- Proxy Soliciting Materials (revised) (PRER14A)

 

This summary highlights selected information from this proxy statement and does not contain all of the information that is important to you. To better understand the acquisition, you should read this entire document carefully, including the Stock Purchase Agreement attached as Annex A-1 to this proxy statement and the other agreements, instruments and documents attached as annexes to this proxy statement.

 

The Parties

 

MBF Healthcare Acquisition Corp.   MBF Healthcare Acquisition Corp. was incorporated in Delaware on June 2, 2006 to serve as a vehicle for the acquisition, through a merger, capital stock exchange, asset acquisition or other similar business combination, of an operating business in the healthcare industry. On April 13, 2007, MBF Healthcare Partners, L.P., an affiliate of the MBF Healthcare Acquisition Corp.’s officers and directors, purchased an aggregate of 343,750 private placement units from MBF Healthcare Acquisition Corp. at a price of $8.00 per unit and 4,593,750 private placement warrants at a purchase price of $1.00 per warrant, for an aggregate purchase price of $7.0 million.

 

On April 23, 2007, MBF consummated its initial public offering of 18,750,000 units. On May 8, 2007, MBF consummated the closing of an additional 2,812,500 units that were subject to the underwriters’ over-allotment option. Each unit consists of one share of common stock and one redeemable common stock purchase warrants. Each warrant expires on April 23, 2009, or earlier upon redemption, and entitles the holder to purchase one share of our common stock at an exercise price of $6.00 per share. The common stock and warrants started trading separately as of July 2, 2007. Gross proceeds from the sale of the MBF units were $172,500,000. Of that amount, and including the proceeds from the April 13 private placement, approximately $170,962,500 was deposited in trust and, in accordance with MBF’s certificate of incorporation, will be released either upon the consummation of a business combination or upon the liquidation of MBF. The remaining funds, net of underwriting fees and related expenses, were held outside of trust to provide for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. As of June 30, 2008, approximately $176.8 million was held in deposit in the trust account.

 

Other than its IPO and the pursuit of a business combination, MBF has not engaged in any business to date. If MBF does not consummate a business combination by April 23, 2009, then, pursuant to Article Seventh of its Amended and Restated Certificate of Incorporation, MBF’s officers must take all actions necessary to dissolve and liquidate MBF as soon as reasonably practicable following such date. Such actions include (i) prompt notice to the trustee of the trust account who will then notify the accounts where the funds are invested to commence liquidation of any investments that are not already in cash; and (ii) using any of MBF’s cash remaining outside of the trust account to pay liabilities. The amount to be distributed to holders of MBF’s IPO shares in a liquidation will be the amount in the trust account plus any cash remaining outside of the trust account after the payment of MBF’s liabilities. Currently, MBF does not expect to have any cash remaining outside of the trust account after the payment of such liabilities.

 

The mailing address of MBF’s principal executive office is MBF Healthcare Acquisition, 121 Alhambra Plaza, Suite 1100, Coral Gables, Florida 33134, and its telephone number is (305) 461-1162.

 

Critical Homecare Solutions Holdings, Inc.   CHS is a leading provider of comprehensive home infusion therapy services to patients suffering from acute or chronic conditions. Home infusion therapy involves the pharmaceutical preparation, delivery, administration and clinical monitoring of pharmaceutical treatments that are administered to a patient via intravenous, subcutaneous, intramuscular and intra-spinal methods. These therapies are prescribed when a patient’s condition is so severe that it cannot be treated effectively by oral medications. CHS operates in two business segments: home infusion therapy and home nursing. Through its home infusion therapy segment, CHS fills 400,000 prescriptions for infusion pharmaceuticals, biopharmaceuticals, nutrients and related services and equipment each year to patients in the home through 36 infusion locations in 17 states, primarily in the eastern United States. Through its home nursing segment, CHS provides approximately 350,000 nursing and therapy visits and approximately 600,000 private duty nursing hours each year to patients in the home through 34 home nursing locations in three states. CHS currently provides customized local clinical care to approximately 21,000 patients through its branch network and has

relationships with approximately 450 payors, including insurers, managed care organizations and government payors.

 

CHS was incorporated in Delaware on August 8, 2006 under the name KCHS Holdings, Inc. and changed its name to Critical Homecare Solutions Holdings, Inc. CHS was formed by Kohlberg Investors V, L.P., Kohlberg TE Investors V, L.P., Kohlberg Offshore Investors V, L.P., Kohlberg Partners V, L.P. and KOCO Investors V, L.P. (collectively, the “Kohlberg Entities”) in connection with the acquisition by CHS of its predecessors, Speciality Pharma, Inc. (“Specialty Pharma”) and New England Home Therapies, Inc. (“New England Home Therapies”). Specialty Pharma and New England Home Therapies, both of which CHS acquired in September 2006 for a total consideration of approximately $56.1 million, consisting of $49.4 million in cash and $6.7 million in assumed liabilities, have operated in the home health care business since 2002 and 2000, respectively. Specialty Pharma is a comprehensive home infusion provider and specialty pharmacy provider (i.e. a provider of medications manufactured often using highly specialized techniques and developed to manage or prevent symptoms associated with long term chronic disease states) based in Connecticut and New England Home Therapies is a Massachusetts-based provider of home infusion products and services. Since CHS’s formation in 2006, the Kohlberg Entities have invested an aggregate of $100.0 million in CHS. CHS is a holding company that conducts substantially all of its operations through its direct and indirect subsidiaries. CHS is headquartered in Conshohocken, Pennsylvania and the mailing address of its principal executive office is Two Tower Bridge, One Fayette Street, Suite 150, Conshohocken, Pennsylvania 19428.

