RTSX Radiation Therapy Services (MM)

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant  x                               Filed by a Party other than the Registrant  o

Check the appropriate box:

o    Preliminary Proxy Statement

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

x    Definitive Proxy Statement

o    Definitive Additional Materials

o    Soliciting Material Pursuant to § 240.14a-12

Radiation Therapy Services, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
		(1)		Title of each class of securities to which transaction applies: Common Stock, par value $0.0001 per share of Radiation Therapy Services, Inc, (“Common Stock”)
		(2)		Aggregate number of securities to which transaction applies: 23,725,688 Shares of Common Stock (including restricted Common Stock) 1,312,169 Options to purchase shares of Common Stock
		(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): As of October 19, 2007, there were (i) 23,725,688 shares of Common Stock outstanding (including restricted Common Stock obligations) and owned by shareholders other than Radiation Therapy Investments, LLC, Radiation Therapy Services Holdings, Inc. and RTS MergerCo, Inc. and

				(ii) options to purchase 1,312,169 shares of Common Stock with an exercise price less than $32.50 per share outstanding. The filing fee was determined by adding (x) the product of (I) the number of shares of Common Stock (including restricted stock obligations) that are proposed to be acquired in the merger and (II) the merger consideration of $32.50 in cash per share of Common Stock, plus (y) $28,351,688 expected to be paid to holders of options to purchase Common Stock with an exercise price of less than $32.50 per share in exchange for the cancellation of such options, ((x) and (y) together, the “Total Consideration”). The payment of the filing fee, calculated in accordance with Exchange Act Rule 0-11(c)(1), was calculated by multiplying the Total Consideration by .00003070
		(4)		Proposed maximum aggregate value of transaction:
				$799,436,548
		(5)		Total fee paid:
				$24,543
þ		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
		(1)		Amount previously paid:
		(2)		Form, Schedule or Registration Statement No.:
		(3)		Filing Party:
		(4)		Date Filed:

 

Radiation Therapy Services, Inc.

2234 Colonial Boulevard, Ft. Myers, Florida 33907

 

January 11, 2008

Dear Shareholder:

 

You are cordially invited to attend a special meeting of shareholders of Radiation Therapy Services, Inc. (“RTS,” “we,” “us” or “our”), to be held at, the Hyatt Regency Coconut Point Resort & Spa, 5001 Coconut Road, Bonita Springs, Florida, 34134, on Wednesday, February 6, 2008, at 10:00 a.m., Eastern Time. At the special meeting, you will be asked to consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of October 19, 2007 (the “Merger Agreement”), among RTS, Radiation Therapy Services Holdings, Inc. (“Parent”) and RTS MergerCo, Inc. (“Merger Sub”), pursuant to which, upon completion of the merger, each outstanding share of RTS common stock, par value $0.0001 per share (other than shares held in our treasury, shares owned by our subsidiaries, Radiation Therapy Investments, LLC (“Holdings”), Parent or Merger Sub and shares held by shareholders who perfect appraisal rights in accordance with Florida law), will be converted into the right to receive $32.50 in cash, without interest, and Merger Sub will merge with and into RTS and RTS will become a direct or indirect wholly owned subsidiary of Parent. Parent is owned and controlled by Holdings and Holdings is a party to the Merger Agreement for purposes of the termination fees section of the Merger Agreement. Holdings is owned by an affiliate of Vestar Capital Partners, a leading international private equity firm. Certain of our executive officers and/or directors, Dr. Howard M. Sheridan, Dr. Daniel E. Dosoretz, Dr. James H. Rubenstein and Dr. Michael J. Katin as well as certain or our non-executive employees, are expected to exchange shares of RTS common stock that they own for limited liability company interests in Holdings in connection with the merger.

 

On October 19, 2007, the independent and disinterested members of our board of directors (i.e. all members of the board other than Dr. Howard M. Sheridan, our Chairman of the Board, Dr. Daniel E. Dosoretz, our Chief Executive Officer, Dr. James H. Rubenstein, our Medical Director and Secretary and Dr. Michael J. Katin, each of whom is expected to exchange shares of our common stock for units of limited liability company interests in Holdings in connection with the merger and therefore abstained from voting), based in part upon the unanimous recommendation of the special committee of our board of directors comprised of three of our five independent and disinterested directors, among other things, (i) determined that it was advisable and in the best interests of RTS and its shareholders to enter into the Merger Agreement and (ii) approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement. Following such approval and adoption by the independent and disinterested members of our board of directors, our full board of directors unanimously, based in part upon the unanimous recommendation of a special committee and the approval and adoption of our independent and disinterested directors, among other things, (i) determined that it was advisable and in the best interests of RTS and its shareholders to enter into the Merger Agreement and (ii) approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement. Therefore, our board of directors recommends that you vote “FOR” the approval of the Merger Agreement.

 

The proxy statement attached to this letter provides you with information about the merger, the Merger Agreement and the special meeting. A copy of the Merger Agreement is attached as Annex A to the proxy statement. We encourage you to read the entire proxy statement and its annexes carefully. You may also obtain more information about us from documents we have filed with the Securities and Exchange Commission.

 

Your vote is very important, regardless of the number of shares of our common stock you own. Under Florida law, the merger cannot be completed unless the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting vote for the approval of the Merger Agreement. If you do not vote, it will have the same effect as a vote against the approval of the Merger Agreement.

 

Whether or not you plan to attend the special meeting in person, please complete, sign, date and return promptly the enclosed proxy card. If you hold shares through a broker or other nominee, you should follow the procedures provided by your broker or nominee. These actions will not limit your right to vote in person if you wish to attend the special meeting and vote in person.

 

Thank you in advance for your cooperation and continued support.

 

 

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

THIS PROXY STATEMENT IS DATED JANUARY 11, 2008, AND IS FIRST BEING
MAILED TO SHAREHOLDERS ON OR ABOUT JANUARY 15, 2008.

 

Radiation Therapy Services, Inc.

 

2234 Colonial Boulevard Fort Myers, Florida 33907

 

 

TABLE OF CONTENTS

 

 

SUMMARY TERM SHEET

 

This summary term sheet highlights selected information from this proxy statement and may not contain all of the information that is important to you. To understand the merger fully, and for a more complete description of the terms of the merger, you should carefully read this entire proxy statement, the annexes attached to this proxy statement, the documents referred to in this proxy statement and any information incorporated by reference. We have included section references to direct you to a more complete description of the topics presented in this summary term sheet. In this proxy statement, the terms “RTS,” “we,” “us,” “our” and the “Company” refer to Radiation Therapy Services, Inc., a Florida corporation. In addition, we refer to Radiation Therapy Investments, LLC as “Holdings,” to Radiation Therapy Services Holdings, Inc. as “Parent,” and to RTS MergerCo, Inc. as “Merger Sub.”

 

The Proposal.   You are being asked to vote on a proposal to approve the Agreement and Plan of Merger, dated as of October 19, 2007 (the “Merger Agreement”), among RTS, Parent, Merger Sub and Holdings. Pursuant to the Merger Agreement, upon completion of the merger, each outstanding share of RTS common stock, par value $0.0001 per share (other than shares held in our treasury, shares owned by our subsidiaries, Holdings, Parent or Merger Sub and shares held by shareholders who perfect appraisal rights in accordance with Florida law), will be converted into the right to receive $32.50 in cash, without interest, and Merger Sub will merge with and into RTS and RTS will become a direct or indirect wholly owned subsidiary of Parent. In the event that there are not sufficient votes properly cast at the time of the special meeting to approve the Merger Agreement, shareholders may also be asked to vote on a proposal to adjourn or postpone the special meeting to solicit additional proxies. See “The Special Meeting” beginning on page 63.

 

The Parties to the Merger Agreement.   RTS owns, operates and manages treatment centers focused principally on providing radiation treatment alternatives ranging from conventional external beam radiation to newer, technologically-advanced options. RTS is one of the largest companies in the United States focused principally on providing radiation therapy. RTS opened its first radiation treatment center in 1983 and as of September 30, 2007 provides radiation therapy services in 83 treatment centers. RTS’s treatment centers are clustered into 27 local markets in 16 states, including Alabama, Arizona, California, Delaware, Florida, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, and West Virginia. Of these 83 treatment centers, 25 treatment centers were internally developed, 48 were acquired and 10 involve hospital-based treatment centers. RTS has continued to expand its affiliation with physician specialties in other areas including gynecological and surgical oncology and urology in a limited number of local markets to strengthen its clinical working relationships.

 

Holdings is a Delaware limited liability company and Parent is a Delaware corporation and a wholly owned subsidiary of Holdings. Each of these entities were formed in anticipation of the merger by Vestar Capital Partners V, L.P. an investment fund (the “Vestar Capital Fund”) sponsored by Vestar Capital Partners, a private equity firm (“Vestar Capital Partners” or “Vestar”). Vestar Capital Partners and Vestar Capital Fund are collectively referred to in this proxy statement as “Vestar Capital.” Upon completion of the merger, RTS will be a direct or indirect wholly owned subsidiary of Parent and Holdings. Certain of our executive officers and/or directors, Dr. Howard M. Sheridan, Dr. Daniel E. Dosoretz, Dr. James H. Rubenstein and Dr. Michael J. Katin, as well as certain of our non-executive employees, are expected to exchange shares of our common stock for units of limited liability company interests in Holdings, immediately prior to the merger. We refer to Sheridan, Dosoretz, Rubenstein and Katin as the “Rollover Investors.” Holdings and Parent currently have de minimis assets and no operations. Holdings is a party to the Merger Agreement only for purposes of the termination fees section.

 

Vestar Capital Partners is a leading international private equity firm specializing in management buyouts and growth capital investments. The firm’s investment strategy is targeted towards companies in the U.S., Europe and Japan with valuations in the $100 million to $4 billion range. Since the firm’s founding in 1988, the Vestar funds have completed over 60 investments in companies with a total value of approximately $20 billion. These companies have varied in size and geography and span a broad range of industries. The firm’s strategy is to invest behind incumbent management teams, family owners or corporations in a creative, flexible and entrepreneurial way with the overriding goal to build long-term franchise value. Vestar currently

manages funds with committed capital totaling approximately $7 billion and has offices or affiliates operating in New York, Denver, Boston, Paris, Milan, Munich and Tokyo.

 

Merger Sub is a Florida corporation formed by Parent in anticipation of the merger. Subject to the terms and conditions of the Merger Agreement and in accordance with Florida law, at the effective time of the merger, Merger Sub will merge with and into RTS and RTS will continue as the surviving corporation. Merger Sub currently has de minimis assets and no operations.

 

Going-Private Transaction.   This is a “going private” transaction. If the merger is completed, your shares will be converted into the right to receive $32.50 in cash per share, without interest and less any applicable withholding tax, and:

 

 

See “Special Factors — Certain Effects of the Merger” beginning on page 39.

 

Special Committee.   A special committee of our board of directors was formed and given the full power and authority to review, evaluate, and determine whether it would be appropriate to move forward with any potential transaction or strategic alternative, as well as to review, evaluate and, if appropriate, negotiate and recommend approval or rejection to the board of directors regarding whether to proceed with a sale of RTS or other strategic alternative. The special committee consisted entirely of independent and disinterested members of our board of directors. The members of the special committee are Leo R. Doerr, Ronald E. Inge, and Rabbi Solomon Agin. Initially, independent director Herbert Dorsett was a member of the special committee, but was unable to continue that role after August 2, 2007, due to health related issues. Janet Watermeier, our other independent director and newest member of the board, was not a member of the special committee due to her then limited knowledge and experience with the Company. Our non-independent directors are Dr. Sheridan, Dr. Dosoretz, Dr. Rubenstein and Dr. Katin. See “Special Factors — Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors” beginning on page 25.

 

Special Committee and Board Recommendation.   The special committee unanimously determined that the merger is both procedurally and substantively fair to RTS’s unaffiliated shareholders and in the best interests of our shareholders, and unanimously recommended that our board of directors approve and adopt the Merger Agreement. Based in part on the recommendation of the special committee, the independent and disinterested members of our board of directors (with Dr. Sheridan, our Chairman of the Board; Dr. Dosoretz, our Chief Executive Officer, Dr. Rubenstein our Medical Director and Secretary and Dr. Katin abstaining) unanimously determined that the merger is both procedurally and substantively fair to RTS’s unaffiliated shareholders, and in the best interests of our shareholders, and unanimously approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement. In addition, all of the members of our board of directors, also based in part on the recommendation of the special committee as well as the approval and adoption of the independent and disinterested directors, unanimously determined that the merger is both procedurally and substantively fair to RTS’s unaffiliated shareholders, and in the best interests of our shareholders, and unanimously approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement. ACCORDINGLY, OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE MERGER AGREEMENT. See “Special Factors — Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors” beginning on page 25.

 

Opinion of Morgan Joseph & Co. Inc.   In connection with the merger, the special committee received an opinion, subsequently confirmed in writing, from Morgan Joseph & Co. Inc., its financial advisor (“Morgan Joseph”), as to the fairness, from a financial point of view and as of the date of such opinion to the holders of our common stock (other than the Rollover Investors), of the $32.50 per share merger consideration to be received by those holders of our common stock. The opinion also was provided to our board of directors for its information in connection with its consideration of the transactions contemplated by the Merger Agreement. The full text of Morgan Joseph’s written opinion, dated October 18, 2007, is attached to this proxy statement as Annex B. You are encouraged to read this opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the scope of review undertaken. Morgan Joseph’s opinion addressed only the fairness of the merger consideration to our shareholders (other than the Rollover Investors) from a financial point of view as of the date of the opinion and did not address any other aspect of the merger, including the merits of the underlying decision by RTS to enter into the Merger Agreement. The opinion was addressed to the special committee and was provided to our board of directors for its information and use, but does not constitute a recommendation as to how any shareholder should vote or act on any matter relating to the proposed merger. See “Special Factors — Opinion of Morgan Joseph & Co. Inc.” beginning on page 34.

 

Purpose of the Transaction.   The purpose of the transaction is for Vestar Capital and the Rollover Investors to acquire all of the outstanding equity interests of RTS and to enable RTS’s shareholders to realize a premium on their shares of RTS common stock based on the closing price of our common stock on October 19, 2007. See “Special Factors — Purposes and Reasons of the Rollover Investors” beginning on page 30.

 

Position of the Rollover Investors Regarding the Fairness of the Merger.   Each of the Rollover Investors believes that the merger is both procedurally and substantively fair to RTS’s unaffiliated shareholders. Their belief is based upon their knowledge and analysis of RTS, as well as the factors discussed in the section entitled “Special Factors — Position of Rollover Investors Regarding the Fairness of the Merger” beginning on page 30.

 

Position of Parent, Merger Sub and Vestar Capital Regarding the Fairness of the Merger.   Parent, Merger Sub and Vestar Capital believe that the merger is both procedurally and substantively fair to RTS’s unaffiliated shareholders. Their belief is based upon their knowledge and analysis of RTS, as well as the factors discussed in the section entitled “Special Factors — Position of Holdings, Parent, Merger Sub and Vestar Capital Regarding the Fairness of the Merger” beginning on page 33.

 

Special Meeting.   The special meeting will be held on Wednesday, February 6, 2008, beginning at 10:00 a.m., Eastern Time, at the Hyatt Regency Coconut Point Resort & Spa, 5001 Coconut Road, Bonita Springs, Florida, 34134.

 

Record Date and Quorum.   You are entitled to vote at the special meeting if you were the record owner of shares of our common stock at the close of business on Thursday, January 10, 2008, the record date for the special meeting. You will have one vote for each share of RTS common stock that you owned on the record date. As of the record date, there were 23,704,917 shares of our common stock entitled to vote at the special meeting, 14,504,854 of which were held by persons other than the Rollover Investors. The holders of a majority of the outstanding shares of our common stock at the close of business on the record date represented in person or by proxy will constitute a quorum for purposes of the special meeting. See “Special Meeting — Record Date and Quorum” beginning on page 63.

 

Required Vote.   Under Florida law, the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting voting in favor of approval is required to approve the Merger Agreement. A failure to vote your shares of our common stock or an abstention will have the same effect as voting against the approval of the Merger Agreement. Directors and executive officers Dosoretz, Sheridan, Rubenstein and Katin have each entered into Support and Voting Agreements obligating them to vote their shares of RTS common stock, which represents approximately 40.4% of our outstanding common stock, for approval of the Merger Agreement. Our directors and executive officers collectively beneficially

own approximately 40.5% of our common stock. The merger does not require the approval of at least a majority of our unaffiliated shareholders. See “The Special Meeting — Required Vote” beginning on page 63.

 

Approvals and Consents Required.   The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “Hart-Scott-Rodino Act”), provides that transactions such as the merger may not be completed until certain information has been submitted to the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and certain waiting period requirements have been satisfied. RTS and Parent filed notification reports with the Department of Justice and the Federal Trade Commission under the Hart-Scott-Rodino Act on November 9, 2007. The Federal Trade Commission granted early termination of the applicable waiting period on November 20, 2007. Additionally, it is a condition to closing under the Merger Agreement that certain health care related governmental approvals, consents or licenses specified by the parties shall have been obtained, except where the failure to obtain such consents or approvals would not reasonably be expected to have an adverse affect equal to or greater than 2.5% of the revenues, EBITDA or assets of the Company and it subsidiaries or give rise to a violation of criminal law. It is also a condition to closing under the Merger Agreement that certain third party consents related to indebtedness and leases specified by the parties shall have been obtained. See “Special Factors — Approvals and Consents” beginning on page 58.

 

Interests of RTS’s Directors and Executive Officers in the Merger.   Our directors and executive officers collectively beneficially own approximately 40.5% of our common stock. See “Security Ownership of Certain Beneficial Owners and Management.” Our directors (other than our independent directors) and executive officers have interests in the merger that are different from, or in addition to, their interests as RTS shareholders. These interests include:

 

 

 

 

 

 

 

 

 

Management Agreement.   In connection with the merger, RTS, Holdings and Parent have agreed to enter into a management agreement with Vestar Capital Partners relating to certain advisory and consulting services Vestar Capital Partners will render to RTS, Holdings and Parent. Under the management agreement, Vestar Capital Partners will receive a $10 million transaction fee upon the closing of the merger for services rendered in connection with the consummation of merger and be reimbursed for its reasonable out of pocket expenses. The management agreement also provides for Vestar Capital Partners to receive an annual management fee equal to the greater of (i) $850,000 or (ii) an amount equal to 1.0% of the RTS’s consolidated EBITDA which fee will be payable quarterly. Parent, Holdings and RTS will indemnify Vestar Capital Partners and its affiliates against all losses, claims, damages and liabilities arising out of the performance by Vestar Capital Partners of its services pursuant to the management agreement, other than those that have resulted primarily from the gross negligence or willful misconduct of Vestar Capital Partners and/or its affiliates. See — “Special Factors — Interests of our Directors and Executive Officers in the Merger” beginning on page 45.

Appraisal Rights.   We have concluded that our shareholders are entitled to appraisal rights and to obtain payment in cash of the fair value of their shares of our common stock as determined pursuant to Florida law in the event of consummation of the merger. Such fair value could be greater than, equal to or less than the $32.50 per share (without interest) that our shareholders are entitled to receive pursuant to the Merger Agreement. To preserve their appraisal rights, shareholders must deliver to us prior to the vote being undertaken at the special meeting written notice of the shareholder’s intent to demand payment and must not vote, or cause or permit to be voted, any of their shares of our common stock in favor of the approval of the Merger Agreement. Failure to strictly comply with the specific procedures required by Florida law will result in the loss of appraisal rights. A copy of the provisions of Florida law that provide for appraisal rights and govern such procedures are reproduced in its entirety as Annex C to this proxy statement.

 

Financing.   The total amount of funds required to complete the merger and the related transactions, including payment of fees and expenses in connection with the merger, is anticipated to be approximately $1.1 billion. This amount is expected to be provided through a combination of (i) equity contributions from Vestar Capital and the Rollover Investors, totaling approximately $660 million and (ii) debt financing totaling $575 million of which, approximately $475 million is expected to be funded at closing. Vestar Capital Fund may allocate a portion of its equity commitment to limited partners of Vestar Capital Fund and certain other co-investors, provided that such allocation will not limit the obligations of Vestar Capital Fund under the equity commitment letter to the extent any such co-investor fails to purchase the equity allocated to it. See “Special Factors — Financing” beginning on page 42. The closing of the merger is not conditioned on the receipt of the debt or equity financing by Parent. Parent and Merger Sub, however, are not required to consummate the merger until after the earlier to occur of (x) the completion of a 25 consecutive business day marketing period (during which the purchasing entities will market the debt financing) and (y) April 21, 2008. The marketing period will begin to run after we have obtained the required shareholder approval, satisfied certain closing conditions in the Merger Agreement, and provided Parent and Merger Sub with certain financial statements and financial data customarily included in private placements pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). See “The Merger Agreement — Effective Time; The Marketing Period” beginning on page 66.

