2,005.5 $2,197.8 5.1% 4.9% 0.0% 0.0% 95.1% Mean $119.3 $0.0 $2,279.4 $2,398.7 6.3% 5.6% 0.0% 0.0% 94.4% All Selected Companies Median $5.4 $0.0 $753.1 $753.5 4.8% 4.6% 0.0% 0.0% 95.4% Mean $81.4 $0.6 $1,388.5 $1,470.5 14.7% 9.6% 1.7% 1.2% 89.3% Note: No company is identical to the Company. 1. Debt amount based on most recent public filing as of December 13, 2017. 2. Preferred stock amount as stated in most recent public filing as of December 13, 2017. 3. Equity market value based on closing price on December 13, 2017 and on reported fully-diluted shares as of December 13, 2017. 4. Total capitalization equal to equity market value + debt outstanding + preferred stock. EV refers to Enterprise Value. Source: Bloomberg, Capital IQ, public filings.
Preliminary Weighted Average Cost of Capital Summary (cont.) (dollars in millions) Levered Unlevered Equity Risk Size Cost of Cost of Cost of Preferred Selected Company Beta [1] Beta [2] Premium [3] Premium [4] Equity [5] Debt [6] Stock [7] WACC [8] <$500m EV Castlight Health, Inc. 1.74 # 1.72 # 6.0% 2.7% 15.7% # 3.3% # NA 15.5% 0 eHealth, Inc. 1.92 # 1.92 # 6.0% 2.7% 16.7% # NA NA 16.7% 0 Health Insurance Innovations, Inc. 1.31 * 1.31 * 6.0% 2.7% 13.1% * NA NA 13.1% * Hooper Holmes, Inc. 1.28 * 0.64 * 6.0% 5.6% 15.8% * 11.7% # NA 13.8% * NantHealth, Inc. 2.08 * 1.31 * 6.0% 2.7% 17.7% * 5.2% # NA 13.1% * Orion Health Group Limited 0.67 * 0.64 * 6.0% 5.6% 12.2% * NA NA 11.6% * Streamline Health Solutions, Inc. 0.29 * 0.21 * 6.0% 5.6% 9.9% * 6.6% # NA NA * Median 1.83 1.82 16.2% 5.9% NA 16.1% Mean 1.83 1.82 16.2% 6.7% NA 16.1% >$500m EV (Informational) athenahealth, Inc. 1.26 # 1.20 # 6.0% 1.0% 11.1% # 1.6% # NA 10.6% 0 Benefitfocus, Inc. 1.63 # 1.43 # 6.0% 2.1% 14.4% # 5.3% # NA 13.3% 0 Care.com, Inc. 1.55 # 1.55 # 6.0% 2.1% 13.9% # NA * NA 13.9% 0 HealthEquity, Inc. 1.66 # 1.66 # 6.0% 1.5% 14.0% # NA * NA 14.0% 0 HMS Holdings Corp. 1.20 # 1.03 # 6.0% 1.7% 11.5% # 3.3% # NA 10.3% 0 Inovalon Holdings, Inc. 0.90 # 0.81 # 6.0% 1.7% 9.6% # 2.5% # NA 8.9% 0 Medidata Solutions, Inc. 1.63 # 1.63 # 6.0% 1.0% 13.3% # NA * NA 13.3% 0 Omnicell, Inc. 1.06 # 0.96 # 6.0% 1.7% 10.6% # 1.9% # NA 9.8% 0 Vocera Communications, Inc. 0.50 * 0.50 * 6.0% 2.1% 7.6% * NA * NA 7.6% * Median 1.41 1.31 12.4% 2.5% NA 12.0% Mean 1.36 1.28 12.3% 2.9% NA 11.8% All Selected Companies Median 1.59 1.49 13.6% 3.3% NA 13.3% Mean 1.45 1.39 13.1% 4.6% NA 12.7% Note: No company is identical to the Company. 1. Based on actual beta per Bloomberg as of December 13, 2017. 2. Unlevered Beta = Levered Beta / (1 + ((1 Tax Rate) * (Debt to Equity Market Value)) + (Preferred Stock to Equity Market Value)). 3. Based on review of studies measuring the historical returns between stocks and bonds, theoretical models such as supply side and demand side models and other materials. 4. 2017 Duff & Phelps Valuation Handbook, Appendix 3 and Exhibit 4.7 (Handbook). 5. Cost of Equity = Risk Free Rate of Return + (Levered Beta * Equity Risk Premium) + Size Premium. Risk Free Rate of Return as of December 13, 2017, based on 20-year U.S. Treasury Bond Yield. 6. Based on selected company weighted average interest rate per most recent public filings. 7. Based on selected company weighted average preferred dividend per most recent public filings. 8. Weighted Average Cost of Capital (WACC) = (Cost of Debt * (1 Tax Rate) * Debt to Total Capitalization) + (Cost of Equity * Equity Market Value to Total Capitalization) + (Cost of Preferred * Preferred Stock to Total Capitalization). See next page for tax rate assumption. EV refers to Enterprise Value. NA refers to not available. * Not included in median and mean data given low R2 correlations (beta indications are not meaningful). Source: Bloomberg, Capital IQ, public filings.
Preliminary Weighted Average Cost of Capital Summary (cont.) Market Capital Structure Cost of Equity for Assumptions Assumptions Computed WACC Risk-Free Rate of Return [1] 2.56% Debt to Total Capitalization [5] 4.6% Selected Unlevered Beta [6] 1.49 Equity Risk Premium [2] 6.00% Preferred Stock to Total Capitalization [5] 0.0% Computed Levered Beta [7] 1.56 Size Premium [3] 8.64% Equity Market Value to Total Capitalization [5] 95.4% Cost of Equity [8] 20.6% Tax Rate [4] 0.00% Debt to Equity Market Value 4.8% Preferred Stock to Equity Market Value 0.0% Cost of Debt [5] 3.3% Cost of Preferred Stock [5] NA Company Specific Decile Beta 0.00 Computed Weighted Average Cost of Capital [9] 19.8% Selected Weighted Average Cost of Capital Range 18.0% 22.0% 1. Risk-Free Rate of Return as of December 13, 2017, based on 20-year U.S. Treasury Bond Yield. 2. Based on a review of studies measuring the historical returns between stocks and bonds, theoretical models such as supply side and demand side models and other materials. 3. Handbook. 4. Per Company management. 5. Based on review of corresponding metrics of selected companies listed on previous pages. 6. Based on review of selected companies unlevered betas listed on previous pages. 7. Computed Levered Beta = Selected Unlevered Beta * (1 + ((Debt to Equity Market Value) * (1 Tax Rate)) + (Preferred Stock to Equity Market Value)). Based on Market and Capital Structure Assumptions. 8. Cost of Equity = Risk Free Rate of Return + (Computed Levered Beta * Equity Risk Premium) + Size Premium. Based on Market Assumptions. 9. Weighted Average Cost of Capital (WACC) = (Cost of Debt * (1 Tax Rate) * Debt to Total Capitalization) + (Cost of Equity * Equity Market Value to Total Capitalization) + (Cost of Preferred Stock * Preferred Stock to Total Capitalization). Based on Cost of Equity for Computed WACC and Market and Capital Structure Assumptions. NA refers to not available. Source: Bloomberg, Capital IQ, public filings.