 

Effective January 1, 2007, CHS acquired Deaconess Enterprises, Inc. (“Deaconess”), one of the largest providers of comprehensive infusion and nursing services in the United States, for a total final consideration of approximately $170.6 million, consisting of $156.0 million in cash and $14.6 million in assumed liabilities, including related fees and expenses. Effective March 1, 2007, CHS acquired Infusion Solutions, Inc. (“Infusion Solutions”), a New Hampshire-based infusion services provider, for a total consideration of approximately $9.1 million, consisting of $8.4 million in cash and $0.7 million in assumed liabilities. Effective June 1, 2007, CHS acquired Applied Health Care, Ltd. (“Applied”), a Texas provider of infusion, specialty pharmacy, nursing and other services, for a total consideration of approximately $9.2 million, consisting of $8.7 million in cash and $0.5 million in assumed liabilities. In July 2007, CHS acquired Infusion Partners of Brunswick, Inc. (“Infusion Partners of Brunswick”), a provider of home infusion and specialty pharmacy services in Georgia and Infusion Partners of Melbourne, Inc. (“Infusion Partners of Melbourne”), a provider of home infusion, respiratory and nutritional services in Florida, for a total consideration of approximately $11.3 million, consisting of $10.9 million in cash and $0.4 million in assumed liabilities. In August 2007, CHS acquired East Goshen Pharmacy, Inc. (“East Goshen Pharmacy”), a provider of home infusion services in Delaware and Pennsylvania, for a total consideration of approximately $6.4 million, consisting of $5.9 million in cash and $0.5 million in assumed liabilities. In April 2008, CHS acquired Wilcox Medical, Inc. (“Wilcox Medical”), a provider of home infusion services in Vermont, for a total consideration of approximately $4.5 million, consisting of $3.7 million in cash, $0.5 million in assumed liabilities and $0.3 million in contingent consideration. In September 2008, CHS acquired Optioncare of Lexington (“OCL”), a provider of home infusion and nursing services in Kentucky, for a total consideration of $6.5 million, consisting of $6.2 million in cash and $0.3 million in assumed liabilities. On June 20, 2008, CHS entered into a purchase agreement to acquire all of the outstanding stock of Avanti Health Care Services, a provider of infusion, specialty pharmacy, nursing and other services in New York. Pursuant to the agreement, CHS will acquire the outstanding stock for a total consideration of $12.1 million, consisting of $11.0 million in cash and $1.1 million in assumed liabilities. Closing of the transaction is subject to state regulatory approval, which is expected to be received in the fourth quarter of 2008. The effective date of the transaction will be the first day of the month the transaction closes.

 

The Sellers.   The Sellers are the current stockholders of CHS. The Sellers include the Kohlberg Entities, affiliates of Blackstone (such affiliates collectively, the “Blackstone Stockholders”), S.A.C. Domestic Investments, LP (“SAC”), and members of CHS’s management team, including, Mr. Cucuel, Ms. Graves, Mr. Patel and Ms. Ryan. None of Mr. Cucuel, Ms. Graves, Mr. Patel or Ms. Ryan are affiliated with the Blackstone Stockholders or SAC.

 

The Stock Purchase Agreement

 

Consideration.   At the closing of the transactions contemplated by the Stock Purchase Agreement, MBF will acquire all of the issued and outstanding common stock of CHS from the Sellers.

 

The components of the consideration payable by MBF in the acquisition is as follows:

 

 

Certain debt, such as capital lease obligations, that are not satisfied at closing, including obligations previously assumed by CHS in connection with its acquisitions, are not expected to be material, and the payoff amounts as of closing will reduce the purchase price.

 

The total cash to be paid to Sellers at closing is estimated to be:

 

 

 

 

 

MBF will pay the Aggregate Option Consideration in exchange for the cancellation of each Option not exercised from the amounts described in the preceding sentence.

 

The acquisition consideration is described in more detail below under “The Stock Purchase Agreement — Acquisition Consideration.”

 

Warrant Repurchase.   Prior to the closing of the acquisition, MBF will repurchase and retire a total of 12,855,405 warrants held by a small group of institutional MBF warrantholders (including 4,593,750 warrants held by MBF LP) who were selected based on the number of warrants held by them. MBF is repurchasing warrants in order to reduce future dilution of our stockholders and reduce the “market overhang” of the combined company after closing. MBF is repurchasing the warrants at a price of $0.75 per warrant, which price was determined in privately negotiated transactions with each of the warrantholders. At the time of entering into the agreement, the warrants were trading at $0.24 per warrant. On October 17, 2008, the closing per warrant price was $0.05. Under the terms of the Stock Purchase Agreement, the aggregate purchase price for the warrants acquired by MBF will be funded by the Sellers and will be included as a Company Expense.

 

Post-Closing Ownership of MBF Common Stock.   The table below sets forth ownership of MBF common stock immediately after the consummation of the acquisition, assuming either (a) that no MBF stockholder demands that MBF convert its shares into cash as permitted by MBF’s certificate of incorporation or (b) that holders of 6,468,749 shares of MBF common stock vote against the acquisition and such stock is converted into cash. See the sections entitled “The Stock Purchase Agreement — Acquisition Consideration” and “The Acquisition Proposal — Reduction of Percentage Ownership of MBF’s Existing Stockholders.”

