AMAC American Medical Alert Corp. (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

(Rule 14a-101)

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of

 

the Securities Exchange Act of 1934 (Amendment No.  )

 

Filed by the Registrant þ

   

Filed by a Party other than the Registrant o

 

Check the appropriate box:

þ Preliminary Proxy Statement

o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o Definitive Proxy Statement

o Definitive Additional Materials

o Soliciting Material Pursuant to §240.14a-12

 

AMERICAN MEDICAL ALERT CORP.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

o	No fee required.
þ	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)	Title of each class of securities to which transaction applies:   common stock, par value $0.01 per share (the “common stock”)
	(2)	Aggregate number of securities to which transaction applies:   10,335,222 shares of common stock (including (1) 9,620,153 shares of common stock (including restricted stock) outstanding as of October 28, 2011 (2) 657,821 shares of common stock issuable upon exercise of “in the money” outstanding stock options, (3) 46,500 shares of common stock issuable upon vesting of restricted stock units and (4) 10,748 shares of common stock issuable upon exercise of warrants).

	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):   Solely for the purpose of calculating the filing fee, the underlying value of the transaction was calculated as the sum of (1) 9,620,153 shares of common stock (including restricted stock), multiplied by $8.55 per share, (2) 657,821 shares of common stock issuable upon exercise of stock options with an exercise price below $8.55 multiplied by $4.8696 per option (which is the difference between $8.55 and the $3.6804 weighted average exercise price of such options), (3) 46,500 shares of common stock issuable upon vesting of restricted stock units, multiplied by $8.55 per share and (4) 10,748 shares of common stock issuable upon exercise of warrants with an exercise price below $8.55 multiplied by $2.62 per warrant (which is the difference between $8.55 and the $5.93 weighted average exercise price of such warrants).
	(4)	Proposed maximum aggregate value of transaction:  $85,881,368.
	(5)	Total fee paid:   $9,842, calculated by multiplying .00011460 by the proposed maximum aggregate value of transaction of $85,881,368.

o	Fee paid previously with preliminary materials.
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

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	(2)	Form, Schedule or Registration Statement No.:
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	(4)	Date Filed:

 

 

Preliminary Proxy Statement — Subject to Completion

 

AMERICAN MEDICAL ALERT CORP.

36-36 33rd Street

Long Island City, New York  11106

 

[•] , 2011

Dear Shareholder:  

 

Our board of directors has unanimously approved an agreement and plan of merger and a merger pursuant to which American Medical Alert Corp., or AMAC, will become a wholly owned subsidiary of Tunstall Healthcare Group Limited, or Tunstall.

 

If the merger is completed, holders of AMAC common stock will be entitled to receive (1) $8.55 in cash, without interest and less applicable withholding taxes, and (2) one contingent payment right, or CPR , providing for an opportunity for certain future cash payments subject to and in accordance with the CPR agreement described in the proxy statement attached to this letter, for each share of AMAC common stock that they own at the effective time of the merger.  Receipt of the merger consideration will generally be taxable to our shareholders for U.S. federal income tax purposes.   The cash portion of the merger consideration represents a premium of approximately 50% over the closing sale price of AMAC common stock on September 22, 2011, the last trading day prior to the public announcement of the merger agreement.  In addition, it represents a premium of approximately 64.6%, 59.0% and 56.3%, respectively, over the one, three and six month average closing share prices, and a premium of approximately 51.0% over the one year average closing share price, of AMAC’s common stock, prior to market close on September 22, 2011.

 

Our shareholders will be asked at a special meeting to adopt the merger agreement.   Our shareholders will also be asked to approve   any adjournments of the special meeting, if determined necessary by AMAC, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to adopt the merger agreement, and to approve, by non-binding, advisory vote, certain compensation arrangements for AMAC’s named executive officers in connection with the merger.

 

Our board of directors unanimously recommends that all of our shareholders vote FOR the adoption of the merger agreement.  Additionally, our board of directors unanimously recommends that all of our shareholders vote FOR the proposal regarding adjournment of the special meeting, and FOR the proposal regarding certain merger-related executive compensation arrangements.

 

We cannot complete the merger unless the proposal to adopt the merger agreement is approved by the affirmative vote of the holders of at least two-thirds of the outstanding shares of AMAC common stock entitled to vote thereon.   The failure to vote your shares of common stock or to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote AGAINST the proposal to adopt the merger agreement.   Each holder of AMAC common stock is entitled to one vote per share.  Proxies returned to us that are properly signed and dated but not marked to indicate your voting preference will be counted as votes FOR adoption of the merger agreement, FOR approval of adjournments of the special meeting, if determined necessary by AMAC, and FOR the proposal regarding certain merger-related executive compensation arrangements.

 

The date, time and place of the special meeting to consider and vote upon the proposals described above are as follows:

 

[•] , 2011

[•] a.m., local time

Moses & Singer LLP

405 Lexington Avenue, 12 th floor

New York, New York  10174

 

The proxy statement attached to this letter provides you with information about the special meeting of our shareholders and the proposed merger. We encourage you to read the entire proxy statement carefully.

 

Your vote is very important. Whether or not you plan to attend the special meeting, if you are a holder of AMAC common stock please complete, sign, date and mail the enclosed proxy card or voting instruction form to us.  If you attend the special meeting and follow the procedures described in the proxy statement, you may vote in person even if you previously returned your proxy.

 

 

If you have any questions or need assistance voting your shares of AMAC common stock, please contact Okapi Partners LLC, our proxy solicitor, by telephone at (877) 259-6290 (toll-free within the U.S. and Canada) or via email at info@okapipartners.com .

 

Sincerely,     Howard M. Siegel   Chairman of the Board of Directors

 

The merger has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission.  Neither the Securities and Exchange Commission nor any state securities commission has passed upon the merits or fairness of the merger or upon the adequacy of the information contained in this document or the accompanying proxy statement. Any representation to the contrary is a criminal offense.

 

The proxy statement is dated [•] , 2011, and is first being mailed, with the form of proxy card, to our shareholders on or about [•] , 2011.

 

 

AMERICAN MEDICAL ALERT CORP.

36-36 33rd Street

Long Island City, New York  11106

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

Time:

[•] a.m., local time, on [•] , 2011

 

Place:

Moses & Singer LLP 405 Lexington Avenue, 12 th floor New York, New York  10174

 

Items of Business:	1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of September 22, 2011, by and among American Medical Alert Corp., or AMAC, Tunstall Healthcare Group Limited, or Tunstall, and Monitor Acquisition Corp., a wholly owned subsidiary of Tunstall, as it may be amended from time to time.
	2. To consider and vote upon a proposal to approve any adjournments of the special meeting, if determined necessary by AMAC, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to adopt the merger agreement.
	3. To approve, by non-binding, advisory vote, certain compensation arrangements for AMAC’s named executive officers in connection with the merger.

 

Record date:

You may vote if you were a shareholder of record of AMAC as of the close of business on [•] , 2011.

 

The merger agreement and other proposals are described more fully in the proxy statement of which this notice forms a part.  Please give your careful attention to all of the information in the proxy statement, including the annexes.

 

Only holders of record of AMAC common stock at the close of business on [•], 2011, the record date, or their proxies can vote at the special meeting or any adjournment or postponement of the special meeting.   Adoption of the merger agreement requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of AMAC common stock entitled to vote thereon on the record date.

 

 

Your vote is important.   Whether or not you expect to attend the special meeting in person, we urge you to complete, sign, date and return the enclosed proxy card or voting instruction form at your earliest convenience.  Instructions for voting your shares are included on the enclosed proxy card or voting instruction form.  If you attend the special meeting and follow the procedures described in the proxy statement, you may vote in person even if you previously returned your proxy.  You may also revoke your proxy in the manner described in the proxy statement before it has been voted at the special meeting.  If you have any questions about the proposals or about your shares, please contact Okapi Partners LLC, our proxy solicitor, by telephone at (877) 259-6290 (toll-free within the U.S. and Canada) or via email at info@okapipartners.com .

By Order of the Board of Directors,     Richard Rallo Corporate Secretary

 

Long Island City, New York

[•] , 2011

 

 

 

 

 

 

 

 

 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This proxy statement, and the documents to which we refer in this proxy statement, contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that involve risks and uncertainties, as well as assumptions and information that are based on the current beliefs and expectations of the management of AMAC.  All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, among other things, any projections of earnings, revenues, cash flow, net sales or other financial items; any statements of the plans, strategies and objectives of management for future operations, statements concerning whether and when the proposed merger with Tunstall will close, whether and when conditions to the proposed merger will be satisfied, the effect of the proposed merger on our business and operating results, and whether and when payments will be made under the CPR agreement; any statements concerning proposed new products or services; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.  In addition to the foregoing, when used in this proxy statement, the words “anticipate,” “believe,” “plan,” “estimate,” “expect,” and “intend” and other similar expressions, as they relate to AMAC or its management or shareholders, are intended to identify forward-looking statements.

 

Such forward-looking statements, whether expressed or implied, reflect the current views of AMAC’s directors and officers with respect to future events and are subject to a number of known and unknown risks, delays, uncertainties and other important factors which could cause the actual results of AMAC to differ materially from those implied by such forward-looking statements, due to a number of factors, many of which are beyond AMAC’s control, which include, but are not limited to, the risks described in AMAC’s filings with the SEC, including AMAC’s Annual Report on Form 10-K for the year ended December 31, 2010, as amended, and its subsequent Quarterly Reports on Form 10-Q; and the following important factors and assumptions that could cause actual results to differ materially from the results, performance or other expectations implied or expressed in any forward-looking statements:

 

·

the failure of the merger to be completed;

 

·

the time at which the merger is completed;

 

·

the failure to obtain approval and adoption of the merger agreement by our shareholders;

 

·

the failure to satisfy the other conditions to the merger, including regulatory approval;

 

·

the likelihood following the merger that the payments under the CPRs will be triggered;

 

·

the diversion of our management's attention from ongoing business concerns;

 

·

the potential difficulties for AMAC’s employee retention as a result of the announcement or completion of the merger;

 

·

the effect of the announcement of the merger on our business relationships, operating results and business generally;

 

·

the outcome of any pending or future litigation and administrative claims;

 

·

the amount of the costs, fees, expenses and charges related to the merger; and

 

·

the effects of the local and national economic, credit and capital market conditions on the economy in general.

 

If any of these risks or uncertainties materialize or any of AMAC’s assumptions prove incorrect, results of AMAC could differ materially from the expectations in these statements.

 

Consequently, all of the forward-looking statements AMAC makes in this document are qualified by the information contained or incorporated by reference herein, including, but not limited to (a) the information contained under this heading and (b) the information contained under the headings “Risk Factors” and “Business” and information in our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010, as amended, and its subsequent Quarterly Reports on Form 10-Q.  See “Where You Can Find More Information” beginning on page 78.  AMAC is under no obligation to publicly revise any forward-looking statement contained or incorporated herein to reflect any future events or occurrences and does not undertake to do so.

 

You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by AMAC or persons acting on AMAC’s behalf.

 

 

SUMMARY

 

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you.  To understand the merger fully and for a more complete description of the provisions of the merger, you should read carefully this entire proxy statement and the other documents to which we refer you. See "Where You Can Find More Information."  References to captioned sections in this summary and elsewhere in this proxy statement are references to the relevant text of this proxy statement that follows this summary section.  The merger agreement is attached as Annex A to this proxy statement. We encourage you to read the merger agreement as it is the legal document that governs the merger.

 

Throughout this proxy statement, "AMAC," “we," "us" and "our" refer to American Medical Alert Corp., "Tunstall" refers to Tunstall Healthcare Group Limited, and "merger sub" refers to Monitor Acquisition Corp.  Also, we refer to the merger between AMAC and merger sub as the "merger," and the Agreement and Plan of Merger, dated as of September 22, 2011, by and among Tunstall, merger sub and AMAC, as it may be amended from time to time, as the "merger agreement."

 

Parties to the Merger (Page 19)

 

AMAC was founded and incorporated in New York in 1981.  AMAC is a healthcare communications company dedicated to the provision of support services to the healthcare community.  AMAC’s product and service portfolio includes Personal Emergency Response Systems (PERS) and emergency response monitoring, electronic medication reminder devices, disease management monitoring appliances and healthcare communication solutions services. AMAC operates nine U.S.-based communication centers to support the delivery of high quality, healthcare communications.

 

Additional information regarding AMAC is contained in our filings with the SEC.  See "Where You Can Find More Information."

 

Tunstall Healthcare Group Limited, which we refer to as Tunstall, is a Private Company Limited by Shares incorporated in England and Wales.   Tunstall is a leading provider of telecare/telehealth solutions.  Operating in more than 30 countries and employing over 1,100 people, Tunstall supports 2.5 million people around the world. Tunstall's philosophy is simple - to protect, support and care for people - by providing healthcare technology and services that enable anyone requiring support and reassurance, such as older people or those with long term needs, to lead an independent life with dignity and reassurance.  Tunstall provides complete and fully-integrated telecare and telehealth solutions for home, assisted living and specialist care environments, hospital communication systems, associated support services, response centre software systems and monitoring services.

 

Monitor Acquisition Corp., which we refer to as merger sub, is a New York corporation and a wholly owned subsidiary of Tunstall that was formed by Tunstall solely for the purpose of facilitating the acquisition of AMAC.  To date, merger sub has not carried on any activities other than those related to its formation and completing the transactions contemplated by the merger agreement.  By operation of the merger, merger sub will be merged with and into AMAC, merger sub’s separate existence will cease and AMAC will become a wholly-owned subsidiary of Tunstall.

 

Each of Tunstall and merger sub are affiliates of Charterhouse Capital Partners LLP, which we refer to as Charterhouse. Charterhouse is a London-based private equity firm, which has specialized in management buyout investments in European companies for over 30 years and which has a long-standing affiliation with US investors.  Charterhouse has investments across a range of sectors, including healthcare, business/support services companies, financial services, leisure, and consumer brands.