Page 1. Overview 3 2. Preliminary Financial Analyses 8 3. Appendices (Informational) 18 Weighted Average Cost of Capital 19 Illustrative Selected Transactions 23 Certain Observations 25 4. Disclaimer 33
Preliminary Selected Transactions Overview (Illustrative) (dollars in millions) Transaction Adjusted Transaction Value / EBITDA Announced Effective Target Acquiror Value [1] Revenue Revenue [2] Margin % [2] 8/11/17 8/11/17 RemitDATA Inc. eSolutions, Inc. NA N NA N NA A NA NA 3/13/17 4/18/17 Eliza Corporation [3] HMS Holdings Corp. $172.0 # $35.0 # 4.91x # NA NA 1/4/17 4/3/17 Jiff, Inc. [4] Castlight Health, Inc. $155.0 # $25.0 # 6.20x # NA NA 2/18/16 4/7/16 Truven Holding Corp. IBM Watson Health $3,578.6 # $610.7 # 5.86x # 24.5% 0.245078264 2/22/16 4/4/16 Brightree LLC ResMed Corp. $800.0 # $113.2 # 7.07x # 37.3% 0.373279815 New Mountain Capital, LLC; New 12/18/15 12/18/15 Aeneas Buyer Corp. $225.0 # NA N NA A NA NA Mountain Partners IV, L.P. 10/30/15 1/4/16 HealthFusion Holdings, Inc. [5] Quality Systems, Inc. $173.1 # $25.0 # 6.93x # 22.0% 0.21977819 10/29/15 1/5/16 Aesynt Incorporated Omnicell International, Inc. $275.0 # $182.0 # 1.51x # 11.0% 0.109890182 8/24/15 9/1/15 Avalere Health LLC Inovalon Holdings, Inc. $131.2 # $49.5 # 2.65x # NMF NMF 7/6/15 8/12/15 Altegra Health, Inc. MediFAX-EDI Holding Company, Inc. $910.0 # $211.8 # 4.30x # 27.4% 0.274377593 Emdeon Inc. (nka:Change 11/19/14 11/25/14 Change Healthcare Corporation $185.0 # NA N NA A NA NA Healthcare Holdings, Inc.) 11/3/14 11/25/14 bswift, LLC Aetna Inc. $400.0 # NA N NA A NA NA 11/22/13 11/22/13 Liazon Corporation Towers Watson & Co. $215.0 # NA N NA A NA NA Low $131.2 $25.0 1.51x 11.0% High $3,578.6 $610.7 7.07x 37.3% Median $220.0 $81.4 5.39x 24.5% Mean $601.7 $156.5 4.93x 24.4% Note: No company is identical to the Company, and no transaction is identical to the Transaction. 1. Transaction Value refers to the implied enterprise value of target company based on announced transaction equity price and other public information available at the time of announcement. 2. Based on reported metric for most recent LTM period prior to announcement of transaction. 3. Eliza Corporation revenue represents estimated 2017 figure, per HMS Holdings Corp. press release dated April 18, 2017. 4. Jiff, Inc. revenue represents FY 2017 revenue earnout target of $25.0 million, per Castlight Health, Inc. Form 8-K filed on January 4, 2017. 5. HealthFusion Holdings, Inc. transaction value is on a pre-earnout basis, and revenue is representative of FY 2014, per HealthFusion Holdings, Inc. Form 8-K dated March 11, 2016. Adjusted EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization, adjusted for certain non-recurring items. LTM refers to most recently completed 12-month period for which financial information has been made public. NA refers to not available. NMF refers to not meaningful figure. Source: Capital IQ, public filings.
Page 1. Overview 3 2. Preliminary Financial Analyses 8 3. Appendices (Informational) 18 Weighted Average Cost of Capital 19 Illustrative Selected Transactions 23 Certain Observations 25 4. Disclaimer 33
Capital Structure Projected Debt and Preferred Stock Detail as of December 31, 2017 ¹ (dollars in millions) Amount Interest / Dividend Outstanding Rate Notes Lender / Holder Maturity Revolving Credit Facility $0.0 12.25% 9.75% cash plus 2.50% PIK Wells Fargo 6/8/2021 Senior Term Loan 32.6 10.30% 7.80% cash plus 2.50% PIK Wells Fargo 6/8/2021 Total Debt $32.6 Series A Preferred Stock ² $58.9 7.50% PIK â´ FP96.2%, Chrysalis3.8% Redeemable 2023 Series B Preferred Stock ³ 19.7 15.00% PIK â´ FP94.3%, Chrysalis5.7% Redeemable 2023 Total Preferred Stock $78.6 Total Debt and Preferred Stock $111.2 1. Per Company management. 2. Represents liquidation preference of $52.0 million plus projected accrued dividends as of 12/31/17 of $6.9 million, per Company management. 3. Represents liquidation preference of $17.5 million plus projected accrued dividends as of 12/31/17 of $2.2 million, per Company management. 4. The Company may elect to pay in cash following the second anniversary of issuance. Source: Company management, public filings.
Company Ownership Profile Common Equity (Estimated as of 12/31/2017) As-Converted (Estimated as of 12/31/2017) 1) 57.3%Francisco Partners Management LLC 1) 17.9%Great Point Partners, LLC 2) 17.4%Chrysalis Ventures 2) 10.7%Chrysalis Ventures II, L.P. 3) 15.7%Francisco Partners Management LLC 4) 5.9%Rahim, Ahsan 3) 8.6%Great Point Partners I, LP 5) 1.3%Vanguard 41.8%Other 23.4%Other Series A Preferred Stock Series B Preferred Stock Chrysalis Chrysalis Ventures II, L.P. Ventures II, L.P. 3.8% 5.7% Francisco Francisco Partners Partners Management Management LLC LLC 96.2% 94.3% Source: Company management, public filings, Capital IQ.