 

 

Representations, Warranties and Covenants.   The parties have made customary representations, warranties and covenants in the Stock Purchase Agreement, including CHS’s agreement to operate in the ordinary course and not engage in certain kinds of transactions.

Conditions to Closing.   The closing of the transaction is subject to MBF stockholder approval, termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as well as customary closing conditions. In addition, the closing is conditioned on fewer than 30% in interest of the holders of MBF’s IPO shares having demanded that MBF redeem their shares for cash as permitted by the MBF certificate of incorporation. See “The Stock Purchase Agreement — Conditions to Closing of the Acquisition.”

 

Indemnification.   The Stock Purchase Agreement provides that the Sellers will severally indemnify MBF and its affiliates, and MBF will indemnify the Sellers and their affiliates, against any losses arising from a breach or inaccuracy of any representation or warranty of such party or a breach or failure to perform any covenant of such party. The Sellers will also indemnify MBF against any Seller transaction expense to the extent such amounts are not taken into account in calculating the cash consideration. Subject to certain exceptions, indemnification for breach of a representation or warranty is subject to a $1.0 million threshold, after which losses in excess of $50,000 will be indemnifiable, and a $30.0 million cap. Subject to certain exceptions, the representations and warranties of the parties expire 15 months following the closing of the acquisition.

 

Termination.   The Stock Purchase Agreement contains certain termination rights for both MBF and the Sellers under specified circumstances, including in the event that the closing of the transactions contemplated by the Stock Purchase Agreement has not occurred by October 31, 2008.

 

See the section entitled “The Stock Purchase Agreement” for a more detailed summary of the material terms of the Stock Purchase Agreement. A copy of the Stock Purchase Agreement and all amendments thereto are attached as Annex A-1 through Annex A-6 to this proxy statement. We encourage you to read the Stock Purchase Agreement, including all amendments thereto, in its entirety.

 

Amendments to Stock Purchase Agreement

 

On April 22, 2008, MBF and the Sellers entered into Amendment No. 1 (“Amendment No. 1”) to the Stock Purchase Agreement to provide for the issuance of 4,000 shares of Series A Convertible Preferred Stock, $0.001 par value (“Preferred Shares”), by CHS to Kohlberg Investors V, L.P., Kohlberg TE Investors V, L.P., Kohlberg Offshore Investors V, L.P. and Kohlberg Partners V, L.P. in exchange for $4.0 million paid by such entities to CHS and to include the Preferred Shares in the outstanding capital stock of CHS to be acquired by MBF in the transaction. See “The Stock Purchase Agreement — Amendments to Stock Purchase Agreement” for more information regarding the terms of the Preferred Shares. The $4.0 million paid for the Preferred Shares is considered Acquisition Costs in the purchase price adjustment provisions, is included as Acquisition Costs in the estimated purchase price adjustments presented on page 3 and will be repaid in full, plus the amount of any accrued and unpaid interest thereon at the Closing Date, by MBF to the preferred shareholders as part of the purchase price.

 

In addition, Amendment No. 1 amended Section 7.23 of the Stock Purchase Agreement to indicate that MBF will appoint a designee of the Kohlberg Entities to the Board of Directors of MBF rather than nominate a designee for election as previously contemplated. Amendment No. 1 is attached as Annex A-2 to this proxy statement.

 

On July 7, 2008, MBF and the Sellers entered into Amendment No. 2 to the Stock Purchase Agreement to extend the termination date of the Stock Purchase Agreement, from June 30, 2008 (with an automatic extension to July 31, 2008 in the event that MBF’s preliminary proxy statement has not cleared comments from the SEC on or prior to May 25, 2008) to September 30, 2008. Amendment No. 2 is attached as Annex A-3 to this proxy statement.

 

On July 31, 2008, MBF and the Sellers entered into Amendment No. 3 to the Stock Purchase Agreement to set the termination date of the Stock Purchase Agreement as August 29, 2008, provided however that if parties are able to secure a new committed credit facility on or before August 29, 2008, and MBF is able to acquire at least 16,171,875 warrants from certain MBF warrant holders in privately negotiated transactions and subsequently retire such warrants, the termination date will be extended to September 30, 2008. Amendment No. 3 is attached as Annex A-4 to this proxy statement.

On August 29, 2008, MBF and the Sellers entered into Amendment No. 4 to the Stock Purchase Agreement to extend the termination date of the Stock Purchase Agreement as October 31, 2008. Attachment No. 4 is attached as Annex A-5 to this proxy statement.

 

On September 10, 2008, MBF and the Sellers entered into Amendment No. 5 to the Stock Purchase Agreement. Pursuant to Amendment No. 5, the expenses of CHS were increased by $12.0 million, thereby decreasing the cash amount paid to the Sellers at the closing of the acquisition by $12.0 million.

 

Amendment No. 5 also replaced Exhibit D to the Stock Purchase Agreement with the subscription agreement executed by the Sellers pursuant to which, at the closing of the acquisition, MBF will issue shares of unregistered common stock to the Sellers for the purpose of raising $55.0 million in connection with the acquisition and up to an additional $13.2 million to fund the conversion of dissenting stockholders’ shares if the acquisition is consummated (the “Sellers Subscription Agreement”).

 

Amendment No. 5 also replaced the equity commitment letter previously filed as Annex B to this proxy statement with a letter agreement from MBF LP to MBF, dated September 10, 2008, (the “MBF Subscription Agreement”), pursuant to which, at the closing of the acquisition, MBF will issue shares of unregistered common stock to MBF LP for the purpose of raising $30.4 million, substantially all of which will be used to finance a portion of the consideration required to acquire CHS and up to an additional $8.0 million to fund the conversion of dissenting stockholders’ shares if the acquisition is consummated. The MBF Subscription Agreement is attached as Annex B to this proxy statement.