 

The Merger (Page 20)

 

Our board of directors has approved a merger agreement and a merger whereby AMAC will become a wholly owned subsidiary of Tunstall upon completion of the merger. If the merger agreement is approved and adopted by AMAC shareholders, and subject to other closing conditions as described below in the section captioned "The Merger Agreement—Conditions to the Merger," merger sub, a newly formed merger subsidiary of Tunstall, will be merged with and into AMAC, and AMAC will be the surviving company in the merger.  As a result of the merger, AMAC will cease to be a publicly traded company.  If the merger is completed, you will not own any shares of the capital stock of the surviving company.   See "The Merger—Description of the Merger."

 

Merger Consideration (Page 20)

 

If the merger is completed, you will be entitled to receive, in exchange for each share of AMAC common stock that you own at the effective time of the merger: (1) $8.55 in cash, without interest, and (2) one contingent payment right, or CPR , providing for an opportunity for certain future cash payments subject to and in accordance with the CPR agreement described below.  We refer to the consideration payable in the merger described in clauses (1) and (2) together as the merger consideration.  See “The Merger Agreement — Treatment of AMAC Common Stock, Options, Restricted Stock, Restricted Stock Units and Warrants,” and “Description of the CPRs.”

 

 

After the merger is completed, you will have the right to receive the merger consideration, but you will no longer have any rights as a shareholder of AMAC.  In the case of shares of AMAC common stock represented by certificates, you will receive your portion of the merger consideration after exchanging your stock certificates in accordance with the instructions contained in a letter of transmittal to be sent to you shortly after completion of the merger.   If your shares of common stock are held in “street name” by your bank, broker or other nominee, you may receive instructions from your bank, broker or other nominee as to what action, if any, is necessary to effect the surrender of your shares of common stock in exchange for the per share merger consideration.

 

The CPRs (Page 65)

 

Concurrently with the execution of the merger agreement, AMAC, Tunstall and each of Howard Siegel and Gregory Fortunoff, serving jointly as the shareholder representative, entered into a Contingent Payment Rights agreement, which we refer to as the CPR agreement, governing the terms of the CPRs.  Under the CPR agreement, Tunstall is obligated to pay to all holders of CPRs, and each holder of a CPR is entitled to receive, a pro rata portion of the first $5 million, plus 66.66% of any amounts in excess of $5 million, of proceeds received by the surviving company from either (i) a sale of AMAC’s interest in Lifecomm LLC, which we refer to as Lifecomm, (ii) an initial public offering of Lifecomm or (iii) a liquidation or dissolution of Lifecomm, each of which we refer to as a Lifecomm liquidity event.  In addition, if Tunstall is acquired by a third party or there is otherwise a change of control of Tunstall prior to a Lifecomm liquidity event, then the holders of CPRs will have the right, in lieu of a payment triggered by a Lifecomm liquidity event, as elected by the shareholder representatives and subject to the terms and conditions of the CPR agreement, to cause Tunstall to pay to each holder of a CPR $0.50 per CPR so long as certain financial hurdles relating to AMAC’s interest in Lifecomm are achieved.  If, the shareholder representatives elect to cause Tunstall to pay $0.50 per CPR, and following dispute resolution mechanics described in the CPR agreement the financial hurdles are determined to have not been met, the shareholder representatives will also have the right to cause Tunstall to use commercially reasonable efforts to sell AMAC’s interest in Lifecomm, subject to any required consents required by AMAC’s agreement with Lifecomm, which sale will be deemed to be a Lifecomm liquidity event and the proceeds will be paid by Tunstall as set forth above.  Any amounts payable by Tunstall to the holders of CPRs will be reduced by expenses of Tunstall, AMAC and the shareholder representatives relating to maintenance of the CPRs and holding or disposing of AMAC’s interest in Lifecomm.  CPRs will not be transferable, except in the limited circumstances specified in the CPR agreement.

 

There is no assurance that any payment will be made under the CPRs. There are numerous risks associated with the CPRs, including whether or not a Lifecomm liquidity event will occur, whether or not a change of control of Tunstall will occur, and whether or not  the financial hurdles will also be met at the time of such change of control. In addition, the CPRs are not freely transferable.  See “Description of the CPRs”.  In addition, the tax consequences regarding the receipt of the CPRs are uncertain.  See “Certain Material U.S. Federal Income Tax Consequences.” The summary of the CPR agreement in this proxy statement is qualified in its entirety by reference to the full text of the CPR agreement, which is included as Annex B to this proxy statement.

 

Background of the Merger (Page 20)

 

Our board of directors oversaw a process of investigating potential transactions with third parties to maximize value for our shareholders that culminated with the execution of the merger agreement on September 22, 2011.  For a description of this process, including:

 

·

the solicitation of interest in strategic transactions with parties with the greatest potential interest in, and capacity for, paying full value for our long-term prospects and completing a transaction with us without undue delay;

 

·

the deliberations of our board in connection with that process and its results; and

 

·

the negotiations with Tunstall,

 

see “The Merger—Background of the Merger.”

 

Reasons for the Merger (Page 27)

 

At a meeting held on September 22, 2011, our board of directors approved the merger with Tunstall and recommended it to our shareholders.  In the course of its deliberations, our board of directors considered a number of material positive factors and a number of potentially negative factors regarding the merger described in the section entitled “The Merger — Reasons for the Merger; Recommendation of AMAC’s Board of Directors.”  Our board of directors believed that, overall, the potential benefits of the merger to AMAC’s shareholders outweighed the risks and uncertainties both of alternatives to the merger and of the merger.  Accordingly, our board of directors concluded that the merger was in the best interests of our shareholders.

 

 

Recommendation of AMAC’s Board of Directors (Page 27)

 

Our board of directors has unanimously approved resolutions:

 

·

approving the merger agreement and the merger;

 

·

determining that the merger agreement and the terms and conditions of the merger are advisable, fair to and in the best interests of AMAC and our shareholders;

 

·

directing that the merger agreement be submitted for approval and adoption at a special meeting of our shareholders; and

 

·

recommending that all of our shareholders vote for the adoption of the merger agreement.

 

Our board of directors recommends that you vote your shares of common stock FOR the proposal to adopt the merger agreement, FOR the proposal to adjourn the special meeting and FOR the non-binding proposal regarding certain merger-related executive compensation arrangements.

 

See “The Merger — Reasons for the Merger; Recommendation of AMAC’s Board of Directors.”

 

Opinion of AMAC’s Financial Advisor (Page 30)

 

In connection with the merger, AMAC’s financial advisor, Houlihan Lokey Capital, Inc., which we refer to as Houlihan Lokey, delivered a written opinion, dated September 22, 2011, to our board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by holders of AMAC common stock.  The full text of Houlihan Lokey's written opinion, which describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion, is attached to this proxy statement as Annex D.   Houlihan Lokey's opinion was furnished for the use and benefit of the board of directors (in its capacity as such) in connection with its evaluation of the merger consideration from a financial point of view and did not address any other aspect or implication of the merger.  The summary of Houlihan Lokey's opinion in the proxy statement is qualified in its entirety by reference to the full text of its written opinion.  Houlihan Lokey's opinion should not be construed as creating any fiduciary duty on Houlihan Lokey's part to any party.  Houlihan Lokey's opinion was not intended to be, and does not constitute, a recommendation to the board of directors, any security holder or any other person or entity as to how to act or vote with respect to any matter relating to the merger or otherwise.  See “The Merger — Opinion of AMAC’s Financial Advisor.”

 

Interests of AMAC’s Executive Officers and Directors in the Merger (Page 38)

 

When you consider the recommendation of our board of directors that you vote in favor of the proposal to adopt the merger agreement, you should be aware that the executive officers and directors of AMAC have interests in the merger that may be different from, or in addition to, the interests of AMAC shareholders generally.  These interests include, among others, future employment arrangements with Tunstall, the acceleration of vesting and removal of restrictions with respect to stock options and other stock awards, change of control payments and continuation of rights to indemnification and liability insurance.  Our board of directors was aware of and considered these interests, among others, when it approved the merger agreement and the merger, and in recommending that the merger agreement be adopted by the shareholders of AMAC.  See “The Merger—Interests of AMAC’s Executive Officers and Directors in the Merger.”

 

Share Ownership of, and Voting by, AMAC’s Directors and Executive Officers  (Page 16)

 

Concurrently with the execution of the merger agreement, each of our executive officers and directors (together representing ownership of approximately [•]% of AMAC common stock as of the record date) executed voting agreements, pursuant to which such individuals agreed to, among other things, vote in favor of adoption of the merger agreement and approval of the transactions contemplated thereby on the terms and subject to the conditions set forth in the voting agreements.  The voting agreements are described in additional detail in the section entitled “Voting Agreements” beginning on page 63.  The summary of the voting agreements in this proxy statement is qualified in its entirety by reference to the full text of the voting agreement, which is included as Annex C to this proxy statement.

 

In addition, each of AMAC’s executive officers and directors has informed AMAC that he or she currently intends to vote all of such holder’s shares of common stock FOR the proposal to adjourn the special meeting and FOR the non-binding proposal regarding certain merger-related executive compensation arrangements.

 

 

Key Terms of the Merger Agreement (Page 49)

 

Treatment of AMAC Common Stock, Options, Restricted Stock, Restricted Stock Units and Warrants (Page 50)

 

·

Common Stock .  At the effective time of the merger, each share of AMAC common stock, issued and outstanding (other than treasury shares of AMAC and any shares owned by Tunstall, merger sub or any wholly owned subsidiary of AMAC), will convert automatically into the right to receive (1) $8.55 in cash, without interest and less applicable withholding taxes, and (2) one CPR , providing for an opportunity for certain future cash payments subject to and in accordance with the CPR agreement described below.

 

·

Options .  At the effective time of the merger, each option to purchase shares under any stock option, stock purchase or equity compensation plan, arrangement or agreement of AMAC, or otherwise, whether vested or unvested, will be cancelled and will entitle the holder to receive an amount in cash, without interest and less applicable withholding taxes, equal to the product of the total number of shares subject to such stock option immediately prior to the effective time of the merger and the amount by which $8.55 exceeds the exercise price per share subject to such stock option, and, for each share subject to such stock option, one CPR, which will represent the rights provided for in the CPR agreement.

 

·

Restricted Stock . At the effective time of the merger, each share subject to restrictions on transfer and/or forfeiture granted under an AMAC equity plan or otherwise will become fully vested and will be converted automatically into the right to receive $8.55 in cash, without interest and less applicable withholding taxes, and one CPR, which will represent the rights provided for in the CPR agreement.

 

·

Restricted Stock Units .  At the effective time of the merger, each restricted stock unit granted under an AMAC equity plan or otherwise, whether vested or unvested, will be cancelled and the holder will be entitled to receive an amount in cash, without interest and less applicable withholding taxes , equal to the product of the total number of shares subject to such restricted stock unit immediately prior to the effective time and $8.55 in cash, and, for each share subject to such restricted stock unit, one CPR,which will represent the rights provided for in the CPR agreement.

 

·

Warrants .  At the effective time of the merger, each warrant to purchase AMAC common stock that is outstanding will be redeemed at the Black-Scholes Value of such warrant at that time, pursuant to the terms and conditions of such warrant.

 

Solicitation of Acquisition Proposals (Page 56)

 

We have agreed that we will not, and will cause our subsidiaries, and our directors, officers and employees not to (and will use our commercially reasonable efforts to cause our third party representatives not to and will not authorize any of our third party representatives to):

 

§

solicit, initiate or knowingly encourage or facilitate any inquiry, proposal or offer with respect to, or the making or completion of, any acquisition proposal, or any inquiry, proposal or offer that would reasonably be expected to lead to any acquisition proposal;

 

§

enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person other than Tunstall, merger sub or any representatives of the foregoing any information or data with respect to or for the purpose of facilitating, any acquisition proposal; or

 

§

enter into any letter of intent, definitive acquisition agreement, agreement in principle, merger agreement, option agreement, joint venture agreement or partnership agreement requiring us to abandon, terminate or materially breach our obligations under the merger agreement.

 

We have also agreed to immediately cease and cause to be terminated any and all activities, solicitations, encouragement, discussions or negotiations with any person other than Tunstall, merger sub or any of their representatives conducted previously with respect to any acquisition proposal.

 

 

However, if at any time following the date of the merger agreement and prior to the time our shareholders adopt the merger agreement (i) we receive an unsolicited, bona fide written acquisition proposal that did not result from a material breach of our obligations under the preceding paragraph, and (ii) our board of directors determines in good faith (after consultation with outside counsel and a financial advisor) that such acquisition proposal constitutes or is reasonably likely to lead to a superior proposal, and (after consultation with outside counsel)   that the failure to take the actions would be reasonably likely to constitute a breach of its fiduciary duties under applicable law, we may take certain actions prohibited by the preceding paragraphs, so long as we comply with certain terms of the merger agreement. Furthermore, at any time before the merger agreement is adopted by our shareholders, we may terminate the merger agreement and enter into any acquisition, merger or similar agreement, which we refer to as an alternative acquisition agreement, with respect to a superior proposal, so long as we comply with certain terms of the merger agreement, including paying a termination fee to Tunstall.  See “The Merger Agreement—Termination Fees.”

 

Conditions to the Merger (Page 59)

 

The respective obligations of AMAC, Tunstall and merger sub to complete the merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the merger agreement by our shareholders, the expiration or termination of the waiting period under the HSR Act and any timing agreement with any government entity has expired or been terminated, the absence of any restraining orders, injunctions or other legal restraints prohibiting the merger, the accuracy of the representations and warranties by the parties and compliance by the parties with their respective obligations under the merger agreement.  The obligation of Tunstall and merger sub to complete the merger is also subject to the absence of any event, change or occurrence that has had individually or in the aggregate, a material adverse effect on us, as described under “The Merger Agreement—Representations and Warranties” beginning on page 51.