Summary of Historical Stock Price Performance A Shelf Registration Announced 1H 2015 2H 2015 B Company reports positive Series A Preferred Stock Issuance Announced $16.00 earnings post-IPO Company announces State Exchange business winding down C Series B Preferred Stock Issuance Announced Management revises FY 2015 $14.00 guidance downward Company announces intention to delist from D Company starts experiencing liquidity NASDAQGM constraints by end of 2015 $12.00 2016 Company experiences weakness in under-65 business due to softness in demand and Price $10.00 inability to execute on sales strategy 2017 Management revises FY 2016 revenue and Company management tempers adjusted EBITDA guidance downward mid-year expectations for 2017 and Stock $8.00 from $100mm-$115mm to $85mm-$88mm (revenue) and from $10.5mm-$12mm to $0mm- implements significant cost reduction initiatives (run-rate $2mm (adjusted EBITDA); actual reported 2016 savings of ~$15mm) revenue and adjusted EBITDA was $81.9mm Closing $6.00 and $(13.6)mm, respectively Commercial segment experiences continued macro headwinds (IFPs), Company faces significant liquidity shortfall by while Medicare business benefits end of 2016 from macro tailwinds $4.00 A B $2.00 C D $0.00 Source: Capital IQ, Company management, Wall Street Research.
Recent Stock Trading History High: $0.31, Volume-Weighted Average Stock Prices $0.35 10/27/2017 $4.00 Since Delisting Prior to Delisting $0.30 11/20/2017 A B Last 30-Days All Three-Months Six-Months Nine-Months One-Year $0.25 $3.50 $0.21 $0.23 $0.72 $0.72 $0.96 $1.09 $0.20 $0.15 $3.00 $0.10 E $0.05 Low: $0.12, C 12/6/2017 $2.50 F $0.00 10/27 11/3 11/10 11/17 11/24 12/1 12/8 $2.00 $1.50 D $1.00 Closing Stock Price G $0.50 (12/13/17): $0.13 $0.00 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Oct-17 Dec-17 Historical Stock Price Current Stock Price (12/13/17) Selected Events Event Date Comment Event Date Comment Company files $50 million shelf registration with no disclosed plan Company reports Q2 2016 earnings lowers FY 2016 revenue A 1/8/16 E 8/8/16 guidance by ~$15-20 million and adjusted EBITDA guidance by for use of proceeds ~$10 million Company reports FY 2015 earnings and announces $52 million Company reports FY 2016 earnings adjusted EBITDA decreased B 3/14/16 Series A Preferred Stock investment from Francisco Partners and by ~$22 million compared to FY 2015; FY 2017 guidance of ~10% Chrysalis Ventures F 3/14/17 decline in revenue and negative adjusted EBITDA; Company also Company reports Q1 2016 earnings revenue and adjusted announces $17.5 million Series B Preferred Stock investment led C 5/9/16 EBITDA both decreased year-over-year and were below Wall by Francisco Partners Street analyst consensus estimates Company announces acquisition of ConnectedHealth, LLC, a Company announces intention to voluntarily delist from Nasdaq D 6/7/16 G 10/20/17 leading benefits technology company Global Market exchange and list on OTCQX Market Source: Capital IQ, Company management, Wall Street Research.
Relative Stock Price Performance Since Cure IPO 180.0% 12/12/201412/13/2017 Cure (98.5%) 160.0% eHealth, Inc. (31.5%) S&P 500 33.0% 140.0% Selected Companies <$500m EV¹ (7.2%) Selected Companies >$500m EV² (Informational) 2.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 12/12/2014 4/12/2015 8/12/2015 12/12/2015 4/12/2016 8/12/2016 12/12/2016 4/12/2017 8/12/2017 12/12/2017 1. Includes Castlight Health, Inc.; eHealth, Inc.; Health Insurance Innovations, Inc.; Hooper Holmes, Inc.; NantHealth, Inc.; Orion Health Group Limited and Streamline Health Solutions, Inc. Index constructed using free-float adjusted market-capitalization weighting. 2. Includes athenahealth, Inc.; Benefitfocus, Inc.; Care.com, Inc.; HealthEquity, Inc.; HMS Holdings Corp.; Inovalon Holdings, Inc.; Medidata Solutions, Inc.; Omnicell, Inc. and Vocera Communications, Inc. Index constructed using free-float adjusted market-capitalization weighting. EV refers to Enterprise Value. Source: Capital IQ.
Relative Stock Price Performance Last 12 Months 12/13/201612/13/2017 300.0% Cure (92.5%) eHealth, Inc. 70.1% S&P 500 17.2% 250.0% Selected Companies <$500m EV¹ 62.4% Selected Companies >$500m EV² (Informational) 35.6% 200.0% 150.0% 100.0% 50.0% 0.0% 12/13/2016 2/13/2017 4/13/2017 6/13/2017 8/13/2017 10/13/2017 12/13/2017 1. Includes Castlight Health, Inc.; eHealth, Inc.; Health Insurance Innovations, Inc.; Hooper Holmes, Inc.; NantHealth, Inc.; Orion Health Group Limited and Streamline Health Solutions, Inc. Index constructed using free-float adjusted market-capitalization weighting. 2. Includes athenahealth, Inc.; Benefitfocus, Inc.; Care.com, Inc.; HealthEquity, Inc.; HMS Holdings Corp.; Inovalon Holdings, Inc.; Medidata Solutions, Inc.; Omnicell, Inc. and Vocera Communications, Inc. Index constructed using free-float adjusted market-capitalization weighting. EV refers to Enterprise Value. Source: Capital IQ.