 

Amendment No. 5 also established an earn-out provision for the Sellers as follows: after the conclusion of each of the five successive twelve-month periods beginning January 1, 2009 and ending December 31, 2013 and within thirty (30) days of MBF’s filing of its annual report on Form 10-K with the SEC, MBF shall pay to the Sellers and the Optionholders (as such term is defined in the Stock Purchase Agreement) (i) twenty-five percent (25%) of CHS’ EBITDA in excess of $52.5 million if paid in cash or (ii) thirty-three and one third percent (33 1 / 3 %) of CHS’ EBITDA in excess of $52.5 million if paid in MBF common stock calculated at the average closing sales price of MBF’s common stock for the ten consecutive trading days prior to the delivery of MBF’s common stock for a given earn-out period; provided that the maximum earn-out paid for all such earn-out periods (whether paid in cash, MBF common stock or any combination thereof) shall not exceed $12.0 million in the aggregate. MBF is granted the sole and absolute discretion to determine whether to pay the earn-out in cash or MBF common stock.

 

Amendment No. 5 also provided for the issuance of 6,036 Preferred Shares by CHS to Kohlberg Investors V, L.P., Kohlberg TE Investors V, L.P., Kohlberg Offshore Investors V, L.P., Kohlberg Partners V, L.P. and SAC in exchange for $6.036 million paid by such entities to CHS and to revise the number of Preferred Shares to be acquired by MBF in the transaction. The $6.036 million paid for the Preferred Shares is considered Acquisition Costs in the purchase price adjustment provisions, is included as Acquisition Costs in the estimated purchase price adjustments presented on page 3 and will be repaid in full, plus the amount of any accrued and unpaid interest thereon at the Closing Date, by MBF to the preferred shareholders as part of the purchase price.

 

In connection with Amendment No. 5, pursuant to a separate letter agreement between MBF LP, us, Kohlberg and the underwriters in our initial public offering, MBF may issue to MBF LP up to an additional $1.15 million in shares of MBF common stock as contingent consideration.

 

Board of Directors

 

At closing, MBF will appoint Gordon H. Woodward, Robert A. Cucuel, Dr. Roger Medel, Jorge L. Rico and, one additional individual to serve as members on the Board of Directors of MBF for a three year term.

 

Debt Financing

 

We have received commitments for a total of $276.0 million of debt financing from CIT Bank, CIT Healthcare LLC (“CIT Healthcare”) and Jefferies Finance LLC (“Jefferies”) consisting of the following:

 

 

 

We will use the proceeds of the term loan facility, the subordinated term loans, a portion of the revolving credit facility, the funds currently held by us in our trust account, the proceeds from the issuance of $30.4 million in shares of MBF common stock, to MBF LP, and the proceeds from the issuance of $55.0 million in shares of MBF common stock to the Sellers to finance the cash portion of the purchase price payable in the acquisition, for working capital, to pay any of our stockholders who exercise their conversion rights, to repay existing CHS debt of approximately $155.1 million, which amount is included in the purchase price, and to pay fees and expenses related to the acquisition and the financing. We expect that the total borrowings we will require at the time of closing will be approximately $209.0 million, assuming that there are no adjustments to the $420.0 million purchase price. The first lien facilities will be secured by substantially all of our assets and CHS’s (and its subsidiaries’) assets. We may use the proceeds of the first lien delayed draw term loan facility for a period of 18 months after the Closing Date to finance permitted acquisitions. The portion of the first lien delayed draw term loan facility not used within 18 months from the Closing Date will be cancelled and not used for any other purpose. We may use the proceeds of the first lien revolving credit facility for general corporate purposes, including to finance permitted acquisitions. “Permitted acquisitions” is not currently a defined term in the commitment letter and that term or a similar concept will be negotiated in good faith in connection with the definitive credit facility documents.

 

CIT Bank, a Utah-based industrial bank with deposit-taking responsibilities, and CIT Healthcare LLC, a limited liability company organized under the laws of the State of Delaware, are both wholly-owned subsidiaries of CIT Group, Inc., a Delaware corporation.

 

Below is a summary of the material terms of the commitment letter, which is attached as Annex I-1 to this proxy statement. Under the terms of a fee letter that we have executed with CIT Bank, CIT Healthcare and Jefferies, CIT Bank, CIT Healthcare and Jefferies are entitled (subject to certain limitations), in consultation with us, to change certain pricing and structural terms of any or all of the credit facilities, to ensure a successful syndication of the credit facilities prior to or at any time within 90 days after the Closing Date.

 

Changes to the pricing and other terms of the financing set forth in the commitment described below may be required, and the final pricing and terms have not yet been determined. Accordingly, the final terms of the credit facilities may differ in several material respects from the terms described below. The final terms of the credit facilities may not be determined until shortly before the closing of the acquisition or within 90 days after the Closing Date. Accordingly, you will likely not have the opportunity to evaluate the final terms of the credit facilities prior to voting on the proposals. Any such changes, however, to the extent material, will be disclosed in appropriate filings with the Securities and Exchange Commission or by other appropriate means.

 

The commitment letter provides that the first lien term loan facility and the first lien delayed draw term loan facility will mature on the sixth anniversary of the Closing Date, the first lien revolving credit facility will mature on the fifth anniversary of the Closing Date, and the unsecured subordinated credit facility will mature seven years after the Closing Date.