 

Equity Commitment.   Vestar Capital has provided an irrevocable equity commitment letter to Parent and RTS pursuant to which it has agreed to provide up to $560 million in equity financing for the Merger (other than the amounts provided by the Rollover Investors), subject to the satisfaction of the closing conditions set forth in the Merger Agreement. In the event the Merger does not close, Vestar Capital has agreed to provide equity funds (i) up to the amount of $25,000,000 with respect to any termination fee payable by Parent and up to $3,000,000 in reimbursement of RTS’s out of pocket deal expenses and (ii) up to the amount of $40,000,000 (inclusive of any termination fee and expense reimbursement payable by Holdings) with respect to damages arising from failures of Parent or Merger Sub to comply with the Merger Agreement. See “Special Factors — Financing” beginning on page 42.

 

Accounting Treatment of The Merger.   We expect the merger to be accounted for as a business combination for financial accounting purposes, whereby the purchase price would be allocated to the Company’s assets and liabilities based on their relative fair values as of the date of the merger in accordance with Financial Accounting Standards No. 141, Business Combinations. See “Special Factors — Accounting Treatment of the Merger” beginning on page 58.

 

Material United States Federal Income Tax Consequences of the Merger.   For U.S. federal income tax purposes, the disposition of RTS common stock pursuant to the merger generally will be treated as a sale of the shares of our common stock for cash by each of our shareholders. As a result, in general, each shareholder will recognize gain or loss equal to the difference, if any, between the amount of cash received in the merger and such shareholder’s adjusted tax basis in the shares surrendered. Such gain or loss will be capital gain or loss if the shares of common stock surrendered are held as a capital asset in the hands of the shareholder, and will be long-term capital gain or loss if the shares of common stock have a holding period of more than one year at the effective time of the merger. We recommend that our shareholders consult their own tax advisors as to the particular tax consequences to them of the merger. See “Special Factors — Material United States Federal Income Tax Consequences” beginning on page 55.

 

Litigation.   We are aware of two lawsuits filed in connection with the proposed merger. Shareholder complaints were filed on October 24, 2007 and November 16, 2007, respectively, against RTS, each of RTS’s directors and Vestar Capital Partners as purported class actions on behalf of the public shareholders of RTS in the Circuit Court of Lee County, Florida. On January 3, 2008, one of the two lawsuits was dismissed voluntarily. The remaining complaint has been amended and the amended complaint alleges, among other things, that the directors of RTS breached their fiduciary duties in connection with the proposed transaction. Among other things, the complaint seeks to enjoin RTS, its directors and Vestar Capital from proceeding with or consummating the merger. Vestar Capital is alleged to have aided and abetted the individual defendants in breaching their fiduciary duties. Based on the facts known to date, and the allegations in the complaint, we believe that the claims asserted in the complaint are without merit and we intend to vigorously defend against the complaint. The absence of an injunction prohibiting the consummation of the merger is a condition to the closing of the merger. See “Special Factors — Litigation” beginning on page 57.

 

Treatment of Stock Options and Other Stock-Based Awards. Except as we otherwise agreed to in writing with Parent and Merger Sub:

 

 

See “The Merger Agreement — Treatment of Stock, Stock Options and Other Stock-Based Awards” beginning on page 67.

 

Anticipated Closing of the Merger.   The parties to the Merger Agreement are using commercially reasonable efforts to complete the merger as soon as possible. We anticipate completing the merger shortly after the special meeting, subject to the approval of the Merger Agreement by our shareholders and the satisfaction of the other closing conditions. See “The Merger Agreement — Effective Time; The Marketing Period” beginning on page 66. We will issue a press release when the merger has been completed.

 

Procedure for Receiving Merger Consideration.   As soon as reasonably practicable after the effective time of the merger and in any event not later than the third business day following the effective time, a paying agent will mail a letter of transmittal and instructions to you and the other RTS shareholders. The letter of transmittal and instructions will tell you how to surrender your stock certificates in exchange for the merger consideration. Y ou should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

 

Solicitation of Transactions; Recommendation to Shareholders.   The Merger Agreement restricts our ability to solicit or encourage alternative acquisition offers. Notwithstanding these restrictions, under certain circumstances required for our board of directors to comply with its fiduciary duties, our board of directors or the special committee may respond to an unsolicited bona fide written proposal received by us. If, prior to the approval by our shareholders of the Merger Agreement, our board of directors or the special committee determines that any such unsolicited bona fide written proposal is a superior proposal, our board of directors may withdraw or change its recommendation of the merger or we may terminate the Merger Agreement if our board of directors or the special committee concludes in good faith, after consultation with RTS’s or the special committee’s outside legal counsel and the special committee’s financial advisor, that, in light of the superior proposal, failure to do so would be inconsistent with our directors’ fiduciary obligations under applicable law. In the event the Merger Agreement is terminated as a result the foregoing we will be required to pay Holdings a termination fee of $25 million and reimburse the out-of-pocket fees and expenses incurred by Parent and Merger Sub up to a maximum amount of $3 million. See “The Merger Agreement — Solicitation of Transactions; Recommendation to Shareholders” beginning on page 75.

Conditions to Closing.   Before we can complete the merger, a number of conditions must be satisfied or waived by all parties. These include:

 

 

See “The Merger Agreement — Conditions to the Merger” beginning on page 80.

 

Termination of the Merger Agreement.   The Merger Agreement may be terminated at any time prior to the effective time of the merger, whether before or after shareholder approval has been obtained (unless otherwise specified), as follows:

 

 

 

by RTS, if:

 

 

by Parent if:

 

 

See “The Merger Agreement — Termination” beginning on page 81.

 

Termination Fees and Expenses.   Under certain circumstances, in connection with the termination of the Merger Agreement by us, we will be required to pay to Holdings a termination fee in the amount of $25,000,000 and reimburse Holdings for certain fees and expenses of Parent relating to the Merger Agreement in an aggregate amount not to exceed $3,000,000. Parent has agreed to pay us a termination fee of $25,000,000 and reimburse us for certain fees and expenses relating to the Merger Agreement in an aggregate amount not to exceed $3,000,000 if we terminate the Merger Agreement in certain circumstances related to the failure of Parent to promptly close the transaction upon satisfaction of its closing conditions or a material breach by Parent of the Merger Agreement resulting in failure to satisfy a closing condition which cannot be cured by April 21, 2008. See “The Merger Agreement — Termination Fees and Expenses” beginning on page 83.

 

Market Price of RTS Common Stock.   The closing price of RTS common stock on the NASDAQ Global Select Market on October 19, 2007, the last trading day prior to the announcement of the proposed merger transaction, was $21.56 per share. The $32.50 per share to be paid for each share of RTS common stock in the merger represents a premium of approximately 51% to the closing price of RTS common stock on October 19, 2007. See “Market Price of Our Common Stock” beginning on page 92.

 

Additional Information.   You can find more information about RTS in the periodic reports and other information we file with the SEC. The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at http://www.sec.gov. For a more detailed description of the additional information available, please see “Where You Can Find More Information” beginning on page 98.

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

 

The following questions and answers are intended to address some commonly asked questions regarding the special meeting, the Merger Agreement and the merger. These questions and answers may not address all questions that may be important to you as our shareholder. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement, and the documents to which we refer you in this proxy statement, contain not only historical information, but also forward-looking statements. Forward-looking statements represent RTS’s expectations or beliefs concerning future events, including the following: any projections or forecasts, including the financial forecast included under “Financial Forecast” beginning on page 96, any statements regarding future sales, costs and expenses and gross profit percentages, any statements regarding the continuation of historical trends, any statements regarding the expected number of future treatment center openings and expected capital expenditures, any statements regarding the sufficiency of our cash balances and cash generated from operating and financing activities for future liquidity and capital resource needs and any statement regarding the expected completion and timing of the merger and other information relating to the merger. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “should,” “estimates” and similar expressions are intended to identify forward-looking statements. You should read statements that contain these words carefully. They discuss our future expectations or state other forward-looking information and may involve known and unknown risks over which we have no control. Those risks include, without limitation:

 

 

 

 

We believe that the assumptions on which the forward-looking statements in this proxy statement are based are reasonable. However, we cannot assure you that the actual results or developments we anticipate will be realized or, if realized, that they will have the expected effects on our business or operations. In light of significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on such statements. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this proxy statement and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Forward-looking statements speak only as of the date of this proxy statement or the date of any document incorporated by reference in this document. Except as required by applicable law or regulation, we do not undertake to update these forward-looking statements to reflect future events or circumstances.

 

INTRODUCTION

 

This proxy statement and the accompanying form of proxy are being furnished to RTS’s shareholders in connection with the solicitation of proxies by our board of directors for use at a special meeting of our shareholders to be held at the Hyatt Regency Coconut Point Resort & Spa, 5001 Coconut Road, Bonita Springs, Florida, 34134, on February 6, 2008, at 10:00 a.m., Eastern Time.

 

We are asking our shareholders to vote on the approval of the Merger Agreement. If the merger is completed, RTS will become a direct or indirect wholly owned subsidiary of Parent, and our shareholders will have the right to receive $32.50 in cash, without interest, for each outstanding share of our common stock.

 

SPECIAL FACTORS

 

Background of the Merger

 

Our board of directors periodically reviews and assesses strategic alternatives available to maximize value to our shareholders and prospects for continued operations as an independent public company. During recent years, the costs and management time and attention requirements of being a public company have significantly increased. In addition, at the end of fiscal 2006 and during the first quarter of 2007 management and the board of directors began to believe that RTS’s capital requirements to fund the maintenance and growth of its future operations would be significantly increased as compared to prior years. These increases were attributable to a variety of business and operational reasons related to our expansion, including, but not limited to, the addition of equipment in new local markets and existing markets, expanded employee and infrastructure requirements and acquisition and development costs. During December 2006 and January 2007, members of our senior management had preliminary informal meetings with representatives from various investment banking firms, regarding potential debt financing opportunities that might be available to RTS. During the same period, management and the board of directors also began to believe that because it would be a significant challenge to finance both short-term and long-term growth and maintain satisfactory levels of profitability, it would be necessary to evaluate the current state of its capital structure.

 

On March 1, 2007, at a regular board of directors meeting with representatives from management and our outside legal advisor Shumaker, Loop & Kendrick, LLP (“Shumaker”) present, an investment banking firm discussed with the board of directors, at our invitation, the potential availability of more permanent types of debt financing including, term bank debt, high yield bonds and convertible debt as well as the advantages and disadvantages of each and the favorable market conditions for such financing options. The board of directors discussed the various debt options and the related costs. Management expressed its belief that regardless of the type of capital source, RTS should consider raising additional capital given the then current favorable market conditions. Management indicated that entering into new debt financing arrangements could add a certain amount of liquidity to RTS’s balance sheet, but indicated that such debt financing would primarily be used to replace our existing bank debt. At this meeting, the board of directors expressed its belief that while debt financing alone may not be sufficient to address all of RTS’s future capital needs, it authorized management to further explore the replacement of RTS’s existing bank debt with a more permanent form of capital.

 

At the March 1, 2007 board meeting, our Chief Executive Officer and President, Dr. Daniel Dosoretz, also reviewed with the board of directors the most recent trends in the healthcare industry, including Medicare reimbursement and increased competition from non-radiation oncology physicians and their potential impact on RTS’s business and operating strategies. There was discussion regarding financing alternatives, private equity investment and the benefits and risks of being a public company. The board of directors discussed the challenges and opportunities that RTS may face in the future associated with its business, including but not limited to continued growth, capital expenditures, reimbursement rates and personnel needs and constraints. The board of directors, while considering opportunities (such as growth in RTS’s business and equipment utilization initiatives designed to maximize patient care and thereby revenue), also discussed the advantages and disadvantages associated with remaining a public company (including, without limitation, future uncertainties associated with Medicare reimbursement policy changes, as well as increased competition from non-radiation oncologist physicians, and their potential impact on market perceptions and RTS’s stock price).

Dr. Dosoretz also informed the board of directors at the March 1, 2007 board meeting that he had recently received several unsolicited contacts from third parties inquiring about interest in a possible transaction with RTS. He indicated that no specific proposals had been made or discussed, and that these contacts were limited to general inquiries. The board of directors discussed in general the potential strategic alternatives that could be available to RTS including debt financing, bank debt, convertible debt, private equity and a strategic transaction, and the board of directors determined to continue with RTS’s existing growth strategy of internal and external development through investing in our existing facilities and selectively acquiring new facilities. The board of directors expressed a desire to review all possible strategic alternatives available for shareholders to realize substantial value that may not be available at another time given the then current activity in the mergers and acquisitions market and strength of the financing markets and noted that the decision to pursue any specific transaction, financing or other strategic opportunity must be subject to the board’s prior review and approval.

 

In March 2007, Wachovia Capital Markets, LLC (“Wachovia Securities”), one of our longstanding financial advisors, was engaged as our financial advisor in connection with assisting us in exploring and evaluating potential strategic alternatives available to RTS. On March 27, 2007, we commenced, with the assistance of Wachovia Securities, a third party solicitation process regarding a potential sale of RTS as one of our possible strategic alternatives. During late March 2007 and April 2007, as part of its engagement and at our direction, Wachovia Securities initially contacted 14 strategic buyers and 20 financial buyers (including Vestar Capital Partners) regarding their interest in a possible transaction with RTS, as one of our potential strategic alternatives. These parties were selected by RTS, in consultation with Wachovia Securities, based on a determination of which parties might have an interest in, and the ability to conclude, a transaction at a reasonable price if we decided to pursue this particular type of strategic alternative. In late April and early May of 2007, an additional eight potential financial buyers were contacted regarding their interest in a possible transaction with RTS.

 

On April 10, 2007, the board of directors convened a special meeting, which was attended by members of our management as well as representatives from our legal and financial advisors. Representatives from Wachovia Securities updated our board of directors regarding the on-going strategic alternative process and reviewed and discussed potential strategic alternatives for RTS, including various financing options such as term bank debt high yield bonds and convertible debt as well as a sale of RTS. The board of directors, while clearly reiterating that it had not made any determination of which strategic alternative, if any, RTS should ultimately pursue, directed Wachovia Securities to continue to assist RTS in exploring possible options with potential parties that might be interested in a possible business combination with, interest in, or acquisition of, RTS, so that the board could evaluate potential options.

 

On April 26, 2007, the board of directors held a special meeting, at which meeting members of our management as well as representatives from our legal and financial advisors also participated. The board of directors discussed certain financial and strategic alternatives available to RTS, including, among other things, debt refinancing, equity transactions and recapitalization alternatives and a potential sale, and the various considerations and advantages and disadvantages related to these alternatives. Wachovia Securities updated the board on the preliminary indications of interest received from six potential financial buyers and one potential strategic buyer. These preliminary indications of interest, which at this time were based solely on public information since non-public information had not yet been made available to parties, reflected potential valuations for RTS within a range of $34.00 to $40.00 per share of RTS common stock. The closing price of our common stock on April 26, 2007 was $29.47.

 

At the April 26, 2007 meeting, the board of directors indicated that it believed that it would be in the best interests of RTS and its shareholders to continue to explore strategic options available to RTS and unanimously approved going forward with the next steps towards exploring potential strategic alternatives. These next steps, with respect to a potential sale transaction, included forwarding proposed confidentiality and nondisclosure agreements to the interested potential financial and strategic buyers that had expressed interest (including negotiating any requested revisions) and assembling a data room and formulating management presentations. At the April 26 meeting, the board of directors reiterated that its approval of further exploring a potential sale transaction was not a decision to engage in such a transaction. Any decision to engage in a debt

financing or strategic transaction would be made, if at all, only after appropriate consideration of possible strategic and financial alternatives.

 

On May 3, 2007, at a regular meeting the board of directors appointed David Watson, the Chief Financial Officer of RTS and Ronald Inge, one of our independent and disinterested directors, to work with RTS’s outside legal counsel and authorized them to make any decisions on RTS’s behalf regarding the confidentiality and nondisclosure agreements to be entered into with potential financial and strategic buyers. Confidentiality and nondisclosure agreements were determined to be necessary so that we could provide such parties with non-public information.

 

During the period of May 8, 2007 through May 16, 2007, Vestar Capital Partners and six other parties entered into confidentiality and nondisclosure agreements. Such parties were provided access to the data room, as well as other non-public information from us. Following the execution of the confidentiality and nondisclosure agreements and review of the information in the data room, the sole strategic buyer among the interested parties informed us that it was withdrawing from the process due to recent changes in such strategic buyer’s business, leaving only the six potential financial buyers. The interested parties were provided guidelines and a timeframe for submitting a formal written proposal. The interested parties were notified that RTS expected to promptly evaluate the proposals (with the assistance of RTS’s legal and financial advisors) to determine if RTS would continue to explore its strategic alternatives. They were also notified that if RTS elected to continue the process, it would select a limited number of parties to complete due diligence and negotiate definitive agreements based on the belief of the board of directors that inviting a limited number of parties who were the most realistic potential acquirors would result in a more efficient and manageable process, limiting both the disruption to RTS as well as the disclosure of RTS’s most sensitive confidential information. Members of RTS’s management, including David Watson, Daniel Dosoretz and James Rubenstein, participated in presentations and general discussions with interested parties, along with RTS’s financial advisor, regarding RTS’s business and operations.

 

On June 14, 2007, the board of directors met to further discuss the status of the potential financial and strategic alternatives process. Members of our management and representatives of our legal advisor also attended the meeting. The board of directors again discussed possible strategic alternatives, including, among other things, debt refinancing, equity transactions and recapitalization alternatives and a potential sale of the Company. However, no decision was made by the board of directors as to a particular course of action at the meeting. Shumaker discussed the fiduciary duties of the directors under the applicable corporate law of the State of Florida. After discussions regarding the ability of prospective members to be independent and whether they were disinterested in the context of any potential alternative transaction to serve on a special committee, the board of directors established a special committee of independent and disinterested directors, originally comprised of Rabbi Agin and Messrs. Doerr (Chairman), Inge and Dorsett (who was relieved from service on the special committee on August 2, 2007 for health reasons). Janet Watermeier, who joined RTS’s board of directors as an independent director in May 2007 and was attending her first board meeting, was not appointed to the special committee due to her then limited knowledge and experience with RTS.

 

At the June 14, 2007 meeting establishing the special committee, the board of directors gave the special committee full power and authority to review, evaluate and determine whether it would be appropriate to move forward with any potential transaction or other strategic alternative, as well as to review, evaluate and, if appropriate, negotiate and recommend approval or rejection to the board of directors regarding whether to proceed with a sale of RTS or other strategic alternative. It was reiterated at the meeting that throughout the process the board of directors had instructed management not to discuss their own potential arrangements with any parties that might be interested in a transaction and that management should not do so in the future unless authorized by the special committee.

 

Immediately following the board of directors meeting on June 14, 2007, the special committee met to address the next steps. The special committee requested and was provided with a list of law firms experienced in, and capable of, providing legal services to special committees, including, without limitation Holland & Knight, LLP (“Holland & Knight”). The special committee met separately and considered potential legal counsel, including firms not included on the list. The special committee chairman had discussions with several

law firms and obtained engagement letters from three law firms for the special committee to consider. Subsequently, the special committee engaged Holland & Knight as its legal advisor on June 25, 2007.

 

On June 18, 2007, Vestar Capital Partners submitted a preliminary formal indication of interest at $36.75 per share of RTS common stock and, on June 19, 2007, another bidder (“Bidder One”) submitted a preliminary formal indication of interest at $38.00 per share of RTS common stock. On such dates, the closing price per share of RTS common stock was $26.77 and $26.35, respectively. Each proposal required equity participation by senior management of RTS. On June 20, 2007, a third party expressed a willingness to engage in a private investment in RTS at no premium to RTS’s stock price. On such date, the closing price per share of RTS’s common stock was $25.79.

 

On June 21, 2007, the board of directors held a special meeting to discuss the results of the strategic alternatives process to date. Members of our management and representatives of our legal and financial advisors also attended the meeting. The board of directors received an update regarding current capital market conditions in the leveraged finance, equity and convertible debt markets, and there was a discussion regarding the pros and cons of high yield debt, convertible debt, bank debt and share repurchase and equity alternatives. The board of directors also received an overview of the third party solicitation process conducted to date regarding a potential sale of RTS. Wachovia Securities noted that during the process a total of 11 participants had submitted initial indications of interest based on public information. Our legal and financial advisors reviewed with the board of directors the two formal proposals received to date and it was noted that both proposals contemplated rollover by management of a portion of their holdings in the proposed transaction. After a discussion, the board of directors determined that the special committee would need to consider the proposals at its sole discretion and inform the board of its decision on the next steps in the process.