Float and Trading Data Average Daily Average Daily Average Daily Average Daily Public Float Basic Shares Public Float / Volume / Volume / Selected Company Volume [1] Value [2] Estimate Outstanding Shares Outstanding Public Float Shares Out <$500m EV Castlight Health, Inc. 0.3 $1.2 60.9 133.7 45.5% 0 0.5% 0 0.2% 0 eHealth, Inc. 0.1 3.1 13.0 18.6 69.9% 1 1.0% 0 0.7% 0 Health Insurance Innovations, Inc. 0.9 19.6 7.7 12.6 61.3% 1 11.9% 0 7.3% 0 Hooper Holmes, Inc. 0.0 0.0 22.7 26.8 84.7% 1 0.1% 0 0.1% 0 NantHealth, Inc. 0.2 0.7 18.7 107.0 17.5% 0 1.0% 0 0.2% 0 Orion Health Group Limited 0.0 0.0 64.6 196.5 32.9% 0 0.1% 0 0.0% 0 Streamline Health Solutions, Inc. 0.3 0.4 9.8 20.0 48.8% 0 2.9% 0 1.4% 0 Low 17.5% 0.1% 0.0% High 84.7% 11.9% 7.3% Median 48.8% 1.0% 0.2% Mean 51.5% 2.5% 1.4% >$500m EV (Informational) athenahealth, Inc. 0.5 $65.4 39.5 40.0 98.6% # 1.3% 0 1.3% # Benefitfocus, Inc. 0.2 5.4 23.0 31.3 73.5% # 0.8% 0 0.6% # Care.com, Inc. 0.3 5.2 17.5 30.1 58.1% # 1.8% 0 1.0% # HealthEquity, Inc. 0.5 24.5 52.4 60.7 86.3% # 0.9% 0 0.8% # HMS Holdings Corp. 0.7 13.3 82.5 84.1 98.1% # 0.9% 0 0.9% # Inovalon Holdings, Inc. 0.5 7.6 61.3 145.9 42.0% # 0.8% 0 0.3% # Medidata Solutions, Inc. 0.6 40.5 56.3 56.7 99.4% # 1.0% 0 1.0% # Omnicell, Inc. 0.2 12.4 36.8 37.9 97.0% # 0.7% 0 0.7% # Vocera Communications, Inc. 0.2 4.7 27.0 29.2 92.3% # 0.6% 0 0.6% # Low 42.0% 0.6% 0.3% High 99.4% 1.8% 1.3% Median 92.3% 0.9% 0.8% Mean 82.8% 1.0% 0.8% All Selected Companies Low 17.5% 0.1% 0.0% High 99.4% 11.9% 7.3% Median 71.7% 0.9% 0.7% Mean 69.1% 1.6% 1.1% Cure [3] 0.1 $0.1 9.9 23.0 43.1% 1.3% 0.5% 1. Shares in millions based on 90-day average trading activity as of December 13, 2017. 2. Dollars in millions based on 90-day average trading activity as of December 13, 2017. 3. Public float for Cure represents total common shares outstanding of 23.0 million, less the number of shares held by Great Point Partners (4.1 million), Chrysalis Ventures (4.0 million), Francisco Partners (3.6 million) and Ahsan Rahim (1.4 million). EV refers to Enterprise Value. Source: Bloomberg, Capital IQ.
Page 1. Overview 3 2. Preliminary Financial Analyses 8 3. Appendices (Informational) 18 4. Disclaimer 33
Disclaimer This presentation, and any supplemental information (written or oral) or other documents provided in connection therewith (collectively, the materials), are provided solely for the information of the Special Committee (the Committee) of the Board of Directors (the Board) of Cure (the Company or Cure) by Houlihan Lokey in connection with the Committees consideration of a potential transaction (the Transaction) involving the Company. This presentation is incomplete without reference to, and should be considered in conjunction with, any supplemental information provided by and discussions with Houlihan Lokey in connection therewith. Any defined terms used herein shall have the meanings set forth herein, even if such defined terms have been given different meanings elsewhere in the materials. The materials are for discussion purposes only. Houlihan Lokey expressly disclaims any and all liability which may be based on the materials and any errors therein or omissions therefrom. 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Exhibit (c)(4)
Project Cure D I S C U S S I O N M AT E R I A L S F O R T H E S P E C I A L C O M M I T T E E D E C E M B E R 1 3 , 2 0 1 7 | C O N F I D E N T I A L | P R E L I M I N A R Y | S U B J E C T T O F U R T H E R R E V I E W
Certain Considerations Additional FP funds required in a potential transaction ~$6 million for common equity purchase price based on FP proposal of $0.30/share ~$5 million estimated for buyer and seller expenses Unspecified amount for funding of operations Unspecified amount for refinancing of existing senior debt Cost to FP of increases in common equity purchase price Every increase of $0.05/share results in increase in consideration of ~$1 million FP has invested ~$72 million in the Company in the last ~18 months Costs of a bankruptcy process Advisory fees Business disruption risk ability to retain / attract customers Viability of other alternatives / results of recent market outreach Viability of Company without additional capital or transaction Recent stock price / trading volume data CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Volume Weighted Average Price and Average Daily Trading Value Data Over 6 million shares of common stock have traded since the Company announced its intention to delist from the NASDAQ Global Market exchange, which represents approximately 61% of the total common shares outstanding not held by the Companys significant stockholders1, and over 8 million shares have traded in the last 3 months, representing approximately 82% of the total common shares outstanding not held by the Companys significant stockholders1 Stock Price $2.50 $2.24 Average Daily Trading Value ($ in thousands) $2.00 1-Day 5-Day 10-Day 20-Day 30-Day 35-Day 3-Month 6-Month 9-Month 12-Month $3.4 $14.3 $11.3 $16.9 $17.9 $40.3 $43.1 $60.0 $68.0 $76.9 $1.50 $1.00 $0.82 $0.64 $0.51 $0.50 $0.34 $0.23 $0.23 $0.14 $0.16 $0.18 $0.14 $0.10 $0.12 $0.00 1-Day 5-Day 10-Day 20-Day 30-Day VWAP 3-Month 6-Month 9-Month 12-Month 52-Week 52-Week Current VWAP VWAP VWAP VWAP VWAP Since VWAP VWAP VWAP VWAP Low High Price [3] Delisting [2] Closing Closing Price Price Source: Capital IQ. 1. Based on 9.9 million common shares outstanding as of November 1, 2017, which excludes the shares held by Great Point Partners (4.1 million), Chrysalis Ventures (4.0 million), Francisco Partners (3.6 million) and Ahsan Rahim (1.4 million). 2. Represents 35-day VWAP since the Company announced its intention to delist from the NASDAQ Global Market exchange on October 20, 2017. 3. Based on closing stock price on December 11, 2017. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Company Ownership Profile Common Equity (Estimated as of 12/31/2017) As-Converted (Estimated as of 12/31/2017) 1) 57.3%Francisco Partners Management LLC 1) 17.9%Great Point Partners, LLC 2) 17.4%Chrysalis Ventures 2) 10.7%Chrysalis Ventures II, L.P. 3) 15.7%Francisco Partners Management LLC 4) 5.9%Rahim, Ahsan 3) 8.6%Great Point Partners I, LP 5) 1.3%Vanguard 41.8%Other 23.4%Other Series A Preferred Stock Series B Preferred Stock Chrysalis Chrysalis Ventures II, L.P. Ventures II, L.P. 3.8% 5.7% Francisco Francisco Partners Partners Management Management LLC LLC 96.2% 94.3% Source: Company management, public filings, Capital IQ. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Disclaimer This presentation, and any supplemental information (written or oral) or other documents provided in connection therewith (collectively, the materials), are provided solely for the information of the Special Committee (the Committee) of the Board of Directors (the Board) of Cure (the Company) by Houlihan Lokey in connection with the Committees consideration of a potential transaction (the Transaction) involving the Company. This presentation is incomplete without reference to, and should be considered in conjunction with, any supplemental information provided by and discussions with Houlihan Lokey in connection therewith. Any defined terms used herein shall have the meanings set forth herein, even if such defined terms have been given different meanings elsewhere in the materials. The materials are for discussion purposes only. Houlihan Lokey expressly disclaims any and all liability which may be based on the materials and any errors therein or omissions therefrom. The materials were prepared for specific persons familiar with the business and affairs of the Company for use in a specific context and were not prepared with a view to public disclosure or to conform with any disclosure standards under any state, federal or international securities laws or other laws, rules or regulations, and none of the Committee, the Company or Houlihan Lokey takes any responsibility for the use of the materials by persons other than the Committee. The materials are provided on a confidential basis solely for the information of the Committee and may not be disclosed, summarized, reproduced, disseminated or quoted or otherwise referred to, in whole or in part, without Houlihan Lokeys express prior written consent. Notwithstanding any other provision herein, the Company (and each employee, representative or other agent of the Company) may disclose to any and all persons without limitation of any kind, the tax treatment and tax structure of any transaction and all materials of any kind (including opinions or other tax analyses, if any) that are provided to the Company relating to such tax treatment and structure. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. income or franchise tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. income or franchise tax treatment of the transaction. 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Although subsequent developments may affect the contents of the materials, Houlihan Lokey has not undertaken, and is under no obligation, to update, revise or reaffirm the materials, except as may be expressly contemplated by Houlihan Lokeys engagement letter. The materials are not intended to provide the sole basis for evaluation of the Transaction and do not purport to contain all information that may be required. The materials do not address the underlying business decision of the Company or any other party to proceed with or effect the Transaction, or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available for the Company or any other party. The materials do not constitute any opinion, nor do the materials constitute a recommendation to the Board, the Committee, the Company, any security holder of the Company or any other party as to how to vote or act with respect to any matter relating to the Transaction or otherwise or whether to buy or sell any assets or securities of any company. Houlihan Lokeys only opinion is the opinion, if any, that is actually delivered to the Committee. The materials may not reflect information known to other professionals in other business areas of Houlihan Lokey and its affiliates. The preparation of the materials was a complex process involving quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaption and application of these methods to the unique facts and circumstances presented and, therefore, is not readily susceptible to partial analysis or summary description. Furthermore, Houlihan Lokey did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. Accordingly, the analyses contained in the materials must be considered as a whole. Selecting portions of the analyses, analytic methods and factors without considering all analyses and factors could create a misleading or incomplete view. The materials reflect judgments and assumptions with regard to industry performance, general business, economic, regulatory, market and financial conditions and other matters, many of which are beyond the control of the participants in the Transaction. Any estimates of value contained in the materials are not necessarily indicative of actual value or predictive of future results or values, which may be significantly more or less favorable. Any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which any assets, businesses or securities may actually be sold. The materials do not constitute a valuation opinion or credit rating. In preparing the materials, Houlihan Lokey has not conducted any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (contingent or otherwise) of the Company or any other party and has no obligation to evaluate the solvency of the Company or any other party under any law. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Disclaimer (cont.) All budgets, projections, estimates, financial analyses, reports and other information with respect to operations (including estimates of potential cost savings and expenses) reflected in the materials have been prepared by management of the relevant party or are derived from such budgets, projections, estimates, financial analyses, reports and other information or from other sources, which involve numerous and significant subjective determinations made by management of the relevant party and/or which such management has reviewed and found reasonable. The budgets, projections and estimates (including, without limitation, estimates of potential cost savings and synergies) contained in the materials may or may not be achieved and differences between projected results and those actually achieved may be material. 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Exhibit (c)(5)
Project Cure D I S C U S S I O N M AT E R I A L S F O R T H E S P E C I A L C O M M I T T E E D E C E M B E R 1 0 , 2 0 1 7 | C O N F I D E N T I A L | P R E L I M I N A R Y | S U B J E C T T O F U R T H E R R E V I E W
Agenda Situation Overview Recent Performance and Outlook Summary Overview of Potential Alternatives Potential Next Steps CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Situation Overview Since shortly after its 2014 IPO, Cure (the Company) has faced headwinds that have impacted its financial performance and liquidity In order to address liquidity concerns, the Company raised capital in the form of two preferred stock issuances led by Francisco Partners, with participation by Chrysalis Ventures $52 million in 2016 (Series A) and $17.5 million in 2017 (Series B) In addition, the Company has obtained multiple amendments to the terms of its senior credit facility with Wells Fargo over that period Company management has indicated that, absent a recapitalization of the Company, the Company likely will not have sufficient cash to fund its operations and will breach its covenants under its existing credit facility Weekly cash forecasts prepared by Company management show insufficient liquidity to fund operations potentially beginning in March 2018 Minimum liquidity covenant of $1.5 million through March 31, 2018 increases to $15 million on April 1, 2018, at which time Company management projects the Company will fall substantially short of satisfying such covenant Company management also has indicated that the Companys financial situation is impacting customer perception and the ability to attract new customers On November 13, 2017, the Board of Directors of the Company received an offer from Francisco Partners to purchase all outstanding shares of Company common stock not owned by Francisco Partners for $0.30 / share in cash Source: Company management. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Summary of Historical Stock Price Performance A Shelf Registration Announced 1H 2015 2H 2015 B Company reports positive Series A Preferred Stock Issuance Announced $16.00 earnings post-IPO Company announces that State Exchange business is winding down C Series B Preferred Stock Issuance Announced Management revises FY 2015 $14.00 guidance downward Company announces intention to delist from D Company starts experiencing liquidity NASDAQGM constraints by end of 2015 $12.00 2016 Company experiences weakness in under-65 business due to softness in demand and Price $10.00 inability to execute on sales strategy 2017 Management revises FY 2016 revenue and Company management tempers adjusted EBITDA guidance downward mid- expectations for 2017 and Stock $8.00 year from $100mm-$115mm to $85mm- $88mm (revenue) and from $10.5mm-$12mm implements significant cost reduction initiatives (run-rate to $0mm-$2mm (EBITDA); actual 2016 savings of ~$15mm) revenue and adjusted EBITDA was $81.9mm Closing $6.00 and $(13.6)mm, respectively Commercial segment experiences continued macro headwinds (IFPs), Company faces significant liquidity shortfall by while Medicare business benefits end of 2016 from macro tailwinds $4.00 A B $2.00 C D $0.00 Source: Capital IQ, Company management, Wall Street Research. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Recent Stock Trading History Volume-Weighted Average Prices High: $0.31, $0.35 10/27/2017 $4.50 11/20/2017 Since Delisting Prior to Delisting $0.30 Last 30-Days All Three-Months Six-Months Nine-Months One-Year $0.25 $4.00 A $0.24 $0.24 $0.72 $0.72 $0.96 $1.09 $0.20 $3.50 B $0.15 $0.10 $3.00 Low: $0.12, E $0.05 12/6/2017 $2.50 C $0.00 F 10/23 10/30 11/6 11/13 11/20 11/27 12/4 $2.00 $1.50 $1.00 D G Closing Stock Price $0.50 (12/7/17): $0.14 $0.00 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Dec-17 Historical Stock Price Current Stock Price (12/7/17) Selected Events Event Date Comment Event Date Comment Company files $50 million shelf registration with no disclosed plan Company reports Q2 2016 earnings lowers FY 2016 revenue A 1/8/16 E 8/8/16 guidance by ~$15-20 million and adjusted EBITDA guidance by for use of proceeds ~$10 million Company reports FY 2015 earnings and announces $52 million Company reports FY 2016 earnings adjusted EBITDA decreased B 3/14/16 Series A Preferred Stock investment from Francisco Partners and by ~$22 million compared to FY 2015; FY 2017 guidance of ~10% Chrysalis Ventures F 3/14/17 decline in revenue and negative adjusted EBITDA; Company also Company reports Q1 2016 earnings revenue and adjusted announces $17.5 million Series B Preferred Stock investment led C 5/9/16 EBITDA both decreased year-over-year and were below Wall by Francisco Partners Street analyst consensus estimates Company announces acquisition of ConnectedHealth, LLC, a Company announces intention to voluntarily delist from Nasdaq D 6/7/16 G 10/20/17 leading benefits technology company Global Market exchange and list on OTCQX Market Source: Capital IQ. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Historical Financial Performance Revenue by Segment LTM (dollars in millions) 2013 2014 2015 2016 9/30/2017 Enterprise / Commercial $33.0 $40.4 $55.5 $49.1 $41.0 Enterprise / State 3.2 21.6 13.4 3.5 2.9 Medicare 15.9 16.2 18.0 18.6 21.7 Private Exchange 6.2 6.4 9.0 10.8 12.4 Total Revenue $58.3 $84.6 $95.8 $81.9 $78.0 Gross Profit by Segment LTM (dollars in millions) 2013 2014 2015 2016 9/30/2017 Enterprise / Commercial ($0.7) $10.3 $23.7 $11.9 $12.5 Enterprise / State (1.1) 11.0 6.3 1.3 1.9 Medicare 7.8 9.5 10.7 11.5 14.3 Private Exchange 2.2 1.3 4.5 0.3 (0.5) Total Gross Profit $8.2 $32.1 $45.2 $25.0 $28.2 Operating Expenses and Operating Income (dollars in millions) LTM 2013 2014 2015 2016 9/30/2017 Research & Development $11.8 $18.1 $22.7 $22.3 $17.7 Sales & Marketing 6.8 7.7 9.5 10.4 9.2 General & Administrative 12.2 10.6 14.4 13.2 12.6 Total Operating Expenses $30.8 $36.4 $46.6 $45.9 $39.5 Operating Income ($22.6) ($4.3) ($1.4) ($20.9) ($11.3) Source: Company public filings and management, Figures based on GAAP reporting. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Recent Financial Performance Relative to Budget Per Company management: In 2016, the Companys top-line performance was impacted by (i) weakness in the Commercial segment, (ii) continued wind-down of the State Exchanges business, and (iii) slower than expected adoption of the Private Exchange business. In addition, in 2016, failure to control costs contributed to significant underperformance in operating income relative to budget. In 2017, revenue is expected to be slightly lower than budget due to material headwinds in the Commercial segment (specifically, the IFP market) offset to some extent by growth in the Medicare segment. Operating income is forecasted to slightly exceed budget in 2017 as a result of significant cost reduction initiatives. 2016 Budget vs. Actual 2017 Budget vs. Revised Forecast ($ in millions) ($ in millions) $120.0 $105.0 $100.0 $100.0 $81.9 $79.8 $76.5 $80.0 $80.0 $54.7 $60.0 $60.0 $40.0 $40.0 $33.6 $29.7 $25.0 $20.0 $20.0 $0.0 ($1.0) $0.0 -$20.0 -$40.0 ($26.5) -$20.0 ($9.3) ($8.4) Revenue Gross Profit Operating Income Revenue Gross Profit Operating Income Budget Actual Budget 9+3 Forecast While 2017 financial performance reflects achievement of targets and execution of cost reduction plans, top-line improvement prospects remain uncertain Source: Company management. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Management Outlook Company Management Near-Term Cash Flow Projections Management currently projects that the Company likely will not have sufficient available cash to fund operations beyond March 2018 While the Company may be able to obtain short-term funding through potential 1Q 2018 pipeline billings and cash prepayment of ~$4 million from United in connection with the Polaris project, management projects that, absent a substantial capital infusion, the Company will be in breach of the minimum liquidity covenant under the Companys existing senior credit facility with Wells Fargo Under its existing senior credit facility, the Company is subject to a minimum liquidity covenant of $1.5 million through March 31, 2018 and $15 million starting April 1, 20181 Management has indicated that Francisco Partners has declined a request to submit a financing proposal and in lieu thereof offered to acquire the shares of Company common stock not owned by Francisco Partners Company Management Long-Term Going Concern Financial Projections Managements long-term projections assume the Company is able to raise sufficient external financing (amount to be determined) required to continue to operate as a going concern Absent sufficient financing, Company management believes that the Company faces significant operating challenges that are not reflected in managements preliminary long-term projections Acquisition of new customers unlikely Retention of existing customers more difficult Financial projections methodology: Detailed 2018 budget bottoms up top-line build, detailed expense build High-level estimates for 2019 2023 1. Liquidity is defined as the sum of Availability and Qualified Cash (Availability refers to amount available under revolving loans; Qualified Cash refers to amount of unrestricted cash and cash equivalents). Source: Company management. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Summary Overview of Potential Alternatives Status Quo Debt Refinancing Third-Party Equity Financing Sale to Third Party for Cash Merger with Third Party Sale of Medicare Business Only to Third Party Wind-Down of Non-Medicare Operations Bankruptcy CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Potential Next Steps Ongoing Continued dialogue with third parties regarding potential sale of the Company Continued consideration of potential alternatives Continued financial review Additional Topics for Next Meeting Potential response to Francisco Partners Potential outreach to Chrysalis and Great Point Partners CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Appendix: Additional Information