 

At our option, the interest rate on the loans will be equal to either the Prime Rate plus an applicable margin or LIBOR plus an applicable margin. We may elect to pay the Prime Rate or LIBOR with respect to any interest period during the term of the loans. The Prime Rate is equal to the higher of the prime rate as quoted by JPMorgan Chase Bank as its “prime rate” in effect from time to time and the federal funds effective rate plus 0.50%. LIBOR means the rate per annum (adjusted for statutory reserve requirements) for US Dollar deposits, for a period selected by us, appearing on Bloomberg Screen BBAM (or any successor thereto). LIBOR shall be subject to a floor of 3.00%.

 

The commitment letter provides that with respect to the first lien credit facilities, the applicable margin will equal 5.00% in the case of LIBOR loans and 4.00% in the case of Prime Rate loans.

With respect to the unsecured subordinated credit facility, the commitment letter provides for an interest rate of 14.5% per annum, with the cash component to be between 12.0% and 12.5% payable semi-annually in arrears and the remainder payable semi-annually in kind by adding such interest to the principal amount of the outstanding unsecured subordinated loan.

 

An unused line fee at a rate of 1.50% per annum shall be payable on the daily unutilized portion of the delayed draw term loan facility. An unused line fee at a rate per annum equal to 0.50% shall be payable on the daily unutilized portion of the revolving credit facility.

 

Notwithstanding the terms of the commitment letter, it is possible that the final terms of our debt financing agreements will provide for applicable margins and floors that are different than the amounts set forth above.

 

The commitment letter does not provide for any prepayment penalties for mandatory and optional prepayments of the first lien term loan facility (except that LIBOR loans will be subject to customary breakage costs). The unsecured subordinated credit facility will contain call premiums for optional prepayments; provided that no prepayment will be permitted during the first 24-months following the Closing Date. Notwithstanding the terms of the commitment letter, it is possible that the final terms of our debt financing will provide for prepayment penalties for the first lien term loan facility as well. Mandatory prepayments under the first lien facilities are expected to include:

 

 

The commitment letter provides that the first lien term loan facility (including the delayed draw term loan facility) will amortize in equal quarterly installments in an aggregate amount equal to a percentage of the original principal amount of the loan per year in accordance with the following table, with the balance payable in a balloon payment on the maturity date:

 

 

The credit facilities will provide for customary affirmative and negative covenants (inclusive of customary exceptions and basket sizes).

 

The credit facilities will contain covenants regarding a maximum senior and total leverage ratio and a minimum fixed charge coverage ratio and maximum capital expenditures, with applicable levels and ratios to be agreed upon.

 

The commitments of CIT Bank, CIT Healthcare and Jefferies are subject to the satisfaction of a number of conditions, including but not limited to the following:

 

 

 

 

Other terms and conditions of the commitment letter call for other customary funding conditions, and customary representations and warranties, events of default, indemnification provisions and other miscellaneous provisions.

 

Employment Agreements

 

CHS entered into amended and restated employment agreements with the executive officers listed below. Each employment agreement becomes effective upon the closing of the acquisition; however, if the acquisition is not consummated, the new employment agreements shall automatically terminate and the prior agreements shall continue in full force and effect.

 

Pursuant to the Amended and Restated Employment Agreement with Robert Cucuel:

 

 

Pursuant to the Amended and Restated Employment Agreement with Mary Jane Graves:

 

 

 

Pursuant to the Amended and Restated Employment Agreement with Joey Ryan:

 

 

Pursuant to the Amended and Restated Employment Agreement with Colleen Lederer:

 

 

Pursuant to the Amended and Restated Employment Agreement with Nitin Patel:

 

 

 

The employment agreements are attached as Annex G to this proxy statement. We encourage you to read them in their entirety.

 

Acquisition Expenses

 

At June 30, 2008, MBF had cash outside the trust fund of $91,454, other current assets of $195,098 and total liabilities of approximately $8.4 million, excluding the common stock subject to conversion and related interest income. Our working capital deficiency (excluding investments held in the trust) amounted to approximately $8.2 million. MBF anticipates that it will incur costs of approximately $3.0 million in connection with consummating the acquisition of CHS and approximately $12.5 million in connection with the debt financing being provided for the acquisition. MBF also anticipates that it will incur approximately $50,000 of additional costs through the closing date related to general administrative matters. See the section entitled “The Acquisition Proposal — Acquisition Expenses”.

 

MBF LP has entered into a subscription agreement with us whereby it has irrevocably committed to purchase $30.4 million in shares of MBF common stock, substantially all the proceeds of which will be used to finance a portion of the consideration required to acquire CHS, and up to an additional $8.0 million to fund the conversion of dissenting stockholder’s shares if the acquisition is consummated. MBF LP will purchase the shares at a per share price to be determined at closing of the acquisition based on the greater of (i) the average closing sales price of MBF common stock for the ten consecutive trading days prior to the closing of the acquisition or (ii) the price at which a holder of common stock would be entitled to have a single share of common stock converted, assuming (a) such holder had voted against the acquisition and elected to have his shares of common stock converted pursuant to the terms of MBF’s Amended and Restated Certificate of Incorporation and (b) all other conditions precedent to such conversion had occurred. It is expected that the shares of common stock to be issued pursuant to the subscription agreement will be restricted. A copy of the subscription agreement is attached as Annex B to this proxy statement.

