AGREEMENT AND PLAN OF MERGER
by and among
CIGNA CORPORATION
CHC ACQUISITION CORP.
and
HEALTHSOURCE, INC.
February 27, 1997
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer . . . . . . . . . . . . . . . . 1
Section 1.2 Company Actions . . . . . . . . . . . . . 3
Section 1.3 Directors . . . . . . . . . . . . . . . . 5
Section 1.4 The Merger . . . . . . . . . . . . . . . 7
Section 1.5 Effective Time . . . . . . . . . . . . . 7
Section 1.6 Closing . . . . . . . . . . . . . . . . . 7
Section 1.7 Directors and Officers of the Surviving
Corporation . . . . . . . . . . . . . . . 8
Section 1.8 Shareholders' Meeting . . . . . . . . . . 8
Section 1.9 Merger Without Meeting of Shareholders . 9
Section 1.10 Convertible Notes . . . . . . . . . . . . 9
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock . . . . . . . 10
Section 2.2 Exchange of Certificates . . . . . . . . 11
Section 2.3 Dissenting Shares . . . . . . . . . . . . 13
Section 2.4 Company Option Plans . . . . . . . . . . 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization . . . . . . . . . . . . . . 16
Section 3.2 Capitalization . . . . . . . . . . . . . 18
Section 3.3 Authorization; Validity of Agreement;
Company Action . . . . . . . . . . . . . 19
Section 3.4 Consents and Approvals; No Violations . . 20
Section 3.5 SEC Reports and Financial Statements . . 21
Section 3.6 No Undisclosed Liabilities . . . . . . . 22
Section 3.7 Absence of Certain Changes . . . . . . . 22
Section 3.8 Employee Benefit Plans; ERISA . . . . . . 23
Section 3.9 Litigation . . . . . . . . . . . . . . . 25
Section 3.10 No Default; Compliance with Applicable
Laws . . . . . . . . . . . . . . . . . . 25
Section 3.11 Taxes . . . . . . . . . . . . . . . . . . 25
Section 3.12 Real Property . . . . . . . . . . . . . . 27
Section 3.13 Intellectual Property . . . . . . . . . . 27
Section 3.14 Computer Software . . . . . . . . . . . . 27
Section 3.15 Information in Offer Documents . . . . . 28
Section 3.16 Brokers or Finders . . . . . . . . . . . 28
Section 3.17 Opinion of Financial Advisor . . . . . . 28
Section 3.18 Regulatory Statements . . . . . . . . . . 29
Section 3.19 Certain Contracts . . . . . . . . . . . . 29
Section 3.20 Investigation by the Company . . . . . . 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER
Section 4.1 Organization . . . . . . . . . . . . . . 30
Section 4.2 Authorization; Validity of Agreement;
Necessary Action . . . . . . . . . . . . 31
Section 4.3 Consents and Approvals; No Violations . . 31
Section 4.4 SEC Reports and Financial Statements . . 32
Section 4.5 Information in Offer Documents; Proxy
Statement . . . . . . . . . . . . . . . . 33
Section 4.6 Sufficient Funds . . . . . . . . . . . . 34
Section 4.7 Share Ownership . . . . . . . . . . . . . 34
Section 4.8 Purchaser's Operations . . . . . . . . . 34
Section 4.9 Brokers or Finders . . . . . . . . . . . 34
Section 4.10 Investigation by Parent . . . . . . . . . 34
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company . . . . 35
Section 5.2 Actions Regarding the Rights . . . . . . 37
Section 5.3 Access to Information . . . . . . . . . . 38
Section 5.4 Employee Benefits . . . . . . . . . . . . 38
Section 5.5 No Solicitation . . . . . . . . . . . . . 40
Section 5.6 Publicity . . . . . . . . . . . . . . . . 43
Section 5.7 Directors' and Officers' Insurance and
Indemnification . . . . . . . . . . . . . 43
Section 5.8 Approvals and Consents; Cooperation;
Notification . . . . . . . . . . . . . . 45
Section 5.9 Further Assurances . . . . . . . . . . . 46
Section 5.10 Taxes . . . . . . . . . . . . . . . . . . 47
Section 5.11 Compliance with Security Takeover
Disclosure Act . . . . . . . . . . . . . 47
Section 5.12 1996 Form 10-K . . . . . . . . . . . . . 48
Section 5.13 Shareholder Litigation . . . . . . . . . 48
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . 48
Section 6.2 Conditions to the Obligations of the
Company to Effect the Merger . . . . . . 49
Section 6.3 Conditions to the Obligations of Parent
and the Purchaser to Effect the Merger . 49
Section 6.4 Exception . . . . . . . . . . . . . . . . 50
ARTICLE VII
TERMINATION
Section 7.1 Termination . . . . . . . . . . . . . . . 50
Section 7.2 Effect of Termination . . . . . . . . . . 52
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment and Modification . . . . . . . 53
Section 8.2 Nonsurvival of Representations and
Warranties . . . . . . . . . . . . . . . 54
Section 8.3 Notices . . . . . . . . . . . . . . . . . 54
Section 8.4 Interpretation . . . . . . . . . . . . . 55
Section 8.5 Counterparts . . . . . . . . . . . . . . 56
Section 8.6 Entire Agreement; Third Party
Beneficiaries . . . . . . . . . . . . . . 56
Section 8.7 Severability . . . . . . . . . . . . . . 56
Section 8.8 Governing Law . . . . . . . . . . . . . . 57
Section 8.9 Specific Performance . . . . . . . . . . 57
Section 8.10 Assignment . . . . . . . . . . . . . . . 57
Section 8.11 Expenses . . . . . . . . . . . . . . . . 57
Section 8.12 Headings . . . . . . . . . . . . . . . . 57
Section 8.13 Waivers . . . . . . . . . . . . . . . . . 58
Section 8.14 Schedules . . . . . . . . . . . . . . . . 58
Annex A Conditions to the Offer
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of
February 27, 1997 (this "Agreement"), by and among CIGNA
Corporation, a Delaware corporation ("Parent"), CHC
Acquisition Corp., a New Hampshire corporation and a
wholly-owned, indirect subsidiary of Parent (the
"Purchaser"), and Healthsource, Inc., a New Hampshire
corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, the
Purchaser and the Company have approved, and deem it
advisable and in the best interests of their respective
shareholders to consummate, the acquisition of the
Company by Parent and the Purchaser upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the
foregoing and the representations, warranties, covenants
and agreements set forth herein, and other good and
valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) As promptly as
practicable (but in no event later than five business
days from the public announcement of the execution
hereof), the Purchaser shall commence (within the meaning
of Rule 14d-2 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) an offer (the "Offer")
to purchase for cash any and all of the issued and
outstanding shares of Common Stock, par value $.10 per
share (referred to herein as either the "Shares" or
"Company Common Stock"), of the Company (excluding the
related Common Stock Purchase Rights (the "Rights")
issued pursuant to the Rights Agreement between the
Company and The Bank of New York, dated as of July 29,
1996 (the "Rights Agreement") which will be redeemed
prior to the consummation of the Offer), at a price of
$21.75 per Share, net to the seller in cash (such price,
or such higher price per Share as may be paid in the
Offer, being referred to herein as the "Offer Price").
The Purchaser shall, on the terms and subject to the
prior satisfaction or waiver of the conditions of the
Offer (except that the Minimum Condition (as hereinafter
defined) may not be waived), accept for payment and pay
for Shares tendered as soon as it is legally permitted to
do so under applicable law. The obligations of the
Purchaser to accept for payment and to pay for any and
all Shares validly tendered on or prior to the expiration
of the Offer and not withdrawn shall be subject only to
there being validly tendered and not withdrawn prior to
the expiration of the Offer, that number of Shares which,
together with any Shares beneficially owned by Parent or
the Purchaser, represent at least a majority of the
Shares outstanding on a fully diluted basis (the "Minimum
Condition") and the other conditions set forth in Annex A
hereto. The Offer shall be made by means of an offer to
purchase (the "Offer to Purchase") containing the terms
set forth in this Agreement, the Minimum Condition and
the other conditions set forth in Annex A hereto. The
Purchaser shall not amend or waive the Minimum Condition
and shall not decrease the Offer Price or decrease the
number of Shares sought, or amend any other term or
condition of the Offer in any manner adverse to the
holders of the Shares or extend the expiration date of
the Offer without the prior written consent of the
Company (such consent to be authorized by the Board of
Directors of the Company or a duly authorized committee
thereof). Notwithstanding the foregoing, the Purchaser
shall, and Parent agrees to cause the Purchaser to,
extend the Offer from time to time until seven months
from execution of this Agreement (as such time may be
extended pursuant to Section 7.1(b)(i) hereof) if, and to
the extent that, at the initial expiration date of the
Offer, or any extension thereof, all conditions to the
Offer have not been satisfied or waived. In addition,
the Offer Price may be increased and the Offer may be
extended to the extent required by law in connection with
such increase in each case without the consent of the
Company.
(b) As soon as practicable on the date
the Offer is commenced, Parent and the Purchaser shall
file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer (together with
all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-1"). The Schedule
14D-1 will include, as exhibits, the Offer to Purchase
and a form of letter of transmittal and summary
advertisement (collectively, together with any amendments
and supplements thereto, the "Offer Documents"). The
Offer Documents will comply in all material respects with
the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders,
shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they
were made, not misleading, except that no representation
is made by Parent or the Purchaser with respect to
information supplied by the Company in writing for
inclusion in the Offer Documents. Each of Parent and the
Purchaser further agrees to take all steps necessary to
cause the Offer Documents to be filed with the SEC and to
be disseminated to holders of Shares, in each case as and
to the extent required by applicable federal securities
laws. Each of Parent and the Purchaser, on the one hand,
and the Company, on the other hand, agrees promptly to
correct any information provided by it for use in the
Offer Documents if and to the extent that it shall have
become false and misleading in any material respect and
the Purchaser further agrees to take all steps necessary
to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to holders of Shares,
in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel
shall be given a reasonable opportunity to review the
initial Schedule 14D-1 before it is filed with the SEC.
In addition, Parent and the Purchaser agree to provide
the Company and its counsel in writing with any comments
or other communications that Parent, the Purchaser or
their counsel may receive from time to time from the SEC
or its staff with respect to the Offer Documents promptly
after the receipt of such comments or other
communications.
Section 1.2 Company Actions.
(a) The Company hereby approves of and
consents to the Offer and represents that the Board of
Directors, at a meeting duly called and held, has (i)
approved this Agreement and the transactions contemplated
hereby, including the Offer and the Merger (as defined in
Section 1.4) (collectively, the "Transactions"), which
approvals constitute approval of this Agreement, the
Offer and the Merger for purposes of Section 293-A:11.01
of the New Hampshire Business Corporation Act (the
"NHBCA"), (ii) resolved to recommend that the
shareholders of the Company accept the Offer, tender
their Shares thereunder to the Purchaser and approve and
adopt this Agreement and the Merger; provided, that such
recommendation may be withdrawn, modified or amended only
as provided in Section 5.5(b) hereof, and (iii) approved
the redemption of the Rights prior to the consummation of
the Offer according to the provisions of the Rights
Agreement.
(b) As promptly as practicable following
the commencement of the Offer and in all events not later
than 10 business days following such commencement, the
Company shall file with the SEC a Solicitation/
Recommendation Statement on Schedule 14D-9 (together
with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9")
which shall, subject to the fiduciary duties of the
Company's directors under applicable law and to the
provisions of this Agreement, contain the recommendation
referred to in clause (ii) of Section 1.2(a) hereof. The
Schedule 14D-9 will comply in all material respects with
the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders,
shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they
were made, not misleading, except that no representation
is made by the Company with respect to information
supplied by Parent or the Purchaser in writing for
inclusion in the Offer Documents. The Company further
agrees to take all steps necessary to cause the Schedule
14D-9 to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Each of
the Company, on the one hand, and Parent and the
Purchaser, on the other hand, agrees promptly to correct
any information provided by it for use in the Schedule
14D-9 if and to the extent that it shall have become
false and misleading in any material respect and the
Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with
the SEC and to be disseminated to holders of the Shares,
in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be
given a reasonable opportunity to review the initial
Schedule 14D-9 before it is filed with the SEC. In
addition, the Company agrees to provide Parent, the
Purchaser and their counsel in writing with any comments
or other communications that the Company or its counsel
may receive from time to time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the
receipt of such comments or other communications.
(c) In connection with the Offer, the
Company will promptly furnish or cause to be furnished to
the Purchaser mailing labels, security position listings
and any available listing or computer file containing the
names and addresses of the record holders of the Shares
as of a recent date, and shall furnish the Purchaser with
such additional information (including updated lists of
holders of Shares and their addresses, mailing labels and
lists of security positions) and such other assistance as
the Purchaser or its agents may reasonably request in
communicating the Offer to the record and beneficial
shareholders of the Company. Except for such steps as
are necessary to disseminate the Offer Documents, Parent
and the Purchaser shall hold in confidence the
information contained in any of such labels and lists and
the additional information referred to in the preceding
sentence, will use such information only in connection
with the Offer, and, if this Agreement is terminated,
will upon request of the Company deliver or cause to be
delivered to the Company all copies of such information
then in its possession or the possession of its agents or
representatives.
Section 1.3 Directors.
(a) Promptly upon the purchase of and
payment for Shares by Parent or any of its subsidiaries
which represent at least a majority of the outstanding
shares of Company Common Stock (on a fully diluted
basis), Parent shall be entitled to designate such number
of directors, rounded up to the next whole number, on the
Board of Directors of the Company as is equal to the
product of the total number of directors on such Board
(giving effect to the directors designated by Parent
pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by
the Purchaser, Parent and any of their affiliates bears
to the total number of shares of Company Common Stock
then outstanding. The Company shall, upon request of the
Purchaser, use its best efforts promptly either to
increase the size of its Board of Directors (which,
pursuant to the Company's Articles of Incorporation, has
a maximum number of 15 directors) or, at the Company's
election, secure the resignations of such number of its
incumbent directors as is necessary to enable Parent's
designees to be so elected to the Company's Board, and
shall cause Parent's designees to be so elected.
Notwithstanding the foregoing, until the Effective Time
(as defined in Section 1.5 hereof), the Company shall
retain as members of its Board of Directors at least two
directors who are directors of the Company on the date
hereof (the "Company Designees"); provided, that
subsequent to the purchase of and payment for Shares
pursuant to the Offer, Parent shall always have its
designees represent at least a majority of the entire
Board of Directors. The Company's obligations under this
Section 1.3(a) shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. The
Company shall promptly take all actions required pursuant
to such Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under this Section 1.3(a), including
mailing to shareholders the information required by such
Section 14(f) and Rule 14f-1 as is necessary to enable
Parent's designees to be elected to the Company's Board
of Directors. Parent or the Purchaser will supply the
Company any information with respect to either of them
and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1.
(b) From and after the time, if any, that
Parent's designees constitute a majority of the Company's
Board of Directors, any amendment of this Agreement, any
termination of this Agreement by the Company, any
extension of time for performance of any of the
obligations of Parent or the Purchaser hereunder, any
waiver of any condition or any of the Company's rights
hereunder or other action by the Company hereunder may be
effected only by the action of a majority of the
directors of the Company then in office who were
directors of the Company on the date hereof, which action
shall be deemed to constitute the action of the full
Board of Directors; provided, that if there shall be no
such directors, such actions may be effected by unanimous
vote of the entire Board of Directors of the Company.
Section 1.4 The Merger. Subject to the terms
and conditions of this Agreement, at the Effective Time
(as defined in Section 1.5 hereof), the Company and the
Purchaser shall consummate a merger (the "Merger")
pursuant to which (a) the Purchaser shall be merged with
and into the Company and the separate corporate existence
of the Purchaser shall thereupon cease, (b) the Company
shall be the successor or surviving corporation in the
Merger (the "Surviving Corporation") and shall continue
to be governed by the laws of the State of New Hampshire,
and (c) the separate corporate existence of the Company
with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger.
Pursuant to the Merger, (x) the Articles of Incorporation
of the Company, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of
the Surviving Corporation until thereafter amended as
provided by law and such Articles of Incorporation, and
(y) the By-laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-laws of the
Surviving Corporation until thereafter amended as
provided by law, the Articles of Incorporation and such
By-laws. The Merger shall have the effects set forth in
the NHBCA.
Section 1.5 Effective Time. On the date of
the Closing (as defined in Section 1.6 hereof) (or on
such other date as the parties may agree), the parties
shall file such certificates of merger, articles of
merger or other appropriate documents (in any such case,
the "Certificates of Merger") executed in accordance with
the relevant provisions of the NHBCA, and shall make all
other filings, recordings and publications required by
the NHBCA with respect to the Merger. The Merger shall
become effective on the date specified in the
Certificates of Merger, which specified time shall be the
same in each Certificate of Merger (the time the Merger
becomes effective is hereinafter referred to as the
"Effective Time").
Section 1.6 Closing. The closing of the
Merger (the "Closing") will take place at 10:00 a.m. on a
date to be specified by the parties, which shall be no
later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI
hereof (the "Closing Date"), at the offices of O'Melveny
& Xxxxx LLP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, unless another date or place is agreed to in
writing by the parties hereto.
Section 1.7 Directors and Officers of the
Surviving Corporation. The directors of the Purchaser at
the Effective Time shall, from and after the Effective
Time, be the directors of the Surviving Corporation until
their successors shall have been duly elected or
appointed or qualified or until their earlier death,
resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and By-laws. The
officers of the Company at the Effective Time shall, from
and after the Effective Time, be the officers of the
Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until
their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of
Incorporation and By-laws.
Section 1.8 Shareholders' Meeting.
(a) If required by applicable law in
order to consummate the Merger, the Company, acting
through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of,
convene and hold a special meeting of its
shareholders (the "Special Meeting") as soon as
practicable following the acceptance for payment and
purchase of Shares by the Purchaser pursuant to the
Offer for the purpose of considering and taking
action upon this Agreement;
(ii) prepare and file with the SEC a
preliminary proxy or information statement relating
to the Merger and this Agreement and use its best
efforts (x) to obtain and furnish the information
required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any
comments made by the SEC with respect to the
preliminary proxy or information statement and cause
a definitive proxy or information statement (the
"Proxy Statement") to be mailed to its shareholders
and (y) to obtain the necessary approvals of the
Merger and this Agreement by its shareholders; and
(iii) subject to the fiduciary
obligations of the Board under applicable law as
advised by independent counsel, include in the Proxy
Statement the recommendation of the Board that
shareholders of the Company vote in favor of the
approval of the Merger and the adoption of this
Agreement.
(b) Parent agrees that it will provide
the Company with the information concerning Parent and
the Purchaser required to be included in the Proxy
Statement and will vote, or cause to be voted, all of the
Shares then owned by it, the Purchaser or any of its
other subsidiaries and affiliates in favor of the
approval of the Merger and the adoption of this
Agreement.
Section 1.9 Merger Without Meeting of
Shareholders. Notwithstanding Section 1.8 hereof, if
permitted by the NHBCA, in the event that Parent, the
Purchaser or any other subsidiary of Parent shall acquire
at least 90% of the outstanding shares of each class of
capital stock of the Company, pursuant to the Offer or
otherwise, the parties hereto agree to take all necessary
and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition,
without a meeting of shareholders of the Company.
Section 1.10 Convertible Notes. In accordance
with the terms of the Indenture, dated as of March 6,
1996 (the "Indenture"), between the Company, as issuer,
and The Bank of New York, as trustee (the "Trustee"),
with respect to the Company's 5% Convertible Subordinated
Notes due 2003 (the "Company Convertible Notes"), within
30 days following the acquisition by Purchaser of
beneficial ownership, directly or indirectly, of more
than 50% of the Shares, the Company shall, in accordance
with the Indenture, publish a notice in The Wall Street
Journal, notify the Trustee and give written notice to
each holder of the Company Convertible Notes, stating,
among other things, (i) that a Change of Control (as
defined in the Indenture) has occurred, (ii) that each
holder of the Company Convertible Notes has the right to
require the Company to repurchase such holder's Company
Convertible Notes at a purchase price in cash in an
amount equal to 101% of the principal amount of such
Company Convertible Notes, plus accrued and unpaid
interest thereon, if any, to the purchase date thereof
and (iii) the date on which such Company Convertible
Notes shall be purchased which shall be a business day no
later than 60 days from the date such notice is mailed.
Parent shall contribute to the Company an amount in cash
necessary to repurchase all such Company Convertible
Notes.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As
of the Effective Time, by virtue of the Merger and
without any action on the part of the holders of any
shares of Company Common Stock or common stock of the
Purchaser (the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued
and outstanding share of the Purchaser Common Stock shall
be converted into and become one fully paid and
nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Parent-Owned Stock.
Any shares of Company Common Stock owned by Parent, the
Purchaser or any other wholly owned Subsidiary (as
defined in Section 3.1 hereof) of Parent shall be
cancelled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and
outstanding share of Company Common Stock (other than
Shares to be cancelled in accordance with Section 2.1(b)
hereof and any Dissenting Shares (if applicable and as
defined in Section 2.3 hereof)), shall be converted into
the right to receive the Offer Price, payable to the
holder thereof, without interest (the "Merger
Consideration"), upon surrender of the certificate
formerly representing such share of Company Common Stock
in the manner provided in Section 2.2 hereof. All such
shares of Company Common Stock, when so converted, shall
no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares
shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in
accordance with Section 2.2 hereof, without interest, or
to perfect any rights of appraisal as a holder of
Dissenting Shares (as hereinafter defined) that such
holder may have pursuant to Section 293-A:13.02 of the
NHBCA.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate
a bank or trust company reasonably acceptable to the
Company to act as agent for the holders of shares of
Company Common Stock in connection with the Merger (the
"Paying Agent") to receive the funds to which holders of
shares of Company Common Stock shall become entitled
pursuant to Section 2.1(c) hereof. Prior to the
Effective Time, Parent shall take all steps necessary to
deposit or cause to be deposited with the Paying Agent
such funds for timely payment hereunder. Such funds
shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation.
(b) Exchange Procedures. As soon as
reasonably practicable after the Effective Time but in no
event more than three business days thereafter, the
Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to
the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates"), whose shares
were converted pursuant to Section 2.1 hereto into the
right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in such form and have such
other provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of
the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to
such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration for
each share of Company Common Stock formerly represented
by such Certificate and the Certificate so surrendered
shall forthwith be cancelled. If payment of the Merger
Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that
the person requesting such payment shall have paid any
transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered
or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid
or is not applicable. Until surrendered as contemplated
by this Section 2.2, each Certificate shall be deemed at
any time after the Effective Time to represent only the
right to receive the Merger Consideration in cash as
contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership
Rights in Company Common Stock. At the Effective Time,
the stock transfer books of the Company shall be closed
and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the
records of the Company. From and after the Effective
Time, the holders of Certificates evidencing ownership of
shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any
rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the
Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be
cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability.
At any time following one year after the Effective Time,
the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds (including
any interest received with respect thereto) which had
been made available to the Paying Agent and which have
not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable
upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, neither
the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar
law.
Section 2.3 Dissenting Shares.
Notwithstanding anything in this Agreement to the
contrary, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in
favor of the Merger or consented thereto in writing and
who has demanded appraisal for such Shares in accordance
with the NHBCA ("Dissenting Shares") shall not be
converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or
withdraws or otherwise loses his or her right to
appraisal. A holder of Dissenting Shares shall be
entitled to receive payment of the appraised value of
such Shares held by him or her in accordance with the
provisions of Section 293-A:13.25 of the NHBCA, unless,
after the Effective Time, such holder fails to perfect or
withdraws or loses his or her right to appraisal, in
which case such Shares shall be treated as if they had
been converted as of the Effective Time into a right to
receive the Merger Consideration, without interest
thereon.
Section 2.4 Company Option Plans. (a) As
soon as practicable following the date of this Agreement,
the Company shall take such actions as may be required to
effect the following:
(i) adjust the terms of all outstanding
options to purchase Company Common Stock held
by all current and former employees and
directors of the Company ("Company Employee
Stock Options") and the terms of each
applicable stock option plan maintained by the
Company ("Company Employee Stock Plans"), to
provide that at the Effective Time, each
individual Company Employee Stock Option
outstanding immediately prior to the Effective
Time shall be fully vested and exercisable;
(ii) further adjust the terms of each
Company Employee Stock Option held by any
person who immediately prior to the Effective
Time served as a member of the Board of
Directors of the Company (and who was not also
a full-time employee of the Company) to provide
that such Company Employee Stock Option shall
remain exercisable for a period ending on the
first to occur of (A) the third anniversary of
the Effective Time and (B) the original
expiration date of such option, determined
without regard to any termination (for any
reason whatsoever) from service as a member of
the Board of Directors of the Company; and
(iii) make such other changes to the
Company Employee Stock Plans and Company
Employee Stock Options as it deems appropriate
to give effect to the Merger (subject to the
approval of Parent, which shall not be
unreasonably withheld).
(b) As soon as practicable following the
date of this Agreement, Parent shall take such actions as
may be required to adopt a plan ("Parent Stock Option
Plan") under which Parent will grant options ("Substitute
Options") to purchase shares of Parent common stock, par
value $1.00 per share ("Parent Common Stock") to replace
any Company Employee Stock Options that are outstanding
at the Effective Time, which plan will include, but not
be limited to, the terms and conditions described in
Section 2.4(c) below.
(c) Pursuant to the Parent Stock Option
Plan each current and former director and employee of the
Company who holds one or more unexercised Company
Employee Stock Options at the Effective Time ("Eligible
Grantee") shall, subject to the terms and conditions set
forth below, automatically receive a grant as of the
Effective Time of one or more Substitute Options in
replacement of his or her Company Employee Stock Options.
Each Substitute Option granted to an Eligible Grantee
pursuant to this Section 2.4(b) shall:
(i) be for a number of shares of Parent
Common Stock equal to the number of shares of
Company Common Stock subject to the Company Employee
Stock Option, multiplied by the Option Ratio (as
defined below), rounded down to the next whole
number of shares;
(ii) be for a per share exercise price
equal to the exercise price for the shares of
Company Common Stock otherwise purchasable pursuant
to such Company Employee Stock Option divided by the
Option Ratio, rounded to the nearest hundredth of a
cent;
(iii) be immediately exercisable upon the
Eligible Grantee's execution of the Option Agreement
(referred to below) and, except as provided in
Section 2.4(a)(ii) with respect to current and
former directors of the Company (and regardless of
the actual date of termination of employment of the
Eligible Grantee with the Company, Parent or any
subsidiary of the Parent), shall expire no earlier
than the date the Company Employee Stock Option
would expire if the Eligible Grantee would have
remained continuously employed by the Company until
such date; and
(iv) otherwise be subject to
substantially the same terms and conditions as
applicable to the Company Employee Stock Option.
For purposes of this Section 2.4, "Option Ratio" shall
mean the Offer Price divided by the average closing price
per share of Parent Common Stock on the New York Stock
Exchange for the five consecutive trading days ending
immediately prior to the date of this Agreement.
(d) As soon as practicable after the Effective
Time, Parent shall deliver to the holders of Company
Employee Stock Options, appropriate notices setting forth
such holders' rights pursuant to the Parent Stock Option
Plan, and the Option Agreements (based upon a form
reasonably satisfactory to the Company, such form to be
delivered to the Company at least 10 days prior to the
purchase of any shares pursuant to the Offer), evidencing
the grants of such Substitute Options and the provisions
of this Section 2.4. Execution of the Option Agreement
by Eligible Grantee shall result in the replacement of
his or her Company Employee Stock Options with Substitute
Options as described above and immediate cancellation of
all of the Eligible Grantee's rights under the Company
Employee Stock Options.
(e) Parent shall take all corporate
action necessary to reserve for issuance a sufficient
number of shares of Parent Common Stock for delivery upon
exercise of the Substitute Options issued in accordance
with this Section 2.4. At the Effective Time, Parent
shall file a registration statement on Form S-8 (or any
successor or other appropriate form) with the SEC with
respect to the shares of Parent Common Stock subject to
such Substitute Options and shall use its best efforts to
maintain the effectiveness of such registration statement
or registration statements (and maintain the current
status of the prospectus or prospectuses contained
therein) for so long as such Substitute Options remain
outstanding. With respect to those individuals who
subsequent to the Merger are subject to the reporting
requirements under Section 16(a) of the Exchange Act with
respect to Parent, where applicable, Parent shall
administer the Parent Stock Plan assumed pursuant to this
Section 2.4 in a manner that complies with Rule 16b-3
promulgated under the Exchange Act to the extent the
applicable Company Stock Plan complied with such rule
prior to the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Parent and
Purchaser in a letter delivered to it at or prior to the
execution hereof (the "Company Disclosure Letter"), the
Company represents and warrants to Parent and Purchaser
as follows:
Section 3.1 Organization. Each of the Company
and its Subsidiaries (as hereinafter defined) is a
corporation or other entity duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has
all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business
as it is now being conducted, except where failure to be
so existing and in good standing or to have such power
and authority would not have a Company Material Adverse
Effect (as hereinafter defined). Each of the Company and
its Subsidiaries is duly qualified or licensed to do
business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business
conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly
qualified, licensed and in good standing or to be so
qualified or licensed would not have a Company Material
Adverse Effect. The Company has heretofore delivered to
Parent a complete and correct copy of each of its
Articles of Incorporation and By-Laws, as currently in
effect, and has heretofore made available to Parent a
complete and correct copy of the Articles of
Incorporation and By-Laws of each of its Subsidiaries, as
currently in effect. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any
corporation, partnership or other entity or organization,
whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general
partner (excluding such partnerships where such party or
any Subsidiary of such party do not have a majority of
the voting interest in such partnership) or (ii) at least
a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar
functions with respect to such corporation or other
organization is directly or indirectly owned or
controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its
Subsidiaries. As used in this Agreement, "Company
Material Adverse Effect" means only (I) any adverse
change in, or effect on, the business, financial
condition or operations (excluding results of operations
and effects of net income) of the Company and its
Subsidiaries, taken as a whole, that individually or in
the aggregate, exceeds, or is reasonably likely to
exceed, $67.5 million, or (II) the net income of the
Company and its Subsidiaries (not taking into account any
(A) gains or losses resulting from sales or other
dispositions of assets by the Company or any of its
Subsidiaries (including, without limitation, gains or
losses resulting from related severance costs) effected
with the prior written consent of Parent (which consent
will not be unreasonably withheld), and (B) losses
resulting from the costs related to this Agreement and
the transactions contemplated hereby), determined in
accordance with United States generally accepted
accounting principles ("GAAP"), from January 1, 1997
through the last full month of operations for which
financial information is available prior to the
consummation of the Offer being less, on a cumulative
basis, than the Targeted Income (as defined below) by an
amount in excess of the Allowed Shortfall (as defined
below); provided, however, that, in the case of either of
(I) or (II) above, the effects of changes that are
generally applicable to (i) the health care or HMO
industries, (ii) the United States economy or (iii) the
United States securities markets shall be excluded from
such determination; and provided, further, that any
adverse effect on the Company and its Subsidiaries
resulting from the execution of this Agreement and the
announcement of this Agreement and the transactions
contemplated hereby and any change in value of the
Company's marketable securities shall also be excluded
from such determination. In addition to the foregoing,
the determination of the dollar value or impact of any
change or event pursuant to the preceding sentence shall
be based solely on the actual dollar value of such change
or effect, on a dollar-for-dollar basis, and shall not
take into account (i) any multiplier valuation,
including, without limitation, any multiple based on
earnings or other financial indicia or the Offer Price or
(ii) any consequential damages or other consequential
valuation. For purposes hereof, (x) "Targeted Income"
shall mean, for any period, the cumulative monthly net
income from January 1, 1997 set forth on Schedule 3.1
hereto, and (y) "Allowed Shortfall" shall mean, for the
same period, $5 million of net income per month, on a
cumulative basis, plus an aggregate of an additional $10
million of net income. For purposes of considering
whether a "Company Material Adverse Effect" has occurred,
(A) any adjustment of reserves for hospital provider
contracts receivables on the Company's balance sheet as
of December 31, 1996 shall be counted only in clause (I)
above, and (B) any new reserves for hospital provider
contracts receivables established for the period after
December 31, 1996 shall be counted only in clause (II)
above, unless such new reserves are required to be
restated on the Company's balance sheet as of December
31, 1996 under GAAP, in which case such new reserves
shall be counted only in clause (I) above.
Section 3.2 Capitalization. (a) As of the
date hereof, the authorized capital stock of the Company
consists of 800,000,000 shares of Company Common Stock
and 10,000,000 shares of preferred stock, par value $.10
per share (the Company Preferred Stock ). As of January
31, 1997, (i) 63,795,517 shares of Company Common Stock
were issued and outstanding, (ii) 5,262,600 shares of
Company Common Stock were reserved for issuance pursuant
to the conversion of the Company Convertible Notes, (iii)
shares of Company Common Stock issuable pursuant to the
Rights Agreement were reserved for issuance in connection
with the Rights, (iv) no shares of Company Common Stock
were issued and held in the treasury of the Company, and
(v) there were no shares of Preferred Stock issued and
outstanding. Since January 31, 1997, no additional
shares of capital stock have been issued except shares of
Company Common Stock and options therefor issued pursuant
to the Company's stock option and employee stock purchase
plans, pension plans and other similar employee benefit
plans (the "Company Stock Plans"), which, upon exercise
of all such options as of such date (whether or not
vested), would not exceed 7,545,000 shares of Company
Common Stock in the aggregate. Since January 31, 1997,
the Company has issued only options to acquire 1,474,100
shares of Company Common Stock. All the outstanding
shares of the Company s capital stock are duly
authorized, validly issued, fully paid, non-assessable
and free of preemptive rights. Except as disclosed in
Section 3.2(a) of the Company Disclosure Letter and,
except for the Company Convertible Notes, the Company
Stock Plans and the Rights Agreement, as of the date
hereof, there are no existing (i) options, warrants,
calls, subscriptions or other rights, convertible
securities, agreements or commitments of any character
obligating the Company or any of its Subsidiaries to
issue, transfer or sell any shares of capital stock or
other equity interest in, the Company or any of its
Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, (ii)
contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire
any capital stock of the Company or any of its
Subsidiaries of the Company or (iii) voting trusts or
similar agreements to which the Company is a party with
respect to the voting of the capital stock of the
Company.
(b) Except as disclosed in Section 3.2(b)
of the Company Disclosure Letter, all of the outstanding
shares of capital stock (or equivalent equity interests
of entities other than corporations) of each of the
Company s Subsidiaries are owned of record and
beneficially, directly or indirectly, by the Company.
Section 3.3 Authorization; Validity of
Agreement; Company Action. The Company has full
corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the necessary
approval of its shareholders, to consummate the
transactions contemplated hereby. The execution,
delivery and performance by the Company of this
Agreement, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by its
Board of Directors and, except for those actions
contemplated by Section 1.2(a) hereof and obtaining the
approval of its shareholders as contemplated by Section
1.8 hereof, no other corporate action on the part of the
Company is necessary to authorize the execution and
delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and
delivered by the Company and, subject to approval and
adoption of this Agreement by the Company's shareholders
(and assuming due and valid authorization, execution and
delivery hereof by Parent and the Purchaser) is a valid
and binding obligation of the Company enforceable against
the Company in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors'
rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding
therefor may be brought.
Section 3.4 Consents and Approvals; No
Violations. Except as disclosed in Section 3.4 of the
Company Disclosure Letter and except for (a) filings
pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (b) applicable
requirements under the Exchange Act, (c) the filing of
the Certificates of Merger, (d) applicable requirements
under corporation or "blue sky" laws of various states,
(e) approvals or filings under various state and federal
laws, rules and regulations governing insurance holding
and operating companies, health maintenance
organizations, health care services plans, third party
administrators, preferred provider plans, providers of
utilization review services, or other managed health care
organizations, including laws, rules and regulations with
respect to the administration of Medicaid and Medicare
(the "Insurance Regulatory Approvals") or (f) matters
specifically described in this Agreement, neither the
execution, delivery or performance of this Agreement by
the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) violate any
provision of the Articles of Incorporation or By-Laws of
the Company or any of its Subsidiaries, (ii) result in a
violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture (other
than the Indenture), lease, license, contract, agreement
or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound
and which has been filed as an exhibit to the Company SEC
Documents (as defined in Section 3.5 hereof) (the
"Material Agreements"), (iii) violate any order, writ,
judgment, injunction, decree, law, statute, rule or
regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, or
(iv) require on the part of the Company any filing or
registration with, notification to, or authorization,
consent or approval of, any court, legislative, executive
or regulatory authority or agency (a "Governmental
Entity"); except in the case of clauses (ii), (iii) or
(iv) for such violations, breaches or defaults which, or
filings, registrations, notifications, authorizations,
consents or approvals the failure of which to obtain, (A)
would not have a Company Material Adverse Effect and
would not materially adversely affect the ability of the
Company to consummate the transactions contemplated by
this Agreement, or (B) become applicable as a result of
the business or activities in which Parent or Purchaser
is or proposes to be engaged or as a result of any acts
or omissions by, or the status of any facts pertaining
to, Parent or Purchaser.
Section 3.5 SEC Reports and Financial
Statements. The Company has filed all reports required to
be filed by it with the SEC pursuant to the Exchange Act
and the Securities Act of 1933, as amended (the
"Securities Act"), since January 1, 1994 (as such
documents have been amended since the date of their
filing, collectively, the "Company SEC Documents"). The
Company SEC Documents, as of their respective filing
dates, or if amended, as of the date of the last such
amendment, did not contain any untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary in order to
make the statements therein, in light of the
circumstances under which they were made, not misleading.
The Company has delivered to Parent or the Purchaser the
audited consolidated balance sheet (including the related
notes) of the Company and its Subsidiaries as of December
31, 1996 and the audited consolidated statements of
operations and cash flow of the Company and its
Subsidiaries for the period ended December 31, 1996
(collectively, the "1996 Financial Statements"). Each of
the consolidated balance sheets (including the related
notes) included in the Company SEC Documents and the 1996
Financial Statements fairly presents in all material
respects the financial position of the Company and its
consolidated Subsidiaries as of the respective dates
thereof, and the other related statements (including the
related notes) included in the Company SEC Documents and
the 1996 Financial Statements fairly present in all
material respects the results of operations and cash
flows of the Company and its consolidated Subsidiaries
for the respective periods or as of the respective dates
set forth therein. Each of the consolidated balance
sheets and statements of operations and cash flow
(including the related notes) included in the Company SEC
Documents and the 1996 Financial Statements has been
prepared in all material respects in accordance with GAAP
applied on a consistent basis during the periods
involved, except as otherwise noted therein and subject,
in the case of unaudited interim financial statements, to
normal year-end adjustments.
Section 3.6 No Undisclosed Liabilities.
Except (a) for liabilities and obligations incurred in
the ordinary course of business since December 31, 1996,
(b) for liabilities and obligations disclosed in the
Company SEC Documents or the 1996 Financial Statements,
(c) for liabilities and obligations incurred in
connection with the Offer and the Merger or otherwise as
contemplated by this Agreement and (d) as disclosed in
Section 3.6 of the Company Disclosure Letter, since
December 31, 1996, neither the Company nor any of its
Subsidiaries has incurred any material liabilities or
obligations that would be required to be reflected or
reserved against in a consolidated balance sheet of the
Company and its consolidated Subsidiaries prepared in
accordance with GAAP as applied in preparing the
consolidated balance sheet of the Company and its
consolidated Subsidiaries as of December 31, 1996.
Section 3.7 Absence of Certain Changes.
Except as (a) disclosed in the Company SEC Documents or
the 1996 Financial Statements, (b) disclosed in Section
3.7 of the Company Disclosure Letter or (c) contemplated
by this Agreement, since December 31, 1996, the Company
has not (i) suffered any change constituting a Company
Material Adverse Effect; (ii) amended its Articles of
Incorporation or By-laws; (iii) split, combined or
reclassified the Company Common Stock or any capital
stock of any of the Subsidiaries of the Company; (iv)
declared or set aside or paid any dividend or other
distribution with respect to the Company Common Stock
(other than the redemption of the Rights); or (v)
materially changed the Company's accounting methods,
except as required by GAAP or applicable law.
Section 3.8 Employee Benefit Plans; ERISA.
(a) Section 3.8 of the Company Disclosure
Letter sets forth a list of all material employee benefit
plans, (including but not limited to plans described in
section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), maintained by the
Company or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with
the Company would be deemed a "single employer" within
the meaning of section 4001(b)(15) of ERISA ("Benefit
Plans") and all material employment and severance
agreements with employees of the Company ("Employee
Agreements"). True and complete copies of all Employee
Agreements, including all amendments to date, have been
made available to Parent by the Company.
(b) Except as set forth in Section 3.8 of
the Company Disclosure Schedule, with respect to each
Benefit Plan: (i) if intended to qualify under section
401(a) of the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder (the
"Code"), such plan has received a determination letter
from the Internal Revenue Service stating that it so
qualifies and that its trust is exempt from taxation
under section 501(a) of the Code and nothing has occurred
to the best knowledge of the Company since the date of
such determination that could materially adversely affect
such qualification or exempt status; (ii) such plan has
been administered in all material respects in accordance
with its terms and applicable law; (iii) no breaches of
fiduciary duty have occurred which might reasonably be
expected to give rise to material liability on the part
of the Company; (iv) no disputes are pending, or, to the
knowledge of the Company, threatened that give rise to or
might reasonably be expected to give rise to material
liability on the part of the Company; (v) no prohibited
transaction (within the meaning of Section 406 of ERISA)
has occurred that give rise to or might reasonably be
expected to give rise to material liability on the part
of the Company; and (vi) all contributions required to be
made to such plan as of the date hereof (taking into
account any extensions for the making of such
contributions) have been made in full.
(c) No Benefit Plan is a "multiemployer
pension plan," as defined in section 3(37) of ERISA, nor
is any Benefit Plan a plan described in section 4063(a)
of ERISA.
(d) No Benefit Plan has incurred an
accumulated funding deficiency, as defined in section 302
of ERISA or section 412 of the Code, whether or not
waived.
(e) With respect to each Benefit Plan
that is a "welfare plan" (as defined in section 3(1) of
ERISA), no such plan provides medical or death benefits
with respect to current or former employees of the
Company or any of its Subsidiaries beyond their
termination of employment (other than to the extent
required by applicable law).
(f) Except as set forth in the Disclosure
Schedule, no material liability has been or is expected
to be incurred by the Company or any ERISA Affiliate
(either directly or indirectly, including as a result of
an indemnification obligation or any joint and several
liability obligations) under or pursuant to Title I or IV
of ERISA or the penalty or the excise tax or joint and
several liability provisions of the Code, relating to its
or their employee benefit plans, and no event,
transaction or condition has occurred or exists that have
resulted in or would reasonably be expected to result in
any such liability to Parent, the Purchaser, the Company
or any ERISA Affiliate or any employee benefit plan of
the Company or any ERISA Affiliate.
(g) As of the last valuation date prior
to the date hereof, the market value of assets under each
Benefit Plan which is an Employee Pension Benefit Plan
under Section 3(2) of ERISA (other than any multiemployer
plan) is less than the present value of all vested and
nonvested liabilities thereunder determined in accordance
with PBGC methods, factors, and assumptions applicable to
an Employee Pension Benefit Plan terminating on the date
for determination, by an amount no greater than $100,000.
Section 3.9 Litigation. Except as disclosed in
Section 3.9 of the Company Disclosure Letter or as
disclosed in the Company SEC Documents, there is no
action, suit, proceeding (other than any action, suit or
proceeding resulting from or arising out of this
Agreement or the transactions contemplated hereby) or, to
the best knowledge of the Company, audit or investigation
pending or, to the best knowledge of the Company, action,
suit, proceeding, audit or investigation threatened,
involving the Company or any of its Subsidiaries, by or
before any court, governmental or regulatory authority or
by any third party that would have a Company Material
Adverse Effect.
Section 3.10 No Default; Compliance with
Applicable Laws. The business of the Company and each of
its Subsidiaries is not in default or violation of any
term, condition or provision of (i) its respective
articles of incorporation or by-laws or similar
organizational documents, (ii) any Material Agreement or
(iii) any statute, law, rule, regulation, judgment,
decree, order, arbitration award, concession, grant,
franchise, permit or license or other governmental
authorization or approval applicable to the Company or
any of its Subsidiaries, including, without limitation,
laws, rules and regulations relating to the environment,
insurance companies, health maintenance organizations,
Medicare, Medicaid, third-party administrators,
occupational health and safety, employee benefits, wages,
workplace safety, equal employment opportunity and race,
religious or sex discrimination, excluding from the
foregoing clauses (i), (ii) and (iii), defaults or
violations which would not have a Company Material
Adverse Effect or which become applicable as a result of
the business or activities in which Parent or the
Purchaser is or proposes to be engaged or as a result of
any acts or omissions by, or the status of any facts
pertaining to, Parent or Purchaser.
Section 3.11 Taxes. (a) Except as disclosed
in Section 3.11 of the Company Disclosure Letter, the
Company and each of its Subsidiaries has (i) timely filed
all federal, state, local and foreign tax returns
required to be filed by any of them for tax years ended
prior to the date of this Agreement or requests for
extensions have been timely filed and any such request
shall have been granted and not expired and all such
returns are true, correct and complete, (ii) paid or
accrued (in accordance with GAAP) all material taxes
other than such taxes as are being contested in good
faith by the Company or its Subsidiaries, and (iii)
properly accrued (in accordance with GAAP) in all
respects all such taxes for such periods subsequent to
the periods covered by such returns, except in the case
of the foregoing clauses (i), (ii) and (iii) where any
such failure would not have a Company Material Adverse
Effect.
(b) Except as disclosed in Section 3.11
of the Company Disclosure Letter, there are no ongoing
or, to the best knowledge of the Company, threatened, in
writing, federal, state, local or foreign audits or
examinations of any Tax Return of the Company or its
Subsidiaries, except where any such audit or examination
would not have a Company Material Adverse Effect.
(c) Except as disclosed in Section 3.11
of the Company Disclosure Letter, there are no
outstanding written requests, agreements, consents or
waivers to extend the statutory period of limitations
applicable to the assessment of any material Taxes or
deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either
the Company or any of its Subsidiaries with respect to
any Taxes is currently in force.
(d) Except as disclosed in Section 3.11
of the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries is a party to any agreement
providing for the allocation or sharing of Taxes.
(e) Except as disclosed in Section 3.11
of the Company Disclosure Letter, there are no material
liens for Taxes upon the assets of the Company or any of
its Subsidiaries which are not provided for in the
financial statements included in the SEC Reports or the
1996 Financial Statements, except liens for Taxes not yet
due and payable.
(f) "Taxes" shall mean any and all taxes,
charges, fees, levies or other assessments, including,
without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social
security, occupation, use, service, service use, value
added, license, net worth, payroll, franchise, transfer
and recording taxes, fees and charges, imposed by the
United States Internal Revenue Service or any taxing
authority (whether domestic or foreign including, without
limitation, any state, local or foreign government or any
subdivision or taxing agency thereof (including a United
States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and
such term shall include any interest, penalties or
additional amounts attributable to, or imposed upon, or
with respect to, any such taxes, charges, fees, levies or
other assessments. "Tax Return" shall mean any report,
return, document, declaration or other information or
filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes.
Section 3.12 Real Property. The Company and
the Subsidiaries, as the case may be, have sufficient
title, leaseholds or rights to real property to conduct
their respective businesses as currently conducted in all
material respects.
Section 3.13 Intellectual Property. Except as
disclosed in Section 3.13 of the Company Disclosure
Letter or as disclosed in the Company SEC Documents, and
except for such claims, which individually or in the
aggregate, would not have a Company Material Adverse
Effect, there are no pending or threatened claims of
which the Company or its Subsidiaries have been given
written notice, by any person against their use of any
material trademarks, trade names, service marks, service
names, xxxx registrations, logos, assumed names and
copyright registrations, patents and all applications
therefor which are owned by the Company or its
Subsidiaries and used in their respective operations as
currently conducted (collectively, the Intellectual
Property"). The Company and its Subsidiaries have such
ownership of or such rights by license, lease or other
agreement to the Intellectual Property as are necessary
to permit them to conduct their respective operations as
currently conducted, except where the failure to have
such rights would not have a Company Material Adverse
Effect.
Section 3.14 Computer Software. The Company
and its Subsidiaries have such title or such rights by
license, lease or other agreement to the computer
software programs (other than off-the-shelf software)
which are owned, licensed, leased or otherwise used by
the Company and its Subsidiaries and which are material
to the conduct of their respective operations as
currently conducted except where the failure to have such
rights would not have a Company Material Adverse Effect.
Section 3.15 Information in Offer Documents.
None of the information supplied or to be supplied by the
Company, or any of their officers, directors, employees,
representatives or agents for inclusion or incorporation
by reference in the Offer Documents or the Schedule 14D-
9, including any amendments or supplements thereto, will
at the respective times the Offer Documents and the
Schedule 14D-9 are filed with the SEC or first published,
sent or given to the Company's shareholders, contain any
statement which, at such time and in light of the
circumstances under which it is made, is false or
misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the
statements therein not false or misleading.
Notwithstanding the foregoing, the Company does not make
any representation or warranty with respect to the
information that has been supplied by Parent or the
Purchaser or their officers, directors, employees,
representatives or agents for inclusion or incorporation
by reference in any of the foregoing documents. The
Schedule 14D-9 and any amendments or supplements thereto
will comply in all material respects with the applicable
provisions of the Exchange Act and the rules and
regulations thereunder.
Section 3.16 Brokers or Finders. The Company
represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement, except Bear,
Xxxxxxx & Co. Inc. ("Bear, Xxxxxxx"), whose fees and
expenses will be paid by the Company in accordance with
the Company's agreement with such firm, a true and
complete copy of which has heretofore been furnished to
Parent or the Purchaser.
Section 3.17 Opinion of Financial Advisor.
The Company has received the opinion of Bear, Xxxxxxx to
the effect that, as of the date hereof, the Offer and the
Merger are fair, from a financial point of view, to the
shareholders of the Company.
Section 3.18 Regulatory Statements. The
annual and quarterly statements described in Section 3.18
of the Company Disclosure Letter and the statutory
balance sheets and income statements included therein
present fairly the statutory financial condition and
results of operations of the Company and/or its
Subsidiaries as of the dates and for the periods
indicated therein and have been prepared in accordance
with the accounting principles or practices set forth in
applicable state laws and regulations or prescribed or
permitted by the relevant state regulatory body
consistently applied throughout the periods indicated,
except as expressly set forth therein and except where
the failure of such statements to so present fairly or to
have been so prepared would not have a Company Material
Adverse Effect.
Section 3.19 Certain Contracts. Except as set
forth in Section 3.19 of the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries is a
party to any contract which by its terms expressly
prohibits or limits its ability, to an extent material to
the business of the Company and its Subsidiaries taken as
a whole, to engage in any line of business, compete with
any person or expand the nature or geographic scope of
its business.
Section 3.20 Investigation by the Company. In
entering into this Agreement, the Company:
(a) acknowledges that none of Parent, the
Purchaser, their Subsidiaries or any of their respective
directors, officers, employees, affiliates, agents,
advisors or representatives makes any representation or
warranty, either express or implied, as to the accuracy
or completeness of any of the information provided or
made available to the Company or their agents or
representatives, and
(b) agrees, to the fullest extent
permitted by law, that none of Parent, the Purchaser,
their Subsidiaries or any of their respective directors,
officers, employees, shareholders, affiliates, agents,
advisors or representatives shall have any liability or
responsibility whatsoever to the Company on any basis
(including, without limitation, in contract or tort,
under federal or state securities laws or otherwise)
based upon any information provided or made available, or
statements made, to the Company,
except that the foregoing limitations shall not (a) apply
to Parent and the Purchaser to the extent Parent and the
Purchaser makes the specific representations and
warranties set forth in Article IV of this Agreement, but
always subject to the limitations and restrictions
contained herein, or (b) preclude the Company from
seeking any remedy for fraud.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER
Parent and the Purchaser jointly and severally
represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and
the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate
its properties and to carry on its business as now being
conducted, except where the failure to be so organized,
existing and in good standing or to have such power and
authority would not have a Parent Material Adverse
Effect. Parent and each of its Subsidiaries is duly
qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or
licensed and in good standing would not have a Parent
Material Adverse Effect. As used in this Agreement,
"Parent Material Adverse Effect" means only any adverse
change in, or effect on, the business, financial
condition, operations or results of operations of Parent
and its Subsidiaries, taken as a whole that, individually
or in the aggregate, exceeds, or is reasonably likely to
exceed, $67.5 million; provided, however, that the
effects of changes that are generally applicable to (i)
the healthcare or HMO industries, (ii) the United States
economy, or (iii) the United States securities markets
shall be excluded from such determination. In addition
to the foregoing, the determination of the dollar value
or impact of any change or event pursuant to the
preceding sentence shall be based solely on the actual
dollar value of such change or effect, on a dollar-for-
dollar basis, and shall not take into account (i) any
multiplier valuation, including, without limitation, any
multiple based on earnings or other financial indicia or
(ii) any consequential damages or other consequential
valuation.
Section 4.2 Authorization; Validity of
Agreement; Necessary Action. Each of Parent and the
Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution,
delivery and performance by Parent and the Purchaser of
this Agreement, and the consummation of the transactions
contemplated hereby, have been duly authorized by their
Boards of Directors and no other corporate action on the
part of Parent and the Purchaser is necessary to
authorize the execution and delivery by Parent and the
Purchaser of this Agreement and the consummation by them
of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Parent and the
Purchaser, as the case may be (and assuming due and valid
authorization, execution and delivery hereof by the
Company) is a valid and binding obligation of each of
Parent and the Purchaser, as the case may be, enforceable
against them in accordance with its respective terms,
except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii)
the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No
Violations. Except for (a) filings pursuant to the HSR
Act, (b) applicable requirements under the Exchange Act,
(c) the filing of the Certificates of Merger, (d)
applicable requirements under corporation or blue sky
laws of various states, (e) the Insurance Regulatory
Approvals or (f) as described in this Agreement, neither
the execution, delivery or performance of this Agreement
by Parent and the Purchaser nor the consummation by
Parent and the Purchaser of the transactions contemplated
hereby will (i) violate any provision of the Articles of
Incorporation or By-Laws of Parent or the Purchaser, (ii)
result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or
obligation to which Parent or any of its Subsidiaries is
a party or by which any of them or any of their
properties or assets may be bound and which has been
filed as an exhibit to the Parent SEC Documents (as
defined in Section 4.4 hereof), (iii) violate any order,
writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to Parent, any of its Subsidiaries
or any of their properties or assets, or (iv) require on
the part of Parent or the Purchaser any filing or
registration with, notification to, or authorization,
consent or approval of, any court, legislative, executive
or regulatory authority or agency (a Governmental
Entity ); except in the case of clauses (ii), (iii) or
(iv) for such violations, breaches or defaults which, or
filings, registrations, notifications, authorizations,
consents or approvals the failure of which to obtain, (A)
would not have a Parent Material Adverse Effect and would
not materially adversely affect the ability of Parent and
the Purchaser to consummate the transactions contemplated
by this Agreement, or (B) become applicable as a result
of the business or activities in which the Company is or
proposes to be engaged or as a result of any acts or
omissions by, or the status of any facts pertaining to,
the Company.
Section 4.4 SEC Reports and Financial
Statements. Parent has filed with the SEC, and has
heretofore made available to the Company true and
complete copies of, all forms, reports, schedules,
statements and other documents required to be filed by it
and its Subsidiaries since January 1, 1994 under the
Exchange Act or the Securities Act (as such documents
have been amended since the time of their filing,
collectively, the "Parent SEC Documents"). As of their
respective dates or, if amended, as of the date of the
last such amendment, the Parent SEC Documents, including,
without limitation, any financial statements or schedules
included therein did not contain any untrue statement of
a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading. Each of the
consolidated balance sheets (including the related notes)
included in the Parent SEC Documents fairly presents in
all material respects the financial position of Parent
and its consolidated Subsidiaries as of the respective
dates thereof, and the other related statements
(including the related notes) included therein fairly
present in all material respects the results of
operations and cash flows of Parent and its consolidated
Subsidiaries for the respective periods or as of the
respective dates set forth therein. Each of the
consolidated balance sheets and statements of operations
and cash flow (including the related notes) included in
the Parent SEC Documents has been prepared in all
material respects in accordance with GAAP applied on a
consistent basis during the periods involved, except as
otherwise noted therein and subject, in the case of
unaudited interim financial statements, to normal year-
end adjustments.
Section 4.5 Information in Offer Documents;
Proxy Statement. None of the information supplied or to
be supplied by Parent or the Purchaser, or any of their
officers, directors, employees, representatives or agents
for inclusion or incorporation by reference in the Offer
Documents, the Schedule 14D-9 or the Proxy Statement,
including any amendments or supplements thereto, will, in
the case of the Offer Documents and the Schedule 14D-9,
at the respective times the Offer Documents and the
Schedule 14D-9 are filed with the SEC or first published,
sent or given to the Company's shareholders, or, in the
case of the Proxy Statement, at the date the Proxy
Statement is first mailed to the Company's shareholders
or at the time of the Special Meeting, contain any
statement which, at such time and in light of the
circumstances under which it is made, is false or
misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the
statements therein not false or misleading. Notwithstanding
the foregoing, Parent and the Purchaser do not make any
representation or warranty with respect to the information
that has been supplied by the Company or its officers,
directors, employees, representatives or agents for
inclusion or incorporation by reference in any of the
foregoing documents. The Offer Documents and the
Proxy Statement and any amendments or supplements thereto
will comply in all material respects with the applicable
provisions of the Exchange Act and the rules and
regulations thereunder.
Section 4.6 Sufficient Funds. Either Parent
or the Purchaser has sufficient funds available (through
existing credit arrangements or otherwise) to purchase
all of the Shares outstanding on a fully diluted basis
and to pay all fees and expenses related to the
transactions contemplated by this Agreement.
Section 4.7 Share Ownership. None of Parent,
the Purchaser or any of their respective "affiliates" or
"associates" (as those terms are defined in Rule 12b-2
under the Exchange Act) beneficially owns any Shares.
Section 4.8 Purchaser's Operations. The
Purchaser was formed solely for the purpose of engaging
in the transactions contemplated hereby and has not
engaged in any business activities or conducted any
operations other than in connection with the transactions
contemplated hereby.
Section 4.9 Brokers or Finders. Parent
represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be
entitled to any brokers' or finders' fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement, except
Xxxxxxx, Xxxxx & Co., whose fees and expenses will be
paid by Parent in accordance with Parent's agreement with
such firm, a true and complete copy of which has
heretofore been furnished to the Company.
Section 4.10 Investigation by Parent. In
entering into this Agreement, each of Parent and the
Purchaser:
(a) acknowledges that none of the Company,
its Subsidiaries or any of their respective directors,
officers, employees, affiliates, agents, advisors or
representatives makes any representation or warranty,
either express or implied, as to the accuracy or
completeness of any of the information provided or made
available to Parent, the Purchaser or their agents or
representatives, and
(b) agrees, to the fullest extent
permitted by law, that none of the Company, its
Subsidiaries or any of their respective directors,
officers, employees, shareholders, affiliates, agents,
advisors or representatives shall have any liability or
responsibility whatsoever to Parent or the Purchaser on
any basis (including, without limitation, in contract or
tort, under federal or state securities laws or
otherwise) based upon any information provided or made
available, or statements made, to Parent,
except that the foregoing limitations shall not (a) apply
to the Company to the extent the Company makes the
specific representations and warranties set forth in
Article III of this Agreement, but always subject to the
limitations and restrictions contained herein, or (b)
preclude Parent and the Purchaser from seeking any remedy
for fraud.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company.
The Company covenants and agrees that, except (i) as
contemplated by this Agreement, (ii) as disclosed in
Section 5.1 of the Company Disclosure Letter or (iii) as
agreed in writing by Parent, after the date hereof, and
prior to the time the directors of the Purchaser have
been elected to, and shall constitute a majority of, the
Board of Directors of the Company pursuant to Section 1.3
(the "Appointment Date"):
(a) the business of the Company and its
Subsidiaries shall be conducted only in the ordinary and
usual course of business and, to the extent consistent
therewith, each of the Company and its Subsidiaries shall
use its best efforts to preserve in all material respects
its business organization intact and maintain its
existing relations with customers, suppliers, employees
and business associates;
(b) the Company will not, directly or
indirectly, (i) amend its Articles of Incorporation or
By-laws or similar organizational documents; or (ii)
split, combine or reclassify the outstanding Company
Common Stock or any outstanding capital stock of any of
the Subsidiaries of the Company;
(c) neither the Company nor any of its
Subsidiaries shall: (i) declare, set aside or pay any
dividend or other distribution payable in cash, stock or
property with respect to its capital stock (other than
dividends from any Subsidiary of the Company to the
Company or any other Subsidiary of the Company); (ii)
issue or sell any additional shares of, or securities
convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to
acquire, any shares of capital stock of any class of the
Company or its Subsidiaries, other than shares of Company
Common Stock reserved for issuance on the date hereof
upon exercise of outstanding Rights pursuant to the
Rights Agreement, issuances pursuant to the exercise of
Options outstanding on the date hereof, or issuances
pursuant to the Company Convertible Notes; (iii) acquire,
sell, lease or dispose of any assets in excess of $5
million, other than in the ordinary and usual course of
business; (iv) incur or modify any material debt, other
than in the ordinary and usual course of business; or (v)
redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock other than redemption
of the outstanding Rights pursuant to the Rights
Agreement;
(d) neither the Company nor any of its
Subsidiaries shall, except as may be required or
contemplated by this Agreement or in the ordinary and
usual course of business, terminate or materially amend
any of its Benefit Plans;
(e) neither the Company nor any of its
Subsidiaries shall, except as contemplated by this
Agreement, enter into, adopt or materially amend any
employee benefit plans or amend any employment or
severance agreement or (except for normal increases in
the ordinary and usual course of business to persons
other than the employees listed as Tier I through Tier V
on Schedule 5.4(b) hereof) increase in any manner the
compensation of any employees;
(f) neither the Company nor any of its
Subsidiaries shall: (i) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the material obligations
of any other person (other than Subsidiaries of the
Company), except in the ordinary and usual course of
business; (ii) make any material loans, advances or
capital contributions to, or investments in, any other
person (other than to Subsidiaries of the Company), other
than in the ordinary and usual course of business; or
(iii) make capital expenditures in excess of an aggregate
of $10 million for the first seven months from the date
hereof or an additional $5 million thereafter;
(g) neither the Company nor any of its
Subsidiaries shall materially change any of the
accounting methods used by it unless required by GAAP or
applicable law;
(h) the Company will not settle or
compromise any claim (including arbitration) or
litigation involving payments by the Company in excess of
$1,000,000, individually, which are not subject to
insurance reimbursement without the prior written consent
of Parent, which consent will not be unreasonably
withheld, and will consult with Parent with respect to
settlement or compromise of any claim (including
arbitration) or litigation for less than $1,000,000;
(i) the Company will not amend, modify or
terminate in any material respect its hospital contracts
without the prior written consent of Parent, which
consent shall not be unreasonably withheld, and provided
that Parent shall designate a single senior officer with
responsibility to provide such consent and such officer
shall respond within two business days of any such
request and the Company will consult with Parent prior to
entering into any new hospital contract or agreement; and
(j) neither the Company nor any of its
Subsidiaries will authorize or enter into an agreement to
do any of the foregoing.
Section 5.2 Actions Regarding the Rights. The
Company, in accordance with the terms and provisions of
the Rights Agreement, and as promptly as practicable on
or after the date hereof, shall take all reasonable
actions necessary to cause the (a) postponement of the
Distribution Date under the Rights Agreement as necessary
to prevent this Agreement or the consummation of any of
the transactions contemplated hereby, including without
limitation, the publication or other announcement of the
Offer and the consummation of the Offer and the Merger,
from resulting in (i) the distribution of separate Rights
certificates, or (ii) the occurrence of a Distribution
Date, and (b) redemption of the Rights prior to the
consummation of the Offer.
Section 5.3 Access to Information. Upon
reasonable notice, the Company shall (and shall cause
each of its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and
other representatives of Parent, access, during normal
business hours during the period prior to the Appointment
Date, to all its properties, books, contracts,
commitments and records and, during such period, the
Company shall (and shall cause each of its Subsidiaries
to) furnish promptly to the Parent (a) a copy of each
report, schedule, registration statement and other
document filed or received by it during such period
pursuant to the requirements of federal securities laws
and (b) all other information concerning its business,
properties and personnel as Parent may reasonably
request. After the Appointment Date the Company shall
provide Parent and such persons as Parent shall designate
with all such information, at such time, as Parent shall
request. Unless otherwise required by law and until the
Appointment Date, Parent will hold any such information
which is nonpublic in confidence in accordance with the
provisions of the Confidentiality Agreement between the
Company and Parent, dated as of January 31, 1997 (the
"Confidentiality Agreement").
Section 5.4 Employee Benefits.
(a) Parent and the Purchaser agree that,
effective as of the Effective Time and for a two-year
period following the Effective Time, the Surviving
Corporation and its Subsidiaries and successors shall
provide those persons who, immediately prior to the
Effective Time, were employees of the Company or its
Subsidiaries ("Retained Employees") with employee plans
and programs which provide benefits that are no less
favorable in the aggregate to those provided to such
Retained Employees immediately prior to the date hereof.
As soon as reasonably practicable (and in any event prior
to consummation of the Offer) and following a review of
Parent's employee plans and programs, the Company will
confirm to Parent whether it considers Parent's employee
plans and programs to be no less favorable in the
aggregate than the employee plans and programs of the
Company. With respect to such benefits, service accrued
by such Retained Employees during employment with the
Company and its Subsidiaries prior to the Effective Time
shall be recognized for all purposes, except to the
extent necessary to prevent duplication of benefits.
(b) Parent and the Purchaser agree to
honor, and cause the Surviving Corporation to honor,
without modification, (i) all employment and severance
agreements and arrangements, as amended through the date
hereof, with respect to employees and former employees of
the Company, including, without limitation, the Employee
Agreements referred to in Section 3.8(a) hereof
(collectively, the "Severance Agreements"), and (ii) the
New Severance Arrangements (as defined below). Parent
and the Purchaser acknowledge that the transactions
contemplated hereby shall constitute a "change in
control" for purposes of the Severance Agreements.
Parent, the Purchaser and the Company agree that, prior
to the Effective Time, the Company shall adopt severance
plans and/or enter into severance agreements
substantially as provided in Schedule 5.4(b) hereof (the
"New Severance Arrangements").
(c) In the event Parent or the Purchaser
or the Surviving Corporation or any of their successors
or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or
(ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each
such case, to the extent necessary to effectuate the
purposes of this Section 5.4, proper provision shall be
made so that the successors and assigns of Parent, the
Purchaser or the Surviving Corporation, as the case may
be, assume the obligations set forth in this Section 5.4
and none of the actions described in clauses (i) or (ii)
shall be taken until such provision is made.
(d) As soon as practicable following the
Effective Time (but in no event later than 30 days
following the Effective Time) Parent shall take any and
all action necessary and appropriate to grant options
("Parent Options") to purchase 200,000 shares of Parent
Common Stock to persons who were employees of the Company
immediately prior to the Effective Time. Each Parent
Option shall have (i) an exercise price equal to the
closing price of the Parent Common Stock on the New York
Stock Exchange as of the date of grant and (ii) a term of
ten years. The allocation to individual employees of the
Parent Options shall be made solely by Parent after
reasonable consultation with the individual serving as
CEO of the Company on the date hereof (the "Company
CEO"). The Company CEO shall not be eligible to receive
any Parent Options. All other terms and conditions of
Parent Options shall be determined by Parent after
reasonable consultation with the Company CEO; provided,
that such options shall be issued under Parent's existing
option plans with terms and conditions customary for
grants to similarly situated employees.
Section 5.5 No Solicitation. (a) The Company
and its Subsidiaries will not, and will use their best
efforts to cause their respective officers, directors,
employees and investment bankers, attorneys or other
agents retained by or acting on behalf of the Company or
any of its Subsidiaries not to, (i) initiate, solicit or
encourage, directly or indirectly, any inquiries or the
making of any proposal that constitutes or is reasonably
likely to lead to any Acquisition Proposal (as defined in
Section 5.5(c) hereof), (ii) except as permitted below,
engage in negotiations or discussions with, or furnish
any information or data to any third party relating to an
Acquisition Proposal, or (iii) except as permitted below,
enter into any agreement with respect to any Acquisition
Proposal or approve any Acquisition Proposal.
Notwithstanding anything to the contrary contained in
this Section 5.5 or in any other provision of this
Agreement, the Company and its Board of Directors (i) may
participate in discussions or negotiations (including, as
a part thereof, making any counterproposal) with or
furnish information to any third party making an
unsolicited Acquisition Proposal (a "Potential Acquiror")
or approve an unsolicited Acquisition Proposal if the
Company's Board of Directors is advised by its financial
advisor that such Potential Acquiror has the financial
wherewithal to be reasonably capable of consummating such
an Acquisition Proposal, and either (A) the Board
determines in good faith, after receiving advice from its
financial advisor, that such third party has submitted to
the Company an Acquisition Proposal which is a Superior
Proposal, or (B) the Board determines in good faith,
based upon advice of its outside legal counsel, that the
failure to participate in such discussions or
negotiations or to furnish such information or approve an
Acquisition Proposal would violate the Board's fiduciary
duties under applicable law, and (ii) shall be permitted
to (X) take and disclose to the Company's shareholders a
position with respect to any tender or exchange offer by
a third party, or amend or withdraw such position,
pursuant to Rules 14d-9 and 14e-2 of the Exchange Act or
(Y) make disclosure to the Company's shareholders, in the
case of clause (X) or clause (Y) either (1) with respect
to or as result of a Superior Proposal, or (2) if the
Company's Board of Directors determines in good faith,
based upon advice of its outside legal counsel, that the
failure to take such action would violate such Board's
fiduciary duties under, or otherwise violate, applicable
law. The Company agrees that any non-public information
furnished to a Potential Acquiror will be pursuant to a
confidentiality agreement substantially similar to the
confidentiality provisions of the confidentiality
agreement entered into between the Company and Parent.
In the event that the Company shall determine to provide
any information as described above, or shall receive any
Acquisition Proposal, it shall promptly inform Parent in
writing as to the fact that information is to be provided
and shall furnish to Parent the identity of the recipient
of such information and/or the Potential Acquiror and the
terms of such Acquisition Proposal, except to the extent
that the Board determines in good faith, based upon
advice of its outside legal counsel, that any such action
described in this sentence would violate such Board's
fiduciary duties under, or otherwise violate, applicable
law. The Company will keep Parent reasonably informed of
the status (including amendments or proposed amendments)
of any such Acquisition Proposal except to the extent
that the Board determines in good faith, based upon
advice of its outside legal counsel, that any such action
would violate such Board's fiduciary duties under, or
otherwise violate, applicable law.
(b) The Board of Directors of the Company
shall not (i) withdraw or modify or propose to withdraw
or modify, in any manner adverse to Parent, the approval
or recommendation of such Board of Directors of this
Agreement, the Offer or the Merger or (ii) approve or
recommend, or propose to approve or recommend, any
Acquisition Proposal unless, in each case, (A) the Board
determines in good faith, after receiving advice from its
financial advisor, that such Acquisition Proposal is a
Superior Proposal or (B) the Board determines in good
faith, based upon advice of its outside legal counsel,
that the failure to take such action would violate
Board's fiduciary duties under applicable law.
(c) For purposes of this Agreement,
"Acquisition Proposal" shall mean any bona fide proposal,
whether in writing or otherwise, made by a third party to
acquire beneficial ownership (as defined under Rule 13(d)
of the Exchange Act) of all or a material portion of the
assets of, or any material equity interest in, the
Company or its material Subsidiaries pursuant to a
merger, consolidation or other business combination, sale
of shares of capital stock, sale of assets, tender offer
or exchange offer or similar transaction involving the
Company or its material Subsidiaries including, without
limitation, any single or multi-step transaction or
series of related transactions which is structured to
permit such third party to acquire beneficial ownership
of any material portion of the assets of, or any material
portion of the equity interest in, the Company or its
material Subsidiaries (other than the transactions
contemplated by this Agreement).
(d) The term "Superior Proposal" means
any bona fide proposal to acquire, directly or
indirectly, for consideration consisting of cash and/or
securities, more than a majority of the Shares then
outstanding or all or substantially all the assets of the
Company, and otherwise on terms which the Board of
Directors of the Company determines in good faith to be
more favorable to the Company and its shareholders than
the Offer and the Merger (based on advice of the
Company's financial advisor that the value of the
consideration provided for in such proposal is superior
to the value of the consideration provided for in the
Offer and the Merger), for which financing, to the extent
required, is then committed or which, in the good faith
reasonable judgment of the Board of Directors, after
receiving advice from its financial advisor, is
reasonably capable of being financed by such third party.
Section 5.6 Publicity. The initial press
releases with respect to the execution of this Agreement
shall be acceptable to Parent and the Company. There-
after, so long as this Agreement is in effect, neither
the Company, Parent nor any of their respective affiliates
shall issue or cause the publication of any press release
with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior
consultation of the other party, except as may be required
by law or by any listing agreement with a national securities
exchange.
Section 5.7 Directors' and Officers' Insurance
and Indemnification. (a) From and after the consummation
of the Offer, Parent shall, and shall cause the Company
(or the Surviving Corporation if after the Effective
Time) to, indemnify, defend and hold harmless any person
who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, an
officer, director, employee and agent (the "Indemnified
Party") of the Company and its Subsidiaries against all
losses, claims, damages, liabilities, costs and expenses
(including attorney's fees and expenses), judgments,
fines, losses, and amounts paid in settlement in
connection with any actual or threatened action, suit,
claim, proceeding or investigation (each a "Claim") to
the extent that any such Claim is based on, or arises out
of, (i) the fact that such person is or was a director,
officer, employee or agent of the Company or any
Subsidiaries or is or was serving at the request of the
Company or any of its Subsidiaries as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or
(ii) this Agreement, or any of the transactions
contemplated hereby, in each case to the extent that any
such Claim pertains to any matter or fact arising,
existing, or occurring prior to or at the Effective Time,
regardless of whether such Claim is asserted or claimed
prior to, at or after the Effective Time, to the full
extent permitted under New Hampshire law or the Company's
Articles of Incorporation, By-laws or indemnification
agreements in effect at the date hereof, including
provisions relating to advancement of expenses incurred
in the defense of any action or suit. Without limiting
the foregoing, in the event any Indemnified Party becomes
involved in any capacity in any Claim, then from and
after consummation of the Offer Parent shall, or shall
cause the Company (or the Surviving Corporation if after
the Effective Time) to, periodically advance to such
Indemnified Party its legal and other expenses (including
the cost of any investigation and preparation incurred in
connection therewith), subject to the provision by such
Indemnified Party of an undertaking to reimburse the
amounts so advanced in the event of a final non-
appealable determination by a court of competent
jurisdiction that such Indemnified Party is not entitled
thereto.
(b) Parent and the Company agree that all
rights to indemnification and all limitations or
liability existing in favor of the Indemnified Party as
provided in the Company's Articles of Incorporation and
By-laws as in effect as of the date hereof shall survive
the Merger and shall continue in full force and effect,
without any amendment thereto, for a period of six years
from the Effective Time to the extent such rights are
consistent with the NHBCA; provided, that, in the event
any claim or claims are asserted or made within such six
year period, all rights to indemnification in respect of
any such claim or claims shall continue until disposition
of any and all such claims; provided, further, that any
determination required to be made with respect to whether
an Indemnified Party's conduct complies with the
standards set forth under New Hampshire law, the
Company's Articles of Incorporation or By-laws or such
agreements, as the case may be, shall be made by
independent legal counsel selected by the Indemnified
Party and reasonably acceptable to Parent and; provided,
further, that nothing in this Section 5.7 shall impair
any rights or obligations of any present or former
directors or officers of the Company.
(c) In the event Parent or the Purchaser
or any of their successors or assigns (i) consolidates
with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all
or substantially all of its properties and assets to any
person, then, and in each such case, to the extent
necessary to effectuate the purposes of this Section 5.7,
proper provision shall be made so that the successors and
assigns of Parent and the Purchaser assume the
obligations set forth in this Section 5.7 and none of the
actions described in clauses (i) or (ii) shall be taken
until such provision is made.
(d) Parent or the Surviving Corporation
shall maintain the Company's existing officers' and
directors' liability insurance policy ("D&O Insurance")
for a period of not less than six years after the
Effective Date; provided, that the Parent may substitute
therefor policies of substantially similar coverage and
amounts containing terms no less advantageous to such
former directors or officers.
Section 5.8 Approvals and Consents;
Cooperation; Notification. (a) The parties hereto shall
use their respective best efforts, and cooperate with
each other, to obtain as promptly as practicable all
governmental and third party authorizations, approvals,
consents or waivers, including, without limitation,
pursuant to the HSR Act and with respect to the Insurance
Regulatory Approvals, required in order to consummate the
transactions contemplated by this Agreement, including,
without limitation, the Offer and the Merger.
(b) The Company, Parent and the Purchaser
shall take all actions necessary to file as soon as
practicable all notifications, filings and other
documents required to obtain all governmental
authorizations, approvals, consents or waivers,
including, without limitation, under the HSR Act and with
respect to the Insurance Regulatory Approvals, and to
respond as promptly as practicable to any inquiries
received from the Federal Trade Commission, the Antitrust
Division of the Department of Justice and any other
Governmental Entity for additional information or
documentation and to respond as promptly as practicable
to all inquiries and requests received from any State
Attorney General or other Governmental Entity in
connection therewith.
(c) The Company shall give prompt notice
to Parent of the occurrence of any Company Material
Adverse Effect. Each of the Company and Parent shall
give prompt notice to the other of the occurrence or
failure to occur of an event that would, or, with the
lapse of time would cause any condition to the
consummation of the Offer or the Merger not to be
satisfied.
Section 5.9 Further Assurances. Each of the
parties hereto agrees to use their respective best
efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to
consummate and make effective the transactions
contemplated by this Agreement, including, without
limitation, the Offer and the Merger, which efforts shall
include, without limitation, (a) Parent and the Purchaser
proffering their willingness to accept an order or orders
providing for the divestiture by Parent and the Purchaser
of such of the Company's assets and businesses (or, in
lieu thereof, approximately equivalent assets and
businesses of Parent and the Purchaser) which do not
represent in the aggregate assets with a fair market
value greater than $67.5 million as are necessary to
permit Parent and the Purchaser otherwise fully to
consummate the Offer and the Merger and the transactions
contemplated hereby, including an offer to hold separate
such assets and businesses pending any such divestiture
or pending the receipt of any required regulatory
approvals, (b) Parent and the Purchaser using their best
efforts to prevent any preliminary or permanent
injunction or other order by a court of competent
jurisdiction or Governmental Entity relating to
consummating the transactions contemplated by this
Agreement, including, without limitation, under the
antitrust laws and with respect to the Insurance
Regulatory Approvals, and, if issued, to appeal any such
injunction or order through the appellate court or body
for the relevant jurisdiction, provided that Parent shall
not be obligated to continue pursuing any particular
litigation or action following the issuance of any
preliminary injunction with respect thereto and (c)
Parent and the Purchaser using their best efforts to
satisfy any objections of, and accept any conditions
imposed by, any Governmental Entity in connection with
any Insurance Regulatory Approval, except where such
objection or condition would result in costs or
liabilities to the Company and Parent, taken together
(and aggregated with any loss incurred in connection with
a disposition of assets pursuant to clause (a) above at
less than fair market value), in excess of $67.5 million;
provided, however, that notwithstanding the foregoing,
during the sixty day period following the date hereof,
Parent and Purchaser shall only be obligated to use
commercially reasonable efforts to obtain all Insurance
Regulatory Approvals. If at any time after the Effective
Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the parties
hereto shall take or cause to be taken all such necessary
action, including, without limitation, the execution and
delivery of such further instruments and documents as may
be reasonably requested by the other party for such
purposes or otherwise to consummate and make effective
the transactions contemplated hereby. Parent agrees to
file all applications on Form A (or equivalent form)
necessary to obtain the Insurance Regulatory Approvals
within 12 business days of the date hereof.
Section 5.10 Taxes. With respect to any
Taxes, the Company shall not (i) make any material tax
election or (ii) settle or compromise any material income
tax liability (whether with respect to amount or timing),
in each case without the prior written consent of Parent
which consent shall not be unreasonably withheld.
Section 5.11 Compliance with Security Takeover
Disclosure Act. As soon as practicable following the
commencement of the Offer, Parent and Purchaser shall, to
the extent required by law, (i) file with the Director of
the Office of Securities Regulation (the "Director") of
the State of New Hampshire a registration statement (the
"Registration Statement") in accordance with, and
containing the information required by, Section 421-A:4
of the New Hampshire Security Takeover Disclosure Act
(the "Takeover Disclosure Act"), and (ii) comply with all
other requirements of the Takeover Disclosure Act. None
of the information supplied or to be supplied by Parent
or the Purchaser, or any of their officers, directors,
employees, representatives or agents for inclusion or
incorporation by reference in the Registration Statement
will, at the time its is filed with the Director, contain
any statement which, at such time and in light of the
circumstances under which it is made, is false or
misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the
statements therein not false or misleading.
Notwithstanding the foregoing, Parent and the Purchaser
do not make any representation or warranty with respect
to the information that has been supplied by the Company
or its officers, directors, employees, representatives or
agents for inclusion or incorporation by reference in the
Registration Statement.
Section 5.12 1996 Form 10-K. The Company will
periodically provide Parent with current draft versions
of the Company's Annual Report on Form 10-K including
documents incorporated therein by reference, for the year
ended December 31, 1996.
Section 5.13 Shareholder Litigation. The
Company and Parent agree that in connection with any
litigation which may be brought against the Company or
its directors relating to the transactions contemplated
hereby, the Company will keep Parent, and any counsel
which Parent may retain at its own expense, informed of
the course of such litigation, to the extent Parent is
not otherwise a party thereto, and the Company agrees
that it will consult with Parent prior to entering into
any settlement or compromise of any such shareholder
litigation; provided, that, no such settlement or
compromise will be entered into involving the payment of
money in excess of $1 million (to the extent not subject
to insurance reimbursement) without Parent's prior
written consent, which consent shall not be unreasonably
withheld.
ARTICLE VI
CONDITIONS
Section 6.1 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 satisfaction at or prior to the Effective
Time of the following conditions:
(a) this Agreement shall have been
approved and adopted by the requisite vote of the holders
of Company Common Stock, if required by applicable law
and the Articles of Incorporation;
(b) any waiting period applicable to the
Merger under the HSR Act shall have expired or been
terminated;
(c) all Insurance Regulatory Approvals
shall have been obtained, except where the failure to
have obtained any such approvals would not have a Company
Material Adverse Effect;
(d) no statute, rule, regulation, order,
decree or injunction shall have been enacted, promulgated
or issued by any Governmental Entity or court which
prohibits the consummation of the Merger; and
(e) Parent, the Purchaser or their
affiliates shall have purchased shares of Company Common
Stock pursuant to the Offer.
Section 6.2 Conditions to the Obligations of
the Company to Effect the Merger. The obligation of the
Company to effect the Merger shall be further subject to
the satisfaction at or prior to the Effective Time of the
following conditions:
(a) the representations and warranties of
Parent and the Purchaser shall be true and accurate as of
the Effective Time as if made at and as of such time
(except for those representations and warranties that
address matters only as of a particular date or only with
respect to a specific period of time which need only be
true and accurate as of such date or with respect to such
period), except where the failure of such representations
and warranties to be so true and accurate (without giving
effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) would not have a
Parent Material Adverse Effect; and
(b) each of Parent and the Purchaser
shall have performed in all material respects all of the
respective obligations hereunder required to be performed
by Parent or the Purchaser, as the case may be, at or
prior to the Effective Time.
Section 6.3 Conditions to the Obligations of
Parent and the Purchaser to Effect the Merger. The
obligations of Parent and the Purchaser to effect the
Merger shall be further subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) the representations and warranties of the
Company shall be true and accurate as of the Effective
Time as if made at and as of such time (except for those
representations and warranties that address matters only
as of a particular date or only with respect to a
specific period of time which need only be true and
accurate as of such date or with respect to such period),
except where the failure of such representations and
warranties to be so true and accurate (without giving
effect to any limitation as to "materiality" or "material
adverse effect" set forth therein), would not have a
Company Material Adverse Effect; and
(b) the Company shall have performed in
all material respects all of the respective obligations
hereunder required to be performed by the Company, at or
prior to the Effective Time.
Section 6.4 Exception. The conditions set
forth in Section 6.3 hereof shall cease to be conditions
to the obligations of the parties if the Purchaser shall
have accepted for payment and paid for Shares validly
tendered pursuant to the Offer, provided that the terms
of this exception will be deemed satisfied if the
Purchaser fails to accept for payment any Shares pursuant
to the Offer in violation of the terms thereof.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may
be terminated and the Merger contemplated herein may be
abandoned at any time prior to the Effective Time,
whether before or after shareholder approval thereof:
(a) By the mutual consent of Parent, the
Purchaser and the Company.
(b) By either of the Company, on the one
hand, or Parent and the Purchaser, on the other hand:
(i) if shares of Company Common
Stock shall not have been purchased pursuant to the
Offer on or prior to seven months from the execution
of this Agreement; provided, however, the Company
may, in its sole discretion, extend such termination
date for up to an additional 60 days in the event
that the Insurance Regulatory Approvals shall not
have been obtained by the end of such initial seven
month period and provided that, at the end of such
seven month period, no Company Material Adverse
Effect shall have occurred and be continuing;
provided, further, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be
available to any party whose failure to fulfill any
obligation under this Agreement has been the cause
of, or resulted in, the failure of Parent or the
Purchaser, as the case may be, to purchase shares of
Company Common Stock pursuant to the Offer on or
prior to such date; or
(ii) if any Governmental Entity
shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling
or other action the parties hereto shall use their
respective best efforts to lift), in each case
permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this
Agreement or prohibiting Parent to acquire or hold
or exercise rights of ownership of the Shares except
such prohibitions which would not have a Company
Material Adverse Effect, and such order, decree,
ruling or other action shall have become final and
non-appealable.
(c) By the Company:
(i) if, prior to the purchase of
shares of Company Common Stock pursuant to the
Offer, either (A) a third party shall have made an
Acquisition Proposal that the Board of Directors of
the Company determines in good faith, after
consultation with its financial advisor, is a
Superior Proposal, or (B) the Board of Directors of
the Company shall have withdrawn, or modified or
changed in a manner adverse to Parent or the
Purchaser its approval or recommendation of the
Offer, this Agreement or the Merger (or the Board of
Directors of the Company resolves to do any of the
foregoing); or
(ii) if Parent or the Purchaser
shall have terminated the Offer, or the Offer shall
have expired, without Parent or the Purchaser, as
the case may be, purchasing any shares of Company
Common Stock pursuant thereto; provided that the
Company may not terminate this Agreement pursuant to
this Section 7.1(c)(ii) if the Company is in willful
breach of this Agreement; or
(iii) if, due to an occurrence that
if occurring after the commencement of the Offer
would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, the
Purchaser or any of their affiliates shall have
failed to commence the Offer on or prior to five
business days following the date of the initial
public announcement of the Offer; provided, that the
Company may not terminate this Agreement pursuant to
this Section 7.1(c)(iii) if the Company is in
willful breach of this Agreement.
(d) By Parent and the Purchaser:
(i) if, prior to the purchase of
shares of Company Common Stock pursuant to the
Offer, the Board of Directors of the Company shall
have withdrawn, modified or changed in a manner
adverse to Parent or the Purchaser its approval or
recommendation of the Offer, this Agreement or the
Merger or shall have recommended an Acquisition
Proposal or shall have executed an agreement in
principle or definitive agreement relating to an
Acquisition Proposal or similar business combination
with a person or entity other than Parent, the
Purchaser or their affiliates (or the Board of
Directors of the Company resolves to do any of the
foregoing); or
(ii) if, due to an occurrence that
if occurring after the commencement of the Offer
would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, the
Purchaser, or any of their affiliates shall have
failed to commence the Offer on or prior to five
business days following the date of the initial
public announcement of the Offer; provided that
Parent may not terminate this Agreement pursuant to
this Section 7.1(d)(ii) if Parent or the Purchaser
is in willful breach of this Agreement.
Section 7.2 Effect of Termination. (a) In the
event of the termination of this Agreement as provided in
Section 7.1, written notice thereof shall forthwith be
given to the other party or parties specifying the
provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become null and
void, and there shall be no liability on the part of
Parent, the Purchaser or the Company or their respective
directors, officers, employees, shareholders,
representatives, agents or advisors other than, with
respect to Parent, the Purchaser and the Company, the
obligations pursuant to this Section 7.2, Sections 8.1,
8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12,
8.13 and the last sentence of Section 5.3. Nothing
contained in this Section 7.2 shall relieve Parent, the
Purchaser or the Company from liability for willful
breach of this Agreement.
(b) In the event that this Agreement is
terminated by the Company pursuant to Section 7.1(c)(i)
hereof or by Parent and the Purchaser pursuant to Section
7.1(d)(i) hereof, the Company shall pay to Parent by
certified check or wire transfer to an account designated
by Parent immediately following receipt of a request
therefor, an amount equal to $45 million (the
"Termination Fee"). In addition, the Company shall pay
Parent the Termination Fee if this Agreement is
terminated for any reason (other than as a result of a
material breach by Parent or the Purchaser that resulted
in the termination of this Agreement, or a willful breach
by Parent or the Purchaser of their obligations
hereunder) at any time after an Acquisition Proposal has
been made by a third party (a "Third Party Acquiror")
and, within one year after such a termination, the
Company completes either (x) a merger, consolidation or
other business combination with any such Third Party
Acquiror (or another party who makes an Acquisition
Proposal at a time when the Company is in discussions
with any such Third Party Acquiror), or (y) the sale of
50% or more (in voting power) of the voting securities of
the Company or of 40% or more (in market value) of the
assets of the Company and its Subsidiaries, on a
consolidated basis to any such Third Party Acquiror (or
another party who makes an Acquisition Proposal at a time
when the Company is in discussions with any such Third
Party Acquiror).
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment and Modification.
Subject to applicable law, this Agreement may be amended,
modified and supplemented in any and all respects,
whether before or after any vote of the shareholders of
the Company contemplated hereby, by written agreement of
the parties hereto, by action taken by their respective
Boards of Directors (which in the case of the Company
shall include approvals as contemplated in Section
1.3(b)), at any time prior to the Closing Date with
respect to any of the terms contained herein; provided,
however, that after the approval of this Agreement by the
shareholders of the Company, no such amendment,
modification or supplement shall reduce or change the
Merger Consideration or adversely affect the rights of
the Company's shareholders hereunder without the approval
of such shareholders.
Section 8.2 Nonsurvival of Representations and
Warranties. None of the representations and warranties
in this Agreement or in any schedule, instrument or other
document delivered pursuant to this Agreement shall
survive the Effective Time or the termination of this
Agreement. This Section 8.2 shall not limit any covenant
or agreement contained in this Agreement which by its
terms contemplates performance after the Effective Time.
Section 8.3 Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which
is confirmed) or sent by an overnight courier service,
such as Federal Express, to the parties at the following
addresses (or at such other address for a party as shall
be specified by like notice):
(a) if to Parent or the Purchaser, to:
CIGNA Corporation
One Liberty Place
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxx
with a copy to:
O'Melveny & Xxxxx LLP
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: C. Xxxxxxx Xxxxxxxxxx, Esq.
(b) if to the Company, to:
Healthsource, Inc.
Xxx Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, M.D.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Section 8.4 Interpretation. The words
"hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any
particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are
to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified.
Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be
followed by the words "without limitation". The 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. The phrase "to the best knowledge of" or any
similar phrase shall mean such facts and other
information which as of the date of determination are
actually known to any vice president, chief financial
officer, general counsel, chief compliance officer,
controller, and any officer superior to any of the
foregoing, of the referenced party after the conduct of a
reasonable investigation under the circumstances by such
officer. The phrase "made available" in this Agreement
shall mean that the information referred to has been made
available if requested by the party to whom such
information is to be made available. The phrases "the
date of this Agreement", "the date hereof" and terms of
similar import, unless the context otherwise requires,
shall be deemed to refer to February 27, 1997. As used
in this Agreement, the term "affiliate(s)" shall have the
meaning set forth in Rule l2b-2 of the Exchange Act. The
parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
Section 8.5 Counterparts. This Agreement may
be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall
become effective when two or more counterparts have been
signed by each of the parties and delivered to the other
parties, it being understood that all parties need not
sign the same counterpart.
Section 8.6 Entire Agreement; Third Party
Beneficiaries. This Agreement, the Tender Agreement and
Irrevocable Proxy and the Confidentiality Agreement
(including the documents and the instruments referred to
herein and therein) (a) constitutes the entire agreement
and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to
the subject matter hereof, and (b) except as provided in
Sections 2.4, 5.4 and 5.7, are not intended to confer
upon any person other than the parties hereto any rights
or remedies hereunder.
Section 8.7 Severability. If any term,
provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
Section 8.8 Governing Law. This Agreement
shall be governed and construed in accordance with the
laws of the State of New York (other than the provisions
relating to the mechanics of the Merger, and other than
the duties and obligations of directors and officers of
the Company, including without limitation, the provisions
of Section 5.5 and 5.7, which shall be governed by New
Hampshire law) without giving effect to the principles of
conflicts of law thereof or of any other jurisdiction.
Section 8.9 Specific Performance. Each of the
parties hereto acknowledges and agrees that in the event
of any breach of this Agreement, each non-breaching party
would be irreparably and immediately harmed and could not
be made whole by monetary damages. It is accordingly
agreed that the parties hereto (a) will waive, in any
action for specific performance, the defense of adequacy
of a remedy at law and (b) shall be entitled, in addition
to any other remedy to which they may be entitled at law
or in equity, to compel specific performance of this
Agreement in any action instituted in a court of
competent jurisdiction.
Section 8.10 Assignment. 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 will be binding
upon, inure to the benefit of and be enforceable by the
parties and their respective permitted successors and
assigns.
Section 8.11 Expenses. Except as set forth in
Section 7.2 hereof, all costs and expenses incurred in
connection with the Offer, the Merger, this Agreement and
the consummation of the transactions contemplated hereby
shall be paid by the party incurring such costs and
expenses, whether or not the Offer or the Merger is
consummated.
Section 8.12 Headings. Headings of the
Articles and Sections of this Agreement are for
convenience of the parties only, and shall be given no
substantive or interpretative effect whatsoever.
Section 8.13 Waivers. Except as otherwise
provided in this Agreement, any failure of any of the
parties to comply with any obligation, covenant,
agreement or condition herein may be waived by the party
or parties entitled to the benefits thereof only by a
written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
Section 8.14 Schedules. The Company
Disclosure Letter shall be construed with and as an
integral part of this Agreement to the same extent as if
the same had been set forth verbatim herein. Any matter
disclosed pursuant to the Company Disclosure Letter shall
be deemed to be disclosed for all purposes under this
Agreement but such disclosure shall not be deemed to be
an admission or representation as to the materiality of
the item so disclosed.
IN WITNESS WHEREOF, Parent, the Purchaser and
the Company have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of
the date first written above.
HEALTHSOURCE, INC.
By:/s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
CIGNA CORPORATION
By:/s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: Vice President
Strategic Growth &
Development
CHC ACQUISITION CORP.
By:/s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: President
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer,
subject to the provisions of the Merger Agreement, the
Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act (relating to
the Purchaser's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate the Offer and not
accept for payment any tendered Shares if (i) any applicable
waiting period under the HSR Act has not expired or been
terminated prior to the expiration of the Offer, (ii) any
Insurance Regulatory Approvals or any other material consent,
approval, or authorization required under Federal or any
State law required to consummate the Offer have not been
obtained, except where the failure to have obtained any such
approvals, consents, authorizations or Insurance Regulatory
Approvals would not have a Company Material Adverse Effect
and would not result in a violation of law, (iii) the Minimum
Condition has not been satisfied, or (iv) at any time on or
after February 26, 1997, and before the time of acceptance of
Shares for payment pursuant to the Offer, any of the
following events shall occur:
(a) there shall have been any statute, rule,
regulation, judgment, order or injunction promulgated,
entered, enforced, enacted or issued applicable to the Offer
or the Merger by any federal or state governmental regulatory
or administrative agency or authority or court or legislative
body or commission which (1) prohibits the consummation of
the Offer or the Merger, (2) prohibits, or imposes any
material limitations on, Parent's or the Purchaser's
ownership or operation of all or a material portion of the
Company's businesses or assets or the Shares, except for such
prohibitions or limitations which would not have a Company
Material Adverse Effect, (3) prohibits, or makes illegal the
acceptance for payment, payment for or purchase of Shares or
the consummation of the Offer, or (4) renders the Purchaser
unable to accept for payment, pay for or purchase a material
portion or all of the Shares; provided, that the parties
shall have used their best efforts to cause any such statute,
rule, regulation, judgment, order or injunction to be vacated
or lifted;
(b) the representations and warranties of the
Company set forth in the Merger Agreement shall not be true
and accurate as of the date of consummation of the Offer as
though made on or as of such date (except for those
representations and warranties that address matters only as
of a particular date or only with respect to a specific
period of time which need only be true and accurate as of
such date or with respect to such period) or the Company
shall have breached or failed to perform or comply with any
obligation, agreement or covenant required by the Merger
Agreement to be performed or complied with by it except, in
each case where the failure of such representations and
warranties to be true and accurate (without giving effect to
any limitation as to "materiality" or "material adverse
effect" set forth therein), or the performance or compliance
with such obligations, agreements or covenants, do not,
individually or in the aggregate, have a Company Material
Adverse Effect;
(c) the Merger Agreement shall have been
terminated in accordance with its terms;
(d) it shall have been publicly disclosed
that any person, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act), shall have acquired beneficial
ownership (as determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) of more than 30% of the then
outstanding Shares, through the acquisition of stock, the
formation of a group or otherwise;
(e) the Board of Directors of the Company
shall have withdrawn, modified or changed in a manner adverse
to Parent or the Purchaser its approval or recommendation of
the Offer, the Merger Agreement or the Merger or shall have
recommended an Acquisition Proposal or shall have executed an
agreement in principle or definitive agreement relating to an
Acquisition Proposal or similar business combination with a
person or entity other than Parent, the Purchaser or their
affiliates or the Board of Directors of the Company shall
have adopted a resolution to do any of the foregoing; or
(f) there shall have occurred (i) any general
suspension of trading in securities on any national
securities exchange or in the over-the-counter market, (ii)
the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or
not mandatory), or (iii) any limitation (whether or not
mandatory) by an United States governmental authority or
agency on the extension of credit by banks or other financial
institutions
which in the reasonable judgment of Parent or the Purchaser,
in any such case, and regardless of the circumstances giving
rise to such condition, makes it inadvisable to proceed with
the Offer and/or with such acceptance for payment or
payments.
The foregoing conditions are for the sole benefit
of the Purchaser and Parent and, subject to the Merger
Agreement, may be asserted by either of them or may be waived
by Parent or the Purchaser, in whole or in part at any time
and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser at any
time to exercise any such rights shall not be deemed a waiver
of any right and each right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