Capital Structure Debt and Preferred Stock Detail as of September 30, 2017 (dollars in millions) Amount Interest / Dividend Outstanding Rate Notes Lender / Holder Maturity Revolving Credit Facility $0.0 10.30% 7.80% cash plus 2.50% PIK Wells Fargo 6/8/2021 Senior Term Loan 32.4 12.25% 9.75% cash plus 2.50% PIK Wells Fargo 6/8/2021 Total Debt $32.4 Series A Preferred Stock ¹ $57.8 7.50% PIK³ Francisco96.2%, Chrysalis3.8% Redeemable 2023 Series B Preferred Stock ² 19.0 15.00% PIK³ Francisco94.3%, Chrysalis5.7% Redeemable 2023 Total Preferred Stock $76.8 Total Debt and Preferred Stock $109.2 1. Represents liquidation preference of $52.0 million plus accrued dividends of $5.8 million. 2. Represents liquidation preference of $17.5 million plus accrued dividends of $1.5 million. 3. The Company may elect to pay in cash following the second anniversary of issuance. Source: Company management, Public filings. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Ownership Profile Common Equity 1 As-Converted 2 1) 17.9%Great Point Partners, LLC 1) 55.9%Francisco Partners Management LLC 2) 17.4%Chrysalis Ventures 2) 10.9%Chrysalis Ventures II, L.P. 3) 15.7%Francisco Partners Management LLC 4) 5.9%Rahim, Ahsan 3) 8.9%Great Point Partners I, LP 5) 4.8%Surges, Jeffrey A. 24.3%Other 38.3%Other Series A Preferred Stock 2 Series B Preferred Stock 2 Chrysalis Chrysalis Ventures II, L.P. Ventures II, L.P. 3.8% 5.7% Francisco Francisco Partners Partners Management Management LLC LLC 96.2% 94.3% 1. As of November 28, 2017, per Capital IQ. 2. As of November 1, 2017, per Company Form 10-Q dated November 13, 2017. Source: Capital IQ; Company Form 10-Q dated November 13, 2017; Company Schedule 14A dated April 24, 2017. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Trading Volume Overview (Pre-NASDAQ Delisting) Prior Three Months1 Prior Six Months2 Trading Volume (000s) Trading Volume (000s) 1,800 4,000 180-Day VWAP $0.72 90-Day VWAP $0.72 1,568 1,600 3,500 1,400 2,815 3,000 1,149 1,200 2,387 1,042 2,500 2,280 1,000 848 2,000 800 615 1,568 1,519 1,500 600 400 329 1,000 240 500 329 346 200 0 0 0 0 $0.45$0.53$0.60$0.68$0.75$0.83$0.90$0.98$0.45$0.53$0.60$0.68$0.75$0.83$0.90$0.98 -$0.53 $0.60 $0.68 $0.75 $0.83 $0.90 $0.98 $1.05 $0.53 $0.60 $0.68 $0.75 $0.83 $0.90 $0.98 $1.05 % of Total 5.7% 10.6% 19.8% 27.1% 14.6% 18.0% 4.1% 0.0% % of Total 2.9% 13.9% 20.3% 21.2% 13.5% 25.0% 3.1% 0.0% Prior Nine Months3 Prior 12 Months4 Trading Volume (000s) Trading Volume (000s) 8,000 8,000 7,360 7,360 270-Day VWAP $0.96 360-Day VWAP $1.09 7,000 7,000 6,000 6,000 5,000 5,000 4,000 3,725 3,725 4,000 3,000 2,841 3,000 2,044 2,044 2,000 2,000 1,077 1,077 1,060 719 805 805 1,000 394 1,000 0 142 0 0 $0.40$0.65$0.90$1.15$1.40$1.65$1.90$2.15$0.40$0.65$0.90$1.15$1.40$1.65$1.90$2.15 -$0.65 $0.90 $1.15 $1.40 $1.65 $1.90 $2.15 $2.40 $0.65 $0.90 $1.15 $1.40 $1.65 $1.90 $2.15 $2.40 % of Total 23.1% 45.6% 12.7% 6.7% 0.0% 2.4% 4.5% 5.0% % of Total 19.5% 38.6% 10.7% 5.7% 0.7% 14.9% 5.6% 4.2% Note: Stock prices included in each range represent those greater than low-end of range and less than or equal to high-end of range. 1. Represents Cure trading volume between July 21, 2017 and October 20, 2017. 2. Represents Cure trading volume between April 21, 2017 and October 20, 2017. 3. Represents Cure trading volume between January 21, 2017 and October 20, 2017. 4. Represents Cure trading volume between October 21, 2016 and October 20, 2017. Source: Capital IQ. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
Disclaimer This presentation, and any supplemental information (written or oral) or other documents provided in connection therewith (collectively, the materials), are provided solely for the information of the Special Committee (the Committee) of the Board of Directors (the Board) of Cure (the Company) by Houlihan Lokey in connection with the Committees consideration of a potential transaction (the Transaction) involving the Company. This presentation is incomplete without reference to, and should be considered in conjunction with, any supplemental information provided by and discussions with Houlihan Lokey in connection therewith. Any defined terms used herein shall have the meanings set forth herein, even if such defined terms have been given different meanings elsewhere in the materials. The materials are for discussion purposes only. Houlihan Lokey expressly disclaims any and all liability which may be based on the materials and any errors therein or omissions therefrom. The materials were prepared for specific persons familiar with the business and affairs of the Company for use in a specific context and were not prepared with a view to public disclosure or to conform with any disclosure standards under any state, federal or international securities laws or other laws, rules or regulations, and none of the Committee, the Company or Houlihan Lokey takes any responsibility for the use of the materials by persons other than the Committee. The materials are provided on a confidential basis solely for the information of the Committee and may not be disclosed, summarized, reproduced, disseminated or quoted or otherwise referred to, in whole or in part, without Houlihan Lokeys express prior written consent. Notwithstanding any other provision herein, the Company (and each employee, representative or other agent of the Company) may disclose to any and all persons without limitation of any kind, the tax treatment and tax structure of any transaction and all materials of any kind (including opinions or other tax analyses, if any) that are provided to the Company relating to such tax treatment and structure. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. income or franchise tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. income or franchise tax treatment of the transaction. If the Company plans to disclose information pursuant to the first sentence of this paragraph, the Company shall inform those to whom it discloses any such information that they may not rely upon such information for any purpose without Houlihan Lokeys prior written consent. Houlihan Lokey is not an expert on, and nothing contained in the materials should be construed as advice with regard to, legal, accounting, regulatory, insurance, tax or other specialist matters. Houlihan Lokeys role in reviewing any information was limited solely to performing such a review as it deemed necessary to support its own advice and analysis and was not on behalf of the Committee. The materials necessarily are based on financial, economic, market and other conditions as in effect on, and the information available to Houlihan Lokey as of, the date of the materials. Although subsequent developments may affect the contents of the materials, Houlihan Lokey has not undertaken, and is under no obligation, to update, revise or reaffirm the materials, except as may be expressly contemplated by Houlihan Lokeys engagement letter. The materials are not intended to provide the sole basis for evaluation