Free Appendix - District Court of Delaware - Delaware

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 1 of 49

l)ynamic Healthcare Solutions

.

May 4, 1999
Mr, Stephen Feinberg

Cerberu Parers
450 Park Avenue, 28th Floor

New York, NY 10022
Dear Steve,

. thinks after he tastes it. I am told it is the "nectar of

Hope you found the Jamison's to be the "Right Stuff'. Let me know what your Dad the gods".
It has been a while since I sent you a note about Wiiiterland. So, here's an update:

created both a short and long term incentive program for management. These have been very carefully crafted by us to align management's. interests with the owners, to drive EBIT, and to create a sense of urgency that makes it a "right now"
We have environmenL A copy of

both are attached for you.

We have also begun to directly influence Tice on his thinking about organization,
costs, outsourcing, productivity, systems, controls, business planning; and. .. cash.

very frequently with Winterland management and established our own relationships. I think that we have been very well received. Aranda said he has his very own Forte 500 CEO to help him. He may be pandering to me but I think he sees that we really can help him succeed. The entire torieof the senior manàgement seems more "lit up".
We have met

We have set a: tone that immediacy matters. That losses are not an option and management should accept only big chun improvements. We are staring to instill the
fC?eling about winning and taing no prisoners that seemed absent. Still lots to do.

This group has practiced disappointing and have grown sanguine about lousy results. We'll fix that.

that gets in the way ofthis group, and lots of execution and event risk here. Lots can go wrong. Remember, there is no business plan or ~perational discìpline so every little issue gets in their way. No institutional way of handling things yet. We will put in place their first rigorous operational business plan real soon. I'll send you a copy (it wil be very tight, lean, and
There's still a residue and a momentum of stuff

focused on results, now).

EXtl\B\"
400 Capitol Mall, Suite 1150;, Sacramento, CA95814 916.449.6056' 916.449.6059 fax

Bl

Case 1:04-cv-01565-SLR
May 4, 1999
Page 2.

Document 138-2

Filed 05/04/2007

Page 2 of 49

Steve, it has also been really good to work with Kevin Genda. He's smart, careful, and even~handed. Also, he is one of the hardest working people I have ever come across. He is there early, there late, and always has the energy to work through the issue (s). Anyway, I like his intellect. You have ~ solid guy in Kevin.
Kevin and Waren reder asked me to be Chairman at Winterland; to be more directly involved with Tice. I agreed to take on ths assignment to facilitate all the changes we

need. Clearly, this is taing lots more time, effort intellectual.commitment than I had imagined. Just the same, I am enjoying the involvement.
Finally, I am most appreciative of this assignment. I work with it every day now and so do the folks at Dynamic. We want to make lots of money for you (and some for

ourselves~too). So, THANKS!

Sincerely,

1(

Daniel D. Crowley President & CEO

B2

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 3 of 49

Winterland Executive Compensation Program

The Winterland (W fL) Executive Compensation Program (WECP) is designed to permit the company to attract, motivate, and retain the most qualified and three highest performing executives in our industr. The WECP shall consist of (3) key components. These components are:
1) Base Salary: W fL shall position executive salaries

. .

generally to be in the range of salaries in W fL' s industry for comparable positions.

2) Short Term Incentive: An annual bonus opportnity shall be provided

to selected executive management to reward achievement of high levels ofprofitability and organizational performance.
3) Long Term Incentive: Selected members of

Executive Management

wil receive an opportnity to participate in the equity ofWIL through
performance that maximizes shareholder value. .

The WEep shall be reviewed annually by the W fL Board of Directors to

determine participation, individual and corporate goals, as well as the. potential rewards. prospective level(s) of

Actual short terr incentive awards shall be determined by the WfL Board of their sole discretion and wil be made only after the completion of Directors in the financial perforrance ofWfL. the annual independent audit of
This program may be changed or

terminated at any time by the Board. Any

dispute(s) shall only be decided by the Board in its sole discretion and shall not be subject to any dispute by the participants.

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Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 4 of 49

Wintedand Short Term Incentive Progfam
Anually the CEO ofWfL shall recommend to the WIL Board of Executive. Directors

Management positions that should participate in the Short Term Incentive Program (VI fLSTIP). The Board shall determine thè inclusion or exclusion and approve a list whiCh together with the CEO shall comprise the participant's of the Program.

the

The rules of the W /LSTIP are as follows:

1) The W fLSTIP shall provide an annual bonus opportnity for Board-approved participants based upon achievements versus pre-approved goals under the Program. Individual bonus awards shall be calculated using that.
participant's base salary in effect as of January of

the bonus year.

Participant's who werenot with W/L for the full calendar bonus yearshall worked. Parial months shall not be considered. Any executive who is not employed byW /L at the end of the bonus year, or at the date of payout, shall forfeit any bonus
have any bonus awarded prorated fonhe actual months.

accrued.

2) For 1999, the Participant list shall be as follows: CEO

GM/randed GMlicensed
VP CFO
VP Ops

3) Annually the EBIT and Individual Goals shall be submitted by the CEO for the Board's approval.
4) The CEO bonus opportunity shall be 100% of considered achievements for

base at TargetEBIT. The this Program shall be based solely upon achievement ofthe EBITfor the CEO.
base at.

5) The other selected partiCipants bo.nus opportunity shall be 50% of Minimum EBIT. Their bonus shall be divided into a cnmbination of

half
accomplishment.

(25%) for EBIT and half(25%) for Individual goal Individual performance goals must be tangible, specific, and measurable.

and shall directly support the W fL annual business and financials plans for each
paricipant's area of

responsibility. Suitable goals might include specific,

measurable improvements in gross margins, cash flow, productivity, business mix, and costs of materials and overhead.