 

On June 25, 2007, the special committee held a meeting to discuss with Holland & Knight the special committee’s role and the written proposals that had been submitted. Holland & Knight advised the members of the special committee regarding their fiduciary duties in the context of evaluating the strategic alternatives available to RTS, including, without limitation, a sale of RTS. The special committee decided to engage a financial advisor to assist the special committee in determining whether a sale was appropriate and ensure that RTS engaged in an appropriate marketing and sales process. Holland & Knight agreed, at the request of the special committee, to contact four financial advisors, including Morgan Joseph, and arranged for each of them to make a presentation to the special committee. Chairman Doerr noted that up to this point in time bidders had not been permitted to contact management to discuss management’s participation in a potential transaction. The special committee unanimously agreed that because the bidders had been narrowed to two parties (Vestar Capital Partners and the other interested party) and the proposals from both parties contemplated equity participation by RTS management, it would now be appropriate for management to begin speaking directly to the bidders to discuss such matters as employment agreements, management stock rollover, and other matters relative to management. It was further noted that, because management owned approximately 40.4% of RTS’s outstanding common stock, no acquisition transaction could likely be achieved without management participation and support.

 

Beginning on June 28, 2007, management engaged in discussions with the two bidders regarding the potential terms of employment agreements, management stock rollover and other matters relating to management and apprised Holland & Knight of the status. Prior to such time, management had not engaged in any discussions or negotiations with any potential bidders regarding such matters and management’s role was limited to the presentations and general discussions with potential bidders regarding RTS’s business and operations.

 

From June 28, 2007 through July 2, 2007, the special committee met for presentations by the four potential financial advisors in order to assess the ability of each to assist the special committee in determining whether a sale of RTS was in the best interest of the nonaffiliated shareholders, and if so, to facilitate the sale of RTS.

 

On July 3, 2007, the special committee met to discuss the proposals from the four potential financial advisors. After lengthy discussions, the special committee determined that all four potential financial advisors were well qualified, but that Morgan Joseph and one other firm had the best overall fit with RTS and the

special committee. The special committee instructed Holland & Knight to negotiate with two of the potential financial advisors, one of which was Morgan Joseph.

 

On July 5, 2007, the special committee met to discuss Holland & Knight’s communications with the two potential financial advisors. A discussion ensued regarding the engagement letters received from each of the financial advisors and the relative preference of the special committee for either firm. The special committee agreed that the special committee’s financial advisor should not be chosen based upon fees alone, but also based upon: integrity; reputation; its ability to negotiate on behalf of the special committee; and experience.

 

On July 6, 2007, the special committee voted to engage Morgan Joseph as its financial advisor. As part of its engagement, Morgan Joseph was requested to review the process undertaken by RTS, with the assistance of Wachovia Securities, in exploring strategic alternatives. The special committee instructed Morgan Joseph to contact a limited number of additional potential financial and strategic buyers that had not been previously contacted on RTS’s behalf by Wachovia Securities that were most likely to offer an appropriate price for RTS and that offered a reasonable degree of certainty to close on a prompt basis. In deciding to limit the number of potential buyers approached by Morgan Joseph, the special committee took into account, among other things, the process already undertaken by RTS, with the assistance of Wachovia Securities.

 

On July 11, 2007, representatives of Morgan Joseph provided the special committee with a proposed timetable for its activities, which was then approved. After extensive discussions, the special committee reached a consensus that all potential buyers should provide indications of interest by no earlier than July 25, 2007 to ensure potential buyers had sufficient time to evaluate RTS.

 

On July 13, 2007, a special committee meeting was held at which Morgan Joseph provided an update on its activities. Representatives of Morgan Joseph described to the special committee the discussions between Morgan Joseph and Wachovia Securities over the past week. Representatives of Morgan Joseph discussed the potential buyers that had been approached at RTS’s direction by Wachovia Securities and then discussed five additional potential buyers that Morgan Joseph intended to approach. Representatives of Morgan Joseph also indicated to the special committee preliminarily that it believed that RTS had allocated a sufficient amount of time to its third party solicitation process and that the number and type of potential buyers of RTS that were contacted was generally appropriate given the type of industry in which RTS operates and the size of and financing needs for a potential transaction. Representatives of Morgan Joseph stated that seven of the parties (including Vestar Capital Partners) previously contacted entered into confidentiality and non disclosure agreements and six of these (including Vestar Capital Partners) continued to conduct further due diligence. Following a lengthy discussion, the special committee directed Morgan Joseph to proceed with contacting these parties.

 

On July 25, 2007, the special committee met to discuss with representatives of Morgan Joseph its contacts with additional potential buyers. Representatives of Morgan Joseph indicated that it had contacted five additional potential buyers. One of these buyers declined to consider a bid. The other four agreed to evaluate RTS but ultimately decided not to submit an indication of interest. Representatives of Morgan Joseph indicated that it would complete its evaluation of the Company’s third party solicitation process by July 27, 2007. The special committee then engaged in a discussion regarding the factors that were relevant to the decision of continuing as a public company or entering into a transaction that would result in RTS being taken private. Among other factors, increasing compliance costs of being a public company and increased potential liability for noncompliance were discussed.

 

During the week of July 23, 2007, the Dow Jones Industrial Average declined approximately 600 points largely as a result of concerns related to subprime lending. Given this market uncertainty, debt financing for potential buyers of RTS became increasingly difficult and more costly.

 

On August 2, 2007, the board of directors, during its regularly scheduled board meeting, relieved Mr. Dorsett from all of his committee assignments, including service on the special committee, as a result of health-related problems.

 

On August 2, 2007, the per share price of RTS’s common stock declined significantly following the Company’s earnings release which announced that RTS had failed to meet its expected financial performance and lowered its future estimates for the second consecutive quarter. Also, during early August 2007, the equity

and debt capital markets experienced significant volatility, particularly related to subprime debt. As a result, the special committee requested that Morgan Joseph temporarily discontinue its efforts until the capital markets stabilized and RTS was able to revise its estimates and projections. RTS completed its revised estimates and projections on or about August 29, 2007.

 

On September 6, 2007, the special committee met to discuss the status of potential buyers of RTS. Representatives of Morgan Joseph stated that six other potential buyers that had been contacted by Morgan Joseph made inquiries about RTS. Representatives of Morgan Joseph also discussed with the special committee revised forecasts and projections prepared by RTS that included significant downward revisions to revenue growth and EBITDA based upon RTS’s revised expectations. These revised expectations were largely the result of a reexamination of RTS’s prospects by management as a result of the failure to meet expectations for two consecutive quarters. Representatives of Morgan Joseph also expressed concern about whether adequate debt financing would be available in light of RTS’s performance and the current credit conditions in the market. Representatives of Morgan Joseph expressed their belief that the amounts lenders would be willing to lend, relative to similar transactions in the recent past, would be significantly reduced primarily as a result of significant decrease in liquidity and other changes in the debt markets that had occurred in the preceding 60 days and the expected future continuation and impact of those changes. After extensive discussions, the special committee reached a consensus that all potential buyers should provide revised indications of interest by no later than September 14, 2007.

 

Between September 10, 2007 and September 14, 2007, Morgan Joseph contacted potential buyers, including those who were involved in the process prior to RTS’s stock price decline in August 2007, to assess such potential buyers’ interest in RTS following such stock price decline. Morgan Joseph received five indications of interest as a result of its contact with potential buyers. Bidder One submitted a revised indication of interest which reflected a range of $27.00 to $28.00 per share of RTS common stock. The second bidder indicated a range of $28.00 to $30.00 per share of RTS common stock (“Bidder Two”). The third bidder, a strategic buyer, indicated a range of $29.00 to $32.00 per share of RTS common stock (“Bidder Three”). The fourth bidder indicated a range of $30.00 to $34.00 per share of RTS common stock (“Bidder Four”). Vestar Capital Partners provided a revised indication of interest at $32.00 per share of RTS common stock. Vestar Capital Partners indicated in its bid proposal that it desired a 10-business day exclusivity period. Vestar Capital Partners also informed Morgan Joseph that the Company had until September 21, 2007 to accept its proposal.

 

During the week of September 16, 2007, Morgan Joseph engaged in discussions with all of the bidders. Morgan Joseph attempted to raise each bid and also to ascertain the level of interest of each bidder, the necessary due diligence for each bidder to proceed and the ability of each bidder to close the acquisition.

 

On September 20, 2007, Morgan Joseph, at the direction of the special committee, asked Vestar Capital Partners to increase its bid from $32.00 per share to $34.00 per share in exchange for the 10-business day exclusivity period.

 

On September 21, 2007, the special committee met to discuss the status of the various potential buyers of the Company. Representatives of Morgan Joseph indicated that Vestar Capital Partners had declined to increase its bid to $34.00 per share in exchange for a 10-business day exclusivity period. Representatives of Morgan Joseph also informed the special committee that Vestar Capital Partners reiterated its requirement that the special committee accept or reject its proposal by 5:00 p.m. on September 21, 2007. Representatives of Morgan Joseph also indicated that Bidder One informed them that it would not make a bid at $30.00 per share or higher. As a result, the proposal from Bidder One was rejected by the special committee.

 

Also at this meeting, the special committee concluded that because Bidder Two’s range was too low, it was not a suitable buyer. The special committee also concluded that Bidder Three was not a suitable buyer because (i) given Bidder Three’s bid range, Bidder Three’s proposal was unlikely to exceed Vestar Capital Partner’s proposal, and (ii) Bidder Three indicated its desire to integrate operations of RTS with another company post closing, and management had indicated an unwillingness to work with Bidder Three’s management.

The special committee gave additional consideration to Bidder Four’s proposal. Bidder Four indicated to Morgan Joseph that before it could make a more definitive indication of interest, which would include specifics regarding the price it would be willing to pay, it would require meetings with management and at least three weeks of due diligence after such meetings were concluded. The special committee further instructed Morgan Joseph to engage in discussions with Bidder Four to clarify the amount of due diligence that would be required by Bidder Four and assess the likelihood that Bidder Four would make a bid at the top end of its range. The special committee then determined that it would reject the deadline established by Vestar Capital Partners and also directed Morgan Joseph to attempt to increase Vestar Capital Partners’ bid in exchange for the 10-business day exclusivity period.

 

Thereafter, on September 21, 2007, Morgan Joseph informed Vestar Capital Partners that RTS needed more time to evaluate Vestar Capital Partners’ proposal and, as a result, would not meet Vestar Capital Partners’ deadline of 5:00 p.m. September 21, 2007. Vestar Capital Partners agreed to extend its proposal deadline until 5:00 p.m., September 24, 2007. Morgan Joseph also continued discussions with Bidder Four. During September 22 and 23, 2007, Morgan Joseph attempted to increase Vestar’s bid in discussions with Vestar’s representatives.

 

During the day of September 24, 2007, Morgan Joseph continued discussions with Vestar Capital Partners and Bidder Four. Morgan Joseph indicated to Bidder Four that another bidder (Vestar) was seeking exclusivity and that such bidder had made an offer that was attractive to the special committee and was the highest bid yet received. Bidder Four responded by indicating that it was not willing to accelerate the time period in which it would be willing to make a more definitive indication of interest.

 

On September 24, 2007, the special committee met to further discuss the status of the potential buyers of RTS. Representatives of Morgan Joseph indicated that Vestar Capital Partners agreed to increase its bid to $32.50 per share and that Vestar Capital Partners emphasized that such bid was its last and final bid and that it would only participate in further discussions if it received a 10-business day exclusivity period. Representatives of Morgan Joseph indicated that nothing had come to their attention that was likely to preclude it from rendering a fairness opinion at consideration of $32.50 per share if asked to do so. The special committee then discussed the two potential bids that remained: the bids from Vestar Capital Partners and Bidder Four. The special committee noted that Bidder Four had reiterated to Morgan Joseph that it needed three weeks after meetings with management to conduct due diligence before it could provide a formal bid (rather than just a price range). The special committee discussed the fact that even though the top of Bidder Four’s price range was higher than that of Vestar Capital Partners, there was no assurance that any bid would be made by Bidder Four upon the completion of its due diligence. In addition, the special committee noted that Vestar Capital Partners’ bid currently offered more certainty of value to the unaffiliated shareholders of RTS given that Vestar Capital Partners had substantially completed its due diligence. As a result, the special committee determined that waiting at least an additional three weeks for Bidder Four to complete its due diligence presented too much risk to RTS because it was likely that Vestar Capital Partners (based upon Vestar’s consistent communications to the Company regarding its time frame and unwillingness to extend that time frame) would cease participation if its request for a 10-business day exclusivity period was not accepted. Accordingly, the special committee approved entering into the 10-business day exclusivity period with Vestar Capital Partners. The special committee at that time did not approve the sale of RTS. The exclusivity period with Vestar Capital Partners began on September 25, 2007.

 

At the September 24, 2007 special committee meeting, the special committee discussed other alternatives available to the Company and the concerns regarding RTS’s ability to meet earnings expectations if RTS continued as a public company. The special committee also expressed concerns regarding uncertainty related to medicare reimbursements and the potential related impact to RTS’s stock price and future prospects. Significant concerns were also expressed regarding the slowing of RTS’s growth rate and the difficulty of financing future growth.

 

Beginning on September 27, 2007, extensive negotiations were conducted with Vestar Capital Partners regarding the terms of the merger agreement and the management arrangements. Vestar Capital Partners and its lenders completed their due diligence related to RTS.

On October 5, 2007, the board of directors held a meeting to discuss the status of the strategic alternatives process. Members of our management and representatives of our legal and financial advisors, as well as representatives of the special committee’s financial advisor, also attended the meeting. The board of directors further discussed, among other things, the potential strategic alternatives, including refinancing and recapitalization alternatives, that had been discussed at the board of directors meeting on June 21, 2007. In addition, Wachovia Securities updated the board of directors as to the then current debt market conditions, noting that the debt markets had been severely impacted by subprime related activities in August 2007 which continued to have an adverse impact on liquidity and available commitments for leveraged transactions and debt financings. At this meeting, a representative from Morgan Joseph apprised the board of directors of its work with the special committee and indicated that it had reviewed the third party solicitation process that had been undertaken by RTS with the assistance of Wachovia Securities, and noted that it believed that such process had been very thorough.

 

On October 5, 2007, the special committee met with Holland & Knight to discuss the status of negotiations with Vestar Capital Partners. Holland & Knight apprised the special committee of the material terms of the merger agreement that remained unresolved. The special committee provided its positions on the unresolved material terms and requested Holland & Knight to communicate these positions to Vestar Capital Partners and report back to the special committee following these communications. Numerous informal discussions between the special committee and Holland & Knight occurred during the period from October 5, 2007 through October 18, 2007.

 

During the exclusivity period and through October 19, 2007, management continued to negotiate the terms of employment agreements, management stock rollover and other management agreements with Vestar Capital Partners and apprised Holland & Knight of the status of such negotiations.

 

On October 10, 2007, the exclusivity period with Vestar Capital Partners expired. Although the special committee elected not to extend the 10-business day exclusivity period, because the special committee and Vestar Capital Partners were working in good faith towards resolving the outstanding issues on the Merger Agreement, the committee did not initiate discussions with any third parties pending resolution of outstanding issues with Vestar Capital Partners.

 

On October 12, 2007, the special committee met with Holland & Knight and representatives of Morgan Joseph. Representatives of Morgan Joseph discussed the progress of the negotiations to that date and provided an update on the overall condition of the capital markets. Holland & Knight updated the special committee regarding the status of the negotiations regarding the terms of the merger agreement with Vestar Capital Partners. The special committee and Holland & Knight discussed and agreed upon the upcoming action items and the overall timing for moving forward. The special committee considered RTS’s strategic alternatives without coming to any definitive resolution.

 

On October 16, 2007, the special committee met twice with Holland & Knight to discuss the status of negotiations with Vestar Capital Partners. The special committee discussed the material unresolved terms of the merger agreement and provided guidance on its position with respect to such unresolved terms. Among those unresolved terms was the open issue of the size of the termination fee and related expense reimbursement. Holland & Knight noted that it was continuing to attempt to obtain a termination fee of $22.5 million but that it had encountered significant resistance and that its expectation was that Vestar would remain firm in demanding a termination fee of $25.0 million plus a $3.0 million expense reimbursement. Negotiations continued throughout the days and evenings of October 16, 2007 through October 18, 2007.

 

Our board of directors approved an amendment to RTS’s Bylaws effective as of October 17, 2007 providing that Section 607.0902 of the Florida Business Corporation Act, Florida’s control — share acquisition statute, does not apply to any control-share acquisition of any equity securities of RTS. The control-share acquisition statute is intended to deter hostile takeovers of publicly held Florida corporations.

 

During the evening of October 18, 2007, the special committee met to evaluate the proposed merger agreement and the other strategic alternatives available to RTS. Representatives of Morgan Joseph and Holland & Knight also attended the meeting. Holland & Knight summarized for the special committee the

terms of the merger agreement and the terms of related agreements. Representatives of Morgan Joseph then discussed with the special committee the current status of the strategic alternatives available to RTS and reiterated their concerns related to RTS’s projections, ability to achieve historical profitability and ability to obtain debt financing on acceptable terms. After a thorough discussion and analysis with Morgan Joseph, the special committee determined that the other strategic alternatives available to RTS offered less value to the shareholders of RTS when compared to the proposed sale to Vestar Capital Partners. The special committee considered remaining as an independent public company, but concluded that due to a number of factors, including RTS’s capital needs, regulatory conditions, the Company’s competitive situation and financial projections and industry conditions generally, that a cash price of $32.50 per share exceeded the likely future value of RTS’s common stock for a considerable period. The special committee also considered debt financing, but based upon the current and expected condition of the debt markets, it concluded that it was unlikely that adequate debt financing would be available on attractive terms. The special committee also determined that it was unlikely that, given the price of RTS common stock, any equity financing could be accomplished at a price that would be acceptable to the Company and its shareholders. Representatives of Morgan Joseph then discussed their financial analyses of the proposed transaction with Vestar Capital Partners and delivered its verbal opinion, which was subsequently confirmed by delivery to the special committee of a written opinion, dated October 18, 2007, to the effect that, as of that date and based on and subject to the matters described in its written opinion, the proposed consideration of $32.50 per share of RTS’s common stock to be received by RTS’s shareholders (other than shareholders who perfect appraisal rights and other than the Rollover Investors) was fair, from a financial point of view, to those shareholders. The full text of Morgan Joseph’s opinion, which describes the assumptions made, general procedures followed, matters considered and the limitations on the scope of review conducted by Morgan Joseph in rendering its opinion is attached as Annex B. Following a thorough discussion of the proposed acquisition, early in the morning on October 19, 2007, the special committee voted unanimously in favor of the merger agreement and to recommend that the full board of directors and shareholders approve and adopt the merger agreement and the merger. As part of its determination with respect to the fairness of the consideration to be received by RTS’s unaffiliated shareholders, the special committee adopted the conclusion and the analyses underlying such conclusion set forth in the Morgan Joseph opinion based upon its review as to the reasonableness of such conclusion and analyses.

 

Later in the morning of October 19, 2007, the board of directors met to vote upon the proposed Merger Agreement with Vestar Capital Partners. At this meeting, the five independent and disinterested members of the board of directors (Rabbi Agin, Messrs. Doerr, Inge and Dosoretz and Ms. Watermeier) first unanimously approved entering into and adopting the Merger Agreement, and unanimously recommended shareholder approval and adoption of the Merger Agreement. Immediately following the approval and adoption of the Merger Agreement by the independent and disinterested members of the board of directors, the entire board of directors unanimously approved entering into and adopting the Merger Agreement. The independent and disinterested members of the board of directors also unanimously approved the Support and Voting Agreements, the merger and all of the other agreements contemplated by the Merger Agreement for all purposes of the Business Combination law of the State of Florida such that it would not prohibit, restrict or otherwise adversely affect any of the agreements, arrangement and transaction contemplated by the Merger Agreement and the Support and Voting Agreements.

 

On the afternoon of October 19, 2007, RTS and Vestar Capital Partners entered into the Merger Agreement. RTS and Vestar Capital Partners issued a joint press release announcing the transaction after the close of market on October 19, 2007.