of the Transaction and do not purport to contain all information that may be required. The materials do not address the underlying business decision of the Company or any other party to proceed with or effect the Transaction, or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available for the Company or any other party. The materials do not constitute any opinion, nor do the materials constitute a recommendation to the Board, the Committee, the Company, any security holder of the Company or any other party as to how to vote or act with respect to any matter relating to the Transaction or otherwise or whether to buy or sell any assets or securities of any company. Houlihan Lokeys only opinion is the opinion, if any, that is actually delivered to the Committee. The materials may not reflect information known to other professionals in other business areas of Houlihan Lokey and its affiliates. The preparation of the materials was a complex process involving quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaption and application of these methods to the unique facts and circumstances presented and, therefore, is not readily susceptible to partial analysis or summary description. Furthermore, Houlihan Lokey did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. Accordingly, the analyses contained in the materials must be considered as a whole. Selecting portions of the analyses, analytic methods and factors without considering all analyses and factors could create a misleading or incomplete view. The materials reflect judgments and assumptions with regard to industry performance, general business, economic, regulatory, market and financial conditions and other matters, many of which are beyond the control of the participants in the Transaction. Any estimates of value contained in the materials are not necessarily indicative of actual value or predictive of future results or values, which may be significantly more or less favorable. Any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which any assets, businesses or securities may actually be sold. The materials do not constitute a valuation opinion or credit rating. In preparing the materials, Houlihan Lokey has not conducted any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (contingent or otherwise) of the Company or any other party and has no obligation to evaluate the solvency of the Company or any other party under any law. CONFIDENTIAL All budgets, projections, PRELIMINARY estimates, SUBJECT financial TO FURTHER analyses, REVIEW reports and other information with respect to operations (including estimates of potential cost savings and expenses) reflected in the
Disclaimer (cont.) All budgets, projections, estimates, financial analyses, reports and other information with respect to operations (including estimates of potential cost savings and expenses) reflected in the materials have been prepared by management of the relevant party or are derived from such budgets, projections, estimates, financial analyses, reports and other information or from other sources, which involve numerous and significant subjective determinations made by management of the relevant party and/or which such management has reviewed and found reasonable. The budgets, projections and estimates (including, without limitation, estimates of potential cost savings and synergies) contained in the materials may or may not be achieved and differences between projected results and those actually achieved may be material. Houlihan Lokey has relied upon representations made by management of the Company and other participants in the Transaction that such budgets, projections and estimates have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management (or, with respect to information obtained from public sources, represent reasonable estimates), and Houlihan Lokey expresses no opinion with respect to such budgets, projections or estimates or the assumptions on which they are based. The scope of the financial analysis contained herein is based on discussions with the Company (including, without limitation, regarding the methodologies to be utilized), and Houlihan Lokey does not make any representation, express or implied, as to the sufficiency or adequacy of such financial analysis or the scope thereof for any particular purpose. Houlihan Lokey has assumed and relied upon the accuracy and completeness of the financial and other information provided to, discussed with or reviewed by it without (and without assuming responsibility for) independent verification of such information, makes no representation or warranty (express or implied) in respect of the accuracy or completeness of such information and has further relied upon the assurances of the Company and other participants in the Transaction that they are not aware of any facts or circumstances that would make such information inaccurate or misleading. In addition, Houlihan Lokey has relied upon and assumed, without independent verification, that there has been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company or any other participant in the Transaction since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to, discussed with or reviewed by Houlihan Lokey that would be material to its analyses, and that the final forms of any draft documents reviewed by Houlihan Lokey will not differ in any material respect from such draft documents. The materials are not an offer to sell or a solicitation of an indication of interest to purchase any security, option, commodity, future, loan or currency. The materials do not constitute a commitment by Houlihan Lokey or any of its affiliates to underwrite, subscribe for or place any securities, to extend or arrange credit, or to provide any other services. In the ordinary course of business, certain of Houlihan Lokeys affiliates and employees, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, the Company, any Transaction counterparty, any other Transaction participant, any other financially interested party with respect to any transaction, other entities or parties that are mentioned in the materials, or any of the foregoing entities or parties respective affiliates, subsidiaries, investment funds, portfolio companies and representatives (collectively, the Interested Parties), or any currency or commodity that may be involved in the Transaction. Houlihan Lokey provides mergers and acquisitions, restructuring and other advisory and consulting services to clients, which may have in the past included, or may currently or in the future include, one or more Interested Parties, for which services Houlihan Lokey has received, and may receive, compensation. Although Houlihan Lokey in the course of such activities and relationships or otherwise may have acquired, or may in the future acquire, information about one or more Interested Parties or the Transaction, or that otherwise may be of interest to the Company, Houlihan Lokey shall have no obligation to, and may not be contractually permitted to, disclose such information, or the fact that Houlihan Lokey is in possession of such information, to the Company or to use such information on the Companys behalf. Houlihan Lokeys personnel may make statements or provide advice that is contrary to information contained in the materials. CONFIDENTIAL PRELIMINARY SUBJECT TO FURTHER REVIEW
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