2
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Page 5 of 49

6) For 1999, the minimum EBIT 'goal shall be $3,000,000 and the Target EBIT goal shall be $4,000,000 (EBIT iS calculated to be after accrual for any bonus to be paid). Bonus for the year shall be accrued against the EBIT of the financials. Such accrual shall be shown on monthly reported numbers to the Board above the EBIT number line of the Income Statement.
7) For 1999, providing the $3,060,000 EBIT goal has been exceeded, the
participants are then eligible for

an add-on ERIT bonus opportnity. This

add-on shall be paid only for the EBIT portion of the various participant's bonus opportunity. The add-on shall be determined as follows:

A) For The CEO:
EBIT
Payout Factor

Minimum Target

$3 Milion $4 Millon
$4.5MiUion

50% x EBIT Bonus Portion x Base . 100% x EBIT Bonus Portion x Base 125% x EBIT Bonus Portion x Base
150% x EBIT Bonus Portion x Base. Uncapped

$5 Millon
Uncapped

B) For The Vice-President(s): EBIT Minimum $3 Milion Target . $4 Milion $4.5 Milion $5 Milion Uncapped
At the Minimum EBIT, the CEO would receive a bonus payout.

Payout Factor 1 x EBIT Bonus Portion x Base 2 x EBIT Bonus Portion x Base 3 x EBIT Bonus Portion x Base 4 x EBIT Bonus Portion x Base Uncapped

At Target EBIT, the CEO would receive a bonus payout of 100% of

..

of

50% of

base.

base.
a bonus payout

At the Target EBIT, the other listed paricipants would receive

of 50% (multiplier of 2 x 25% EBIT Bonus Portion) for the EBIT portion and also be eligible for such % as they have ~arned for their Individual goals. If
100% of

the Individual gU-als were achieved, then 25% would have bee~ earned

base (i.e. 25% for Individual goal achievement, and 2 x 25%, or 50% for the EBIT add-on).
for this portion. This would result in a bonus of75% of

The payout calculation shall be pro-rated should the EBIT fall between an interval (for example, if the actual EBIT is $3.5 milion then the payout factor would be 75%). For 1999, there shall be no cap on the add-on EBIT bonus opportnity. EBIT shall be calculated so as to include the accrual for any bonus to be paid. For example, if the reported EBIT is $4,000,000 and the bonus total is $500,000, then the actual EBIT earned before the bonus payout accrual would have been $4,500,000. No bonus whatsoever shall be paid to any participant unless WfL achieves the Board approved Minimum EBIT for the year.
3

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Case 1:04-cv-01565-SLR

Document 138-2

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Page 6 of 49

Calculation of

bonus example(s):

· VP earning $ 150,000.
· EBIT (including the accrual of the bonus payouts) is

$4,000,000.

· VP was eligible for 50% bonus. The 50% was divided, half for EBIT and half for individual goal accomplishment

· VP achieved all ofthe individual goals.

25% (Individual Achievement) x $ 150,000(Base)= .
Plus
2 x (EBIT Bonus Portion %) x$150,000(Base)=

$37,500.

$75.000

Total Bonus

$112.500

Final STIP 4/99 DHSfDDC

4
B6

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 7 of 49

(note: dated 4 May 99)

Winterland Lon!! Term Incentive Pro!!ram
Overview
Winterland's (W /L' s) Board of Directors seeks to create .the highest level of corporate
success at W/L. The Board believes that W/L's ultimate SliGCeSS will center around the
critically importt work of that these exeqitives will operate W/L under intense pressue to work off

the CEO and the CEO's key direct report. It is anticipated the high debt,

create rapid change, and compete agait firms with more resources in a business

environment fraught with executio.n rik. The Board's goal is to create a tea-oriented

management unit that has the enthusiasm to effectively manage these risks by rewarding
their success in direct proportion to the shareholder value they create. .
Though the establisluent of members of

the W/L Long Term Incentive Plan (W/L L TIP), selected

Executive Management will receive aI opportity to paricipate in tht

ths program is to maximize the total increase in shareholder value by directly aligning the interest of management with that of the investors.
equity ofW/L though Non-Qualified Stock Options (NQSO). The goal of

Winterland Non-Qualified Stock Option Plan (NQSO) & Management Participation
W/L's initial equity shall consist of

20,000,000 shares.

To maximize organizational performance, the Board has established the WfL LTIP for selected. participants. The LTIP is targeted to directly reward paricipant's long-term performance. To drive long-term organizational performance, the Investor Group has created a total
pool of eighteen (18%) percent, or 3,600,000 Non-Qualified Stock Options (NQSO). pool shall consist of a base pool of fifteen (15%) percent or 3,000,000 NQSOs and an over-achievement pool of an additional thee (3%) percent, or 600,000 NQSO's that are specifically to be designated for "over-aGhievement".
This total

- To facilitate management's participation in W/L's NQSO pool(s), the Board inten~s to
create an anual WfL L TIP award opportunity. The anual award opportity wil

provide for possible NQSO grants for achievement of certin Board designated levels of
performance. The actual number ofNQSOs that are awarded, if any, will depend solely

upon the extent to which Board's pre-approved objectives are achieved.

Participants
The WfL Board has designated the 1999 L TIP paricipants will be the CEO, the OMIraded Products, the OMI Licensed Products, the VP/CFO, and the VP/Operations. . Subject to Board approval, òther paricipants may be recommended by the CEO for inclusion in the Plan. The CEO .may not make any offer ofNQSOs without prior
approval of the W fL Board.
1

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Case 1:04-cv-01565-SLR

Document 138-2

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Page 8 of 49

CEO Current Equity and 1998 Equity "Clawback" Opportunity
The Board has granted the CEO an award of

date.of the reorganization.
Additionally,

3.34%, or 668,000NQSOson the

in 1998, the CEO had an opportty to ear another 2.22%, or 444,000

more NQSOs. These were forfeited due to W IL ' s failure to make the 1998 EBIT target

In 1999, the Board will provide a one-time "claw-back" opportty for the CEO only. This "Clawback" opportity shall be based solely on achieving certin EBIT levels in 1999 (after accrual for any bonus payments under the WIL STIP).
IfWIL achieves an EBIT of between $4.0 milion and $5.0 millon iQ 1999, then the CEO will receive aClawback award ofNQSOs. The NQSOs awarded under this category shall be pro-rated from 222,000 NQSOs at $4.0 milion EBIT to 444,000 NQSOs awarded at $5.0 millon EBIT.

No NQSO's wil be "Clawed back" for EBIT under $4.0 milion.