 

Termination (Page 61)

 

AMAC and Tunstall may, by mutual written consent, terminate the merger agreement and abandon the merger at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by our shareholders.

 

The merger agreement may also be terminated and the merger abandoned at any time prior to the effective time of the merger by either Tunstall or AMAC, if:

 

·

the merger has not been completed on or before March 22, 2012, which we refer to as the outside date; or

 

·

if any court of competent jurisdiction shall have issued a judgment, order, injunction, rule or decree, or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated by the merger agreement and such judgment, order, injunction, rule, decree or other action shall have become final and nonappealable; or

 

·

if our shareholder meeting has been held and completed and our shareholders have not adopted the merger agreement at such meeting or any adjournment or postponement of such meeting.

 

The merger agreement may also be terminated by AMAC, if:

 

·

Tunstall shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach or failure to perform, if occurring or continuing on the date on which the closing of the merger would otherwise occur would result in the failure of any of the conditions precedent to the obligations of AMAC to complete the merger to be satisfied and such breach or failure to perform cannot be or has not been cured or has not been waived by the earlier of (i) the outside date and (ii) 30 days after the giving of written notice to Tunstall of such breach or failure; or

 

·

at any time prior to the adoption of the merger agreement by our shareholders, if (A) subject to complying in all material respects the with terms and conditions set forth below in “The Merger Agreement—Solicitation of Acquisition Proposals” beginning on page 56, our board of directors authorizes us to enter into an alternative acquisition agreement with respect to a superior proposal, (B) we pay the termination fee discussed below and (C) concurrently with the termination of the merger agreement, we enter into an alternative acquisition agreement with respect to the superior proposal.

 

The merger agreement may also be terminated by Tunstall, if:

 

§

AMAC shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach or failure to perform, if occurring or continuing on the date on which the closing of the merger would otherwise occur would result in the failure of any of the conditions precedent to the obligations of the Tunstall to complete the merger to be satisfied and cannot be or has not been cured or has not been waived by the earlier of (i) the outside date and (ii) 30 days after the giving of written notice to AMAC of such breach or failure; or

 

§

AMAC or our board of directors (or any committee thereof) shall (i) at any time prior to obtaining the shareholder approval, have effected a recommendation change adverse to the Tunstall, (ii) at any time prior to the adoption of the merger agreement by our shareholders, approve, adopt, publicly endorse or recommend an acquisition proposal, or cause or permit AMAC or any of our subsidiaries to enter into, an alternative acquisition agreement for an acquisition proposal (other than an acceptable confidentiality agreement), or (iii) have materially breached its obligations discussed below in “The Merger Agreement—Solicitation of Acquisition Proposals” beginning on page 56, in any material respect adverse to Tunstall.

 

 

Termination Fees (Page 62)

 

If the merger agreement is terminated in certain circumstances described under “The Merger Agreement—Termination Fees” beginning on page 62, AMAC may be obligated to pay a termination fee of $3.5 million.

 

Remedies (Page 62)

 

In the event that the termination fee discussed above under “Termination Fees” becomes payable pursuant to the merger agreement, the right of Tunstall to receive such amount will constitute each of Tunstall’s and merger sub’s sole and exclusive remedy for any termination of the merger agreement regardless of the circumstances giving rise to such termination, except that the termination of the merger agreement will not relieve any of the parties from liability arising out of or resulting from fraud or any willful or intentional breach of any representation, warranty or covenant contained in the merger agreement occurring prior to termination.

 

The Special Meeting (Page 15)

 

Time, Place and Purpose of the Special Meeting (Page 15)

 

The special meeting will be held at the offices of Moses & Singer LLP, 405 Lexington Avenue, 12th Floor, New York, New York 10174, on [•], 2011 at [•] a.m., local time.  We refer to the special meeting and any adjournments or postponements thereof as the special meeting.

 

At the special meeting, holders of common stock of AMAC, par value $0.01 per share, which we refer to as AMAC common stock, will be asked to approve the proposal to adopt the merger agreement, to approve any adjournments of the special meeting, if determined necessary by AMAC, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to adopt the merger agreement, and to approve, by non-binding, advisory vote, certain compensation arrangements for certain of AMAC’s named executive officers in connection with the merger.

 

Record Date, Voting Power and Quorum (Page 15)

 

You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of common stock at the close of business on [•], 2011, which AMAC has set as the record date for the special meeting and which we refer to as the record date. You will have one vote for each share of common stock that you owned on the record date.  As of the record date, there were [•] shares of common stock outstanding and entitled to vote at the special meeting, held by approximately [•] holders of record.  A majority of the shares of common stock outstanding at the close of business on the record date and entitled to vote, present in person or represented by proxy, at the special meeting constitutes a quorum for the purposes of the special meeting.

 

Vote Required (Page 16)

 

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of at least two-thirds of all of the outstanding shares of AMAC common stock entitled to vote thereon.  If you fail to grant a proxy or vote in person at the special meeting, abstain from voting, or do not provide your broker, bank or other nominee with voting instructions, this will have the same effect as a vote AGAINST the proposal to adopt the merger agreement.

 

For more information relating to the agreement by our executive officers and directors to vote in favor of adoption of the merger agreement, see “Voting Agreements” beginning on page 63.

 

Approval of the proposal to approve any adjournments of the special meeting, if determined necessary by AMAC, requires the affirmative vote of holders of a majority of the votes cast on the matter at the special meeting.  If you abstain from voting, or if you fail to submit a proxy or to vote in person at the special meeting or do not provide your bank, broker or other nominee with voting instructions, as applicable, such actions will not count as votes “cast” and, as a result, will not have any effect on the proposal to adjourn the special meeting.  

 

Approval of the non-binding proposal regarding certain merger-related executive compensation arrangements requires the affirmative vote of holders of a majority of the votes cast on the matter at the special meeting. If you abstain from voting, or if you fail to submit a proxy or to vote in person at the special meeting or do not provide your broker, bank or other nominee with voting instructions, as applicable, such actions will not count as votes “cast” and, as a result, will not have any effect on the non-binding proposal regarding certain merger-related executive compensation arrangements.  Shareholders should note that a pproval of these compensation arrangements is not a condition to completion of the merger, and the vote with respect to this proposal is advisory only.

 

 

Regulatory Approvals (Page 47)

 

Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which we refer to as the HSR Act, the merger may not be completed until notification and report forms have been filed with the U.S. Federal Trade Commission, which we refer to as the FTC, and the Antitrust Division of the U.S. Department of Justice, which we refer to as the Antitrust Division, and until the expiration of a 30 calendar day waiting period, or the early termination of that waiting period, following the parties’ filing of their respective notification and report forms. If the FTC or the Antitrust Division issues a Request for Additional Information and Documentary Material prior to the expiration of the waiting period, the parties must observe a second 30 calendar day waiting period, which would begin to run only after both parties have substantially complied with the request for information, unless the waiting period is terminated earlier or extended with the consent of the parties.  On October 17, 2011, AMAC and Tunstall filed their respective notification and report forms under the HSR Act with the FTC and the Antitrust Division.  AMAC and Tunstall each received confirmation of early termination of the initial waiting period under the HSR Act effective as of October 28, 2011.

 

Material U.S. Federal Income Tax Consequences of the Merger (Page 69)

 

In general, the receipt by a U.S. holder of cash and CPRs in exchange for shares of AMAC common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes (and may also be a taxable transaction under applicable state, local, and foreign income or other tax laws).  The amount of gain or loss a U.S. holder recognizes, and the timing and potentially the character of a portion of such gain or loss, depends in part on the U.S. federal income tax treatment of the CPRs, with respect to which there is uncertainty.

 

Tax matters can be complicated.  AMAC shareholders are strongly urged to consult their tax advisors as to the specific tax consequences to them of the merger, and in particular, in connection with the legal and factual uncertainty regarding the valuation and tax treatment of the CPRs.  See “Certain Material U.S. Federal Income Tax Consequences” for a more detailed discussion.

 

Market Price and Dividend Data (Page 74)

 

Our common stock is listed on The NASDAQ Capital Market under the symbol “AMAC.” The closing sale price of our common stock on The NASDAQ Capital Market on September 22, 2011, the last trading day prior to the public announcement of the merger, was $5.69 per share.  On [•], 2011, the most recent practicable date before this proxy statement was mailed to our shareholders, the closing sale price of our common stock on The NASDAQ Capital Market was $[•] per share.  We urge you to obtain current market quotations for our common stock in connection with voting your shares of our common stock.

 

Delisting and Deregistration of AMAC Common Stock (Page 47)

 

If the merger is completed, our common stock will no longer be traded on The NASDAQ Capital Market and will be deregistered under the Exchange Act.   As such, we would no longer file periodic reports with the SEC on account of our common stock.

 

No Appraisal Rights (Page 48)

 

The New York Business Corporation Law does not provide for shareholders to have the right to seek appraisal of the value of their shares of AMAC common stock in connection with the merger.

 

Litigation Relating to the Merger (Page 47)

 

Following the September 22, 2011 announcement of the merger agreement, on or about September 28, 2011, a purported class action lawsuit was filed against AMAC and the members of our board of directors by Joseph Weiss, on behalf of himself and all similarly situated shareholders.  The complaint was filed in the Supreme Court of the State of New York, County of Nassau.  The lawsuit asserts claims for breach of fiduciary duty against AMAC’s directors, some of whom are also officers.  The lawsuit seeks injunctive relief preventing the merger, recovery of damages as a result of the alleged actions of AMAC’s directors, and costs, and disbursements of the lawsuit, including attorneys', accountants’ and experts’ fees.

 

 

On or about September 30, 2011, a purported shareholder’s class action complaint was filed against AMAC, the members of our board of directors, Tunstall and merger sub by Diane Kent, on behalf of herself and all similarly situated shareholders.  The complaint was filed in the Supreme Court of the State of New York, County of Queens.  The lawsuit asserts claims for breach of fiduciary duty against the members of our board of directors and aiding and abetting breach of fiduciary duty against AMAC, Tunstall and merger sub.  The lawsuit seeks to enjoin the defendants from completing the merger, commencement of an unspecified sales process, imposition of a constructive trust, attorneys' and experts’ fees and costs and other equitable relief.

 

On or about October 24, 2011, a purported shareholder’s class action complaint was filed against AMAC and the members of our board of directors by Joyce Fauci, on behalf of herself and all similarly situated shareholders.  The complaint was filed in the Supreme Court of the State of New York, County of Queens.  The lawsuit asserts claims for breach of fiduciary duty against the members of our board of directors and aiding and abetting breach of fiduciary duty against AMAC.  The lawsuit seeks to enjoin the defendants from completing the merger, rescission or rescissory damages, an accounting for damages caused by the defendants and all profits and special benefits obtained as a result of the alleged breach of fiduciary duty, and costs of the lawsuit, including attorneys', and experts’ fees.

 

 

AMAC and our board of directors believe that these lawsuits are without merit and intend to defend them vigorously.

 

QUESTIONS AND ANSWERS ABOUT THE SHAREHOLDERS MEETING AND THE MERGER

 

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the shareholders meeting. These questions and answers may not address all questions that may be important to you as a shareholder of AMAC.  Please refer to the preceding “Summary” section and the more detailed information contained elsewhere in this proxy statement, including the annexes to this proxy statement, which you should read carefully and in their entirety.

 

 

 

 

 

 

A:

Holders of options, whether vested or unvested, with an exercise price below the $8.55 cash consideration per share will receive, for each share of AMAC common stock subject to such option, (1) a cash payment equal to the difference between $8.55 and the exercise price of the option, without interest and less any applicable withholding taxes, and (2) one CPR.

 

 

 

 

 

 

 

 

Q.	What happens if the merger is not completed?

 

 

 

 

Tax matters can be complicated.  AMAC shareholders are strongly urged to consult their tax advisors as to the specific tax consequences to them of the merger, and in particular, in connection with the legal and factual uncertainty regarding the valuation and tax treatment of the CPRs.  See “Certain Material U.S. Federal Income Tax Consequences” for a more detailed discussion.

 

 

 

 

 

 

 

 

 

 

 

 

·

The approval of a proposal to adopt the merger agreement, which provides for the acquisition of AMAC by Tunstall;

 

·

The approval of a proposal to approve any adjournments of the special meeting, if determined necessary by AMAC, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to adopt the merger agreement; and

 

·

The approval by non-binding, advisory vote, of certain compensation arrangements for our named executive officers in connection with the merger.

 

 

 

 

 

 

 

 

 

 

 

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name.”  This proxy statement has been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, the shareholder of record.  As the beneficial owner of shares held in street name, you have the right to direct your broker, bank or other nominee how to vote your shares by using the voting instruction form provided by such party with this proxy statement.  If you do not provide instructions on how to vote your shares to your broker, bank or other nominee, your shares will not be counted as present for purposes of establishing a quorum and will not be voted at the special meeting.  Such failure to provide voting instructions will also have the same effect as a vote AGAINST the proposal to adopt the merger agreement.

 

 

 

 

 

 

  If your shares of common stock are held in “street name,” they will not be voted if you do not provide your broker, bank or other nominee with voting instructions.  Currently, brokers, banks or other nominees have the authority to vote shares of common stock for which their customers do not provide voting instructions on certain “routine” matters.  However, brokers, banks and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposals included in this proxy statement.  As a result, absent specific instructions from you, as the beneficial owner of such shares of AMAC common stock, brokers, banks and other nominees are not empowered to, and will not, vote those shares of common stock on any of the proposals to be voted on at the special meeting.  This will have the same effect as a vote AGAINST the proposal to adopt the merger agreement.