 

Pursuant to a separate letter agreement between MBF LP and MBF, MBF may issue to MBF LP up to an additional $1.15 million in shares of MBF common stock as contingent consideration. Under the terms of the contingent consideration provision, after the conclusion of each of the five consecutive fiscal years beginning January 1, 2009 and within thirty (30) days of MBF’s filing of its annual report on Form 10-K with the SEC for that fiscal year, MBF shall pay to MBF LP that number of shares of MBF common stock equal to the quotient of: (i) thirty-three and one third percent (33 1 / 3 %) of the MBF’s EBITDA (as defined in the letter agreement) in excess of $52 million divided by (ii) the Per Share Price (as defined in the letter agreement), up to a maximum of $1,150,000 in value of shares of MBF common stock.

 

The MBF board of directors has determined that the issuance of shares pursuant to the subscription agreement is fair to MBF because the per share purchase price will be equal to the (i) the average closing sales price of MBF common stock for the ten consecutive trading days prior to the closing of the acquisition or (ii) the price at which a holder of common stock would be entitled to have a single share of common stock converted, assuming (a) such holder had voted against the acquisition and elected to have his shares of common stock converted pursuant to the terms of MBF’s Amended and Restated Certificate of Incorporation and (b) all other conditions precedent to such conversion had occurred. In addition, the shares to be acquired will not be immediately liquid. In addition, without the financing contemplated by the commitment letter, MBF will not complete the acquisition.

 

The Sellers have agreed to purchase $55.0 million in MBF common stock, and up to an additional $13.2 million to fund the conversion of dissenting stockholder’s shares if the acquisition is consummated, at a purchase price to be determined at closing, based on the greater of (i) the average closing sales price of MBF common stock for the ten consecutive trading days prior to the closing of the acquisition or (ii) the price at which a holder of common stock would be entitled to have a single share of common stock converted, assuming (a) such holder had voted against the acquisition and elected to have his shares of common stock converted pursuant to the terms of MBF’s Amended and Restated Certificate of Incorporation and (b) all other conditions precedent to such conversion had occurred. A copy of the Subscription Agreement between MBF and the Sellers is attached as Annex C to this proxy statement.

 

As of September 30, 2008 there are 26,593,750 shares of MBF common stock issued and outstanding. As a result of the issuance of $55.0 million in shares of MBF common stock to the Sellers and the issuance of $30.4 million in shares of MBF common stock to MBF LP (both such issuances to be completed at closing), there are expected to be up to 37,704,853 shares of MBF common stock issued and outstanding after completion of the acquisition. As a result of the dilutive effect of the issuance, for purposes of illustration, a stockholder who owned approximately [     ] % of MBF outstanding shares of common stock on [          ], 2008, would own approximately [     ] % of the outstanding shares of MBF common stock immediately following the closing of the acquisition.

 

 

The change of MBF’s corporate name from “MBF Healthcare Acquisition Corp.” to “Critical Homecare Solutions, Inc.” is being proposed. The name change is being effected to reflect MBF’s acquisition of CHS. A copy of the Amended and Restated Certificate of Incorporation as it will read if all amendments proposed are approved is attached as Annex E to this proxy statement. We encourage you to read MBF’s Amended and Restated Certificate of Incorporation in its entirety.

 

 

The increase in the number of authorized shares of MBF common stock from 50,000,000 to 100,000,000 is being proposed. The increase in MBF’s capitalization is being effected to provide MBF with more operating flexibility. A copy of the Amended and Restated Certificate of Incorporation as it will read if all amendments proposed are approved is attached as Annex E to this proxy statement. We encourage you to read MBF’s Amended and Restated Certificate of Incorporation in its entirety.

 

 

The removal of Article Seventh to MBF’s Amended and Restated Certificate of Incorporation is being proposed. Article Seventh relates to the operation of MBF as a blank check company prior to the consummation of a business combination and will no longer be applicable upon consummation of the acquisition of CHS. A copy of the Amended and Restated Certificate of Incorporation as it will read if all amendments proposed are approved is attached as Annex E to this proxy statement. We encourage you to read MBF’s Amended and Restated Certificate of Incorporation in its entirety.

 

The 2008 Incentive Compensation Plan will make available 3,753,326 shares of MBF common stock for issuance in accordance with the plan’s terms. The purpose of the plan is to create incentives designed to motivate MBF’s employees to significantly contribute toward our growth and profitability, to provide MBF executives, directors and other employees and persons who, by their position, ability and diligence are able to make important contributions to our growth and profitability, with an incentive to assist us in achieving our long-term corporate objectives, to attract and retain executives and other employees of outstanding competence and to provide such persons with an opportunity to acquire an equity interest in MBF. The plan is attached as Annex F to this proxy statement. We encourage you to read the plan in its entirety.

 

In the event there are not sufficient votes at the time of the special meeting to approve the acquisition proposal, the MBF equity proposal, the charter amendment proposals or the incentive compensation plan proposal, the chairperson of the meeting may submit a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation of proxies. Approval of the adoption of the adjournment proposal requires the affirmative vote of holders of a majority of the shares of our common stock present, in person or by proxy, at the special meeting.