199.9 NQSO Opportunity and LTIP Goals
1) For' I 999,"LTIP paricipants will have the opportnity to earn NQSO awards of

up to

and the over-achievement pool(s), for achievement of certain EBIT levels. EBIT shall be after inclusion of any accrual for bònus payment under the W/L Short-Term Incentive Plan, and final only when
S.O%, or 1,000,000 NQSOs from the basic

verified by the W IL ' s Independent Auditors.

2) The Total NQSO Pool opportunity for 1999 shall be divided into 3.33% from the . base pool, and 1.67% from the Over-Achievement Pool. The Base Pool NQSO
opportunity wil be divided into 2.22%,

or 444,000 NQSOs for the CEO, and 1. I 1 %,

or 222,000 NQSOs divided equally (55,500 NQSOs each) to.the four (4) remaining Board-approved L TIP paricipants. The Over-Achievement opportty -is as shown below.

3) The BaSe Pool NQSOs for 1999, shall only be awarded if $3 milion EBIT is
achieved for 1999.

4) For 1999, an Over.-Achievement Pool Opportunity of

NQSO's wil be available if EBIT in excess of$4.0 millon is achieved. At $4.0 milion EBIT, an additional 167,000 NQSO's wil be awarded to paricipants from the
over-achievemeiI-t NQSO pool. Ths over-achievement award shall be increased, prorata; up to a total of 334,000 NQSO's at $5.0 millon EBIT. No additionalNQSOs shall be awarded for EBIT between $3.0 millon and $4.0 millon. Anyoverachievement NQSOs that are earned shall be allocated to all of the curent . paricipants on the same basis as the base

up to1.67%, or 334,000

pol award for. 1999.
2

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Page 9 of 49

2000 NQSO Opportunity and L TIP Goals
I) For 2000, L TIP parcipants will have the opportty to ear NQSO awards of

5".0%, or 1,000,000 NQSOs from the basic and the over-achievement pool(s), for

up to

.i

achievement of cert EBIT levels. EBIT shall be after inclusion of any accrul for .bonus payment under the W/L Short-Term Incentive Plan, and final only when venfied by theW/L's Independent Auditors.

2) The Total NQSO Pool opportunity for 2000 shall be divided into 3.33% from the base pool, and 1.67% from the Over-Achievement Pool. The Base Pool NQSO
opportty will be divided into 2.22%, or 444,000 NQSOs for the CEO, and 1.1 i %.

or 222,000 NQSOs divided equally (55,500 NQSOs each) to the four (4) remainig
Board-approved L TIP paricipants. The Over-Achievement opportty is as showI

below.

3) The Base Pool NQSOs for 2000, shall only be awarded if$5.0 milion EBIT is
achieved for 2000.
4) For 2000, an Over-Achieve-ment Pool Opportunity of

NQSO's wil be available if EBIT in excess of $6.0 milion is achieved. At $6.0 "milion EBIT, an additional 167,000 NQSO's wil be awarded to paricipants from the over-achievement NQSO pool. This over-achievement award shall be increased, prorata; up to a total of334,000 NQSO's at $7.0 millon EBIT.No additional NQSOs shall be awarded for EBIT between $5.0 milion.'and $6.0 milion; Anyoverachievement NQSOs that are earned shall be allocated to all of paricipants on the same

up toL.67%, or 334,000

basis as the base pool award for 2000.

the curent

3

B9

Case 1:04-cv-01565-SLR

Document 138-2

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Page 10 of 49

Other Provision(s) of the Plan
I) NQSOs shall be considered as fully vested upon award, or when a majority of the shares of WfL have changed ownership in a change of control.
2) NQSOs will dilute pro-rata with majority stockholders in all caes in the event futue shares of stock are issued.
3) No NQSOs in WIL shall be awarded to any paricipant who is not actively

is not an employee on the date of the award.
4). NQSOs shall remai vaJid for five (5) yeas,

at work, or
except that, NQSOs grated to a

paricipant shall be forfeited ninety (90) days after such paricipant is no longer

active employee ofWIL.

an

5) Any NQSOs that are actually granted wider the WIL LTIP, that are later forfeited,
shall be retued to the pool for consideration by the Board as a futue grt.

6) The WIL LTIP shall be reviewed anually by the WIL Board of discretion, to determine futue paricipation, individual

Directors, in its sole and/or c~rporate goals, as well as level (s) of award opportnity, if any, for futue years; Directors in their sole

7) Actual NQSO awards shall be determined by the WIL Board of

discretion, and will be made only after completion of the anual independent audit of
the financial performance

of WIL.

8) NQSOs shall be granted at a price of one (i) cent each, which value is determined by the Board to be fair market value for NQSOs.

9) This program may be modified, or terminated at any time by the Board. Any dispute(s) shall only be decided by the Board in its sole discretion and shall not be subject to any fuher dispute whatsoever by any paricipant.
1,0) NQSOs are not transferable, assignable, and may not be used as collateral by

paricipants.

WL LTIP.2 DHS 5/4/99

4
BIO

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 11 of 49

Daniel D. Crowley

.400. Capitol Mall #1250, Sacramento, CA 95814

FAX
To:

Date:

. 5 --tj-¥

\ ,r.

Nwiber of pages includig cover sheet: v

//'7

~IA' htJ- ~
pt1Î ~
From:
212-421-2947

Stephen Feinberg
Cerberus Partners

Dan Crowley

Phone:

916.449-6056 (pam Herrera)

Fax phone:

916.449-6059 .

REMA:

Urgent

For your review

Reply ASAP

Please comment

Confidentiality Note This communication is intended to be confidential an for the use of only the indvidualor entity named above. If the readr of this messge is not the iniendd rec.ipient, you are hereby notifed that any retention, dissemination, distribution ar copy of this telecopy is stictly prohibited If you have received I
this facsimile in error, please immediatelj notify us by telephone an return the original messge to us at the addess above via the United States Postal Service (we wil reimburse postage.) Thank you.

Bll

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 12 of 49

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Case 1:04-cv-01565-SLR

Hn!