 

 

 

·

sending a written, dated notice to our Corporate Secretary stating that you would like to revoke your proxy;

 

·

signing another proxy card with a later date and returning it to us prior to the special meeting; or

 

·

attending the special meeting and voting in person by ballot (your attendance at the special meeting will not, by itself, revoke your proxy, you must vote in person at the special meeting to revoke your proxy).

 

If you hold your shares of common stock in “street name,” you should contact your broker, bank or other nominee for instructions regarding how to change your vote.

 

 

 

Concurrently with the execution of the merger agreement, each of our executive officers and directors (together representing ownership of approximately [•]% of AMAC common stock as of the date of this proxy statement) executed voting agreements, pursuant to which such individuals agreed to, among other things, vote in favor of adoption of the merger agreement and approval of the transactions contemplated thereby on the terms and subject to the conditions set forth in the voting agreements.  See “Voting Agreements.”

 

 

 

 

 

 

 

 

 

 

 

 

A.	It means that you have multiple accounts with brokers or our transfer agent.  Please vote all of these shares.

 

 

 

 

 

 

 

 

Q.	Who can help answer my other questions?

 

 

Alternatively, you may contact us:

 

American Medical Alert Corp.

36-36 33rd Street

Long Island City, New York  11106

(212) 879-5700

 

 

INFORMATION ABOUT THE SPECIAL MEETING

 

Time, Place and Purpose of the Special Meeting

 

The special meeting will be held at the offices of Moses & Singer LLP, 405 Lexington Avenue, 12th  Floor, New York, New York 10174, on [•], 2011 at [•] a.m., local time, unless the special meeting is adjourned or postponed.  At the special meeting, holders of common stock will be asked to approve the proposal to adopt the merger agreement, to approve the proposal to adjourn the special meeting and to approve the non-binding proposal regarding certain merger-related executive compensation arrangements.

 

Record Date; Shares Entitled to Vote; Outstanding Shares

 

Only shareholders listed on AMAC’s records at the close of business on [•] , 2011, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting, or any adjournments or postponements of the special meeting.  As of the close of business on the record date, there were [•]  shares of AMAC common stock outstanding and entitled to vote at the special meeting, and held by approximately [•] holders of record.  Each holder of AMAC common stock is entitled to one vote for each share of AMAC common stock held as of the record date.

 

A complete list of AMAC shareholders of record entitled to vote at the special meeting will be available for inspection at the place of the special meeting during the special meeting.

 

How to Vote

 

If you are a shareholder of record, there are two ways to vote:  

 

·

By completing, dating, signing and returning the enclosed proxy card in the accompanying prepaid reply envelope; or

 

·

By attending the special meeting and voting in person by ballot.

 

Based on your proxies, the named proxies will vote your shares according to your directions.  If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the meeting.  If you are a shareholder of record, you are encouraged to vote by proxy even if you plan to attend the special meeting in person.  If you attend the special meeting and vote in person, your vote by ballot will replace and revoke any proxy previously submitted.

 

If your shares are held in “street name” in an account at a broker, bank or other nominee, you must instruct the broker, bank or other nominee on how to vote your shares by following the instructions that the broker, bank or other nominee provides you with this proxy statement.  These shares will not be voted if you do not provide your broker, bank or other nominee with voting instructions.  Currently, brokers, banks or other nominees have the authority to vote shares of common stock for which their customers do not provide voting instructions on certain “routine” matters.  However, brokers, banks and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposals included in this proxy statement.  As a result, absent specific instructions from you, as the beneficial owner of such shares of AMAC common stock, brokers, banks and other nominees are not empowered to, and will not, vote those shares of common stock on any of the proposals to be voted on at the special meeting.  These non-voted shares will have the same effect of votes AGAINST the adoption of the merger agreement.   Note that if your shares are held in “street name” and you wish to vote in person at the special meeting, you must obtain a proxy from your bank, broker or other nominee authorizing you to vote such shares and present it to the inspector of election with your ballot when you vote at the special meeting.

 

Shareholders should not send stock certificates with their proxies.   A letter of transmittal and instructions for the surrender of AMAC common stock certificates will be mailed to AMAC shareholders of record shortly after the completion of the merger.   If your shares of common stock are held in “street name” by your bank, broker or other nominee, you may receive instructions from your bank, broker or other nominee as to what action, if any, is necessary to effect the surrender of your shares of common stock in exchange for the merger consideration.

 

 

Quorum

 

In order to transact business at the special meeting, a quorum of AMAC’s shareholders must be present.  A quorum will exist if holders of a majority of the outstanding shares of AMAC common stock as of the close of business on the record date are present in person, or represented by proxy, at the special meeting.  If a quorum is not present, it is expected that the special meeting will be adjourned to a later date pursuant to the discretionary authority granted to the named proxies in the proxy card.   Shares of AMAC common stock represented at the special meeting but not voting, including shares of AMAC common stock for which proxies have been received but for which shareholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum.   If you hold your shares in “street name” and you do not direct your broker, bank or other nominee to vote, such your unvoted shares will not be treated as present at the special meeting for purposes of determining the presence or absence of a quorum.

 

Vote Required

 

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of common stock entitled to vote thereon.  If a holder of AMAC common stock abstains from voting or does not vote, either in person or by proxy, it will have the effect of a vote against the merger agreement proposal.  If you hold your shares in "street name" through a broker, bank or other nominee, you must direct your broker, bank or other nominee to vote, in accordance with the instructions you have received from your broker, bank or other nominee.  As described above under “Information About the Special Meeting - How to Vote”, brokers, banks and other nominees who hold shares of AMAC common stock in street name for customers who are the beneficial owners of those shares may not give a proxy to vote those customers' shares in the absence of specific instructions from those customers.  These non-voted shares will have the same effect of votes AGAINST the adoption of the merger agreement.

 

Approval of the proposal to adjourn the special meeting to solicit additional proxies requires the affirmative vote of the majority of the votes cast on the matter at the special meeting.  If a holder of AMAC common stock abstains from voting or does not vote, either in person or by proxy, or does not direct his, her or its broker to vote, such actions will not count as votes “cast” and, as a result, will not have any effect on the adjournment proposal.

 

Approval of the non-binding, advisory vote regarding certain merger-related executive compensation arrangements requires the affirmative vote of the majority of the votes cast on the matter at the special meeting.  If a holder of AMAC common stock abstains from voting or does not vote, either in person or by proxy, or does not direct his, her or its broker to vote, such actions will not count as votes “cast” and, as a result, will not have any effect on the non-binding, advisory vote regarding certain merger-related executive compensation arrangements.

 

Share Ownership of, and Voting by, AMAC’s Directors and Executive Officers

 

At the close of business on [•], 2011, the record date for the special meeting, our executive officers and directors beneficially owned and were entitled to vote, in the aggregate, [•] shares of common stock (excluding (1) shares issuable upon the exercise of stock options and (2) shares issuable upon vesting of restricted stock units), which represented approximately [•]% of the shares of our outstanding common stock on that date.

 

Concurrently with the execution of the merger agreement, each of our executive officers and directors executed voting agreements, pursuant to which such individuals agreed to, among other things, vote in favor of adoption of the merger agreement and approval of the transactions contemplated thereby on the terms and subject to the conditions set forth in the voting agreements.  The voting agreements terminate automatically upon the earlier of (i) the effective time of the merger, (ii) the termination of the merger agreement pursuant to its terms, (iii) notice by Tunstall to the applicable director or officer or (iv) at the option of the applicable director or officer, upon notice by such director or officer to Tunstall, upon the making of any change or amendment to the merger agreement that reduces the amount or form of consideration payable pursuant to the merger agreement in any material respect, in each case in this clause (iv) without the prior written consent of such director or officer.  The voting agreements are described in additional detail in the section entitled “Voting Agreements” beginning on page 63.  The summary of the voting agreements in this proxy statement is qualified in its entirety by reference to the full text of the voting agreement, which is included as Annex C to this proxy statement.

 

In addition, each of AMAC’s executive officers and directors has informed AMAC that he or she currently intends to vote all of such holder’s shares of common stock FOR the proposal to adjourn the special meeting and FOR the non-binding proposal regarding certain merger-related executive compensation arrangements.

 

 

Voting Deadline

 

If you vote by mailing a proxy card, AMAC must receive your proxy card no later than the close of business on [•], 2011. You may also vote in person at the special meeting.

 

Voting by Proxies on Your Behalf

 

If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will vote your shares of AMAC common stock in the way that you indicate.

 

If you properly sign your proxy card but do not mark the boxes showing how your shares of common stock should be voted on a matter, the shares of common stock represented by your properly signed proxy will be voted FOR the proposal to adopt the merger agreement, FOR the proposal to adjourn the special meeting and FOR the non-binding, advisory proposal regarding certain merger-related executive compensation arrangements.

 

Revoking Your Proxy

 

If you are a shareholder of record, you have the right to revoke a proxy at any time before it is voted at the special meeting by:

 

·

sending a signed notice of revocation to the Corporate Secretary of AMAC;

 

·

signing another proxy card with a later date and returning it to us prior to the special meeting; or

 

·

attending the special meeting and voting in person by ballot.

 

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the special meeting if you obtain a proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot when you vote at the special meeting.

 

Adjournments and Postponements

 

Although it is not currently expected, the special meeting may be adjourned or postponed pursuant to the discretionary authority granted to the named proxies in the proxy card.  Other than an announcement to be made at the special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice, unless our board of directors fixes a new record date.  At any adjourned meeting, we may transact any business which may have been transacted at the original meeting.  We may also postpone the special meeting under certain circumstances.

 

We have also separately requested your vote upon a proposal to approve any adjournments of the special meeting, if determined necessary by AMAC, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to adopt the merger agreement. See “Adjournment of the Special Meeting (Proposal 2).”  The adjournment proposal relates only to an adjournment of the special meeting for purposes of soliciting additional proxies to obtain the requisite shareholder approval to adopt the merger agreement.

 

Attendance of the Special Meeting

 

Only AMAC shareholders or their duly appointed proxies, and AMAC’s invited guests   have the right to attend the special meeting.  To gain admittance, you must present a valid photo identification, such as a driver’s license or passport.  If you hold shares of common stock in “street name” (that is, in a brokerage account or through a bank or other nominee) and you would like to attend the special meeting, you will need to bring a valid photo identification and proof of ownership, such as a brokerage statement as of a recent date, a copy of your voting instruction form or a proxy from your broker, bank or other nominee. If you wish to vote in person at the special meeting, you must obtain a proxy from your broker, bank or other nominee. If you are the representative of a corporate or institutional shareholder, you must present valid photo identification along with proof that you are the representative of such shareholder.  Please note that cameras, recording devices and other electronic devices will not be permitted at the special meeting.

 

Solicitation of Proxies; Payment of Solicitation Expenses

 

This proxy statement is being furnished in connection with the solicitation of proxies to vote shares of AMAC common stock by our board of directors to be voted at the special meeting.

 

 

All costs related to the solicitation of proxies, including the printing and mailing of this proxy statement, will be borne by us.  We have retained Okapi Partners LLP to aid in the solicitation of proxies and to verify records relating to the solicitation.  Okapi will receive a fee for its services of $12,500, plus fees for direct telephone solicitations of shareholders, and expense reimbursement.  We will indemnify Okapi and its affiliates against certain claims, liabilities, losses, damages and expenses.  In addition, our directors, officers and employees may, without additional compensation, solicit proxies from shareholders by mail, telephone, facsimile, or in person. However, you should be aware that certain members of our board of directors and our officers have interests in the merger that are different from, or in addition to, yours. See "The Merger—Interests of AMAC’s Executive Officers and Directors in the Merger."  We will also reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to you and obtaining your voting instructions.

 

Assistance

 

If you have questions about the merger, the special meeting or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card, please contact Okapi Partners LLC, our proxy solicitor, by telephone at (877) 259-6290 (toll-free within the U.S. and Canada) or via email at info@okapipartners.com .

 

 

 

PARTIES TO THE MERGER

 

American Medical Alert Corp.

36-36 33rd Street, Suite 103

Long Island City, NY 11106

Telephone Number: (212) 879-5700

 

American Medical Alert Corp. was founded and incorporated in New York in 1981.  AMAC is a healthcare communications company dedicated to the provision of support services to the healthcare community.  AMAC’s product and service portfolio includes Personal Emergency Response Systems (PERS) and emergency response monitoring, electronic medication reminder devices, disease management monitoring appliances and healthcare communication solutions services.  AMAC operates nine U.S.-based communication centers to support the delivery of high quality, healthcare communications.

 

AMAC common stock is listed on The NASDAQ Capital Market, under the symbol “AMAC.”

 

Additional information regarding AMAC is contained in our filings with the SEC.  See “Where You Can Find More Information.”

 

Tunstall Healthcare Group Limited

Whitley Lodge, Whitley Bridge

Yorkshire, DN14 OHR, UK

Telephone Number: +44 1977 661 234

 

Tunstall, a Private Company Limited by Shares incorporated in England and Wales, is a leading provider of telecare/telehealth solutions. Operating in more than 30 countries and employing over 1,100 people, Tunstall supports 2.5 million people around the world. Tunstall’s philosophy is simple - to protect, support and care for people - by providing healthcare technology and services that enable anyone requiring support and reassurance, such as older people or those with long term needs, to lead an independent life with dignity and reassurance. Tunstall provides complete and fully-integrated telecare and telehealth solutions for home, assisted living and specialist care environments, hospital communication systems, associated support services, response centre software systems and monitoring services.

 

Monitor Acquisition Corp.