 

Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors

 

In this section, we used the capitalized term “Board” to refer to our board of directors, other than Dr. Sheridan, our Chairman of the Board, Dr. Dosoretz, our Chief Executive Officer, Dr. Rubenstein and Dr. Katin. The Board believes that the merger (which is the Rule 13e-3 transaction for which a Schedule 13E-3 Transaction Statement has been filed with the SEC) is both procedurally and substantively fair to RTS’s unaffiliated shareholders and in the best interests of RTS’s shareholders. On October 19, 2007, the special

committee and board of directors separately approved and adopted the Merger Agreement and authorized the transactions contemplated by the Merger Agreement, including the merger, and recommended that RTS’s shareholders approve and adopt the Merger Agreement. In addition, the special committee believes that sufficient procedural safeguards were and would be present to ensure the fairness of the merger and to permit the special committee to represent effectively the interests of RTS’s unaffiliated shareholders without retaining an unaffiliated representative to act solely on behalf of such shareholders. The approval of the merger by a majority of RTS’s unaffiliated shareholders is not required under Florida law. Accordingly, the special committee did not believe it was necessary to obtain the approval of at least a majority of RTS’s unaffiliated shareholders. A special committee consisting of independent directors is a mechanism designed to ensure procedural fairness. The special committee was created to act solely for and on behalf of RTS’s unaffiliated shareholders. It retained independent legal and financial advisors to assist it; and the special committee received a written opinion from its independent financial advisor as to the fairness, from a financial point of view, of the merger consideration. The special committee believed these protections were adequate to safeguard the interests of RTS’s unaffiliated shareholders. The special committee also considered a number of other factors, including those discussed below, each of which it believed supported its decision and provided assurance of the fairness of the merger to RTS’s unaffiliated shareholders. In reaching these conclusions, the Board and the special committee considered the following material factors, among others which led it to the conclusion that the $32.50 per share merger consideration was fair to RTS’s unaffiliated shareholders:

 

 

 

 

 

 

The special committee and the board of directors also believe the process by which RTS entered into the Merger Agreement with Parent and Merger Sub was fair, and in reaching that determination the special committee and the board of directors took into account, in addition to the factors above, the following:

 

 

The special committee and the board of directors were aware of and also considered the following adverse factors associated with the merger, among others:

 

 

 

In addition, the special committee was aware that the Rollover Investors would be entering into arrangements with Holdings simultaneous with the execution of the Merger Agreement providing that such persons will exchange a portion of their shares of RTS common stock for units of limited liability company interests in Holdings in connection with the completion of the transaction and that such persons would remain employed in substantially their respective current capacities following the completion of the transaction on terms that are more favorable than the current terms of their employment. Although the special committee was aware of these interests (and had reviewed agreements setting forth material terms of these arrangements), the special committee’s primary concern was to ensure that the per share merger consideration and other terms of the Merger Agreement were both procedurally and substantively fair to RTS’s unaffiliated shareholders and in the best interests of RTS’s shareholders. See “Special Factors — Interests of Our Directors and Executive Officers in the Merger” beginning on page 45.

 

In analyzing the transaction relative to the going concern value of RTS, the special committee and the board of directors each took into account the 30-day and 90-day average stock prices, which the special committee and the board of directors considered a meaningful reflection of RTS’s going concern value. The special committee and the board of directors did not consider the net book value or the liquidation value of RTS common stock in determining the substantive fairness of the merger to RTS’s unaffiliated shareholders. They believed that net book value, does not reflect, or have any meaningful impact on, the market trading price of RTS common stock. The merger consideration of $32.50 per share of RTS common stock is higher than the net book value of the RTS common stock. They also believed that RTS’s value is derived, among other things, from the cash flows generated from its continuing operations, rather than from the value of its assets that might be realized in a liquidation. Further, because RTS’s assets include a significant amount of intangible assets, leased properties and other assets that are not readily transferable or are subject to restrictions on their transfer in a liquidation scenario, it was concluded that RTS is not susceptible to a meaningful liquidation valuation. Moreover, the special committee and the board of directors believed that a large part of RTS’s success is attributable to its market share and market presence created by operating radiation treatment centers and its reputation for quality patient care, and any liquidation of its assets or break-up or piecemeal sale of its parts would not maximize shareholder value because it would not likely compensate RTS’s shareholders for the value inherent in its operations. Therefore, the special committee and the board of directors believed that the liquidation methodology would result in a lower valuation for RTS than had been proposed in the merger negotiations.

 

In view of the large number of factors considered by the special committee and the board of directors in connection with the evaluation of the Merger Agreement and the merger and the complexity of these matters, except as expressly noted above, the special committee and the board of directors did not consider it practicable to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision, nor did it evaluate whether these factors were of equal importance. In addition, individual directors may have given different weight to the various factors. The special committee held discussions with Morgan Joseph with respect to the quantitative and qualitative analysis of the financial terms of the merger. The special committee and the board of directors conducted a discussion of, among other things, the factors described above, with RTS’s management and the special committee’s and RTS’s legal and financial advisors. The special committee and the Board reached the conclusion that the merger is both procedurally and substantively fair to RTS’s unaffiliated shareholders and in the best interests of RTS’s shareholders. Therefore, the board of directors recommends that you vote “FOR” the approval of the Merger Agreement. Other than as described in this proxy statement, RTS is not aware of any firm offers by any other person during the prior two years for a merger or consolidation of RTS with another company, the sale or

transfer of all or substantially all of RTS’s assets or a purchase of RTS’s securities that would enable such person to exercise control of RTS.

 

Purposes and Reasons of the Rollover Investors

 

The purposes of the Rollover Investors for engaging in the merger are to enable our shareholders to realize a premium on their shares of RTS based on the closing price of shares of our common stock on October 18, 2007 and to enable the Rollover Investors to continue to own minority equity interests in RTS after shares of RTS Common Stock cease to be publicly traded. In addition, Vestar Capital had requested that as part of the equity financing for the merger, the Rollover Investors and certain non-executive employees make an equity investment in Holdings by contributing a portion of their shares of RTS common stock to Holdings or make a cash investment in Holdings.

 

Purposes and Reasons of Holdings, Parent, Merger Sub and Vestar Capital

 

For Holdings, Parent and Merger Sub, the purpose of the merger is to effectuate the transactions contemplated by the Merger Agreement. For Vestar Capital, the purpose of the merger is to allow it to acquire all of the outstanding equity interests of RTS and to bear the rewards and risks of such ownership after shares of RTS common stock cease to be publicly traded. Holdings, Parent, Merger Sub and Vestar Capital did not consider any alternatives for achieving these purposes. The transaction was structured in the manner described in this proxy statement in order to provide Holdings, Parent, Merger Sub and Vestar Capital the best opportunity to achieve the purposes described above and will have the effect of RTS becoming a private company and a subsidiary of Holdings. Holdings, Parent, Merger Sub and Vestar Capital have undertaken to pursue the transaction at this time in light of the opportunities they perceive to strengthen RTS’s competitive position, strategy and financial performance under a new form of ownership.

 

Position of the Rollover Investors Regarding the Fairness of the Merger

 

Under the rules governing “going private” transactions, the Rollover Investors are required to express their beliefs as to the substantive and procedural fairness of the merger to RTS’s unaffiliated shareholders. The Rollover Investors are making the statements included in this subsection solely for the purposes of complying with the requirements of Rule 13e-3 and related rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Messrs. Sheridan, Dosoretz, Rubenstein and Katin, each in his capacity as a member of our board of directors, participated in the deliberations of the resolutions of the board of directors on October 19, 2007 approving and adopting the Merger Agreement and authorizing the transactions contemplated by the Merger Agreement. Following the approval and adoption of the Merger Agreement by all of our independent directors, our full board unanimously approved and adopted the Merger Agreement. Messrs. Sheridan, Dosoretz, Rubenstein and Katin were not members of, and did not participate in the deliberations of, the special committee.

 

The Rollover Investors believe the merger is substantively and procedurally fair to RTS’s unaffiliated shareholders on the basis of the factors described below. However, the Rollover Investors have not performed, or engaged a financial advisor to perform, any valuation or other analysis for the purposes of assessing the substantive and procedural fairness of the merger to RTS’s unaffiliated shareholders.

 

In making their determination that the merger is substantively fair to RTS’s unaffiliated shareholders, the Rollover Investors expressly adopted the unanimous recommendation of the special committee and considered the following material positive factors, among others:

 

 

 

 

 

 

 

The Rollover Investors also considered the following material negative factors, among others:

 

 

 

The Rollover Investors believe that the merger is procedurally fair to RTS’s unaffiliated shareholders based upon the following material factors, among others:

 

 

The Rollover Investors believe that the merger is procedurally fair despite the fact that our board of directors did not retain an unaffiliated representative, other than the special committee, to act solely on behalf of RTS’s shareholders for purposes of negotiating the terms of the Merger Agreement. In this regard, the Rollover Investors note that the use of a special committee of independent and disinterested directors is a mechanism recognized to ensure the procedural fairness of transactions of this type. The Rollover Investors also believe that the merger is procedurally fair despite the fact that Messrs. Sheridan, Dosoretz, Rubenstein and Katin, each in his capacity as a member of our board of directors, participated in the deliberation of the resolutions of our board of directors on October 19, 2007, approving and adopting the Merger Agreement and the transactions contemplated by the Merger Agreement and Mr. Watson was present during such deliberations; in this regard, the Rollover Investors note that all of the other members of the RTS board who voted on the transaction approved and adopted the Merger Agreement.

 

The Rollover Investors did not consider the net book value of RTS common stock in determining the substantive fairness of the merger to RTS’s unaffiliated shareholders because they believe that net book value, which is an accounting concept, does not reflect, or have any meaningful impact on, the market trading price of RTS common stock. They note, however, that the merger consideration of $32.50 per share of RTS common stock is higher than the net book value of the RTS common stock. The Rollover Investors did not consider liquidation value in determining the substantive fairness of the merger to RTS’s unaffiliated shareholders because of their belief that liquidation value did not present a meaningful valuation for RTS and its business; rather, it was the belief of the Rollover Investors that RTS’s value is derived from the cash flows generated from its continuing operations, rather than from the value of its assets that might be realized in a liquidation. Further, because RTS’s assets include a significant amount of intangible assets, leased properties and other assets that are not readily transferable or are subject to restrictions on their transfer in a liquidation scenario, the Rollover Investors concluded that RTS is not susceptible to a meaningful liquidation valuation. Moreover, it was the belief of the Rollover Investors that a large part of RTS’s success is attributable to its

market share and market presence created by operating radiation treatment centers and its reputation for quality patient care, and any liquidation of its assets or break-up or piecemeal sale of its parts would not maximize shareholder value because it would not likely compensate RTS’s shareholders for the value inherent in its operations. Therefore, the Rollover Investors believed that the liquidation methodology would result in a lower valuation for RTS than had been proposed in the merger negotiations.

 

The foregoing discussion of the information and factors considered and given weight by the Rollover Investors in connection with their evaluation of the substantive and procedural fairness to RTS’s unaffiliated shareholders of the Merger Agreement and the transactions contemplated by the Merger Agreement is not intended to be exhaustive but is believed to include all material factors considered by them. The Rollover Investors did not find it practicable to and did not quantify or otherwise attach relative weights to the foregoing factors in reaching their position as to the substantive and procedural fairness to RTS’s unaffiliated shareholders of the Merger Agreement and the transactions contemplated by the Merger Agreement. The Rollover Investors believe that these factors provide a reasonable basis for their belief that the merger is substantively and procedurally fair to RTS’s unaffiliated shareholders. This belief should not, however, be construed as a recommendation to any RTS shareholder to vote to approve the Merger Agreement. However, Messrs. Sheridan, Dosoretz, Rubenstein and Katin, each in his capacity as a member of our board of directors, concur with the recommendation of our board of directors that our shareholders approve the Merger Agreement. See “Special Factors — Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors” beginning on page 25.

 

Position of Holdings, Parent, Merger Sub and Vestar Capital Regarding the Fairness of the Merger

 

Holdings, Parent, Merger Sub and Vestar Capital are making the statements included in this section solely for the purposes of complying with the applicable requirements of Rule 13e-3 and related rules under the Exchange Act. The views of Holdings, Parent, Merger Sub and Vestar Capital should not be construed as a recommendation to any shareholder as to how that shareholder should vote on the proposal to approve the Merger Agreement.

 

Holdings, Parent, Merger Sub and Vestar Capital attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the shareholders of RTS, and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were fair to such shareholders. None of Holdings, Parent, Merger Sub or Vestar Capital believe that it has or had any duty, fiduciary or otherwise to RTS or its shareholders, including with respect to the merger and its terms. The shareholders of RTS were, as described elsewhere in this proxy statement, represented by the special committee that negotiated with Holdings, Parent, Merger Sub and Vestar Capital on their behalf, with the assistance of independent legal and financial advisors.

 

None of Holdings, Parent, Merger Sub or Vestar Capital participated in the deliberations of the special committee and none of them participated in the conclusions of the special committee or the board of directors of RTS that the merger was fair to RTS’s unaffiliated shareholders, nor did they undertake any independent evaluation of the fairness of the merger or engage any financial advisor for such purposes.

 

While Holdings, Parent, Merger Sub and Vestar Capital found persuasive the conclusions of the special committee and the board of directors with respect to the substantive and procedural fairness of the merger to RTS’s unaffiliated shareholders as set forth in the proxy statement under “Fairness of the Merger — Recommendations of the Special Committee and Our Board of Directors,” they did not base their determination expressed below on the special committee’s analyses of factors. In addition, Holdings, Parent, Merger Sub and Vestar Capital believe the proposed merger is substantively and procedurally fair to RTS’s unaffiliated shareholders based on the following other factors:

 

 

 

 

 

Holdings, Parent, Merger Sub and Vestar Capital did not consider the liquidation value of RTS because they considered RTS to be a viable, going concern and therefore did not consider liquidation value to be a relevant methodology. Further, Holdings, Parent, Merger Sub and Vestar Capital did not consider the net book value, which is an accounting concept, as a factor because they believed that net book value is not a material indicator of the value of RTS as a going concern but rather is indicative of historical costs. Holdings, Parent, Merger Sub and Vestar Capital note that net book value per share of RTS stock was lower than the $32.50 per share cash merger consideration.

 

The foregoing discussion of the information and factors considered and given weight by Holdings, Parent, Merger Sub and Vestar Capital in connection with the fairness of the Merger Agreement and the merger is not intended to be exhaustive but is believed to include all material factors considered by Holdings, Parent, Merger Sub and Vestar Capital. Holdings, Parent, Merger Sub and Vestar Capital did not find it practicable to, and did not, quantify or otherwise attach relative weights to the foregoing factors in reaching their position as to the fairness of the Merger Agreement and the merger. Holdings, Parent, Merger Sub and Vestar Capital believe that these factors provide a reasonable basis for their position that the merger is fair to RTS’s unaffiliated shareholders.

 

Opinion of Morgan Joseph & Co. Inc.

 

The special committee engaged Morgan Joseph to advise it and render a written opinion regarding the fairness, from a financial point of view, to our shareholders, other than the Rollover Investors, of the consideration to be received by those shareholders in the merger. The special committee selected Morgan Joseph to render an opinion regarding fairness, from a financial point of view, because Morgan Joseph has

substantial experience with transactions similar to the transaction and Morgan Joseph regularly engages in the valuation of businesses and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, secondary distributions of listed and unlisted securities, and private placements.

 

At a meeting of the special committee on October 18, 2007, Morgan Joseph rendered its oral opinion, subsequently confirmed in writing, to the effect that, as of such date and based upon the assumptions made, matters considered and limits of review set forth in its written opinion, the consideration to be received by our shareholders, other than the Rollover Investors, in the transaction was fair, from a financial point of view, to those shareholders.

 

The full text of the Morgan Joseph opinion is attached to this proxy statement as Annex B. The description of the opinion set forth in this section is qualified in its entirety by reference to the full text of the Morgan Joseph opinion set forth in Annex B. You are urged to read the Morgan Joseph opinion carefully and in its entirety for a description of the procedures followed, assumptions made, and matters considered by Morgan Joseph, as well as the qualifications and limitations on the Morgan Joseph opinion and the review undertaken by Morgan Joseph in rendering the Morgan Joseph opinion.

 

The Morgan Joseph opinion was directed to the special committee and addresses the fairness, from a financial point of view, to our shareholders, other than the Rollover Investors, of the consideration to be received by those shareholders in the merger. The Morgan Joseph opinion does not address the merits of the underlying business decision of the Company to enter into the merger and does not constitute a recommendation to the Company, the board of directors, the special committee or any other committee of the board of directors, our shareholders, or any other person as to how such person should vote or as to any other specific action that should be taken in connection with the merger.

 

In connection with rendering its opinion, Morgan Joseph reviewed and analyzed, among other things, the following:

 

 

Morgan Joseph also met with and participated in conference calls with certain of our officers and employees as well as representatives from the Company’s financial advisor concerning our business, operations, assets, financial condition and prospects, as well as the merger, and Morgan Joseph undertook such other studies, analyses and investigations as it deemed appropriate.

In performing its analyses, Morgan Joseph made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Morgan Joseph and the Company. Any estimates contained in the analyses performed by Morgan Joseph are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by those analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which those businesses or securities might actually be sold. Accordingly, the analyses and estimates are inherently subject to substantial uncertainty.

 

Morgan Joseph, with our permission, assumed and relied upon the accuracy and completeness of all financial and other information and data provided to or otherwise reviewed by or discussed with it, and upon the assurances of our senior management that all information relevant to its opinion had been disclosed and made available to it. Morgan Joseph further relied on the assurances of our senior management that they were not aware of any facts that would make such information inaccurate or misleading. Morgan Joseph neither attempted independently to verify any such information or data, nor did Morgan Joseph assume any responsibility to do so. Morgan Joseph also assumed, with our permission, that the forecasts and projections of the Company, which were provided to or reviewed by Morgan Joseph, had been reasonably prepared in good faith based on the then best current estimates, information and judgment of our senior management as to our future financial condition, cash flows and results of operations. In that regard, Morgan Joseph assumed, with our permission, that (i) such forecasts and projections would be achieved in the amounts and at the times contemplated thereby and (ii) all of our material assets and liabilities (contingent or otherwise) were as set forth in our financial statements or other information made available to Morgan Joseph. Morgan Joseph expressed no opinion with respect to such forecasts and projections or the estimates and judgments on which they were based. Morgan Joseph made no independent investigation of any legal, accounting or tax matters affecting the Company, and Morgan Joseph assumed the correctness of all legal, accounting and tax advice given to the Company and the board of directors and any committee thereof. Morgan Joseph further assumed that the merger would be consummated on the terms described in the drafts of the Merger Agreement, the commitment letter and the voting agreement, without any waiver, delay, amendment or modification of any material terms or conditions. Morgan Joseph did not conduct a physical inspection of any of our properties and facilities, nor did it make or obtain any independent evaluation or appraisal of such properties and facilities. Although Morgan Joseph took into account its assessment of general economic, market and financial conditions and its experience in transactions that, in whole or in part, it deemed to be relevant for purposes of its analyses, as well as its experience in securities valuation in general, the Morgan Joseph opinion was necessarily based upon economic, financial, political, regulatory and other conditions as they existed and could be evaluated on the date of the Morgan Joseph opinion and Morgan Joseph assumed no responsibility to update or revise its opinion based upon events or circumstances occurring after the date of the Morgan Joseph opinion.

 

Set forth below is a summary of the material financial analyses presented by Morgan Joseph to the special committee in connection with rendering its opinion. The summary set forth below does not purport to be a complete description of the analyses performed by Morgan Joseph in this regard. Certain of the summaries of financial analyses include information set forth in tabular format. In order to fully understand the financial analyses used by Morgan Joseph, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The preparation of opinions regarding fairness, from a financial point of view, involve various determinations as to the most appropriate and relevant methods of financial analyses and the application of these methods to the particular circumstances, and, therefore, such opinions are not readily susceptible to a partial analysis or summary description. Accordingly, notwithstanding the separate analyses summarized below, Morgan Joseph believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors considered by it, without considering all of its analyses and factors, or attempting to ascribe relative weights to some or all of its analyses and factors, could create an incomplete view of the evaluation process underlying the Morgan Joseph opinion.

 

No company or transaction used in the analyses described below is identical to the Company or the merger. Accordingly, an analysis of the results thereof necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect

the merger or the public trading or other values of the Company or companies to which they are being compared. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using selected acquisition or company data. In addition, in performing such analyses, Morgan Joseph relied on projections prepared by research analysts at established securities firms, any of which may or may not prove to be accurate.

 

The following is a summary of the material analyses performed by Morgan Joseph in connection with the Morgan Joseph opinion:

 

Valuation of the Company

 

Selected Publicly Traded Companies Analysis.   Using publicly available information, Morgan Joseph reviewed the stock prices (as of October 17, 2007) and selected market trading multiples of the following companies in the broadly defined healthcare services industry that, in Morgan Joseph’s opinion, may be considered similar to the Company in certain respects for purposes of this analysis:

 

 

The financial information reviewed by Morgan Joseph included market trading multiples exhibited by the selected companies with respect to their 2007 estimated financial performance in general and earnings before interest, taxes, depreciation and amortization in particular, which we refer to as EBITDA. The table below provides a summary of these comparisons:

 

 

Selected Acquisitions Analysis.   Using publicly available information, Morgan Joseph reviewed the purchase prices and multiples paid in the following selected mergers and acquisitions in the broadly defined healthcare services industry that were announced since January 1, 2004 that, in Morgan Joseph’s opinion, may

be considered similar to the merger in certain respects for purposes of this analysis. The table below provides a summary of these comparisons:

 

 

The financial information reviewed by Morgan Joseph included the purchase prices and multiples paid by the acquiring company of the target company’s most recent LTM financial results available preceding the announcement of the acquisition. The table below summarizes the results of this analysis:

 

 

Discounted Cash Flow Analysis.   Using certain projected financial information supplied by the senior management of the Company for calendar years 2007 through 2012, Morgan Joseph calculated the net present value of the Company’s free cash flows using a discount rate of 13.1%. Morgan Joseph’s estimate of the appropriate discount rate was based on the estimated cost of capital for the selected public companies. Morgan Joseph also calculated the terminal value of the Company in the year 2012 based on multiples of EBITDA ranging from 8.0x to 9.0x and discounted these terminal values using the assumed range of discount rates. Morgan Joseph’s estimate of the appropriate range of terminal multiples was based upon the multiples of the selected public companies and the precedent transactions.