CEO

4 Reports

Document 138-2

Peter Aranda
55,500
14/000 14/000 14/000

28,000

. 69,500

83,500
69/500

Barbara Kortei
55,500
55/500
55/500
I I l

28/000
28/.000

83,500
69 p~Q

Preeti Mehta
14,000 56,000

83pOO

GM Branded
-I I

28/000

69,500
112,000

83,500

i

Sub total
.1 22,000

Filed 05/04/2007

I

22/00
44,000
666,000

278,000

334,000

TOTAL

Page 14 of 49

I

668,000

167,000

334,00

1,723,000 I

2,112/000

S\O"l\biei S/ '/~

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 15 of 49

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Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 16 of 49

REPORTER: LORRIE L ¿f,RCHANT RPR. eRR C'ìR NO. /(J!J

Dýnamîc Healthcare

EXHIBIT: 8
Witness:~. ~o ul \ e\f :? =
Date: --.- # oft

INIl, li

Solutions

ages: __ __

· Jmie 28, 1999

).
Mr. Stephen Feinberg

General Parer .
Cerberus Parers, L.P.

. 450 Park A venue, 28tb Floor

New York, NY 10022

Dear Mr. Feinberg:jV
Your call to me today about Coram was a really nice one to receive. My
understanding is that you have secured the CEO's support for me

.Coram' sBoatd as your representative. Your hope is tliat we wiH to serve onthe \.fork with
orgapzatjon todetetie the r~asons that ths company is not perforig as well as

its .peer group~ Then work with the senior managem~nt to create a sITa.Iegy and the
r:elatedínitiativesthat would change the outcomes

ì'

avai.Iable for you should.

for the better. Finally, to be you need to rep'lace management

Steve, you àre veiy importt to me. As I said on óurphone cal, my goal is for us
to work togetliet over

you and yout projects ardtuaniceprofit tor you and to ear a faIr profitformyself take my colleagues.
To ths end. we are committed to makig yourinveshnent in Winterland into a great
oiie. These pastfour days, myself and tWo. of 17 hours pèr day re-,d.rrectig the Winterland management team

the remaider of.our careers, tn help

my colleagues spent between 15 and

and focusing them on those tasks thalwiIJ specifically create signficant EBlT. We are optistic that

we can really. show improvement in i 999. If it were not for some gaping holes in management and a real mess in the production area that slows us down I would
practically guarantee you that we could deliver a R-1O% EBIT on sales.
Neve~eiess,we are on the task and workig the issues for

you.

You asked that I tell you what would make sense economically for me to change the result ..t Coram. Presuiably, I will be involved in a silar way to that which we
)

expectation is that I wil begi workg with the Coram CEO in July; begi to create the analytcs to miderstaiid the company; and begi to
are at WinterJand. My change the shape of to work with the

the strategy alost imediately. Followig ths, we wi begi
organzation and move the energy into those areas

and ways that

400 Capitol Mall. Suite 1250. Sacra

EXHIBIT
memo. CA 95814 916.449.6056.916.449.6059 fa"

0-0
B16

Case 1:04-cv-01565-SLR
Mr. Steve Feinberg
June 28, i 999
Page 2

Document 138-2

Filed 05/04/2007

Page 17 of 49

will increase your retus. For ths effort I would like you to consider the same

retaer we receive for Winterland ($20,000 per month for the next twelve (12)
mònths plus-out-o:tpocket expenses (trvel, etc.)) and five (5) percent of the net gai upon .the sale of the asset if you receive a 20% anualed rehi pro-rated up

"-

. to eight (8) percent of your net retu between 20% and 30%. 11s is a lower share

.l

than we are receivig for Wiiterland. but presumably work has aleady been done
. and a management te.am is aleady in place for me. If it makes

which wil make it a bit less demanding sense for you, let me know. If not, please tell me what would

work for you so that we can get staed.

Steve, I want you to know foremost that I genuiely am grateful for the opportty
you have provided for me. Every day I am than.for your trst and generosity.
That makes it all the more intense for meto want to do eveiyg I

the sUperior results you deserve. Than you.

can to get you

1(~
Daniel D. .Crowley
Chaian,. President & CEO
¡:. .

Sincerely,

ß17

~~. .~.. . Document Case 1:04-cv-01565-SLR __ ~'d.' . q~~~~. .~~~,'_.~... 138-2

.,;~.r'-. mAl

Filed 05/04/2007

Page 18 of 49

27 Aug99

Steve Feinberg
Re: Coram

REDACTED.

Update on the Aetna USHealthcare situation.

As backeround, in my former life I had a lòng-term contract with Aetna on the CHAMPUS (military retirees) for Southern Califonua. Several people ultimately came to work for me directly when we took over Aetna's portion of friend the business. The fellow who headed CHAMPUS for Aetna became a . and employee of mine. The actuary and I used to play golf together. He is now in Aetna Corporate (AI Maltz). The general counsel for the Aetna's health hiz was Kathy Murphy.
.. Kathy Murhy feels that I am by reputation the one who could broker a deal. That is, if one can be hrokered at all. There are bad feelings with Smith and that impacts everything. That said, she states that she knows me, knows that I am would creative, and if anyone can find a way to settle the mess. . . . she thinks it and be me that could do it. She says that Aetna has a high internal regard for me are more likely to be wiling to.deal if they.know It's me.

~ --

~ 'êu. ~ D

Murphy is now theGeneral Counsel for Aetna's Retirement bix. She works for Shaw. the Aetna Corporate General Counsel, Ed
David Simon is the General Counsel for Aetna USHealthcare. He is know as a
very very difficult person. A

n o ;Z

. .

-

-n c: rn

deal wil not be possible with him.

l-'

~, ~

The President of Aetna USHealthcare is Mike Cardillo. Mike applied for a job private office and with myoId company a few years ago. He was in my interviewed by me personally, He wil be friendly to me,

\,

Murphy think that she may be able to broker a meeting with me, Cardilo, and the CFO of Aetna USHealthcare (Don Marin sp??). I would have to have some formal standing in order for them to believe that a meeting would be productive. In other words, they wil need confirmation that I can speak for Coram and commit to a deal of any kind.
All this is as a result of my continued stirrng of the pot on your behalf. I'm not saying that any deal, or an acceptable deal, or even a meeting can occur. I am saying, that if something can be done, and I get into some kind of a formal relationship that it has possibilities.
CROWLEYKVN 018955

B18

~c~

CONFIDENTIAL

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 19 of 49

_;..r_o.._ ;-.:.;-._-_-...r_~-..:.

