-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MgfTVYs3OljvLJBo3Rrrt1qazeSsU+1ekTXmoXG6E9qO8lT5fYP9OqD+rdyE9q7j KksAf7FJK9uYCdtMJRRGbQ== 0000902664-07-002115.txt : 20070627 0000902664-07-002115.hdr.sgml : 20070627 20070627084604 ACCESSION NUMBER: 0000902664-07-002115 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20070627 DATE AS OF CHANGE: 20070627 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HealthSpring, Inc. CENTRAL INDEX KEY: 0001339553 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 201821898 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-82483 FILM NUMBER: 07942582 BUSINESS ADDRESS: STREET 1: 44 VANTAGE WAY, SUITE 300 CITY: NASHVILLE STATE: TN ZIP: 37228 BUSINESS PHONE: 615-291-7000 MAIL ADDRESS: STREET 1: 44 VANTAGE WAY, SUITE 300 CITY: NASHVILLE STATE: TN ZIP: 37228 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CLINTON GROUP INC CENTRAL INDEX KEY: 0001134119 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 32 OLD SLIP 5TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128250400 SC 13D 1 sc13d.txt SCHEDULE 13D - HEALTHSPRING INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) Under the Securities Exchange Act of 1934 (Amendment No. )* HealthSpring, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, Par Value $0.01 Per Share - -------------------------------------------------------------------------------- (Title of Class of Securities) 42224N101 - -------------------------------------------------------------------------------- (CUSIP Number) Marc Weingarten, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 (212) 756-2000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 26, 2007 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 13 Pages) - -------------------------- * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------------------ --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 2 OF 13 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) CLINTON GROUP, INC. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,893,404 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,893,404 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,893,404 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.05% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IA; CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 3 OF 13 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) CLINTON MULTISTRATEGY MASTER FUND, LTD. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,069,277 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,069,277 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,069,277 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.61% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 4 OF 13 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 824,127 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 824,127 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 824,127 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.44% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 5 OF 13 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) GEORGE HALL - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,893,404 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,893,404 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,893,404 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.05% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 6 OF 13 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) CONRAD BRINGSJORD - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,893,404 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,893,404 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,893,404 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.05% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 7 OF 13 PAGES - ------------------------------ --------------------- Item 1. SECURITY AND ISSUER. This statement relates to the shares of Common Stock, $0.01 par value per share (the "Shares"), of HealthSpring, Inc., a Delaware corporation (the "Issuer"). The principal executive office of the Issuer is located at 44 Vantage Way, Suite 300, Nashville, Tennessee 37228. ITEM 2. IDENTITY AND BACKGROUND. (a) This statement is filed by Clinton Group, Inc., a Delaware corporation ("CGI"), Clinton Multistrategy Master Fund, Ltd., a Cayman Islands company ("CMSF"), Clinton Special Opportunities Master Fund, Ltd., a Cayman Islands company ("CSO"), George Hall and Conrad Bringsjord (collectively, the "Reporting Persons"). (b) The principal business address of CGI, George Hall and Conrad Bringsjord is 9 West 57th Street, 26th Floor, New York, New York 10019. The principal business address of CMSF and CSO is c/o Fortis Fund Services (Cayman) Limited, P.O. Box 2003 GT, Grand Pavilion Commercial Centre, 802 West Bay Road, Grand Cayman, Cayman Islands. (c) The principal business of CGI is investing for funds and accounts under its management. The principal business of CMSF and CSO is to invest in securities. George Hall is the Chief Investment Officer and President of CGI. Conrad Bringsjord is a managing director and senior portfolio manager of CGI. (d) None of the Reporting Persons nor any of the individuals set forth in Schedule A attached hereto has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons nor any of the individuals set forth in Schedule A attached hereto has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) George Hall and Conrad Bringsjord are citizens of the United States of America. The name, citizenship, present principal occupation or employment and business address of each director and executive officer of CGI, CMSF and CSO is set forth in Schedule A attached hereto. To the best of the Reporting Persons' knowledge, except as set forth in this statement on Schedule 13D, none of such individuals owns any Shares. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Funds for the purchase of the Shares reported herein were derived from available capital of CMSF and CSO. A total of approximately $55.6 million was paid to acquire such Shares. - --------------------------- --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 8 OF 13 PAGES - --------------------------- --------------------- ITEM 4. PURPOSE OF TRANSACTION. The Reporting Persons originally acquired Shares for investment in the ordinary course of business because they believed that the Shares, when purchased, were undervalued and represented an attractive investment opportunity. On June 15, 2007, CGI sent a letter to the Issuer's Chairman and CEO, Mr. Herbert A. Fritch, expressing its support of the Issuer's management team and its view of the Issuer as an attractive long-term investment. The letter noted that the Issuer's stock price has retreated to levels below that of the Issuer's initial public offering in February 2006 and, in CGI's opinion, is undervalued. CGI suggested that the Issuer consider undertaking a leveraged recapitalization and a Dutch tender offer in the range of $22.00 to $23.00 per share for approximately 30% of the outstanding shares in order to better optimize the Issuer's balance sheet and to take advantage of the appealing debt financing markets in an accretive transaction. Further, CGI offered itself as a sounding board for the Issuer's management team in discussing value maximization opportunities, including a potential privatization in which CGI would participate. A copy of this letter is attached hereto as Exhibit B and incorporated herein by reference. On June 26, 2007, CGI sent a letter to the Issuer's Board of Directors (the "Board") to notify the Board that since CGI had not heard back from Mr. Fritch regarding its proposal to increase shareholder value, CGI deemed it appropriate to forward the June 15, 2007 letter to the Board's attention. A copy of this letter is attached hereto as Exhibit C and incorporated herein by reference. Except as set forth herein or as would occur upon completion of any of the actions discussed herein, including in any Exhibits hereto, the Reporting Persons have no present plan or proposal that would relate to or result in any of the matters set forth in subparagraphs (a) - (j) of Item 4 of Schedule 13D. The Reporting Persons intend to review their investment in the Issuer on a continuing basis and may engage in discussions with management, the board of directors, other shareholders of the Issuer and other relevant parties concerning the business, operations, management, strategy and future plans of the Issuer. Depending on various factors including, without limitation, the Issuer's financial position and strategic direction, the outcome of the discussions and actions referenced above, actions taken by the board of directors, price levels of the Shares, other investment opportunities available to the Reporting Persons, conditions in the securities market and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, purchasing additional Shares or selling some or all of their Shares, engaging in short selling of or any hedging or similar transactions with respect to the Shares and/or otherwise changing their intention with respect to any and all matters referred to in Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) As of the close of business on June 26, 2007, the Reporting Persons beneficially owned an aggregate of 2,893,404 Shares, constituting approximately 5.05% of the Shares outstanding. The aggregate percentage of Shares beneficially owned by the Reporting Persons is based upon 57,340,132 Shares outstanding, which is the total number of Shares outstanding as of May 10, 2007 as reported in the Issuer's Quarterly Report on Form 10-Q for the period ended March 31, 2007. - --------------------------- --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 9 OF 13 PAGES - --------------------------- --------------------- (b) By virtue of investment management agreements with each of CMSF and CSO, CGI has the power to vote or direct the voting, and to dispose or direct the disposition, of all of the 2,069,277 Shares held by CMSF and the 824,127 Shares held by CSO. By virtue of his direct and indirect control of CGI, George Hall is deemed to have shared voting power and shared dispositive power with respect to all Shares as to which CGI has voting power or dispositive power. By virtue of his position as managing director and senior portfolio manager of CGI, Conrad Bringsjord is also deemed to have shared voting power and shared dispositive power with respect to all Shares as to which CGI has voting power or dispositive power. Accordingly, CGI, George Hall and Conrad Bringsjord are deemed to have shared voting and shared dispositive power with respect to an aggregate of 2,893,404 Shares. (c) Information concerning transactions in the Shares effected by the Reporting Persons during the past sixty days is set forth in Schedule B hereto and is incorporated herein by reference. Unless otherwise indicated, all of such transactions were effected in the open market. (d) No person other than the Reporting Persons is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares. (e) Not applicable. Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The Reporting Persons may, from time to time, enter into and dispose of cash-settled equity swap or other similar derivative transactions with one or more counterparties that are based upon the value of Shares, which transactions may be significant in amount. The profit, loss and/or return on such contracts may be wholly or partially dependent on the market value of the Shares, the relative value of Shares in comparison to one or more other financial instruments, indexes or securities, a basket or group of securities in which Shares may be included, or a combination of any of the foregoing. In addition to the Shares that they beneficially own without reference to these contracts, the Reporting Persons currently have short economic exposure to 5,000 Shares through such contracts. These contracts do not give the Reporting Persons direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparties thereto to acquire, hold, vote or dispose of any securities of the Issuer. Accordingly, the Reporting Persons disclaim any beneficial ownership in any securities that may be referenced in such contracts or that may be held from time to time by any counterparties to such contracts. Except as otherwise set forth herein, the Reporting Persons do not have any contract, arrangement, understanding or relationship with any person with respect to the securities of the Issuer. Item 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit A - Joint Filing Agreement dated June 27, 2007 Exhibit B - Letter to the Issuer's Chairman and CEO dated June 15, 2007 Exhibit C - Letter to the Issuer's Board dated June 26, 2007 - --------------------------- --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 10 OF 13 PAGES - --------------------------- --------------------- SIGNATURES After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: June 27, 2007 CLINTON GROUP, INC. By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Comptroller CLINTON MULTISTRATEGY MASTER FUND, LTD. By: Clinton Group, Inc. its investment manager By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Comptroller CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD. By: Clinton Group, Inc. its investment manager By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Comptroller /s/ George Hall ------------------------------ George Hall /s/ Conrad Bringsjord ------------------------------ Conrad Bringsjord - --------------------------- --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 11 OF 13 PAGES - --------------------------- --------------------- SCHEDULE A DIRECTORS AND EXECUTIVE OFFICERS OF CERTAIN REPORTING PERSONS The following sets forth the name, position and principal occupation of each director and executive officer of CGI. Each such person is a citizen of the United States of America. The business address of each director and executive officer is 9 West 57th Street, 26th Floor, New York, New York 10019. CLINTON GROUP, INC. Name Position - --------------------------- ------------------------------------------- George E. Hall Director and President John L. Hall Director and Chief Financial Officer Wendy Ruberti General Counsel and Assistant Secretary Francis A. Ruchalski Director and Comptroller Hani K. Findakly Director The following sets forth the name, citizenship, principal occupation and business address of each director of each of CMSF and CSO. There are no executive officers of CMSF and CSO. CLINTON MULTISTRATEGY MASTER FUND, LTD. Jane Fleming is a citizen of the United Kingdom. Her principal occupation is Client Accountant of Queensgate Bank & Trust Company Ltd. Her business address is Queensgate Bank & Trust Company Ltd., Harbour Place, 5th Floor, 103 South Church Street, P.O. Box 30464 SMB, Grand Cayman, Cayman Islands. Dennis Hunter is a citizen of the United Kingdom. His principal occupation is Director of Queensgate Bank & Trust Company Ltd. His business address is Queensgate Bank & Trust Company Ltd., Harbour Place, 5th Floor, 103 South Church Street, P.O. Box 30464 SMB, Grand Cayman, Cayman Islands. Roger Hanson is a citizen of the United Kingdom. His principal occupation is director of dms Management Ltd. His business address is dms Management Ltd., P.O. Box 31910 SMB, Ansbacher House, 20 Genesis Close, Grand Cayman, Cayman Islands. Blair Gauld is a citizen of New Zealand. His principal occupation is Director of Queensgate Bank & Trust Company Ltd. His business address is Queensgate Bank & Trust Company Ltd., Harbour Place, 5th Floor, 103 South Church Street, P.O. Box 30464 SMB, Grand Cayman, Cayman Islands. CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD. Dennis Hunter's citizenship, principal occupation and business address are set forth above. Roger Hanson's citizenship, principal occupation and business address are set forth above. Cassandra Powell is a citizen of the Cayman Islands. Her principal occupation is Senior Manager of Queensgate Bank & Trust Company Ltd. Her business address is Queensgate Bank & Trust Company Ltd., Harbour Place, 5th Floor, 103 South Church Street, P.O. Box 30464 SMB, Grand Cayman, Cayman Islands. - --------------------------- --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 12 OF 13 PAGES - --------------------------- --------------------- SCHEDULE B TRANSACTIONS IN THE SHARES BY THE REPORTING PERSONS DURING THE PAST 60 DAYS Clinton Multistrategy Master Fund, Ltd. Trade Date Shares Purchased (Sold) Price Per Share ($) ---------- ----------------------- ------------------- 04/30/2007 19,300 23.87 05/01/2007 34,400 23.05 05/03/2007 70,000 22.33 05/04/2007 23,200 22.35 05/08/2007 (5,000) 22.90 05/08/2007 (5,000) 22.86 05/09/2007 (18,100) 23.55 05/10/2007 4,000 23.01 05/11/2007 5,000 23.05 05/14/2007 4,000 22.51 05/14/2007 10,400 22.61 05/15/2007 5,700 22.34 05/17/2007 13,500 22.13 05/18/2007 8,800 22.45 05/21/2007 5,000 22.62 05/24/2007 5,000 22.68 05/25/2007 (11,000) 22.96 05/31/2007 (40,500) 24.15 06/04/2007 10,000 23.94 06/05/2007 10,000 23.56 06/07/2007 20,000 22.83 06/08/2007 3,816 22.60 06/11/2007 10,000 22.51 06/13/2007 104,700 19.25 06/13/2007 20,000 18.94 06/14/2007 114,500 19.00 06/14/2007 130,300 19.06 06/15/2007 96,800 18.84 06/15/2007 54,900 18.87 06/18/2007 101,200 18.61 06/18/2007 5,000 18.89 06/19/2007 50,000 18.43 06/19/2007 10,000 18.40 06/19/2007 37,800 18.35 06/20/2007 13,200 18.50 06/20/2007 60,300 18.48 06/20/2007 25,000 18.51 06/21/2007 12,500 18.42 06/21/2007 53,800 18.41 06/21/2007 44,100 18.38 06/22/2007 62,500 18.38 06/22/2007 80,000 18.32 06/25/2007 5,000 18.07 06/25/2007 72,600 18.05 06/26/2007 32,300 18.22 - --------------------------- --------------------- CUSIP NO. 42224N101 SCHEDULE 13D PAGE 13 OF 13 PAGES - --------------------------- --------------------- Clinton Special Opportunities Master Fund, Ltd. Trade Date Shares Purchased (Sold) Price Per Share ($) ---------- ----------------------- ------------------- 05/04/2007 5,800 22.35 05/14/2007 2,600 22.61 05/14/2007 1,000 22.51 05/18/2007 2,200 22.45 05/31/2007 (4,500) 24.15 06/15/2007 54,900 18.87 06/15/2007 96,700 18.84 06/18/2007 101,100 18.61 06/18/2007 5,000 18.89 06/19/2007 50,000 18.43 06/19/2007 37,800 18.35 06/19/2007 10,000 18.40 06/20/2007 13,200 18.50 06/20/2007 60,427 18.48 06/20/2007 25,000 18.51 06/21/2007 12,500 18.42 06/21/2007 44,100 18.38 06/21/2007 53,700 18.41 06/22/2007 62,500 18.38 06/22/2007 80,000 18.32 06/25/2007 5,000 18.07 06/25/2007 72,700 18.05 06/26/2007 32,400 18.22 EX-99 2 exhibita.txt EXHIBIT A JOINT FILING AGREEMENT EXHIBIT A JOINT FILING AGREEMENT PURSUANT TO RULE 13d-1(k) The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D may be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained herein and therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent that he or it knows or has reason to believe that such information is inaccurate. Dated: June 27, 2007 CLINTON GROUP, INC. By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Comptroller CLINTON MULTISTRATEGY MASTER FUND, LTD. By: Clinton Group, Inc. its investment manager By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Comptroller CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD. By: Clinton Group, Inc. its investment manager By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Comptroller /s/ George Hall ------------------------------ George Hall /s/ Conrad Bringsjord ------------------------------ Conrad Bringsjord EX-99 3 exhibitb.txt EXHIBIT B LETTER TO THE ISSUER'S CHAIRMAN AND CEO EXHIBIT B LETTER TO THE ISSUER'S CHAIRMAN AND CEO CLINTON GROUP 6/15/2007 HealthSpring, Inc. 44 Vintage Way Suite 300 Nashville, Tennessee 37228 Attention: Herbert A. Fritch Chairman of the Board, Chief Executive Officer and President Dear Mr. Fritch: As one of the largest investors of HealthSpring, Inc. (the "Company" or "HealthSpring") and given the recent performance in the stock price, we thought it would be appropriate to detail to you our ideas with regards to the financial structure of the Company. We are very supportive of your management team and view HealthSpring as an attractive long-term investment. We hope you find this constructive and would welcome any follow-up discussions with you and your team. UNDERPERFORMANCE SINCE IPO As a result of the earnings guidance revision, the Company's stock price has retreated to levels below the price of $19.50 per share pursuant to the Company's initial public offering in February 2006. As a comparison, the S&P 500 Index and Dow Jones Industrial Average have increased 20% and 25%, respectively, since February 2006. Furthermore, the strong cash generation of your business over the past five quarters SHOULD HAVE increased your market value of equity. VALUATION Based on a current stock price today of approximately $19.00, the implied valuation multiples are as follows: 2007 2008 ------------------------------------- HS COMPS(1) HS COMPS(1) ------ -------- ------ -------- MULTIPLES - --------- TEV (Includes Total Cash) / EBITDA 5.0x 8.9x 4.5x 7.9x Price / Earnings 14.9x 16.0x 12.9x 13.9x Clearly, there is a disconnect in the Street's valuation of the Company, and the earnings revision with regards to medical loss ratios have caused a deterioration in shareholder's confidence in the execution capabilities of management. As a comparison, the forward 2006 PE multiple at the pricing of the IPO was 19.5x. Furthermore, we share management's view that your business specialized in Medicare Advantage - HMO products is more defensible than other companies focused on managed Medicare, and could argue that a premium multiple to comparable companies' implied valuations may be warranted. - -------------------------- (1) Comparable companies include AET, CI, CVH, HUM, SIE, UNH, WCG and WLP. LEVERAGED RECAPITALIZATION AND DUTCH TENDER We believe that you and your management team share our view of the Company's under-valuation relative to its growth prospects going forward. At this point, given the current stock price, we believe that it is in the best interest of shareholders for the Company to execute a leveraged recapitalization in conjunction with a Dutch Tender offer for approximately 30% of the outstanding shares of the Company at a reasonable premium to the current market prices. Based on our monitoring of the debt financing markets and conversations with our investment banking relationships, we believe that a modest $338 million credit facility borrowing (Revolver and Term Loan B) is certainly financeable and could be achieved at attractive rates of at least L+175 to L+200 with flexible terms with regards to prepayment and the absence of financial covenants. This debt financing along with cash on the balance sheet would comprise the amount required to execute the Dutch Tender. We believe that an appropriate range to set the Dutch Tender is $22.00 to $23.00 per share based on (i) the earnings accretion resulting from the transaction; (ii) the price range's implied premiums to divesting shareholders; and (iii) that the price range is below an expected post-tender trading range. Sources and uses and pro forma capitalization for this transaction would be as follows:
DUTCH TENDER: PRO FORMA CAPITALIZATION: Current Price $19.00 Pro Forma Leverage % of Total 3/31/2007 Multiple Capital Offer Price $22.50 % Premium 18.4% Unrestricted Cash $26.0 Sources of Funds: Cash on Balance Sheet $55.1 Revolver 0.0 0.00x 0.0% Term Loan B 337.8 Term Loan B 337.8 3.00x 27.2% ------ -------- ------ ------ Total $393.0 Other 0.0 0.00x 0.0% Total Debt 337.8 3.00x 27.2% Uses of Funds: Shares Repurchased $387.0 Transaction Fees 5.9 MVE 903.1 8.02x 72.8% ------ -------- ------ ------ Total $393.0 Total Capitalization $1,240.9 11.02x 100.0%
Based on this transaction, an illustration of the earnings impact is set forth below. We estimate 13.8% accretion. INCOME STATEMENT: Fiscal Year End December Projected Pro Forma 2008 Adj. 2008 --------- ------ --------- Net Sales $1,701.1 $1,701.1 Medical Expenses 1,372.4 1,372.4 SG&A 220.1 220.1 -------- -------- EBIT $108.5 $108.5 % Margin 6.38% 6.38% Revolver 0.0 0.0 Term Loan B (L + 200) 0.0 24.8 24.8 -------- -------- Total Interest Expense 0.0 24.8 -------- -------- Interest Income (26.0) 2.2 (23.8) -------- -------- EBT 134.5 107.5 Taxes 48.9 39.1 -------- -------- Net Income $85.6 $68.4 Fully Diluted Shares 57.8 (17.2) 40.6 Earnings Per Share $1.48 $1.69 Accretion % 13.8% It could be argued that post the tender, the PE could increase due to accelerated estimated EPS growth. Assuming HealthSpring trades at the comparable companies valuation multiple of 13.9x, the implied share price post-transaction would be $23.42. VALUATION: Projected Pro Forma 2008 2008 --------- --------- Earnings Per Share $1.48 $1.69 Implied PE Multiple 12.83x 13.90x Implied Price $19.00 $23.42 We believe the contemplated transaction would: (i) better optimize the Company's balance sheet and provide conservative leverage to equity returns going forward and (ii) take advantage of the extremely appealing debt financing markets. We note that your total debt as of September 30, 2005 (prior to the IPO) was $192 million. Conservatively excluding any unrestricted cash in both cases, the Company's total debt to EBITDA was 2.7x pre-IPO compared to the above transaction's pro forma leverage of 3.0x total debt to EBITDA. Pro forma for the transaction detailed above, the Company would have additional debt capacity and over $25 million in unrestricted balance sheet cash plus cash flow generated from operations. We believe that this is a pivotal point in the Company's history as a public company. We believe that the transaction detailed is a prudent one from a financial point of view while offering significant upside to continuing shareholders. I want to reiterate that we are supportive of your management and excited about the growth prospects and strategic positioning of the Company. We have a long-term view regarding our investment in HealthSpring and are happy to offer ourselves as a sounding board for your team in discussing value maximization opportunities. We hope that you find this letter constructive and look forward to your timely response. We would welcome the opportunity to discuss our proposal in person or by teleconference. As an aside, our investment team also manages the private equity fund at the Clinton Group and would be happy to explore a privatization with you, if appropriate. Please feel free to contact me at your convenience at (212) 377-4224 or my colleague, Joseph De Perio, at (212) 739-1833 to discuss any and all issues. We look forward to hearing from you. Sincerely, /s/ Conrad Bringsjord Conrad Bringsjord Senior Managing Director EX-99 4 exhibitc.txt EXHIBIT C LETTER TO ISSUER'S BOARD EXHIBIT C LETTER TO ISSUER'S BOARD CLINTON GROUP 6/26/2007 HealthSpring, Inc. 44 Vintage Way Suite 300 Nashville, Tennessee 37228 Attention: Board of Directors Gentlemen: As of today, funds and accounts managed by Clinton Group Inc. ("Clinton") currently beneficially own approximately 5% of the outstanding shares of HealthSpring, Inc. Two weeks ago, we sent the attached letter to Mr. Herbert A. Fritch describing our thoughts on opportunities to increase shareholder value. Despite what we believe is a prudent proposal designed to enhance shareholder value, we have not heard back from Mr. Fritch, so we deemed it appropriate to forward this letter to your attention as well. Please feel free to contact me at your convenience at (212) 377-4224 or my colleague, Joseph De Perio, at (212) 739-1833 to discuss our proposal as well as any and all issues. We look forward to hearing from you. Sincerely, /s/ Conrad Bringsjord Conrad Bringsjord Senior Managing Director -----END PRIVACY-ENHANCED MESSAGE-----