 

This analysis resulted in a range of equity values per share indicated in the table below:

 

 

Inherent in any discounted cash flow valuation are the use of a number of assumptions, including the accuracy of projections and the subjective determination of an appropriate terminal value and discount rate to apply to the projected cash flows of the entity under examination. Variations in any of these assumptions or judgments could significantly alter the results of a discounted cash flow analysis.

Leveraged Buyout Analysis.   Based on the financial forecasts and projections provided by the senior management of the Company for calendar years 2007 through 2012, Morgan Joseph performed a leveraged buyout analysis to determine the potential implied enterprise value that might be achieved in an acquisition in a leveraged buyout transaction assuming an exit from the business in four or five years. Estimated exit values were calculated by applying a range of exit value multiples from 9.5x to 10.5x 2012E EBITDA, which exit value multiples were derived from the implied EBITDA multiples paid for the target companies in the precedent transactions referred to above under Discounted Cash Flow Analysis. Morgan Joseph then derived a range of theoretical purchase prices based on assumed required internal rates of return for a buyer between approximately 19% and 26%, which range of percentages was, in Morgan Joseph’s professional judgment, generally reflective of the range of required internal rates of return commonly assumed when performing a leveraged buyout analysis of this type. This analysis indicated an implied equity value of approximately $28.00 to $32.00 per share.

 

Miscellaneous.   The Company and Morgan Joseph entered into a letter agreement dated July 5, 2007 relating to the services to be provided by Morgan Joseph in connection with the merger. We agreed to pay Morgan Joseph a fee of $1.45 million in connection with its (i) analysis of strategic alternatives to maximize shareholder value, (ii) analysis of the process undertaken by the Company, with the assistance of the Company’s financial advisor, to explore the possibility of a transaction such as the proposed merger, and (iii) delivery of the Morgan Joseph opinion. None of these fees were contingent upon either the conclusion of its opinion or the consummation of the merger. We also agreed to reimburse Morgan Joseph for its reasonable out-of-pocket expenses incurred in connection with its engagement, including certain fees and disbursements of its legal counsel, and to indemnify Morgan Joseph against liabilities relating to or arising out of its engagement, including liabilities under the securities laws. In the ordinary course of its business, Morgan Joseph may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions in debt, equity and other securities and financial instruments (including loans and other obligations) of, or investments in, the Company, portfolio companies of Vestar, and their respective affiliates. Other than this engagement, Morgan Joseph had not been, and was not, engaged by the Company, Vestar Capital Partners or any of the portfolio companies of Vestar Capital Partners.

 

Certain Effects of the Merger

 

If the merger is completed, all of the equity interests in RTS will be owned directly or indirectly by Parent, which immediately following the effective time of the merger will be owned directly or indirectly by Vestar Capital, the Rollover Investors and certain other RTS non-executive employees who may acquire units of limited liability company interests in Holdings. Immediately before, and contingent upon the completion of, the merger, the Rollover Investors and certain other RTS non-executive employees are expected to exchange certain shares of RTS common stock and/or cash for units of limited liability company interests in Holdings. Except for the Rollover Investors, Vestar Capital and the RTS non-executive employees, no current shareholder of RTS will have any ownership interest in, nor be a shareholder of, RTS immediately following the completion of the merger. As a result, our shareholders (other than the Rollover Investors and RTS non-executive employees) will no longer benefit from any increase in RTS’s value, nor will they bear the risk of any decrease in RTS’s value. Following the merger, Vestar Capital Fund, the Rollover Investors and certain other RTS non-executive employees who have contributed RTS common stock and/or cash in exchange for equity interests in Holdings will, through their ownership of Holdings, benefit from any increase in the value of RTS and also will bear the risk of any decrease in the value of RTS.

 

Upon completion of the merger, each RTS shareholder (other than Holdings, Parent, Merger Sub, RTS or any subsidiary of RTS or any shareholder who perfects appraisal rights in accordance with Florida law) will be entitled to receive $32.50 in cash for each share of RTS common stock held. Except as otherwise agreed to in writing by RTS, Parent, Merger Sub and certain members of RTS management (including certain of the Rollover Investors) (i) each outstanding option to purchase shares of RTS common stock, whether vested or unvested, will be canceled and converted into the right to receive a cash payment equal to the excess (if any) of the $32.50 per share cash merger consideration over the exercise price per share of the option, multiplied by the number of shares subject to the option, without interest and less any applicable withholding taxes and

(ii) each award of restricted stock will be converted into the right to receive $32.50 per share in cash less any applicable withholding taxes. The receipt of cash in the merger will be a taxable transaction for U.S. federal income tax purposes under the Internal Revenue Code of 1986 and may also be a taxable transaction under applicable state, local, foreign and other tax laws.

 

Following the merger, shares of RTS common stock will no longer be traded on the NASDAQ or any other public market.

 

Our common stock constitutes “margin securities” under the regulations of the Board of Governors of the Federal Reserve System, which has the effect, among other things, of allowing brokers to extend credit on collateral of our common stock. As a result of the merger, our common stock will no longer constitute “margin securities” for purposes of the margin regulations of such Board of Governors and therefore will no longer constitute eligible collateral for credit extended by brokers.

 

Our common stock is currently registered as a class of equity security under the Exchange Act. Registration of our common stock under the Exchange Act may be terminated upon application of RTS to the SEC if our common stock is not listed on the NASDAQ or another national securities exchange and there are fewer than 300 record holders of the outstanding shares. Termination of registration of our common stock under the Exchange Act will substantially reduce the information required to be furnished by RTS to its shareholders and the SEC, and would make certain provisions of the Exchange Act, such as the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement of furnishing a proxy statement in connection with any shareholder meeting pursuant to Section 14(a) of the Exchange Act, no longer applicable to RTS. If RTS (as the entity surviving the merger) completed a registered exchange or public offering of debt securities, however, it would be required to file periodic reports with the SEC under the Exchange Act for a period of time following that transaction.

 

Parent and the Rollover Investors expect that following completion of the merger, RTS’s operations will be conducted substantially as they are currently being conducted. Parent and the Rollover Investors have informed us that they have no current plans or proposals or negotiations which relate to or would result in an extraordinary corporate transaction involving our corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations, or sale or transfer of a material amount of assets except as described in this proxy statement. Parent and the Rollover Investors may initiate from time to time reviews of us and our assets, corporate structure, capitalization, operations, properties, management and personnel to determine what changes, if any, would be desirable following the merger. They expressly reserve the right to make any changes that they deem necessary or appropriate in light of their review or in light of future developments.

 

Following consummation of the merger, Holdings through Parent will own directly or indirectly 100% of our outstanding common stock and will therefore have a corresponding interest in RTS’s net book value and net earnings. It is currently expected that immediately following the closing, Messrs. Sheridan, Dosoretz, Rubenstein and Katin will each own (excluding the units they may receive under the management equity incentive plan) approximately 1.8%, 7.2%, 3.5% and 2.6% of the outstanding units of Holdings (excluding incentive units). Messrs. Sheridan, Dosoretz, Rubenstein and Katin, currently beneficially own approximately 9.3%, 16.0%, 10.8% and 4.2%, respectively, of our outstanding shares of common stock. Each holder of Holdings units will have an interest in RTS’s net book value and net earnings in proportion to his ownership interest. An equity investment in Holdings in connection with the merger will involve substantial risk resulting from the limited liquidity of such an investment. Nonetheless, if RTS successfully executes its business strategies, the value of such an equity investment could be considerably greater than the original cost. In addition, Holdings will have substantially more debt outstanding after the merger and this may adversely affect the equity value of Holdings. In general, higher levels of debt can have the effect of increasing the risk to equity holders of losing the entire value of their investment. It is expected that Messrs. Sheridan, Dosoretz and Rubenstein will serve on the board of managers of Holdings as of the closing of the merger. However, Vestar Capital Fund will own a majority of the equity interests in Holdings, will control the board of managers of Holdings and exert substantial influence over the governance and operations of Holdings, Parent and RTS (as the surviving corporation in the merger) following the completion of the merger.

The following table sets forth for each member of the Rollover Investors (1) such person’s interest in the stockholders’ equity (net book value) of RTS at September 30, 2007, (2) such person’s interest in the net income of RTS for the quarter ended September 30, 2007 (in the case of (1) and (2), such person’s interest has been calculated to give pro forma effect to the exercise of all stock options (vested or unvested) and unvested restricted stock that were outstanding on October 19, 2007) and (3) the approximate percentage interest expected to be held by each such person in the limited liability company interests in Holdings (and accordingly the net book value and net income) of the surviving corporation, without giving effect to incentive unit awards, immediately following the merger.

 

 

 

 

Plans for RTS After the Merger

 

After the effective time of the merger, and excluding the transactions contemplated in connection with the merger as described in this proxy statement, Parent and the Rollover Investors anticipate that RTS’s operations will be conducted substantially as they are currently being conducted, except that it will cease to be an independent public company and will instead be a direct or indirect wholly owned subsidiary of Parent. After the effective time of the merger, the directors of Merger Sub immediately prior to the effective time of the merger will become the directors of RTS, and the officers of RTS immediately prior to the effective time of the merger will remain the officers of RTS, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.

 

Conduct of RTS’s Business if the Merger is Not Completed

 

In the event that the Merger Agreement is not approved by RTS’s shareholders or if the merger is not completed for any other reason, RTS shareholders will not receive any payment for their shares of RTS common stock. Instead, RTS will remain an independent public company, its common stock will continue to be listed and traded on the NASDAQ, and RTS shareholders will continue to be subject to the same risks and opportunities as they currently face with respect to their ownership of RTS common stock. If the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your RTS shares, including the risk that the market price of our common stock may decline, due to factors including but not limited to the fact that the current market price of our stock may reflect a market assumption that the merger will be completed. From time to time, our board of directors will evaluate and review the business operations, properties, dividend policy and capitalization of RTS, and, among other things, make such changes as are deemed appropriate and continue to seek to maximize shareholder value. If the Merger Agreement is not approved by our shareholders or if the merger is not consummated for any other reason,

there can be no assurance that any other transaction acceptable to RTS will be offered or that the business, prospects or results of operations of RTS will not be adversely impacted.

 

Pursuant to the Merger Agreement, under certain circumstances, RTS is permitted to terminate the Merger Agreement and recommend an alternative transaction. See “The Merger Agreement — Termination” beginning on page 81.

 

However, under certain circumstances, if the merger is not completed, RTS may be obligated to pay Parent or its designee a termination fee and/or to reimburse Parent or its designee for out-of-pocket fees and expenses in connection with the merger. See “The Merger Agreement — Termination Fees and Expenses” beginning on page 83.

 

Financing

 

The total amount of funds necessary for Vestar to complete the merger and the related transactions is anticipated to be approximately $1.1 billion, consisting of (1) approximately $700 million to be paid out to our shareholders and holders of other equity-based interests in RTS, (2) approximately $240 million to refinance our existing indebtedness (assuming the Company’s existing capital leases remain in place after the closing of the merger and there is no change to the terms and conditions of such leases), (3) approximately $45 million to pay fees and expenses in connection with the transaction and (4) approximately $100 million under the revolving credit facility and the delayed draw term loan facility, which will provide a source of funds for general corporate needs, including acquisitions by the Company, post-closing.

 

These funds are anticipated to come from the following sources:

 

 

Equity Financing

 

Vestar Capital Funds V, L.P. delivered an equity commitment letter for a maximum aggregate amount of $560 million in equity contribution to Parent and RTS. This commitment constitutes all of the equity portion of the merger financing, other than shares of RTS common stock to be contributed by the Rollover Investors and certain other RTS non-executive employees in exchange for units of limited liability company interests in Holdings.

 

The equity commitment letter provides that in the event the merger is consummated, equity funds will be contributed to the extent necessary up to the maximum aggregate commitment amount to fund the consideration payable in connection with the merger and the other transactions contemplated by the Merger Agreement. In the event the merger does not close, the equity commitment letter provides that equity funds will be funded in the amount (i) up to $28 million with respect to any termination fee or expense reimbursement payable by Holdings or (ii) up to $40 million (inclusive of any termination fee or expense reimbursement payable by Holdings) with respect to damages arising from failures of Parent or Merger Sub to comply with the Merger Agreement and for no other purpose. The obligation to fund any portion of the equity commitment is subject to the terms and conditions of the equity commitment letter, including the satisfaction or waiver at the closing of the conditions precedent to the obligations of Parent to consummate the merger.

The terms of the equity commitment letter will expire automatically upon the earlier to occur of (i) contemporaneously with the closing of the Merger Agreement; or (ii) the termination of the Merger Agreement in accordance with its terms.

 

In addition, Vestar Capital Fund may allocate a portion of its equity commitment to limited partners of Vestar Capital Fund and certain other co-investors, provided that such allocation will not limit the obligations of Vestar Capital Fund under the equity commitment letter to the extent any such co-investor fails to purchase the equity allocated to it. The terms and conditions of any such investments would be subject to negotiations and discussions among Vestar Capital and the potential investors.

 

Debt Financing

 

Merger Sub has entered into a debt financing commitment letter with Wachovia Bank, National Association, Wachovia Investment Holdings, LLC and Wachovia Capital Markets, LLC providing Merger Sub with committed financing for (i) $410 million in senior secured credit facilities and (ii) $165 million under a new senior subordinated unsecured bridge facility. Merger Sub has additionally engaged Wachovia Securities to place or underwrite the issuance and sale of $165 million in aggregate principal amount of notes in a public offering or in a Rule 144A or other private placement. In connection with strategic alternative process undertaken by the board of directors of RTS, RTS had arranged for Wachovia Bank and its affiliates to provide stapled financing for potential bidders in a sale of RTS. While Vestar and its affiliates did not have significant business relationships with Wachovia Bank or its affiliates, Vestar decided to retain Wachovia Bank and its affiliates to provide debt financing for the merger.

 

The documentation governing the senior secured credit facilities and the bridge facility has not been finalized and, accordingly, their actual terms may differ materially from those described in this proxy statement in which event we will update such information through a supplement to the proxy statement and amend the Schedule 13E-3 filed in connection with the merger to the extent required by applicable law. Except as described herein, there is no current plan or arrangement to finance or repay the debt financing arrangements.

 

Senior Secured Credit Facilities

 

The senior secured credit facilities are expected to be comprised of (i) a senior secured term loan facility of up to $350 million (of which $40 million shall consist of a delayed draw term loan facility) and (ii) a senior secured revolving credit facility of $60 million. As a result of the merger, Merger Sub will be merged with and into RTS, and RTS, as the surviving corporation, will be the borrower under the senior secured credit facilities. All obligations of RTS under the senior secured credit facilities will be guaranteed by Parent and each existing and future direct and indirect wholly owned domestic subsidiary and certain non-wholly owned subsidiaries of RTS, subject to certain exceptions. The obligations of RTS and the guarantors under the senior secured credit facilities will be secured by substantially all of the assets of RTS and the guarantors, including the equity interests in certain subsidiaries.

 

The full amount of the term loans is expected to be used to fund a portion of the merger consideration, to refinance our existing indebtedness and to pay related fees and expenses. The term loans are expected to bear interest based on either the adjusted London inter-bank offered rate (“Adjusted LIBOR”) plus an initial spread, or the alternate base rate (“ABR”) plus an initial spread, at the option of RTS. The term loans will mature six years after the closing date of the merger and will also require quarterly interim amortization payments, with the balance payable at the final maturity date of the term loans. The borrower may, subject to prepayment penalties as applicable, make voluntary prepayments of the term loans at any time. In addition, the term loans are required to be prepaid in certain circumstances, including with the net cash proceeds of debt issuances (other than debt otherwise permitted), the net cash proceeds from any issuance of public equity securities, the net cash proceeds of certain asset sales (subject to reinvestment rights and other exceptions) and specified percentages of certain cash flows subject to step down based on maximum leverage ratio.

 

The revolving credit facilities will be used to fund a portion of the merger consideration, to refinance our existing indebtedness, to pay related fees and expenses and for ongoing working capital and for other general

corporate purposes (including, without limitation, permitted acquisitions). The revolving credit facilities will mature five years after the closing of the merger and are expected to bear interest based on either Adjusted LIBOR plus an initial spread, or ABR plus an initial spread, at the option of RTS.

 

The senior secured credit facilities will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, capital expenditures, liens, investments, asset sales, mergers and consolidations, dividends and other distributions, redemptions, prepayments of certain indebtedness, and a maximum leverage ratio and minimum interest coverage ratio. The senior secured facilities will also include customary events of default, including upon a change of control.

 

High Yield Notes

 

Wachovia Capital Markets, LLC has been engaged by Merger Sub to place or underwrite the issuance and sale of $165 million in aggregate principal amount of notes in a public offering or in a Rule 144A or other private placement. Although the interest rate, maturity and other material terms of the notes have not been finalized, we expect that the notes will have terms and conditions customary for unsecured senior subordinated note offerings of issuers that are affiliates of Vestar Capital Partners.

 

High Yield Bridge Facility

 

If and to the extent the offering or placement of the notes is not completed on or prior to the closing of the merger, Wachovia Capital Markets, LLC has committed to provide Merger Sub with $165 million of loans under a senior subordinated unsecured bridge facility. The obligations of RTS, as successor to Merger Sub pursuant to the merger, under the senior subordinated unsecured bridge facility will be guaranteed on a senior subordinated basis by each of its subsidiaries that is a guarantor of the senior secured credit facilities.

 

The loans under the senior subordinated unsecured bridge facility will be increasing rate bridge loans. For the initial six-month period under the senior unsecured bridge facility, interest on the bridge loans is expected to accrue at a rate per annum based on three-month Adjusted LIBOR, as determined on the effective date of the merger, plus an initial spread, subject to a maximum overall interest cap. The bridge loans will have an initial maturity of one year after the effective date of the merger, but the maturity of any bridge loans outstanding at that time will automatically be extended to the seventh anniversary of the effective date of the merger. Holders of the extended term loans will have the right (subject to certain minimum amount requirements) to exchange such loans for exchange notes maturing on the seventh anniversary of the effective date of the merger.

 

The borrower will be required to prepay the bridge loans or to make an offer to prepay or repurchase the extended term loans and the exchange notes under certain circumstances, typical for a high yield bridge facility, subject to certain exceptions and others to be agreed, and upon a change of control.

 

The senior subordinated unsecured bridge facility will contain customary representations and warranties and covenants substantially similar to those in the senior secured credit facilities, provided that there will be no financial maintenance or capital expenditure covenants. The unsecured senior subordinated bridge facility will also include customary events of default, including a change of control.

 

Conditions to the Debt Financing

 

The debt financing commitments will expire if not drawn on or prior to April 21, 2008. The facilities contemplated by the debt financing commitments are subject to customary closing conditions, including:

 

 

 

Since the final terms of the debt financing facilities have not been agreed upon, such terms and amounts may differ from those set forth above and, in certain cases, such differences may be significant.

 

As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described herein is not available as anticipated.

 

Interests of Our Directors and Executive Officers in the Merger

 

General

 

In considering the recommendation of the special committee and our board of directors with respect to the Merger Agreement, RTS shareholders should be aware that some of the RTS directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of RTS shareholders generally. These interests and arrangements may create potential conflicts of interest. The special committee and our board of directors were aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions to approve and adopt the Merger Agreement and to recommend that RTS shareholders vote in favor of approval of the Merger Agreement.

 

Stock Options, Restricted Stock and Other Equity-Based Awards

 

As of the effective time of the merger:

 

 

We estimate the amounts that will be payable to each RTS named executive officer in settlement of stock options as follows: Sheridan, $0, Dosoretz, $7,860,000, Rubenstein, $3,900,000, Katin, $0, Watson, $0 and Biscardi, $0. We estimate the aggregate amount that will be payable to all directors and executive officers in settlement of stock options and restricted stock awards to be approximately $12,238,109. No member of the special committee has any stock options or restricted stock awards.

Current Employment Agreements of Management

 

Each of Messrs. Dosoretz and Rubenstein is currently a party to an employment agreement with RTS entered into in 2004 that would provide benefits to the executive in the event of specified triggering events in connection with a change of control of RTS such as the proposed merger.

 

Pursuant to our agreements with Messrs. Dosoretz and Rubenstein, in the event of a separation of service of the executive by RTS without cause or by the executive for good reason within 12 months prior to or 6 months after a change of control of RTS, Messrs. Dosoretz and Rubenstein will receive a lump sum severance payment equal to 250% the sum of:

 

 

In addition, if a change of control occurs and such executives continued in his position, such executives’ then current annual base salary and bonus will automatically be increased by 150% for the greater of the remaining term of his employment agreement or 2 to 3 years in lieu of the severance payment described above.

 

Each of Messrs. Dosoretz’s and Rubenstein’s agreements provide a “conditional gross-up” for excise and related taxes in the event the severance compensation and other payments or distributions to an executive pursuant to an employment agreement, stock option agreement, restricted stock agreement or otherwise would constitute “excess parachute payments,” as defined in Section 280G of the Internal Revenue Code. The tax gross-up will be provided if the aggregate parachute value of all severance and other change in control payments to the executive is greater than 110% of the maximum amount that may be paid under Section 280G of the Internal Revenue Code without imposition of an excise tax. If the parachute value of an executive’s payments does not exceed the 110% threshold, the executive’s payments under the change in control agreement will be reduced to the extent necessary to avoid imposition of the excise tax on “excess parachute payments.”

 

Assuming hypothetically that the merger occurred on December 1, 2007 and there was a termination of employment without cause or for good reason in connection therewith, Dosoretz and Rubenstein would have been entitled to receive lump sum payments of $3,554,000 and $2,436,000 under their respective employment agreement, plus any applicable tax gross-up payments. However, Parent and each of Dosoretz and Rubenstein have agreed that if the merger closes, the current employment agreements described above will be replaced by new employment agreements effective upon the closing of the Merger as described below, in which event the amounts described in the immediately preceding paragraph would not become payable.

 

Support and Voting Agreement

 

Holdings and Parent have entered into separate Support and Voting Agreements (“Support Agreements”) with each of Sheridan, Dosoretz, Rubenstein and Katin. As of the date of the Support Agreements, the Rollover Investors were the beneficial owners of 9,811,140 shares of RTS common stock. We refer to the RTS shares beneficially owned by the Rollover Investors, together with any shares of common stock issued upon exercise of any of their options and any other RTS shares over which the Rollover Investors acquire beneficial ownership after the date of the Support Agreements as the “Subject Shares.”

 

The following is a summary of the material terms of the Support Agreements among Parent, Holdings and the Rollover Investors. Pursuant to the Support Agreement, the Rollover Investors have agreed that, during the period from and including October 19, 2007 through and including the earliest to occur of (a) the closing of the merger and (b) the termination of the Merger Agreement in accordance with its terms (the “voting period”), they will vote or execute consents with respect to the Subject Shares beneficially owned by them on the applicable record date, at any meeting or in connection with any proposed action by written consent of the Company’s shareholders, with respect to any of the following matters:

 

•  against:

 

 

 

In connection with the performance of the obligations of the Rollover Investors under the Support Agreement, each Rollover Investor irrevocably appointed Holdings as his attorney-in-fact and proxy to vote or execute consents with respect to his Subject Shares to the extent described above and agreed not to grant any other proxy or take any actions that are inconsistent with or that would impede such holder’s performance of the Support Agreement. The proxy and power of attorney granted by the Rollover Investors pursuant to the Support Agreements will terminate only upon the expiration of the voting period.

 

Under the Support Agreement, each Rollover Investor has agreed not to transfer his or her Subject Shares or interfere with the voting agreement set forth in the Support Agreements, including by:

 

 

In addition, the Rollover Investors have agreed that during the voting period, they will not solicit or knowingly encourage any alternative acquisition proposal or engage in any negotiations with or furnish any nonpublic information relating to the Company to any person with respect to any alternative acquisition proposal and will provide Holdings with prompt notice of receipt of any alternative acquisition proposal or request for information from any such person.

 

The Rollover Investors have further agreed to waive any enhanced severance, compensation, tax gross-up or other “change of control” payments that would become payable to such person as a result of the consummation of the merger.

 

The Support Agreements will terminate on the earliest to occur of (i) the effective time of the merger and (ii) the termination of the Merger Agreement in accordance with its terms.

 

In connection with, and as part of, the Support Agreements, Holdings and each of Messrs. Sheridan, Dosoretz, Rubenstein and Katin have agreed to enter into concurrently with the closing of the merger, new Executive Employment Agreements (as applicable), Physician Employment Agreements (as applicable), Management Stock Contribution and Unit Subscription Agreements, Securityholders Agreement, an

Amended and Restated Limited Liability Company Agreement and Incentive Unit Subscription Agreement each of which are summarized below.

 

New Employment Agreements of Management

 

Effective as of the closing, each of Messrs. Sheridan, Dosoretz and Rubenstein has agreed to enter into a new executive employment agreement with us and Parent and each of Messrs. Dosoretz, Rubenstein and Katin has agreed to enter into a new physician employment agreement, with our operating subsidiary, 21st Century Oncology. These new agreements would replace the current executive employment agreements and physician agreements, respectively, described above. Principal terms of the new agreements include the following:

 

Term: Dosoretz will have a five-year term, subject to automatic two-year renewals absent notice to the contrary and each of Sheridan, Rubenstein and Katin will have three-year terms with two year renewals.

 

Base Salary: The base salary for Dosoretz in connection with his services to us as an executive will be $1.5 million and in connection with his services to us as a physician will be $500,000. Rubenstein’s base salary in connection with his services to us as an executive will be $400,000 and in connection with his services to us as a physician will be $300,000. Sheridan and Katin will receive base salaries of $300,000 and $700,000 respectively.

 

Target Bonus: Target bonus opportunity for Messrs. Dosoretz and Rubenstein of not less than $1.5 million and $400,000 respectively, based upon factors including earnings before interest, taxes, depreciation and amortization and net debt plans. Sheridan is expected to be eligible to receive a performance incentive bonus at the discretion of the board.

 

Benefits; Perquisites: Benefits and perquisites at least as favorable as in effect immediately prior to the closing, including airplane usage (for Dosoretz and Rubenstein).

 

Severance: In the event of a termination of employment without cause or a termination by the executive for good reason:

 

 

Restrictive Covenants: Each of Messrs. Sheridan, Dosoretz, Rubenstein and Katin will be subject to confidentiality obligations, and non-competition and non-solicitation covenants, for a period beginning upon the consummation of the merger and ending on the later of the fifth anniversary of the consummation of the merger and three years following the executive’s termination of employment. Dosoretz’s and Rubenstein’s non-competition provisions are subject to an exception for owning an interest or participation on the board of directors in activities related to imaging initiatives (Dosoretz only), pharmacies, banks or health care related insurance companies, PPOs and HMOs as well as the

practice of medicine individually or as part of a group of five or less radiation oncologists in a single geographic location.

 

Non-Compete Payment: The new employment agreement with Dosoretz will provide for a $6,000,000 non-compete payment in consideration of Dosoretz’s agreement not to compete with RTS during his employment and for a period of three years after the termination of his employment. The non-compete payment will be paid in three equal installments on the closing date of the merger and the first and second anniversaries of the closing date.

 

Legal Fees: RTS will pay all reasonable legal fees incurred by Sheridan, Dosoretz, Rubenstein and Katin arising out of the negotiation and drafting of the Support Agreements and the related agreements.

 

Management Stock Contribution and Unit Subscription Agreement

 

Each of Messrs. Sheridan, Dosoretz, Rubenstein and Katin have agreed to enter into a Management Stock Contribution and Unit Subscription Agreement with Holdings pursuant to which they will be contributing 338,462, 1,384,616, 676,923 and 492,308 in shares of RTS common stock, respectively, immediately prior to the effective time of the merger in exchange for units (Preferred and Class A) of limited liability company interests of Holdings. Following the completion of the merger, it is currently expected that Sheridan, Dosoretz, Rubenstein and Katin will own (excluding the units they may receive under the management equity incentive plan) approximately 1.8%, 7.2%, 3.5% and 2.6% of the outstanding units of Holdings (excluding incentive units), respectively. Holdings will have certain call option rights to repurchase the Preferred Units and Class A Units upon certain termination of employment events. Dosoretz will also have certain put option rights to require Holdings to repurchase his Preferred Units and Class A Units up to an amount equal to his rollover investment value if his employment is terminated without cause or he terminates his employment for good reason and at such time the Company has met certain performance targets.

 

Securityholders Agreement

 

Each of Messrs. Sheridan, Dosoretz, Rubenstein and Katin has agreed to enter into a Securityholders Agreement with Holdings which will govern their rights as holders of limited liability company interests in Holdings following completion of the merger. Among other rights and obligations, the Securityholders Agreement provides them with certain board representation rights, supermajority voting provisions with respect to certain corporate actions, right of first refusal, registration rights and participation rights as well as take-along obligations. It also sets forth restrictions on transfer of the units they own in Holdings. Pursuant to the Securityholder Agreement, immediately following the closing of the merger, Messrs. Dosoretz, Rubenstein and Sheridan will serve on the board of managers of Holdings, which will initially consist of nine members (four managers to be designated by Vestar Capital Fund and two independent managers). The number of managers to be designated by the Rollover Investors may be reduced if their ownership interest in Holdings decreases or if RTS fails to achieve certain performance targets. The Securityholders Agreement also provides for a management agreement to be entered into among RTS, Holdings, Parent and Vestar Capital Partners which is described below.

 

Management Agreement

 

In connection with the merger RTS, Holdings and Parent have agreed to enter into a management agreement with Vestar Capital Partners relating to certain advisory and consulting services Vestar Capital Partners will render to RTS, Holdings and Parent. Under the management agreement, Vestar Capital Partners will receive a $10 million transaction fee upon the closing of the merger for services rendered in connection with the consummation of merger and be reimbursed for its reasonable out of pocket expenses. The management agreement also provides for Vestar Capital Partners to receive an annual management fee equal to the greater of (i) $850,000 or (ii) an amount equal to 1.0% of the RTS’s consolidated EBITDA which fee will be payable quarterly. Holdings, Parent and RTS will indemnify Vestar Capital Partners and its affiliates against all losses, claims, damages and liabilities arising out of the performance by Vestar Capital Partners of

its services pursuant to the management agreement, other than those that have resulted primarily from the gross negligence or willful misconduct of Vestar Capital Partners and/or its affiliates.

 

Incentive Unit Subscription Agreement and Management Incentive Equity Plan

 

In connection with the closing of the merger Holdings will adopt a management incentive equity plan pursuant to which certain employees will be eligible to receive incentive unit awards from an equity pool representing up to 13% (as of immediately following the closing of the merger) of the Common Equity Value of Holdings. Each of Messrs. Sheridan, Dosoretz, Rubenstein and Katin is expected to enter into an Incentive Unit Subscription Agreement relating to equity incentive awards of Class B Units and Class C Units of Holdings under the plan. The Class B Units will comprise 38.5% of the units reserved for issuance under the plan and will be time vesting over a four year period. The Class C Units will comprise 61.5% of the units reserved for issuance under the plan and will be vesting over a three year period upon the achievement of certain interval rate of return or multiple of investment hurdle. The Class B Units and Class C Units are subject to forfeiture upon certain termination of employment events. If the Class B Units and Class C Units fully vest, the aggregate amount of Class B units and Class C units owned by each of Sheridan, Dosoretz, Rubenstein and Katin will represent 0.13%, 6.5%, 0.52% and 0.13%, respectively (as of immediately following the closing of the merger), of Common Equity Value of Holdings.

 

Amended and Restated Limited Liability Company Agreement

 

The current limited liability company agreement of Holdings will be amended and restated upon the closing of the merger. Each of Sheridan, Dosoretz, Rubenstein and Katin has agreed to become party to the Amended and Restated Limited Liability Company Agreement, which would govern the affairs of Holdings and the conduct of its business following completion of the merger. It also sets forth certain terms of the limited liability interests of members of Holdings including, without limitation, the right of members to receive distributions. A board of managers will have the exclusive authority to manage and control the business and affairs of Holdings. The composition of the board of managers will be determined in accordance with the provisions of the Securityholders Agreement described above.

 

Indemnification of Directors and Officers; Directors’ and Officers’ Insurance

 

The RTS directors and officers are entitled under the Merger Agreement to continued indemnification and insurance coverage for a period of six years following the closing of the merger.

 

 

 

Each of Dosoretz, Rubenstein, Sheridan and Parent has agreed that the existing employment agreements will be amended and restated based upon the terms described above, in which event the severance amounts discussed under “ — Interests of our Directors and Executive Officers in the Merger — Current Employment Agreements of Management” would not become payable. Sheridan, Dosoretz, Rubenstein and Katin and our other management also will receive time vesting and performance vesting additional units of Holdings as described under “ — Interests of Our Directors and Executive Officers in the Merger — Management Equity Incentive Plan.”

 

Related Party Transactions

 

In addition to the arrangements in connection with the merger discussed elsewhere, we had the following transactions with related parties:

 

 

 

 

The following table provides information with respect to all grants of restricted stock or stock options to Sheridan, Dosoretz, Rubenstein, Katin and Watson during the past two years:

 

 

Administrative Services Agreements

 

In California, Maryland, Massachusetts, Michigan, Nevada, New York and North Carolina, we have administrative services agreements with professional corporations owned by certain of our directors, officers and principal shareholders, who are licensed to practice medicine in such states. We have entered into these administrative services agreements in order to comply with the laws of such states which prohibit us from employing physicians. Our administrative services agreements generally obligate us to provide treatment center facilities, staff and equipment, accounting services, billing and collection services, management and administrative personnel, assistance in managed care contracting and assistance in marketing services. Terms of the agreements are typically 20-25 years. Monthly fees for such services may be computed on a fixed basis, percentage of net collections basis, or on a per treatment basis, depending on the particular state requirements. Our Chairman, Howard M. Sheridan, M.D., our Chief Executive Officer and President, Daniel E. Dosoretz, M.D., our Medical Director, James H. Rubenstein, M.D., and a director, Michael J. Katin, M.D., own interests in these professional corporations ranging from 0% to 100%. The administrative services fees paid to us by such professional corporations under the administrative services agreements were approximately $24,753,000, $35,023,000 and $38,030,000 for the years ended December 31, 2005 and 2006 and for the nine months ended September 30, 2007, respectively. We engaged an independent consultant to complete a fair market value review of the fees paid by related party professional service corporations to the Company under the terms of these agreements, except for the administrative services agreement related to our Michigan centers, which were newly acquired in 2006. The consulting firm completed a review of 2006 fees under the California, Maryland, Nevada, Massachusetts, New York and North Carolina agreements and determined that the fees are at fair market value. With respect to the acquisition of all of the equity interests in the Michigan centers, of which the management companies were acquired by a wholly-owned affiliate of the Company and the professional service corporations were acquired by a director, the audit committee approved the continuation of the use of existing administrative service agreements between the management companies and the professional corporations. With respect to any new centers to date in 2007 which required an administrative services agreement, the audit committee approved the utilization by management of the same underlying fee methodology used in the California, Maryland, Nevada, Massachusetts, New York and North Carolina administrative services agreements based on the fair market value review completed by the independent consultant.

 

Lease Arrangements with Entities Owned by Related Parties

 

We lease certain of our treatment centers and other properties from related parties. We have entered into various lease arrangements with entities owned by Drs. Sheridan, Dosoretz, Rubenstein and Katin, and certain of our shareholders and employees. Their ownership interests in these entities range from 0% to 100%. These related party leases have expiration dates through October 10, 2022, and provide for annual lease payments ranging from approximately $30,000 to $595,000. The aggregate lease payments we made to the entities owned by these related parties were approximately $3,173,000, $3,843,000 and $3,464,000 for the years ended December 31, 2005 and 2006 and for nine months ended September 30, 2007, respectively. The rents were determined on the basis of the debt service incurred by the entities and a return on the equity component of the project’s funding. An independent consultant is utilized to assist the Company’s audit committee in determining fair market rental for any renewal or new rental arrangements with any affiliated party.

 

In October 1999, we entered into a sublease arrangement with a partnership which is owned by certain of our shareholders to lease space to the partnership for an MRI center in Mount Kisco, New York. Sublease rentals paid by the partnership to the landlord on our behalf were approximately $571,000, $658,000 and

$531,000 for the years ended December 31, 2005 and 2006 and for nine months ended September 30, 2007, respectively.

 

Indebtedness with Related Parties

 

At December 31, 2004, the Company had approximately $310,000 payable to three land partnerships owned by certain of the Company’s directors, officers, principal shareholders, shareholders and employees for construction in process and building improvement costs related to the construction of a medical facility. Dr. Dosoretz owned 15-30% of each of the three land partnerships while Drs. Sheridan, Rubenstein and Katin each owned 8.8% of one land partnership, 10-15% of a second land partnership and 5.7% of the third land partnership, respectively. These costs were reimbursed to the land partnerships in 2005.

 

Indemnification Agreements with Certain Officers and Directors

 

We have entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide, among other things, that the Company will, to the extent permitted by applicable law, indemnify and hold harmless each indemnitee if, by reason of his or her status as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of the Company or of any other enterprise which such person is or was serving at the request of the Company, such indemnitee was, is or is threatened to be made, a party to or a participant (as a witness or otherwise) in any threatened, pending or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, against all expenses, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such proceeding. In addition, the indemnification agreements provide for the advancement of expenses incurred by the indemnitee in connection with any such proceeding to the fullest extent permitted by applicable law. The indemnification agreements do not exclude any other rights to indemnification or advancement of expenses to which the indemnitee may be entitled, including any rights arising under the Articles of Incorporation or Bylaws of the Company, or the Florida Business Corporation Act.

 

Other Related Party Transactions

 

We provide billing and collection services to Riverhill MRI Specialists, P.C. (“Riverhill MRI”), a provider of medical services in New York which is owned by certain of our directors, officers, principal shareholders, shareholders and employees. In addition, the Company charges Riverhill MRI for certain allocated costs of certain staff that perform services on behalf of Riverhill MRI. Drs. Sheridan, Dosoretz, Katin and Rubenstein each own a 10.4% interest in Riverhill MRI Specialists, P.C. The fees received by the Company for the billing and collection services and for reimbursement of certain allocated costs were approximately $332,000, $368,000 and $284,000 for the years ended December 31, 2005 and 2006 and for nine months ended September 30, 2007, respectively. The balance due from Riverhill MRI was approximately $71,000 at September 30, 2007.

 

The Company is a participating provider in an oncology network, of which Dr. Dosoretz has an ownership interest. The Company provides oncology services to members of the network. Payments received by the Company for services rendered in 2005, 2006 and the nine months ended September 30, 2007 approximated $384,000, $619,000, and $429,000, respectively.

 

In October 2003, we contracted with Batan Insurance Company SPC, LTD, a newly-formed entity, which is owned by Drs. Katin, Dosoretz, Rubenstein and Sheridan to provide us with malpractice insurance coverage. We paid premium payments to Batan Insurance Company SPC, LTD of approximately $4,096,000, $7,981,000 and $1,009,000 for the years ended December 31, 2005 and 2006 and for the nine months ended September 30, 2007, respectively.

 

During the years ended December 31, 2005, 2006 and the nine months ended September 30, 2007, we employed certain family members of certain of our directors, officers and shareholders. The total compensation paid to such family members in 2005, 2006 and the nine months ended September 30, 2007 was $515,745, $327,870 and $247,713, respectively.

Dr. Katin is employed by us pursuant to a physician agreement. Compensation paid by us to Dr. Katin was $1,136,478, $1,007,692 and $511,539 for the years ended December 31, 2005 and 2006 and for the nine months ended September 30, 2007, respectively.

 

The Company maintains a construction company which provides remodeling and real property improvements at its facilities. In addition, the construction company builds and constructs facilities on behalf of certain land partnerships which are owned by certain of the Company’s shareholders (including, Dr. Sheridan, Dr. Dosoretz, Dr. Rubenstein and Dr. Katin). Payments received by the Company for building and construction fees were approximately $0, $1,310,000 and $2,823,000 for the years ended December 31, 2005 and 2006 and for the nine months ended September 30, 2007, respectively. Amounts due to the Company for the construction services were approximately $1,381,000 at September 30, 2007. In connection with the Company’s plans with respect to future development of new treatment centers on land owned by or contemplated to be acquired by land partnerships owned by certain of the Company’s shareholders, the terms and conditions of the transactions, including leases of such property and in some instances (buildout and equipment reimbursements) by the Company are expected to be on terms and conditions as those of similar historical transactions.

 

 

 

 

In addition, if the Merger Agreement is terminated, RTS will, in specified circumstances, be required to reimburse Parent and Merger Sub for up to $3.0 million of documented out-of-pocket fees and expenses. See “The Merger Agreement — Termination Fees and Expenses” on page 83.

 

RTS retained Wachovia Securities to act as its financial advisor in connection with the merger. RTS selected Wachovia Securities as its financial advisor based on Wachovia Securities’ reputation, experience and familiarity with RTS and its business. Wachovia Securities and certain of its affiliates will be participating in the financing relating to the merger. The estimated fees and expenses payable in connection with the financing are described above. Given Wachovia Securities’ participation in such financing, Wachovia Securities was not requested to, and it did not, deliver an opinion in connection with the merger. Pursuant to the terms of

Wachovia Securities’ engagement, RTS has agreed to pay Wachovia Securities for its financial advisory services an aggregate fee of approximately $5.6 million. RTS also has agreed to reimburse Wachovia Securities for reasonable expenses, including reasonable fees and expenses of its legal counsel, and to indemnify Wachovia Securities and related parties against certain liabilities, including liabilities under the federal securities laws, arising out of Wachovia Securities’ engagement. In connection with unrelated matters, Wachovia Securities or its affiliates in the past have provided investment banking and other financial services to RTS and certain of its affiliates, for which Wachovia Securities and its affiliates have received fees, including acting as (i) financial advisor to RTS and certain of its affiliates in connection with certain acquisition transactions and (ii) administrative agent, lead arranger and sole bookrunner for, and a lender under, certain credit facilities of RTS and certain of its affiliates. Also in connection with unrelated matters, Wachovia Securities or its affiliates in the past have provided and currently are providing investment banking and other financial services to Vestar Capital Partners and certain of its affiliates, including in connection with certain securities offerings and credit facilities of Vestar Capital Partners and/or certain of its affiliates, for which Wachovia Securities and its affiliates have received and expect to receive fees, but these services and fees are not expected to be material for either Wachovia or Vestar Capital Partners and its affiliates. Wachovia Securities and its affiliates also may provide similar or other such services to, and maintain relationships with, RTS, Vestar Capital Partners and their respective affiliates in the future. In addition, Wachovia Securities and certain affiliates and employees of Wachovia Securities and its affiliates have investments in Vestar Capital Partners and certain of its affiliates.

 

Appraisal Rights

 

We have concluded that our shareholders are entitled to assert appraisal rights in the event of the consummation of the merger, and, in the event such rights are perfected, to obtain payment in cash of the fair value of their shares of our common stock as determined pursuant to Florida law. The fair value of shares of our common stock, as determined in accordance with Florida law, could be more or less than the merger consideration that our shareholders are entitled to receive pursuant to the Merger Agreement. To preserve their appraisal rights, shareholders must not vote, or cause or permit to be voted, any of their shares of our common stock in favor of the approval of the Merger Agreement and must follow specific procedures. Shareholders who wish to exercise appraisal rights must precisely follow these specific procedures or their appraisal rights may be lost. These procedures are described in this proxy statement, and the provisions of Florida law that provide for appraisal rights and govern such procedures are attached as Annex C to this proxy statement. See “Appraisal Rights” beginning on page 86.

 

Material United States Federal Income Tax Consequences of the Merger

 

The following is a discussion of the material United States federal income tax consequences of the merger to U.S. holders (as defined below) whose shares of our common stock are converted into the right to receive cash in the merger. The discussion is based upon the Internal Revenue Code, Treasury regulations, Internal Revenue Service published rulings and judicial and administrative decisions in effect as of the date of this proxy statement, all of which are subject to change (possibly with retroactive effect) and to differing interpretations. The following discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our shareholders. This discussion applies only to shareholders who, on the date on which the merger is completed, hold shares of our common stock as a capital asset within the meaning of section 1221 of the Internal Revenue Code. The following discussion does not address taxpayers subject to special treatment under U.S. federal income tax laws, such as insurance companies, financial institutions, dealers in securities or currencies, traders of securities that elect the mark-to-market method of accounting for their securities, persons that have a functional currency other than the U.S. dollar, tax-exempt organizations, mutual funds, real estate investment trusts, S corporations or other pass-through entities (or investors in an S corporation or other pass-through entity) and taxpayers subject to the alternative minimum tax. In addition, the following discussion may not apply to shareholders who acquired their shares of our common stock upon the exercise of employee stock options or otherwise as compensation for services or through a tax-qualified retirement plan or who hold their shares as part of a hedge, straddle, conversion transaction or other integrated transaction. The following discussion does not address the U.S. federal income

tax consequences of the merger to the Rollover Investors. If our common stock is held through a partnership, the U.S. federal income tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. It is recommended that partnerships that are holders of our common stock and partners in such partnerships consult their own tax advisors regarding the tax consequences to them of the merger.

 

The following discussion also does not address potential alternative minimum tax, foreign, state, local and other tax consequences of the merger. All shareholders should consult their own tax advisors regarding the U.S. federal income tax consequences, as well as the foreign, state and local tax consequences of the disposition of their shares in the merger.

 

For purposes of this summary, a “U.S. holder” is a beneficial owner of shares of our common stock, who or that is, for U.S. federal income tax purposes:

 

 

Except with respect to the backup withholding discussion below, this discussion is confined to the tax consequences to a shareholder who or that, for U.S. federal income tax purposes, is a U.S. holder.

 

For U.S. federal income tax purposes, the disposition of RTS common stock pursuant to the merger generally will be treated as a sale of our common stock for cash by each of our shareholders. Accordingly, in general, the U.S. federal income tax consequences to a shareholder receiving cash in the merger will be as follows:

 

 

Cash payments made pursuant to the merger will be reported to our shareholders and the Internal Revenue Service to the extent required by the Internal Revenue Code and applicable Treasury regulations. Non-corporate shareholders may be subject to back-up withholding at a rate of 28% on any cash payments they receive. Shareholders who are U.S. holders generally will not be subject to backup withholding if they: (1) furnish a correct taxpayer identification number and certify that they are not subject to backup withholding

on the substitute Form W-9 included in the election form/letter of transmittal they are to receive or (2) are otherwise exempt from backup withholding. Shareholders who are not U.S. holders should complete and sign a Form W-8BEN (or other applicable tax form) and return it to the paying agent in order to provide the information and certification necessary to avoid backup withholding tax or otherwise establish an exemption from backup withholding tax. Certain of our shareholders will be asked to provide additional tax information in the letter of transmittal for the shares of our common stock.

 

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.

 

As contemplated under the Merger Agreement, each of Dr. Sheridan, Dr. Dosoretz, Dr. Rubenstein and Dr. Katin will acquire, and Holdings will issue and transfer to such person, a number of units of limited liability company interests in Holdings, in exchange for the contribution of such person’s shares of RTS common stock to Holdings. This exchange is intended to qualify as a tax-free exchange with respect to each such shareholder under Section 721 of the Internal Revenue Code.

 

With respect to their shares of RTS common stock not contributed to Holdings, each of Dr. Sheridan, Dr. Dosoretz, Dr. Rubenstein and Dr. Katin will receive cash equal to the per share merger consideration to be received by RTS’s other shareholders in the merger. For U.S. federal income tax purposes, the disposition of these shares of RTS common stock pursuant to the merger generally is expected to be treated as a sale of RTS common stock for cash by each Rollover Investor. Accordingly, the U.S. federal income tax consequences are expected to be the same as those described above.

 

The foregoing is a general discussion of certain material U.S. federal income tax consequences. We recommend that you consult your own tax advisor to determine the particular tax consequences to you (including the application and effect of any foreign, state or local income and other tax laws) of the receipt of cash in exchange for shares of our common stock pursuant to the merger.

 

Litigation

 

We are aware of two lawsuits filed in connection with the proposed merger. Shareholder complaints were filed on October 24, 2007 and November 16, 2007, respectively, against RTS, each of RTS’s directors and Vestar Capital Partners as purported class actions on behalf of the public shareholders of RTS in the Circuit Court of Lee County, Florida. The first case (Case No. 07-CA-013398) under the caption Jeffrey Schwartz, individually and on behalf of all others similarly situated, Plaintiff against Howard M. Sheridan, Daniel E. Dosoretz, Solomon Agin, Michael J. Katin, Ronald E. Inge, James H,. Rubenstein, Herbert F. Dorsett, Leo R. Doerr, Janet Watermeier, Radiation Therapy Services, Inc. and Vestar Capital Partners, Defendant and the second case (Case No. 07-CA-051293) was filed under the caption Wayne County Employees’ Retirement System, on behalf of itself and all others similarly situated vs. Radiation Therapy Services, Inc., Howard M. Sheridan, M.D., Daniel E. Dosoretz, M.D., James H. Rubenstein, M.D., Michael J. Katin, M.D., Herbert F. Dorsett, Ronald E. Inge, Leo K. Doerr, Rabbi Solomon Agin, D.D., Janet Watermeier and Vestar Capital Partners. On January 3, 2008, the plaintiff in the Schwartz case voluntarily dismissed his claims. The Wayne County complaint has been amended and the amended complaint alleges, among other things, that the directors of RTS breached their fiduciary duties in connection with the proposed transaction by failing to maximize shareholder value, by approving a transaction that purportedly benefits the defendants at the expense of RTS’s public shareholders, and by allegedly violating duties of disclosure in connection with this proxy statement. Among other things, the complaint seeks to enjoin RTS, its directors, RTS MergerCo, Inc., and Vestar Capital from proceeding with or consummating the merger. Vestar Capital and RTS are alleged to have aided and abetted the individual defendants in breaching their fiduciary duties. The plaintiff filed motions for preliminary injunction, to consolidate, and to expedite discovery. The parties have agreed on a discovery schedule. The court has not yet ruled on any other motions, and no preliminary injunction hearing date has been set. Based on the facts known to date, and the allegations in the complaint, we believe that the claims asserted in the complaint are without merit and we intend to vigorously defend against the complaint. There can be no assurance that additional lawsuits pertaining to the proposed merger will not be filed or that defendants will successfully oppose an injunction.

The absence of an injunction prohibiting the consummation of the merger is a condition to the closing of the merger.

 

Accounting Treatment of The Merger

 

We expect the merger to be accounted for as a business combination for financial accounting purposes, whereby the purchase price would be allocated to the Company’s assets and liabilities based on their relative fair values as of the date of the merger in accordance with Financial Accounting Standards No. 141, Business Combinations.

 

Approvals and Consents

 

Under the Merger Agreement, we and the other parties to the Merger Agreement have agreed to use our commercially reasonable efforts to complete the transactions contemplated by the Merger Agreement as promptly as practicable, including obtaining all necessary governmental approvals and all necessary consents, approvals or waivers from third parties. The Hart-Scott-Rodino Act provides that transactions such as the merger may not be completed until certain information has been submitted to the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and certain waiting period requirements have been satisfied. RTS and Parent filed notification reports with the Department of Justice and the Federal Trade Commission under the Hart-Scott-Rodino Act on November 9, 2007. The Federal Trade Commission granted early termination of the applicable waiting period on November 20, 2007.

 

At any time before or after consummation of the merger, the Federal Trade Commission and Department of Justice may, however, challenge the merger on antitrust grounds. Private parties could take antitrust action under the antitrust laws, including seeking an injunction prohibiting or delaying the merger, divestiture or damages under certain circumstances. Additionally, at any time before or after consummation of the merger, notwithstanding the termination of the applicable waiting period, any state could take action under its antitrust laws as it deems necessary or desirable in the public interest.

 

It is a condition to closing under the Merger Agreement that certain health care related governmental approvals, consents or licenses specified by the parties shall have been obtained except where the failure to obtain such consents or approvals would not reasonably be expected to have an adverse affect equal to or greater than 2.5% of the revenues, EBITDA or assets of the Company and it subsidiaries or give rise to a violation of criminal law. It is also a condition to closing under the Merger Agreement that certain third party consents related to indebtedness and leases specified by the parties shall have been obtained.

 

IDENTITY AND BACKGROUND OF FILING PERSONS

 

Radiation Therapy Services, Inc.

 

Radiation Therapy Services, Inc., a Florida corporation, owns, operates and manages treatment centers focused principally on providing radiation treatment alternatives ranging from conventional external beam radiation to newer, technologically-advanced options. RTS is one of the largest companies in the United States focused principally on providing radiation therapy. RTS opened its first radiation treatment center in 1983 and as of September 30, 2007 provides radiation therapy services in 83 treatment centers. RTS’s treatment centers are clustered into 27 local markets in 16 states, including Alabama, Arizona, California, Delaware, Florida, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, and West Virginia. Of these 83 treatment centers, 25 treatment centers were internally developed, 48 were acquired and 10 involve hospital-based treatment centers. RTS has continued to expand its affiliation with physician specialties in other areas including gynecological and surgical oncology and urology in a limited number of local markets to strengthen its clinical working relationships.

 

RTS’s principal executive offices are located at 2234 Colonial Boulevard, Ft. Myers, Florida 33907, and its telephone number is (239) 931-7275.

 

RTS Executive Officers

 

Daniel E. Dosoretz, M.D., F.A.C.R., F.A.C.R.O., is one of our founders and has served as a director since 1988 and as our President and Chief Executive Officer since April 1997. Dr. Dosoretz is also employed as a physician by our wholly-owned subsidiary, 21st Century Oncology, Inc. Prior to joining us, Dr. Dosoretz served as attending physician at the Massachusetts General Hospital. He also was an Instructor and Assistant Professor of Radiation Medicine at Harvard Medical School and Research Fellow of the American Cancer Society. Upon moving to Fort Myers, Florida, he was appointed to the Clinical Faculty as Associate Professor at the University of Miami School of Medicine. He also has been a visiting Professor at Duke University Medical School. Dr. Dosoretz graduated from the University of Buenos Aires School of Medicine and served his residency in Radiation Oncology at the Department of Radiation Medicine at the Massachusetts General Hospital, Harvard Medical School, where he was selected Chief Resident of the department. Dr. Dosoretz is board certified in Therapeutic Radiology by the American Board of Radiology. He is a Fellow of the American College of Radiation Oncology and of the American College of Radiology and is a member of the International Stereotactic Radiosurgery Society, the American Society for Therapeutic Radiology and Oncology and the American Society of Clinical Oncology.

 

James H. Rubenstein, M.D., joined us in 1989 as a physician and has served as a director since 1993, as our Secretary since May 1998 and as our Medical Director since January 2004. Dr. Rubenstein is also employed as a physician by our wholly-owned subsidiary, 21st Century Oncology, Inc. Prior to joining us, Dr. Rubenstein was an Assistant Professor of Radiation Oncology at the University of Pennsylvania and later became Co-Director of the Radiation Oncology Residency Program. He also served as Chairman of the Department of Medicine for Columbia Regional Medical Center in Southwest Florida and became a Clinical Assistant Professor at the University of Miami School of Medicine’s Department of Radiology. He graduated from New York University School of Medicine and completed his internship and residency in internal medicine at Beth Israel Hospital in Boston, at the same time working as an Assistant Instructor in internal medicine for Harvard University’s School of Medicine. He is board certified in Internal Medicine by the American Board of Internal Medicine and in Radiation Oncology by the American Board of Radiology.

 

David N. T. Watson has served as Chief Financial Officer of RTS since July 1, 2007. Mr. Watson joined us in April 2007 as Executive Vice President-Finance. Prior to joining us, Mr. Watson worked for The GEO Group, Inc., a New York Stock Exchange-listed world leader in the delivery of correctional, detention and residential treatment services to federal, state, and local government agencies around the globe. From 1994 to 2007, he held various management and executive positions covering all areas of finance, including Treasurer & Vice President-Finance, Chief Accounting Officer, Corporate Controller, Assistant Secretary, and Assistant Treasurer. Prior to joining The GEO Group, Mr. Watson held several positions at Arthur Andersen LLP, most

recently as Manager, Audit and Business Advisory Services. Prior to joining Arthur Andersen, he was with Arthur Young & Co. Mr. Watson holds an MBA in accounting from Rutgers, The State University of New Jersey and a BA in economics from University of Virginia.

 

Joseph Biscardi joined us in 1997 as our Corporate Controller and Chief Accounting Officer. Prior to joining us, Mr. Biscardi worked for PricewaterhouseCoopers, LLP from 1993 to 1997. He is a Certified Public Accountant in New York.

 

RTS Directors:

 

Howard M. Sheridan, M.D., is one of our founders and has served as a director since 1988 and as Chairman of the Board since April 2004. Dr. Sheridan planned and developed our first radiation treatment center. Prior to joining us, Dr. Sheridan served as President of the medical staff at Southwest Florida Regional Medical Center as well as chairman of the Department of Radiology. Dr. Sheridan currently serves as Chairman of Edison Bancshares, Inc. He previously served on the Advisory Board of Southeast Bank, N.A., and also served as a founding Director and member of the Executive Compensation and Loan Committee of Heritage National Bank from 1989 until September 1996, when Heritage was acquired by SouthTrust Corporation. Dr. Sheridan has practiced interventional radiology and diagnostic radiology in Fort Myers, Florida from 1975 until accepting the chairmanship in April 2004. Dr. Sheridan is a member of the American Medical Association, the Florida Medical Association, and the American College of Radiology. He graduated from Tulane Medical School and completed his residency at the University of Colorado Medical Center. Dr. Sheridan is board certified by the American Board of Radiology and the American Board of Nuclear Medicine.

 

Michael J. Katin, M.D., F.A.C.P., F.A.C.R., F.A.C.R.O., is one of our founders and has served as a director since 1988. Dr. Katin is also employed as a physician by our wholly-owned subsidiary, 21st Century Oncology, Inc. Prior to joining us, Dr. Katin served as a clinical instructor in medicine at the State University of New York, Buffalo, School of Medicine and as a clinical fellow in Radiation Therapy at Harvard Medical School. He graduated from the University of Pennsylvania Medical School. He completed an internal medicine residency at Lankenau Hospital in Philadelphia, subspecialized in Medical Oncology and Hematology with fellowships at Roswell Park Memorial Institute in Buffalo, New York, and the National Cancer Institute of the National Institutes of Health, Bethesda, Maryland and later completed a residency in Radiation Medicine at the Massachusetts General Hospital. Dr. Katin is board certified in Therapeutic Radiology by the American Board of Radiology and is board certified by the American Board of Medicine in Internal Medicine and in the subspecialties of Medical Oncology, Hematology and Geriatric Medicine.

 

Ronald E. Inge , has served as an independent member of our board of directors since the completion of our June 2004 initial public offering. Since September 2003, Mr. Inge has served as Chief Operations Officer of Land Solutions, Inc. and President of Development Solutions, Inc., two related real estate entities engaged in real estate development. Mr. Inge has also served as President of Inge & Associates, Inc., a mining and real estate consulting firm, since February 2002. From June 1999 to November 2002 Mr. Inge served as Vice President — Business Development, South Florida for Florida Rock Industries, Inc., a NYSE-listed construction materials company. From October 1981 to November 2002 he served as Executive Vice President of Harper Bros., Inc., which was acquired by Florida Rock Industries, Inc. in June 1999. Mr. Inge served as Tax and Audit Supervisor for Coopers & Lybrand, Certified Public Accountants, from July 1978 to September 1981. Mr. Inge is a Certified Public Accountant in Florida and received his Bachelor of Business Administration degree from Stetson University.

 

Solomon Agin D.D ., has served as an independent member of our board of directors since January 2005. Rabbi Agin brings over 30 years of community and congregational leadership in humanitarian, healthcare, and religious activities to the board. He has numerous certifications in grief and trauma counseling, and has served as chaplain, guest lecturer, and staff instructor at hospitals in Florida and Missouri. His distinguished record of healthcare service continues with the Southwest Florida AIDS Task Force, Institutional Review Board and Cancer Committee of Southwest Regional Medical Center, the National Association of Jewish Chaplains Board and as chaplain and consultant for Hospice of Southwest Florida and Sarasota, Florida. Rabbi Agin was

committee member and chairperson of the Florida Advisory Committee, United States Commission on Civil Rights for many years. He is past president of the Southeast Association Central Conference of American Rabbis. Degrees and awards throughout his career include an honorary doctorate of divinity from Hebrew Union College.

 

Herbert F. Dorsett has served as an independent member of our board of directors since the completion of our June 2004 initial public offering. Since 2001 Mr. Dorsett has served as Director of Development of Harry Chapin Food Banks of Southwest Florida. From 1995 to 2001, Mr. Dorsett was a hospital consultant for Organizational Dimensions. Mr. Dorsett served as Chief Executive Officer of Kirskville Osteopathic Medical Center from 1993 to 1995 and from 1992 to 1993 he was Vice President, Corporate Development for Basic American Medical, Inc. Prior to such time he served as President of Southwest Florida Regional Medical Center for more than 10 years. Mr. Dorsett is a Diplomate of the American College of Healthcare Executives and was past chairperson of the Florida Hospital Association and the Florida League of Hospitals. Mr. Dorsett holds a Masters of Hospital Administration from Baylor University and a Bachelor of Music from Stetson University.

 

Leo R. Doerr has served as an independent member of our board of directors since January 2005. Mr. Doerr brings 40 years of banking and financial services experience to the board. He has served as Senior Vice President of Marketing and Support at SouthTrust Bank and Senior Vice President of Lending at the Banc of the Islands. Mr. Doerr was President and CEO of Heritage National Bank, as well as a founder and director of the bank. He has been a Director of the Florida Bankers Association, President of Community Bankers Association and a member of American Bankers Association. Mr. Doerr’s active involvement in his community includes service as Director of the National Multiple Sclerosis Society.

 

Janet Watermeier has served as an independent member of our board of directors since May 2007. Ms. Watermeier is currently the President of Watermeier Property Services, LLC, a Ft. Myers, FL-based consulting and real estate resources firm that provides market information, project feasibility analysis, economic and development consulting services and property management services. She also currently serves as the Vice Chair of the Florida Transportation Commission, the Chairwoman of the Airport Special Management Committee at Southwest Florida International Airport and is a member of the Southwest Florida Regional Planning Council. Ms. Watermeier brings over 20 years experience in economic development and real estate to the board. She has previously served as Director of Economic Development for Lee County, FL and as Vice President of WCI Communities, Inc., a community development subsidiary of Westinghouse Electric Corporation. Ms. Watermeier received a B.A. in economics from Old Dominion University School of Business and attended the University of Buffalo School of Law.