;J\_ .:.':.....::._:.:

sc~ I.
llealùicare Solutions
.\ .

Dyamic

lERSONAL &. CONFE~
REPORTER: LORRIE L MARCHANT RPR. eRR. CSR NO IIJJ~J

12 Novemb 199

mJ: \ ß
Witness: C V 0 UJ! t Ý Date: ill(J \ ni # of pages: -2-

Me. Srcen Feibe

Ce ûpw

450 Puk A venlU, ~ Floo

New YorX NY .loo

Dea Sleve:5tpJL
. The pur of ,ih not Ì1 to provide.both of ui With &l'ord th we em both

reta for ou pnvll rc.
You live ad::edme to ub over th Conm opeori. Mr. Jl of Cora
~. iIca ùw th ù no

problem with Co,providig me with. an

\lpside on their cqcy in Conm but prtçn il'upsidc rit be diectly tied 10

Cer'debtpotioIi
is eqal 10 iht whicl 1

You agee to ~ the econ.oiIC3 on W1rebnd.lD .provie tor ;i upsideibai
would o.il have bt ablew reive (Îfmy) for

creng oplÍoi ui .ti~ imvement ~Iiig in EBIIA at Conm ~ I\
Our C\lI da prvide .. 20 sl on th ~ pi on Wmia1i (I iid" cr.k

r~ive 20% frm (Jn Ðiocn on their sh ot Wmtibil). A cop; Xc -curnt Wmtcla dc beeen Ql .ind Ceroerunnd GòrdonÐroer is

atthed
)

Ther U 10 be no clge on ihe Gordon Broeo piec of W tntcland..
You (Cerrusl~ to Ïicr my gai si 00 lfe Ccrro' piece oC

Winte to tcx (40) perct (or ~ .

EXHIBIT

ieG-z,t;
.1'

3

. 1- ~
.. J-~.. ~11L

.oc.pi.ot r.- s.¡..IVO.s.cnlD. a 9:i1l 9i6_+l.~.916_+l15~9 r.~

~.

Jt . EX .
CERB 01)41.

CH-11 TRUSTEEI

EXHIBIT

CrowleyAdmin000126

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Document 138-2

Filed 05/04/2007

Page 20 of 49

-.. - - - -.:

Mr_ Ste"'e Feiobcr¡

Novembe 12.199

.P"-2

~ iIt if thCI I. no improvemnt at Co or th value of i1 improvemet u les th th vùne- of the 40% ih on Cerl:' piec pf

.Winii;hnd, il C~rbà)ß wi rede wFu C£r~ni pa.i if onWinIad
frm 40% to a pente inQl amun Ui~.io wha L aaly ac~ for.
you lit Cora but in ~ fL ll di 20% ba.e dc we Iu~e on

Wlicr toy. In th event th me reti on Co eic= .w%. Ceru

wi in ih paymnt acocgly on WmiC

For thè pur~ of cicug th Cor.imvein you ~ to itk)'OIl

Conu'poition to S4 . .
Any Cninai:on ocoii; rcwd tl I or. my te reeive frni Comn wil tWl be offset agt the-cacuUton.ol Co i~ slig_

.. l.0...
below we bothindi th th rdu OIundebndiDg. .With

The Conm rcl.t is not to be coDSide~or 6I, a pontolio re~'p. _ itl. ~

reli io mypeom.on otlet.Ca rdA! wor I mighr do II the
funior am plently doin it Wmtela now. .

Cer ai.tht I wil contiue to be aske to wod: on itioili: projects an

thihe work lIIy do at Conm shil DO be ~ fen io retrct.my actiVity OD .
. ~~~;..~.:;:~:::

"':.r',.

Ci' ponfoliocömpae, now or In tho tutu.
By sigig

conln with.~ ioy. . .
)

thes' umkoUrdigi I wi unde to bOth sign :i Wnn-t Wiih Cota and a

.Agree~~~ A~
Iñei D. CrwleylPaUl

. -.. . . lL,l-lr
D)'c HeitI:m

Slcen A. Feing/aie
. Cer ûpiul Mgt. LP,

CERa 01348

CH-11 TRUSTEE! Crowley Admin000129

B20

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 21 of 49

REPORTER: LOE L MARCHANT_ RPR. eRR (~ NO. IlHl

EXHIBIT: I (0
Wi"~4U1ìOlD \~
PERSONAL & CONFJDENTL
16 November i 999
;";. ?~~ ~

Dale:. # of p ges:

to

Steve Feinberg

CONFIDENTIAL

Dear Steve, ;;.ß..
A brief update. Amarl and I continue to work on aii Employment Agreement.
I accepted a base of $650,000:
. : !

I asked for a bonus of up to 3 X base. Amaral did not accept my formula and

did.not accept my EBITDA targ~t.
.. I asked for a rolling 3 year contract. Amaral did not accept my term.
I asked for options with

a parial vest up front and aslightIy advaIitaged ~ption

price. Amaral did not accept either.
.:' '.'~
...

i ~sked for a 2.99 x base and targeted bomis.inthe event of a dismissat (not for

cause). Amaral did not accept either. .
i asked fot a success fee of 1 % in the event that I could

to move CRR . Amaral did not accept the fee.
lasked for

engineer a sale/merger

the contIact to continue once I had CRH stabilzed and thatJ have an

option to appoint a CEO to replace myself. Amaral

'did not accept this. Instead he worded the contraclto cease my contract and åJl of tÍie obligations on the

date that I appoint someone as CEO. Ultimately. We arved at wording iii which terms remained in effect but pay would be cut, thereby reducing any
incenti.ve ¡might have under the contract or effectively freezing me into the CEO's job until I can seJI eRR

I asked for protection under 280 G íf any of the contrct trggered an excess
golden parachute under IRS. rules. Amaral did not accept trus, I am baviíig
PeatMarick review the Agreement to see . upside

on the deaL.

if the IRS limits obviate any real

CONFIDENTIAL
EXHIBIT

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Page 22 of 49

CONFIDENTIAL
i asked for the D&O and E&O coverag~;,Amar3i refused to provide thk He
later relented and said I will receive this iomorrow_

I asked him how many options remain in the option pool. He told me that he did not know. He later said it was 12,000. He subsequently told me ¡hat he would return 800,000 of his own options to be used to recruit a new Corporate
management team.