 

 

MBF’s final IPO prospectus, as filed with the SEC on April 17, 2007, required that it (i) effect a business combination with a company in the healthcare industry and (ii) such business combination be with a target business (or businesses) with a fair market value of at least 80% of MBF’s net assets at the time of the acquisition. MBF’s board of directors concluded that the acquisition satisfied both of these criteria. After careful consideration, MBF’s board of directors has (i) approved and declared advisable the acquisition and determined that the acquisition is fair to and in the best interests of MBF, (ii) approved and authorized the issuance of shares of MBF common stock pursuant to the subscription agreement executed by MBF LP and pursuant to a letter agreement between MBF LP and MBF and determined that such issuances are fair to and in the best interests of MBF, (iii) approved and authorized the issuance of shares of MBF common stock pursuant to a subscription agreement executed by the Sellers and determined that such issuances are fair and in the best interests of MBF, (iv) approved and authorized the proposed amendments to MBF’s Amended and Restated Certificate of Incorporation and (v) approved and authorized the incentive compensation plan. Accordingly, MBF’s board of directors recommends that MBF stockholders vote:

 

 

FOR the acquisition proposal;

 

FOR the MBF equity proposal;

 

FOR the Sellers’ equity proposal;

 

FOR the name change proposal;

 

FOR the authorized shares proposal;

 

FOR the Article Seventh proposal;

 

FOR the incentive compensation plan proposal; and

 

FOR the adjournment proposal.

 

 

On February 6, 2008, Houlihan Lokey Howard & Zukin Financial Advisors, Inc., which we refer to as Houlihan Lokey, rendered its oral opinion to the Board of Directors of MBF (which was confirmed in writing the next day by delivery of Houlihan Lokey’s written opinion dated February 6, 2008), to the effect that, as of February 6, 2008, the acquisition consideration to be paid by MBF in the proposed acquisition is fair to MBF from a financial point of view. For purposes of its analyses and opinion, Houlihan Lokey, at MBF’s direction, assumed that there would be no Purchase Price Adjustments other than the Estimated Company Indebtedness Amount of approximately $0.2 million.

 

Houlihan Lokey’s opinion was directed to the Board of Directors of MBF and only addressed the fairness, from a financial point of view, of the acquisition consideration to be paid by MBF, and did not address any other aspect or implication of the proposed acquisition. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex H to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion. However, neither Houlihan Lokey’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute advice or a recommendation

to any stockholder as to how such stockholder should act or vote with respect to any matter relating to the proposed acquisition. See “The Acquisition Proposal — Opinion of Houlihan Lokey”.

 

 

On the record date, directors and executive officers of MBF and their affiliates (the “MBF Insider Stockholders”) beneficially owned and were entitled to vote [          ] shares or approximately [     ]% of MBF’s outstanding common stock. In connection with its IPO, MBF and Merrill Lynch & Co., Inc., the managing underwriter of the IPO, entered into agreements with each of the MBF Insider Stockholders pursuant to which each MBF Insider Stockholder agreed to vote his shares of MBF common stock held prior to the IPO on the acquisition proposal in accordance with the majority of the votes cast by the holders of shares issued in connection with the IPO. The MBF Inside Stockholders also agreed, in connection with the IPO, to place their pre-IPO shares in escrow until April 17, 2009. With the exception of MBF LP, which may acquire $12.0 million in shares of MBF common stock in an open market purchase obligation commencing on February 22, 2008 and ending on [          ], 2008, and subject to MBF LP’s agreement to purchase up to $38.4 million shares of MBF common stock as described in the MBF equity proposal (inclusive of any balance remaining under MBF’s open market purchase obligation), no MBF Insider Stockholder has acquired shares of MBF common stock as part of or following the IPO.

 

 

The special meeting of the stockholders of MBF will be held at 10:00 a.m., Eastern time, on [          ], 2008, at [          ] to consider and vote upon the acquisition proposal, the MBF equity proposal, the charter amendment proposals and the incentive compensation plan proposal and, if necessary, the adjournment proposal.

 

 

You will be entitled to vote or direct votes to be cast at the special meeting if you owned shares of MBF common stock at the close of business on [          ], 2008, which is the record date for the special meeting. You will have one vote for each share of MBF common stock you owned at the close of business on the record date. MBF warrants do not have voting rights. On the record date, there were [          ] shares of MBF common stock outstanding.

 

 

The Sellers have approved the Stock Purchase Agreement and the transactions contemplated thereby for purposes of the DGCL. Accordingly, no further action by the Sellers or CHS is needed to approve the acquisition.

 

A quorum of MBF stockholders is necessary to hold a valid meeting. A quorum will be present at the MBF special meeting if a majority of the outstanding shares entitled to vote at the meeting are represented in person or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.

 

 

 

Abstentions will have the same effect as a vote against each of the proposals. Broker non-votes, while considered present for the purposes of establishing a quorum, will have the effect of votes against the acquisition proposal, the MBF equity proposal, the Sellers’ equity proposal and the charter amendment proposals, but will have no effect on the incentive compensation plan proposal or the adjournment proposal. Please note that you cannot seek conversion of your shares unless you affirmatively vote against the acquisition.

 

If following the date of this proxy statement, MBF determines that the acquisition proposal may not receive sufficient votes at the special meeting for the acquisition to be consummated, MBF, the Sellers, and/or their affiliates may enter into negotiations of one or more transactions with existing stockholders or other third parties that would be designed to incentivize stockholders who have indicated, or are believed to have indicated, an intention to vote against the acquisition proposal to either vote in favor of, or to sell their shares to one or more parties who would vote in favor of, the acquisition proposal. In addition, MBF, the Sellers and/or their affiliates may purchase MBF common stock or warrants in the open market to incentivize other stockholders to vote in favor of the acquisition or to obtain a sufficient number of votes to approve the acquisition. Any such incentives would be provided by the Sellers or their affiliates or from MBF or its affiliates. There can be no certainty that any such transactions would in fact be sought to be negotiated or, if negotiations are commenced, would be consummated. If any such transactions are consummated, MBF, MBF’s executive officers and directors, the Sellers and any other applicable parties will promptly disclose such transactions by means of a supplement to this proxy statement and/or the filing of a Current Report on Form 8-K with the Securities and Exchange Commission and any other required filings. MBF has retained Piper Jaffray & Co. and Jefferies & Company, Inc. to assist it with this process.

 

The acquisition will not be consummated unless the MBF equity proposal, the Sellers’ equity proposal and charter amendment proposals are approved, and the MBF equity proposal the charter amendment proposal and incentive compensation plan proposal will not be presented to the meeting for adoption unless the acquisition is approved. The incentive compensation plan has been approved by MBF’s board of directors and will take effect upon consummation of the acquisition, subject to stockholder approval of the plan. The adjournment proposal will not be considered at the meeting unless, based on the tabulated vote at the time of the special meeting, MBF is not authorized to consummate the acquisition.

 

Pursuant to MBF’s certificate of incorporation, a holder of shares of MBF’s IPO shares may, if the stockholder votes against the acquisition, demand that MBF convert such shares into cash. This demand must be made in writing at the same time that the stockholder votes against the acquisition proposal. If properly demanded, MBF will convert each such share of common stock into a pro rata portion of the trust account as of the date two business days prior to the consummation of the acquisition. If you exercise your IPO conversion rights, then you will be exchanging your shares of MBF common stock for cash and will no longer own the shares. You must continue to hold these shares through the closing of the acquisition and then tender your stock certificate to MBF. If the acquisition is not completed, these shares will not be converted into cash.

However, if we are unable to complete the acquisition by April 23, 2009, we may be forced to liquidate and in that case all holders of MBF’s IPO shares will receive at least the amount they would have received if they sought conversion of their shares and we did consummate the acquisition.

 

MBF intends to fund conversions of IPO shares from amounts available under the trust fund at closing and, in the event of a shortfall, additional amounts will be funded by MBF, MBF LP and the Sellers as follows:

 

 

 

 

Any amounts in the trust fund not used to fund conversions will be reflected on our post-closing balance sheet as cash.

 

The delay in payment of deferred underwriting fees resulted from an agreement entered into among MBF, Kohlberg and the underwriters on October   , 2008 providing for such delay in payment in the event MBF and Sellers fund their pro rata portion of the additional equity investment described in the second bullet point above. The amount of deferred fees for which there will be a delay in payment will be determined on a pro rata basis, proportional to the amount of the additional equity investment made by MBF LP and Sellers, and will not exceed $2.0 million.

 

The acquisition will not be consummated if the holders of 30% or more of the IPO shares (6,468,749 shares or more) exercise their IPO conversion rights.

 

MBF stockholders do not have appraisal rights in connection with the acquisition under the DGCL.

 

MBF is soliciting proxies on behalf of its board of directors. This solicitation is being made by mail but MBF and its directors and officers may also solicit proxies in person, by telephone or by other electronic means (including the Internet). Any information provided by electronic means will be consistent with the written proxy statement and proxy card. [          ] , a proxy solicitation firm that MBF has engaged to assist it in soliciting proxies, will be paid its customary fee of approximately $ [     ] plus $ [     ] per solicited stockholder and out-of-pocket expenses. MBF will ask banks, brokers and other institutions, nominees and fiduciaries to forward their proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. MBF will reimburse them for their reasonable expenses. If you grant a proxy, you may still vote your shares in person if you revoke your proxy before the special meeting.

 

MBF’s outstanding common stock, warrants and units are quoted on the American Stock Exchange, under the symbols MBH, MBH.WS and MBH.U, respectively.

 

The acquisition will not be a taxable event for MBF or its stockholders for federal income tax purposes. Accordingly, neither MBF nor any MBF stockholder (other than a stockholder who exercises its IPO conversion rights) will recognize any gain or loss for federal income tax purposes.

 

A stockholder of MBF who exercises IPO conversion rights and effects a termination of the stockholder’s interest in MBF will generally be required to recognize capital gain or loss upon the exchange of that stockholder’s shares of common stock of MBF for cash, if such shares were held as a capital asset on the date

of the acquisition. Such gain or loss will be measured by the difference between the amount of cash received and the tax basis of that stockholder’s shares of MBF common stock.

 

The acquisition will be accounted for by MBF as an acquisition under the purchase method of accounting. Pursuant to this method, the aggregate consideration paid by MBF in connection with the acquisition will be allocated to CHS’s assets and liabilities based on their fair values, with any excess being treated as goodwill. CHS’s assets, liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of MBF after consummation of the acquisition.

 

In addition to the filing of the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, we and CHS may not complete the acquisition until we have made the required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with the United States Federal Trade Commission, or FTC, and the Antitrust Division of the United States Department of Justice. The filings were made on February 14, 2008 and the applicable waiting period was terminated on February 25, 2008.

 

CHS’s government registrations include various state licenses and a U.S. Drug Enforcement Administration retail pharmacy registration for schedules 2 through 5 controlled substances. In connection with the acquisition, the DEA registration and potentially certain state licenses will need to be transferred, or voluntarily surrendered and reissued, to reflect the change in control of CHS.

 

 

In evaluating the acquisition proposal, the charter amendment proposal and the incentive compensation plan proposal, you should carefully read this proxy statement and especially consider the factors discussed in the section entitled “Risk Factors.”