 

Each person identified above is a United States citizen. None of RTS or any of RTS’s executive officers or directors has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of RTS or any of RTS’s executive officers, directors has, during the past five years, been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Except as set forth above, the business address of each person identified above is c/o RTS at 2234 Colonial Boulevard, Ft. Myers, Florida 33907.

 

Radiation Therapy Investments, LLC

 

Radiation Therapy Investments, LLC is a Delaware limited liability company formed by Vestar Capital in anticipation of the merger.

 

Radiation Therapy Services Holdings, Inc.

 

Radiation Therapy Services Holdings, Inc. is a Delaware corporation formed by Vestar Capital in anticipation of the merger. The Rollover Investors are expected to exchange shares of RTS common stock for units of limited liability company interests in Holdings which controls 100% of Parent, in connection with the merger. Upon completion of the merger, RTS will be a direct or indirect wholly owned subsidiary of Parent and Holdings. Parent and Holdings currently have de minimis assets and no operations. Parent’s principal

executive offices are c/o Vestar Capital Partners, V, L.P., 245 Park Avenue, 41st Floor, New York, NY 10167, and its telephone number is (212) 351-1600. Vestar Capital Partners is a leading international private equity firm specializing in management buyout and growth capital investment. The firm’s investment strategy is targeted towards companies in the U.S., Europe and Japan with valuations in the $100 million to $4 billion range. Since the firm’s founding in 1988, the Vestar Capital Partners funds have completed over 60 investments in companies with a total value of approximately $20 billion. These companies have varied in size and geography and span a broad range of industries. The firm’s strategy is to invest behind incumbent management teams, family owners or corporations in a creative, flexible and entrepreneurial way with the overriding goal to build long-term franchise value. Vestar currently manages funds with committed capital totaling approximately $7 billion and has offices or affiliates operating in New York, Denver, Boston, Paris, Milan, Munich and Tokyo. More information about Vestar Capital Partners is available at http://www.vestarcapital.com .

 

RTS MergerCo, Inc.

 

RTS MergerCo, Inc. is a Florida corporation formed by Parent in anticipation of the merger. Subject to the terms and conditions of the Merger Agreement and in accordance with Florida law, at the effective time of the merger, Merger Sub will merge with and into RTS and RTS will continue as the surviving corporation. Merger Sub currently has de minimis assets and no operations. The address for Merger Sub’s principal executive offices is c/o Vestar Capital Partners, V, L.P. 245 Park Avenue, 41st Floor, New York, NY 10167, and Merger Sub’s telephone number is (212) 351-1600.

 

Vestar Capital Partners V, L.P.

 

Vestar Capital Fund V, L.P. is a Cayman Islands exempted limited partnership engaged in the business of making private equity and other types of investments.

 

Additional information concerning Holdings, Parent, Merger Sub and Vestar Capital Fund is set forth on Annex D to this proxy statement.

 

THE SPECIAL MEETING

 

Date, Time, Place and Purpose of the Special Meeting

 

This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on Wednesday, February 6, 2008, beginning at 10:00 a.m., Eastern Time, at the Hyatt Regency Coconut Point Resort & Spa, 5001 Coconut Road, Bonita Springs, Florida, 34134, or at any postponement or adjournment thereof. The purpose of the special meeting is for our shareholders to consider and vote upon the approval of the Merger Agreement, to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies and to transact such other business that may properly come before the special meeting or any adjournment or postponement thereof. Our shareholders must approve the Merger Agreement for the merger to occur. If our shareholders do not approve the Merger Agreement, the merger will not occur. A copy of the Merger Agreement is attached to this proxy statement as Annex A. This proxy statement and the enclosed form of proxy are first being mailed to our shareholders on or about January 15, 2008.

 

Record Date and Quorum

 

The holders of record of our common stock as of the close of business on January 10, 2008, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting. On the record date, there were 23,704,917 shares of our common stock outstanding.

 

The holders of a majority of the outstanding shares of our common stock at the close of business on the record date represented in person or by proxy will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. Once a share is represented at the special meeting, it will be counted for the purpose of determining whether a quorum is present at the special meeting and any postponement or adjournment of the special meeting. However, if a new record date is set for the adjourned or postponed special meeting, then a new quorum must be established.

 

Required Vote

 

Under Florida law, the merger cannot be completed unless the holders of a majority of the outstanding shares of our common stock entitled to vote at the close of business on the record date for the special meeting vote for the approval of the Merger Agreement. Each outstanding share of our common stock is entitled to one vote. The merger does not require the approval of at least a majority of the Company’s unaffiliated shareholders.

 

Approval of the proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of holders representing a majority of the shares present in person or by proxy at the special meeting.

 

As of the record date for the special meeting, the directors and executive officers of RTS beneficially owned, in the aggregate, 9,833,671 shares of our common stock (which includes an aggregate of 7,820 shares of common stock owned by our independent directors), or approximately 40.5% of our outstanding common stock. Persons other than the Rollover Investors held 14,486,856 shares of our common stock, representing approximately 61.1% of our outstanding common stock, as of such date. Directors and executive officers Dosoretz, Sheridan, Rubenstein and Katin who collectively beneficially own approximately 40.4% of our outstanding common stock have each entered into a Support and Voting Agreement obligating them to vote all of their shares of our common stock “ FOR ” the approval of the Merger Agreement and “ FOR ” any adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies.

 

Proxies; Revocation

 

If you are a shareholder of record and submit a proxy by returning a signed proxy card by mail, your shares will be voted at the special meeting as you indicate on your proxy card. If no instructions are indicated on your proxy card, your shares of RTS common stock will be voted “ FOR ” the approval of the Merger Agreement and “ FOR ” any adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies.

 

The persons named as proxies may propose and vote for one or more postponements or adjournments of the special meeting to solicit additional proxies.

 

If your shares are held in “street name” by your broker, you should instruct your broker how to vote your shares using the instructions provided by your broker. If you have not received such voting instructions or require further information regarding such voting instructions, contact your broker and they can give you directions on how to vote your shares. Under the rules of the NYSE, brokers who hold shares in “street name” for customers may not exercise their voting discretion with respect to the approval of non-routine matters such as the approval of the Merger Agreement or approval of any adjournment or postponement of the special meeting. Therefore, absent specific instructions from the beneficial owner of the shares, brokers are not empowered to vote the shares with respect to the approval of the Merger Agreement or approval of any adjournment or postponement of the special meeting (i.e., “broker non-votes”). Shares of our common stock held by persons attending the special meeting but not voting, or shares for which we have received proxies with respect to which holders have abstained from voting, will be considered abstentions. Abstentions and properly executed broker non-votes, if any, will be treated as shares that are present and entitled to vote at the special meeting for purposes of determining whether a quorum exists but will have the same effect as a vote “Against” the approval of the Merger Agreement and any adjournment or postponement of the special meeting.

 

You may revoke your proxy at any time before the vote is taken at the special meeting. To revoke your proxy, you must (i) advise the Corporate Secretary of RTS of the revocation in writing, (ii) submit by mail a new proxy card dated after the date of the proxy you wish to revoke or (iii) attend the special meeting and vote your shares in person. Attendance at the special meeting will not by itself constitute revocation of a proxy.

 

Please note that if you hold your shares in “street name” and you have instructed your broker to vote your shares, the options for revoking your proxy described in the paragraph above do not apply and instead you must follow the directions provided by your broker to change your vote.

 

RTS does not expect that any matter other than the approval of the Merger Agreement (and approval of the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies) will be brought before the special meeting. The persons appointed as proxies will have discretionary authority to vote upon other business unknown by RTS a reasonable time prior to the solicitation of proxies, if any, that properly comes before the special meeting and any adjournments or postponements of the special meeting.

 

Adjournments and Postponements

 

The special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment may be made without notice (if the adjournment is not for more than 120 days from the date fixed for the original meeting), other than by an announcement made at the special meeting of the time, date and place of the adjourned meeting. Whether or not a quorum exists, the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote thereat may adjourn the special meeting. If no instructions are indicated on your proxy card, your shares of our common stock will be voted “FOR” any adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies. Any adjournment or postponement of the special meeting for the

purpose of soliciting additional proxies will allow our shareholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.

 

Solicitation of Proxies

 

RTS will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, directors, officers and employees of RTS may solicit proxies personally and by telephone, facsimile or other electronic means of communication. These persons will not receive additional or special compensation for such solicitation services.

 

RTS will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. RTS has retained Georgeson Inc. to assist it in the solicitation of proxies for the special meeting. RTS has paid Georgeson Inc. a retainer of $8,000 toward a final fee to be agreed upon based on customary fees for the services provided, which fee will include the reimbursement of out-of-pocket fees and expenses.

 

THE MERGER AGREEMENT

 

This section of the proxy statement describes the material provisions of the Merger Agreement but it may not contain all of the information about the Merger Agreement that is important to you. The Merger Agreement is attached as Annex A to this proxy statement and is incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement in its entirety. The Merger Agreement is a document that establishes and governs the legal relations among us, Parent, Merger Sub and Holdings with respect to the transactions described in this proxy statement. We do not intend for the text of the Merger Agreement to be a source of factual, business or operational information about RTS, its subsidiaries or any of its managed practices. The Merger Agreement contains representations, warranties and covenants that are qualified and limited, including by information in the schedules referenced in the Merger Agreement that the parties delivered in connection with the execution of the Merger Agreement. Representations and warranties are used as a tool to allocate risks between the respective parties to the Merger Agreement, including where the parties do not have complete knowledge of all facts, instead of to establish such matters as facts. Furthermore, the representations and warranties may be subject to different standards of materiality applicable to the parties, which may differ from what may be viewed as material to shareholders or under the federal securities laws. These representations may or may not have been accurate as of any specific date and do not purport to be accurate as of the date of this proxy statement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Merger Agreement and subsequent developments or new information qualifying a representation or warranty may not have been included in this proxy statement.

 

Effective Time; The Marketing Period

 

The effective time of the merger will occur at the time that we file the articles of merger with the Department of State of the State of Florida on the closing date of the merger (or such later time as provided in such articles of merger). The closing date will occur no later than the third business day after all of the conditions to the merger set forth in the Merger Agreement have been satisfied or waived (other than conditions that by their nature are to be satisfied on the closing date), or at such other date as we and Parent may agree; provided that the parties will not be required to effect the closing until the earliest to occur of:

 

 

The “Marketing Period” is defined in the Merger Agreement as the period of 25 consecutive business days after the date of the Merger Agreement, during which:

 

 

The purpose of the marketing period is to provide Parent with a reasonable and appropriate period of time during which it can market and place the permanent debt financing contemplated by the debt financing commitments for the purposes of financing the merger. The marketing period will not be deemed to have

commenced if, prior to the completion of the marketing period, Ernst & Young LLP shall have withdrawn its audit opinion with respect to any financial statements contained in our reports filed with the SEC, or if any required financial statements available to Parent on the first day of any such 25 consecutive business day period would not be sufficiently current on any day during such 25 consecutive business day period to permit a registration statement using such financial statements to be declared effective by the SEC on the last day of such 25 consecutive business day period.

 

Throughout the Marketing Period Parent and Merger Sub have agreed:

 

 

See “Financing Commitments; Cooperation of RTS” below for a further discussion of Parent and Merger Sub’s covenants relating to the financing commitments.

 

Structure

 

Subject to the terms and conditions of the Merger Agreement and in accordance with Florida law, at the effective time of the merger, Merger Sub will merge with and into RTS. The separate corporate existence of Merger Sub will cease, and RTS will continue as the surviving corporation and a direct or indirect wholly owned subsidiary of Parent. The surviving corporation will be a privately held corporation and our current shareholders, other than the Rollover Investors and the Additional Management Investors, will cease to have any ownership interest in the surviving corporation or rights as our shareholders. Therefore, such current shareholders will not participate in any future earnings or growth of the surviving corporation and will not benefit from any appreciation in value of the surviving corporation.

 

Treatment of Stock, Stock Options and Other Stock-Based Awards

 

Common Stock

 

At the effective time of the merger, each share of our common stock issued and outstanding immediately prior to the effective time of the merger will automatically be canceled and will cease to exist and will be converted into the right to receive $32.50 in cash, without interest and less applicable withholding taxes, other than:

 

 

After the effective time of the merger, each stock certificate representing shares of common stock converted into the right to receive the merger consideration will be canceled and cease to exist and the holder of such certificate will have only the right to receive the merger consideration of $32.50 in cash per share, without any interest and less applicable withholding taxes.

Stock Options and Other Stock-Based Awards

 

Except as we otherwise agreed to in writing with Parent, Merger Sub and the Rollover Investors:

 

 

Exchange and Payment Procedures

 

Substantially contemporaneous with the effective time of the merger, Parent will deposit, or will cause to be deposited, cash in an amount sufficient to pay the merger consideration and the amount required by the Merger Agreement to be so deposited with respect to stock options and restricted stock with a bank or trust company (the “paying agent”) reasonably acceptable to us. As soon as reasonably practicable after the effective time of the merger and in any event not later than the third business day after the effective time, the paying agent will mail (i) a letter of transmittal and instructions to each holder of our common stock (other than those seeking appraisal rights) which will tell holders of our common stock how to surrender their common stock certificates in exchange for the merger consideration, and (ii) a check to each holder of options to purchase shares of our common stock or awards of restricted stock for the amount, if any, payable to them in connection with the merger.

 

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

 

You will not be entitled to receive the merger consideration until you surrender your stock certificate or certificates to the paying agent, together with a duly completed and executed letter of transmittal and any other documents as may reasonably be required by the paying agent. The merger consideration may be paid to a person other than the person in whose name the corresponding certificate is registered if the certificate is properly endorsed or is otherwise in the proper form for transfer. In addition, the person who surrenders such certificate must establish to the reasonable satisfaction of the surviving corporation that any applicable stock transfer taxes have been paid or are not applicable.

 

No interest will be paid or will accrue on the cash payable upon surrender of the certificates. The paying agent will be entitled to deduct and withhold, and pay to the appropriate taxing authorities, any applicable taxes from the merger consideration and the option consideration. Any sum which is withheld and paid to a taxing authority by the paying agent will be deemed to have been paid to the person with regard to whom it is withheld.

 

At the effective time of the merger, our stock transfer books will be closed, and there will be no further registration of transfers of outstanding shares of our common stock. If, after the effective time of the merger, certificates for shares issued and outstanding prior to the merger are presented to the surviving corporation or Parent for transfer, they will be canceled and exchanged for the merger consideration.

 

Any portion of the merger consideration deposited with the paying agent that remains undistributed to the former holders of shares for nine months after the effective time of the merger will be delivered, upon demand, to the surviving corporation. Holders of certificates who have not surrendered their certificates prior to the delivery of such funds to the surviving corporation may only look to the surviving corporation for the payment of the merger consideration. None of RTS, the surviving corporation, Parent, Merger Sub, the paying agent or any other person will be liable to any former holder of shares for any amount of property delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Any portion of the merger consideration deposited with the paying agent that remains unclaimed as of a date that is immediately

prior to such time as such amounts would otherwise escheat to or become property of any governmental authority will, to the extent permitted by applicable law, become the property of Parent, free and clear of any claims or interest of any person previously entitled to the merger consideration.

 

If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the merger consideration, you will have to make an affidavit of that fact and, if required by the paying agent, post a bond in a customary amount as indemnity against any claim that may be made against it with respect to that certificate.

 

Representations and Warranties

 

We make various representations and warranties in the Merger Agreement with respect to RTS, our affiliates or subsidiaries, and, in some cases, certain managed practices in which we provide services pursuant to administrative services agreements (“Managed Practices”). These include representations and warranties regarding:

 

 

 

Many of our representations and warranties are qualified by the absence of a material adverse effect on RTS, which means, for purposes of the Merger Agreement, any facts, circumstances, events or changes that are or would reasonably be expected to become materially adverse to the business, properties, assets, results of operation, financial condition or profitability of RTS, its affiliates and the Managed Practices (certain entities in which the Company has entered into services agreements defined in the Merger Agreement as “Managed Practices”), taken as a whole, excluding facts, circumstances, events or changes:

 

 

In the event that we should fail to meet any expected financial or operating performance targets, the fact of such failure alone shall not constitute a Company material adverse effect; provided that in each case the facts or occurrences giving rise to or contributing to such failure will not be excluded to the extent such facts, circumstances or events would otherwise constitute a material adverse effect.

 

Certain of our representations and warranties relating to governmental consents and approvals, permits, licenses, compliance and regulatory matters are qualified by the absence of an adverse affect equal to or greater than 2.5% of the revenues, EBITDA or assets of the Company and its subsidiaries, taken as a whole.

 

Parent and Merger Sub make various representations and warranties in the Merger Agreement with respect to Parent and Merger Sub. These include representations and warranties regarding:

 

 

 

The representations and warranties of each of the parties to the Merger Agreement will expire upon the effective time of the merger. The assertions embodied in those representations and warranties were made solely for purposes of the Merger Agreement and may be subject to important qualifications and limitations agreed by the parties in connection with negotiating its terms. Moreover, some of those representations and warranties may not be accurate or complete as of any particular date because they are subject to a contractual standard of materiality or material adverse effect different from that generally applicable to public disclosures to shareholders or used for the purpose of allocating risk between the parties to the merger agreement rather than establishing matters of fact. For the foregoing reasons, you should not rely on the representations and warranties contained in the Merger Agreement as statements of factual information.

 

Conduct of Our Business Pending the Merger

 

Under the Merger Agreement, RTS has agreed, subject to certain exceptions, that unless required, permitted or expressly contemplated by the Merger Agreement, required by applicable law, Parent gives its written consent (which consent may not be unreasonably withheld, delayed or conditioned), or as set forth in the disclosure schedule, between the date of the Merger Agreement and the effective time of the merger:

 

 

RTS has also agreed, on behalf of RTS and its affiliates, that during the same time period, and unless Parent gives its written consent (which consent may not be unreasonably withheld, delayed or conditioned), RTS:

 

 

 

 

 

 

 

 

 

Shareholders Meeting

 

The Merger Agreement requires us to duly call, give notice of and hold a meeting of our shareholders to approve the Merger Agreement as promptly as reasonably practicable after the mailing of this proxy statement. Subject to limited circumstances contemplated by the Merger Agreement, our board of directors is required to recommend that our shareholders vote in favor of approval of the Merger Agreement. Notwithstanding, the foregoing, the Company will not be required to hold the Shareholders meeting if, prior to the meeting, the Company receives a superior proposal that was not solicited in violation of the Merger Agreement and the special committee or the board of directors has concluded in good faith, after consultation with legal counsel and the special committee’s financial advisor, that the failure to terminate the Merger Agreement, would be inconsistent with the directors’ exercise of their fiduciary obligations under applicable law, the Company has complied in all material respects with the Merger Agreement and the Company enters into a definitive agreement with respect to the superior proposal.

 

Solicitation of Transactions; Recommendation to Shareholders

 

Solicitation of Transactions

 

From the date of the Merger Agreement and continuing until the earlier of the receipt of the shareholder approval and the termination date, RTS has agreed, subject to certain exceptions, that RTS, its subsidiaries and their respective representatives will not directly or indirectly (i) initiate, solicit or knowingly encourage the submission of any inquiries, proposals or offers or any other efforts or attempts that constitute or may reasonably be expected to lead to, any alternative proposal or engage in any discussions or negotiations with respect thereto or otherwise knowingly cooperate with or knowingly assist or participate in, or knowingly facilitate any such inquiries, proposals, discussions or negotiations, (ii) participate in any way in any negotiations or discussions regarding, or furnish or disclose to any third party any information with respect to, or which could reasonably be expected to lead to, any alternative proposal, (iii) approve or recommend, or publicly propose to approve or recommend any alternative proposal or make a change of recommendation, or (iv) enter into any merger agreement, letter of intent, agreement in principle, share purchase agreement, asset purchase agreement or share exchange agreement, option agreement or other similar agreement or arrangement providing for or relating to or which could reasonably be expected to lead to an alternative proposal or enter into any agreement or agreement in principle requiring the Company to abandon, terminate or fail to consummate the transactions contemplated hereby or breach its obligations hereunder or propose or agree to do any of the foregoing.

 

An “alternative proposal” means any bona fide proposal or offer made by any person or group of persons, other than Parent or its subsidiaries, for:

 

 

 

In addition, subject to the following paragraph, RTS was required to immediately cease and cause to be terminated any ongoing discussions or negotiations with any parties with respect to an alternative proposal.

 

Notwithstanding the restrictions on solicitation described above, at any time from the date of the Merger Agreement and continuing until the earlier of receipt of shareholder approval with respect to the Merger Agreement and the date of termination of the Merger Agreement, if RTS receives an unsolicited bona fide written alternative proposal: