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EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
AMONG
AMERICAN HEALTHWAYS, INC.,
C-STEPS ACQUISITION COMPANY
AND
XXXXXXXXX.XXX, INC.
DATED AS OF APRIL 30, 2001
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), is dated as of the
30th day of April, 2001, by and among AMERICAN HEALTHWAYS, INC., a Delaware
corporation ("American Healthways"), C-STEPS ACQUISITION COMPANY, a newly formed
Delaware corporation and wholly owned subsidiary of American Healthways ("Merger
Sub"), and XXXXXXXXX.XXX, INC., a Delaware corporation ("CareSteps").
RECITALS
A. The Boards of Directors of American Healthways and CareSteps each
have determined that a business combination between American Healthways and
CareSteps is in the best interests of their respective companies and
shareholders and accordingly have agreed to effect the merger provided for
herein upon the terms and subject to the conditions set forth herein.
B. American Healthways, Merger Sub and CareSteps desire to make certain
representations, warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1.
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into CareSteps in accordance with this Agreement and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger").
CareSteps shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall be a wholly
owned subsidiary of American Healthways. The Merger shall have the effects
specified in Section 259 of the Delaware General Corporation Law ("DGCL").
1.2 THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices of
Bass, Xxxxx & Xxxx, 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx, at
9:00 a.m., local time, on the first business day immediately following the day
on which the last to be fulfilled or waived of the conditions set forth in
Article 7 shall be fulfilled or waived in accordance herewith or (b) at such
other time, date or place as American Healthways and CareSteps may agree, but in
any case, such date shall not be later than June 1, 2001, provided that the
conditions set forth in Article 7 shall have been fulfilled or waived in
accordance herewith. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article 7 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 8, the parties
hereto shall cause a certificate of merger meeting the requirements of the
relevant provisions of the DGCL to be properly executed and filed in accordance
with such provisions on the Closing Date. The merger shall become effective at
the time of filing of the certificate of merger or at such later time which the
parties hereto shall have agreed upon and designated in such filing as the
effective time of the Merger (the "Effective Time"). Each of the parties will
use its best efforts to cause the Merger to be consummated as soon as
practicable following the fulfillment or waiver of the conditions in Article 7.
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ARTICLE 2.
CERTIFCATE OF INCORPORATION AND BYLAWS
AND OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION. The Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with applicable law.
2.2 BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
2.3 DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time.
2.4 OFFICERS. The officers of the Surviving Corporation as of the
Effective Time shall be the officers listed on EXHIBIT A hereto.
ARTICLE 3.
EXCHANGE AND CONVERSION OF STOCK OF CONSTITUENT PARTIES
3.1 EXCHANGE AND CONVERSION OF MERGER SUB SHARES. At the Effective
Time, the issued and outstanding shares of common stock of Merger Sub shall be
converted into a number of shares of common stock, par value $.001 per share, of
CareSteps ("CareSteps Common Stock"), as the Surviving Corporation, equal to the
number of shares of CareSteps Common Stock outstanding immediately prior to the
merger, so that there shall be no change in the capitalization of CareSteps as
the Surviving Corporation and that all of its outstanding shares shall be owned
by American Healthways.
3.2 EXCHANGE AND CONVERSION OF CARESTEPS SHARES IN THE MERGER. At the
Effective Time, by virtue of the Merger and without any action on the part of
any holder of any capital stock of CareSteps, each issued and outstanding share
of CareSteps Common Stock shall, subject to Section 3.3(d) hereof, be converted
into, and become exchangeable for, the right to receive the number of shares of
validly issued, fully paid and nonassessable common stock, par value $.001 per
share, of American Healthways ("American Healthways Common Stock") equal to the
Conversion Ratio set forth on EXHIBIT B hereto (the "Merger Consideration").
3.3 EXCHANGE OF CARESTEPS CAPITAL STOCK CERTIFICATES.
(a) On or prior to the Closing Date, American Healthways shall
instruct an exchange agent appointed by it (the "Exchange Agent") to make
available the certificates representing shares of American Healthways Common
Stock required to effect the exchange referred to in Section 3.3(b). American
Healthways shall also make available to the Exchange Agent the cash required to
make the cash payments in lieu of fractional shares referred to in Section
3.3(d) below. Shares of American Healthways Common Stock into which shares of
CareSteps Common Stock shall be converted in the Merger shall be deemed to have
been issued at the Effective Time.
(b) From and after the Effective Time, each holder of a
certificate which immediately prior to the Effective Time represented
outstanding shares of CareSteps Common Stock are perfected under the DGCL, shall
be entitled to receive in exchange therefor, upon surrender thereof to the
Exchange Agent, a certificate or certificates representing the number of whole
shares of American Healthways Common Stock into which such holder's shares of
CareSteps Common Stock were converted pursuant to Section 3.2 and cash in lieu
of any fractional shares of such American Healthways Common Stock pursuant to
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Section 3.3(d). From and after the Effective Time, American Healthways shall be
entitled to treat the certificates which immediately prior to the Effective Time
represented shares of CareSteps Common Stock and which have not yet been
surrendered for exchange as evidencing the ownership of the number of full
shares of American Healthways Common Stock into which the shares of CareSteps
Common Stock represented by such certificates shall have been converted pursuant
to Section 3.2, notwithstanding the failure to surrender such certificates.
However, notwithstanding any other provision of this Agreement, until holders or
transferees of certificates which immediately prior to the Effective Time
represented shares of CareSteps Common Stock have surrendered them for exchange
as provided herein, no dividends shall be paid with respect to any shares
represented by such certificates and no payment for fractional shares shall be
made with respect to such shares. Upon surrender of a certificate which
immediately prior to the Effective Time represented outstanding shares of
CareSteps Common Stock, there shall be paid to the holder of such certificate
the amount of any dividends which theretofore became payable, but which were not
paid by reason of the foregoing, with respect to the number of whole shares of
American Healthways Common Stock represented by the certificate or certificates
issued upon such surrender. If any certificate for shares of American Healthways
Common Stock is to be issued in a name other than that in which the certificate
for shares of CareSteps Common Stock surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the person requesting
such exchange shall pay any transfer or other taxes required by reason of the
issuance of certificates for such shares of American Healthways Common Stock in
a name other than that of the registered holder of any such certificate
surrendered. Certificates for shares of American Healthways Common Stock issued
hereunder to the Principal Shareholders (as defined in Section 3.5 hereof) shall
bear, in addition to any restrictive legend as shall be required by the federal
securities laws, a conspicuous legend to the effect that the shares are subject
to legal restrictions against transfer and are held under and subject to the
terms and provisions of this Agreement.
(c) Immediately after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented outstanding shares of
CareSteps Common Stock (collectively, the "CareSteps Certificates") (i) a form
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to CareSteps Certificates shall pass, only upon actual
delivery of CareSteps Certificates to the Exchange Agent and (ii) instructions
for use in effecting the surrender of CareSteps Certificates in exchange for
certificates representing shares of American Healthways Common Stock. Upon
surrender of CareSteps Certificates to the Exchange Agent, together with a duly
executed letter of transmittal and such other documents as the Exchange Agent
shall require, the holder of such CareSteps Certificates shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of American Healthways Common Stock into which the shares of CareSteps
Common Stock represented by CareSteps Certificates so surrendered shall have
been exchanged and converted pursuant to the provisions of Section 3.2.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of shares of CareSteps Common Stock for any shares
of American Healthways Common Stock or dividends or distributions thereon
delivered to a public official pursuant to applicable escheat laws.
(d) Notwithstanding any other provision of this Agreement, no
certificates or scrip for fractional shares of American Healthways Common Stock
shall be issued upon the surrender for exchange of CareSteps Certificates
pursuant to this Article 3 in the Merger and no American Healthways Common Stock
dividend, stock split or interest shall relate to any fractional security, and
such fractional interests shall not entitle the owner thereof to vote or to any
other rights of a security holder. In lieu of any such fractional shares, each
holder of CareSteps Common Stock who would otherwise have been entitled to a
fraction of a share of American Healthways Common Stock upon surrender of
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CareSteps Certificates for exchange pursuant to this Article 3, shall be
entitled to receive from the Exchange Agent a cash payment in lieu of such
fractional share equal to such fraction multiplied by the Average American
Healthways Stock Price (as defined in EXHIBIT B hereto).
(e) All shares of CareSteps Common Stock held by American
Healthways or CareSteps at the Effective Time (the "Treasury Shares") shall
cease to exist, and all certificates representing any Treasury Shares shall, as
promptly as practicable thereafter be cancelled, and no cash or shares of
capital stock of American Healthways shall be issued in exchange therefor.
3.4 CARESTEPS OPTIONS. American Healthways shall not assume any stock
options or warrants to acquire CareSteps Common Stock outstanding and
unexercised as of the Effective Time ("CareSteps Options").
3.5 RESTRICTIONS ON TRANSFER OF AMERICAN HEALTHWAYS COMMON STOCK. All
shares of American Healthways Common Stock issued pursuant to this Agreement
shall be subject to such restrictions as are required by the federal securities
laws. Shares of American Healthways Common Stock issued pursuant to this
Agreement to Xxxxxxx Xxxx, M.D., Xxxx Xxxxxxxx, M.D. and Xxxx Xxxxxxxxxx (the
"Principal Shareholders") may not be voluntarily sold, exchanged, given or
otherwise disposed of ("Transferred") during the first three (3) years following
the Closing Date, other than as follows: no more than one-third (1/3) of such
shares may be Transferred during the second year following the Closing Date, and
no more than two-thirds (2/3) of such shares (including any shares previously
Transferred) may be Transferred during the third year following the Closing
Date. Upon the expiration of the third year following the Closing Date, all
remaining shares held by the Principal Shareholders may be Transferred subject
only to applicable securities laws. During the three year period following the
Closing Date, the restrictions set forth in this subsection shall terminate and
be of no further force and effect upon the occurrence of any of the following:
(a) the occurrence of a "change of control" (as defined in the
Principal Shareholder's employment agreement, which shall be substantially in
the form attached hereto as EXHIBIT C (the "Principal Shareholder's Employment
Agreement")) of American Healthways;
(b) the termination of a Principal Shareholder's employment
with American Healthways by American Healthways "without just cause" (as defined
in the Principal Shareholder's Employment Agreement) or by the Principal
Shareholder with "good reason" (as defined in the Principal Shareholder's
Employment Agreement); or
(c) the death or "disability" (as defined in the Principal
Shareholder's Employment Agreement) of a Principal Shareholder.
3.6 PIGGYBACK REGISTRATIONS.
(a) At any time (i) for the Principal Shareholders, after one
(1) year following the consummation of the Merger or (ii) for all other persons
receiving shares of American Healthways Common Stock pursuant to this Agreement,
upon consummation of the Merger, whenever American Healthways proposes to
register any of its equity securities or securities convertible or exchangeable
into or exercisable for its equity securities under the Securities Act of 1933,
as amended (the "Securities Act") (other than a registration relating to the
American Healthways employee benefit plans, exchange offers by American
Healthways or a merger or acquisition of a business or assets by American
Healthways including, without limitation, a registration on Form S-4 or Form S-8
or any successor form) (a "Piggyback Registration"), subject to the conditions
set forth herein, American Healthways shall give the persons receiving shares of
American Healthways Common Stock pursuant to this Agreement listed on EXHIBIT D
hereto (the "Piggyback Rights Holders") prompt written notice thereof (but not
less than ten (10) days prior to the filing by American Healthways with the
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Securities Exchange Commission (the "Commission") of any registration statement
with respect thereto). Such notice (a "Piggyback Notice") shall specify, at a
minimum, the number of securities proposed to be registered, the proposed date
of filing of such registration statement with the Commission, the proposed
method of distribution, the proposed managing underwriter or underwriters (if
any and if known), and a good faith estimate by American Healthways of the
proposed minimum offering price of such securities. Upon the written request of
a Piggyback Rights Holder given within ten (10) days of such Piggyback Rights
Holder's receipt of the Piggyback Notice (which written request shall specify
the number of Registrable Securities intended to be disposed of by such
Piggyback Rights Holder and the intended method of distribution thereof),
American Healthways shall include in such registration all shares of American
Healthways Common Stock with respect to which American Healthways has received
such written requests for inclusion.
(b) If, in connection with a Piggyback Registration, any
managing underwriter (or, if such Piggyback Registration is not an underwritten
offering, a nationally recognized independent underwriter selected by American
Healthways) advises American Healthways and the Piggyback Rights Holders who
seek to be included in such Piggyback Registration, that, in its opinion, the
inclusion of all the securities sought to be included in such Piggyback
Registration by American Healthways, any persons who have sought to have shares
registered thereunder pursuant to rights to demand (other than pursuant to
"piggyback" or other incidental or participation registration rights) such
registration (such demand rights being "Other Demand Rights" and such persons
being "Other Demanding Sellers") and any other proposed sellers, in each case,
if any, would adversely affect the marketability of the securities sought to be
sold pursuant thereto, then American Healthways shall include in the
registration statement applicable to such Piggyback Registration only such
securities as American Healthways, the Other Demanding Sellers and the Piggyback
Sellers are so advised by such underwriter can be sold without such an effect
(the "Maximum Piggyback Number"), as follows and in the following order of
priority:
(i) if the Piggyback Registration is an offering on
behalf of American Healthways and not any person exercising Other Demand Rights
(whether or not other persons seek to include securities therein pursuant to
"piggyback" or other incidental or participatory registration rights) (a
"Primary Offering"), then (A) first, such number of securities to be sold by
American Healthways as American Healthways, in its reasonable judgment and
acting in good faith and in accordance with sound financial practice, shall have
determined and (B) second, if the number of securities to be included under
clause (A) above is less than the Maximum Piggyback Number, the number of
securities sought to be registered by each Piggyback Rights Holder and other
proposed seller, pro rata in proportion to the number of securities sought to be
registered by all the Piggyback Rights Holders and all other proposed sellers,
which, in the aggregate, when added to the number of securities to be registered
under clause (A) above, equals the Maximum Piggyback Number; and
(ii) if the Piggyback Registration is an offering
other than pursuant to a Primary Offering, then (A) first, such number of
securities sought to be registered by each Other Demanding Seller, pro rata in
proportion to the number of securities sought to be registered by all such Other
Demanding Sellers, and (B) second, if the number of securities to be included
under clause (A) above is less than the Maximum Piggyback Number, the number of
securities sought to be registered by each Piggyback Rights Holder and other
proposed seller, pro rata in proportion to the number of securities sought to be
registered by all the Piggyback Rights Holders and all other proposed sellers,
which, in the aggregate, when added to the number of securities to be registered
under clause (A) above, equals the Maximum Piggyback Number.
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(c) If, at any time after giving written notice of its
intention to register any of its securities as set forth in this Section 3.6 and
prior to time the registration statement filed in connection with such
registration is declared effective, American Healthways shall determine for any
reason not to register such securities, American Healthways may, at its
election, give written notice of such determination to each Piggyback Rights
Holder and thereupon shall be relieved of its obligation to register any
securities in connection with such particular withdrawn or abandoned
registration.
(d) The rights granted pursuant to this Section 3.6 shall
terminate and be of no further force and effect on the date on which the
Piggyback Rights Holders may sell the shares of American Healthways Common Stock
they received pursuant to this Agreement pursuant to the terms of Rule 144(k) of
the Securities Act.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF CARESTEPS
Except as set forth in the disclosure letter delivered prior to the
execution hereof to American Healthways (the "CareSteps Disclosure Letter"),
CareSteps represents and warrants to American Healthways as of the date of this
Agreement as follows:
4.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. CareSteps and each
CareSteps Subsidiary (as hereinafter defined) is a corporation duly
incorporated, validly existing and in good standing under the laws of its
respective state of incorporation. The CareSteps Disclosure Letter sets forth
the name and jurisdiction of organization of each corporation, partnership or
other entity of which at least a majority of the voting interest is owned
directly or indirectly by CareSteps (a "CareSteps Subsidiary"). CareSteps and
the CareSteps Subsidiaries are qualified to do business as foreign corporations
and are in good standing under the laws of any state of the United States in
which the character of the properties owned or leased by it therein or in which
the transaction of its business makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on the
business, results of operations or financial condition of CareSteps (a
"CareSteps Material Adverse Effect"); provided, however, that the effects of
changes that are generally applicable to (a) the industries and markets in which
CareSteps operates or (b) the United States economy shall be excluded from the
determination of a CareSteps Material Adverse Effect. CareSteps and each
CareSteps Subsidiary has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as now conducted,
except where such failure would not result in a CareSteps Material Adverse
Effect. CareSteps has provided to American Healthways complete and correct
copies of the Certificate of Incorporation and Bylaws of CareSteps and each
CareSteps Subsidiary, each of which is in full force and effect.
4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. CareSteps has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. This Agreement has been
approved by CareSteps' Board of Directors, and, subject only to the approval of
the holders of the CareSteps Common Stock, the consummation by CareSteps of the
transactions contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes, and all agreements and documents
contemplated hereby (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of
CareSteps, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or affecting creditors' rights and general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
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4.3 CAPITALIZATION. The authorized capital stock of CareSteps consists
of 20,000,000 shares of CareSteps Common Stock, 16,239,372 shares of which are
issued and outstanding as of the date of this Agreement, and 5,000,000 shares of
preferred stock, par value $.001 per share, of CareSteps (the "CareSteps
Preferred Stock"), 100 shares of which (convertible into 632,703 shares of
CareSteps Common Stock) are issued and outstanding as of the date of this
Agreement. CareSteps has no outstanding capital stock, bonds, debentures, notes
or other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the shareholders of CareSteps on any matter. All issued and outstanding shares
of CareSteps Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except for the CareSteps Options,
which consist of 382,750 options and which shall be exercised or cancelled prior
to the Closing Date, there are no options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate CareSteps to issue, transfer or sell any shares of capital stock of
CareSteps.
4.4 SUBSIDIARIES. The CareSteps Disclosure Letter sets forth, as of
April 30, 2001, the outstanding capital stock of each CareSteps Subsidiary, all
of which are owned of record or beneficially by CareSteps. The CareSteps
Disclosure Letter lists all CareSteps Subsidiaries as of the date of this
Agreement and indicates for each CareSteps Subsidiary the jurisdiction of
incorporation and percentage equity interest of CareSteps in such CareSteps
Subsidiary. All of the shares of capital stock of each CareSteps Subsidiary held
by CareSteps or by another subsidiary of CareSteps are fully paid and
nonassessable, and, except as set forth on the CareSteps Disclosure Letter, all
such shares or other equity interests in such CareSteps Subsidiary are owned by
CareSteps or a CareSteps Subsidiary free and clear of any claim, lien or
encumbrance.
4.5 PRIOR SALES OF SECURITIES. All offers and sales of CareSteps Common
Stock and CareSteps Options prior to the date hereof were at all relevant times
exempt from the registration requirements of the Securities Act and were duly
registered or the subject of an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws, or the
relevant statutes of limitations have expired, or civil liability therefor has
been eliminated by an offer to rescind.
4.6 OTHER INTERESTS. Other than the CareSteps Subsidiaries, CareSteps
does not own directly or indirectly any interest or investment in any
corporation, partnership, joint venture, business, trust or other entity.
4.7 NO VIOLATION. Neither the execution and delivery by CareSteps of
this Agreement nor the consummation by CareSteps of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) conflict with
or result in a breach of any provisions of the Certificate of Incorporation or
Bylaws of CareSteps; (ii) conflict with, result in a breach of any provision of
or the modification or termination of, constitute a default under, or result in
the creation of imposition of any lien, security interest, charge or encumbrance
upon any of the assets of CareSteps or any CareSteps Subsidiary pursuant to any
material commitment, lease, contract, or other material agreement or instrument
to which CareSteps or any CareSteps Subsidiary is a party; or (iii) violate or
result in any material change in CareSteps' rights or obligations under any
governmental permit, license or any order, arbitration award, judgment, writ,
injunction, decree, statute, rule or regulation applicable to CareSteps or any
CareSteps Subsidiary.
4.8 REGULATORY CONSENTS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental entity, is
required by or with respect to CareSteps or any CareSteps Subsidiary in
connection with the execution and delivery of this Agreement by CareSteps, or
the consummation by CareSteps of the transactions contemplated hereby, which the
failure to obtain would have a CareSteps Material Adverse Effect except for the
filing of the Certificate of Merger with the Delaware Secretary of State.
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4.9 FINANCIAL STATEMENTS.
(a) CareSteps has delivered its unaudited, cash basis income
statement and balance sheet for the twelve (12) months ended February 28, 2001.
Except as disclosed in the CareSteps Disclosure Letter, this cash basis income
statement and the associated cash basis balance sheet reflect all cash receipts
and disbursements of CareSteps for the period set forth therein, and as of
February 28, 2001 the balance sheet reflects the unrestricted cash balance of
CareSteps. As of February 28, 2001 or any subsequent date for which a balance
sheet is provided, CareSteps did not have liabilities, contingent or otherwise,
whether due or to become due, that are not reflected on the balance sheet of
such date, other than any such liability or obligation which have or has been
disclosed in this Agreement. The liabilities for all benefits provided under any
Plans (as defined in Section 4.12 herein) have been fully disclosed to American
Healthways as provided in this Agreement.
(b) All liabilities of Seller that individually exceed $1,000
as of February 28, 2001 are disclosed in the CareSteps Disclosure Letter.
4.10 NO MATERIAL ADVERSE CHANGES. Since February 28, 2001, there has
not been (i) any material adverse change in the financial condition, results of
operations, business, assets or liabilities (contingent or otherwise, whether
due or to become due) of CareSteps or the CareSteps Subsidiaries; (ii) any
dividend declared or paid or distribution made on the capital stock of
CareSteps; (iii) except as set forth in the CareSteps Disclosure Letter, any
incurrence of long term debt by CareSteps or the CareSteps Subsidiaries; (iv)
except as set forth in the CareSteps Disclosure Letter, any salary, bonus or
compensation increases to any officers, employees or agents of CareSteps or any
CareSteps Subsidiary whose compensation exceeds $50,000; (v) except as set forth
in the CareSteps Disclosure Letter, any pending or threatened labor disputes or
other labor problems against or potentially affecting CareSteps or the CareSteps
Subsidiaries; or (vi) except as set forth in the CareSteps Disclosure Letter,
any other transaction entered into by CareSteps or any CareSteps Subsidiary,
except in the ordinary course of business and consistent with past practice.
4.11 TAX MATTERS. CareSteps has duly filed all material Taxes and other
charges (whether or not shown on any Tax Return) due or claimed to be due from
it or from the CareSteps Subsidiaries by federal, foreign, state or local taxing
authorities or has set up an adequate reserve for all Taxes payable by CareSteps
and the CareSteps Subsidiaries accrued through February 28, 2001. True and
correct copies of all Tax Returns relating to federal taxes and state income and
sales taxes and other charges for the period from organization through 2000 have
been heretofore delivered to American Healthways. Except as set forth in the
CareSteps Disclosure Letter, there are no Tax liabilities as of the date of this
Agreement. There are no Tax liens (other than liens for current Taxes not yet
due) upon any properties or assets of CareSteps or the CareSteps Subsidiary
(whether real, personal or mixed, tangible or intangible), and, except as
reflected in the financial statements, there are no pending or to CareSteps'
Knowledge (as hereinafter defined), threatened audits or examinations relating
to, or claims asserted for, Taxes or assessments against CareSteps or any
CareSteps Subsidiary, and CareSteps is aware of no substantial basis for any
material claims. Neither CareSteps nor any CareSteps Subsidiary has granted or
been requested to grant any extension of the limitation period applicable to any
claim for Taxes or assessments with respect to Taxes. CareSteps is not a party
to any Tax allocation or sharing agreement. CareSteps has no liability for the
Taxes of any Affiliated Group under Treasury Regulation 1.1502-6 (or any similar
provision of state, local or foreign law other than the Affiliated Group of
which CareSteps is the parent company as of the date hereof). CareSteps or a
CareSteps Subsidiary has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor or shareholder where failure to do so would
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have a CareSteps Material Adverse Effect. For purposes of this Agreement, (i)
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not and (ii) "Tax Return" means any
return, report, information return, or other document (including any related or
supporting information) filed or required to be filed with any taxing authority
in connection with its determination, assessment, collection, administration, or
imposition of any Tax. For the purposes of this Agreement, "Knowledge" means,
when any statement or representation contained herein is qualified by the phrase
"to the Knowledge" of a party hereto or "to [a party's] Knowledge," the party
making such statement or representation shall be deemed to have made such
statement or representation based on the personal knowledge of each of the
officers and directors of such party.
4.12 EMPLOYEES AND FRINGE BENEFIT PLANS.
(a) The CareSteps Disclosure Letter sets forth the names, ages
and titles of all members of the Board of Directors and officers of CareSteps
and all employees of CareSteps or any CareSteps Subsidiary earning in excess of
$50,000 per annum, and the annual rate of compensation (including bonuses) being
paid to each such member of the Board of Directors, officer and employee as of
the most recent practicable date.
(b) The CareSteps Disclosure Letter lists each employment,
bonus, deferred compensation, pension, stock option, stock appreciation right,
profit-sharing or retirement plan, arrangement or practice, each medical,
vacation, retiree medical, severance pay plan, and each other agreement or
fringe benefit plan, arrangement or practice, of CareSteps or any CareSteps
Subsidiary, which affects one or more of its or their employees, including all
"employee benefit plans" as defined by Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (collectively, the "Plans").
No Plan is subject to Title IV of ERISA or the minimum funding standards of
Section 412 of the Code.
(c) For each Plan which is an "employee benefit plan" under
Section 3(3) of ERISA, CareSteps has delivered to American Healthways the
following documents (to the extent such documents are required by ERISA with
respect to such Plan): (i) correct and complete copies of the Plan documents and
summary plan descriptions, (ii) the most recent determination letter received
from the Internal Revenue Service ("IRS"), (iii) the most recent Form 5500
Annual Report and (iv) any related trust agreements, insurance contracts and
funding agreements associated with each such Plan.
(d) Except as may be required by applicable law, neither
CareSteps nor any CareSteps Subsidiary, has any commitment, whether formal or
informal and whether legally binding or not, (i) to create any additional such
Plan; (ii) to modify or change any such Plan; or (iii) to maintain for any
period of time any such Plan. The CareSteps Disclosure Letter contains an
accurate and complete description of the funding policies (and commitments, if
any) of CareSteps and all CareSteps Subsidiaries with respect to each such
existing Plan.
(e) CareSteps has no unfunded past service liability in
respect of any of its Plans. Neither CareSteps nor any Plan nor to CareSteps'
Knowledge any trustee, administrator, fiduciary or sponsor of any Plan has
engaged in any prohibited transactions as defined in Section 406 of ERISA or
Section 4975 of the Code for which there is no statutory exemption in Section
408 of ERISA or Section 4975 of the Code or administrative exemption; all
filings, reports and descriptions as to such Plans (including Form 5500 Annual
Reports, Summary Plan Descriptions, PBGC-1's and Summary Annual Reports)
required to have been made or distributed to participants, the IRS, the United
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States Department of Labor and other governmental agencies have been made in a
timely manner or, to the extent practicable, will be made on or prior to the
Closing Date; there is no material litigation, disputed claim, governmental
proceeding or investigation pending or to CareSteps' Knowledge threatened with
respect to any of such Plans, the related trusts, or to CareSteps' Knowledge any
fiduciary, trustee, administrator or sponsor of such Plans; such Plans have been
established, maintained and administered in all material respects in accordance
with their governing documents and applicable provisions of ERISA and the Code
and Treasury Regulations promulgated thereunder. Each Plan which is intended to
be a qualified plan under Section 401(a) of the Code has received a favorable
determination letter from the IRS.
(f) Except where failure to do so would not have a CareSteps
Material Adverse Effect, CareSteps and the CareSteps Subsidiaries have complied
in all respects with all applicable federal, state and local laws, rules and
regulations relating to employees' employment and/or employment relationships,
including, without limitation, wage related laws, anti-discrimination laws,
employee safety laws and COBRA (defined herein to mean the requirements of
Section 4980B of the Code, Treasury Regulation Section 54.4980B and Part 6 of
Subtitle B of Title I of ERISA).
(g) The consummation of the transactions contemplated by this
Agreement will not (i) result in the payment or series of payments by CareSteps
to any employee or other person of an "excess parachute payment" within the
meaning of Section 280G of the Code, (ii) entitle any employee or former
employee of CareSteps to severance pay, unemployment compensation or any other
payment, or (iii) except for employee stock options specified in the CareSteps
Disclosure Letter, accelerate the time of payment or vesting of any stock
option, stock appreciation right, deferred compensation or other employee
benefits under any Plan (including vacation and sick pay).
(h) None of the Plans which are "welfare benefit plans,"
within the meaning of Section 3(1) of ERISA, provide for continuing benefits or
coverage after termination or retirement from employment, except for COBRA
rights under a "group health plan" as defined in Section 4980B(g) of the Code
and Section 607 of ERISA.
(i) Neither CareSteps nor any member of a controlled group
with of CareSteps within the meaning of Section 414(b), (c), (m) or (o) of the
Code has ever maintained or terminated a pension plan subject to Title IV of
ERISA or the minimum funding standards of Section 412 of the Code or has ever
contributed to, participated in or withdrawn from a multi-employer plan as
defined in Section 4001(a)(3) of Title IV of ERISA, and CareSteps has not
incurred and does not have any liability as a result of any partial or complete
withdrawal by any employer from such a multi-employer plan as described under
Sections 4201, 4203, or 4205 of ERISA.
4.13 COMPLIANCE WITH APPLICABLE LAWS.
(a) CareSteps and the CareSteps Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all governmental
entities which are necessary to the operation of the businesses or ownership of
the properties of CareSteps and the CareSteps Subsidiaries (the "CareSteps
Permits") as now conducted, except where the failure to so hold would not have a
CareSteps Material Adverse Effect. CareSteps and the CareSteps Subsidiaries are
in compliance with the terms of the CareSteps Permits, except where the failure
so to comply would not have a CareSteps Material Adverse Effect. As of the date
of this Agreement, except as set forth in the CareSteps Disclosure Letter, to
CareSteps' Knowledge, no investigation or review by any governmental entity with
respect to CareSteps or any CareSteps Subsidiary is pending or threatened, and
CareSteps has no reason to believe that any such investigation or review known
to CareSteps will result in a CareSteps Material Adverse Effect. To CareSteps'
Knowledge, no condition exists which is reasonably likely to result in any suit,
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claim, action, proceeding or investigation by any person or governmental entity
against CareSteps or any CareSteps Subsidiary which would have a CareSteps
Material Adverse Effect.
(b) As used in this Agreement, "Environmental Laws" shall mean
the Federal Water Pollution Control Act, Resource Conservation and Recovery Act,
Safe Drinking Water Act, Toxic Substances Control Act, Clean Air Act and
Comprehensive Environmental Response, Compensation and Liability Act and similar
federal and state laws. As of the date of this Agreement, CareSteps and the
CareSteps Subsidiaries (A) are in compliance in all material respects with any
and all applicable Environmental Laws, (B) have received all material permits,
licenses or other approvals required under applicable Environmental Laws to
conduct their business and (C) are in compliance in all material respects with
all terms and conditions of any such permit, license or approval. To CareSteps'
Knowledge, no condition exists that could give rise to any suit, claim, action,
proceeding or investigation by any person or governmental entity against
CareSteps as a result of or in connection with noncompliance with Environmental
Laws, except where such noncompliance would not have a CareSteps Material
Adverse Effect.
4.14 LITIGATION. As of the date of this Agreement, except as disclosed
in the CareSteps Disclosure Letter, there is no suit, action or proceeding
pending or, to the knowledge of CareSteps, threatened against or affecting
CareSteps.
4.15 CORPORATE RECORDS; OTHER INFORMATION. The minute books of
CareSteps and the CareSteps Subsidiaries, copies of which have been provided to
American Healthways, constitute complete and accurate records of all meetings
and actions taken by the boards of directors, committees of the boards of
directors and the shareholders thereof. To CareSteps' Knowledge, all documents
and other written information as to existing facts relating to CareSteps, the
CareSteps Subsidiaries and their respective assets and liabilities which have
been provided to American Healthways by CareSteps in connection with this
Agreement are true, correct and complete in all material respects except to the
extent that any documents or other written information was later specifically
supplemented or corrected prior to the date of this Agreement with additional
documents or written information that was provided to American Healthways.
4.16 PROPERTIES. Each of CareSteps and the CareSteps Subsidiaries (i)
has good, clear and marketable title to all the properties and assets that are
reflected in the February 28, 2001 balance sheet as being owned by CareSteps or
one of the CareSteps Subsidiaries or acquired after the date thereof (except
properties sold or otherwise disposed of since the date thereof), free and clear
of all claims, liens, charges, security interests or encumbrances of any nature
whatsoever except (A) statutory liens securing payments not yet due, (B) such
imperfections or irregularities of title, claims, liens, charges, security
interest or encumbrances as do not affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially impair business
operations at such properties and (ii) is the lessee of all leasehold estates
which are reflected in the February 28, 2001 balance sheet as being leased by
CareSteps or one of the CareSteps Subsidiaries or leased after the date thereof
(except for leases that have expired by their terms or as to which CareSteps or
one of the CareSteps Subsidiaries, as applicable, has agreed to terminate since
the date thereof) and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without default thereunder by the
lessee, or to CareSteps' Knowledge, the lessor.
4.17 MATERIAL CONTRACTS. The CareSteps Disclosure Letter sets forth as
of the date of this Agreement a list of the following agreements (the "CareSteps
Contracts"):
(a) each agreement between CareSteps or any CareSteps
Subsidiary and any customer accounting for more than 2% of CareSteps'
consolidated revenues in the month of March 2001;
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(b) each agreement of CareSteps or any CareSteps Subsidiary
concerning a partnership, joint venture or other business venture with any other
person;
(c) each agreement limiting the right of CareSteps or any
CareSteps Subsidiary to engage in or compete with any person in, any business or
geographical area;
(d) each agreement or other arrangement of or involving
CareSteps or any CareSteps Subsidiary with respect to indebtedness for money
borrowed, including letters of credit, guaranties, swaps and similar agreements;
(e) each management, consulting, employment, severance or
similar agreement; and
(f) each agreement not otherwise listed which is material to
CareSteps.
Each of the CareSteps Contracts is in full force and effect and is a legal,
valid and binding contract or agreement, and there is no default (or any event
known to CareSteps which, with the giving of notice or lapse of time or both
would be a material default or breach) by CareSteps or any CareSteps Subsidiary
or, to the knowledge of CareSteps, any other party, in the timely performance of
any obligation to be performed or paid or any other material provision under any
such contracts or agreements. There is not pending, nor to CareSteps' Knowledge,
threatened any cancellation or termination of any of the CareSteps Contracts.
4.18 CARESTEPS PROPRIETARY ASSETS.
(a) The CareSteps Disclosure Letter sets forth (i) with
respect to each Proprietary Asset (as hereinafter defined) owned by CareSteps or
any CareSteps Subsidiary and registered with any governmental body or for which
any application has been filed with any governmental body, (1) a statement
identifying such Proprietary Asset, and (2) the names of the jurisdictions
covered by the applicable registration or application; (ii) a statement
identifying all other Proprietary Assets owned by CareSteps or any CareSteps
Subsidiary; and (iii) a statement identifying each Proprietary Asset licensed to
CareSteps or any CareSteps Subsidiary by any person (except for any Proprietary
Asset that is licensed to CareSteps or any CareSteps Subsidiary under any third
party license generally available to the public at a cost of less than Ten
Thousand Dollars ($10,000)), and identifies the license agreement under which
such Proprietary Asset is being licensed to CareSteps or CareSteps Subsidiary.
All Proprietary Assets used by CareSteps and the CareSteps Subsidiaries are
either owned by or licensed to CareSteps or a CareSteps Subsidiary. Except as
set forth in the CareSteps Disclosure Letter, CareSteps and the CareSteps
Subsidiaries have good and valid title to all of the Proprietary Assets owned by
CareSteps and the CareSteps Subsidiaries, free and clear of all liens and other
encumbrances, and have a valid right to use all Proprietary Assets identified in
the CareSteps Disclosure Letter. Except as set forth in the CareSteps Disclosure
Letter, neither CareSteps nor any CareSteps Subsidiary is obligated to make any
payment to any person for the use of any Proprietary Asset. Except as set forth
in the CareSteps Disclosure Letter, neither CareSteps nor any CareSteps
Subsidiary has developed jointly with any other person any Proprietary Assets
with respect to which such other person has any rights.
(b) CareSteps and the CareSteps Subsidiaries have taken
reasonable measures and precautions necessary to protect and maintain the
confidentiality and secrecy of all Proprietary Assets owned or licensed by
CareSteps or any CareSteps Subsidiary (except Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise maintain and protect the
value of all such Proprietary Assets. Except as set forth in the CareSteps
Disclosure Letter, neither CareSteps nor any CareSteps Subsidiary has (other
than pursuant to license agreements identified in the CareSteps Disclosure
Letter) delivered to any person, or permitted the disclosure or delivery to any
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person of, the source code, or any portion or aspect of the source code, of any
Proprietary Asset owned by CareSteps. Neither CareSteps nor any CareSteps
Subsidiary has delivered to any person any object code of any Proprietary Asset
owned by CareSteps or any CareSteps Subsidiary unless such person entered into a
license or other similar agreement with CareSteps or a CareSteps Subsidiary
which restricts the use of such object code and retains all ownership rights of
such object code in CareSteps and the CareSteps Subsidiaries.
(c) To the knowledge of CareSteps, none of the Proprietary
Assets owned by CareSteps or any CareSteps Subsidiary (including, without
limitation, the medical best practices information used by CareSteps and the
CareSteps Subsidiaries) infringes or conflicts with any Proprietary Asset owned
by any other person. To the Knowledge of CareSteps, neither CareSteps nor any
CareSteps Subsidiary is infringing, misappropriating or making any unlawful use
of, and neither CareSteps nor any CareSteps Subsidiary has at any time
infringed, misappropriated or made any unlawful use of, or received any notice
or other communication (in writing or orally) of any actual, alleged, possible
or potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned by any other person. To the Knowledge of CareSteps, no other person
is infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned by any other person infringes with, any Proprietary
Asset owned by CareSteps or any CareSteps Subsidiary.
(d) Except as set forth in the CareSteps Disclosure Letter,
(i) each Proprietary Asset owned by CareSteps or any CareSteps Subsidiary
conforms in all material respects with all written specifications,
documentation, performance standards, representations or statements made or
provided to American Healthways, and (ii) there has not been any claim by any
customer or other person alleging that any such Proprietary Asset (including
each version thereof that has ever been licensed or otherwise made available by
CareSteps or any CareSteps Subsidiary to any person) does not conform in all
material respects with any written specification, documentation, performance
standard, representation or statement made or provided by CareSteps or any
CareSteps Subsidiary, and, to the Knowledge of CareSteps, there is no valid
basis for any such claim.
(e) The Proprietary Assets described in the CareSteps
Disclosure Letter constitute all the Proprietary Assets necessary to enable
CareSteps and the CareSteps Subsidiaries to conduct their respective businesses
in the manner in which such businesses have been and are being conducted. Except
as set forth in the CareSteps Disclosure Letter, (i) neither CareSteps nor any
CareSteps Subsidiary has licensed any of the Proprietary Assets owned by
CareSteps or any CareSteps Subsidiary to any person, and (ii) neither CareSteps
nor any CareSteps Subsidiary has entered into any covenant not to compete or
other agreement limiting its ability to exploit fully any of the Proprietary
Assets owned or licensed by CareSteps or any CareSteps Subsidiary or to transact
business in any market or geographic area or with any person.
(f) "Proprietary Asset" means any: (i) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (ii) right to use or exploit any of the
foregoing.
4.19 CERTAIN BUSINESS PRACTICES AND REGULATIONS. Neither CareSteps nor
any CareSteps Subsidiary nor any of its executive officers, directors, or
professional employees has, to the knowledge of CareSteps, (i) made or agreed to
make any contribution, payment or gift to any customer, supplier, landlord,
political candidate, governmental official, employee or agent where either the
contribution, payment or gift or the purpose thereof was illegal under any law
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or regulation, (ii) established or maintained any unrecorded fund or asset for
any purpose or made any false entries on its books and records for any reason,
(iii) made or agreed to make any contribution, or reimbursed any political gift
or contribution made by any other person, to any candidate for federal, state or
local public office in violation under any law or regulation, or (iv) engaged in
any activity constituting fraud or abuse under laws relating to health care,
insurance or the regulation of professional corporations.
4.20 INSURANCE. All policies and binders of insurance for professional
liability, directors and officers, fire, liability, worker's compensation and
other customary matters held by or on behalf of CareSteps ("Insurance Policies")
have been made available to American Healthways. The Insurance Policies (which
term shall include any insurance policy entered into after the date of this
Agreement in replacement of an Insurance Policy provided that such replacement
policy shall insure against risks and liabilities, and in amounts and under
terms and conditions, substantially the same as those provided in such replaced
policy or binder) are in full force and effect and CareSteps is not in default
with respect to any material provision contained in any Insurance Policy nor, to
the Knowledge of CareSteps, has CareSteps failed to give any notice of any claim
under any Insurance Policy in due and timely fashion, nor, to the Knowledge of
CareSteps, has any coverage for current claims been denied, except where such
default or failure (A) as of the date of this Agreement, individually or in the
aggregate, could not reasonably be expected to result in a cost to CareSteps in
excess of $10,000 and (B) as to any default or failure arising after the date of
this Agreement, individually or in the aggregate, could not reasonably be
expected to have a CareSteps Material Adverse Effect.
4.21 ACCOUNTS RECEIVABLE. All accounts receivable of Seller and all
rights of Seller to payment for goods or services rendered by Seller have been
recorded on the books of Seller and are bona fide and represent amounts validly
due.
4.22 ADMINISTRATION OF EMPLOYEE BENEFIT PLANS. With respect to any
employee benefit plans administered by CareSteps, including but not limited to,
any such plan for which CareSteps or any CareSteps Subsidiary may provide
administrative services, provider contracting and/or utilization review
services, to CareSteps' Knowledge, such employee benefit plans have been
administered in all material respects in accordance with their terms and the
terms of any agreement between the employer and CareSteps and in accordance with
ERISA. Neither CareSteps or to the best of CareSteps' Knowledge any "party in
interest" or "disqualified person" within the control of CareSteps or any
CareSteps Subsidiary has engaged with respect to any employee benefit plan in
(i) a prohibited transaction within the meaning of Section 4975 of the Code or
Title I, Part 4, of ERISA, or (ii) any transaction in connection with which
CareSteps could be subject to liability or civil penalties assessed pursuant to
Sections 409 or 502 (i) of ERISA, in each case which is reasonably likely to
have a CareSteps Material Adverse Effect.
4.23 NO BROKERS. CareSteps has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of CareSteps or American Healthways to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. CareSteps is not aware of any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
4.24 AMERICAN HEALTHWAYS STOCK OWNERSHIP. None of CareSteps or, to
CareSteps' Knowledge, CareSteps's affiliates own any shares of American
Healthways Common Stock or other securities convertible into American Healthways
Common Stock.
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4.25 NO PREFERENCES, ETC. Except as set forth in the CareSteps
Disclosure Letter, no holders of any capital stock of CareSteps hold any
preferential, preemptive, voting or other similar rights or privileges with
respect to their shares of CareSteps capital stock.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF AMERICAN HEALTHWAYS AND MERGER SUB
Except as set forth in the disclosure letter delivered at or prior to
the execution hereof to CareSteps (the "American Healthways Disclosure Letter"),
American Healthways and Merger Sub, jointly and severally, represent and warrant
to CareSteps as of the date of this Agreement as follows:
5.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of American
Healthways, Merger Sub and each of American Healthways's "significant
subsidiaries" as defined in Rule 1-02 of Regulation S-X promulgated by the
Commission ("American Healthways Subsidiaries") is a corporation duly
incorporated, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation. Each of American Healthways, Merger
Sub, and the American Healthways Subsidiaries is qualified to do business as a
foreign corporation and is in good standing under the laws of any other state of
the United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect on the business, results of operations or financial condition of
American Healthways (an "American Healthways Material Adverse Effect");
provided, however, that the effects of changes that are generally applicable to
(a) the industries and markets in which American Healthways operates or (b) the
United States economy shall be excluded from the determination of an American
Healthways Material Adverse Effect. Each of American Healthways, Merger Sub and
the American Healthways Subsidiaries has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted. American Healthways and Merger Sub have each previously delivered
to CareSteps complete copies of its respective Certificate of Incorporation and
Bylaws.
5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of American
Healthways and Merger Sub has the requisite corporate power and authority to
execute and deliver this Agreement and all agreements and documents contemplated
hereby. The consummation by American Healthways and Merger Sub of the
transactions contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes, and all agreements and documents
contemplated hereby (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of American
Healthways and Merger Sub, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
5.3 CAPITALIZATION. The authorized capital stock of American Healthways
consists of 15,000,000 shares of American Healthways Common Stock, 8,518,648
shares of which are issued and outstanding as of April 12, 2001 and 5,000,000
shares of preferred stock, par value $.001 per share ("American Healthways
Preferred Stock"), no shares of which are issued and outstanding as of April 12,
2001. All issued and outstanding shares of American Healthways Common Stock and
American Healthways Preferred Stock are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights.
5.4 LITIGATION. As of the date of this Agreement, there is no suit,
action or proceeding pending or, to the knowledge of American Healthways,
threatened against or affecting American Healthways that is reasonably likely to
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(i) have an American Healthways Material Adverse Effect or (ii) to affect
American Healthways' ability to consummate the transactions contemplated hereby.
5.5 OTHER INTERESTS. As of the date hereof, neither American Healthways
nor Merger Sub owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust
or entity except as set forth on the American Healthways Disclosure Schedule.
5.6 NO VIOLATION. Neither the execution and delivery by American
Healthways and Merger Sub of this Agreement, nor the consummation by American
Healthways and Merger Sub of the transactions contemplated hereby in accordance
with the terms hereof, will: (i) conflict with or result in a breach of any
provisions of the Certificate of Incorporation or Bylaws of American Healthways
or Merger Sub; (ii) conflict with, result in a breach of any provision of or the
modification or termination of, constitute a default under, or result in the
creation or imposition of any lien, security interest, charge, or encumbrance
upon any of the assets of American Healthways or Merger Sub pursuant to any
material commitment, lease, contract, or other material agreement or instrument
to which American Healthways or Merger Sub is a party; or (iii) violate any
order, arbitration award, judgment, writ, injunction, decree, statute, rule, or
regulation applicable to American Healthways or Merger Sub.
5.7 REGULATORY CONSENTS. Except as set forth in the American Healthways
Disclosure Letter, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required by
or with respect to American Healthways or any American Healthways Subsidiary in
connection with the execution and delivery of this Agreement by American
Healthways, or the consummation by American Healthways of the transactions
contemplated hereby, which the failure to obtain would have a American
Healthways Material Adverse Effect.
5.8 SEC DOCUMENTS. Prior to the date hereof, American Healthways has
delivered to CareSteps and to the CareSteps Affiliates copies of American
Healthways's Annual Reports on Form 10-K for the year ended August 31, 2000,
Quarterly Reports on Form 10-Q for the periods ended November 30, 2000 and
February 28, 2001, and proxy materials dated December 19, 2000 (the "American
Healthways Reports"). The American Healthways Reports (i) were prepared in all
material respects in accordance with the applicable requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder, and (ii) as of
their respective dates, did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. Each of the consolidated balance sheets included
in or incorporated by reference into the American Healthways Reports (including
the related notes and schedules) fairly presents the consolidated financial
position of American Healthways as of its date and each of the consolidated
statements of income, retained earnings and cash flows included in or
incorporated by reference into the American Healthways Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings or cash flows of American Healthways for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect) in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. All material
agreements, contracts and other documents required to be filed as exhibits to
any of the American Healthways Reports have been so filed. To American
Healthways' Knowledge, there are no unasserted claims or liabilities or
contingent liabilities that are not disclosed in the American Healthways Reports
and that would reasonably be expected to have a American Healthways Material
Adverse Effect.
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5.9 ABSENCE OF CERTAIN CHANGES. Except as set forth in the American
Healthways Disclosure Letter, since February 28, 2001, there has not been any
material adverse change in the financial condition, results of operations,
business, assets or liabilities (contingent or otherwise, whether due or to
become due), of American Healthways or any American Healthways Subsidiary.
5.10 NO BROKERS. American Healthways has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of CareSteps or American Healthways to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. American Healthways is not aware of any claim for payment
of any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
5.11 CARESTEPS STOCK OWNERSHIP. As of the date hereof, American
Healthways owns 1,181,818 shares of CareSteps Common Stock. Merger Sub does not
own any shares of capital stock of CareSteps or other securities convertible
into capital stock of CareSteps.
5.12 AMERICAN HEALTHWAYS COMMON STOCK. The issuance and delivery by
American Healthways of shares of American Healthways Common Stock in connection
with the Merger and this Agreement have been duly and validly authorized by all
necessary corporate action on the part of American Healthways. The shares of
American Healthways Common Stock to be issued in connection with the Merger and
this Agreement, when issued in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable and not subject to preemptive
rights and will be issued in compliance in all material respects with the
registration requirements of applicable federal and state securities laws.
5.13 MERGER SUB. Since the date of its incorporation, Merger Sub has
not, and as of the Effective Time it will not have, (i) conducted any business,
(ii) had assets in excess of $10,000, (iii) incurred liabilities other than an
amount not exceeding $10,000 representing fees and disbursements incurred in
connection with incorporating and maintaining its corporate existence, and (iv)
made any distributions with respect to its stock or other payments except in
satisfaction of liabilities referred to in clause (iii) above.
ARTICLE 6.
COVENANTS
6.1 COVENANTS OF AMERICAN HEALTHWAYS AND CARESTEPS. During the period
from the date hereof and continuing until the Effective Time (except as
expressly contemplated or permitted hereby, or to the extent that the other
parties shall otherwise consent in writing) each of American Healthways and
CareSteps covenants with the other that, insofar as the obligations relate to
it:
(a) Each of American Healthways and CareSteps shall carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and shall use all
reasonable efforts to preserve intact their present business organizations,
maintain their rights and franchises and preserve their relationships with
customers, suppliers and others having business deals with them to the end that
their good will and ongoing businesses shall not be impaired in any material
respect at the Effective Time.
(b) From the date hereof to the Effective Time, each of
CareSteps and American Healthways shall allow all designated officers,
attorneys, accountants and other representatives of the other access at all
reasonable times during regular business hours with reasonable notice to the
records and files, correspondence, audits and properties, as well as to all
information relating to commitments, contracts, titles and financial position,
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or otherwise pertaining to the business and affairs, of CareSteps and American
Healthways.
(c) Except as and to the extent required by law, each of
American Healthways and CareSteps hereby agree not to disclose or use, and each
shall cause its representatives not to disclose or use, any confidential
information with respect to the other party hereto furnished, or to be
furnished, by such other party or their representatives in connection herewith
at any time or in any manner other than in connection with its evaluation of the
Merger. Except as required by law, and as set forth in this subsection (c),
neither CareSteps nor its representatives shall make any public statements
regarding the Merger or this Agreement without the prior approval of American
Healthways. American Healthways may make such statements, disclosures and
filings regarding the Merger or this Agreement as it is advised by its counsel
are necessary or appropriate for a public company. Should the Merger not be
consummated, all such confidential information, in whatever form, shall be
returned to the originator by each party and its representatives.
(d) Each of American Healthways and CareSteps, without the
prior written consent of the other, shall not take any action which would cause
or tend to cause the conditions upon the obligations of the parties hereto to
effect the transactions contemplated hereby not to be fulfilled including,
without limitation, taking, causing to be taken, or permitting or suffering to
be taken or to exist any action, condition or thing which would cause the
representations and warranties made by the other herein not to be true and
correct as of the Closing Date.
(e) From and after the date hereof to and until the Effective
Time and thereafter, neither CareSteps nor American Healthways shall knowingly
take any action, or knowingly fail to take any action, that would jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a)(2)(E) of the Code or enter into any contract, agreement, commitment or
arrangement with respect to the foregoing.
(f) From and after the date hereof and until the Closing Date,
both CareSteps and American Healthways shall act in good faith to conclude the
Merger.
6.2 COVENANTS OF CARESTEPS. CareSteps covenants and agrees that between
the date hereof and continuing until the Effective Time (except as expressly
contemplated or permitted hereby, or to the extent that American Healthways
shall otherwise consent in writing or until this Agreement is terminated as
provided in Section 8.5):
(a) Prior to the Effective Time, CareSteps agrees (a) that it
shall, and shall direct and use its best efforts to cause its directors,
officers, employees, specified five percent or greater shareholders, advisors,
accountants and attorneys (the "Representatives"), including such
Representatives of any of CareSteps' affiliated entities or persons, not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of
CareSteps (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; (b) that it will
immediately cease and cause to be terminated any existing activities,
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discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 6.2(a); and (c) that it will notify American Healthways immediately if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it.
CareSteps agrees that American Healthways will be entitled to
specifically enforce its rights under this Section 6.2(a) to recover damages by
reason of any breach of the provisions therein and to exercise all other rights
existing in its favor. CareSteps further agrees and acknowledges that money
damages may not be an adequate remedy for the breach of such provision and that
American Healthways may in its sole discretion apply to any court of law or
equity of competent jurisdiction for specific performance or injunctive relief
in order to enforce or prevent any violations of this covenant.
(b) CareSteps will not and will not permit any CareSteps
Subsidiary to, without the prior written consent of American Healthways:
(i) change its charter, bylaws or capitalization or
merge, consolidate with or into or, otherwise acquire any interest in any
entity;
(ii) declare, set aside or pay any cash dividend or
other distribution on or in respect of shares of its capital stock, or redeem,
retire or purchase any shares of its capital stock or issue any additional
shares or rights or options or agreements to acquire shares of its capital
stock;
(iii) discharge or satisfy any lien, charge,
encumbrance or indebtedness outside the ordinary course of business, except
those required to be discharged or satisfied;
(iv) authorize, guarantee or incur indebtedness
aggregating in excess of $100,000;
(v) make any capital expenditures or capital
additions or betterments, or commitments therefor, aggregating in excess of
$100,000;
(vi) loan funds to any person;
(vii) institute any material litigation, action or
proceeding before any court or governmental body, or make any material
settlement or enter into a material settlement agreement for any litigation,
action or proceeding;
(viii) sell, lease, mortgage, pledge or subject to
any other encumbrance or otherwise dispose of any of its property or assets,
tangible or intangible, other than in the ordinary course of business;
(ix) authorize any compensation increases of any kind
whatsoever for any employee, (provided CareSteps shall pay owing or accrued
deferred compensation) other than as in the ordinary course of business and
consistent with past practice, or adopt or amend any existing employee benefit
plan or severance plan or employment agreement;
(x) take any action, other than reasonable and usual
actions in the ordinary course of business;
(xi) enter into or modify any material contract,
except for customer contracts (including mutual nondisclosure agreements with
prospective customers) entered into in the ordinary course of business
consistent with past practice; or
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(xii) enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
6.3 COVENANTS OF AMERICAN HEALTHWAYS. (a) American Healthways covenants
and agrees that between the date hereof and continuing until the Effective Time
(except as expressly contemplated or permitted hereby, or to the extent that
CareSteps shall otherwise consent in writing):
(i) it shall not amend any of the material terms or
provisions of American Healthways's securities, except for any such amendments
which do not affect or which affect equally all shares of American Healthways
Common Stock;
(ii) it shall not knowingly take any action which
would result in a failure to maintain the trading of American Healthways Common
Stock on Nasdaq without causing such stock to be listed for trading on a
national securities exchange at or prior to the termination of its trading on
Nasdaq;
(iii) it shall not undertake any activities to
knowingly manipulate the secondary market price of American Healthways Common
Stock with the intent to decrease the number of shares comprising the Merger
Consideration to the extent prohibited by Rule 10b-5 of the Exchange Act;
provided, however, that such activities shall not include the making by American
Healthways, its officers, directors, representatives or affiliates of any
disclosures as required of reporting companies under the Exchange Act or as
otherwise made by American Healthways, its officers, directors, representatives
or affiliates in the ordinary course of business, including without limitations,
press releases and disclosures to investment advisers;
(iv) it shall not take any action or fail to take any
action which could reasonably be expected to have a American Healthways Material
Adverse Effect prior to the Effective Time; and
(v) it shall not agree in writing or otherwise to do
any of the foregoing.
(b) Except as contemplated by this Agreement, for a period of
one year from and after the Effective Time or until such employee benefit plans
or arrangements are integrated with American Healthways's employee benefit plans
and arrangements, whichever is earlier, American Healthways shall, or shall
cause the Surviving Corporation to, provide employee benefit plans and
arrangements for the benefit of the employees of the Surviving Corporation and
the CareSteps Subsidiaries that are reasonably comparable in the aggregate to
the employee benefit plans and arrangements of CareSteps and the CareSteps
Subsidiaries as in effect on the date hereof; provided, however, that American
Healthways reserves the right to make any changes to such employee benefit plans
and arrangements as are necessary to comply with, or respond to changes in,
applicable law. The employee benefit plans and arrangements for the benefit of
employees of the Surviving Corporation and the CareSteps Subsidiaries, to the
extent possible under the terms thereof, shall give full credit for each
participant's period of service with CareSteps and the CareSteps Subsidiaries
prior to the Effective Time for all purposes for which such service was
recognized, and to the extent such service was recognized, under American
Healthways' employee benefit plans and arrangements prior to the Effective Time.
Nothing contained in this Agreement shall require the continued employment by
CareSteps of any employee from and after the Effective Time, or make any
employee of CareSteps a third party beneficiary of the provisions of this
Agreement.
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ARTICLE 7.
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) No action or proceeding shall have been instituted before
a court or other governmental body by any governmental agency or public
authority to restrain or prohibit the transactions contemplated by this
Agreement or to obtain an amount of damages or other material relief in
connection with the execution of the Agreement or the related agreements or the
consummation of the Merger; and no governmental agency shall have given notice
to any party hereto to the effect that consummation of the transactions
contemplated by this Agreement would constitute a violation of any law or that
it intends to commence proceedings to restrain consummation of the Merger.
(b) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or registration
would not have a material adverse effect on the business of American Healthways
and CareSteps, taken as a whole, following the Effective Time.
(c) American Healthways shall have received from CareSteps
copies of all resolutions adopted by the Board of Directors and shareholders of
CareSteps in connection with this Agreement and the transactions contemplated
hereby. CareSteps shall have received from American Healthways and Merger Sub
copies of all resolutions adopted by the Board of Directors and shareholders of
each respective company in connection with this Agreement and the transactions
contemplated hereby.
7.2 CONDITIONS TO OBLIGATION OF CARESTEPS TO EFFECT THE MERGER. The
obligation of CareSteps to effect the Merger shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions:
(a) American Healthways shall have performed its agreements
contained in this Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of American Healthways and Merger
Sub contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, and CareSteps shall
have received a certificate of the President or the Chief Financial Officer,
dated the Closing Date, certifying to such effect.
(b) From the date of this Agreement through the Effective
Time, there shall not have occurred any adverse change in the financial
condition, business or operations of American Healthways, that would have or
would be reasonably likely to have a American Healthways Material Adverse
Effect.
(c) CareSteps shall have received a written opinion, dated as
of the Closing Date, from the legal counsel of American Healthways, in form and
substance satisfactory to it, as to certain matters agreed upon by legal counsel
of American Healthways and CareSteps.
7.3 CONDITIONS TO OBLIGATION OF AMERICAN HEALTHWAYS AND MERGER SUB TO
EFFECT THE MERGER. The obligations of American Healthways and Merger Sub to
effect the Merger shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions:
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(a) CareSteps shall have performed its agreements contained in
this Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of CareSteps contained in this Agreement and in
any document delivered in connection herewith shall be true and correct as of
the Closing Date to the same extent as if made on the Closing Date, and American
Healthways shall have received a certificate of the Chief Executive Officer of
CareSteps, dated the Closing Date, certifying to such effect.
(b) From the date of this Agreement through the Effective
Time, there shall not have occurred any adverse change in the financial
condition, business or operations of CareSteps, that would have or would
reasonably be likely to have a CareSteps Material Adverse Effect.
(c) American Healthways shall have received a written opinion,
dated as of the Closing Date, from the legal counsel of CareSteps, in form and
substance satisfactory to it, as to certain matters agreed upon by legal counsel
of American Healthways and CareSteps.
(d) CareSteps shall have received executed releases from the
CareSteps Preferential Right Holders (as hereinafter defined) who hold at least
90% of the CareSteps Preferential Right Holders' shares of CareSteps Common
Stock. "CareSteps Preferential Right Holders" means the holders of that certain
preferential right granted pursuant to that certain Voting and Stockholders
Agreement by and among, CareSteps, eMed Ventures Fund I, Ltd. and certain
stockholders of CareSteps.
(e) Springboard LP shall have released CareSteps from any and
all obligations, liabilities or duties under any consulting, finance or other
business arrangement, whether written or oral (including, without limitation,
the services and funding agreements evidence by letters dated February 5, 2000
from Springboard, LP);
(f) U.S. Patent Application No. 09/393026 shall have been
assigned by the Principal Shareholders to CareSteps.
(g) CareSteps and the Principal Shareholders shall have
terminated and released each other from any and all obligations, liabilities or
duties under employment agreements between CareSteps and each Principal
Shareholder, and American Healthways shall have received an employment agreement
substantially in the form of the Principal Shareholder's Employment Agreements
executed by each of the Principal Shareholders.
(h) American Healthways shall have received from ninety
percent (90%) of the holders of CareSteps Common Stock a letter (a "Letter of
Representations") pursuant to which such holder represents and warrants to each
other holder and American Healthways as follows:
(i) Each such holder will be acquiring shares of
American Healthways Common Stock for investment purposes only, without any
intention of distributing or selling such shares in violation of federal, state
or other securities laws. If such holder should in the future decide to dispose
of any of such shares, such holder understands and agrees that it may do so only
in compliance with the terms this Agreement and applicable federal and state
securities laws, as then in effect.
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(ii) Each such holder understands that the shares
will not be registered at the time of their issuance under the federal
securities laws for the reason that the issuance of the shares is exempt under
the federal securities laws and that the reliance of American Healthways on such
exemption is predicated in part on such holder's representations set forth
herein. Each holder represents that either (a) it is experienced in evaluating
companies such as American Healthways, has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to suffer the total loss of its
investment or (b) such holder is an "Accredited Investor" within the meaning of
Rule 501 of Regulation D under the Securities Act, as presently in effect. Each
holder further represents that it has had the opportunity to conduct due
diligence on American Healthways, to ask questions of and receive answers from
American Healthways concerning the terms and conditions of the offering and to
obtain additional information to such holder's satisfaction.
(i) All CareSteps Options shall have been exercised or
cancelled prior to the Closing Date.
(j) All shares of CareSteps Preferred Stock shall have been
converted into shares of CareSteps Common Stock prior to the Closing Date.
ARTICLE 8.
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the shareholders of CareSteps and/or
American Healthways, by the mutual consent of American Healthways and CareSteps.
8.2 TERMINATION BY EITHER AMERICAN HEALTHWAYS OR CARESTEPS. This
Agreement may be terminated and the Merger may be abandoned by action of the
Board of Directors of either American Healthways or CareSteps if a United States
federal or state court of competent jurisdiction or United States federal or
state governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable; provided, that the party seeking to terminate this
Agreement pursuant to this Section 8.2 shall have used all reasonable efforts to
remove such injunction, order or decree.
8.3 TERMINATION BY CARESTEPS. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the shareholders of CareSteps by action of the
Board of Directors of CareSteps, if (a) there has been a breach by American
Healthways or Merger Sub of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have a American
Healthways Material Adverse Effect, or (b) there has been a material breach of
any of the covenants or agreements set forth in this Agreement on the part of
American Healthways, which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by CareSteps to
American Healthways.
8.4 TERMINATION BY AMERICAN HEALTHWAYS. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by the shareholders of American Healthways by
action of the Board of Directors of American Healthways, if (a) there has been a
breach by CareSteps of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have an CareSteps
Material Adverse Effect, or (b) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of CareSteps,
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which breach is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by American Healthways to CareSteps.
8.5 EFFECT OF TERMINATION AND ABANDONMENT. Upon termination of this
Agreement pursuant to this Article, except for Sections 4.24, 5.8, 6.1(c) and
10.14, and this Section 8.5, which shall survive termination of this Agreement,
this Agreement shall be void and of no other effect, and there shall be no
liability by reason of this Agreement or the termination thereof on the part of
any party hereto (other than for breach of a covenant contained herein), or on
the part of the respective directors, officers, employees, agents or
shareholders of any of them.
8.6 EXTENSION; WAIVER. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 9.
INDEMNIFICATION; SURVIVAL OF CARESTEPS REPRESENTATIONS
AND WARRANTIES
9.1 INDEMNITY OBLIGATIONS OF THE CARESTEPS INDEMNIFYING SHAREHOLDERS.
Subject to the limitations provided in Section 9.6 below, each of the
shareholders of CareSteps who is a party to the Agreement, Acknowledgement and
Consent attached to this Agreement (the "CareSteps Indemnifying Shareholders")
hereby severally agrees to indemnify and hold American Healthways harmless from,
and to reimburse American Healthways for any American Healthways Indemnity
Claims (as that term is hereinafter defined) arising under the terms and
conditions of this Agreement. For purposes of this Agreement, the term "American
Healthways Indemnity Claim" shall mean any and all losses, damages,
deficiencies, liabilities, obligations, actions, claims, suits, proceedings,
demands, assessments, judgments, recoveries, fees, costs and expenses
(including, without limitation, all out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) of any nature whatsoever arising out of, based upon or resulting from
(i) any breach of any representation and warranty of CareSteps which is
contained in this Agreement or any Schedule or certificate delivered pursuant
hereto; or (ii) any breach or nonfulfillment of, or any failure to perform, any
of the covenants, agreements or undertakings of CareSteps which are contained in
or made pursuant to the terms and conditions of this Agreement.
9.2 INDEMNITY OBLIGATIONS OF AMERICAN HEALTHWAYS. Subject to the
limitations provided in Section 9.6 below, American Healthways hereby agrees to
indemnify and hold each holder of CareSteps Common Stock harmless from, and to
reimburse each holder of CareSteps Common Stock for any CareSteps Indemnity
Claims (as that term is hereinafter defined) arising under the terms and
conditions of this Agreement. For purposes of this Agreement, the term
"CareSteps Indemnity Claim" shall mean any and all losses, damages,
deficiencies, liabilities, obligations, actions, claims, suits, proceedings,
demands, assessments, judgments, recoveries, fees, costs and expenses
(including, without limitation, all out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) of any nature whatsoever arising out of, based upon or resulting from
(i) any breach of any representation and warranty of American Healthways which
is contained in this Agreement or any Schedule or certificate delivered pursuant
hereto; or (ii) any breach or nonfulfillment of, or any failure to perform, any
of the covenants, agreements or undertakings of American Healthways which are
contained in or made pursuant to the terms and conditions of this Agreement.
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9.3 APPOINTMENT OF REPRESENTATIVE. Each of the CareSteps Indemnifying
Shareholders, by executing the Agreement, Acknowledgement and Consent attached
to this Agreement, hereby appoints Xxxxxxx X. Xxxx, M.D. as such CareSteps
Indemnifying Shareholder's exclusive agent to act on such CareSteps Indemnifying
Shareholder's behalf with respect to any and all American Healthways Indemnity
Claims arising under this Agreement. In such representative capacity, Xxxxxxx X.
Xxxx, M.D., or any person who shall succeed Xxxxxxx X. Xxxx, M.D. in such
representative capacity is sometimes referred to in this Agreement as the
"Representative." The Representative shall take, and the CareSteps Indemnifying
Shareholders agree that the Representative shall take, any and all actions which
he believes are necessary or appropriate under this Agreement for and on behalf
of the CareSteps Indemnifying Shareholders, as fully as if the CareSteps
Indemnifying Shareholders were acting on their own behalf, including, without
limitation, defending all American Healthways Indemnity Claims, consenting to,
compromising or settling American Healthways Indemnity Claims, conducting
negotiations with American Healthways and its representatives regarding such
claims, taking any and all other actions specified in or contemplated by this
Agreement and engaging counsel, accountants or other representatives in
connection with the foregoing matters. American Healthways shall have the right
to rely upon all actions taken or omitted to be taken by the Representative
pursuant to this Agreement, all of which actions or omissions shall be legally
binding upon each of the CareSteps Indemnifying Shareholders.
9.4 NOTIFICATION OF CLAIMS. In the event of the occurrence of an event
which any party asserts constitutes either an American Healthways Indemnity
Claim or a CareSteps Indemnity Claim (collectively, an "Indemnity Claim"), the
asserting party shall provide the indemnifying party (or, in the case of an
American Healthways Indemnity Claim, the Representative) with prompt notice of
such event and shall otherwise make available to the indemnifying party (or the
Representative) all relevant information which is material to the claim and
which is in the possession of the asserting party. If such event involved the
claim of any third party (a "Third-Party Claim"), the indemnifying party (or the
Representative) shall have the right to elect to join in the defense,
settlement, adjustment or compromise of any such Third-Party Claim, and to
employ counsel to assist the indemnifying party (or the Representative) in
connection with the handling of such claim, at the sole expense of the asserting
party and no such claim shall be settled, adjusted or compromised, or the
defense thereof terminated, without the prior consent of the asserting party (or
the Representative) unless and until the asserting party (or the Representative)
shall have failed, after the lapse of a reasonable period of time, but in no
event more than 30 days after written notice to it of the Third-Party Claim, to
join in the defense, settlement, adjustment or compromise of the same. The
asserting party's failure give timely notice or to furnish the indemnifying
party (or the Representative) with any relevant data and documents in connection
with any Third-Party Claim shall not constitute a defense (in part or in whole)
to any claim for indemnification by the asserting party, except and only to the
extent that such failure shall result in any material prejudice to the
indemnifying party. If so desired by the indemnifying party, it may elect, at
its sole expense, to assume control of the defense, settlement, adjustment or
compromise of any Third-Party Claim, insofar as such claim relates to the
liability of the indemnifying party, provided that the indemnifying party shall
obtain the consent of the asserting party (or the Representative) before
entering into any settlement, adjustment or compromise of such claim, or ceasing
to defend against such claim, if as a result thereof, or pursuant thereto, there
would be imposed on the asserting party any material liability or obligation not
covered by the indemnity obligations of the indemnifying party under this
Agreement (including, without limitation, any injunctive relief or other
remedy). In connection with any Third-Party Claim, the asserting party, or the
indemnifying party (or the Representative) if it assumed the defense of such
claim pursuant to the preceding sentence, shall diligently pursue the defense of
such Third-Party Claim.
9.5 DURATION. Except as otherwise provided in this Agreement, all
representations, warranties, covenants and agreements of CareSteps and American
Healthways contained in or made pursuant to this Agreement, and the right of
American Healthways and the holders of CareSteps Common Stock to seek
indemnification with respect thereto, shall survive the Closing but, except in
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respect of any claims for indemnification as to which notice shall have been
given prior to the expiration date, shall expire on the one (1) year anniversary
of the Closing Date. To be duly given, any such notice shall set forth in
reasonable detail the nature of such claim, the provision(s) under this
Agreement pursuant to which such claim is being asserted and, to the extent
feasible, a reasonable estimate of the anticipated amount of such claim.
9.6 LIMITATIONS. Notwithstanding anything to the contrary herein, any
claim by an asserting party against any indemnifying party under this Agreement
shall be payable by the indemnifying party only in the event that the
accumulated amount of the claims in respect of such indemnifying party's
obligations to indemnify under this Agreement shall exceed the amount of
$100,000 in the aggregate (the "Indemnification Threshold"); provided, however,
that (i) at such time as the aggregate amount of claims in respect of the
indemnity obligations of such party shall exceed the Indemnification Threshold,
such party shall thereafter be liable on a dollar-for-dollar basis for the full
amount of all claims; (ii) the aggregate amount of American Healthways Indemnity
Claims for which indemnification may be sought against each Principal
Shareholder hereunder shall not exceed the aggregate amount of consideration
received by such Principal Shareholder pursuant to the terms of this Agreement;
(iii) the aggregate amount of CareSteps Indemnity Claims for which
indemnification may be sought against American Healthways hereunder shall not
exceed the aggregate amount of consideration received by the Principal
Shareholders hereunder; and (iv) with respect to any American Healthways
Indemnity Claims related to the representations contained in Section 4.9 hereof,
the Indemnification Threshold shall be $50,000. A CareSteps Indemnifying
Shareholder, at his, her or its sole option, may reimburse American Healthways
for any American Healthway Indemnity Claim by tendering shares of American
Healthways Common Stock issued to such CareSteps Indemnifying Shareholder
pursuant to the terms of this Agreement to American Healthways for redemption.
Such tendered shares shall be redeemed by American Healthways at the average
closing sale price of a share of American Healthways Common Stock as reported on
Nasdaq for the 10 trading days immediately preceding the day on which such
shares are tendered; provided, however, that the redemption price of such shares
shall not be less than the Average American Healthways Stock Price.
ARTICLE 10.
POST-CLOSING COVENANTS
American Healthways and the Principal Shareholders agree as follows
with respect to the period following the Closing Date:
10.1 GENERAL. In case at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party may
reasonably request.
10.2 COOPERATION ON PREPARATION OF CARESTEPS AUDITED FINANCIAL
STATEMENTS. The Principal Shareholders shall cooperate fully, as and to the
extent reasonably requested by the American Healthways, in connection with the
preparation of audited financial statements of CareSteps after the Closing Date.
Such cooperation shall include the retention and (upon American Healthways'
request) the provision of records and information which are reasonably relevant
to such financial statements and making themselves available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder.
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ARTICLE 11.
WAIVER OF PREFERENTIAL RETURN
American Healthways hereby waives, effective as of the Closing Date,
any and all rights to receive from CareSteps a preferential return with respect
to the CareSteps Common Stock held by American Healthways prior to Closing.
ARTICLE 12.
GENERAL PROVISIONS
12.1 PUBLICITY. Except as otherwise required by law or the rules of the
Nasdaq or the SEC (or as otherwise required by law in the opinion of counsel to
such party), as long as this Agreement is in effect, no party shall, or shall
permit any of its subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other parties, which
consent shall not be unreasonably withheld.
12.2 NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
If to American Healthways or Merger Sub: If to CareSteps:
Xxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxx, M.D.
President Chief Executive Officer
American Healthways, Inc. XxxxXxxxx.xxx, Inc.
0000 Xxxxx Xxxxx Xxxxxxx Xxxxx 000 X. Xxxx Xxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000 Xxxxx 000
Xxxxxx, Xxxxx 00000
Xxxxx X. Xxxxx X. Xxxx Lemon III
Bass, Xxxxx & Xxxx PLC Xxxxx Xxxxx LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000 0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000-0000 Xxxxxx, Xxxxx 00000
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
12.3 ASSIGNMENT, BINDING EFFECT; BENEFIT. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
12.4 ENTIRE AGREEMENT. This Agreement, the Exhibits, the CareSteps
Disclosure Letter, the American Healthways Disclosure Letter and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
12.5 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
shareholders of CareSteps and American Healthways, but after any such
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shareholder approval, no amendment shall be made which by law requires the
further approval of shareholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
12.6 GOVERNING LAW. The validity of this Agreement, the construction of
its terms and the determination of the rights and duties of the parties hereto
shall be governed by and construed in accordance with the laws of the United
States and those of the State of Tennessee applicable to contracts made and to
be performed wholly within such state.
12.7 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
12.8 HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
12.9 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
12.10 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
12.11 INCORPORATION OF EXHIBITS. The CareSteps Disclosure Letter, the
American Healthways Disclosure Letter and the Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
12.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
12.13 EXPENSES. Each party to this Agreement shall bear its own
expenses in connection with the Merger and the transactions contemplated hereby.
12.14 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
ATTEST: AMERICAN HEALTHWAYS, INC.
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
------------------------- ---------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
ATTEST: C-STEPS ACQUISITION COMPANY
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxx X. Xxxx
------------------------- ---------------------------------------
Name: Xxxxx X. Xxxx
-------------------------------------
Title: Vice President and Secretary
------------------------------------
ATTEST: XXXXXXXXX.XXX, INC.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxx
------------------------- ---------------------------------------
Name: Xxxxxxx X. Xxxx
-------------------------------------
Title: Chief Executive Officer
------------------------------------
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AGREEMENT, ACKNOWLEDGMENT AND CONSENT
The undersigned, being the CareSteps Indemnifying Shareholders, hereby
agree to indemnify American Healthways in accordance with, and subject to the
conditions of, Article 9 of this Agreement and, in connection therewith,
acknowledge and consent to the appointment of Xxxxxxx X. Xxxx, M.D. as the
Representative pursuant to the provisions thereof.
/s/ Xxxxxxx X. Xxxx, M.D.
--------------------------
Xxxxxxx X. Xxxx, M.D.
/s/ Xxxx Xxxxxxxx, M.D.
--------------------------
Xxxx Xxxxxxxx, M.D.
/s/ Xxxx Xxxxxxxxxx
--------------------------
Xxxx Xxxxxxxxxx
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