-.-

Steve, because of our friendship and the other deal we are in togeiher.
I want to do what I can for you. I now see 1he deal you and I have in writing,

and it is clear to me that lcannot m¿ie the kind of retu I want on one Or two

deals. For this to work for me, I need to be in several deals and to make them all succeed.

save it. .~ .
The reality at CRH is there is $300M in

So, let's Come back toCRH. I know your debt is in jeopardy. I want to help

debt and it's too much. CRH '~may" reduce this by $30M to $ i OOM (?'!) oil the possible .sale of CPS (the Iist of

. potential buyers is attached, note the number of financial buyèrS). When and
"jf' CPS is sold and R Net is shut, CRH wil have lost approximately $650M top line. Infsion and CIinicalwiU be left to service

about $200M of its _

the debt. Remember Infusion has about $160M in revenue in the red at thjs time.
~.

Now, for ilustration purposes, if"cPS'sale reduces the debt by $50M (a high
end result in my opinion), to $250M. At thåt level of

debt, CRH wiJ have to make Interest payments of roughly $25M 'a year (forget about principal . rtpayment). The bad news is that wiU leave zip for cap-ex or restrcturing; so

CRH has ve.-y liiiIe going for it in terms of improving. The point is that the
debt wil stil be too

high for CRH.

SUppose that in the next year, somehow I am able.lo impr:ove EBITDA on the $450M top line to roughly $30M to $40M (7% tó 9%). No small taSk given how reduced CRH' s situation is at this time. I tlink it's fair for you to expect
there wil be a sigiuficant charge to be taken

large aTld too old not to expect it's sofL

at CRR. Certainly the AR is too

So what? WelJ, here's how it looks to me from here:

A) Even with tle sale of CPS, and the potential for EBrrDA improvement, CRH wil be able to do little more than serVice the interest on the debt. B) With an EBITDA improvement, it's stil quite hard to imagine.that We can .turn around and sell ~is debt-ñdden .rum tõ anyone for enough to make tls workout well for anyone (think aboùt who's out there to buy.sometlung lie

CONFIDENTIAL

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Page 23 of 49

CONFIDENTIAL
this and what their realistic appetite would be for CRH and its large debt); and; C) There's no way there can be any real equity value on the stock. Today's equi1y value is roughly $40M (SOM shares x .75 cents = $37.5M). Obviou~ly, the debt already o~ns ths company and the present public equity value is a miage, right? Makes having incentive options pointless in my opinion. At any rate, one.could expect options to have little value or to be materially diluted if they ever get in the money.
Amaral told me that the debt holder~ ~ßow offering a six (6) month

bearanceon the interest, principal, and covenants.

fore-

My reaction is that this is too short of what wiU be needed by CRH. It really needs to be more like a year. 1 think CRH wil probably need cash (StOM to $20M) versus be able to service debt in 2000. To tell the trth, I think CR wil be lucky if it can show much improvement before the six (6) months payment holiday wears off. Then i will be left to be a disappointment to you, have my
name name is trashed as the guy who couldn't turn eRH (or, in

on à BK, and people associate me with the failure. At that point, where

time), -or Worse, my

am 1 after busting my buii for CRH? H-m-ìri-m.
NQw ¡fyou. were me what would you do? .Knowing CRH wil be a 60-75 hour a
week

trench-war fOf me_ Obviously, CRH has been horrbly mismanaged. So
some silver lining waiting in the wings

. .

)

ihere'sDQreas.on to think that there's

all I need to do is sho~ up.

and

I absolutely want to do what I can for you because you have. been generous with iie this past year, I consider you a fiendj-and you deserve a better Qutcome. (In fairness, 1 hope thai you feel thai i have delivered for you at WIL in an

.\ J

investmeniihat had clearly failed up until I sig.ned onto help).

measure the risk - reward. \Vouldn't you?

But 1 have to

I am seriously àsking myself why i should do this? The upside just isn't there. The Board isn't wiling to pay for what needs to be done.
llonestly, I do not see how we can reasonably expect W/L to cover the shortfalL What if at the end of the day, .the value at W/L is insuffcient? Are you just
going to write

me a check? Based on what?

What if no matter h.ow clever I am, or how many hours I work, CRHjust can't
be improved, or enough? Wil you stil pay me and what would Uial amount be? . i don't think it's realistic for me to expect anyting. At the same time, Idon't

CONFIDENTIAL

B23

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Page 24 of 49

CONFIDENTIAL
tlink CRH wil be able to pay me either. In that case, all of my work would have been for nothing,
TIs is understandably a very~ad situation, but it's not my fault. I should have been called much earlier.
What should happen now is that I sho~l.d lJe hied as Crisis Manager, for six (6)
months, working for all the creditors to.~ssess CRH and deteffne whether eRR can be salvaged or must be liquidated. Then J could implement the plan.

My initial inclination is that CRH may.n'ét:d to be put into a BK and be thoughtfully reslrctured under protection of a court.

I am open to talkng about ths but the reality is I think we should go back to ground zero. What is your/GoldmanIoothiIl's goal? We aii need to be at this
table together.

We've screwed around with this a lot. I've been much tortured by Smith and AmaraL. I've wOr.ed about this endlessly, because I want to be there for you.

I am recommending all of us (including the credit()rs and CRH's "Independent" Directbrs) meet in New Y oTk and detennne what it is that people think can be done. Whether I ain the right person to do it And, ífJ am the guy, what is the upside that Covers this effort.
I) ':~':~~~(:

Sincerely,

-, ./

j)'-/i

B24

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Page 25 of 49

/- 15 199 17:49 FR crn I-THC EXC3Ø3 6'r¿ tf~ IU:l1 "..r..:J~~.

DeUtsche Bank

ø
DeutSche Bane Alox. Brown ONE SOUTH STREET BALTIMORE. MARYLAND 21202

Fax Tran~mì3~ron
Dale: 11/15/9

Pages: 7
QnclUdlng Cover Shesl)

To: Don Amaral

Weridy SImpson
Fax: (303) 672.8799

From: Chñstne Mcmlson .

j

DIrecor
In VIil!tmen r

Bank/ng

(410) 9911-483 - Fax

a ."'". .~

4~ . ~

(410)895-69 - Phone
of thm.

We-noed 10 rlewand linafize Ih~ii "arsa as i am noUamnìawil all

. 'Ç'ç'iI(ìAl

lo-efS 0)- CP~
. ~Cr Å

CONFIDEN
110 inormatioii conWnød in ih tllClimil9 ia codential. õlnd inondd onl for the use of itn indhu;cl Qr

imlily rumed Qbo. If il& rvader of !his mniigo i& nollhe Iiliindad rnple you are hNöly notIfied
Ihat arr dí4umlne Il or cf1 of IIls laos/mUe b it prohlbit. .

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B25

Case 1:04-cv-01565-SLR
..

Document 138-2

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tD 15 199 17:49 FR QJI-AlIHCAR EXt:.J b'fc Oc1J 'u JU .~:~--_.
ONE SOUTH ~RE:ET BALTIMORE. MAIWlAND 21202

Deutsche Bank lZ.
David D. Stcvei

Deutschii Bane A1~ BJOV

Chai &. Q1ief ExCttivoOffcer

Acçio Heth Inc. 1640 Cetu Ceter Pkw
Suite 101
.

Tim Dahtorp Chief Financial Ofcer Tho Bra Comp.tes
252 Claytn Stret
4th

Floo

Mcmphìi, TN 38J34

Denver, CO 80206

(~Ol) 385-3621

(303) 393-03
(303) 329-2979 PAX
. Torn SchIO!ìnger

(901) 385-3689 FAJ
T. Danny PhiUps Senior Vice Prdent 8c Chief Fînanci:ù Ofcer
Adyincc Pardinn.lnc.

Mod:ue
neeke Pttty & Co. 901 WarVillc.Road
Suite 205
Usle.ll 60532

.545 E.lohn Cat'tuPrway
Suite 1.70
Irng, TX 75062

(92) i3()199
(971) 830.6196 FAX

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DomIJdR. Rod

J

Kuechlo PrnCipal . AdVent futeriilIcmal Cmporat1on
Peter

Prsidenr & Chief Bergen

Executive Offçer

Bniiii-ig Corpon

75 StareStrt

40 Metoliil! Drive Oiaga, CA92863

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Bessem Parers &. Co 630 Fiflh Ave 39th FloPt . New York. NY lOu 1
(21 2)708~9176

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(:516) g,ß-5JOO
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PAX

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Stephen C_ Sberll

"TmoUiy A. Dugan

Parter
Bane Oni; EquIty C3pittl

Mmaging Dìretor
Brudanann, Rosser, Shenll &. Co., Inc.
126 Eat 56th Sirt. 29 noor
New

- 3 Fiut NatjonalPlaz
Suite: 1210

York. NY ioo

Chicago. II 606Q.0610
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B26

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tO 1S 199 17:49 FR COR¡: i-ir EXOai or,! lJ,= ,u :7A' ,~.~~_.

Deutsche Bank
Man Engel
Assocate Brown McMian & Co.
930 Montgomor Strt

IZ

ONE SOUTH STI'&T 8ALTIMORE. MARYl~D in02

Deuucliii Bane Alu. Brown

Ca L Gamel"
Oiiian & Chief

ExecUtiVIi ofcfr

Dura Phanceutals;In.

747$ Lwk Bouleyar
San Diei;o, CA 92121
(619) 457-2353

Suite 310 San Francisco. CA 94133 (415) 273-7178 (415) 273-7l71 FAX
Brendan Ford
Semor Vice PridCJt -

(6i9)4$7-iSS~ PAX
Barn A. T oan

Pre&ldenr &. Chef Exc:cuUve Offcer

Expres Scrpts, Inc.
140 Riveirt Drive
, Matand Heghts, MO 63043

Coiprate Devcopmcnl Carnal Heath. Inc. 7000 Cadingl Place Dublin. OIl 43017
(614) 757-7713

(314) 770-1666 .

(314)770-1581.FAX

(614)757-6918 FAX
Edwin M. CrawÍord U

Jos4ph E. Whittrs ChicrFinanciaI Offcer

Ftr Health Grup Cororiion
3200

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Olio1 Executivo :Offcer
Car

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Binngham, AL 352M (205) 133-S9?li
(205).733-9780

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vîc~ Prt.dent

Suite -150 Foater City, CA 94404
(650) 525-2031

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1001 Pennsyhiua Avenue N.W. Suit!) i20South W3shington D.C. 2004

(6jQ) :525':13% FA.

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Generl Faner

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135 South Laalle Sirt

Derus Bunon _
CVS i-:i
. One CVS Drive
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B27

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HJ 15 19' 17:50 FR CQRI-"T EXC:m.i or¿ r,,= iV"" ,~.~~-.

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~ßIk G. Solow

ø

ONE SOUT srm
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Mana¡:ng Pnncipal

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61 Pax Plii .
9t Floo

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(913) 984-1233

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Preident .iChier ExecutiVe Officer

Vice l!(C$Ident.
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Lincar Holdings-Inc.
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Morean StanleyDoan WittCapitaJ

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Vice Predent. Oenet¡J Counsd

Henry Schein, Inc.
13S: Di.ii:ye: Road

B my A.posne ~i~ Presidonl - SecretaI) & Gencri

Melville, NY 11747 (516) 843-590 . (516) 843-553) FAX

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Road

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B28

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ll 15 199 17:5Ø FR C() i-THCRR ExtL..i b-U 0'-;:7 .~ JU 0_0_____
ONE oour SlREE

Deutsche Bank

IZ

BALTIMORE, MAYlD 21202
Diiutèhe ~nc Alii Brown

Vice

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Cntherino 1. Orany Prsidet, Merge and Acquisition!
lOOBasl Riveenter Blvd.

Cralg Albreht Excc\lti'le Vice p¡dait
RfItor, Inc.

16980 Via TIlOß, $uilo 240
Sail

Suii~ 1600
Covin:ron.KY 41011

Diego. CA 92127

(650) 688-0810

(60 392-334'

(650) 688"'811 FAX

(606 392-3330 PAX

Man Mannion
Geeral Partir

:Om O'Kr~
. Analys (212)753-6300
Pauicof &. Co. Ventirs, Inc.

Summt Parors
60 Atlantic Avenue, Suite 2800

Boston. MA 02210-227

445 Parlt A "enue

(617) 82-1010 .
(617) a24-1100PAX
Ann K:oo~od

New York, NY 1002 (212) 753-6300 (212) 319-6155 FAX

i\sociue
Stedini: Vent\re LId
276 Post Roiid West WestOn CT- 06880 (203) 226-8711 (i03) 454-5780 FAX
Ricbml D. Tiucr

RobertL Myer

Pnonty Hiithcm: çötplÌon
Prident &.CruefExectÌvo Offçer

i0333N. Mendian
Suite 300
lødian~poli3, IN 46290

(407)869-7001 .
(407) 772-3802 FAX

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Jefy ¡;, Jons

Maagng Din:ctor TA As3ocates'
HighStièet Tower 125 High Street, Suite 250

President &. CliefExewuvc Ofcer . ProYlUtae m:th Serce5
N 19ih West 24130 Waukesha. WI 53188 (414)641-3759 (414) 641-3770 FAX
Patrck C. Kelly

Boston, MA mHO
(61'7) 574 - 6708 .

(611) 574 -6728 FAX
Judy Ul) Chíef Exccdve Ofcer
Theratoro, me.

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Executve Offcer PSS World Medca Inc.
Ch~iilU &. Chief

266 Harstown Road
Glen Rock. NJ 074,Z

4345 Somhpolnt Blvd Jacksonville. fL 32216 (904) 312-300
(904) 332-339 .5 PAX

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B29

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 30 of 49

. No 15 19917:50 FR aiI-UU'ó l:1\'-"'J ""~ ~._- .- .- -,-

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D;¡vid Mayer

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Clef Fmmciat Offcer

Wa1~en'¡ Health Initiatvos
520 Lae Cook Road
Deeteld, 1L 60015

(847) 37L2640
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B30

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 31 of 49

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CERB 01351

B31

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 32 of 49

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-2.

CERB 01352

B32

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 33 of 49

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CElU OlJ5:

B33

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 34 of 49

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CERB 01354

B34

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 35 of 49

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"""--

CERB 01355

~

f
B35

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 36 of 49

~l5?gg ~:.~Al ~l!. .2--__~__BU.CK ACR OJ'ITAL

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he aiy lawn.iiy iJu to. ..d¡¡ 10 tho Employw 2U JIIc "l.. ri.. ",odo. 15'", or

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CERB 01J56 .

B36

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 37 of 49
a¡oiz.oii

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ii be bh b:¡ dic ü....li"" II Il iim ui i1a; U lIprtdliY o. C 10U1ll'rn. .od ..' !i coiicnt ",idi di b~at-iA rc.1(1:ilñi: lD lUy PurtulioCoIlY. Th Exocvø williili:b ai;\cd wtlir pid bolld3) anotlcrpol Ian nol IO m ii r.''f1.'1d. pol!t:.
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CERa OIJ57

B37

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 38 of 49

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lini nnhn i..rtd. The Ri=iin muøl ribmta rmiik """,ba of ciii., Iiy.ii

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:i .winllOI -l idJ ""ini; iicllesl ¡-. ir lh ~lIY" i- ",11c!.ily ""ipml,

ihe I\oa,'i lei ¡iium"" er A"iy ..1\ di.-Ü.fict will_ in ih Eio=O'1
w~. nod.. di S.c6.:l foc tho puro: of eornIt"l iho ~"lÍ." iu ruc e,t:liimr",1.
0D providio& .\be lutiriloi uf di:l~ ~ uner ihh Sc:on 62
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Ih Em. tllO I laiQall'..iu.Siabi A- p.moq or ii Bod of l).. .,r in:

lUloUo ColI. or ti wI,, to .. In "'I ..ñUm Pilø or Afe (hwl:my
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¡:i- du lle lr.1 ",04 ¡i~ Ia~oii gfl! ÕlGQVt'1 cm/o;nail ii

t1. Asai): (.) lh "Vrootol (nrlill".llcd llbdOd) uC 0 ..i~al bii:Sl

iilud. olhidi IO:S or ~i"e ~":I ~.i prolit ii eonJon ,.il :iy Inbon
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opi, n'lI.. Eni..oCii "tln A1.. (inl1ldml ur r.lõli" C'.ny),

!be :bndJ or

l'''''cry oCile J!iloyr, lIt olita J\llll"" or It 1'~)0& (.; (0' iI.. ctJ,oion.or,
th iicnt f.-i(dr ¡.t. I"',..~ ~oi. DT "'.. ..... of.. püt ptea '" ¡d.. Dr bO

WlI\l1. wlil ~llo 111louY. th iiirnleifutir; or -. other .emn ~du",r-Ilo whch
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lJoml. of lJir nft;y l'o Cu11y,.11 ii lI .Ion¡¡ bo llc fo !he; ~a;vc

to co1Ìii ID ..lYe 11 ri iiici nrOf l'n.lll1ml to icch l'.oitlJ C~or (I) MY oil
..od ~ \h l'l!orÌJ -iuiiv~ Ù1vol\1ll ~ Iinlrth I!midri. ¡,~ Aflii", ac ii

l"ucuiio Compiiny. .

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~ do.iailiy llooiolb .&ilo it rfc 10 t1mø ll. if

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in.. -- .i 'Vi...1i ~ nD cM.1i -1 ~l- to UI~ '" opll an

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CERa 01358

B38

Case 1:04-cv-01565-SLR

Document 138-2

Filed 05/04/2007

Page 39 of 49

i:ria,u 18:01 _.-"_.- FA! 211 i~a _n~. __ 8LA~ii~R£~AL _,_ --"
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