 

c/o Tunstall Healthcare Group Limited

Whitley Lodge, Whitley Bridge

Yorkshire, DN14 OHR, UK

Telephone Number: +44 1977 661 234

 

Monitor Acquisition Corp. is a New York corporation and a wholly owned subsidiary of Tunstall that was formed by Tunstall solely for the purpose of facilitating the acquisition of AMAC.  To date, merger sub has not carried on any activities other than those related to its formation and completing the transactions contemplated by the merger agreement. By operation of the merger, merger sub will be merged with and into AMAC, merger sub’s separate existence will cease and AMAC will become a wholly-owned subsidiary of Tunstall.

 

Each of Tunstall and merger sub are affiliates of Charterhouse.  Charterhouse is a London-based private equity firm, which has specialized in management buyout investments in European companies for over 30 years and which has a long-standing affiliation with US investors.  Charterhouse has investments across a range of sectors, including healthcare, business services/support services companies, financial services, leisure and consumer brands.

 

 

THE MERGER

(PROPOSAL 1)

 

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A .  You should read the entire merger agreement carefully as it is the legal document that governs the merger.

 

Description of the Merger

 

The merger agreement provides that merger sub will merge with and into AMAC. AMAC will be the surviving corporation in the merger and will continue to do business following the merger. As a result of the merger, AMAC will cease to be a publicly traded company.  You will not own any shares of the capital stock of the surviving corporation.

 

Merger Consideration

 

In the merger, each outstanding share of AMAC common stock (other than treasury shares of AMAC and any shares of AMAC common stock owned by Tunstall, merger sub or any wholly owned subsidiary of AMAC) will be automatically cancelled and converted into the right to receive (1) $8.55 in cash, without interest and less any applicable withholding taxes, and (2) one CPR , providing for an opportunity for certain future cash payments subject to and in accordance with the CPR agreement described below.

 

Background of the Merger

 

During early 2008, our board of directors held discussions about strategic alternatives available to AMAC and options for increasing shareholder value.  In connection with this review, our board of directors consulted with AMAC's legal counsel, Moses & Singer, and decided to interview various investment banking firms to potentially act as AMAC's financial advisor.  AMAC subsequently engaged Houlihan Lokey as its financial advisor to assist management and our board of directors in connection with this review.

 

  On August 26, 2008, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to discuss potential strategic alternatives for AMAC.  Our board of directors discussed with Houlihan Lokey the possibility of conducting, with the assistance of management and on behalf of AMAC, a third-party solicitation process in which a select group of companies would be contacted to determine their interest, if any, in exploring a potential acquisition transaction with AMAC.  Our board of directors approved the commencement of efforts by Houlihan Lokey to assist management in the preparation of AMAC's information memorandum.  Our board of directors emphasized in this meeting that no decision to pursue any transaction had been made and that the purpose of the solicitation process, if undertaken, was to assist AMAC in analyzing its potential strategic alternatives.

 

  On October 8, 2008, our board of directors determined not to proceed with the third-party solicitation process in light of market conditions and the worsening of the financial crisis in September/October of 2008.  Our board of directors concluded that the extraordinary market conditions made it inopportune to conduct a “market check” on AMAC.  No parties had been contacted as of that date in connection with the proposed process.

 

On or about December 18, 2008, a representative of a potential strategic buyer, which we refer to as Company A, contacted Howard Siegel, AMAC’s Chairman, and expressed an interest in discussing a potential acquisition of AMAC by Company A.  Company A’s interest in pursuing an acquisition of AMAC was not solicited by AMAC or its advisors.  Howard Siegel informed Mr. Rhian, CEO of AMAC, of the expression of interest.  Mr. Rhian had a preliminary conversation with the Company A representative to better understand Company A’s potential interest.  During that conversation, the Company A representative discussed the rationale for Company A’s proposed acquisition of AMAC and suggested that the parties meet to engage in discussions.  Company A did not propose a purchase price or any terms for a transaction during this conversation.

 

On December 29, 2008, our board of directors held a meeting, together with representatives of AMAC's management and legal and financial advisors, at which Messrs. Siegel and Rhian informed our board of directors of their conversations with the Company A representative.  At that meeting, our board of directors authorized Mr. Rhian to meet with the Company A representative to engage in discussions regarding Company A’s proposed transaction.

 

On January 6, 2009, our board of directors held a meeting, together with representatives of AMAC's management and legal and financial advisors, and engaged in additional discussions concerning the potential interest of Company A.

 

On March 6, 2009, Mr. Rhian met with the Company A representative to discuss further Company A's potential interest in acquiring AMAC in an all-cash transaction. Company A did not communicate a proposed valuation of AMAC and our discussion was limited to Company A expressing its view of the perceived benefits of combining the businesses of AMAC and Company A.

 

 

On March 9, 2009, our board of directors held a meeting, together with representatives of AMAC's management and legal and financial advisors.  Mr. Rhian reported on the discussion held with the Company A representative.  Our board of directors instructed Mr. Rhian to continue his discussions with Company A with respect to a potential transaction.  Our board of directors also directed our legal counsel to prepare and negotiate a non-disclosure and standstill agreement prior to engaging in further discussions with Company A, which agreement subsequently was executed by AMAC and Company A on March 10, 2009.

 

On April 14, 2009, Mr. Rhian reported to our board of directors that Company A had advised Mr. Rhian on April 12th that it had suspended its discussions with AMAC due to Company A’s recent weak financial performance.

 

  On June 24, 2009, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to discuss the status of the M&A market.  Houlihan Lokey noted for our board of directors that the financial crisis continued to negatively impact the M&A market.  After taking into consideration the status of the M&A market and economy in general, our board of directors once again determined to delay proceeding with a third-party solicitation process.

 

On August 21, 2009, Mr. Rhian received an email from a representative of Company A suggesting that Company A and AMAC reinitiate discussions regarding a possible acquisition of AMAC.

 

On November 2, 2009, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to further discuss the status of the M&A market and Company A's recent request to reinitiate discussions.  At this meeting, our board of directors authorized Mr. Rhian to meet with the representatives of Company A.

 

On November 20, 2009, in accordance with our board of directors’ directives, Mr. Rhian, together with representatives of Houlihan Lokey, met with representatives of Company A. Company A indicated that it was interested in an acquisition of AMAC’s HSMS division and not the entire company or AMAC’s TBCS division.   Company A indicated a purchase price for the HSMS division of $45 million, and proposed that the remainder of AMAC’s assets be divested.  Company A asserted that the proposed transaction implied a $9.27 per share price on a fully diluted basis, assuming the other division had an equal value.  Company A indicated that it wished to take no risk with regard to owning or disposing of the TBCS division.  In response to AMAC’s concerns that an asset sale might not be tax efficient for AMAC’s shareholders, Company A indicated that there could be some flexibility with respect to a stock purchase structure pursuant to which Company A would acquire AMAC's outstanding shares after disposition of the TBCS division, instead of an asset sale. Mr. Rhian advised the Company A representatives that he would discuss Company A’s alternative structure with our board of directors.

 

On November 25, 2009, our board of directors convened a meeting, together with representatives of AMAC's management and legal and financial advisors, at which our board of directors was informed of the meeting on November 20th with Company A.  Our board of directors discussed Company A’s proposed transaction with management and Houlihan Lokey.  Our board of directors determined that it was inappropriate for Company A to assume that the valuation of the two divisions would be approximately equal, and that such assumption did not take into account the potential tax consequences of divesting the TBCS division or the fact that the valuation of TBCS businesses are typically significantly lower than HSMS businesses based on comparable profit and revenue. Our board of directors concluded, therefore, that the $9.27 per share value Company A implied would likely be significantly less.  Our board of directors also concluded that the proposal undervalued AMAC’s HSMS division and that the proposed structure would be difficult to execute, particularly with respect to coordinating the divestiture of AMAC’s TBCS division and a merger with Company A.  Our board of directors then directed Mr. Rhian to advise Company A of our board of directors’ views and that, while AMAC might contact it for further discussions, it also would explore its other opportunities.  Our board of directors also determined during that meeting that, in light of the improvement in the M&A market, AMAC would direct Houlihan Lokey to contact companies that might be interested in exploring a potential acquisition of AMAC.  Our board of directors emphasized, however, that no decision had been made as to whether it would be advisable to engage in a sale transaction at that time.

 

On December 10, 2009, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to discuss the status of the third-party solicitation process.  Houlihan Lokey discussed with our board of directors the 63 potential parties that had been or would be contacted, which potential parties were comprised of 32 strategic parties and 31 financial parties.  It was noted that several strategic and financial parties had expressed preliminary interest in exploring a transaction with AMAC.

 

 

On January 7, 2010, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to discuss the status of the third-party solicitation process.  Our board of directors was informed that four indications of interest had been submitted by potential financial buyers, referred to as Company B, C, D and E, expressing interest in acquiring AMAC in an overall range of $5.75 to $8.21 per share.  All of these companies executed a non-disclosure and standstill agreement with AMAC.  Our board of directors reviewed these indications of interest with management and Houlihan Lokey and determined that each proposal undervalued AMAC and should not be pursued further.  Our board of directors directed Houlihan Lokey to contact the three potential strategic parties that had not yet responded and indicated that, if indications of interest were received in a similar price range, the third-party solicitation process should be discontinued.  Our board of directors also was informed that Company A had increased its indication of interest for AMAC’s HSMS division to approximately $60-65 million and confirmed that it was not interested in purchasing AMAC’s TBCS division, which would need to be divested as a condition precedent to consummating its purchase. Our board of directors instructed Houlihan Lokey to inform Company A that its valuation was too low, that the transaction structure was problematic and that AMAC would not pursue further discussions with Company A unless Company A was willing to increase its proposed purchase price and acquire the entire company.  The other strategic parties that had not yet responded as of the January 7, 2010 board of directors meeting did not subsequently furnish an indication of interest.

 

On July 12, 2010, Mr. Rhian received a phone call from Company A’s representative asking to reopen discussions concerning a potential acquisition of the HSMS Division.  On July 16, 2010, our board of directors held a meeting at which our board of directors authorized Mr. Rhian to have a preliminary discussion with this representative.

 

On August 5, 2010, Mr. Rhian updated our board of directors with respect to his discussion with the Company A representative.  The representative indicated to Mr. Rhian that Company A would be willing to increase its proposed purchase price, but was still only interested in AMAC’s HSMS division and that the TBCS division would need to be sold separately by AMAC as a condition precedent to consummating Company A’s purchase.  Our board of directors authorized Mr. Rhian to continue conversations with the Company A representative and to keep our board of directors updated.

 

On October 27, 2010, Mr. Rhian, together with representatives of Houlihan Lokey, met with representatives of Company A. At that meeting, the Company A representative indicated that Company A would be willing to pay between $65-70 million to acquire the HSMS division, but that AMAC would be required to find a purchaser for the TBCS division as a condition precedent to consummating its purchase.  Mr. Rhian advised the Company A representative that, in his view, the proposal was still too low and that the structure was still problematic, but he would present it to our board of directors.

 

On November 1, 2010, our board of directors held a meeting, together with representatives of AMAC's management and legal and financial advisors, at which Mr. Rhian reported on his meeting with the Company A representative.   During this meeting, our board of directors discussed the possibility of entering into a letter of intent and exclusivity agreement with Company A, but determined not to do so at that time because of the low valuation and the problematic structure that was proposed by Company A.  However, our board of directors authorized Mr. Rhian to continue discussions with Company A.

 

At this meeting, Mr. Rhian also advised our board of directors that he had preliminary discussions with another potential financial buyer, referred to as Company F, which had expressed a potential interest in acquiring AMAC.  Company F was introduced to AMAC by Mr. Gallagher, a member of our board of directors.  Our board of directors authorized Mr. Rhian to enter into a non-disclosure and standstill agreement with this financial buyer and to further ascertain its potential interest.  On November 1, 2010, AMAC entered into a non-disclosure and standstill agreement with Company F following which AMAC provided Company F with preliminary due diligence information.  Company F did not subsequently submit an indication of interest.

 

On December 10, 2010, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, and again reviewed the non-binding proposal that Company A submitted for $65-70 million for the HSMS division. Mr. Rhian reported that he had indicated to the Company A representative earlier that day that, given the complexity of the transaction structure and potential tax issues, the proposal would be unlikely to garner board interest and that the Company A representative had responded that Company A might re-evaluate its proposal after performing due diligence.  Mr. Rhian reiterated to our board of directors that, under Company A’s proposal, AMAC would need to find a buyer for the TBCS division, that the sale of the TBCS division on a stand-alone basis would be a taxable transaction to AMAC and that this transaction had to precede a possible stock purchase by Company A. At this meeting, our board of directors also discussed with management and Houlihan Lokey strategic alternatives potentially available to AMAC, including remaining an independent company.  After a discussion, our board of directors authorized Mr. Rhian to continue his dialogue with a financial buyer, Company G, which was potentially interested in an acquisition of the TBCS division, after the execution of a non-disclosure and standstill agreement.  Mr. Rhian had contacted Company G because he believed that Company G would potentially be interested in an acquisition of AMAC’s TBCS division.  Our board of directors also directed management to allow Company A to perform due diligence with respect to the HSMS division and directed Houlihan Lokey to contact a select group of companies to determine if there was potential interest in purchasing AMAC and, if so, at what valuation. Subsequently, 32 parties were contacted, including 25 strategic buyers (seven of which previously had been contacted in late 2009) and seven financial buyers, including Charterhouse Capital Partners LLP, the controlling shareholder of Tunstall.

 

 

On January 20, 2011, Charterhouse executed a non-disclosure and standstill agreement with AMAC.

 

In early February 2011, Jeremy Greenhalgh, a representative of Charterhouse and a director of Tunstall, requested an initial meeting with AMAC.

 

On February 17, 2011, Mr. Greenhalgh met with Mr. Rhian to discuss a potential acquisition of AMAC.

 

On February 22, 2011, Tunstall executed a non-disclosure and standstill agreement with AMAC.

 

On March 3, 2011, Tunstall submitted a preliminary non-binding proposal to acquire 100% of the issued and outstanding capital stock of AMAC, on a cash free, debt free basis, for $73 million to $80 million in cash.  Tunstall indicated in its proposal that it believed such range equated to a fully diluted per share value of between $7.77 to $8.25 which represented a premium of approximately 32% to 40% to AMAC’s then current closing share price of $5.88 per share. Tunstall’s proposal was not subject to any financing condition.

 

On March 17, 2011, Company A, after completing its primary due diligence, provided an indication of interest of $65 million for AMAC’s HSMS division.  Also on March 17, 2011, Tunstall submitted a revised preliminary non-binding proposal increasing its proposed purchase price range to $77 million to $88 million in cash on a cash free, debt fee basis.  Tunstall indicated in its proposal that it believed such range equated to a fully diluted per share value of between $8.00 to $9.00.  Tunstall also requested that AMAC agree to a 30-day exclusivity period and, as consideration for Tunstall increasing its proposed purchase price, that AMAC reimburse up to $800,000 of Tunstall’s expenses in the event AMAC did not enter into a merger agreement with Tunstall (in line with the principal terms outlined in Tunstall’s proposal). Our board of directors advised Mr. Rhian that the $800,000 expense reimbursement Tunstall requested was unacceptable and also authorized Mr. Rhian to continue negotiating with Tunstall.

 

On March 17, 2011, our board of directors held a meeting, together with representatives of AMAC's management and legal and financial advisors, to discuss the third-party solicitation process and Company A’s proposal.  Management informed our board of directors that initial feedback from Company G indicated a possible sale of AMAC’s TBCS division for $25 million to $30 million.   Assuming a sale of the TBCS division in this price range, it was estimated that Company A’s proposal would provide consideration to shareholders of between $8.38 and $8.68 per share on a fully diluted basis, after deduction for certain taxes on gains and transaction and other expenses anticipated to be incurred by AMAC.  Our board of directors resolved to reject Company A’s proposal and directed Houlihan Lokey to inform Company A of our board of directors’ decision.  In that same board meeting, Mr. Rhian reported that Tunstall had presented a revised indication of interest ranging from $8.00-9.00 per share.  Our board of directors discussed this preliminary non-binding proposal and authorized Mr. Rhian to continue discussions with Tunstall.  Our board of directors noted that the Tunstall proposal was more favorable to AMAC than Company A’s proposal because it was an acquisition of the entire company and would not have the execution risks associated with Company A’s proposal.  Our board of directors also noted that, unlike Company A’s proposal, Tunstall’s proposal was likely to result in AMAC substantially maintaining its current employee base and operations.  Our board of directors instructed Mr. Rhian to continue discussions with Tunstall to work toward a final proposal.

 

On March 24, 2011, we provided Tunstall with access to a virtual data room in order to conduct due diligence on AMAC.

 

On March 29 and 30, 2011, the executive management team of AMAC made a full presentation to certain representatives of Tunstall, Charterhouse and Jefferies & Company, Inc., financial advisor to Tunstall, on the financial and business profile of AMAC.

 

On April 4, 2011, in a telephone conference between Mr. Rhian and Mr. Greenhalgh, Mr. Rhian informed Mr. Greenhalgh that the price of Tunstall’s proposal needed to be increased.

 

On April 14 and April 15, 2011, Tunstall and KPMG LLC, Tunstall’s accounting firm, conducted due diligence at AMAC’s headquarters.

 

On April 21, 2011, Mr. Rhian and Gil Baldwin, Tunstall's CEO, had a telephonic discussion concerning the price and terms of a possible contingent payment right (CPR) relating to AMAC’s interests in Lifecomm that Tunstall expected to include in its proposal.

 

On April 26, 2011, Messrs. Rhian, Baldwin and Greenhalgh met in New York to further discuss the possibility of an acquisition of AMAC by Tunstall.

 

On May 12, 2011, Tunstall submitted a written non-binding proposal to acquire AMAC for $8.50 per share in cash plus a CPR predicated on the realization of value from AMAC’s ownership interest in Lifecomm.

 

Between May 12, 2011 and June 9, 2011, additional conversations occurred between Tunstall and AMAC and their respective representatives regarding Tunstall’s proposal during which AMAC sought to increase Tunstall’s proposed purchase price.

 

 

On May 19, 2011, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to discuss the latest Tunstall proposal and to further review the details of ongoing negotiations.  At this meeting, our board of directors reviewed various financial and business information from management updating AMAC’s current financial performance and prospects. Our board of directors authorized Mr. Rhian to continue negotiating with Tunstall and to ask for an improvement in the purchase price.

 

On May 24, 2011, our board of directors met again to discuss details with respect to various conversations Mr. Rhian had with Tunstall representatives.  Mr. Rhian advised that, based on prior input of the board of directors, that he had suggested that a payment be added to the CPR to allow the AMAC shareholders to realize value of $0.50 per share if Tunstall was sold before a Lifecomm liquidity event.

 

On June 9, 2011, Latham & Watkins LLP, counsel to Tunstall, delivered Tunstall’s letter of intent (LOI) and term sheet reflecting an increase in the cash consideration proposed by Tunstall to $8.75 per share on a fully diluted basis, as well as a provision that allowed the CPR holders to receive, upon the sale of Tunstall prior to a liquidity event with respect to Lifecomm, the lower of $0.50 and fair market value of the CPR.

 

On that same day, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to discuss the terms of the LOI, including Tunstall’s request for expense reimbursement in the event AMAC did not sign a definitive agreement with Tunstall. Our board of directors authorized Mr. Rhian, together with our legal and financial advisors, to further negotiate the terms of Tunstall’s proposal, including to remove the p art of the parent sale event payment that would provide for a less than $0.50 per CPR realization upon the issuance of a parent sale event payment.  Our board of directors also emphasized that there could be no discussion regarding post-closing management arrangements until all deal terms had been finalized.  At this meeting, the independent directors discussed the potential retention of independent counsel to represent them.

 

On June 13, 2011, representatives of Moses & Singer had discussions with representatives of Latham & Watkins regarding the LOI.  Later that day, Moses & Singer provided Latham & Watkins with a revised draft of the LOI setting forth our comments to the LOI distributed by Latham & Watkins on June 9, 2011.

 

On June 15, 2011, representatives of Latham & Watkins contacted representatives of Moses & Singer to discuss a number of our comments to the LOI, primarily with respect to the proposed CPR structure, deal protection and expense reimbursement and our estimated expenses for completing the sale process.

 

On June 17, 2011, representatives of Jefferies and Houlihan Lokey had a conference call to discuss certain outstanding business items with respect to the LOI. Also on June 17, 2011, representatives of Latham & Watkins and Moses & Singer had a conference call to discuss the open issues with respect to the LOI, including the terms of the CPR, the amount of AMAC's transaction expenses, expense reimbursement for Tunstall and the amount of the proposed break-up fee payable to Tunstall.  Later that evening, representatives of Latham & Watkins sent a revised version of the LOI to Moses & Singer.

 

On June 20, 2011, AMAC and its representatives had several discussions with representatives of Tunstall to discuss outstanding matters with respect to the LOI.

 

On June 20, 2011, our board of directors held a meeting, together with representatives of AMAC's management and legal and financial advisors, at which Mr. Rhian discussed the status of the ongoing negotiations with Tunstall and indicated that he expected Tunstall to provide a revised version of the LOI shortly.  At the meeting, the independent directors determined that Richards, Layton & Finger, P.A. would represent them in connection with AMAC's consideration of strategic alternatives.

 

On June 21, 2011, our board of directors held a meeting, together with representatives of AMAC's management and legal and financial advisors, to discuss the revised LOI received from Tunstall earlier that day which provided as follows: the proposed transaction would be structured as a one-step merger; the cash portion of the consideration would be $8.75 per share on a fully diluted basis plus additional consideration in the form of a CPR (the structure of the CPR would call for payments upon certain liquidity events with respect to Lifecomm and a $0.50 per share payment based upon a Tunstall change of control prior to the sale or IPO of Lifecomm), a 30-day exclusivity period for Tunstall to complete its due diligence and negotiate transaction documents with AMAC; a break-up fee of $3.5 million; and $500,000 expense reimbursement if AMAC shareholders rejected the transaction and there was no alternative transaction then pending.  Our board of directors further discussed the confidentiality and exclusivity features of the LOI as well as the provision for a window-shop period after a merger agreement was signed.  Our board of directors also noted that Tunstall’s request for expense reimbursement if the merger agreement was not executed had been successfully negotiated out of the proposal.  The transactions contemplated in the LOI were subject to the mutual agreement of Tunstall and AMAC to definitive documentation and the completion by Tunstall of its due diligence of AMAC.

 

 

At the meeting, our board of directors determined to approve the terms and conditions of the LOI and to authorize AMAC to execute the LOI substantially in the form presented to our board of directors.

 

On June 22, 2011, Tunstall and AMAC exchanged the executed version of the LOI.  Following the execution of the LOI, representatives of Tunstall continued their due diligence review of AMAC.

 

Between June 23, 2011 and July 22, 2011, representatives of Tunstall and AMAC worked on issues with respect to the CPR structure and exchanged drafts of various transaction documents.

 

On July 22, 2011, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, for a status report on the progress of the various transaction documents and issues with respect to the potential transaction.  Our board of directors was informed that Tunstall had requested a two-week extension to the exclusivity period because Tunstall’s due diligence and the negotiation of the transaction documents had not been completed.  Our board of directors also heard a report from legal counsel on various issues that were being negotiated with Tunstall’s counsel with respect to the merger agreement.  On July 22, 2011, AMAC granted Tunstall a one-week extension of exclusivity.

 

On July 26, 2011, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to review various tax and commercial provisions with respect to the CPR, including the terms of the contemplated Tunstall sale event payment.

 

On July 27, 2011, AMAC and its representatives had a conference call with Tunstall and its representatives to discuss the terms of the merger agreement, voting agreement and the CPR agreement.

 

On July 29, 2011, AMAC representatives had a conference call with representatives of Tunstall to discuss the terms of the merger agreement, voting agreement and CPR agreement.  During that call, representatives of Tunstall requested an additional one-week extension to the exclusivity period in the LOI because Tunstall’s due diligence review and the transaction documents were still not completed.  On July 29, 2011, AMAC granted Tunstall a one-week extension of the exclusivity period.

 

On July 31, 2011, representatives of Latham & Watkins had a conference call with representatives of Moses & Singer and Richards, Layton & Finger to discuss the terms of the merger agreement, voting agreement and CPR agreement.

 

On August 1, 2011, representatives of Latham & Watkins had a conference call with representatives of Moses & Singer and Richards, Layton & Finger to discuss the terms of the merger agreement, voting agreement and CPR agreement.  Also on August 1, 2011, representatives of Latham & Watkins conducted due diligence at AMAC’s headquarters.

 

On August 2, 2011, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to review progress on the merger agreement and the CPR agreement.  It also authorized an additional one-week extension of the exclusivity period.  Our board of directors was also provided with a summary of Tunstall’s financial condition.  In addition, our board of directors discussed compensation to independent board members for 2011.  It was noted that stock compensation would not be practical and it was suggested that the independent directors consult with their counsel and furnish a proposal on how to deal with director compensation for the remainder of the year.

 

On August 4, 2011, having determined that the material terms of the transaction had been finalized, the independent board members advised management that they were free to communicate with Tunstall regarding management post-closing arrangements. Later that day, Mr. Rhian communicated to Mr. Baldwin that those discussions could commence. Mr. Baldwin communicated to Mr. Rhian that there was still one outstanding issue on the CPR agreement (Mr. Rhian thought Tunstall had accepted AMAC’s last proposal on this issue, which dealt with a feature of the Tunstall sale event payment) and that discussions should wait until that issue was resolved. The issue was resolved over the weekend of August 6th and 7th.

 

On August 5, 2011, AMAC granted Tunstall a one-week extension of the exclusivity period.

 

On August 8, 2011, Mr. Baldwin communicated to Mr. Rhian that Charterhouse no longer believed it could move forward with a transaction at $8.75 per share in light of the turmoil in the debt markets, volatility in the equity markets and the reduced trading valuations of companies in the healthcare industry. Tunstall indicated that, if the transaction were to proceed, it would likely seek a 10% price reduction per share. Mr. Baldwin also communicated that Charterhouse had not completed its financial due diligence and had additional questions regarding AMAC’s financial forecast. Mr. Rhian responded that, in his opinion, our board of directors would not entertain a reduction in the purchase price for the transaction.

 

On August 9, 2011, Mr. Baldwin informed Mr. Rhian that Tunstall might agree to limit the reduction of the per share price to $0.50 per share. Later that same day, Mr. Baldwin again called Mr. Rhian to advise that more evaluation by Tunstall was required on AMAC’s projections for which AMAC’s input was requested. Mr. Baldwin closed the call by suggesting that Tunstall be permitted to “sleep” on the subject and would communicate with Mr. Rhian the following day.

 

 

On August 10, 2011, Mr. Rhian called Mr. Baldwin to advise that, notwithstanding prevailing macroeconomic conditions, in Mr. Rhian’s opinion, there was no basis that would justify  lowering Tunstall's proposed purchase price. Mr. Baldwin responded that he would take AMAC’s position under advisement. Mr. Baldwin also advised that in his opinion it would be necessary for Mr. Rhian and other officers of AMAC to invest in a performance incentive program tied to the success of Tunstall’s investment in AMAC following the merger in order to show that management had “skin in the game.”

 

Later that day, Mr. Baldwin called Mr. Rhian and indicated that the transaction might proceed by only lowering the purchase price by $0.20 per share, subject to a further analysis of AMAC’s projections. Mr. Baldwin believed this analysis should be done in an in-person meeting between Mr. Rhian and Mr. Rallo (AMAC’s CFO) in London.  Mr. Rhian advised Mr. Baldwin that, while he would travel to London to meet, AMAC was not accepting the $0.20 per share price reduction.

 

On August 11 and 12, 2011, Mr. Rhian and Mr. Rallo met with Tunstall in London to discuss AMAC’s basis for its projections and the rationale as to why AMAC management believed that those projections were achievable.  Mr. Baldwin reiterated the demand that, as a condition to going forward, an investment by Mr. Rhian and the other officers would be required and that a $0.20 reduction in the per share purchase price was the minimum that would be acceptable. Mr. Rhian responded that, while he was amenable to considering an investment for himself personally, he objected in concept to the requirement, rather than the option, being extended to other officers of AMAC.  Mr. Rhian stated he would discuss all of these matters with our board of directors for consideration.  During these discussions, the Tunstall representatives also discussed the structure of a potential management performance bonus which would further incentivize and align management with Tunstall’s shareholders in the same manner as the proposed cash investment required of certain officers.

 

On August 13, 2011, Mr. Rhian received a telephone call from Tunstall stating that Tunstall had acceded to the position that only he (Mr. Rhian) would be required to make an investment and that other officers would have the option of doing so. During this call, Mr. Baldwin advised Mr. Rhian that his (Mr. Rhian’s) investment requirement would be at least $500,000 on a pre-tax basis (or $250,000 if the amount could not be invested on a pre-tax basis).

 

On August 14, 2011, Mr. Rhian updated our board of directors on the communications and meetings that had taken place since August 8, including the conversations he had regarding management compensation issues and the request for management to invest in an incentive performance plan.

 

At the meeting, our board of directors determined to permit Mr. Rhian to offer a concession of up to $0.20 per share and to negotiate a lesser amount if possible.  Our board of directors also directed Yacov Shamash, one of the independent board members, to accompany Mr. Rhian on future phone conversations on which deal terms would be negotiated.

 

On August 15, 2011, Mr. Rhian and Dr. Shamash spoke to Mr. Greenhalgh and Mr. Baldwin.  Later that same day, Mr. Rhian and Dr. Shamash reported to our board of directors the results of that phone call, relaying the information that Tunstall would not entertain a counteroffer to the $0.20 per share price reduction because of prevailing negative market conditions, that Tunstall wanted AMAC management to be aligned and financially at risk with the acquiring company and that Tunstall had remaining questions regarding AMAC management’s business plan. Our board of directors authorized Mr. Rhian to indicate tentative agreement with respect to the $0.20 per share price reduction and requested that Mr. Rhian continue negotiating the transaction with Tunstall.

 

On August 21, 2011, Mr. Rhian and Dr. Shamash spoke to Mr. Baldwin.  During that conversation, they conveyed to Mr. Baldwin that AMAC was prepared to accept the $0.20 per share price reduction.  Mr. Rhian also requested clarification of various elements of the management investment requirements and management compensation program.

 

On August 30, 2011, our board of directors convened to discuss revised and updated projections for the years 2012, 2013, and 2014 for AMAC.  During this meeting, our board of directors once again reviewed the prospects for AMAC to remain independent in light of the revised and updated projections presented by management.  Our board of directors debated the merits of proceeding with the sale to Tunstall versus remaining independent and discussed the pros and cons of each course of action.  Our board of directors unanimously determined that proceeding with Tunstall was the most favorable course for the shareholders in light of all relevant circumstances.  See “The Merger — Reasons for the Merger; Recommendation of AMAC’s Board of Directors.”

 

Between August 30, 2011 and September 21, 2011, counsel for Tunstall and AMAC continued to work on finalizing the various transaction documents, including the completion of AMAC's disclosure schedules and Tunstall’s confirmatory due diligence.  Tunstall requested that AMAC remain under exclusivity during this period but AMAC did not agree to do so.

 

Between September 9 and September 21, 2011, representatives of Tunstall and management negotiated the terms of management employment agreements, bonus plans and incentive performance plans (which included a required $500,000 pre-tax investment by Mr. Rhian).

 

 

On September 22, 2011, our board of directors met, together with representatives of AMAC's management and legal and financial advisors, to review the final terms of the merger agreement and related transaction documents.  During this meeting, Moses & Singer and Richards, Layton & Finger provided our board of directors with a summary of the various provisions of the merger agreement, the voting agreement and the CPR agreement.  The directors asked various questions with respect to the agreements.  Also at this meeting, Houlihan Lokey reviewed with our board of directors its financial analysis of the merger consideration and rendered to our board of directors an oral opinion, which was confirmed by delivery of a written opinion dated September 22, 2011, to the effect that, as of that date and based on and subject to the matters described in the opinion, the merger consideration to be received by holders of AMAC common stock was fair, from a financial point of view, to such holders. During this meeting, our board of directors once again reviewed, and confirmed, its August 30 th determination that a sale to Tunstall was in the best interest of the AMAC shareholders.  In the course of its deliberations, our board of directors considered a number of material positive factors and a number of potentially negative factors regarding the merger described in the section entitled “The Merger — Reasons for the Merger; Recommendation of AMAC’s Board of Directors.”  After further review and discussion, our board of directors unanimously approved the merger agreement and the merger contemplated thereby, the voting agreement and the CPR agreement.

 

At this meeting, our board of directors also approved a modification to our independent directors’ compensation plan, essentially granting the same annual amount in cash, payable at the 2011 annual meeting, that it had granted during 2010, in lieu of the value of an annual option grant of an option for 10,000 shares payable in stock. It also removed the equity option for quarterly payments.

 

During the evening of September 22, 2011, Tunstall and AMAC exchanged signature pages for the various transaction documents and announced the execution of the merger agreement and related transaction documents.

 

Reasons for the Merger; Recommendation of AMAC’s Board of Directors

 

In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, our board of directors consulted with our senior management and legal and financial advisors.  In unanimously recommending that AMAC’s shareholders vote their shares of AMAC common stock in favor of adoption of the merger agreement, our board of directors considered a variety of factors, including the following:

 

Financial Condition and Prospects of AMAC; Strategic Alternatives

 

·

The difficulty of predicting future prospects for AMAC on a stand-alone basis.

 

·

The fact that AMAC’s ability to implement its growth strategy was dependent in part on identification of attractive acquisition targets and its ability to acquire them at acceptable valuations and to integrate them successfully.

 

·

The perceived risks of continuing as a stand-alone company or pursuing other alternatives and the range of potential benefits to AMAC’s shareholders of these alternatives, and the assessment that no other alternatives were reasonably likely to create greater value for AMAC’s shareholders than the merger, taking into account risk of execution as well as business, competitive, industry and market risk.

 

Market Check; Alternative Proposals  

 

·

Our board of directors’ view that the sales process undertaken by AMAC, with the assistance of Houlihan Lokey, in which 88 potential acquirors of AMAC were contacted, including 50 strategic parties and 38  financial parties, and 37 parties executed confidentiality agreements, was an effective process.

 

·

Our board of directors’ view that the sale and negotiation process yielded the best available price for AMAC.

 

·

The fact that while there were discussions and meetings with several potential third party acquirors, each of the other parties ultimately indicated that they were not interested in acquiring AMAC at a price as high as or higher than $8.55 per share or indicated that they were only interested in buying one division of AMAC.

 

·

The fact that Tunstall agreed to purchase both the HSMS and TBCS divisions of AMAC, and indicated its intention to substantially maintain AMAC’s current employee base and operations.

 

·

Our board of directors’ view that third parties are not likely to be unduly deterred from making a superior proposal by the provisions of the merger agreement.

 

 

·

The fact that AMAC may, under certain circumstances specified in and prior to the time our shareholders adopt the merger agreement, (i) provide non-public information in response to a unsolicited bona fide written acquisition proposal and (ii) participate in discussions or negotiations with the person making such a proposal, if, in each case, the acquisition proposal was not the result of a material violation of the provisions of the merger agreement relating to the solicitation of acquisition proposals, and if the board of directors, prior to taking any such actions, determines in good faith, after consultation with its outside legal counsel, that failure to take such actions would be reasonably likely to constitute a breach of the board of directors’ fiduciary duties under applicable law and, after consultation with its financial advisor and outside counsel, that such acquisition proposal either constitutes a superior proposal or is reasonably likely to lead to a superior proposal.

 

·

The fact that our the board of directors’ may, under certain circumstances, (i) withhold, withdraw, qualify or modify the AMAC recommendation or (ii) cause AMAC to terminate the merger agreement in order to enter into an agreement providing for a superior proposal, subject to the payment by us of a termination fee of $3.5 million to Tunstall, which the board of directors concluded was reasonable in the context of termination fees in comparable transactions and in light of the overall terms of the merger agreement, including the per share merger consideration.

 

·

The fact that AMAC may, under the merger agreement, withhold, withdraw, qualify or modify the board’s recommendation that stockholders approve the merger agreement under certain circumstances if a material event, development or change in circumstances occurs, arises or becomes known after the date of the merger agreement that had not occurred or was unknown on the date of the merger agreement (other than an acquisition proposal or a superior proposal) and the board of directors, prior to taking any such actions, determines in good faith, after consultation with its outside legal counsel, that failure to take such actions would be reasonably likely to constitute a breach of the board of directors’ fiduciary duties under applicable law.

 

·

The fact that, although AMAC’s executive officers and directors, who collectively own approximately [•]% of the outstanding AMAC common stock as of the record date have entered into voting agreements with Tunstall and merger sub to support the merger, such voting agreements would terminate if the merger agreement were terminated, including if the merger agreement is terminated by AMAC as permitted in connection with a superior proposal.

 

Financial Terms; Certainty of Value; Opinion of AMAC’s Financial Advisor

 

·

The historical trading ranges of AMAC common stock, the potential trading range of AMAC common stock absent takeover speculation and the lack of liquidity in the trading market for AMAC common stock.

 

·

The fact that the $8.55 cash portion of the merger consideration represented a premium of approximately 64.6%, 59.0% and 56.3% over the one, three and six month average closing share prices, respectively, and a premium of approximately 51.0% over the one-year average closing share price, of AMAC’s common stock, prior to market close on September 22, 2011, the last trading day prior to the announcement of the merger agreement.

 

·

the fact that most of the merger consideration is in the form of cash, which provides immediate liquidity and a high degree of certainty of value to AMAC shareholders.

 

·

the fact that, in addition to cash, each AMAC shareholder will receive CPRs, which may provide AMAC shareholders an opportunity to realize additional value, to the extent certain payment triggers are achieved, through additional cash payments under the terms of the CPR agreement;

 

·

Houlihan Lokey's opinion, dated September 22, 2011, to our board of directors with respect to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by holders of AMAC common stock, which opinion was based on and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion, as more fully described below under the caption "Opinion of AMAC’s Financial Advisor" and attached hereto as Annex D.

 

Merger Agreement Terms; Likelihood of Completion

 

·

Our board of directors’ view that the merger agreement has customary terms and was the product of extensive arms-length negotiations.

 

 

·

Our board of directors’ view that the termination fee of $3.5 million, or approximately 4.0% of the implied common equity value of the transaction, that AMAC would be required to pay to Tunstall in certain limited circumstances, is reasonable and not preclusive of other potential acquisition proposals.

 

·

The fact that there is no third-party consent condition (other than certain antitrust approvals) and no financing condition in the merger agreement.

 

·

Management’s assessment that Tunstall will have adequate capital resources to pay the cash portion of the merger consideration.

 

·

Our board of directors’ belief that while the completion of the merger is subject to certain antitrust approvals, there were not likely to be significant antitrust or other regulatory impediments to the completion of the merger.

 

In addition to the merger agreement, our board of directors also reviewed, considered and discussed the terms and potential ramifications of the other transaction documents executed in connection with the merger agreement, including the form of voting agreements, the CPR agreement and the employment agreements between Tunstall and certain executive officers of AMAC.

 

Risks and Other Potentially Negative Factors

 

In the course of its deliberations, our board of directors also considered a variety of risks and other potentially negative factors (not in any relative order of importance), including the following:

 

·

The fact that AMAC’s shareholders would forego the opportunity to realize the potential long-term value of the successful execution of AMAC’s current strategy as a stand-alone company.

 

·

Because payments under the terms of the CPR agreement are contingent upon the occurrence of certain events which may not occur, AMAC shareholders are subject to the risk that there may never be payments made in connection with the CPRs.

 

·

AMAC has incurred and will continue to incur significant transaction costs and expenses in connection with the proposed merger, and management has invested and will continue to invest substantial time and effort in order to complete the proposed merger, which may disrupt AMAC’s business operations, regardless of whether or not the merger is completed;

 

·

The merger agreement precludes AMAC from actively soliciting alternative acquisition proposals from third parties.

 

·

The deal protection measures in the merger agreement, including the fact that the merger agreement includes a $3.5 million termination fee and matching rights, may inhibit other potential acquirors from submitting potentially superior proposals to acquire AMAC and, if AMAC terminates the merger agreement to accept a superior proposal, the termination would result in an immediate $3.5 million payment obligation to Tunstall.  For a full description of the reasons AMAC would be required to pay a termination fee to Tunstall, see “The Merger Agreement — Termination Fees.”

 

·

If the merger agreement is terminated by either AMAC or Tunstall following a failure to obtain approval of AMAC’s shareholders of the merger, AMAC is required to pay Tunstall’s costs and expenses in an amount not to exceed $500,000.  For a full descriptions of the reasons AMAC would be required to pay a termination fee to Tunstall, see “The Merger Agreement — Termination Fees.”

 

·

The business operations of AMAC will be restricted by interim operating covenants under the merger agreement during the period between signing the merger agreement and the closing of the merger, which could effectively prohibit AMAC from undertaking any strategic initiatives or other material transactions to the detriment of AMAC and its shareholders should the closing not occur.

 

·

The receipt by a U.S. holder of the merger consideration in exchange for AMAC common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes.

 

·

Certain of AMAC’s executive officers and directors may receive certain benefits that may be different from, and in addition to, those of AMAC’s other shareholders.  See “The Merger — Interests of AMAC’s Executive Officers and Directors in the Merger.”

 

 

·

The fact that, while AMAC expects the merger to be completed if approved by AMAC’s shareholders, there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied.

 

·

The fact that the public announcement and pendency of the merger, or failure to complete the merger, may cause substantial harm to AMAC’s relationships with its employees (including making it more difficult to attract and retain key personnel and the possible loss of key management, technical, sales or other personnel), vendors and customers and may divert employees’ attention away from AMAC’s day-to-day business operations.

 

·

The fact that the market price of AMAC common stock could be affected by many factors relating to a termination of the merger agreement or a failure to complete the merger, including:

 

o

the reason or reasons for which the merger agreement was terminated and whether such termination resulted from factors adversely affecting AMAC or its business prospects;

 

o

the possibility that, as a result of the termination of the merger agreement, the marketplace would consider AMAC to be an unattractive acquisition candidate; and

 

o

the possible sale of AMAC common stock by short-term investors following an announcement that the merger agreement was terminated.

 

Our board of directors believed that, overall, the potential benefits of the merger to AMAC’s shareholders outweighed the risks and uncertainties of the merger.

 

The foregoing discussion of factors considered by our board of directors is not intended to be exhaustive, but includes the material factors considered by our board of directors.  In light of the variety of factors considered in connection with its evaluation of the merger, our board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations.  Moreover, each member of our board of directors applied his own personal business judgment to the process and may have given different weight to different factors.

 

Our board of directors unanimously recommends that you vote FOR the proposal to adopt the merger agreement .

 

Opinion of AMAC’s Financial Advisor

 

Houlihan Lokey has been engaged as AMAC’s financial advisor in connection with the merger.  In connection with this engagement, the board of directors requested that Houlihan Lokey evaluate the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by holders of AMAC common stock.  On September 22, 2011, at a meeting of the board of directors held to evaluate the merger, Houlihan Lokey rendered to the board of directors an oral opinion, which was confirmed by delivery of a written opinion dated September 22, 2011, to the effect that, as of that date and based on and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion, the merger consideration to be received by holders of AMAC common stock was fair, from a financial point of view, to such holders.  The full text of Houlihan Lokey's written opinion, dated September 22, 2011, is attached to this proxy statement as Annex D and is incorporated herein by reference.   Houlihan Lokey's opinion was furnished for the use and benefit of the board of directors (in its capacity as such) its evaluation of the merger consideration from a financial point of view and did not address any other aspect or implication of the merger.  The summary of Houlihan Lokey's opinion in the proxy statement is qualified in its entirety by reference to the full text of its written opinion.  Houlihan Lokey's opinion should not be construed as creating any fiduciary duty on Houlihan Lokey's part to any party.  Houlihan Lokey's opinion was not intended to be, and does not constitute, a recommendation to the board of directors, any security holder or any other person or entity as to how to act or vote with respect to any matter relating to the merger or otherwise.

 

In connection with its opinion, Houlihan Lokey made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances.  Among other things, Houlihan Lokey:

 

·	reviewed the merger agreement and the CPR agreement, collectively referred to as the agreements;

 

·	reviewed certain publicly available business and financial information relating to AMAC that Houlihan Lokey deemed to be relevant;

 

·

reviewed certain information relating to the historical, current and future operations, financial condition and prospects of AMAC made available to Houlihan Lokey by AMAC, including financial projections prepared by AMAC’s management relating to AMAC for the fiscal years ending December 31, 2011 through December 31, 2015;

 

 

·	spoke with members of AMAC’s management and certain of its representatives and advisors regarding (i) the business, operations, financial condition and prospects of AMAC and (ii) the merger and related matters;

 

·	compared the financial and operating performance of AMAC with that of other public companies that Houlihan Lokey deemed to be relevant;

 

·	considered publicly available financial terms of certain transactions that Houlihan Lokey deemed to be relevant;

 

·	reviewed current and historical market prices and trading volume for AMAC common stock and current and historical market prices of publicly traded securities of certain other companies that Houlihan Lokey deemed to be relevant;

 

·	considered the results of the third-party solicitation process conducted by AMAC, with Houlihan Lokey's assistance, with respect to a possible sale of AMAC; and

 

·	conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

 

Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to Houlihan Lokey, discussed with or reviewed by Houlihan Lokey, or publicly available, and did not assume any responsibility with respect to such data, material and other information.  In addition, AMAC’s management advised Houlihan Lokey, and Houlihan Lokey assumed, that the financial projections utilized in its analyses were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of AMAC and Houlihan Lokey expressed no opinion with respect to such projections or the assumptions on which they were based.  Houlihan Lokey relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of AMAC since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey, and that there was no information or any facts that would have made any of the information reviewed by Houlihan Lokey incomplete or misleading, in each case that would be meaningful in any respect to its analyses or opinion.  In addition, Houlihan Lokey relied upon, without independent verification, the assessments of AMAC’s management as to the financial condition and prospects of businesses or companies in which AMAC has an investment or a joint venture, strategic or similar arrangement, including, without limitation, Lifecomm, and Houlihan Lokey assumed, at AMAC’s direction, that there would be no developments with respect to any such matters that would be meaningful in any respect to its analyses or opinion.

 

Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the agreements and all other related documents and instruments referred to in the agreements would be true and correct, (b) each party to the agreements and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the completion of the merger would be satisfied without waiver, and (d) the merger would be completed in a timely manner in accordance with the terms described in the agreements and such other related documents and instruments, without any amendments or modifications that would be meaningful in any respect to Houlihan Lokey's analyses or opinion.  Houlihan Lokey also relied upon and assumed, without independent verification, that (i) the merger would be completed in a manner that complied in all material respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the completion of the merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on AMAC or the merger that would be meaningful in any respect to Houlihan Lokey's analyses or opinion.

 

Furthermore, in connection with its opinion, Houlihan Lokey was not requested to, and did not, make any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance sheet or otherwise) of AMAC or any other party, nor was Houlihan Lokey provided with any such appraisal or evaluation.  Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of AMAC or any other entity or business.  Houlihan Lokey did not undertake an independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities to which AMAC is or may be a party or is or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which AMAC is or may be a party or is or may be subject.

 

Houlihan Lokey's opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Houlihan Lokey as of, the date of its opinion.  Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to Houlihan Lokey's attention after the date of its opinion.  Houlihan Lokey's opinion did not purport to address potential developments in the credit, financial or stock markets, including, without limitation, the market for shares of AMAC common stock.  Houlihan Lokey also did not express any opinion as to the price or range of prices at which shares of AMAC common stock would trade at any time.

 

 

Houlihan Lokey was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the board of directors, AMAC, its security holders or any other party to proceed with or effect the merger, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the merger (other than the merger consideration to the extent expressly specified in Houlihan Lokey's opinion) or otherwise, including, without limitation, any terms or aspects of the CPR agreement or any voting agreements to be entered into in connection with the merger, (iii) the fairness of any portion or aspect of the merger to the holders of any class of securities, creditors or other constituencies of AMAC, or to any other party, except if and only to the extent expressly set forth in Houlihan Lokey's opinion, (iv) the relative merits of the merger as compared to any alternative business strategies that might exist for AMAC or any other party or the effect of any other transaction in which AMAC   or any other party might engage,   (v) the fairness of any portion or aspect of the merger to any one class or group of AMAC’s or any other party's security holders or other constituents vis-à-vis any other class or group of AMAC’s or such other party's security holders or other constituents (including, without limitation, the allocation of any consideration among or within such classes or groups of security holders or other constituents), (vi) whether or not AMAC, its security holders or any other party is receiving or paying reasonably equivalent value in the merger,   (vii) the solvency, creditworthiness or fair value of AMAC or any other participant in the merger, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the merger, any class of such persons or any other party, relative to the merger consideration or otherwise.  Furthermore, no opinion, counsel or interpretation was intended in matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice.  Houlihan Lokey assumed that such opinions, counsel or interpretations had been or would be obtained from appropriate professional sources.  Furthermore, Houlihan Lokey relied, with the board's consent, on the assessments by AMAC and its advisors as to all legal, regulatory, accounting, insurance and tax matters with respect to AMAC, the merger or otherwise.   The issuance of Houlihan Lokey's opinion was approved by a Houlihan Lokey committee authorized to approve opinions of this nature.  Except as described in this summary, AMAC imposed no other instructions or limitations on Houlihan Lokey with respect to the investigations made or the procedures followed by it in rendering its opinion.

 

In preparing its opinion to the board of directors, Houlihan Lokey performed a variety of analyses, including those described below.  This summary is not a complete description of Houlihan Lokey's opinion or the financial analyses performed and factors considered by Houlihan Lokey in connection with its opinion.  The preparation of a financial opinion is a complex analytical process involving various quantitative and qualitative judgments and determinations as to the most appropriate and relevant financial, comparative and other analytical methods employed and the adaptation and application of those methods to the particular facts and circumstances presented.  Therefore, a financial opinion and its underlying analyses are not readily susceptible to summary description.  Houlihan Lokey arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion.  Accordingly, Houlihan Lokey believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies, and factors or focusing on information presented in tabular format, without considering all analyses, methodologies, and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Houlihan Lokey's analyses and opinion.  Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques.

 

In performing its analyses, Houlihan Lokey considered industry performance, general business, economic, market and financial conditions and other matters as they existed on, and could be evaluated as of, the date of Houlihan Lokey's opinion, many of which are beyond AMAC’s control.  Accordingly, the information may not reflect current or future market conditions.  No company, business or transaction used in the analyses for comparative purposes is identical to AMAC or the merger, and an evaluation of the results of those analyses is not entirely mathematical.  Rather, the analyses involve complex considerations, judgments, and assumptions concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed.  Houlihan Lokey believes that mathematical derivations (such as determining an average or median) of financial data are not by themselves meaningful and should be considered together with judgments and informed assumptions.  The assumptions and estimates contained in Houlihan Lokey's analyses and the reference ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by its analyses.  In addition, analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which assets, businesses or securities actually may be sold or acquired.  Accordingly, the assumptions and estimates used in, and the results derived from, Houlihan Lokey's analyses are inherently subject to substantial uncertainty.

 

 

Houlihan Lokey's opinion and financial analyses provided to the board of directors in connection with its evaluation of the merger consideration, from a financial point of view, were only one of many factors considered by the board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the board of directors or management with respect to the merger or the consideration payable in the merger.  Houlihan Lokey was not requested to, and it did not, recommend the specific consideration payable in the merger.  The type and amount of consideration payable in the merger was determined through negotiation between AMAC and Tunstall, and the decision to enter into the merger was solely that of the board of directors.

 

The following is a summary of the material financial analyses reviewed by Houlihan Lokey with the board of directors in connection with Houlihan Lokey's opinion.  The order of analyses does not represent relative importance or weight given to those analyses by Houlihan Lokey.   The financial analyses summarized below include information presented in tabular format.  In order to fully understand Houlihan Lokey's financial analyses, the tables must be read together with the text of each summary.  The tables alone do not constitute a complete description of the financial analyses.  Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying and the qualifications and evaluations affecting the analyses, could create a misleading or incomplete view of Houlihan Lokey's financial analyses .   For purposes of its financial analyses, Houlihan Lokey assumed no value attributable to the contingent payment right.

 

Selected Companies Analysis

 

Houlihan Lokey reviewed financial and stock market information for AMAC and the following five selected publicly held companies that provide monitoring or alarm services, information technology or call center services:

 

·    AlarmForce Industries Inc.

·    CIBER, Inc.

·    Convergys Corporation

·    Sykes Enterprises, Incorporated

·    TeleTech Holdings Inc.

Houlihan Lokey reviewed, among other things, enterprise values of the selected companies, calculated as equity market value based on reported fully-diluted common shares outstanding and closing stock prices on September 21, 2011, plus debt outstanding and preferred stock, less cash and cash equivalents, as a multiple , to the extent publicly available, of latest 12 months and next fiscal year estimated earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, as adjusted for non-recurring items, referred to as adjusted EBITDA.  The overall low, mean, median and high adjusted EBITDA multiples observed for the selected companies for the latest 12 months were 3.2x, 6.1x, 5.7x and 11.6x, respectively, and for the next fiscal year were 3.9x, 6.5x, 4.9x and 12.4x, respectively.  In calculating implied per share equity value reference ranges for AMAC, Houlihan Lokey applied a range of selected multiples of latest 12 months adjusted EBITDA of 6.0x to 7.0x and next fiscal year estimated adjusted EBITDA of 5.5x to 6.5x derived from the selected companies to AMAC’s latest 12 months (as of June 30, 2011) adjusted EBITDA and calendar year 2011 estimated adjusted EBITDA.  Financial data of the selected companies were based on publicly available research analysts' estimates, public filings and other publicly available information.  Financial data of AMAC were based on AMAC’s public filings and internal estimates of AMAC’s management.  This analysis indicated the following implied per share equity value reference ranges for AMAC, as compared to the merger consideration:

 

Implied Per Share Equity Value Reference Ranges Based on:				Merger Consideration
Latest 12 Months		Next Fiscal Year
$5.77 - $6.65		$5.78 - $6.74		$8.55

 

 

Selected Transactions Analysis

Houlihan Lokey reviewed publicly available financial terms of the following 17 selected transactions announced between January 1, 2006 and September 21, 2011, including seven selected transactions involving companies that provide monitoring or alarm services and 10 selected transactions involving companies that provide call center services: