<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MEDPARTNERS, INC.
(Exact Name of Registrant as Specified in its Charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 8011 63-1151076
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
---------------------
3000 GALLERIA TOWER, SUITE 1000, BIRMINGHAM, ALABAMA 35244-2331
(205) 733-8996
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
J. BROOKE JOHNSTON, JR., ESQ.
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
MEDPARTNERS, INC.
3000 GALLERIA TOWER, SUITE 1000
BIRMINGHAM, ALABAMA 35244-2331
(205) 733-8996
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
COPIES TO:
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<S> <C>
ROBERT E. LEE GARNER, ESQ. PHILIP A. THEODORE, ESQ.
F. HAMPTON MCFADDEN, JR., ESQ. KING & SPALDING
HASKELL SLAUGHTER & YOUNG, L.L.C. 191 PEACHTREE STREET
1200 AMSOUTH/HARBERT PLAZA ATLANTA, GEORGIA 30303
1901 SIXTH AVENUE NORTH (404) 572-4676
BIRMINGHAM, ALABAMA 35203
(205) 251-1000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
Effective Time of the Merger of a wholly-owned subsidiary of the Registrant, ASG
Merger Corporation (the "Subsidiary"), with America Service Group Inc. ("ASG").
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
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==========================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(1) OFFERING PRICE FEES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share (including the Common Stock
Purchase Rights)................... 2,502,072 shares Inapplicable $59,027,753.75(2) $17,887.20(3)
==========================================================================================================================
</TABLE>
(1) The number of shares of Common Stock, par value $.001 per share (the
"MedPartners Common Stock"), of MedPartners to be registered has been
determined based upon 3,524,045 shares of Common Stock, par value $0.01 per
share (the "ASG Common Stock"), of ASG and an exchange ratio of 0.71 of a
share of MedPartners Common Stock per share of ASG Common Stock as provided
for in the Plan and Agreement of Merger, dated as of October 1, 1997, by and
among MedPartners, the Subsidiary and ASG (the "Plan of Merger").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) of the Securities Act of 1933, as amended (the
"Securities Act"). Pursuant to Rule 457(f)(1), the maximum aggregate
offering price is the product of (a) $16.75 representing the average of the
high and low sale prices of the ASG Common Stock as reported on The Nasdaq
Stock Market, National Market System on October 15, 1997, and (b) 3,524,045,
the number of shares of ASG Common Stock anticipated to be acquired by
MedPartners in connection with the acquisition of ASG pursuant to the Plan
of Merger.
(3) The registration fee for the securities registered hereby is $17,887.20,
calculated pursuant to Section 6(b) of the Securities Act and Rule 457(f)
promulgated thereunder.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
ASG INC. LETTERHEAD
, 1997
Dear Stockholder:
You are cordially invited to attend an important Special Meeting of the
Stockholders of America Service Group Inc. ("ASG") to be held on ,
1997, at a.m. local time, at , , .
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the Plan and Agreement of Merger, dated as of October 1,
1997 (the "Plan of Merger"), by and among ASG, MedPartners, Inc. ("MedPartners")
and ASG Merger Corporation, a wholly-owned subsidiary of MedPartners (the
"Subsidiary"), which provides for (i) the acquisition of ASG by MedPartners and
(ii) the merger of the Subsidiary with and into ASG (the "Merger"). If the
Merger is consummated, each outstanding share of ASG Common Stock will be
converted into the right to receive 0.71 of a share of MedPartners Common Stock.
The Plan of Merger has been approved and adopted by the Board of Directors
of ASG and MedPartners and is subject to approval by the holders of a majority
of the outstanding shares of ASG Common Stock.
THE BOARD OF DIRECTORS OF ASG HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF ASG AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER, HAS APPROVED AND
ADOPTED THE PLAN OF MERGER AND RECOMMENDS THAT THE ASG STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE PLAN OF MERGER.
Details of the background and reasons for the proposed Merger appear and
are explained in the accompanying Prospectus-Proxy Statement. Additional
information regarding ASG and MedPartners also is set forth in the
Prospectus-Proxy Statement and incorporated therein by reference to other
documents.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for the ASG Common Stock you own is
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return such card in the
enclosed postage paid envelope. If you attend the Special Meeting, you may vote
in person if you wish, even if you have previously returned your proxy card.
Your prompt cooperation will be greatly appreciated.
Sincerely,
/s/ Scott L. Mercy
Scott L. Mercy
President and Chief Executive Officer
<PAGE> 3
AMERICA SERVICE GROUP INC.
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
---------------------
Notice is hereby given that a Special Meeting (the "Special Meeting") of
the stockholders of America Service Group Inc. ("ASG") will be held on
, 1997, at a.m., local time at ,
, , to consider and vote upon:
(1) A proposal to approve and adopt the Plan and Agreement of Merger,
dated as of October 1, 1997 (the "Plan of Merger"), among MedPartners,
Inc., a Delaware corporation ("MedPartners"), ASG, and ASG Merger
Corporation, a Delaware corporation and a newly-formed, wholly-owned
subsidiary of MedPartners (the "Subsidiary"). Pursuant to the Plan of
Merger, at the Effective Time (as defined in Section 1.3 of the Plan of
Merger): (i) the Subsidiary will merge with and into ASG and (ii) each
outstanding share of ASG Common Stock, par value $.01 per share, will be
converted into the right to receive 0.71 of a share of MedPartners Common
Stock, par value $.001 per share, as more fully set forth in the Plan of
Merger and described in the attached Prospectus-Proxy Statement; and
(2) Such other matters as may properly come before the meeting or any
adjournments or postponements thereof.
Holders of shares of ASG Common Stock have no right to dissent from the
Merger or to receive a statutory payment for the "fair value" of their shares,
although such holders may vote against the Merger or abstain from voting.
Failure to submit a proxy card or the abstention from voting by an ASG
stockholder will have the same effect as a vote "against" the approval and
adoption of the Plan of Merger.
The Board of Directors has fixed the close of business on , 1997
as the record date for determination of stockholders entitled to notice of, and
to vote at the Special Meeting or any adjournment or postponement thereof.
Your attention is directed to the Prospectus-Proxy Statement accompanying
this notice.
By order of the Board of Directors
/s/ Michael Catalano
Michael Catalano
Secretary
Brentwood, Tennessee
, 1997
PLEASE COMPLETE DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN SUCH CARD
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 4
PROSPECTUS-PROXY STATEMENT
PROXY STATEMENT
OF
AMERICA SERVICE GROUP INC.
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
PROSPECTUS
OF
MEDPARTNERS, INC.
THIS PROSPECTUS-PROXY STATEMENT RELATES TO UP TO SHARES OF THE
COMMON STOCK, PAR VALUE $.001 PER SHARE (THE "MEDPARTNERS COMMON STOCK"),
TOGETHER WITH THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS, OF MEDPARTNERS,
INC., A DELAWARE CORPORATION (TOGETHER WITH ITS SUBSIDIARIES, "MEDPARTNERS"),
ISSUABLE TO THE STOCKHOLDERS OF AMERICA SERVICE GROUP INC., A DELAWARE
CORPORATION (TOGETHER WITH ITS SUBSIDIARIES, "ASG"), UPON CONSUMMATION OF THE
MERGER (AS DEFINED BELOW) AS CONSIDERATION FOR THE MERGER (THE "MERGER
CONSIDERATION"). SUCH NUMBER OF SHARES REPRESENTS THE MAXIMUM ANTICIPATED NUMBER
OF SHARES THAT WILL BE ISSUED IN THE MERGER. THIS PROSPECTUS-PROXY STATEMENT
ALSO SERVES AS THE PROXY STATEMENT OF ASG FOR ITS SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON , 1997, AND ANY ADJOURNMENTS AND
POSTPONEMENTS THEREOF (THE "SPECIAL MEETING"). SEE "THE SPECIAL MEETING".
This Prospectus-Proxy Statement describes the terms of the proposed
acquisition by MedPartners of ASG by means of the merger (the "Merger") of ASG
Merger Corporation, a Delaware corporation and a wholly-owned subsidiary of
MedPartners (the "Subsidiary"), with and into ASG, with ASG being the surviving
corporation. After the Merger, the combined operations of MedPartners and ASG
are expected to be conducted with ASG as a subsidiary of MedPartners. At the
Special Meeting, the stockholders of ASG will be asked to approve and adopt the
Plan of Merger (as defined below), which approval and adoption will also
constitute approval of the transactions contemplated thereby, including the
Merger. The Merger will be effected pursuant to the terms, and subject to the
conditions, of the Plan and Agreement of Merger, dated as of October 1, 1997
(the "Plan of Merger"), among MedPartners, the Subsidiary and ASG. The Plan of
Merger is attached to this Prospectus-Proxy Statement as Annex A and is
incorporated herein by reference.
Upon consummation of the Merger, each issued and outstanding share of
common stock, par value $.01 per share, of ASG (the "ASG Common Stock" and
sometimes, collectively, referred to herein as the "ASG Shares") will
automatically be converted into the right to receive 0.71 (the "Exchange Ratio")
of a share of MedPartners Common Stock. Cash will be paid (without interest) in
lieu of fractional shares of MedPartners Common Stock. For a more complete
description of the terms of the Merger, see "The Merger".
On , 1997, the closing price of MedPartners Common Stock on The
New York Stock Exchange was $ . At such price, the equivalent value of a
share of ASG Common Stock would have been $ , calculated on the basis of the
Exchange Ratio (the "Equivalent Value"), and the aggregate value of the Merger
Consideration would be approximately $ million. The actual market price of
the MedPartners Common Stock is subject to fluctuation and could be more or less
than the market price of the MedPartners Common Stock on the date of this
Prospectus-Proxy Statement or the date of the Special Meeting. Any such change
will cause a corresponding change in the Equivalent Value and the aggregate
value of the Merger Consideration. Each ASG stockholder is urged to obtain
updated market information.
All information contained herein with respect to MedPartners and the
Subsidiary has been furnished by MedPartners, and all information contained
herein with respect to ASG has been furnished by ASG. See "Available
Information".
This Prospectus-Proxy Statement, the accompanying Notice of Special Meeting
and the form of Proxy are first being mailed to stockholders of ASG on or about
, 1997.
SEE "RISK FACTORS" AT PAGE 12 FOR A DISCUSSION OF CERTAIN RISK FACTORS
RELATED TO THE MERGER AND TO MEDPARTNERS.
THE SECURITIES TO BE ISSUED HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS-PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus-Proxy Statement is , 1997.
<PAGE> 5
AVAILABLE INFORMATION
MedPartners has filed a Registration Statement (the "Registration
Statement") on Form S-4 under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the "SEC")
covering the shares of MedPartners Common Stock to be issued in connection with
the Merger. This Prospectus-Proxy Statement does not contain all the information
set forth in the Registration Statement which MedPartners has filed with the
SEC. Certain portions have been omitted pursuant to the rules and regulations of
the SEC, and reference is hereby made to such portions for further information
with respect to MedPartners, ASG and the MedPartners Common Stock to be issued
in the Merger. Statements contained herein concerning certain documents are not
necessarily complete, and in each instance, reference is made to the copies of
such documents filed as exhibits to the Registration Statement or incorporated
by reference. Each such statement is qualified in its entirety by such
reference.
MedPartners and ASG are subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (SEC File Nos.
0-27276 and 0-19673, respectively), and in accordance therewith, file periodic
reports, proxy statements and other information with the SEC relating to their
respective businesses, financial statements and other matters. The Registration
Statement, as well as such reports, proxy statements and other information, may
be inspected and copied at prescribed rates at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 and the regional offices of the SEC located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained at prescribed rates by writing to the SEC, Public
Reference Section, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The SEC also maintains a Web site that contains reports, proxy statements
and other information regarding registrants that file electronically with the
SEC. The address of such site is http://www.sec.gov. The MedPartners Common
Stock is listed on The New York Stock Exchange (the "NYSE"). The Registration
Statement, reports, proxy statements and certain other information with respect
to MedPartners can be inspected at the office of the NYSE, 20 Broad Street, New
York, New York 10005. The ASG Common Stock is listed on The Nasdaq Stock Market,
National Market System (the "Nasdaq Stock Market"), and the Registration
Statement, reports, proxy statements and certain other information with respect
to ASG may be inspected at the offices of Nasdaq Operations, 1735 K Street,
N.W., Washington, D.C. 20006 or obtained by calling the Nasdaq Public Reference
Room Disclosure Group at (800) 638-8241.
FORWARD-LOOKING STATEMENTS
This Prospectus-Proxy Statement contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations and business of
MedPartners and ASG. Statements in this document that are not historical facts
are hereby identified as "forward-looking statements" for the purpose of the
safe harbor provided by Section 21E of the Exchange Act and Section 27A of the
Securities Act. MedPartners and ASG caution readers that such "forward-looking
statements", including without limitation, those relating to MedPartners' and
ASG's future business prospects, revenues, working capital, liquidity, capital
needs, interest costs and income, wherever they occur in this document or in
other statements attributable to MedPartners or ASG, are necessarily estimates
reflecting the best judgment of MedPartners' and ASG's senior management and
involve a number of risks and uncertainties that could cause actual results to
differ materially from those suggested by the "forward-looking statements". Such
"forward-looking statements" should, therefore, be considered in light of
various important factors, including those set forth in this Prospectus-Proxy
Statement. Other factors set forth from time to time in MedPartners' and ASG's
reports and registration statements filed with the SEC should also be
considered.
The words "estimate", "project", "intend", "expect" and similar expressions
are intended to identify forward-looking statements. These "forward-looking
statements" are found at various places throughout this document and the other
documents incorporated herein by reference including but not limited to,
MedPartners' and ASG's Annual Reports on Form 10-K (including any amendments
thereto). Additionally, the discussions therein with respect to MedPartners
under the captions "Business of MedPartners --
i
<PAGE> 6
Acquisition Program", "Business of MedPartners -- Industry", "Business of
MedPartners -- Strategy", "Business of MedPartners -- Operations", "Business of
MedPartners -- Government Regulation", "Business of MedPartners -- Corporate
Liability and Insurance", "Business of MedPartners -- Legal Proceedings",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- MedPartners" and with respect to ASG under the captions
"Business -- Correctional Healthcare Services", "Business -- Employees and
Independent Contractors", "Business -- Medical Supplies, Pharmacy and
Prescription Services", "Business -- 1996 Corporate Reorganization", and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are susceptible to the risks and uncertainties discussed herein that
could cause actual results to differ materially from those contemplated in such
forward looking statements. For a discussion of such risks, see "Risk Factors".
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Neither MedPartners nor ASG
undertakes any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. Moreover,
MedPartners and ASG, through senior management, may from time to time make
"forward-looking statements" about the matters described herein or other matters
concerning MedPartners and ASG.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents are hereby incorporated by reference in this
Prospectus-Proxy Statement, all of which were previously filed by MedPartners
with the SEC:
1. MedPartners' Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996.
2. MedPartners' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
3. MedPartners' Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997.
4. MedPartners' Current Report on Form 8-K filed August 27, 1997
(containing audited consolidated financial statements of MedPartners at
December 31, 1996 and for the three years then ended reflecting the
combined operations of MedPartners and InPhyNet Medical Management Inc.).
5. The description of MedPartners' Common Stock contained in
MedPartners' Registration Statement filed with the SEC on Form 8-B under
the Exchange Act and declared effective on November 29, 1995, including any
amendment or reports filed for the purpose of updating such description.
The following documents are hereby incorporated by reference in this
Prospectus-Proxy Statement, all of which were previously filed by ASG with the
SEC:
1. ASG's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
2. ASG's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
3. ASG's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
4. ASG's Current Report on Form 8-K filed October 3, 1997.
5. The description of ASG's Common Stock set forth in ASG's
Registration Statement on Form 8-A filed on November 11, 1991.
Additionally, all documents subsequently filed by MedPartners or ASG
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus-Proxy Statement and prior to the termination of its
offering of the securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus-Proxy Statement. Any statement contained in a
previously filed document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus-Proxy Statement to the
extent that a statement contained herein or in a subsequently filed document
modifies or replaces such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or replaced, to constitute
a part of this Prospectus-Proxy Statement.
THIS PROSPECTUS-PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH
ii
<PAGE> 7
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROSPECTUS-PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST FROM
MEDPARTNERS AT 3000 GALLERIA TOWER, SUITE 1000, BIRMINGHAM, ALABAMA 35244,
ATTENTION: CORPORATE SECRETARY (TELEPHONE (205) 733-8996) AND FROM ASG AT SUITE
300, 105 WESTPARK DRIVE, BRENTWOOD, TENNESSEE 37027, ATTENTION: MICHAEL
CATALANO, SECRETARY (TELEPHONE (615) 373-3100). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY [DATE FIVE BUSINESS
DAYS PRIOR TO THE SPECIAL MEETING].
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS-PROXY STATEMENT, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS-PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS PROSPECTUS-PROXY STATEMENT RELATES
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION CONCERNING MEDPARTNERS OR ASG CONTAINED IN THIS
PROSPECTUS-PROXY STATEMENT SINCE THE DATE OF SUCH INFORMATION. THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO MEDPARTNERS AND ITS SUBSIDIARIES HAS BEEN
SUPPLIED BY MEDPARTNERS; THE INFORMATION CONTAINED HEREIN WITH RESPECT TO ASG
AND ITS SUBSIDIARIES HAS BEEN SUPPLIED BY ASG. THIS PROSPECTUS-PROXY STATEMENT
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE,
ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
PROSPECTUS-PROXY STATEMENT, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION,
TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER,
SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION.
iii
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION....................................... i
FORWARD-LOOKING STATEMENTS.................................. i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... ii
SUMMARY OF PROSPECTUS-PROXY STATEMENT....................... 1
The Companies............................................. 1
MedPartners' Acquisition Program.......................... 2
Recent Developments....................................... 3
Risk Factors.............................................. 3
The Special Meeting....................................... 3
Record Date and Shares Entitled to Vote................... 3
Vote Required............................................. 3
The Merger................................................ 4
Market and Market Prices.................................. 7
Comparative Per Share Information......................... 8
Selected Financial Information -- MedPartners............. 10
Selected Financial Information -- ASG..................... 11
RISK FACTORS................................................ 12
Risks Relating to Integration in Connection with
Acquisitions and the Merger............................ 12
Risks Relating to MedPartners' Growth Strategy;
Integration and Identification of Growth
Opportunities.......................................... 12
Risks Relating to Capitated Nature of Revenues; Control of
Healthcare Costs....................................... 14
Risks Relating to Certain Caremark Legal Matters.......... 15
Risks Relating to Exposure to Professional Liability;
Liability Insurance.................................... 17
Government Regulation..................................... 17
Risks Relating to Pharmacy Licensing and Operation........ 19
Risks Relating to Healthcare Reform; Proposed
Legislation............................................ 19
Anti-Takeover Considerations.............................. 19
Possible Volatility of Stock Price; Risks Relating to
Fixed Exchange Ratio................................... 20
Risks Relating to Federal Income Taxes.................... 20
THE SPECIAL MEETING......................................... 21
General................................................... 21
Date, Place and Time...................................... 21
Record Date, Quorum and Voting............................ 21
Voting Required........................................... 21
Voting and Revocation of Proxies.......................... 21
Solicitation of Proxies................................... 22
THE MERGER.................................................. 22
Terms of the Merger....................................... 22
Background of the Merger.................................. 23
Reasons for the Merger; Recommendation of the ASG Board of
Directors.............................................. 24
Opinion of Financial Advisor to ASG....................... 24
Interests of Certain Persons in the Merger................ 27
Effective Time of the Merger.............................. 28
Appraisal Rights.......................................... 29
Exchange of Certificates.................................. 29
Conditions to the Merger.................................. 30
Representations and Covenants............................. 31
Regulatory Approvals...................................... 31
Business Pending the Merger............................... 32
Waiver and Amendment...................................... 32
Termination............................................... 32
The New York Stock Exchange Listing....................... 33
Resale of MedPartners Common Stock by Affiliates.......... 33
Accounting Treatment...................................... 34
</TABLE>
iv
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Federal Income Tax Consequences........................... 34
No Solicitation of Transactions........................... 35
Expenses.................................................. 35
Indemnification........................................... 35
DESCRIPTION OF CAPITAL STOCK OF MEDPARTNERS................. 36
Authorized Capital Stock.................................. 36
Common Stock.............................................. 36
Preferred Stock........................................... 36
Certain Provisions of the Certificate of Incorporation and
the DGCL............................................... 36
Stockholder Rights Plan................................... 37
Limitations on Liability of Officers and Directors........ 39
Registration Rights....................................... 40
Transfer Agent and Registrar.............................. 40
COMPARISON OF RIGHTS OF ASG STOCKHOLDERS AND MEDPARTNERS
STOCKHOLDERS.............................................. 41
Classes and Series of Capital Stock....................... 41
Size and Election of the Board of Directors............... 41
Removal of Directors...................................... 42
Conversion and Dissolution................................ 42
Amendment or Repeal of the Certificate of Incorporation
and Bylaws............................................. 42
Stockholder Rights Plan................................... 43
Advance Notice Provisions for Stockholder Proposals and
Stockholder Nominations of Directors................... 43
Action by Written Consent................................. 44
OWNERSHIP OF COMMON STOCK OF ASG............................ 45
Principal Stockholders.................................... 45
Information as to Directors and Executive Officers........ 46
EXPERTS..................................................... 49
ASG STOCKHOLDER PROPOSALS................................... 50
LEGAL MATTERS............................................... 50
OTHER BUSINESS.............................................. 50
ANNEXES:
A. PLAN AND AGREEMENT OF MERGER DATED AS OF OCTOBER 1, 1997
BY AND AMONG MEDPARTNERS, INC., ASG MERGER CORPORATION
AND AMERICA SERVICE GROUP INC............................ A-1
B. FORM OF OPINION OF EQUITABLE SECURITIES CORPORATION...... B-1
C. ASG PROXY................................................ C-1
</TABLE>
v
<PAGE> 10
SUMMARY OF PROSPECTUS-PROXY STATEMENT
The following is a summary of certain information contained elsewhere in
this Prospectus-Proxy Statement or incorporated by reference herein. Certain
capitalized terms used in this Summary are defined elsewhere in this
Prospectus-Proxy Statement. Reference is made to, and this Summary is qualified
in its entirety by, the more detailed information contained or incorporated by
reference in this Prospectus-Proxy Statement and in the Annexes hereto.
Shareholders of ASG are urged to read this Prospectus-Proxy Statement, the
Annexes hereto and the documents incorporated herein by reference in their
entirety.
THE COMPANIES
MedPartners. MedPartners is the largest physician practice management
("PPM") company in the United States, based on revenues. MedPartners develops,
consolidates and manages comprehensive integrated healthcare delivery systems,
consisting of primary care and specialty physicians, as well as the nation's
largest group of physicians engaged in the delivery of emergency medicine and
other hospital-based services. MedPartners provides services to prepaid managed
care enrollees and fee-for-service patients in 37 states through its network of
13,128 affiliated physicians. As an integral part of its PPM business,
MedPartners operates one of the nation's largest independent pharmacy benefit
management ("PBM") programs and provides disease management services and
therapies for patients with certain chronic conditions.
MedPartners affiliates with physicians who are seeking the resources
necessary to function effectively in healthcare markets that are evolving from
fee-for-service to managed care payor systems. MedPartners enhances clinic
operations by centralizing administrative functions and introducing management
tools, such as clinical guidelines, utilization review and outcomes measurement.
MedPartners provides affiliated physicians with access to capital and advanced
management information systems. In addition, MedPartners contracts with health
maintenance organizations and other third-party payors that compensate
MedPartners and its affiliated physicians on a prepaid basis (collectively,
"HMOs"), as well as hospitals and outside providers on behalf of its affiliated
physicians. These relationships provide physicians with the opportunity to
operate under a variety of payor arrangements and increase their patient flow.
MedPartners also operates the largest hospital-based physician ("HBP") group in
the country with over 2,200 physicians providing emergency medicine, radiology,
anesthesiology, primary care and other hospital-based physician services. In
addition, MedPartners provides comprehensive medical care for inmates at various
correctional institutions and for military personnel and their dependents at
facilities owned by the Department of Defense.
MedPartners manages outpatient prescription drug benefit programs for
clients throughout the United States, including corporations, insurance
companies, unions, government employee groups and managed care organizations.
MedPartners dispenses over 43,000 prescriptions daily through four mail service
pharmacies and manages patients' immediate prescription needs through a network
of retail pharmacies. MedPartners is in the process of integrating its PBM
program with the PPM business by providing pharmaceutical services to affiliated
physicians, clinics and HMOs. MedPartners' disease management services are
intended to meet the healthcare needs of individuals with chronic diseases or
conditions. These services include the design, development and management of
comprehensive programs that comprise drug therapies, physician support and
patient education. MedPartners currently provides therapies and services for
individuals with such conditions as hemophilia, growth disorders, immune
deficiencies, genetic emphysema, cystic fibrosis and multiple sclerosis.
The principal executive office of MedPartners is located at 3000 Galleria
Tower, Suite 1000, Birmingham, Alabama 35244, and its telephone number is (205)
733-8996.
ASG. America Service Group Inc. ("ASG"), primarily through its subsidiary
Prison Health Services ("PHS"), enters into capitated (fixed-fee per person
covered, with certain adjustments) contracts and other contractual arrangements
with state, county, and local government agencies to provide comprehensive
healthcare services to prison and jail inmates. ASG focuses its services on
facilities with an average daily population of over 300 inmates. The services
provided include a wide range of on-site healthcare programs, as well as
off-site hospitalization and specialty out-patient care. Medical services
provided on-site include
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<PAGE> 11
physical and mental health screening, dental screening and care, psychiatric
care, OB-GYN screening and care, and diagnostic testing. Off-site services
include specialty out-patient diagnostic testing and care, emergency room care,
surgery and hospitalization.
In addition, ASG provides administrative support services both on-site and
at ASG's headquarters and regional offices. ASG also maintains a utilization
review system to monitor the expense and duration of most healthcare services
required by inmates on an in-patient and out-patient basis. Also, through its
subsidiary UniSource, Inc. ("UniSource"), ASG sells pharmaceutical-related
products and distributes medical supplies to various institutions but primarily
to those for which PHS delivers healthcare services.
ASG is incorporated under the laws of the State of Delaware. ASG Common
Stock is currently traded on The Nasdaq Stock Market under the symbol "ASGR".
Unless the context otherwise requires, references to ASG include America Service
Group Inc. and its subsidiaries.
ASG's principal executive office is located at Suite 300, 105 Westpark
Drive, Brentwood, Tennessee 37027, and its telephone number is (615) 373-3100.
ASG Merger Corporation. The Subsidiary is a newly formed, wholly owned
subsidiary of MedPartners and has not engaged in any business activity unrelated
to the Merger. The principal executive office of the Subsidiary is located at
3000 Galleria Tower, Suite 1000, Birmingham, Alabama 35244, and its telephone
number is (205) 733-8996.
MEDPARTNERS' ACQUISITION PROGRAM
MedPartners believes it is the leading consolidator in the PPM industry.
MedPartners' acquisition strategy is to develop locally prominent, integrated
healthcare delivery networks that provide high quality, cost-effective
healthcare in selected geographic markets. MedPartners implements this strategy
through growth in its existing markets, expansion into new markets through
acquisitions and affiliations and through the implementation of comprehensive
healthcare solutions for patients, physicians and payors. In pursuing its
acquisition strategy, MedPartners creates strategic alliances with hospital
partners and HMOs. As an integral element of these alliances, MedPartners
utilizes sophisticated information systems to improve the operational efficiency
of, and to reduce the operating costs associated with, MedPartners' networks and
the practices of affiliated physicians. MedPartners' principal methods of
expansion are the acquisition of PPM businesses and affiliations with physician
and medical groups.
In June 1997, MedPartners acquired InPhyNet Medical Management Inc.
("InPhyNet"), a publicly traded PPM company based in Fort Lauderdale, Florida
and specializing in HBP operations and correctional care, in exchange for
approximately 19.3 million shares of MedPartners Common Stock having a total
value of approximately $413 million, creating the largest HBP group in the
United States. The acquisition of InPhyNet was accounted for as a pooling of
interests.
In September 1996, MedPartners acquired Caremark International Inc.
("Caremark"), a publicly traded PPM and PBM company based in Northbrook,
Illinois, in exchange for approximately 90.5 million shares of MedPartners
Common Stock having a total value of approximately $1.8 billion (the "Caremark
Acquisition"), creating the largest PPM business in the United States. Caremark
provided PPM services to approximately 1,000 affiliated physicians.
In November 1995, MedPartners acquired Mullikin Medical Enterprises, L.P.
("MME"), a privately held PPM entity based in Long Beach, California, in
exchange for approximately 13.5 million shares of MedPartners Common Stock
having a total value of approximately $384.1 million. MME provided PPM services
to approximately 400 group and 2,600 IPA physicians. In February 1996,
MedPartners acquired Pacific Physician Services, Inc. ("PPSI"), a publicly
traded PPM company based in Redlands, California, in exchange for approximately
11.0 million shares of MedPartners Common Stock having a total value of
approximately $341.8 million. PPSI provided PPM services to approximately 710
group and 100 IPA physicians. PPSI had acquired Team Health, Inc. ("Team
Health"), based in Knoxville, Tennessee in
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<PAGE> 12
June 1995. Team Health primarily manages physicians and other healthcare
professionals engaged in the delivery of emergency medicine and hospital-based
primary care.
MedPartners had affiliated with 190 physicians through December 31, 1994
(without giving effect to physicians who became affiliated with MedPartners
through acquisitions that were accounted for as poolings of interests). As of
June 30, 1997, MedPartners had affiliated with approximately 13,128 physicians.
RECENT DEVELOPMENTS
On September 23, 1997, MedPartners completed a cash tender offer to
purchase all of the issued and outstanding common stock, par value $.01 per
share, of Talbert Medical Management Holdings Corporation ("Talbert") at a price
of $63.00 net per share in cash or an aggregate acquisition price of
approximately $200 million. Ninety-nine percent of the shares were tendered and
purchased. Talbert is a physician practice management company representing 282
primary and specialty care physicians and operating 52 clinics in five
Southwestern states.
RISK FACTORS
Certain factors to be considered in connection with an investment in
MedPartners Common Stock and approval of the Merger are set forth under "Risk
Factors". These risk factors include risks associated with the Merger and
MedPartners' growth strategy in general, and risks associated with the
businesses of MedPartners and ASG, including: capital requirements; the
capitated nature of revenues; control of healthcare costs; reduction in third
party reimbursement; dependence on affiliated physicians; federal income taxes;
certain Caremark legal matters; professional liability concerns; competition;
government regulation; pharmacy licensing and operations; healthcare reform; the
risks associated with a fixed Exchange Ratio; and possible volatility of
MedPartners' stock price. For a complete discussion of the risk factors, see
"Risk Factors".
THE SPECIAL MEETING
At the Special Meeting and any adjournment or postponement thereof, the
stockholders of ASG will be asked to consider and vote upon the proposal to
approve and adopt the Plan of Merger and the transactions contemplated thereby.
The Special Meeting is to be held on , 1997, at a.m., local
time, at , , , . Only stockholders of
record at the close of business on the Record Date will be entitled to notice
of, and to vote at, the Special Meeting. The enclosed proxy card, the
accompanying Notice of Special Meeting of Stockholders and this Prospectus-Proxy
Statement are being first mailed to stockholders of ASG on or about ,
1997. For additional information relating to the Special Meeting, see "The
Special Meeting".
RECORD DATE AND SHARES ENTITLED TO VOTE
Only stockholders of record at the close of business on , 1997
(the "Record Date") will be entitled to notice of, and to vote at, the Special
Meeting. As of the Record Date, there were shares of ASG Common Stock
issued and outstanding. Holders of record of ASG Common Stock on the Record Date
for the Special Meeting are entitled to one vote per share on any matter that
may properly come before the Special Meeting.
VOTE REQUIRED
Approval and adoption of the Plan of Merger by the stockholders of ASG
require the affirmative vote of a majority of the issued and outstanding shares
of ASG Common Stock as of the Record Date. Because the required vote of ASG
stockholders to approve the Plan of Merger is based upon the total number of
outstanding shares, the failure to submit a proxy card (or to vote in person at
the Special Meeting) or the abstention from voting by an ASG stockholder
(including broker non-votes) will have the same effect as a
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<PAGE> 13
vote "against" the approval and adoption of the Plan of Merger. The affirmative
vote of the holders of shares of ASG Common Stock is required to
approve the Plan of Merger. As of the Record Date, directors and executive
officers of ASG owned in the aggregate shares of ASG Common Stock
(or approximately % of the outstanding shares of ASG Common Stock). All
the directors and executive officers of ASG have indicated their present intent
to vote all of the shares of ASG Common Stock beneficially owned by them in
favor of the Plan of Merger and the transactions contemplated thereby. See "The
Special Meeting -- Vote Required" and "The Merger -- Conditions to the Merger".
THE MERGER
Terms of the Merger. Upon consummation of the Merger, each ASG Share will
be converted into the right to receive 0.71 of a share of MedPartners Common
Stock and cash paid in lieu of fractional shares. For example, if an ASG
stockholder owned 100 shares of ASG Common Stock at the time the Merger is
consummated (the "Effective Time"), that stockholder would receive 71 shares of
MedPartners Common Stock. In addition, all outstanding and unexercised options
to acquire ASG Common Stock will be adjusted at the Effective Time to permit
them to remain outstanding and become exercisable for MedPartners Common Stock
as more fully described in the Plan of Merger. Each outstanding share of
MedPartners Common Stock will remain outstanding and unchanged following the
Merger. See "The Merger -- Terms of the Merger".
On , 1997, the closing price of MedPartners Common Stock on the
NYSE was $ . At such price, the Equivalent Value of a share of ASG Common
Stock would be $ and the aggregate value of the Merger Consideration would
be approximately $ million. The actual market price of the MedPartners
Common Stock is subject to fluctuations and could be more or less than its
market price on the date of this Prospectus-Proxy Statement or on the date of
the Special Meeting. Any such change will cause a corresponding change in the
Equivalent Value and the aggregate value of the Merger Consideration. See "Risk
Factors -- Possible Volatility of Stock Price; Risks Relating to Fixed Exchange
Ratio". ASG stockholders are urged to obtain updated market information
concerning the shares of MedPartners Common Stock and to review the historical
trading prices of the MedPartners Common Stock. See "-- Market and Market
Prices". ASG stockholders may obtain updated information regarding the market
prices for the MedPartners Common Stock by calling toll-free 1-800-563-7126.
Recommendation of the ASG Board of Directors. THE BOARD OF DIRECTORS OF
ASG HAS DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF ASG AND ITS
STOCKHOLDERS, HAS APPROVED THE MERGER, HAS APPROVED AND ADOPTED THE PLAN OF
MERGER AND RECOMMENDS THAT THE ASG STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE
THE PLAN OF MERGER.
Opinion of Financial Advisor to ASG. Equitable Securities Corporation
("Equitable"), which has acted as financial advisor to ASG in connection with
the Merger, has rendered its opinion to ASG's Board of Directors that, as of the
date of such opinion, the Merger Consideration is fair, from a financial point
of view, to ASG and its stockholders. A copy of such opinion is attached as
Annex B to this Prospectus-Proxy Statement. ASG's stockholders are urged to, and
should, read such opinion carefully in its entirety in conjunction with this
Prospectus-Proxy Statement for assumptions made, matters considered and the
limits of the review by Equitable. See "The Merger -- Opinion of Financial
Advisor to ASG".
Interests of Certain Persons in the Merger. In considering the
recommendation of the Board of Directors of ASG with respect to the Plan of
Merger, ASG stockholders should be aware that certain members of ASG's
management have certain interests in the Merger that are in addition to, or
different from, the interests of the stockholders of ASG generally. See "The
Merger -- Interests of Certain Persons in the Merger".
Appraisal Rights. Holders of ASG Common Stock are not entitled to
appraisal rights in connection with the Merger. See "The Merger -- Appraisal
Rights".
Effective Time of the Merger. The Merger will become effective upon the
filing of a Certificate of Merger by the Subsidiary and ASG under the General
Corporation Law of the State of Delaware (the "DGCL"), or at such later time as
may be specified in such Certificate of Merger. The Plan of Merger
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<PAGE> 14
requires that this filing be made as soon as practicable on or after the date of
the consummation of the Merger. If the Plan of Merger is approved by the
stockholders of ASG, it is presently anticipated that such filing will be made
as soon as practicable after the Special Meeting on , 1997, and that
the Effective Time will occur upon such filing, although there can be no
assurance as to whether or when the Merger will occur. See "The
Merger -- Effective Time of the Merger" and "Risk Factors -- Possible Volatility
of Stock Price; Risks Relating to Fixed Exchange Ratio".
Exchange of Certificates. As soon as reasonably practicable but no later
than ten business days on or after the Effective Time, transmittal materials
will be provided to each holder of record of ASG Shares for use in exchanging
such holder's stock certificates for certificates evidencing shares of
MedPartners Common Stock and for receiving cash in lieu of fractional shares.
CERTIFICATES OF ASG COMMON STOCK SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL AND INSTRUCTIONS ARE OBTAINED AND THEN SHOULD BE SURRENDERED ONLY IN
ACCORDANCE WITH SUCH INSTRUCTIONS. See "The Merger -- Exchange of Certificates".
Conditions to the Merger. The obligation of each of MedPartners, the
Subsidiary and ASG to consummate the Merger is subject to certain conditions.
See "The Merger -- Conditions to the Merger".
Representations and Covenants. At the time the Plan of Merger was
executed, MedPartners and ASG each made a number of representations regarding
the organization and capital structures of the respective companies and their
affiliates, their operations, financial condition and other matters, including
their authority to enter into the Plan of Merger and to consummate the Merger.
These representations and warranties will be reconfirmed at the consummation of
the Merger. Under the Plan of Merger, ASG has agreed not to, directly or
indirectly, furnish information or access, in response to unsolicited requests
therefor, to any corporation, partnership, person or other entity or group,
participate in discussions and negotiate with such corporation, partnership,
person or other entity or group concerning any proposal to acquire such party
upon a merger, purchase of assets, purchase of or tender offer for shares of its
common stock or similar transaction. See "The Merger -- Representations and
Covenants" and "-- No Solicitation of Transactions".
Regulatory Approvals. The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") provides that certain business mergers
(including the Merger) may not be consummated until certain information has been
furnished to the United States Department of Justice (the "DOJ") and the United
States Federal Trade Commission (the "FTC"), and certain waiting period
requirements (including any extensions thereof) have been satisfied. MedPartners
and ASG each made their respective filings with the DOJ and the FTC on October
, 1997. Under the HSR Act, these filings commenced a 30-day waiting period
during which the Merger may not be consummated. Notwithstanding the termination
of the waiting period on , 1997, the FTC, the DOJ or others could
take action under the antitrust laws, including seeking to enjoin the
consummation of the Merger or, after the Effective Time, seeking the divestiture
by MedPartners of all or any part of the assets of ASG acquired in the Merger.
There can be no assurance that a challenge to the Merger on antitrust grounds
will not be made or, if such a challenge was made, that it would not be
successful. See "The Merger -- Regulatory Approvals".
Business Pending the Merger. The Plan of Merger provides that, until the
Effective Time, except as otherwise provided in the Plan of Merger, ASG will use
its reasonable best efforts to preserve intact its present business organization
and to preserve its relationships with customers, suppliers and others having
business dealings with ASG. ASG has also agreed to abide by certain restrictions
and limitations with respect to its business (as set forth in the Plan of
Merger) prior to the Effective Time and to cooperate on certain matters relating
to the Merger. See "The Merger -- Business Pending the Merger".
Waiver and Amendment. The Plan of Merger provides that, at any time prior
to the Effective Time, MedPartners and the Subsidiary, on the one hand, and ASG,
on the other hand, may, under certain circumstances, waive compliance with
covenants or conditions for the benefit of that company or amend or otherwise
change the Plan of Merger. Under the Plan of Merger and the DGCL, if the Plan of
Merger is approved at the Special Meeting, the Board of Directors of ASG may not
amend or waive any covenant or condition in a manner that would adversely affect
the stockholders of ASG without the requisite approval of ASG's stockholders.
Any determination to amend the Plan of Merger or waive a covenant or condition
and to obtain stockholder approval, if required, would depend on the facts and
circumstances existing at the time of
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<PAGE> 15
such amendment or waiver and would be made by ASG's Board of Directors,
exercising its fiduciary duties and in compliance with Delaware law. As of the
date of this Prospectus-Proxy Statement, the parties to the Plan of Merger have
no reason to believe that any of the material conditions to the Merger will not
be satisfied. See "The Merger -- Waiver and Amendment".
Termination. The Plan of Merger may be terminated prior to the Effective
Time, and whether or not the Plan of Merger has been approved by the
stockholders of ASG, if, among other things, (i) any court of competent
jurisdiction or other governmental entity shall have issued an order permanently
enjoining, restraining or otherwise prohibiting the Merger, and such order shall
have become final and nonappealable; (ii) the Merger shall not have occurred on
or before March 31, 1998 other than due to the willful breach of the Plan of
Merger by the party seeking to terminate the Plan of Merger; (iii) at the option
of ASG if the average closing price per share of the MedPartners Common Stock as
reported on the New York Stock Exchange Composite Tape, during any consecutive
thirty trading day period between October 1, 1997 and the date five trading days
before the Special Meeting is less than $17.50; or (iv) ASG's Board of
Directors, in the exercise of its fiduciary obligations, withdraws its
recommendation of the Merger or recommends approval of another Acquisition
Transaction (as defined herein). See "The Merger -- Termination".
Accounting Treatment. It is expected that the Merger will be accounted for
as a pooling of interests under generally accepted accounting principles. The
consummation of the Merger is conditioned upon ASG and MedPartners receiving
letters at the closing from Ernst & Young LLP, as independent auditors of
MedPartners, regarding such firm's concurrence with the conclusions of
management of both ASG and MedPartners as to the appropriateness of pooling of
interests accounting for the Merger under Accounting Principles Board ("APB")
Opinion No. 16 if the Merger is closed and consummated in accordance with the
Plan of Merger. See "The Merger -- Accounting Treatment".
Federal Income Tax Consequences. The Merger is expected to qualify as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"); however, neither MedPartners nor ASG has
requested or will receive an advance ruling from the Internal Revenue Service.
Instead, Haskell Slaughter & Young, L.L.C., counsel to MedPartners, and King &
Spalding, counsel to ASG, have each delivered opinions to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code. These opinions are based on federal income tax laws in existence at
the time such opinions were delivered, facts and assumptions of fact described
therein and upon certain customary representations provided by MedPartners, ASG
and certain ASG stockholders. Collectively, the opinions of counsel state, among
other matters, that: (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, and MedPartners, the Subsidiary and ASG
will each be a party to the reorganization within the meaning of Section 368(b)
of the Code; (ii) no gain or loss will be recognized by MedPartners, ASG or the
Subsidiary as a result of the Merger; (iii) no gain or loss will be recognized
by an ASG stockholder who receives solely shares of MedPartners Common Stock in
exchange for ASG Shares; (iv) the receipt of cash in lieu of fractional shares
of MedPartners Common Stock will be treated as if the fractional shares were
distributed as part of the exchange and then were redeemed by MedPartners; (v)
the tax basis of the shares of MedPartners Common Stock received by an ASG
stockholder will be equal to the tax basis of the ASG Shares exchanged therefor,
excluding any basis allocable to a fractional share of MedPartners Common Stock
for which cash is received; and (vi) the holding period of the shares of
MedPartners Common Stock received by an ASG stockholder will include the holding
period or periods of the ASG Shares exchanged therefor, provided that the ASG
Shares are held as a capital asset within the meaning of Section 1221 of the
Code at the Effective Time. See "The Merger -- Federal Income Tax Consequences".
EACH HOLDER OF ASG SHARES IS URGED TO CONSULT HIS OR HER OWN PERSONAL TAX
AND FINANCIAL ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER, AS WELL AS ANY APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX
CONSEQUENCES, BASED UPON SUCH HOLDER'S OWN PARTICULAR FACTS AND CIRCUMSTANCES.
Resale Restrictions. All shares of MedPartners Common Stock received by
ASG stockholders in the Merger will be freely transferable, except that shares
of MedPartners Common Stock received by persons who
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are deemed to be "affiliates" (as such term is defined under the Securities Act)
of ASG at the time of the Special Meeting may be resold by them only in certain
permitted circumstances under the Securities Act, other applicable securities
laws and rules related to pooling of interests accounting treatment. See "The
Merger -- Resale of MedPartners Common Stock by Affiliates".
NYSE Listing. A subsequent listing application will be filed with the NYSE
to list the shares of MedPartners Common Stock to be issued to the ASG
stockholders upon consummation of the Merger. Although no assurance can be given
that the NYSE will accept such shares of MedPartners Common Stock for listing,
MedPartners anticipates that these shares will qualify for listing. See "The
Merger -- The New York Stock Exchange Listing". The consummation of the Merger
is conditioned upon the listing of the shares of MedPartners Common Stock to be
issued in the Merger on the NYSE.
MARKET AND MARKET PRICES
Prior to February 21, 1995, the effective date of the initial public
offering of MedPartners, there was no public market for the MedPartners Common
Stock. The MedPartners Common Stock traded on the Nasdaq Stock Market under the
symbol "MPTR" from February 21, 1995 until February 21, 1996. On February 22,
1996, the MedPartners Common Stock was listed on the NYSE under the symbol
"MDM".
The following table sets forth for the quarterly periods indicated the high
and low reported bid prices for the MedPartners Common Stock as reported on the
Nasdaq Stock Market through February 21, 1996 and thereafter as reported on the
NYSE Composite Tape.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995
First Quarter (from February 21)............................ $24.00 $14.75
Second Quarter.............................................. 24.50 17.75
Third Quarter............................................... 30.00 18.00
Fourth Quarter.............................................. 33.00 26.00
1996
First Quarter............................................... $34.75 $28.50
Second Quarter.............................................. 30.25 20.13
Third Quarter............................................... 23.13 16.63
Fourth Quarter.............................................. 24.50 19.88
1997
First Quarter............................................... $24.63 $18.63
Second Quarter.............................................. 22.38 18.00
Third Quarter............................................... 24.06 20.31
Fourth Quarter (through , 1997)...................
</TABLE>
There were approximately 43,210 holders of record of the MedPartners Common
Stock as of May 1, 1997.
Restrictions contained in the credit facility between MedPartners and
NationsBank, National Association (South), as administrative agent for itself
and the other lenders party thereto, limit the payment of non-stock dividends on
the MedPartners Common Stock.
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The ASG Common Stock is listed on the Nasdaq Stock Market under the symbol
"ASGR". The following table sets forth the high and low bid prices for the ASG
Common Stock through , 1997 for the quarterly periods indicated as
reported on the Nasdaq Stock Market:
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
1995
First Quarter............................................... $ 5.88 $ 4.13
Second Quarter.............................................. 6.38 4.88
Third Quarter............................................... 6.38 5.25
Fourth Quarter.............................................. 9.75 5.88
1996
First Quarter............................................... $ 9.00 $ 6.88
Second Quarter.............................................. 21.25 9.75
Third Quarter............................................... 17.50 10.75
Fourth Quarter.............................................. 15.75 9.13
1997
First Quarter............................................... $ 13.63 $ 9.25
Second Quarter.............................................. 14.75 9.25
Third Quarter............................................... 15.75 14.00
Fourth Quarter (through , 1997).................
</TABLE>
There were approximately 2,600 holders of record of the ASG Common Stock as
of March 25, 1997.
ASG has not declared cash dividends on its Common Stock since prior to its
initial public offering effective November 21, 1991, and does not currently
anticipate paying any dividends in the foreseeable future. ASG currently
anticipates that it will retain any future earnings for use in its business.
Restrictions contained in the credit facility, between ASG, Prison Health
Services, Inc., Unisource, Inc. and NationsBank of Tennessee, a national banking
association, limit the payment of cash dividends on the ASG Common Stock.
On September 30, 1997, the trading day immediately preceding the public
announcement of the proposed Merger, the high and low sale prices of the
MedPartners Common Stock as reported on the NYSE Composite Tape were $22.50 and
$21.25, respectively, and the high and low sales prices for the ASG Common Stock
as reported on the Nasdaq Stock Market were $15.75 and $15.38, respectively.
STOCKHOLDERS OF ASG ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
MEDPARTNERS COMMON STOCK. No assurance can be given as to the market price of
MedPartners Common Stock at the Effective Time or at any other time.
COMPARATIVE PER SHARE INFORMATION
The following summary presents selected comparative per share information
for (i) MedPartners on a historical basis in comparison with pro forma
information giving effect to the Merger on a pooling of interests basis, and
(ii) ASG on a historical basis in comparison with pro forma equivalent
information after giving effect to the Merger, assuming that 0.71 of a share of
MedPartners Common Stock is issued in exchange for each ASG Share in the Merger.
The historical and pro forma financial information should be read in conjunction
with the historical consolidated financial statements of MedPartners, the
historical consolidated financial statements of ASG and the related notes
thereto incorporated herein by reference. See "Incorporation of Certain
Information by Reference".
MedPartners has not paid cash dividends since inception. It is anticipated
that MedPartners will retain all earnings for use in the expansion of its
business and therefore does not anticipate paying any cash dividends in the
foreseeable future. The payment of future dividends will be at the discretion of
the Board of Directors of MedPartners and will depend, among other things, upon
MedPartners' earnings, capital requirements, financial condition and debt
covenants.
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The following information is not necessarily indicative of the combined
results of operations or combined financial position that would have resulted
had the Merger been consummated at the beginning of the periods indicated, nor
is it necessarily indicative of the future combined results of operations or
financial position.
<TABLE>
<CAPTION>
PER COMMON AND COMMON EQUIVALENT SHARES
---------------------------------------------------------------------
INCOME (LOSS)
------------------------------------------
SIX MONTHS STOCKHOLDERS' EQUITY
ENDED (BOOK VALUE)
YEAR ENDED DECEMBER 31, JUNE 30, -----------------------
------------------------ --------------- DECEMBER 31, JUNE 30,
1994 1995 1996 1996 1997 1996 1997
----- ------ ------ ------ ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss):
MedPartners
Historical(1)................ $0.61 $(0.66) $(0.83) $(0.15) $(0.15) $ 4.81 $4.56
Pro forma combined........... 0.61 (0.65) (0.87) (0.18) (0.15) 4.76 4.52
ASG
Historical................... 0.31 0.21 (2.81) (1.60) 0.28 0.78 1.11
Pro forma equivalent(2)...... 0.43 (0.46) (0.62) (0.13) (0.11) 3.38 3.21
Income (loss) from continuing
operations(3):
MedPartners
Historical(3)................ 0.43 0.20 (0.44) 0.25 0.25
Pro forma combined........... 0.43 0.20 (0.48) 0.22 0.25
ASG
Historical................... 0.31 0.21 (2.81) (1.60) 0.28
Pro forma equivalent(2)...... 0.31 0.14 (0.34) 0.16 0.18
</TABLE>
- ---------------
(1) MedPartners' historical pro forma net income (loss) per common share is
computed, after adjusting historical net income for the estimated tax
provision applicable to the pooled companies, by dividing net income (loss)
by the number of common equivalent shares outstanding during the period in
accordance with the applicable rules of the SEC. All stock options and
warrants issued have been considered as outstanding common share
equivalents, even if anti-dilutive, under the treasury stock method. Shares
of MedPartners Common Stock issued in February 1995 upon conversion of the
then outstanding convertible preferred stock are assumed to be common share
equivalents.
(2) ASG pro forma equivalent per common share data is calculated by multiplying
the MedPartners pro forma combined amounts by the Exchange Ratio of 0.71.
(3) Income (loss) from continuing operations per share data is computed, after
adjusting historical net income (loss) to eliminate the effects of
discontinued operations, by dividing adjusted net income (loss) by the
number of common equivalent shares outstanding during the period in
accordance with applicable rules of the SEC. All stock options issued have
been considered as outstanding common share equivalents, even if
anti-dilutive, under the treasury stock method. Shares of MedPartners Common
Stock issued in February 1995, upon conversion of the then outstanding
Convertible Preferred Stock, are assumed to be common share equivalents. The
pro forma combined per share data for income (loss) from continuing
operations relates to Caremark excluding results from its Clozaril(R)
Patient Management System, Home Infusion business, Oncology Management
Service business, Caremark Orthopedic Services Inc. subsidiary and
Nephrology Services division, all of which have been reflected as
discontinued operations in accordance with APB Opinion No. 30 -- Reporting
the Results of Operations -- Effects of Disposal of a Segment of a Business
and Extraordinary, Unusual and Infrequently Occurring Events & Transactions.
9
<PAGE> 19
SELECTED FINANCIAL INFORMATION -- MEDPARTNERS
The selected consolidated financial data of MedPartners for, and as of the
end of, each of the periods indicated in the five-year period ended December 31,
1996, have been derived from the audited consolidated financial statements of
MedPartners. The selected consolidated financial data for each of the six months
ended June 30, 1996 and 1997, and as of June 30, 1997, have been derived from
the unaudited consolidated financial statements of MedPartners, which reflect,
in the opinion of management of MedPartners, all adjustments (which include only
normal recurring adjustments) necessary for the fair presentation of the
financial data for such periods. The results for such interim periods are not
necessarily indicative of the results for the full year. The selected financial
data should be read in conjunction with the consolidated financial statements of
MedPartners and the notes thereto which have been incorporated by reference
herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.............. $1,484,027 $1,980,967 $2,909,024 $3,908,717 $5,222,019 $2,524,407 $3,028,533
Income (loss) from
continuing
operations............. $ 25,351 $ 55,017 $ 63,510 $ 32,189 $ (76,790) $ 42,393 $ 46,445
Income (loss) from
discontinued
operations............. $ 5,858 $ 30,808 $ 25,902 $ (136,528) $ (68,698) $ (68,698) $ (75,434)
Net income (loss)........ $ 31,209 $ 85,825 $ 89,412 $ (104,339) $ (145,488) $ (26,305) $ (28,989)
Income (loss) per share
from continuing
operations(1).......... $ 0.24 $ 0.42 $ 0.43 $ 0.20 $ (0.44) $ 0.25 $ 0.25
Income (loss) per share
from discontinued
operations(1).......... $ 0.05 $ 0.24 $ 0.18 $ (0.86) $ (0.39) $ (0.40) $ (0.40)
Net income (loss) per
share(1)............... $ 0.29 $ 0.66 $ 0.61 $ (0.66) $ (0.83) $ (0.15) $ (0.15)
Number of shares used in
net income (loss) per
share calculations..... 107,460 130,903 146,773 158,109 174,269 171,889 187,192
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 40,249 $ 44,852 $ 101,101 $ 87,581 $ 127,397 $ 134,162
Working capital..................... 158,634 251,736 180,198 286,166 226,409 277,766
Total assets........................ 832,671 1,117,557 1,682,345 1,964,130 2,423,120 2,661,509
Long-term debt, less current
portion........................... 92,873 177,141 394,811 541,391 715,996 926,524
Total stockholders' equity.......... 395,441 491,039 644,918 674,442 837,408 853,061
</TABLE>
- ---------------
(1) Income (loss) per share amounts are computed by dividing income (loss) by
the number of common equivalent shares outstanding during the periods
presented in accordance with the applicable rules of the Commission. All
stock options issued have been considered as outstanding common equivalent
shares for all periods presented, even if anti-dilutive, under the treasury
stock method. Shares of MedPartners Common Stock issued in February 1995
upon conversion of the then outstanding convertible preferred stock are
assumed to be common equivalent shares for all periods presented.
10
<PAGE> 20
SELECTED FINANCIAL INFORMATION -- ASG
The selected consolidated financial data of ASG for, and as of the end of,
each of the periods indicated in the five-year period ended December 31, 1996,
have been derived from the audited consolidated financial statements of ASG. The
selected consolidated financial data for each of the six months ended June 30,
1996 and 1997, and as of June 30, 1997, have been derived from the unaudited
consolidated financial statements of ASG, which reflect, in the opinion of
management of ASG, all adjustments (which include only normal recurring
adjustments) necessary for the fair presentation of the financial data for such
periods. The results for such interim periods are not necessarily indicative of
the results for the full year. The selected financial data should be read in
conjunction with ASG's consolidated financial statements, including the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated herein by reference from ASG's Annual Report
on Form 10-K for the period ended December 31, 1996.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $77,530 $108,932 $109,983 $115,238 $152,282 $77,934 $78,687
Gross margin................ 10,602 10,256 10,983 12,088 6,664 2,729 5,584
Income (loss) before taxes
(benefits) & extraordinary
item...................... 2,806 363 1,646 1,146 (9,933) (5,590) 940
Income (loss) before
extraordinary item........ 1,776 225 996 687 (8,686) (3,351) 940
Extraordinary item(1)....... (1,710) -- -- -- -- -- --
Net income (loss)
attributable to common
shares.................... 66 225 996 687 (8,912) (4,879) 997
Income (loss) per common and
common equivalent share --
before extraordinary
item...................... $ 0.49 $ 0.07 $ 0.31 $ 0.21 $ (2.81) $ (1.60) 0.28
Net income (loss) per common
and common equivalent
share..................... $ 0.02 $ 0.07 $ 0.31 $ 0.21 $ (2.81) $ (1.60) 0.28
Weighted average common and
common equivalent shares
outstanding............... 3,608 3,254 3,219 3,335 3,171 3,051 3,602
BALANCE SHEET DATA:
Working capital (deficit)... $ 3,128 $ (399) $ 2,302 $ 2,692 $ (3,466) $ (162) $ 421
Total assets................ 25,012 34,634 32,108 42,501 46,457 47,072 39,400
Stockholders' equity(2)..... 6,926 7,151 8,188 8,666 2,468 6,348 3,987
</TABLE>
- ---------------
(1) Consists of the cost of litigation settlement.
(2) Stockholders' equity for 1996 does not include $1,916,000 of Common Stock
that ASG can be required to redeem. Stockholders' equity for the six months
ended June 1996 and 1997 does not include $3,575,000 and $1,842,000 of
Common Stock that ASG can be required to redeem.
11
<PAGE> 21
RISK FACTORS
In addition to the other information contained in this Prospectus-Proxy
Statement, ASG stockholders should consider carefully the factors listed below
in evaluating the Merger.
RISKS RELATING TO INTEGRATION IN CONNECTION WITH ACQUISITIONS AND THE MERGER
MedPartners has recently completed major acquisitions and is still in the
process of integrating those acquired businesses. While the business plans of
these acquired companies are similar, their histories, geographical location,
business models and cultures are different in many respects. The MedPartners
Board of Directors and senior management of MedPartners face a significant
challenge in their efforts to integrate the businesses of MedPartners and the
acquired companies so that the different cultures and the varying emphases on
managed care and fee-for-service can be effectively managed to continue to grow
these businesses. The dedication of management resources to such integration may
detract attention from the day-to-day business of MedPartners. There can be no
assurance that there will not be substantial costs associated with such
activities or that there will not be other material adverse effects as a result
of these integration efforts. Such effects could have a material adverse effect
on the operating results and financial condition of MedPartners.
Physician Compensation. Approximately 70% of MedPartners' PPM revenue for
the six months ended June 30, 1997 was derived from or through contracts between
MedPartners and hospitals or HMOs. None of ASG's revenue is derived from such
relationships. The balance of MedPartners' PPM revenue is generated through
professional corporations ("PCs") that have entered into contracts directly with
HMOs or have the right to receive payment directly from HMOs for the provision
of medical services. MedPartners has a controlling financial interest in these
PCs by virtue of a long-term management agreement that also provides for
physician compensation.
The most significant clinic expense, physician compensation, accounted for
39% of total expenses in MedPartners' PPM service area in the first six months
of 1997. Physicians that generated 7% of PPM revenue in the first six months of
1997 received a fixed-dollar amount plus a discretionary bonus based on
performance criteria goals. Physician compensation expense was 51% of this first
category of PCs' total net revenue in the first six months of 1997. Physicians
that were compensated on a fee-for-service basis produced approximately 15% of
MedPartners' PPM revenue in the first six months of 1997. Physician compensation
expense pursuant to such agreements represented 48% of this second category of
PCs' total net revenue in the first six months of 1997. The remaining 8% of PPM
revenues were generated by physicians who were provided a salary, bonus and
profit-sharing payment based on the PC's net income. Physician compensation
expense pursuant to such agreements represented 39% of this third category of
PCs' total net revenue in the first six months of 1997. Under each of these
arrangements, revenue is assigned to MedPartners by the PC, and MedPartners is
responsible and at risk for all clinic expenses. See "Business of
MedPartners -- Operations" and Note 1 of the consolidated financial statements
of MedPartners set forth in MedPartners' Annual Report on Form 10-K/A and
incorporated herein by reference.
While management of MedPartners believes that the diverse experience of
each of the combined companies will serve to strengthen MedPartners, there can
be no assurance that management's efforts to integrate the operations of
MedPartners will be successful or that the anticipated benefits of the Merger
will be fully realized. The profitability of MedPartners is largely dependent on
its ability to develop and integrate networks of physicians from the affiliated
practices, to manage and control costs and to realize economies of scale.
MedPartners' operating results could be adversely affected in the event it
incurs costs associated with developing networks without generating sufficient
revenues from such networks.
RISKS RELATING TO MEDPARTNERS' GROWTH STRATEGY; INTEGRATION AND IDENTIFICATION
OF GROWTH OPPORTUNITIES
MedPartners intends to continue to pursue an aggressive growth strategy
through acquisitions and internal development for the foreseeable future.
MedPartners' ability to pursue new growth opportunities successfully will depend
on many factors, including, among others, MedPartners' ability to identify
suitable growth opportunities and successfully integrate acquired businesses and
practices. There can be no assurance that MedPartners will anticipate all of the
changing demands that expanding operations will impose on its
12
<PAGE> 22
management, management information systems and physician network. Any failure by
MedPartners to adapt its systems and procedures to those changing demands could
have a material adverse effect on the operating results and financial condition
of MedPartners.
Competition for Expansion Opportunities. MedPartners is subject to the
risk that it will be unable to identify and recruit suitable acquisition
candidates in the future. MedPartners competes for acquisition, affiliation and
other expansion opportunities with national, regional and local PPM companies
and other physician management entities. In addition, certain companies,
including hospital management companies, hospitals and insurers, are expanding
their presence in the PPM market. MedPartners' failure to compete successfully
for expansion opportunities or to attract and recruit suitable acquisition
candidates could have a material adverse effect on the operating results and
financial condition of MedPartners. MedPartners is also subject to the risk that
it will be unable to recruit and retain qualified physicians and other
healthcare professionals to serve as employees or independent contractors of
MedPartners and its affiliates. See "Business of MedPartners -- Competition" set
forth in MedPartners' Annual Report on Form 10-K/A and incorporated herein by
reference.
Integration Risks. Acquisitions of PPM companies and physician practices
entail the risk that such acquisitions will fail to perform in accordance with
expectations and that MedPartners will be unable to successfully integrate such
acquired businesses and physician practices into its operations. The
profitability of MedPartners is largely dependent on its ability to develop and
integrate networks of physicians, to manage and control costs and to realize
economies of scale from acquisitions of PPM companies and physician practices.
The histories, geographic location, business models, including emphasis on
managed care and fee-for-service, and cultures of acquired PPM businesses and
physician practices may differ from MedPartners' past experiences. Dedicating
management resources to the integration process may detract attention from the
day-to-day business of MedPartners. Moreover, the integration of the acquired
businesses and physician practices may require substantial capital and financial
investments. These, together with other risks described herein, could result in
the incurrence of substantial costs in connection with acquisitions that may
never achieve revenue and profitability levels comparable to MedPartners'
existing physician networks, which could have a material adverse effect on the
operating results and financial condition of MedPartners.
The major acquisitions carried out by MedPartners since January 1995 have
been structured as poolings of interests. As a result, the operating income of
MedPartners has been reduced by the merger expenses incurred in connection with
those acquisitions, resulting in a net loss for the year ended December 31,
1996. There can be no assurance that future merger expenses will not result in
further net losses. Nor can there be any assurance that there will not be
substantial future costs associated with integrating acquired companies; that
MedPartners will be successful in integrating such companies; or that the
anticipated benefits of such acquisitions will be realized fully. The
unsuccessful integration of such companies or the failure of MedPartners to
realize such anticipated benefits fully could have a material adverse effect on
the operating results and financial condition of MedPartners. See "-- Risks
Relating to Capital Requirements".
Dependence on HMO Enrollee Growth. MedPartners is also largely dependent
on the continued increase in the number of HMO enrollees who use its physician
networks. This growth may come from development or acquisition of other PPM
entities, affiliation with additional physicians, increased enrollment in HMOs
currently contracting with MedPartners through its affiliated physicians and
additional agreements with HMOs. There can be no assurance that MedPartners will
be successful in identifying, acquiring and integrating additional medical
groups or other PPM companies or in increasing the number of enrollees. A
decline in enrollees in HMOs could have a material adverse effect on the
operating results and financial condition of MedPartners. MedPartners is
statutorily and contractually prohibited from controlling any medical decisions
made by a healthcare provider. Accordingly, affiliated physicians may decline to
enter into HMO agreements that are negotiated for them by MedPartners or may
enter into contracts for the provision of medical services or make other
financial commitments that are not intended to benefit MedPartners and which,
accordingly, could have a material adverse effect on the operating results and
financial condition of MedPartners. See "Business of MedPartners -- Operations"
set forth in MedPartners' Annual Report on Form 10-K/A and incorporated herein
by reference.
13
<PAGE> 23
Risks Relating to Capital Requirements. MedPartners' growth strategy
requires substantial capital for the acquisition of PPM businesses and assets of
physician practices, and for their effective integration, operation and
expansion. Affiliated physician practices may also require capital for
renovation, expansion and additional medical equipment and technology.
MedPartners believes that its existing cash resources, the use of MedPartners
Common Stock for selected practice and other acquisitions, and available
borrowings under the $1.0 billion credit facility (the "Credit Facility") with
NationsBank, National Association (South), as administrative bank to a group of
lenders, or any successor credit facility, will be sufficient to meet
MedPartners' anticipated acquisition, expansion and working capital needs for
the next twelve months. MedPartners expects from time to time to raise
additional capital through the issuance of long-term or short-term indebtedness
or the issuance of additional equity securities in private or public
transactions, at such times as management deems appropriate and the market
allows in order to meet the capital needs of MedPartners. There can be no
assurance that acceptable financing for future acquisitions or for the
integration and expansion of existing networks can be obtained. Any of such
financings could result in increased interest and amortization expense,
decreased income to fund future expansion and dilution of existing equity
positions.
Dependence on Affiliated Physicians. MedPartners' revenue depends on
revenues generated by the physicians with whom MedPartners has practice
management agreements. These agreements define the responsibilities of the
physicians and MedPartners and govern all terms and conditions of their
relationship. The practice management agreements have terms generally of 20 to
40 years, subject to termination for cause, which includes bankruptcy or a
material breach. Practice management agreements with certain of the affiliated
practices contain provisions giving the physician practice the option to
terminate the agreement without cause, subject to significant limitations.
Because MedPartners cannot control the provision of medical services by its
affiliated physicians contractually or otherwise under the laws of California
and most other states in which MedPartners operates, affiliated physicians may
decline to enter into HMO agreements that are negotiated for them by MedPartners
or may enter into contracts for the provision of medical services or make other
financial commitments which are not intended to benefit MedPartners and which
could have a material adverse effect on the operating results and financial
condition of MedPartners. See "Business of
MedPartners -- Operations -- Affiliated Physicians" set forth in MedPartners'
Annual Report on Form 10-K/A and incorporated herein by reference.
RISKS RELATING TO CAPITATED NATURE OF REVENUES; CONTROL OF HEALTHCARE COSTS
A substantial portion of MedPartners' revenue is derived from agreements
with HMOs that provide for the receipt of capitated fees. Under these
agreements, MedPartners, through its affiliated physicians, is generally
responsible for the provision of all covered outpatient benefits, regardless of
whether the affiliated physicians directly provide the medical services
associated with the covered benefits. MedPartners is statutorily and
contractually prohibited from controlling any medical decisions made by any
healthcare provider. To the extent that enrollees require more care than is
anticipated or require supplemental medical care that is not otherwise
reimbursed by the HMO, aggregate capitation rates may be insufficient to cover
the costs associated with the treatment of enrollees. If revenue is insufficient
to cover costs, the operating results and financial condition of MedPartners
could be materially adversely affected. As a result, MedPartners' success will
depend in large part on the effective management of healthcare costs through
various methods, including utilization management, competitive pricing for
purchased services and favorable agreements with payors. Recently, many
providers, including MedPartners, have experienced pricing pressures with
respect to negotiations with HMOs. In addition, employer groups are becoming
increasingly successful in negotiating reductions in the growth of premiums paid
for their employees' health insurance, which tends to depress the reimbursement
for healthcare services. At the same time, employer groups are demanding higher
accountability from payors and providers of healthcare services with respect to
measurable accessibility, quality and service. If these trends continue, the
cost of providing physician services could increase while the level of
reimbursement could grow at a lower rate or could decrease. There can be no
assurance that these pricing pressures will not have a material adverse effect
on the operating results and financial condition of MedPartners. In addition,
changes in healthcare practices, inflation, new technologies, major epidemics,
natural disasters and numerous other factors affecting the delivery and cost of
healthcare could have a material adverse effect on the operating results and
financial condition of MedPartners.
14
<PAGE> 24
MedPartners' financial statements include estimates of costs for covered
medical benefits incurred by HMO enrollees, but not yet reported. While these
estimates are based on information available at the time of calculation, there
can be no assurance that actual costs will approximate the estimates of such
amounts. If the actual costs significantly exceed the amounts estimated and
accrued, such additional costs could have a material adverse effect on the
operating results and financial condition of MedPartners.
The HMO agreements often contain shared-risk provisions under which
additional revenue can be earned or economic penalties can be incurred based
upon the utilization of hospital and non-professional services by HMO enrollees.
MedPartners' financial statements contain accruals for estimates of shared-risk
amounts receivable from or payable to the HMOs that contract with their
affiliated physicians. These estimates are based upon inpatient utilization and
associated costs incurred by HMO enrollees compared to budgeted costs.
Differences between actual contract settlements and amounts estimated as
receivable or payable relating to HMO risk-sharing arrangements are generally
reconciled annually. This may cause fluctuations from amounts previously
accrued. To the extent that HMO enrollees require more care than is anticipated
or require supplemental care that is not otherwise reimbursed by the HMOs,
aggregate capitation rates may be insufficient to cover the costs associated
with the treatment of enrollees. Any such insufficiency could have a material
adverse effect on the operating results and financial condition of MedPartners.
Physician groups that render services on a fee-for-service basis (as
opposed to a capitated plan) typically bill various third-party payors, such as
governmental programs (e.g., Medicare and Medicaid), private insurance plans and
managed care plans, for the healthcare services provided to their patients. A
significant portion of the revenue of MedPartners is derived from payments made
by these third-party payors. There can be no assurance that payments under
governmental programs or from other third-party payors will remain at present
levels. In addition, third-party payors can deny reimbursement if they determine
that treatment was not performed in accordance with the cost-effective treatment
methods established by such payors or was experimental or for other reasons. Any
material decrease in payments received from such third-party payors could have a
material adverse effect on the operating results and financial condition of
MedPartners.
RISKS RELATING TO CERTAIN CAREMARK LEGAL MATTERS
OIG Settlement and Related Claims. Caremark agreed in June 1995 to settle
with the Office of the Inspector General (the "OIG") of the United States
Department of Health and Human Services (the "DHHS"), the DOJ, the Veteran's
Administration, the Federal Employee Health Benefits Program ("FEHBP"), the
Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS") and
related state investigative agencies in all 50 states and the District of
Columbia a four-year-long investigation of Caremark (the "OIG Settlement").
Under the terms of the OIG Settlement, which covered allegations dating back to
1986, a subsidiary of Caremark pled guilty to two counts of mail fraud -- one
each in Minnesota and Ohio -- resulting in the payment of civil penalties and
criminal fines. The basis of these guilty pleas was Caremark's failure to
provide certain information to CHAMPUS, FEHBP and federally funded healthcare
benefit programs concerning financial relationships between Caremark and a
physician in each of Minnesota and Ohio. See "Business of MedPartners -- Legal
Proceedings" set forth in MedPartners' Annual Report on Form 10-K/A and
incorporated herein by reference.
In its agreement with the OIG and DOJ, Caremark agreed to continue to
maintain certain compliance-related oversight procedures. Should these oversight
procedures reveal credible evidence of legal or regulatory violations, Caremark
is required to report such violations to the OIG and DOJ. Caremark is,
therefore, subject to increased regulatory scrutiny and, in the event it commits
legal or regulatory violations, Caremark may be subject to an increased risk of
sanctions or penalties, including disqualification as a provider of Medicare or
Medicaid services, which would have a material adverse effect on the operating
results and financial condition of MedPartners.
In connection with the matters described above relating to the OIG
Settlement, Caremark is a party to various non-governmental claims and may in
the future become subject to additional OIG-related claims. Caremark is a party
to, or the subject of, and may be subjected to in the future, various private
suits and claims (including stockholder derivative actions) being asserted in
connection with matters relating to the
15
<PAGE> 25
OIG Settlement by Caremark's stockholders, patients who received healthcare
services from Caremark and such patients' insurers. MedPartners cannot determine
at this time what costs may be incurred in connection with future disposition of
non-governmental claims or litigation. Such additional costs, if incurred, could
have a material adverse effect on the operating results and financial condition
of MedPartners. See "Business of MedPartners -- Legal Proceedings" and Note 13
to the consolidated financial statements of MedPartners set forth in
MedPartners' Annual Report on Form 10-K/A and incorporated herein by reference.
In August and September 1994, stockholders, each purporting to represent a
class, filed complaints against Caremark and certain officers and employees of
Caremark in the United States District Court for the Northern District of
Illinois, alleging violations of the Securities Act and the Exchange Act, and
fraud and negligence in connection with public disclosures by Caremark regarding
Caremark's business practices and the status of the OIG investigation discussed
above. The complaints sought unspecified damages, declaratory and equitable
relief, and attorneys' fees and expenses. In June 1996, the complaint filed by
one group of stockholders alleging violations of the Exchange Act only, was
certified as a class. This action has been settled for $25 million, most of
which will be paid by Caremark's directors and officers insurance. MedPartners
will record an after tax charge of $5 million in the third quarter of 1997 in
connection with the settlement.
In May 1996, three home infusion companies, purporting to represent a class
consisting of all of Caremark's competitors in the alternate site infusion
therapy industry, filed a complaint against Caremark, a subsidiary of Caremark,
and two other corporations in the United States District Court for the District
of Hawaii alleging violations of the federal conspiracy laws, the antitrust laws
and of California's unfair business practices statute. The complaint seeks
unspecified treble damages, and attorneys' fees and expenses. MedPartners
intends to defend this case vigorously. Although management believes, based on
information currently available, that the ultimate resolution of this matter is
not likely to have a material adverse effect on the operating results and
financial condition of MedPartners, there can be no assurance that the ultimate
resolution of this matter, if adversely determined, would not have a material
adverse effect on the operating results and financial condition of MedPartners.
Private Payor Settlements. In March 1996, Caremark agreed to settle all
disputes with a number of private payors. These disputes relate to businesses
that were covered by the OIG Settlement. The settlements resulted in an
after-tax charge of approximately $43.8 million. In addition, Caremark paid
$24.1 million after tax to cover the private payors' pre-settlement and
settlement-related expenses. An after-tax charge for the above amounts was
recorded in first quarter 1996 discontinued operations.
Coram Litigation. On September 11, 1995, Coram Healthcare Corporation
("Coram") filed a complaint in the San Francisco Superior Court against Caremark
and its subsidiary, Caremark Inc., and 50 unnamed individual defendants. The
complaint, which arises from Caremark's sale to Coram of Caremark's home
infusion therapy business in April 1995, for approximately $209.0 million in
cash and $100.0 million in securities, alleges breach of the Asset Sale and Note
Purchase Agreement, dated January 29, 1995, as amended April 1, 1995, between
Coram and Caremark, breach of related contracts, fraud, negligent
misrepresentation and a right to contractual indemnity. Coram's amended
complaint included claims for specific performance, declaratory relief,
injunctive relief and requested damages of $5.2 billion. However, at a pretrial
hearing in May 1997 and in motions subsequently filed with the court, counsel
for Coram stated to the court that, with respect to compensatory damages, Coram
was realistically seeking approximately $300 million. Caremark filed
counterclaims against Coram in this lawsuit and also filed a lawsuit in the
United States District Court in Chicago claiming that Coram committed securities
fraud in its sale to Caremark of its securities in connection with the sale of
Caremark's home infusion business to Coram. The lawsuit filed in federal court
in Chicago was dismissed, but on appeal by Caremark the dismissal was reversed
and the lawsuit was remanded. On July 1, 1997, the parties to the Coram
litigation announced that a settlement had been reached pursuant to which
Caremark returned for cancellation all of the securities issued by Coram in
connection with the acquisition and paid Coram $45 million in cash on or about
September 1, 1997. The settlement agreement also provides for termination and
resolution of all disputes and issues between the parties and for the exchange
of mutual releases. MedPartners recognized an after tax charge from discontinued
business operations of $75.4 million in the second quarter of 1997 related to
this settlement.
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RISKS RELATING TO EXPOSURE TO PROFESSIONAL LIABILITY; LIABILITY INSURANCE
In recent years, physicians, hospitals and other participants in the
healthcare industry have become subject to an increasing number of lawsuits
alleging medical malpractice and related legal theories. Many of these lawsuits
involve large claims and substantial defense costs. Although MedPartners does
not engage in the practice of medicine or provide medical services, and does not
control the practice of medicine by its affiliated physicians or the compliance
with regulatory requirements directly applicable to the affiliated physicians
and physician groups, there can be no assurance that MedPartners will not become
involved in such litigation in the future. Through the ownership and operation
of U.S. Family Care Medical Center ("USFMC") and Friendly Hills Hospital
("Friendly Hills"), acute care hospitals located in Montclair and La Habra,
California, respectively, MedPartners could be subject to allegations of
negligence and wrongful acts by its hospital-based physicians or arising out of
providing nursing care, emergency room services, credentialing of medical staff
members and other activities incident to the operation of an acute care
hospital. In addition, through its management of clinic locations and provision
of non-physician health care personnel, MedPartners could be named in actions
involving care rendered to patients by physicians employed by or contracting
with affiliated medical organizations and physician groups.
MedPartners maintains professional and general liability insurance and
other coverage deemed necessary by MedPartners. Nevertheless, certain types of
risks and liabilities are not covered by insurance and there can be no assurance
that the limits of coverage will be adequate to cover losses in all instances.
In addition, MedPartners' practice management agreements require the affiliated
physicians to maintain professional liability and workers' compensation
insurance coverage on the practice and on each employee and agent of the
practice, and MedPartners generally is indemnified under each of the practice
management agreements by the affiliated physicians for liabilities resulting
from the performance of medical services. However, there can be no assurance
that a future claim or claims will not exceed the limits of these available
insurance coverages or that indemnification will be available for all such
claims. See "Business of MedPartners -- Corporate Liability and Insurance" set
forth in MedPartners' Annual Report on Form 10-K/A and incorporated herein by
reference.
GOVERNMENT REGULATION
Federal and state laws regulate the relationships among providers of
healthcare services, physicians and other clinicians. These laws include the
fraud and abuse provisions of the Medicare and Medicaid statutes, which prohibit
the solicitation, payment, receipt or offering of any direct or indirect
remuneration for the referral of patients covered by any federal healthcare
program, including Medicare and Medicaid, or for recommending, leasing,
arranging, ordering or purchasing of services covered by any federal healthcare
program, as well as laws that impose significant penalties for false or improper
billings for physician services. These laws also impose restrictions on
physicians' referrals for designated health services to entities with which they
have financial relationships. Violations of these laws may result in substantial
civil or criminal penalties for individuals or entities, including large civil
monetary penalties and exclusion from participation in all federal healthcare
programs. Such exclusion and penalties, if applied to MedPartners' affiliated
physicians, could result in significant loss of reimbursement.
Moreover, the laws of many states, including California (from which a
significant portion of MedPartners' revenues are derived), prohibit physicians
from splitting fees with non-physicians and prohibit non-physician entities from
practicing medicine. These laws and their interpretations vary from state to
state and are enforced by the courts and by regulatory authorities with broad
discretion. As stated in Note 1 to the consolidated financial statements of
MedPartners incorporated herein by reference, MedPartners believes that it has
perpetual and unilateral control over the assets and operations of the various
affiliated professional corporations. There can be no assurance that regulatory
authorities will not take the position that such control conflicts with state
laws regarding the practice of medicine or other federal restrictions. Although
MedPartners believes its operations as currently conducted are in material
compliance with existing applicable laws, there can be no assurance that the
existing organization of MedPartners and its contractual arrangements with
affiliated physicians will not be successfully challenged as constituting the
unlicensed practice of medicine or that the enforceability of the provisions of
such arrangements, including non-competition
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agreements, will not be limited. There can be no assurance that review of the
business of MedPartners and its affiliates by courts or regulatory authorities
will not result in a determination that could adversely affect their operations
or that the healthcare regulatory environment will not change so as to restrict
existing operations or expansion thereof. In the event of action by any
regulatory authority limiting or prohibiting MedPartners or any affiliate from
carrying on its business or from expanding the operations of MedPartners and its
affiliates to certain jurisdictions, structural and organizational modifications
of MedPartners may be required, which could have a material adverse effect on
the operating results and financial condition of MedPartners.
In addition to the regulations referred to above, significant aspects of
MedPartners' operations are subject to state and federal statutes and
regulations governing workplace health and safety, the operation of pharmacies,
repackaging of drug products, dispensing of controlled substances and the
disposal of medical waste. MedPartners' operations may also be affected by
changes in ethical guidelines and operating standards of professional and trade
associations and private accreditation commissions such as the American Medical
Association and the Joint Commission on Accreditation of Healthcare
Organizations. Accordingly, changes in existing laws and regulations, adverse
judicial or administrative interpretations of such laws and regulations or
enactment of new legislation could have a material adverse effect on the
operating results and financial condition of MedPartners. See "-- Risks Relating
to Pharmacy Licensing and Operation".
For the six months ended June 30 1997, approximately 12% of the revenues of
MedPartners' affiliated physician groups were derived from payments made by
government-sponsored healthcare programs (principally, Medicare and state
reimbursed programs). As a result, any change in reimbursement regulations,
policies, practices, interpretations or statutes could adversely affect the
operations of MedPartners. There are also state and federal civil and criminal
statutes imposing substantial penalties (including civil penalties and criminal
fines and imprisonment) on healthcare providers that fraudulently or wrongfully
bill governmental or other third-party payors for healthcare services.
MedPartners believes it is in material compliance with such laws, but there can
be no assurance that MedPartners' activities will not be challenged or
scrutinized by governmental authorities or that any such challenge or scrutiny
would not have a material adverse effect on the operating results and financial
condition of MedPartners.
Certain provisions of the Social Security Act, commonly referred to as the
"Anti-Kickback Statute", prohibit the offer, payment, solicitation or receipt of
any form of remuneration in return for the referral of patients or patient care
opportunities covered by any federal healthcare program (including Medicare and
Medicaid), or in return for the recommendation, arrangement, purchase, lease or
order of items or services that are covered by any federal healthcare program.
Many states have adopted similar prohibitions against payments intended to
induce referrals of Medicaid and other third-party payor patients. The
Anti-Kickback Statute contains provisions prescribing civil and criminal
penalties to which individuals or providers who violate such statute may be
subjected. The criminal penalties include fines up to $25,000 per violation and
imprisonment for up to five years or both. Additionally, the DHHS has the
authority to exclude anyone, including individuals or entities, who has
committed any of the prohibited acts from participation in any federal
healthcare program. If applied to MedPartners or any of its subsidiaries or
affiliated physicians, such exclusion could result in a significant loss of
reimbursement for MedPartners, up to a maximum of 12% of the revenues of
MedPartners' affiliated physician groups, which could have a material adverse
effect on the operating results and financial condition of MedPartners. Although
MedPartners believes that it is not in violation of the Anti-Kickback Statute or
similar state statutes, its operations do not fit within any of the existing or
proposed federal safe harbors.
Significant prohibitions against physician referrals were enacted by the
federal Omnibus Budget Reconciliation Act of 1993. Subject to certain
exemptions, a physician or a member of his immediate family is prohibited from
referring Medicare or Medicaid patients to an entity providing "designated
health services" in which the physician has an ownership or investment interest
or with which the physician has entered into a compensation arrangement. While
MedPartners believes it is in compliance with such legislation, future
regulations could require MedPartners to modify the form of its relationships
with physician groups. Some states have also enacted similar self-referral laws,
and MedPartners believes it is likely that more states will follow. MedPartners
believes that its practices fit within exemptions contained in such statutes.
Nevertheless, expansion of the operations of MedPartners into certain
jurisdictions may require structural and organizational
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modifications of MedPartners' relationships with physician groups to comply with
new or revised state statutes. Such structural and organizational modifications
could have a material adverse effect on the operating results and financial
condition of MedPartners.
The Knox-Keene Health Care Service Plan Act of 1975 (the "Knox-Keene Act")
and the regulations promulgated thereunder subject entities which are licensed
as healthcare service plans in California to substantial regulation by the
California Department of Corporations (the "DOC"). In addition, licensees under
the Knox-Keene Act are required to file periodic financial data and other
information (which generally become available to the public), maintain
substantial tangible net equity on their balance sheets and maintain adequate
levels of medical, financial and operational personnel dedicated to fulfilling
the licensee's statutory and regulatory requirements. The DOC is empowered by
law to take enforcement actions against licensees that fail to comply with such
requirements. On March 5, 1996, the DOC issued to Pioneer Provider Network, Inc.
("PPN"), a wholly-owned subsidiary of MedPartners, a healthcare service plan
license (the "Restricted License"). PPN is a recently created organization
without an operating history, and there is no assurance that the DOC will view
PPN's operations to be fully in compliance with applicable laws, including the
Knox-Keene Act, and regulations. Any material non-compliance could have a
material adverse effect on the operating results and financial condition of
MedPartners.
RISKS RELATING TO PHARMACY LICENSING AND OPERATION
MedPartners is subject to federal and state laws and regulations governing
pharmacies. Federal controlled substance laws require MedPartners to register
its pharmacies with the United States Drug Enforcement Administration and comply
with security, record-keeping, inventory control and labeling standards in order
to dispense controlled substances. State controlled substance laws require
registration and compliance with the licensing, registration or permit standards
of the state pharmacy licensing authority. State pharmacy licensing,
registration and permit laws impose standards on the qualifications of the
applicant's personnel, the adequacy of its prescription fulfillment and
inventory control practices and the adequacy of its facilities. In general,
pharmacy licenses are renewed annually. Pharmacists must also satisfy state
licensing requirements. Any failure to satisfy such pharmacy licensing statutes
and regulations could have a material adverse effect on the operating results
and financial condition of MedPartners.
RISKS RELATING TO HEALTHCARE REFORM; PROPOSED LEGISLATION
As a result of the continued escalation of healthcare costs and the
inability of many individuals to obtain health insurance, numerous proposals
have been, and other proposals may be, introduced in the United States Congress
and state legislatures relating to healthcare reform. There can be no assurance
as to the ultimate content, timing or effect of any healthcare reform
legislation, nor is it possible at this time to estimate the impact of potential
legislation, which may be material, on MedPartners.
ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of MedPartners' Third Restated Certificate of
Incorporation, as amended (the "MedPartners Certificate of Incorporation"),
MedPartners' Second Amended and Restated Bylaws (the "MedPartners Bylaws") and
the DGCL could, together or separately, discourage potential acquisition
proposals, delay, or prevent a change in control of MedPartners. These
provisions include a classified Board of Directors and the issuance, without
further stockholder approval, of preferred stock with rights and privileges
which could be senior to MedPartners' Common Stock. MedPartners also is subject
to Section 203 of the DGCL, which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any of a broad range of business
combinations with any "interested stockholder" for a period of three years
following the date that such stockholder became an interested stockholder. In
addition, MedPartners rights plan, which provides for discount purchase rights
to certain stockholders of MedPartners upon certain acquisitions of 10% or more
of the outstanding shares of MedPartners Common Stock, may also inhibit a change
in control of MedPartners.
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POSSIBLE VOLATILITY OF STOCK PRICE; RISKS RELATING TO FIXED EXCHANGE RATIO
There may be significant volatility in the market price for the MedPartners
Common Stock. Quarterly operating results of MedPartners, changes in general
conditions in the economy, the financial markets or the healthcare industry,
adverse developments with respect to future acquisitions or other developments
affecting MedPartners or its competitors, could cause the market price of the
MedPartners Common Stock to fluctuate substantially. In addition, in recent
years, the stock market and, in particular, the healthcare industry segment, has
experienced significant price and volume fluctuations. This volatility has
affected the market prices of securities issued by many companies for reasons
unrelated to their operating performance.
The Plan of Merger provides for a fixed Exchange Ratio, with each ASG Share
being converted into the right to receive 0.71 of a share of MedPartners Common
Stock. The Plan of Merger does not contain any provisions for adjustment of the
Exchange Ratio based on fluctuations in the price of MedPartners Common Stock.
As a result of the fixed Exchange Ratio, the aggregate value of the Merger
Consideration to be received by stockholders of ASG upon the Merger will depend
on the market price of the MedPartners Common Stock at the Effective Time.
Because of the fixed Exchange Ratio, ASG stockholders share in the risks and
rewards of ownership of MedPartners Common Stock pending the closing of the
Merger.
On October 1, 1997, the date the Merger Agreement was signed, the closing
price of the MedPartners Common Stock on the NYSE was $21.88, and on ,
1997, the closing price of the MedPartners Common Stock on the NYSE was $ .
There can be no assurance that the market price of the MedPartners Common Stock
on and after the Effective Time will not be lower than either of such prices or
the market price of the MedPartners Common Stock on the date of the Special
Meeting. Pursuant to the Plan of Merger, the Plan of Merger may be terminated by
ASG if the arithmetic average of the closing prices per share of the MedPartners
Common Stock, as reported on the NYSE Composite Tape during any consecutive
thirty day trading period between October 1, 1997 and the date five trading days
before the Special Meeting is less than $17.50 and MedPartners has received
written notice of the decision to terminate the Plan of Merger within two
trading days after such thirty trading day period.
Consummation of the Merger could be delayed following approval of the
Merger at the Special Meeting as a result of, among other things, the failure to
obtain certain regulatory approvals or to satisfy other conditions to the
consummation of the Merger. See "The Merger -- Regulatory Approvals" and
"-- Conditions to the Merger". It is presently anticipated, however, that the
Merger will be consummated as soon as practicable after the Special Meeting. If,
however, the consummation of the Merger is delayed beyond the date of the
Special Meeting, holders of ASG Common Stock have the risk that the market price
of the MedPartners Common Stock at the consummation of the Merger may be less
than the market price of the MedPartners Common Stock on the date of the Special
Meeting.
RISKS RELATING TO FEDERAL INCOME TAXES
If the Merger were not to constitute a tax-free reorganization under
Section 368(a) of the Code, each holder of ASG Shares would recognize gain or
loss equal to the difference between the fair market value of the MedPartners
Common Stock received and cash received in lieu of fractional shares and such
holder's basis in the ASG Shares exchanged therefor. See "The Merger -- Federal
Income Tax Consequences".
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THE SPECIAL MEETING
GENERAL
This Prospectus-Proxy Statement is being furnished to holders of ASG Shares
in connection with the solicitation of proxies by the Board of Directors of ASG
for use at the Special Meeting to consider and vote upon the approval of the
Plan of Merger and the transactions contemplated thereby at the Special Meeting
or any adjournments or postponements thereof. Each copy of this Prospectus-Proxy
Statement mailed or delivered to holders of ASG Shares is accompanied by a form
of Proxy for use at the Special Meeting.
This Prospectus-Proxy Statement is also furnished to ASG stockholders as a
Prospectus in connection with the issuance to them of the shares of MedPartners
Common Stock upon consummation of the Merger.
DATE, PLACE AND TIME
The Special Meeting is to be held at the , ,
, , on , 1997 at a.m., local time.
RECORD DATE, QUORUM AND VOTING
The Board of Directors of ASG has fixed the close of business on
, 1997 as the Record Date for the determination of the holders of ASG
Shares entitled to receive notice of, and to vote at, the Special Meeting. The
presence, in person or by Proxy, of the holders of ASG Shares entitled to cast a
majority of the votes entitled to be cast at the Special Meeting will constitute
a quorum at the Special Meeting. As of the Record Date, there were
shares of ASG Common Stock issued and outstanding, which were held by
approximately holders of record. Each stockholder of record as of that date
is entitled to one vote for each share then held.
The Board of Directors of ASG unanimously recommends a vote in favor of the
Plan of Merger and the transactions contemplated thereby.
VOTE REQUIRED
Approval and adoption of the Plan of Merger and the transactions
contemplated thereby by the stockholders of ASG requires the affirmative vote of
a majority of the issued and outstanding shares of ASG Common Stock as of the
Record Date. Because the required vote of ASG stockholders to approve the Plan
of Merger is based upon the total number of outstanding shares, the failure to
submit a proxy card (or to vote in person at the Special Meeting) or the
abstention from voting by an ASG stockholder (including broker non-votes) will
have the same effect as a vote "against" the approval and adoption of the Plan
of Merger. As of the Record Date, there were shares of ASG Common
Stock issued and outstanding. Accordingly, the affirmative vote of the holders
of shares of ASG Common Stock is required to approve the Plan of
Merger. As of the Record Date, directors and executive officers of ASG owned in
the aggregate shares of ASG Common Stock (or approximately % of
the outstanding shares of ASG Common Stock). All the directors and executive
officers of ASG have indicated their present intent to vote all of the shares of
ASG Common Stock beneficially owned by them in favor of the Plan of Merger and
the transactions contemplated thereby.
VOTING AND REVOCATION OF PROXIES
ASG Shares represented by a Proxy properly signed and received at or prior
to the Special Meeting, unless subsequently revoked, will be voted in accordance
with the instructions thereon. IF A PROXY IS PROPERLY EXECUTED AND RETURNED
WITHOUT INDICATING ANY VOTING INSTRUCTIONS, ASG SHARES REPRESENTED BY THE PROXY
WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE PLAN OF MERGER and the
transactions contemplated thereby. Any Proxy given pursuant to this solicitation
may be revoked by the person giving it at any time before the Proxy is voted by
the filing with the Secretary of ASG of an instrument revoking it or of a duly
executed Proxy bearing a later date prior to or at the Special Meeting, or by
voting in person at the Special Meeting. Attendance at the Special Meeting will
not in and of itself constitute a revocation of a Proxy. Only votes cast FOR
approval of the Plan of Merger or other matters constitute affirmative votes.
Abstentions and
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votes that are withheld will, therefore, have the same effect as votes AGAINST
approval of the Plan of Merger.
The Board of Directors of ASG is not aware of any business to be acted upon
at the Special Meeting other than as described in the Notice of the Special
Meeting or in this Prospectus-Proxy Statement. If, however, other matters are
properly brought before the Special Meeting, or any adjournments or
postponements thereof, the persons appointed as proxies will have discretion to
vote or act thereon according to their best judgment.
Representatives of ASG's independent public accountants, Ernst & Young LLP,
will be present at the Special Meeting to respond to appropriate questions and
will have the opportunity to make a statement if they desire to do so.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
ASG, who will not be specifically compensated for such services, may solicit
proxies from the stockholders of ASG personally or by telephone or telegram or
other form of communication. ASG has retained ChaseMellon Shareholder Services
("ChaseMellon") to solicit proxies on its behalf and will pay ChaseMellon a fee
of approximately $6,500 for these services. ASG will also reimburse ChaseMellon
for its out-of-pocket expenses incurred in connection with such solicitation.
Copies of solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of ASG Common Stock
beneficially owned by others to forward to such beneficial owners. ASG may
reimburse persons representing such beneficial owners for the costs of
forwarding solicitation materials to such beneficial owners. Except as otherwise
provided in the Plan of Merger, ASG will bear its own expenses in connection
with the solicitation of proxies for the Special Meeting. See "The
Merger -- Expenses".
ASG STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
THE PROCEDURE FOR THE EXCHANGE OF ASG SHARES AFTER THE MERGER IS CONSUMMATED IS
SET FORTH IN THIS PROSPECTUS-PROXY STATEMENT. SEE "THE MERGER -- EXCHANGE OF
CERTIFICATES".
THE MERGER
The description of the Merger contained in this Prospectus-Proxy Statement
summarizes the principal provisions of the Plan of Merger; it is not complete
and is qualified in its entirety by reference to the Plan of Merger, the full
text of which is attached hereto as Annex A. All ASG stockholders are urged to
read Annex A carefully in its entirety.
TERMS OF THE MERGER
The acquisition of ASG by MedPartners will be effected by means of the
merger of the Subsidiary with and into ASG, with ASG being the surviving
corporation (the "Surviving Corporation"). The Certificate of Incorporation of
ASG shall be amended and restated at the Effective Time such that from and after
the Effective Time the Certificate of Incorporation of ASG shall be identical to
the Certificate of Incorporation of the Subsidiary. The Bylaws of the Subsidiary
in effect at the Effective Time will become the Bylaws of the Surviving
Corporation at the Effective Time until amended or repealed in accordance with
applicable law. After the Effective Time, ASG shall continue as the surviving
corporation of the Merger under the name "America Service Group Inc.".
The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of the State of the State of Delaware, or such other time as
MedPartners, the Subsidiary and ASG specify in the Certificate of Merger. It is
expected that the Merger will be consummated as soon as practicable after the
Special Meeting. See "Risk Factors -- Possible Volatility of Stock Price; Risks
Relating to Fixed Exchange Ratio".
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Upon consummation of the Merger, each share of ASG Common Stock, other than
shares held by ASG (which will be canceled), will be converted into the right to
receive 0.71 of a share of MedPartners Common Stock. For example, if an ASG
stockholder owned 100 shares of ASG Common Stock as of the Effective Time, that
stockholder would receive 71 shares of MedPartners Common Stock in the Merger.
Each holder of ASG Shares exchanged pursuant to the Merger who would otherwise
have been entitled to receive a fraction of a share of MedPartners Common Stock
will receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of MedPartners Common Stock multiplied by the
per share closing price on the NYSE Composite Tape of MedPartners Common Stock
on the date of the Effective Time.
Because the Exchange Ratio of MedPartners Common Stock for the ASG Common
Stock is fixed at 0.71 and will not increase or decrease due to fluctuations in
the market price of either stock, the aggregate value of the Merger
Consideration will change in the event the market price of MedPartners Common
Stock increases or decreases before the Effective Time. As a result, in the
event the market price of MedPartners Common Stock decreases as of the Effective
Time, the value of the MedPartners Common Stock to be received in the Merger in
exchange for the ASG Common Stock would decrease. In the event the market price
of MedPartners Common Stock instead increases as of the Effective Time, the
value of the MedPartners Common Stock to be received in the Merger in exchange
for the ASG Common Stock would increase. See "Risk Factors -- Possible
Volatility of Stock Price; Risks Relating to Fixed Exchange Ratio".
On , 1997, the closing price of MedPartners Common Stock was
$ . At such price, the Equivalent Value of a share of ASG Common Stock
would be $ and the aggregate value of the Merger Consideration would be
approximately $ million. The actual market price of the MedPartners Common
Stock may vary, which will cause a corresponding change in the Equivalent Value
and the aggregate value of the Merger Consideration. Each ASG stockholder is
urged to obtain updated market information as to the MedPartners Common Stock.
ASG stockholders may obtain updated information regarding the market price for
MedPartners Common Stock by calling toll-free 1-800-563-7126.
At the Effective Time, all rights with respect to ASG Common Stock pursuant
to any ASG stock options which are outstanding at the Effective Time, whether or
not then vested or exercisable, shall be converted into and become rights to
purchase that number of shares of MedPartners Common Stock equal to the number
of ASG Shares subject thereto multiplied by the Exchange Ratio and will be
exercisable at an exercise price per share equal to the ASG exercise price
divided by the Exchange Ratio.
ASG STOCKHOLDERS WILL RECEIVE THEIR SHARES OF MEDPARTNERS COMMON STOCK
AFTER THE CONSUMMATION OF THE MERGER. SEE "-- EXCHANGE OF CERTIFICATES".
BACKGROUND OF THE MERGER
EMSA Correctional Care, Inc. ("EMSA"), a subsidiary of InPhyNet, provides
comprehensive medical services, including mental health and dental services to
inmates in various state and local correctional institutions. In late April
1997, representatives of ASG approached representatives of EMSA regarding the
possible acquisition of EMSA. Management of ASG was aware of the pending
acquisition of InPhyNet by MedPartners and believed that MedPartners might be
willing to sell EMSA following the consummation of the acquisition of InPhyNet.
The EMSA representatives responded to ASG's inquiries by stating their concern
that a sale of EMSA might jeopardize the accounting treatment of MedPartners'
acquisition of InPhyNet as a pooling-of-interests. The EMSA representatives
suggested that MedPartners might have an interest in acquiring ASG but that the
possibility of such a transaction could not be pursued by MedPartners until
MedPartners completed the acquisition of InPhyNet. On June 26, 1997, MedPartners
completed the acquisition of InPhyNet. On July 28, 1997, representatives of ASG
met with representatives of MedPartners to discuss a combination of EMSA and
ASG. At this meeting, MedPartners expressed interest in acquiring ASG in a
stock-for-stock transaction that would be accounted for as a
pooling-of-interests. On July 29, 1997, MedPartners sent a letter to ASG
indicating MedPartners' non-binding expression of interest in acquiring ASG. On
July 31, 1997, MedPartners issued a second letter indicating MedPartners'
non-binding expression of interest in acquiring ASG.
ASG's Board of Directors conducted a meeting on July 29, 1997 and a
conference call on August 1, 1997 during which it considered reports of
management's discussions with MedPartners. ASG's Board of Directors
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considered, among other things, the due diligence process that MedPartners would
pursue, the timing of the proposed transaction and the effect of its disclosure
on ASG's relationship with its clients and on the morale of ASG's employees, the
effect of the proposed transaction with MedPartners on another transaction under
consideration by ASG and alternatives to the proposed transaction with
MedPartners. Following the discussion during both the meeting and the conference
call, the ASG Board of Directors authorized ASG's senior management to proceed
with discussions with MedPartners.
A team of MedPartners representatives met with their ASG counterparts in
Nashville from August 7 through August 9, 1997 to discuss the proposed
acquisition of ASG by MedPartners. During this period, MedPartners continued its
due diligence examination of ASG. Following the meetings in Nashville,
MedPartners advised ASG that further discussions of the proposed acquisition of
ASG would be postponed until other transactions being pursued by MedPartners
were completed.
During the week of September 15, 1997, management of MedPartners notified
management of ASG that MedPartners was ready to resume discussions regarding the
potential acquisition of ASG by MedPartners. The terms of the Plan of Merger
were negotiated between September 22 and October 1, 1997. ASG's Board of
Directors held conference calls on Friday, September 26, 1997 and again on
Monday, September 29, 1997, to consider the terms of the proposed acquisition
and to receive a report from Equitable, ASG's financial advisor, regarding the
fairness, from a financial point of view, of the consideration to be received by
ASG's stockholders in the Merger. During the second conference call, ASG's Board
of Directors approved the Plan of Merger and adopted a resolution recommending
the Merger to ASG's stockholders, in each case subject to the approval of the
Merger by the Board of Directors of MedPartners. MedPartners' Board of Directors
approved the Plan of Merger at a meeting held on October 1, 1997. The Plan of
Merger was signed on October 1, 1997. Prior to the events described above, there
was no material relationship between MedPartners or EMSA and ASG.
REASONS FOR THE MERGER; RECOMMENDATION OF THE ASG BOARD OF DIRECTORS
The ASG Board of Directors believes that the Merger is in the best
interests of holders of ASG Common Stock. MedPartners has a larger market
capitalization and a more active market for its shares, which will provide
holders of ASG Common Stock with greater liquidity. The Merger will also allow
ASG shareholders to own shares in a larger company. Further, the Merger will
provide a larger base of operations for ASG, permitting it to achieve economies
of scale, offer more services to its clients, improve its competitive position
and improve its contacts in the industry. The Merger will also permit ASG to
draw upon the core competencies of MedPartners (physician practice management,
pharmacy benefit management and disease stage management) and to improve the
services it offers its clients. Finally, the Merger is expected to result in
reduction of overhead, improvements in field operations and improved benefits
for ASG's employees.
In approving and adopting the Plan of Merger and formulating its
recommendation that the stockholders of ASG approve and adopt the Plan of Merger
and consummate the Merger, the ASG Board of Directors considered a number of
factors, including, without limitation, the following: (i) the limited volume of
trading in shares of ASG Common Stock; (ii) the quality of, and risks associated
with, the MedPartners' Common Stock to be received by ASG stockholders in the
Merger; (iii) the terms of the Merger Agreement; (iv) the expectation that the
Merger will be treated as a tax-free reorganization for federal income tax
purposes so that generally no gain or loss will be recognized by ASG
stockholders in connection with the exchange of ASG Common Stock for MedPartners
Common Stock in the Merger; and (v) the opinion rendered by Equitable to the
Board of Directors of ASG that the consideration to be received by holders of
ASG Common Stock in the Merger is fair from a financial point of view to such
stockholders, the full text of which appears as Annex B, to this
Prospectus-Proxy Statement.
FOR THE REASONS SET FORTH ABOVE, ASG'S BOARD OF DIRECTORS VOTED TO APPROVE
THE MERGER AND RECOMMENDS THAT HOLDERS OF ASG COMMON STOCK VOTE FOR THE APPROVAL
OF THE MERGER AND PLAN OF MERGER. SEE "THE SPECIAL MEETING -- RECORD DATE,
QUORUM AND VOTING".
OPINION OF FINANCIAL ADVISOR TO ASG
ASG engaged Equitable to act as its financial advisor in connection with
the Merger and to render an opinion as to the fairness from a financial point of
view to the ASG stockholders of the consideration to be
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paid by MedPartners in the Merger. Equitable made a presentation to the Board of
Directors of ASG on September 26, 1997, and during a subsequent conference call
conducted by the Board of Directors of ASG on September 29, 1997, Equitable
opined to the Board of Directors that, as of such date, the Merger Consideration
is fair to the holders of the ASG Common Stock from a financial point of view.
Equitable subsequently confirmed its September 29, 1997 opinion in writing as of
the date of this Prospectus-Proxy Statement. A copy of Equitable's opinion dated
the date of this Prospectus-Proxy Statement, which sets forth the assumptions
made, matters considered, the scope and limitations of the review undertaken and
the procedures followed by Equitable, is attached as Annex B to this
Prospectus-Proxy Statement. ASG stockholders are advised to read the opinion in
its entirety. No limitations were placed on Equitable by the Board of Directors
of ASG with respect to the investigation made or the procedures followed in
preparing and rendering its opinion.
In arriving at its opinion delivered on September 29, 1997, Equitable held
discussions with management and certain representatives of ASG concerning the
historical and current operations of ASG, and its financial condition and
prospects. Equitable examined certain publicly available business and financial
information relating to ASG and certain publicly available business and
financial information relating to MedPartners, as well as certain financial
forecasts and other data for ASG which were provided to Equitable by management
of ASG. Equitable considered, to the extent publicly available, the financial
terms of certain other transactions recently effected which Equitable considered
comparable to the Merger and analyzed certain financial, stock market and other
publicly available information relating to the businesses of other companies
whose businesses Equitable considered comparable to those of ASG and
MedPartners. Equitable also evaluated the potential pro forma financial effects
of the Merger on MedPartners. In addition, Equitable conducted such other
financial studies, analyses and investigations and reviewed such other factors
as it deemed appropriate to arrive at its opinion. Equitable noted that its
opinion was based on economic, market and other conditions existing as of the
date of its opinion.
In rendering its opinion, Equitable relied, without independent
verification, on the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with Equitable. With respect to financial forecasts, Equitable assumed
with the consent of ASG that such forecasts were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgments of
the management of ASG. Equitable assumed that (i) the Merger will be accounted
for under the pooling of interests method of accounting in accordance with
generally accepted accounting principles, (ii) the Merger will be treated as a
tax-free reorganization for federal income tax purposes, and (iii) all material
liabilities (contingent or otherwise) of MedPartners are as set forth in the
financial statements of MedPartners or as otherwise disclosed to Equitable in
connection with the engagement. Equitable did not make an independent evaluation
or appraisal of the assets or liabilities (contingent or otherwise) of
MedPartners.
The text of the written opinion of Equitable dated the date hereof, which
sets forth the matters considered and limitations on the review undertaken, is
attached hereto as Annex B and is incorporated herein by reference. The matters
considered in the September 29, 1997 opinion are substantially the same as those
contained in the opinion dated the date hereof. ASG shareholders are urged to
read this opinion carefully in its entirety. Equitable's opinion is directed
only to the fairness of the Merger Consideration from a financial point of view
as of the date of the opinion and has been provided solely for the use of the
Board of Directors of ASG in its evaluation of the Merger, does not address any
other aspect of the Merger and does not constitute a recommendation to any ASG
stockholder as to how such stockholder should vote at the Special Meeting.
Equitable's opinion is based upon economic, market and other conditions existing
on the date of the opinion and does not address the fairness of the Merger
Consideration to the stockholders of ASG as of any other date, or any other
aspect of the Merger. Equitable expresses no opinion as to the price or trading
range at which shares of ASG Common Stock or MedPartners Common Stock will trade
following the announcement of the Merger, or as to the price or trading range at
which shares of MedPartners Common Stock will trade following consummation of
the Merger. This summary of the opinion of Equitable is qualified in its
entirety by reference to the full text of such opinion.
In preparing its opinion to the Board of Directors of ASG, Equitable
performed a variety of financial and comparative analyses, including those
described below. The summary of such analyses does not purport to be a
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<PAGE> 35
complete description of the analyses underlying Equitable's opinion. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, Equitable did not attribute any
particular weight to any analyses or factors considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Equitable believes that its analyses must be considered as
whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create a misleading or incomplete
view of the processes underlying such analyses and its opinion. In its analyses,
with the consent of ASG, Equitable made numerous assumptions with respect to
ASG, MedPartners, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
ASG and MedPartners. The estimates contained in such analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. The actual results
achieved by ASG following the Merger may vary from projected results, and the
variations may be material.
On September 26, 1997, Equitable delivered to the Board of Directors a
presentation of certain financial analyses and information concerning the Merger
(the "Presentation"). The Presentation contained, among other information, a
description of the transaction and background information. The Presentation also
included a profile of MedPartners. The profile consisted of information
concerning, among other things, MedPartners' business, history and acquisitions,
ownership, management and directors, financial information, and stock
performance and volume. The Presentation also included a summary of research by
certain investment banking analysts.
Equitable utilized three methodologies to analyze the fairness, from a
financial point of view, of the Merger Consideration. These methodologies
consisted of (i) performing a discounted cash flow analysis of ASG's projected
free cash flows for the five year period beginning in fiscal 1998 and ending in
fiscal 2002; (ii) comparing the Merger to certain similar acquisition
transactions in the managed health care, physician practice management and
correctional services industries; and (iii) comparing ASG to certain managed
health care, physician practice management and correctional services providers
with publicly traded equity securities.
Equitable utilized the discounted cash flow evaluation methodology to
derive valuation ranges for ASG. Equitable utilized certain base case
projections based on discussions with ASG management and projections prepared by
certain investment banking analysts. Equitable calculated the estimated free
cash flows for ASG for the five years beginning in fiscal 1998 and ending in
fiscal 2002 resulting from those base case projections, and discounted these
flows back to the beginning of the fiscal 1998 period to determine the present
value of expected future annual cash flows. Equitable then developed a terminal
value for ASG. The terminal value represents the estimated future value of ASG's
free cash flows in perpetuity based on an assumed multiple of earnings before
interest, taxes, depreciation, and amortization ("EBITDA") generated in fiscal
2002. After discounting this terminal value back to the beginning of fiscal
1998, Equitable added the present value of the projected annual cash flows
through fiscal 2002 to the terminal value to arrive at a total enterprise
valuation for ASG, and Equitable further modified this total enterprise value
for certain balance sheet and other adjustments. To test the sensitivity of
these forecasted results, Equitable valued ASG using a range of discount rates
and multiples of EBITDA.
In rendering its fairness opinion, Equitable compared the Merger to certain
acquisition transactions in the managed health care, physician practice
management and correctional services industries. Equitable reviewed and analyzed
certain publicly available financial and structural information for the selected
transactions. Each transaction was examined and calculations regarding the total
purchase consideration paid by the acquiror as a multiple of the target's
trailing revenue and certain earnings statistics, such as gross profit, EBITDA,
and income before taxes (to the extent such financial information was publicly
available and ascertained by Equitable) were made. The multiples associated with
the acquisitions for the managed health care, physician
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<PAGE> 36
practice management and correctional service industries were analyzed for
comparative purposes to the Merger.
Equitable utilized publicly traded companies to compare ASG to certain
managed health care, physician practice management and correctional service
providers. The public company multiples that were examined were based on
multiples of total market capital (stock price multiplied by the number of
shares of common stock outstanding, plus total debt) and included the following:
trailing twelve months' revenue, trailing twelve months' EBITDA, trailing twelve
months' earnings before interest expense and taxes ("EBIT") and trailing twelve
months' net income. In addition, Equitable analyzed certain stock price to
projected earnings ratios of these public companies on the basis of earnings
estimates provided by certain investment banking analysts. The multiple
associated with the trading of public equity securities for the managed health
care, physician practice management and correctional services industries were
analyzed for comparative purposes to the Merger.
No company, transaction or business used in selected merger and acquisition
transaction analyses and comparable publicly traded company analyses represents
an identical comparison to ASG, MedPartners or the Merger. Accordingly, an
analysis of the results of the foregoing is not entirely mathematical; rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
acquisition or public trading value of the comparable companies or the business
segment or company to which they are being compared.
Pursuant to the terms of Equitable's engagement, ASG has agreed to pay
Equitable for its services in connection with the Merger a financial advisory
and opinion fee totaling $400,000, of which $40,000 is payable upon delivery of
Equitable's opinion and the balance of $360,000 is payable upon the closing of
the Merger. ASG also has agreed to reimburse Equitable for reasonable travel and
other out-of-pocket expenses incurred by Equitable in performing its services,
including the reasonable fees and expenses of its legal counsel, and to
indemnify Equitable and related persons against certain liabilities, including
liabilities under the federal securities laws, arising out of Equitable's
engagement.
Equitable has provided investment banking and financial advisory services
for ASG from time to time, and has been compensated for such services.
Equitable, in the ordinary course of business, actively trades the equity
securities of ASG for its own account or for the account of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Equitable regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
THE FULL TEXT OF THE WRITTEN OPINION OF EQUITABLE, DATED , 1997,
WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS ON AND THE REVIEW UNDERTAKEN IS ATTACHED AS ANNEX B TO THIS
PROSPECTUS-PROXY STATEMENT. HOLDERS OF ASG COMMON STOCK ARE URGED TO READ
EQUITABLE'S OPINION CAREFULLY AND IN ITS ENTIRETY. EQUITABLE'S OPINION IS
DIRECTED TO ASG'S BOARD OF DIRECTORS AND TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE MERGER CONSIDERATION TO THE HOLDERS OF ASG COMMON STOCK. SUCH
OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER NOR DOES IT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF ASG COMMON STOCK AS TO HOW TO VOTE AT THE
SPECIAL MEETING. THE SUMMARY OF THE OPINION OF EQUITABLE SET FORTH IN THIS
PROSPECTUS-PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, holders of ASG Common Stock should be aware that
certain members of ASG management have an interest in the Merger, as described
below.
Messrs. Scott L. Mercy, Michael Catalano, and Jeffrey J. Bairstow, who are
the President and Chief Executive Officer; Executive Vice President of
Development, General Counsel and Secretary; and Executive Vice President and
Chief Operating Officer, respectively, of ASG, currently have employment
agreements with ASG that provide for certain severance payments if, following a
"change in control" of ASG (such term, as defined in such agreements, includes
the Merger), such officers resign or are terminated from their positions with
ASG. In addition, upon such resignation or termination, Messrs. Catalano and
Bairstow are
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entitled to full vesting of all options granted to them and any bonuses,
incentive compensation, or other payments due which, pursuant to the terms of
any compensation or benefit plan have been earned or vested as of the relevant
termination date. If Mr. Mercy's employment with ASG is terminated following
consummation of the Merger, he would be entitled to severance payments of
$475,000 and an additional amount equal to up to 200% of the incentive
compensation he could have earned under ASG's annual incentive compensation plan
as described below. If Mr. Catalano's employment with ASG is terminated
following consummation of the Merger, he would be entitled to severance payments
of $173,000, an additional amount equal to the amount earned or vested under
ASG's annual incentive compensation plan as described below, and to vesting of
options to acquire 40,000 shares of ASG Common Stock (to be converted in the
Merger into options to acquire 28,400 shares of MedPartners Common Stock). If
Mr. Bairstow's employment with ASG is terminated following consummation of the
Merger, he would be entitled to severance payments of $178,000, an additional
amount equal to the amount earned or vested under ASG's annual incentive
compensation plan as described below, and to vesting of options to acquire
75,000 shares of ASG Common Stock (to be converted in the Merger into options to
acquire 53,250 shares of MedPartners Common Stock). The severance payments,
bonuses and benefits will be paid from existing cash balances by ASG following
the Merger.
Messrs. Mercy, Catalano and Bairstow are entitled to up to 200% of each
person's base salary of $190,000, $173,000 and $178,000, respectively, pursuant
to ASG's incentive compensation plan. Payments of 5% of each person's base
salary are earned under such incentive compensation plan when 95% of the pre-tax
profit target of $3,228,000 ("Target") has been achieved on a pro-rata basis for
the portion of the calendar year prior to termination. The amount of the payment
earned increases by 5% of each person's base salary for each incremental
increase of 1% of the Target above 95% of the amount of the Target up to 100% of
the Target. Twenty-five percent of pretax profit above the Target amount shall
be paid to Messrs. Mercy, Catalano and Bairstow, up to 200% of each person's
base salary.
Further, ASG is required to maintain, for 18 months following the
consummation of the Merger, in full force and effect for the benefit of Messrs.
Mercy, Catalano and Bairstow and their dependents and beneficiaries, at ASG's
expense, all medical insurance under plans and programs in which they and/or
their dependents and beneficiaries participated immediately prior to the
consummation of the Merger, if continued participation is possible under the
general terms and provisions of such plans and programs. If continued
participation in any such plan or program is barred, ASG is required to arrange
at its own expense to provide Messrs. Mercy, Catalano and Bairstow with benefits
substantially similar to those to which they were entitled to receive under such
plans and programs.
As of the Record Date, the executive officers and directors of ASG (as a
group) owned and had the right to vote an aggregate of shares of ASG Common
Stock. All such shares will be treated in the Merger in the same manner as the
shares of ASG Common Stock held by other stockholders of ASG. See "--Terms of
the Merger" and "Ownership of Common Stock of ASG -- Information as to Directors
and Executive Officers".
As of the Record Date, the executive officers and directors of ASG (as a
group) also held options to purchase an aggregate of shares of ASG Common
Stock pursuant to ASG's stock option plan, including options to purchase an
aggregate of shares of ASG Common Stock held by non-employee directors. Such
options, to the extent not exercised prior to the Merger, together with all
other outstanding ASG stock options, shall, by virtue of the Merger and without
any further action on the part of ASG or the holder of any such ASG options, be
assumed by MedPartners. See "-- Terms of the Merger".
MedPartners and the Subsidiary have agreed pursuant to the Plan of Merger
that all rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers of ASG as provided in its Amended and Restated Certificate of
Incorporation or Bylaws shall survive the Merger and shall continue in full
force and effect in accordance with their terms.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of a Certificate of
Merger, executed in accordance with the relevant provisions of the DGCL, with
the Secretary of State of the State of Delaware, or at such later
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time as MedPartners, the Subsidiary and ASG agree should be specified in the
Certificate of Merger. The Plan of Merger requires that this filing be made as
soon as practicable on or after the date of the consummation of the Merger. As
of the date of this Prospectus-Proxy Statement, the parties to the Plan of
Merger expect that the Certificate of Merger will be filed, and the Merger
consummated, as soon as practicable after the Special Meeting.
APPRAISAL RIGHTS
Holders of ASG Common Stock are not entitled to appraisal rights in
connection with the Merger. See the Notice to Stockholders, the Form Proxy Card
attached to this Prospectus-Proxy Statement, "The Special Meeting" and
"Summary -- The Special Meeting; Record Date and Shares Entitled to Vote; Vote
Required" for further information on the rights of ASG stockholders in relation
to voting on the Plan of Merger.
EXCHANGE OF CERTIFICATES
Exchange Agent. Prior to the Effective Time, MedPartners will enter into
an agreement with First Chicago Trust Company of New York, New York, New York
(the "Exchange Agent"), which will provide that MedPartners shall deposit with
the Exchange Agent as of the Effective Time, for the benefit of the holders of
the ASG Shares, (i) certificates representing the shares of MedPartners Common
Stock issuable pursuant to the Plan of Merger and (ii) cash in an amount equal
to the aggregate amount required to be paid in lieu of fractional shares,
together with any dividends or distributions paid with respect to the
MedPartners Common Stock with a record date after the Effective Time.
Exchange Procedures. As soon as reasonably practicable, but no later than
ten business days after the Effective Time, the Exchange Agent will mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding ASG Shares (the "ASG Certificates"), (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the ASG Certificates shall pass, only upon
delivery of the ASG Certificates to the Exchange Agent and shall be in such form
and have such other customary provisions as MedPartners may reasonably specify),
and (ii) instructions for use in effecting the surrender of the ASG Certificates
in exchange for certificates representing shares of MedPartners Common Stock.
Upon surrender of an ASG Certificate to the Exchange Agent, together with such
letter of transmittal, duly executed, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such ASG Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of MedPartners Common Stock which such holder has the right to
receive pursuant to the provisions of the Plan of Merger. In the event of a
transfer of ownership of ASG Shares which is not registered in the transfer
records of ASG, a certificate representing the proper number of shares of
MedPartners Common Stock may be issued to a person other than the person in
whose name the ASG Certificate so surrendered is registered, if such ASG
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of MedPartners Common Stock
to a person other than the registered holder of such ASG Certificate or
establish to the satisfaction of MedPartners that such tax has been paid or is
not applicable. Until surrendered as contemplated by the Plan of Merger, each
ASG Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of MedPartners Common Stock and cash in lieu of any
fractional shares of MedPartners Common Stock as contemplated by the Plan of
Merger. No interest will be paid or will accrue on any cash payable in lieu of
any fractional shares of MedPartners Common Stock. To the extent permitted by
law, former holders of record of ASG Shares shall be entitled to vote after the
Effective Time at any meeting of MedPartners stockholders the number of whole
shares of MedPartners Common Stock into which their respective ASG Shares are
converted, regardless of whether such holders have received their certificates
representing MedPartners Common Stock in accordance with the Plan of Merger.
No certificates or scrip representing fractional shares of MedPartners
Common Stock shall be issued upon conversion of ASG Shares, and such fractional
share interests will not entitle the owner thereof to vote or to any rights as a
stockholder of MedPartners. Notwithstanding any other provision of the Plan of
Merger, each holder of ASG Shares exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of MedPartners
Common Stock shall receive, in lieu thereof, cash (without
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interest) in an amount equal to such fractional part of a share of MedPartners
Common Stock multiplied by the per share closing price of the MedPartners Common
Stock on the NYSE Composite Tape on the date of the Effective Time.
At the Effective Time, holders of ASG Shares immediately prior to the
Effective Time will cease to be, and shall have no rights as, holders of ASG
Shares, other than the right to receive shares of MedPartners Common Stock into
which such shares have been converted and any fractional share payment and any
dividends or other distributions with respect to MedPartners Common Stock that
are payable to holders of record after the Effective Time.
CONDITIONS TO THE MERGER
The obligations of MedPartners and the Subsidiary to consummate the Merger
are subject to the following conditions (which may be waived by MedPartners and
the Subsidiary (see "-- Waiver and Amendment" below)): (i) each of the
agreements of ASG to be performed at or prior to the Closing Date shall have
been performed in all material respects and ASG shall have performed, in all
material respects, all of the acts required to be performed by it at or prior to
the Closing Date; (ii) the representation and warranties of ASG set forth in
Section 3.10(a) of the Plan of Merger, to the effect that ASG has not incurred
any material adverse change, shall have been true and correct as of October 1,
1997 and shall be true and correct as of the Closing Date; the other
representations and warranties of ASG set forth in the Plan of Merger shall have
been true and correct on October 1, 1997 and shall be true and correct on the
Closing Date, subject to immaterial exceptions; and MedPartners and the
Subsidiary shall have received a certificate of a duly authorized officer of ASG
to such effect; (iii) MedPartners shall have received an opinion from Haskell
Slaughter & Young, L.L.C. to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code; (iv)
MedPartners shall have received an opinion from King & Spalding with respect to
customary corporate matters, including corporate authority, capitalization, no
conflicts, and compliance with federal securities laws; (v) all consents,
authorization, orders and approvals of (or filings or registrations with) any
governmental commission, board or other regulatory body required in connection
with the execution, delivery and performance of the Plan of Merger shall have
been obtained or made, except for filings in connection with the Merger and any
documents required to be filed after the Effective Time; and (vi) MedPartners
shall have received an undertaking from holders ("Holders") of options to
purchase not less than 516,000 shares of ASG stock (such number to be reduced by
the number of shares with respect to which Holders of ASG options have made
cashless exercises of such options since the date of the Plan of Merger) that if
they should exercise such options prior to or after the Effective Time, such
exercises will be cashless exercises.
The obligation of ASG to consummate the Merger is subject to the following
conditions (which may be waived by ASG (see "-- Waiver and Amendment" below)):
(i) each of the agreements of MedPartners and the Subsidiary to be performed at
or prior the Closing Date pursuant to the terms of the Plan of Merger shall have
been duly performed, in all material respects, and MedPartners and the
Subsidiary shall have performed, in all material respects, all of the acts
required to be performed by them at or prior to the Closing Date; (ii) the
representations and warranties of MedPartners set forth in Section 5.11(a) of
the Plan of Merger, to the effect that ASG has not incurred any material adverse
change, shall have been true and correct as of October 1, 1997 and as of the
Closing Date; the other representations and warranties of MedPartners set forth
in the Plan of Merger shall have been true and correct on October 1, 1997 and
shall be true and correct on the Closing Date, subject to immaterial exceptions;
and ASG shall have received a certificate of a duly authorized officer of
MedPartners to such effect; (iii) ASG shall have received an opinion from King &
Spalding to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code; (iv) ASG shall have received an
opinion from Haskell Slaughter & Young, L.L.C. with respect to customary
corporate matters, including corporate authority, capitalization, no conflicts
and compliance with federal securities laws; and (v) all consents,
authorizations, orders and approvals of (or filings or registrations with) any
governmental commission, board or other regulatory body required in connection
with the execution, delivery and performance of the Plan of Merger shall have
been obtained or made, except for filings in connection with the Merger and any
other documents to be filed after the Effective Time.
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The obligation of each of MedPartners, the Subsidiary and ASG to consummate
the Merger is subject to certain additional conditions, including the following
(any of which may be waived by MedPartners, the Subsidiary and ASG, subject to
the limitations discussed under "-- Waiver and Amendment" below): (i) none of
MedPartners, the Subsidiary or ASG nor any of their respective subsidiaries
shall be subject to any order, decree or injunction by a court of competent
jurisdiction which prevents or materially delays the consummation of the Merger
or would impose any material limitation on the ability of MedPartners
effectively to exercise full rights of ownership of the Common Stock of the
Surviving Corporation or any material portion of the assets or business of ASG,
taken as a whole; (ii) no statute, rule or regulation shall have been enacted by
the government (or any governmental agency) of the United States or any state
that makes the consummation of the Merger and any other transaction contemplated
by the Plan of Merger illegal; (iii) any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated; (iv) MedPartners, the Subsidiary and ASG shall
have received all consents, waivers, approvals and authorizations of third
parties with respect to all material contracts, leases, service agreements and
management agreements to which such entities are parties, which consents,
waivers, approvals and authorizations are required of such third parties by such
documents, in form and substance acceptable to MedPartners or ASG, as the case
may be, except where the failure to obtain such consent, approval or
authorization would not have a material effect on the business of the Surviving
Corporation; (v) the Merger shall have been approved by the requisite votes of
the holders of the shares of ASG Common Stock; (vi) the shares of MedPartners
Common Stock to be issued in connection with the Merger shall have been listed
on the NYSE, upon official notice of issuance and shall have been issued in
transactions qualified or exempt from registration under applicable securities
or Blue Sky laws of such states and territories of the United States as may be
required; (vii) the Merger shall qualify for pooling of interests accounting
treatment; and (viii) the Registration Statement, of which this Prospectus-Proxy
Statement forms a part, shall have been declared effective under the Securities
Act and shall not be subject to any stop order.
REPRESENTATIONS AND COVENANTS
At the time the Plan of Merger was executed, MedPartners, the Subsidiary
and ASG each made a number of representations regarding the organization and
capitalization of their respective companies and their affiliates, their
operations, financial condition and other matters, including their authority to
enter into the Plan of Merger and to consummate the Merger. These
representations and warranties will be reconfirmed at the consummation of the
Merger. Under the Plan of Merger, ASG has agreed not to, directly or indirectly,
furnish information and access, in response to unsolicited requests therefor, to
any corporation, partnership, person or other entity or group, participate in
discussions and negotiate with such corporation, partnership, person or other
entity or group concerning any proposal to acquire such party upon a merger,
purchase of assets, purchase of or tender offer for shares of its common stock
or similar transaction.
REGULATORY APPROVALS
The HSR Act provides that certain business mergers (including the Merger)
may not be consummated until certain information has been furnished to the DOJ
and the FTC and certain waiting period requirements have been satisfied. On
October , 1997, MedPartners and ASG made their respective filings with the
DOJ and the FTC with respect to the Plan of Merger. Under the HSR Act, the date
of MedPartners' and ASG's filings commenced a 30-day waiting period during which
the Merger may not be consummated, unless such waiting period is terminated
earlier. MedPartners and ASG believe that the Merger does not violate the
antitrust laws and intend to resist vigorously any assertion to the contrary by
the FTC, the DOJ or others. Any such resistance would delay consummation of the
Merger, perhaps for a considerable period.
Certain persons, such as states' attorneys general and private parties,
could challenge the Merger as violative of the antitrust laws and seek to enjoin
the consummation of the Merger and, in the case of private persons, also seek to
obtain treble damages. There can be no assurance that a challenge to the Merger
on antitrust grounds will not be made or, if such a challenge is made, that it
will not be successful. Neither MedPartners nor ASG intends to seek any further
stockholder approval or authorization of the Plan of Merger
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as a result of any action that it may take to resist or resolve any objections
by the FTC or other objections, unless required to do so by applicable law.
The operations of each of MedPartners and ASG are subject to a substantial
body of federal, state, local and accrediting body laws, rules and regulations
relating to the conduct, licensing and development of healthcare businesses and
facilities. As a result of the Merger, a number of the contractual arrangements
between ASG and some of the governmental agencies with which ASG has contracts
may be deemed to have been transferred, arguably requiring the approval and
consent of such payors. Although no assurances to this effect can be given, it
is not anticipated that the parties will be unable to obtain any required
consent or approval.
BUSINESS PENDING THE MERGER
The Plan of Merger provides that, during the period from the date of the
Plan of Merger to the Effective Time, except as provided in the Plan of Merger,
ASG will use its reasonable best efforts to preserve intact its present business
organization, to keep available to MedPartners and the Surviving Corporation the
services of the present employees of ASG, and to maintain the goodwill of
customers, suppliers and others having business dealings with ASG.
Under the Plan of Merger, ASG has agreed that it will not (other than as
required pursuant to or contemplated by the terms of the Plan of Merger and
related documents), without first obtaining the written consent of MedPartners,
enter into certain types of transactions that are material to the business of
ASG.
WAIVER AND AMENDMENT
The Plan of Merger provides that, at any time prior to the Effective Time,
MedPartners and the Subsidiary, on the one hand, and ASG, on the other hand, may
(i) extend the time for the performance of any of the obligations or other acts
of the other party contained in the Plan of Merger; (ii) waive any inaccuracies
in the representations and warranties of the other party contained in the Plan
of Merger or in any document delivered pursuant to the Plan of Merger; and (iii)
subject to the following sentence, waive compliance with the agreements for the
benefit of such party contained in the Plan of Merger or the conditions to the
obligations of such party under the Plan of Merger to consummate the Merger. See
"-- Conditions to the Merger" above. Under the Plan of Merger and the DGCL, if
the Plan of Merger is approved at the Special Meeting, the Board of Directors of
ASG may not amend or waive any covenant or condition in a manner that would
adversely affect the stockholders of ASG without the requisite approval of ASG's
stockholders. Any determination to amend the Plan of Merger or waive a covenant
or condition and to obtain stockholder approval, if required, would depend on
the facts and circumstances existing at the time of such amendment or waiver and
would be made by ASG's Board of Directors, exercising its fiduciary duties and
in compliance with Delaware law. As of the date of this Prospectus-Proxy
Statement, the parties to the Plan of Merger have no reason to believe that any
of the material conditions to the Merger will not be satisfied.
TERMINATION
The Plan of Merger may be terminated at any time prior to the Effective
Time, whether before or after the requisite approval of the Plan of Merger by
the stockholders of ASG: (i) by mutual written consent of MedPartners, the
Subsidiary and ASG; (ii) by either MedPartners or ASG, if the Merger has not
been consummated on or before March 31, 1998, unless the failure to consummate
the Merger by such time is due to the willful and material breach of the Plan of
Merger by the party seeking to terminate the Plan of Merger; provided, however,
that the passage of such period shall be tolled for any part thereof (not to
exceed 60 days in the aggregate) during which any party shall be subject to a
non-final order, decree, ruling or action restraining, enjoining or otherwise
prohibiting the consummation of the Merger or the calling or holding of a
meeting of stockholders; (iii) by either MedPartners or ASG, if any required
approval of the Plan of Merger by holders of ASG Shares is not obtained at the
Special Meeting; (iv) by either MedPartners or ASG if any court of competent
jurisdiction or other governmental entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree,
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ruling or other action shall have become final and nonappealable; (v) by either
MedPartners or ASG in the event of a material breach by the other party of any
representation, warranty, covenant or other agreement contained in the Plan of
Merger which (A) would give rise to the failure of a condition set forth in
Section 9.2(a) or (b) (in the case of MedPartners) or Section 9.3(a) or (b) (in
the case of ASG) and (B) cannot be or has not been cured within 30 days after
the giving of a written notice to the breaching party of such breach (a
"Material Breach") (provided that the terminating party is not then in Material
Breach of any representation, warranty, covenant or other agreement contained in
the Plan of Merger); (vi) by either MedPartners or ASG in the event that (A) all
of the conditions to the obligation of such party to effect the Merger set forth
in Section 9.1 of the Plan of Merger shall not have been satisfied and (B) any
condition to the obligation of such party to effect the Merger set forth in
Section 9.2 (in the case of MedPartners) or Section 9.3 (in the case of ASG) is
not capable of being satisfied prior to March 31, 1998; (vii) by ASG if the
Board of Directors of ASG shall have (A) determined, in the exercise of its
fiduciary duties under applicable law, to withdraw its recommendation to the
stockholders of ASG that they approve the Merger or (B) approved, recommended or
endorsed any Acquisition Transaction (as defined herein) other than the Merger
or (C) resolved to do any of the foregoing; or (viii) by ASG if the arithmatic
average of the closing prices per share of the MedPartners Common Stock, as
reported on the New York Stock Exchange Composite Tape, during any consecutive
30 trading day period between October 1, 1997 and the date five trading days
before the ASG Special Meeting is less than $17.50 and MedPartners has received
written notice of the decision to terminate the Plan of Merger within two
trading days after any such thirty day trading period. See "-- Expenses".
THE NEW YORK STOCK EXCHANGE LISTING
A subsequent listing application will be filed with the NYSE to list the
shares of MedPartners Common Stock to be issued to ASG stockholders in
connection with the Merger. Although no assurance can be given that the shares
of MedPartners Common Stock so issued will be accepted for listing, MedPartners
anticipates that these shares will qualify for listing on the NYSE, upon
official notice of issuance thereof. The consummation of the Merger is
conditioned upon the listing of the shares of MedPartners Common Stock to be
issued in the Merger on the NYSE.
RESALE OF MEDPARTNERS COMMON STOCK BY AFFILIATES
MedPartners Common Stock to be issued to ASG stockholders in connection
with the Merger has been registered under the Securities Act and, upon
consummation of the Merger, will be freely transferable under the Securities
Act, except for shares issued to any person who may be deemed an "Affiliate" (as
defined below) of ASG or MedPartners within the meaning of Rule 145 under the
Securities Act. "Affiliates" are generally defined as persons who control, are
controlled by, or are under common control with ASG or MedPartners at the time
of the Special Meeting (generally, directors and certain executive officers of
ASG or MedPartners and major stockholders of MedPartners or ASG). Generally, all
shares of MedPartners Common Stock received by such Affiliates may not be sold
by them until MedPartners publishes at least one full calendar month of the
combined results of operations of MedPartners and ASG. MedPartners has agreed to
publish (as defined in SEC Accounting Series Release No. 135) such results in
its next succeeding Quarterly Report on Form 10-Q after the end of the first
calendar month following the Effective Time.
In addition, Affiliates of ASG or MedPartners may not sell their shares of
MedPartners Common Stock acquired in connection with the Merger except pursuant
to an effective registration statement under the Securities Act covering such
shares or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act. In general, under Rule 145, for
one year following the Effective Time (the "Restricted Period"), an Affiliate
(together with certain related persons) is entitled to sell shares of
MedPartners Common Stock acquired in connection with the Merger only through
unsolicited "broker transactions" or in transactions directly with a "market
maker", as such terms are defined in Rule 144 under the Securities Act.
Additionally, the number of shares that may be sold by an Affiliate (together
with certain related persons and certain persons acting in concert) within any
three-month period during the Restricted Period for purposes of Rule 145 may not
exceed the greater of (i) 1% of the outstanding shares of
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MedPartners Common Stock or (ii) the average weekly trading volume of such stock
during the four calendar weeks preceding such sale. Rule 145 is available to
Affiliates only if MedPartners remains current with its information filings with
the SEC under the Exchange Act. Following the Restricted Period, an Affiliate
may sell such MedPartners Common Stock free of such manner of sale or volume
limitations, provided that MedPartners was current with its Exchange Act
information filings and such Affiliate was not then an Affiliate of MedPartners.
Two years after the Effective Time, an Affiliate may sell such shares of
MedPartners Common Stock without any restrictions so long as such Affiliate was
not, and had not been for at least three months prior thereto, an Affiliate of
MedPartners.
ACCOUNTING TREATMENT
ASG and MedPartners expect to receive letters at the closing from Ernst &
Young LLP, as independent auditors of MedPartners, regarding such firm's
concurrence with the conclusions of managements of ASG and MedPartners as to the
appropriateness of pooling of interests accounting for the Merger under APB
Opinion No. 16 if the Merger is closed and consummated in accordance with the
Plan of Merger. MedPartners, the Subsidiary and ASG have agreed not to
intentionally take any action that would disqualify treatment of the Merger as a
pooling of interests for accounting purposes.
Under the pooling of interests method of accounting, the historical basis
of the assets and liabilities of MedPartners and ASG will be combined at the
Effective Time and carried forward at their previously recorded amounts, the
stockholders' equity accounts of MedPartners and ASG will be combined on the
consolidated balance sheet of MedPartners and no goodwill or other intangible
assets will be created. Consolidated financial statements of MedPartners issued
after the Merger will be restated retroactively to reflect the consolidated
operations of MedPartners and ASG as if the Merger had taken place prior to the
periods covered by such consolidated financial statements.
The unaudited pro forma financial information contained in this
Prospectus-Proxy Statement has been prepared using the pooling of interests
accounting method to account for the Merger. Consistent with pooling of
interests accounting treatment, the direct costs related to the Merger will be
taken as a non-recurring charge to earnings in the quarter in which the Merger
is consummated.
FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger and the exchange by the holders of ASG Shares of such
shares for shares of MedPartners Common Stock. This discussion does not address
all aspects of taxation that may be relevant to particular stockholders in light
of their personal investment or tax circumstances, or to certain types of
stockholders (including insurance companies, financial institutions,
broker-dealers, foreign corporations, persons who receive stock as compensation
for services rendered and persons who are not citizens or residents of the
United States) subject to special treatment under the federal income tax laws,
nor does it discuss any state, local or foreign tax considerations. Accordingly,
each ASG stockholder is urged to consult his or her own tax advisor as to the
specific tax consequences of the Merger including the applicable federal, state,
local and foreign tax consequences of the Merger.
Neither MedPartners nor ASG has requested or will receive an advance ruling
from the Internal Revenue Service (the "Service") as to the federal income tax
consequences of the Merger. Instead, Haskell Slaughter & Young, L.L.C and King &
Spalding, counsel to MedPartners and ASG, respectively, have delivered opinions
relating to the federal income tax consequences of the Merger. Such opinions are
based upon facts and assumptions of fact described therein, and upon certain
customary representations provided by MedPartners, the Subsidiary, ASG and
certain ASG stockholders. Such opinions are also based upon the Code,
regulations thereunder, administrative rulings and practice by the Service, and
judicial authority, in each case existing at the time such opinions were
delivered. Any change in applicable law or pertinent facts could affect the
continuing validity of such opinions and this discussion. In addition, an
opinion of counsel is not binding upon the Service, and there can be no
assurance, and none is hereby given, that the Service will not take a position
which is contrary to one or more positions reflected in the opinions of counsel,
or that such
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opinions will be upheld by the courts if challenged by the Service. However,
MedPartners and ASG have agreed in the Plan of Merger not to take any action
which would disqualify the Merger as a reorganization which is tax-free to the
stockholders of ASG pursuant to Section 368(a) of the Code. Based on the
foregoing, the opinions of such counsel collectively state, among other matters,
that: (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and MedPartners, the Subsidiary and ASG will each be
a party to the reorganization within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by MedPartners, ASG or the Subsidiary as
a result of the Merger; (iii) no gain or loss will be recognized by an ASG
stockholder who receives solely shares of MedPartners Common Stock in exchange
for ASG Shares; (iv) the receipt of cash in lieu of fractional shares of
MedPartners Common Stock will be treated as if the fractional shares were
distributed as part of the exchange and then were redeemed by MedPartners; (v)
the tax basis of the shares of MedPartners Common Stock received by an ASG
stockholder will be equal to the tax basis of the ASG Shares exchanged therefor,
excluding any basis allocable to a fractional share of MedPartners Common Stock
for which cash is received; and (vi) the holding period of the shares of
MedPartners Common Stock received by an ASG stockholder will include the holding
period or periods of the ASG Shares exchanged therefor, provided that the ASG
Shares are held as a capital asset within the meaning of Section 1221 of the
Code at the Effective Time.
EACH HOLDER OF ASG SHARES IS URGED TO CONSULT SUCH HOLDER'S PERSONAL TAX
AND FINANCIAL ADVISORS AS TO THE SPECIFIC FEDERAL INCOME TAX CONSEQUENCES TO
SUCH HOLDER, BASED ON SUCH HOLDER'S OWN PARTICULAR STATUS AND CIRCUMSTANCES, AND
ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES ARISING OUT OF
THE MERGER.
NO SOLICITATION OF TRANSACTIONS
Under the Plan of Merger, ASG may not, directly or indirectly, furnish
information and access, in response to unsolicited requests therefor, to other
corporations, partnerships, persons or other entities or groups, and may not
participate in discussions and negotiate with such entities concerning any
proposal to acquire such party upon a merger, purchase of assets, purchase of or
tender offer for shares of such party's common stock or similar transaction (an
"Acquisition Transaction"). ASG has further agreed that it will notify
MedPartners of any unsolicited request for information and access in connection
with a possible Acquisition Transaction involving such party, including
providing MedPartners with the identity of the third party and the proposed
terms of such Acquisition Transaction.
EXPENSES
The Plan of Merger provides that all costs and expenses incurred in
connection with the Merger shall be paid by the party incurring such expense,
except that expenses (other than legal, accounting and investment banking costs,
which shall be paid by the party incurring such expenses) incurred in connection
with the preparation, filing, printing and mailing of this Prospectus-Proxy
Statement and the Registration Statement shall be shared equally by MedPartners
and ASG.
INDEMNIFICATION
The Plan of Merger provides that all rights to indemnification for acts or
omissions occurring prior to the Effective Time now existing in favor of the
current or former directors or officers of ASG as provided in its Certificate of
Incorporation and Bylaws shall survive the Merger and shall continue in full
force and effect in accordance with their terms. The SEC has taken the position
that indemnification provisions in certificates of incorporation and bylaws will
have no effect on claims arising under the federal securities laws.
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DESCRIPTION OF CAPITAL STOCK OF MEDPARTNERS
AUTHORIZED CAPITAL STOCK
The MedPartners Certificate of Incorporation currently provides that
MedPartners may issue 9,500,000 shares of Preferred Stock, par value $.001 per
share (the "MedPartners Preferred Stock"), 500,000 shares of Series C Preferred
Stock, par value $.001 per share (the "MedPartners Series C Preferred Stock"),
and 400,000,000 shares of MedPartners Common Stock.
COMMON STOCK
Holders of the MedPartners Common Stock are entitled to one vote for each
share held of record on all matters to be submitted to a vote of the
stockholders and do not have preemptive rights. Subject to preferences that may
be applicable to any outstanding shares of MedPartners Preferred Stock, holders
of MedPartners Common Stock are entitled to receive ratably such dividends, if
any, as may be declared from time to time by MedPartners's Board of Directors
out of funds legally available therefor. All outstanding shares of MedPartners
Common Stock are fully paid and nonassessable. In the event of any liquidation,
dissolution or winding-up of the affairs of MedPartners, holders of MedPartners
Common Stock will be entitled to share ratably in the assets of MedPartners
remaining after payment or provision for payment of all of MedPartners's debts
and obligations and liquidation payments to holders of any outstanding shares of
MedPartners Preferred Stock.
PREFERRED STOCK
MedPartners' Board of Directors, without further stockholder authorization,
is authorized to issue shares of MedPartners Preferred Stock in one or more
series and to determine and fix the rights, preferences and privileges of each
series, including dividend rights and preferences over dividends on the
MedPartners Common Stock and one or more series of MedPartners Preferred Stock,
conversion rights, voting rights (in addition to those provided by law),
redemption rights and the terms of any sinking fund therefor, and rights upon
liquidation, dissolution or winding up, including preferences over the
MedPartners Common Stock and one or more series of MedPartners Preferred Stock.
Although MedPartners has no present plans to issue any shares of MedPartners
Preferred Stock, the issuance of shares of MedPartners Preferred Stock, or the
issuance of rights to purchase such shares, may have the effect of delaying,
deferring or preventing a change in control of MedPartners or an unsolicited
acquisition proposal.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND THE DGCL
Classified Board of Directors. The MedPartners Certificate of
Incorporation and the MedPartners Bylaws provide for MedPartners' Board of
Directors to be divided into three classes of directors, as nearly equal in
number as is reasonably possible, serving staggered terms so that directors'
terms expire either at the 1997, 1998 or 1999 annual meeting of stockholders of
MedPartners. See "MedPartners' Management -- Classified Board of Directors" set
forth in MedPartners Annual Report on Form 10K/A and incorporated herein by
reference.
MedPartners believes that a classified board of directors will help to
assure the continuity and stability of MedPartners' Board of Directors and
MedPartners' business strategies and policies as determined by MedPartners'
Board of Directors, since a majority of the directors at any given time will
have had prior experience as directors of MedPartners. MedPartners believes that
this, in turn, will permit MedPartners' Board of Directors to more effectively
represent the interests of stockholders.
With a classified board of directors, at least two annual meetings of
stockholders, instead of one, will generally be required to effect a change in
the majority of MedPartners' Board of Directors. As a result, a provision
relating to a classified MedPartners' Board of Directors may discourage proxy
contests for the election of directors or purchases of a substantial block of
the MedPartners Common Stock because its provisions could operate to prevent
obtaining control of MedPartners' Board of Directors in a relatively short
period of time. The classification provision could also have the effect of
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of MedPartners. Under the DGCL, unless the certificate of
incorporation otherwise provides, a director on a classified board may be
removed by the stockholders of the corporation only for cause. The MedPartners
Certificate of Incorporation does not provide otherwise.
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Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. The MedPartners Bylaws establish an advance notice
procedure with regard to the nomination, other than by or at the direction of
MedPartners' Board of Directors or a committee thereof, of candidates for
election as directors (the "Nomination Procedure") and with regard to other
matters to be brought by stockholders before an annual meeting of stockholders
of MedPartners (the "Business Procedure").
The Nomination Procedure requires that a stockholder give prior written
notice, in proper form, of a planned nomination for MedPartners' Board of
Directors to the Corporate Secretary of MedPartners. The requirements as to the
form and timing of that notice are specified in the MedPartners Bylaws. If the
Chairman of MedPartners' Board of Directors determines that a person was not
nominated in accordance with the Nomination Procedure, such person will not be
eligible for election as a director.
Under the Business Procedure, a stockholder seeking to have any business
conducted at an annual meeting must give prior written notice, in proper form,
to the Corporate Secretary of MedPartners. The requirements as to the form and
timing of that notice are specified in the MedPartners Bylaws. If the Chairman
of MedPartners' Board of Directors determines that the other business was not
properly brought before such meeting in accordance with the Business Procedure,
such business will not be conducted at such meeting.
Although the MedPartners Bylaws do not give MedPartners' Board of Directors
any power to approve or disapprove stockholder nominations for the election of
directors or of any other business desired by stockholders to be conducted at an
annual or any other meeting, the MedPartners Bylaws (i) may have the effect of
precluding a nomination for the election of directors or precluding the conduct
of business at a particular annual meeting if the proper procedures are not
followed or (ii) may discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of MedPartners, even if the conduct of such
solicitation or such attempt might be beneficial to MedPartners and its
stockholders.
Delaware Takeover Statute. MedPartners is subject to Section 203 of the
DGCL which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any "interested
stockholder" for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) on or after such date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. An "interested stockholder" is defined as any person that is (a)
the owner of 15% or more of the outstanding voting stock of the corporation or
(b) an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
STOCKHOLDER RIGHTS PLAN
The following is a description of the MedPartners' Stockholders' Rights
Agreement ("the MedPartners Rights Plan"). The description thereof set forth
below is qualified in its entirety by reference to the MedPartners Rights Plan,
a copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus-Proxy Statement is a part. See "Available Information".
The MedPartners Rights Plan provides that one right (a "Right") will be
issued with each share of the MedPartners Common Stock (whether originally
issued or from MedPartners' treasury) prior to the Rights
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Distribution Date (as defined therein). The Rights are not exercisable until the
Rights Distribution Date and will expire at the close of business on the date
which is 10 years from the date of the distribution unless previously redeemed
by MedPartners as described below. When exercisable, each Right will entitle the
owner to purchase from MedPartners one one-hundredth of a share of MedPartners
Series C Preferred Stock at a purchase price of $52.00 per share. The
MedPartners Series C Preferred Stock may be issued in fractional shares.
Except as described below, the Rights will be evidenced by all the
MedPartners Common Stock certificates and will be transferred with the
MedPartners Common Stock certificates, and no separate Rights certificates will
be distributed. The Rights will separate from the MedPartners Common Stock and a
"Rights Distribution Date" will occur upon the earlier of (i) 10 days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 10% or more of the outstanding MedPartners Common Stock
(the "Stock Acquisition Date") and (ii) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person
or group becoming an Acquiring Person.
After the Rights Distribution Date, Rights certificates will be mailed to
holders of record of shares of the MedPartners Common Stock as of the Rights
Distribution Date and thereafter the separate Rights certificates alone will
represent the Rights.
The MedPartners Series C Preferred Stock issuable upon exercise of the
Rights will be entitled to a minimum preferential quarterly dividend payment of
$.001 per share and will be entitled to an aggregate dividend of 100 times the
dividend, if any, declared for each share of MedPartners Common Stock. In the
event of liquidation, the holders of the MedPartners Series C Preferred Stock
will be entitled to a minimum preferential liquidation payment of $52.00 per
share and will be entitled to an aggregate payment of 100 times the payment made
per share of MedPartners Common Stock. Each share of the MedPartners Series C
Preferred Stock will have 100 votes and will vote together with the shares of
MedPartners Common Stock. In the event of any merger, consolidation or other
transaction in which shares of MedPartners Common Stock are changed or
exchanged, each share of MedPartners Series C Preferred Stock will be entitled
to receive 100 times the amount received per share of MedPartners Common Stock.
These rights are protected by customary anti-dilution provisions. The
MedPartners Series C Preferred Stock will, if issued, be junior to any other
series of MedPartners Preferred Stock which may be authorized and issued by
MedPartners, unless the terms of any such other series provide otherwise. The
MedPartners Series C Preferred Stock will not be redeemable. Once the shares of
MedPartners Series C Preferred Stock are issued, the MedPartners Certificate of
Incorporation may not be amended in a manner which would materially alter or
change the powers, preferences or special rights of the MedPartners Series C
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of two-thirds or more of the outstanding shares of the MedPartners
Series C Preferred Stock, voting separately as a class. Because of the nature of
the MedPartners Series C Preferred Stock dividend, liquidation and voting
rights, the value of a share of the MedPartners Series C Preferred Stock
purchasable upon exercise of each Right should approximate the value of one
share of MedPartners Common Stock.
In the event that (i) a person becomes an Acquiring Person (except pursuant
to a tender offer or an exchange offer for all outstanding shares of MedPartners
Common Stock at a price and on terms determined by at least a majority of the
members of MedPartners' Board of Directors who are not officers of MedPartners
and who are not representatives, nominees, affiliates or associates of an
Acquiring Person, to be (a) at a price which is fair to MedPartners'
stockholders and (b) otherwise in the best interests of MedPartners and its
stockholders (a "Qualifying Offer")), (ii) an Acquiring Person engages in
certain self-dealing transactions involving MedPartners, such as, (a) merging or
consolidating into or with MedPartners where MedPartners survives and the
MedPartners Common Stock remains outstanding, (b) transferring assets to
MedPartners in exchange for MedPartners' securities, or acquiring securities
from MedPartners other than on the same basis as from all other stockholders,
(c) transferring assets to or from MedPartners on terms less favorable than
arm's length, (d) transferring to or from MedPartners' assets having a fair
market value in excess of $5,000,000, (e) receiving unusual compensation or (f)
receiving any other financial benefit not provided to all other stockholders, or
(iii) during such time as there is an Acquiring Person, there is any
reclassification of securities, recapitalization, merger or consolidation which
increases by more than 1% the amount of the MedPartners Common Stock
beneficially owned by the Acquiring Person, each holder of a Right will
38
<PAGE> 48
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price, shares of MedPartners Common Stock (or, in certain
circumstances, cash, property or other securities of MedPartners) having a value
equal to two times the exercise price of the Right. Notwithstanding any of the
foregoing, following the occurrence of any such events, all Rights that are, or
(under certain circumstances specified in the MedPartners Rights Plan) were,
beneficially owned by any Acquiring Person (or certain related parties), will be
null and void. However, Rights are not exercisable following the occurrence of
the events set forth above until such time as the Rights are no longer
redeemable by MedPartners as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i)
MedPartners is acquired in a merger or other business combination transaction in
which MedPartners is not the surviving corporation or the MedPartners Common
Stock is changed or exchanged (other than a merger which follows a Qualifying
Offer and satisfies certain other requirements), or (ii) 50% or more of
MedPartners' assets or earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive upon the exercise thereof at the then
current exercise price, common stock of the acquiring company having a value
equal to two times the exercise price of the Right.
At any time until ten days following the Stock Acquisition Date,
MedPartners may redeem the Rights in whole, but not in part, at a price of $.001
per Right. Immediately upon the action of MedPartners' Board of Directors
ordering redemption of the Rights, the Rights will terminate, and the only right
of the holders of the Rights will be to receive the $.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of MedPartners, including without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to MedPartners, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for shares of MedPartners Common Stock (or other consideration) or
for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Plan may be amended by MedPartners'
Board of Directors prior to the Rights Distribution Date. After the Rights
Distribution Date, the provisions of the Rights Agreement may be amended by
MedPartners' Board of Directors in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person) or to shorten or lengthen any time period
under the Rights Agreement, provided that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
The Rights have certain anti-takeover effects as they will cause
substantial dilution to a person or group that acquires a substantial interest
in MedPartners without the prior approval of MedPartners' Board of Directors.
The effect of the Rights may be to inhibit a change in control of MedPartners
(including through a third party tender offer at a price which reflects a
premium to then prevailing trading prices) that may be beneficial to MedPartners
stockholders.
LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS
The MedPartners Certificate of Incorporation contains a provision
eliminating or limiting director liability to MedPartners and its stockholders
for monetary damages arising from acts or omissions in the director's capacity
as a director. The provision does not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty to
MedPartners or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
the DGCL making directors personally liable, under a negligence standard, for
unlawful dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision offers persons who serve on MedPartners' Board of Directors protection
against awards of monetary damages resulting from breaches of their duty of care
(except as indicated above). As a result of this provision, the ability of
MedPartners or a stockholder thereof to successfully prosecute an action against
a director for a breach of his duty of care is limited. However, the provision
does not affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care. The SEC has taken
the position that the provision will have no effect on claims arising under the
federal securities laws.
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<PAGE> 49
In addition, the MedPartners Certificate of Incorporation and the
MedPartners Bylaws provide for mandatory indemnification rights, subject to
limited exceptions, to any director, officer, employee, or agent of MedPartners
who by reason of the fact that he or she is a director, officer, employee, or
agent of MedPartners, is involved in a legal proceeding of any nature. Such
indemnification rights include reimbursement for expenses incurred by such
director, officer, employee, or agent in advance of the final disposition of
such proceeding in accordance with the applicable provisions of the DGCL.
REGISTRATION RIGHTS
Pursuant to a Registration Agreement entered into in August 1993 and
amended in March 1994 (the "Registration Agreement"), the prior holders of the
MedPartners Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock, which Convertible Preferred Stock has now been converted into
MedPartners Common Stock, were entitled to certain rights with respect to the
registration under the Securities Act of the 7,000,562 shares of MedPartners
Common Stock into which the MedPartners Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock were converted. The shares of MedPartners
Common Stock covered by the foregoing registration rights are now eligible for
resale either under Rule 144 of the Securities Act or without restriction.
Accordingly, at the request of MedPartners, most of the holders of the
MedPartners Common Stock, have agreed to terminate their rights with respect to
the Registration Agreement, leaving approximately 1,200,000 shares that are
presently covered by the Registration Agreement.
MedPartners has entered into a Registration Rights Agreement with certain
of the holders of MedPartners Common Stock pursuant to which such persons will
have the right to require that MedPartners register shares of MedPartners Common
Stock owned by them for sale, at one year intervals up to three times during
1997, 1998 and 1999. Unlimited piggyback registration rights have also been
granted. The holders of these registration rights are Walter T. Mullikin, M.D.,
John S. McDonald, Rosalio J. Lopez, M.D. and DCNHS, who were the only persons
deemed to be "affiliates" of MedPartners, following the combination of
MedPartners and MME. In the March 1996 public offering carried out by
MedPartners, 1,358,921 shares of MedPartners' Common Stock were sold by Drs.
Mullikin and Lopez and Mr. McDonald at $30.25 per share pursuant to the rights
granted under the Agreement. See "Principal Stockholders of MedPartners".
In addition, from time-to-time, MedPartners will grant registration rights,
both on a contractual and a piggyback basis to various persons in connection
with acquisitions made on a private placement basis. At June 30, 1997, a total
of approximately 8,700,000 shares of MedPartners Common Stock were subject to
such registration rights.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the MedPartners Common Stock is First
Chicago Trust of New York, New York, New York.
40
<PAGE> 50
COMPARISON OF RIGHTS OF ASG STOCKHOLDERS
AND MEDPARTNERS STOCKHOLDERS
Both MedPartners and ASG are incorporated in Delaware. Holders of the ASG
Shares will have their rights and obligations as stockholders of MedPartners
after the Merger governed by Delaware law and the MedPartners Certificate of
Incorporation and the MedPartners Bylaws. Set forth below is a summary
comparison of the material rights of a MedPartners stockholder under the
MedPartners Certificate of Incorporation and Bylaws, on the one hand, and the
material rights of an ASG stockholder under ASG's Amended and Restated
Certificate of Incorporation (the "ASG Certificate of Incorporation") and ASG's
Amended and Restated By-laws (the "ASG Bylaws"), on the other hand. The
information set forth below is qualified in its entirety by reference to the
Certificates of Incorporation and Bylaws of MedPartners and ASG.
CLASSES AND SERIES OF CAPITAL STOCK
ASG. The ASG Certificate of Incorporation authorizes ASG to issue up to
12,000,000 shares of capital stock, of which 10,000,000 shares are designated
Common Stock, par value $.01 per share, and 2,000,000 are designated Preferred
Stock, par value $.01 per share (the "ASG Preferred Stock").
As of October 20, 1997, there were 3,524,045 shares of ASG Common Stock
outstanding. As of September 24, 1997, there were outstanding options under
ASG's stock option plans to purchase an additional 609,901 shares of ASG Common
Stock. There are no outstanding shares of ASG Preferred Stock.
The Board of Directors of ASG has the authority to issue the ASG Preferred
Stock in one or more series and to fix the rights, qualifications, limitations,
and restrictions for each series, without any further vote or action by the
stockholders.
MedPartners. MedPartners is authorized by the MedPartners Certificate of
Incorporation to issue up to 410,000,000 shares of capital stock, of which
400,000,000 shares are designated MedPartners Common Stock, par value $.001 per
share, 9,500,000 shares are designated MedPartners Preferred Stock, par value
$.001 per share, and 500,000 shares are designated MedPartners Series C
Preferred Stock. As of June 30, 1997, there were 194,665,107 shares of
MedPartners Common Stock outstanding. In addition, as of June 30, 1997, there
were outstanding options under MedPartners' stock option plans to purchase an
additional shares of MedPartners Common Stock. An additional
shares of MedPartners Common Stock have been reserved for future
option grants under such plans.
The Board of Directors of MedPartners has the authority to issue the
MedPartners Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions for each such series, without any
further vote or action by the stockholders. As of June 30, 1997, there were no
shares of MedPartners Preferred Stock issued and outstanding, and the Board of
Directors of MedPartners has no present intention of issuing shares of
MedPartners Preferred Stock.
As a consequence of and following the Merger, ASG stockholders will not
hold ASG Shares, but will instead hold shares of MedPartners Common Stock and
the associated rights to acquire the MedPartners Series C Preferred Stock.
SIZE AND ELECTION OF THE BOARD OF DIRECTORS
ASG. The ASG Certificate of Incorporation and the ASG Bylaws provide that
the ASG Board of Directors may determine from time to time the number of
directors which shall constitute the whole Board. Each director is elected at an
annual meeting of ASG stockholders, and a director holds office until the
director's successor is elected and qualified or until the director resigns or
is removed. Under the ASG Bylaws, the ASG Board of Directors currently consists
of six members.
MedPartners. The MedPartners Certificate of Incorporation and the
MedPartners Bylaws provide for the MedPartners Board of Directors to be divided
into three classes, as nearly equal in number as is reasonably possible, serving
staggered terms. With a classified Board of Directors, at least two annual
meetings of stockholders, instead of one, will be required to effect a change in
the majority of the Board of Directors. The
41
<PAGE> 51
MedPartners Bylaws provide that the MedPartners Board of Directors shall consist
of not more than thirteen directors, but in any event shall consist of at least
three directors and that the size of the MedPartners Board of Directors shall be
fixed by the resolution of the MedPartners Board of Directors. Directors of
MedPartners are elected by a plurality of votes cast at the annual meeting of
stockholders.
As a consequence of and following the Merger, the rights and obligations of
holders of ASG Shares exchanged for MedPartners Common Stock with respect to the
size and composition of the MedPartners Board of Directors will be governed by
the MedPartners Bylaws as described in the preceding paragraph.
REMOVAL OF DIRECTORS
ASG. The ASG Certificate of Incorporation provides that a director may be
removed from office only with cause and only by the vote of the holders of 75%
of the outstanding ASG Common Stock. In order to remove a director, the
stockholders must call a special meeting for that purpose.
MedPartners. The MedPartners Bylaws provide that a director may be removed
only with cause and only by the vote of the holders of a majority of the shares
of capital stock entitled to vote thereon.
As a consequence of and following the Merger, the holders of ASG Shares
exchanged for MedPartners Common Stock will be able to remove a director from
the MedPartners Board of Directors only with cause and only by the vote of the
holders of a majority of the shares of capital stock entitled to vote thereon.
CONVERSION AND DISSOLUTION
ASG. The ASG Common Stock has no conversion features. The ASG Certificate
of Incorporation authorizes the issuance of 2,000,000 shares of ASG Preferred
Stock and allows the Board of Directors to make ASG Preferred Stock convertible
into shares of any class of the corporation's stock.
MedPartners. The MedPartners Common Stock has no conversion features. The
MedPartners Certificate of Incorporation authorizes the issuance of 9,500,000
shares of MedPartners Preferred Stock and provides that such shares of
MedPartners Preferred Stock may have such voting powers, preferences and other
special rights (including, without limitation, the right to convert the shares
of such MedPartners Preferred Stock into shares of MedPartners Common Stock) as
shall be stated in the MedPartners Certificate of Incorporation or resolutions
providing for the issuance of MedPartners Preferred Stock. If the Board of
Directors was to designate such a series of MedPartners Preferred Stock in
addition to the MedPartners Series C Preferred Stock, such MedPartners Preferred
Stock could be entitled to preferential payments in the event of the dissolution
of MedPartners.
As a consequence of and following the Merger, the rights and obligations of
holders of ASG Shares exchanged for MedPartners Common Stock with respect to the
conversion and dissolution features of the MedPartners Common Stock will be
governed by the MedPartners Certificate of Incorporation as described in the
preceding paragraph.
AMENDMENT OR REPEAL OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
Under the DGCL, unless a corporation's certificate of incorporation or
bylaws otherwise provide, amendment of a corporation's certificate of
incorporation generally requires the approval of the holders of a majority of
the outstanding stock entitled to vote thereon. If such amendment increases or
decreases the number of authorized shares of any class or series or the par
value of such shares or adversely affects the shares of such class or series,
such amendment requires the approval of the holders of a majority of the
outstanding stock of such class or series.
ASG. The ASG Certificate of Incorporation provides that no amendment to
the ASG Certificate of Incorporation shall amend, modify or repeal any or all of
the provisions of Articles Fifth (requiring stockholder vote to approve purchase
of ASG Common Stock by ASG from any person (or group of two or more persons) who
beneficially holds 5% or more of ASG Common Stock, if such shares have been held
for less than two years as of the proposed repurchase date), Sixth (requiring
cause and the vote of holders of 75%
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<PAGE> 52
of the outstanding shares of ASG Common Stock to remove a director) or Seventh
(requiring stockholder vote to amend provisions of the ASG Certificate of
Incorporation) of the ASG Certificate of Incorporation, unless so adopted by the
affirmative vote or consent of the holders of not less 75% of the outstanding
ASG Common Stock; provided, that if the ASG Board of Directors recommends, by
resolution adopted by a majority of such Directors then in office to the
stockholders the adoption of any such amendment, the stockholders of record
holding a majority of the outstanding ASG Common Stock may amend, modify or
repeal any or all of such provisions. The ASG Bylaws state that in order for the
ASG stockholders to amend the ASG Bylaws, notice of the proposed amendment must
be given prior to the special or annual meeting at which the amendment will be
considered. Subject to the notice provision, the ASG Bylaws may be amended by
the vote of the holders of a majority of the outstanding stock at any annual or
special meeting. The ASG Bylaws further state that the Board of Directors may
adopt, amend, or repeal the ASG Bylaws at any meeting; however, alterations or
amendments of the ASG Bylaws made by the stockholders may not be altered or
amended by the Board of Directors.
MedPartners. The MedPartners Certificate of Incorporation provides that
the powers and rights of the MedPartners Series C Preferred Stock cannot be
materially altered adversely without the affirmative vote of the holders of a
majority of all the shares of MedPartners Series C Preferred Stock, if any that
are then outstanding, voting separately as a class. The MedPartners Certificate
of Incorporation and the MedPartners Bylaws provide that the MedPartners Bylaws
may be altered, amended or repealed by a vote of a majority of the entire
MedPartners Board of Directors, as well as by a majority of the outstanding
stock entitled to vote thereon.
As a consequence of and following the Merger, (i) the holders of ASG Shares
exchanged for MedPartners Common Stock will not be able to materially alter
adversely the powers and rights of the MedPartners Series C Preferred Stock
without the affirmative vote of the holders of a majority of the outstanding
MedPartners Series C Preferred Stock, voting separately as a class and (ii) the
MedPartners Bylaws may be altered, amended or repealed by a vote of a majority
of the entire MedPartners Board of Directors, as well as by a majority of the
outstanding stock entitled to vote thereon.
STOCKHOLDER RIGHTS PLAN
ASG. ASG stock is not subject to a stockholder rights plan.
MedPartners. The MedPartners Common Stock is subject to a rights plan
which may inhibit a change in control of MedPartners that might be beneficial to
MedPartners' stockholders. See "Description of Capital Stock of
MedPartners -- Stockholder Rights Plan".
As a consequence of and following the Merger, the rights and obligations of
holders of ASG Shares exchanged for MedPartners Common Stock will be subject to
the MedPartners rights plan which may inhibit a change of control of MedPartners
that might be beneficial to MedPartners' stockholders.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATIONS
OF DIRECTORS
ASG. The ASG Bylaws do not contain specific provisions requiring advance
notice of stockholder nominations of candidates for election as directors or for
other matters to be brought by stockholders before an annual meeting of
stockholders of ASG.
MedPartners. The MedPartners Bylaws establish an advance notice procedure
with regard to the nomination, other than by or at the direction of the
MedPartners Board of Directors or a committee thereof, of candidates for
election as directors and with regard to other matters to be brought by
stockholders before an annual meeting of stockholders of MedPartners.
The MedPartners Bylaws provide that nominations of persons for election to
the MedPartners Board of Directors may be made at a meeting of stockholders by
or at the direction of the MedPartners Board of Directors, by any nominating
committee or person appointed by the MedPartners Board of Directors, or by any
stockholder of MedPartners who complies with the notice procedures set forth
below. Such nominations, other than those made by or at the direction of the
MedPartners Board of Directors, shall be made pursuant to
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<PAGE> 53
timely notice in writing to the Secretary of MedPartners. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of MedPartners not less than sixty days nor more
than ninety days prior to the meeting. Such notice shall set forth (i) the name,
age, business address and residence address of the nominee, (ii) the principal
occupation or employment of the nominee, (iii) the class and number of shares of
capital stock of MedPartners which are beneficially owned by the nominee, and
(iv) any other information relating to the nominee that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Section 14 of the Exchange Act, and as to the stockholder giving the notice, (i)
the name and address of the stockholder, (ii) the class or series and number of
shares of capital stock of MedPartners which are owned by the stockholder, (iii)
a description of all arrangements or understandings between the stockholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by the stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in such notice, and (v) any other
information relating to the stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for the election of directors pursuant to Section 14 of
the Exchange Act. Such notice must be accompanied by a written consent of each
nominee to serve as a director if elected. MedPartners may require any proposed
nominee to furnish such other information as may reasonably be required by
MedPartners to determine the eligibility of such proposed nominee to serve as a
director of MedPartners.
The MedPartners Bylaws provide that at an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the MedPartners Board of Directors, otherwise
properly brought before the meeting by or at the direction of the MedPartners
Board of Directors or otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to MedPartners. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of MedPartners, not less than sixty days nor more
than ninety days prior to the meeting. The notice must set forth (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
or series and number of shares of capital stock of MedPartners which are owned
beneficially or of record by the stockholder, (iv) a description of all
arrangements or understandings between the stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by the stockholder and any material interest of the stockholder in such
business, and (v) a representation that the stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
As a consequence of and following the Merger, ASG stockholders wishing to
nominate candidates to the MedPartners Board of Directors or bring business
before a meeting of stockholders will have to comply with the notice procedures
of MedPartners, including with respect to the time such notice must be given.
ACTION BY WRITTEN CONSENT
ASG. The ASG Certificate of Incorporation and Bylaws provide that whenever
the vote of stockholders at a stockholders meeting is required or permitted to
be taken, the meeting, notice of the meeting, and vote of the stockholders may
be dispensed with if stockholders holding at least a minimum percent of the vote
required to take action by the ASG Certificate of Incorporation or by statute
execute and deliver written consents.
MedPartners. The MedPartners Certificate of Incorporation provides that,
since MedPartners Common Stock is listed on a national securities exchange, any
action required or permitted to be taken by the stockholders of MedPartners must
be effected at a duly called meeting and may not be effected by any consent in
writing by such stockholders.
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<PAGE> 54
As a consequence of and following the Merger, the holders of ASG Shares
exchanged for MedPartners Common Stock may not effect action by any consent in
writing.
OWNERSHIP OF THE COMMON STOCK OF ASG
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of ASG's Common Stock, as of October 8, 1997, by each
person who was known by ASG to own beneficially more than 5% of ASG's Common
Stock as of such date, based on information furnished to ASG. Except as
otherwise indicated, each person has sole voting and dispositive power with
respect to the shares beneficially owned by such person.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY % OF SHARES
NAME AND ADDRESS OWNED OUTSTANDING(6)
- ---------------- ------------ --------------
<S> <C> <C>
Scott L. Mercy.............................................. 361,000(1) 9.2%
105 Westpark Drive Suite 300 Brentwood, Tennessee 37027
A group of
North American Private Equity Fund II, North American II
Entrepreneurs' Fund, Grid Venture Partners, Inc., and Ronald
L. Chez..................................................... 336,434(2) 8.6
1603 Orrington Avenue, Suite 2050 Evanston, Illinois 60201
Value Partners, Ltd. ....................................... 267,175(3) 6.8
4600 Texas Commerce Tower West 2200 Rose Avenue Dallas,
Texas 75201
Frontier Capital Management................................. 331,630(4) 8.4
99 Summer Street 19th Floor Boston, MA 02110
Wachovia Asset Management................................... 209,000(5) 5.3%
100 North Main Street Winston-Salem, NC 27101
</TABLE>
- ---------------
(1) Includes 146,000 shares of Redeemable Common Stock purchased by Mr. Mercy
from ASG and options to purchase 175,000 shares of Common Stock. His shares
also include 40,000 shares of Redeemable Common Stock issued under his
Employment Agreement (which are presently held in the name of his spouse),
beneficial ownership of which he disclaims.
(2) Based upon an Amendment No. 2 to Schedule 13D filed with the Securities and
Exchange Commission ("SEC") on May 2, 1995, North American Private Equity
Fund II beneficially owns 192,776 shares of Common Stock and has sole voting
and investment power with respect to such shares; North American II
Entrepreneurs' Fund beneficially owns 20,622 shares of Common Stock and has
sole voting and dispositive power with respect to such shares; Grid Venture
Partners, Inc. beneficially owns 24,036 shares of Common Stock and has sole
voting and dispositive power with respect to such shares; and Ronald L. Chez
owns 99,000 shares of Common Stock and has sole voting and investment power
with respect to such shares. The reporting persons have disclaimed
membership in a group under item 2(b) of Schedule 13D. Based on the Nasdaq
Stock Market's online database of institutional holdings as of October 8,
1997, such persons no longer hold 5% or more of ASG Common Stock.
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<PAGE> 55
(3) Based upon a Schedule 13D filed with the SEC on November 24, 1993. According
to such Schedule 13D, Fisher Ewing Partners is the general partner of Value
Partners, Ltd., Richard W. Fisher and Timothy G. Ewing are the general
partners of Fisher Ewing Partners and Messrs. Fisher and Ewing may be deemed
to share the power to dispose of and to vote the shares held by Value
Partners, Ltd. Based on the Nasdaq Stock Market's online database of
institutional holdings as of October 8, 1997, such persons no longer hold 5%
or more of ASG Common Stock.
(4) Based on the Nasdaq Stock Market's online database of institutional holdings
of ASG as of October 8, 1997.
(5) Based on the Nasdaq Stock Market's online database of institutional holdings
of ASG as of October 8, 1997.
(6) Based on 3,932,405 shares, which number includes an amount equal to the
3,524,045 shares of ASG Common Stock issued and outstanding on October 20,
1997 plus the 408,360 shares beneficially owned by the directors and
executive officers of ASG as a group pursuant to Exchange Act Rule
13d-3(d)(1).
INFORMATION AS TO DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, including ownership of
ASG's Common Stock, as of October 8, 1997, with respect to: (i) each director;
(ii) each executive officer and (iii) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION NUMBER OF
OR EMPLOYMENT (BY THE SHARES OF
COMPANY UNLESS DIRECTOR COMMON STOCK
NAME AND AGE OTHERWISE INDICATED) SINCE OWNED PERCENTAGE(7)
------------ ------------------------- -------- ------------------ -------------
<S> <C> <C> <C> <C>
Thomas F. Bogan, 46...... Vice President and 1993 20,600(1) *
General Manager of FQA
Business Unit, a division
of Rational Software,
since April 1997;
President and Chief
Executive Officer of FQA,
Inc. from January to May
1997; President and Chief
Executive Officer,
Pacific Data Products Co,
Inc., supplier of data
communications products,
from 1993 to 1996;
President and Chief
Executive Officer of
Avatar Corporation, a
supplier of computer
products from 1987 to
1993
</TABLE>
46
<PAGE> 56
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION NUMBER OF
OR EMPLOYMENT (BY THE SHARES OF
COMPANY UNLESS DIRECTOR COMMON STOCK
NAME AND AGE OTHERWISE INDICATED) SINCE OWNED PERCENTAGE(7)
------------ ------------------------- -------- ------------------ -------------
<S> <C> <C> <C> <C>
Jack O. Bovender, Jr.
51(2).................. President and Chief 1996 20,750(1) *
Operating Officer of
Columbia/HCA Healthcare
Corporation since August
1997; retired from 1994
to August, 1997;
Executive Vice President
and Chief Operating
Officer of Hospital
Corporation of America
from 1992 through 1994;
Eastern Group President
of Hospital Corporation
of America from 1987
through 1992
William D. Eberle,
75(3).................. Chairman of the Board of 1991 44,002(1) 1.1%
ASG since March 1995;
Chairman, Manchester
Associates, Ltd., an
international consulting
company, since 1977, and
of counsel to Kaye
Scholer, Fierman, Hays &
Handler, a law firm,
since 1993
John W. Gildea, 54(4).... Managing Director, Gildea 1986 34,115(1) *
Management Co., an
investment management
company
Carol R. Goldberg,
66(5).................. President, AVCAR Group, 1991 18,000(1) *
Ltd., a management
consulting firm
Douglas L. Jackson, 51... President, Di/Mac 1986 84,155(1) 2.1%
Technologies, Inc. since
1996; Chairman, Legacy
Fine Jewelry Company,
Inc., from 1994 to 1995;
Chairman of the Board of
ASG from 1987 to 1992;
private investor from
1991 to 1993
</TABLE>
47
<PAGE> 57
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION NUMBER OF
OR EMPLOYMENT (BY THE SHARES OF
COMPANY UNLESS DIRECTOR COMMON STOCK
NAME AND AGE OTHERWISE INDICATED) SINCE OWNED PERCENTAGE(7)
------------ ------------------------- -------- ------------------ -------------
<S> <C> <C> <C> <C>
Scott L. Mercy, 36....... President and Chief 1996 361,000(6) 9.2%
Executive Officer of ASG
since April 1, 1996;
Senior Vice
President-Financial
Operations of
Columbia/HCA Healthcare
Corporation from 1994
through 1995; Vice
President -- Financial
Operations and
Director -- Financial
Operations Support of
Hospital Corporation of
America from 1987 to 1994
OTHER EXECUTIVE OFFICERS
Michael Catalano, 46..... Executive Vice President -- 24,700(1) *
and General Counsel since
July 1996; Senior Vice
President Planning and
Development and Chief
Legal Counsel of Magellan
Health Services, Inc.
(formerly Charter Medical
Corporation) from 1989
through February 1996
Jeffrey J. Bairstow,
39..................... Chief Operating Officer -- 25,000(1) *
since November 1996;
President and Chief
Operating Officer of
Managed Health Network
from October 1995 to
November 1996; President
of Vendell Healthcare
from December 1993 to
October 1995, Chief
Financial Officer of
Vendell Healthcare from
July 1991 to December
1993
</TABLE>
48
<PAGE> 58
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION NUMBER OF
OR EMPLOYMENT (BY THE SHARES OF
COMPANY UNLESS DIRECTOR COMMON STOCK
NAME AND AGE OTHERWISE INDICATED) SINCE OWNED PERCENTAGE(7)
------------ ------------------------- -------- ------------------ -------------
<S> <C> <C> <C> <C>
Bruce A. Teal, 36........ Vice President, -- 7,610(1) *
Controller and Treasurer
since December 1996; Vice
President of Financial
Operations of Vendell
Healthcare from October
1992 to November 1996;
Corporate Controller of
Vendell Healthcare from
November 1989 to October
1992
All Directors and
executive officers as a
group (10 persons)..... 639,932 15.27
</TABLE>
- ---------------
* Less than 1%
(1) Includes the following shares subject to options exercisable presently or
within 60 days: Mr. Bogan, 18,000 shares; Mr. Bovender, 6,750; Mr. Eberle,
43,000 shares; Mr. Gildea, 33,000 shares; Ms. Goldberg, 18,000 shares; Mr.
Jackson, 63,000 shares; Mr. Mercy, 175,000 shares; Mr. Catalano, 20,000
shares; Mr. Bairstow, 25,000 shares; Mr. Teal, 6,610 shares; and all
directors and executive officers as a group 408,360 shares.
(2) Mr. Bovender also serves on the Boards of Directors of Southcap, Princeps,
Behavioral Healthcare Corporation and American Retirement Corporation. His
shares include 4,000 shares held in trust for the benefit of his son,
beneficial ownership of which he disclaims.
(3) Mr. Eberle also serves on the Boards of Directors of FAC Realty, Inc.,
Horace Small Apparel Co., Ampco-Pittsburgh Corporation, Barry's Jewelers,
Inc., Mid-States PLC, Mitchell Energy & Development Corporation, Sirrom
Capital Corporation and Showscan Entertainment, Inc.
(4) Mr. Gildea also serves on the Board of Directors of General Chemical and
Barry's Jewelers, Inc.
(5) Ms. Goldberg also serves on the Board of Directors of The Gillette Company,
Barry's Jewelers, Inc. and Selfcare, Inc.
(6) Includes 146,000 shares of Redeemable Common Stock purchased by Mr. Mercy
from ASG and options to purchase 175,000 shares of Common Stock. His shares
also include 40,000 shares of Redeemable Common Stock issued under his
Employment Agreement (which are presently held in the name of his spouse),
beneficial ownership of which he disclaims.
(7) Based on 3,932,405 shares, which number includes an amount equal to the
3,524,045 shares of ASG Common Stock issued and outstanding on October 20,
1997 plus the 408,360 shares beneficially owned by the directors and
executive officers of ASG as a group pursuant to Exchange Act Rule
13d-3(d)(1).
EXPERTS
The consolidated financial statements of MedPartners, Inc. appearing in
MedPartners, Inc.'s Annual Report on Form 10K/A and the Current Report on Form
8-K dated August 27, 1997 for the period ended December 31, 1996, have been
audited by Ernst & Young, as independent auditors, as set forth in their reports
included therein and incorporated by reference. Such consolidated financial
statements are incorporated by reference in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of ASG appearing in ASG's Annual
Report (Form 10-K) for the year ended December 31, 1996, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial
49
<PAGE> 59
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of ASG appearing in ASG's Annual
Report (Form 10-K) for the years ended December 31, 1994 and 1995, have been
audited by Price Waterhouse LLP, independent accountants, as set forth in their
report thereon included and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
ASG STOCKHOLDER PROPOSALS
If the Merger is not consummated, in order to be eligible for inclusion in
ASG's proxy solicitation materials for its 1998 annual meeting of stockholders,
any stockholder proposal to be considered at such meeting must have been
received by ASG not later than December 1, 1997. ASG will not be required to
include in its proxy solicitation material a stockholder proposal which is
received after that date or which otherwise fails to meet the requirements for
stockholder proposals established by regulations of the SEC. If the Merger is
consummated, there will be no 1998 annual meeting of ASG stockholders.
LEGAL MATTERS
The validity of the shares of MedPartners Common Stock to be issued to the
stockholders of ASG pursuant to the Merger will be passed upon by Haskell
Slaughter & Young, L.L.C., Birmingham, Alabama.
OTHER BUSINESS
The Board of Directors of ASG is not aware of any business to be acted upon
at the Special Meeting other than as described in the Notice of the Special
Meeting or as otherwise described herein. If, however, other matters are
properly brought before the Special Meeting, or any adjournments or
postponements thereof, the persons appointed as proxies will have discretion to
vote or act thereon according to their best judgment.
50
<PAGE> 60
ANNEX A
PLAN AND AGREEMENT OF MERGER
DATED AS OF OCTOBER 1, 1997
BY AND AMONG
MEDPARTNERS, INC.,
ASG MERGER CORPORATION
AND
AMERICA SERVICE GROUP INC.
A-1
<PAGE> 61
TABLE OF CONTENTS
PLAN AND AGREEMENT OF MERGER
BY AND AMONG
MEDPARTNERS, INC.,
ASG MERGER CORPORATION,
AND
AMERICA SERVICE GROUP INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Parties..................................................................... A-5
Recitals.................................................................... A-5
Section 1. The Merger.................................................. A-5
1.1 The Merger.................................................. A-5
1.2 The Closing................................................. A-5
1.3 Effective Time.............................................. A-5
1.4 Effect of the Merger........................................ A-5
Section 2. Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates...................... A-6
2.1 Effect on Capital Stock..................................... A-6
2.2 Exchange of Certificates.................................... A-6
2.3 Certificate of Incorporation of Surviving Corporation....... A-7
2.4 By-laws of the Surviving Corporation........................ A-7
2.5 Directors and Officers of the Surviving Corporation......... A-8
2.6 Assets, Liabilities, Reserves and Accounts.................. A-8
2.7 Corporate Acts of the Subsidiary............................ A-8
Section 3. Representations and Warranties of ASG....................... A-8
3.1 Organization, Existence and Good Standing................... A-8
3.2 ASG Capital Stock........................................... A-8
3.3 Subsidiaries................................................ A-8
3.4 Foreign Qualifications...................................... A-9
3.5 Power and Authority......................................... A-9
3.6 ASG Public Information...................................... A-9
3.7 Contracts, etc.............................................. A-9
3.8 Properties and Assets....................................... A-10
3.9 Legal Proceedings........................................... A-10
3.10 Subsequent Events........................................... A-10
3.11 Accounts Receivable......................................... A-11
3.12 Tax Returns................................................. A-11
3.13 Employee Benefit Plans; Employment Matters.................. A-11
3.14 Compliance with Laws in General............................. A-11
3.15 Regulatory Approvals........................................ A-11
3.16 Commissions and Fees........................................ A-12
3.17 Vote Required............................................... A-12
3.18 Pooling Matters............................................. A-12
3.19 No Untrue Representations................................... A-12
3.20 Medicare and Medicaid....................................... A-12
Section 4. Representations and Warranties of the Subsidiary............ A-12
4.1 Organization, Existence and Capital Stock................... A-12
4.2 Power and Authority......................................... A-12
4.3 Commissions and Fees........................................ A-13
4.4 Legal Proceedings........................................... A-13
</TABLE>
A-2
<PAGE> 62
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Section 5. Representations and Warranties of MedPartners............... A-13
5.1 Organization, Existence and Good Standing................... A-13
5.2 MedPartners Capitalization.................................. A-13
5.3 MedPartners Common Stock.................................... A-13
5.4 Subsidiaries and Affiliated Entities........................ A-14
5.5 Organization, Existence and Good Standing of MedPartners
Subsidiaries and Other MedPartners Entities................. A-14
5.6 Foreign Qualifications...................................... A-14
5.7 Subsidiary Common Stock..................................... A-14
5.8 Power and Authority......................................... A-14
5.9 MedPartners Public Information.............................. A-15
5.10 Legal Proceedings........................................... A-15
5.11 Subsequent Events........................................... A-15
5.12 Compliance with Laws in General............................. A-16
5.13 Regulatory Approvals........................................ A-16
5.14 Investment Intent........................................... A-16
5.15 Commissions and Fees........................................ A-16
5.16 No Stockholder Vote Required................................ A-16
5.17 No Untrue Representations................................... A-17
Section 6. Access to Information and Documents......................... A-17
6.1 Access to Information....................................... A-17
6.2 Return of Records........................................... A-17
6.3 Effect of Access............................................ A-17
Section 7. Covenants................................................... A-17
7.1 Preservation of Business.................................... A-17
7.2 Material Transactions....................................... A-17
7.3 Meeting of Stockholders..................................... A-18
7.4 Registration Statement...................................... A-18
7.5 Exemption from State Takeover Laws.......................... A-19
7.6 HSR Act Compliance.......................................... A-19
7.7 Public Disclosures.......................................... A-20
7.8 Resignation of ASG Directors................................ A-20
7.9 Notice of Subsequent Events................................. A-20
7.10 No Solicitations............................................ A-20
7.11 Other Actions............................................... A-20
7.12 Accounting Methods.......................................... A-20
7.13 Pooling and Tax-Free Reorganization Treatment............... A-20
7.14 Affiliate and Pooling Agreements............................ A-20
7.15 Cooperation................................................. A-21
7.16 ASG Stock Options........................................... A-21
7.17 Publication of Combined Results............................. A-21
Section 8. Termination, Amendment and Waiver........................... A-22
8.1 Termination................................................. A-22
8.2 Effect of Termination....................................... A-23
8.3 Amendment................................................... A-23
8.4 Extension; Waiver........................................... A-23
8.5 Procedure for Termination, Amendment, Extension or Waiver... A-23
8.6 Expenses.................................................... A-23
</TABLE>
A-3
<PAGE> 63
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Section 9. Conditions to Closing....................................... A-23
9.1 Mutual Conditions........................................... A-23
9.2 Conditions to Obligations of MedPartners and the
Subsidiary.................................................. A-24
9.3 Conditions to Obligations of ASG............................ A-25
Section 10. Miscellaneous............................................... A-25
10.1 Nonsurvival of Representations and Warranties............... A-25
10.2 Notices..................................................... A-26
10.3 Further Assurances.......................................... A-26
10.4 Indemnification............................................. A-26
10.5 Governing Law............................................... A-26
10.6 "Including"................................................. A-26
10.7 "Knowledge"................................................. A-27
10.8 "Material adverse change" or "material adverse effect"...... A-27
10.9 "Hazardous Materials"....................................... A-27
10.10 Environmental Laws.......................................... A-27
10.11 Captions.................................................... A-27
10.12 Integration of Exhibits..................................... A-27
10.13 Entire Agreement............................................ A-27
10.14 Counterparts................................................ A-27
10.15 Binding Effect.............................................. A-27
10.16 No Rule of Construction..................................... A-28
Testimonium................................................................. A-28
Signatures.................................................................. A-28
</TABLE>
A-4
<PAGE> 64
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER ("Plan of Merger"), made and entered into as
of the 1st day of October 1997, by and among MEDPARTNERS, INC., a Delaware
corporation ("MedPartners"), ASG MERGER CORPORATION, a Delaware corporation (the
"Subsidiary") and AMERICA SERVICE GROUP INC., a Delaware corporation ("ASG")
(the Subsidiary and ASG being sometimes collectively referred to herein as the
"Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of MedPartners, the Subsidiary
and ASG have approved the merger of the Subsidiary with and into ASG (the
"Merger"), upon the terms and conditions set forth in this Plan of Merger,
whereby each share of Common Stock of ASG (the "ASG Common Stock"), not owned
directly or indirectly by ASG, will be converted into the right to receive the
Merger Consideration (as herein defined) (the ASG Common Stock may be sometimes
hereinafter referred to as the "ASG Shares");
WHEREAS, each of MedPartners, the Subsidiary and ASG desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests".
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
and agreements contained herein, the parties hereto do hereby agree as follows:
SECTION 1.
THE MERGER.
1.1 The Merger. Upon the terms and conditions set forth in this Plan of
Merger, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), the Subsidiary shall be merged into ASG at the Effective
Time (as defined in Section 1.3). Following the Effective Time, the separate
corporate existence of the Subsidiary shall cease and ASG shall continue as the
surviving corporation (the "Surviving Corporation") as a business corporation
incorporated under the laws of the State of Delaware under the name America
Service Group Inc. and shall succeed to and assume all the rights and
obligations of the Subsidiary and ASG in accordance with the DGCL.
1.2 The Closing. The closing of the Merger (the "Closing") will take place
at 10:00 a.m. Central Time on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second business day after
satisfaction of the conditions set forth in Sections 9.1, 9.2 and 9.3, but in no
event later than March 31, 1998, at the offices of Haskell Slaughter & Young,
L.L.C., Birmingham, Alabama, unless another date or place is agreed to in
writing by the parties hereto.
1.3 Effective Time. Subject to the provisions of this Plan of Merger, ASG
and the Subsidiary shall file a Certificate of Merger in accordance with the
relevant provisions of the DGCL and shall make all other filings or recordings
required under the DGCL and as soon as practicable on or after the Closing Date.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Delaware Secretary of State or at such other time as the
Subsidiary and ASG shall agree should be specified in the Certificate of Merger
(the "Effective Time").
1.4 Effect of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL.
A-5
<PAGE> 65
SECTION 2.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES.
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of shares of ASG Common
Stock or any shares of capital stock of the Subsidiary:
(a) Subsidiary Common Stock. Each share of capital stock of the
Subsidiary issued and outstanding immediately prior to the Effective Time
of the Merger shall be converted into one issued and outstanding and
nonassessable share of Common Stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of ASG Common Stock
that is owned by ASG shall automatically be canceled and retired and shall
cease to exist, and none of the Common Stock, par value $.001 per share, of
MedPartners (the "MedPartners Common Stock"), cash or other consideration
shall be delivered in exchange therefor.
(c) Conversion of ASG Shares. At the Effective Time, each ASG Shares
(other than the ASG Shares to be canceled in accordance with Section
2.1(b)) issued and outstanding immediately prior to the Effective Time,
shall be converted into the right to receive 0.71 shares of MedPartners
Common Stock (the "Exchange Ratio"), including the corresponding right (the
"MedPartners Right"), with respect to each share of MedPartners Common
Stock, to purchase one one-hundredth of a share of Series C Junior
Participating Preferred Stock, par value $.001 per share (the "MedPartners
Series C Preferred Stock") of MedPartners pursuant to the terms of the
Stockholders Rights Agreement, dated as of March 1, 1995, among
MedPartners, Inc., now MP of Delaware, Inc. and a wholly owned subsidiary
of MedPartners, Inc. and Chemical Bank, a national banking association, as
it may be amended from time to time (the "MedPartners Rights Agreement").
All such shares of MedPartners Common Stock shall be fully paid and
nonassessable and, together with the MedPartners Rights, are hereinafter
sometimes referred to as the "MedPartners Shares". Upon such conversion,
all such ASG Shares shall be canceled and cease to exist, and each holder
thereof shall cease to have any rights with respect thereto other than the
right to receive the MedPartners Shares issued in exchange therefor and
cash in lieu of fractional MedPartners Shares in accordance with the terms
provided herein. Prior to the Rights Distribution Date (as defined in the
MedPartners Rights Agreement) and unless the context otherwise requires,
all references in this Agreement to the MedPartners Stock shall be deemed
to include the MedPartners Rights.
(d) Stock Options. At the Effective Time, all rights with respect to
ASG Common Stock pursuant to any ASG stock options which are outstanding at
the Effective Time, whether or not then vested or exercisable, shall be
converted into and become rights with respect to MedPartners Common Stock,
and MedPartners shall assume each ASG stock option in accordance with the
terms of any stock option plan under which it was issued and any stock
option agreement by which it is evidenced. It is intended that the
foregoing provisions shall be undertaken in a manner that will not
constitute a "modification" as defined in Section 425 of the Code, as to
any stock option which is an "incentive stock option". Each ASG stock
option so assumed shall be exercisable for that number of shares of the
MedPartners Common Stock equal to the number of the ASG Shares subject
thereto multiplied by the Exchange Ratio, and shall have an exercise price
per share equal to the ASG exercise price divided by the Exchange Ratio.
(e) Anti-Dilution Provisions. If after the date hereof and prior to
the Effective Time MedPartners shall have declared a stock split (including
a reverse split) of MedPartners Common Stock or a dividend payable in
MedPartners Common Stock, or any other distribution of securities or
dividend (in cash or otherwise) to holders of MedPartners Common Stock with
respect to their MedPartners Common Stock (including without limitation
such a distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction) then the Merger Consideration shall be appropriately adjusted
to reflect such stock split, dividend or other distribution of securities.
2.2 Exchange of Certificates. (a) Exchange Procedures. As soon as
reasonably practicable, but no later than ten business days after the Effective
Time, MedPartners' exchange agent (the "Exchange Agent")
A-6
<PAGE> 66
shall mail to the holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding ASG Shares (the
"Certificates") whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 2.1, (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 Exchange
Agent and shall be in such form and have such other customary provisions as
MedPartners may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing
shares of MedPartners Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
MedPartners Common Stock which such holder has the right to receive pursuant to
the provisions of this Section 2, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of ASG Shares
which is not registered in the transfer records of ASG, a certificate
representing the proper number of shares of MedPartners Common Stock may be
issued to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the issuance of
shares of MedPartners Common Stock to a person other than the registered holder
of such Certificate or establish to the satisfaction of MedPartners that such
tax 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 upon such surrender the
certificate representing shares of MedPartners Common Stock and cash in lieu of
any fractional shares of MedPartners Common Stock as contemplated by this
Section 2.2. No interest will be paid or will accrue on any cash payable in lieu
of any fractional shares of MedPartners Common Stock. To the extent permitted by
law, the former shareholder of record of ASG shall be entitled to vote after the
Effective Time at any meeting of MedPartners stockholders the number of whole
shares of MedPartners Common Stock into which his respective ASG Shares are
converted, regardless of whether such holder has exchanged his Certificates for
certificates representing MedPartners Common Stock in accordance with this
Section 2.2.
(b) No Further Ownership Rights in ASG Shares. All shares of MedPartners
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Section 2 (including any cash paid pursuant to
Section 2.2(c)) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the ASG Shares theretofore represented
by such Certificates.
(c) No Fractional Shares. No certificates or scrip representing fractional
shares of MedPartners Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of MedPartners.
Notwithstanding any other provision of this Plan of Merger, the holder of shares
of ASG Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of MedPartners Common Stock
(after taking into account all Certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of MedPartners Common Stock multiplied by the
MedPartners Trading Price.
2.3 Certificate of Incorporation of Surviving Corporation. In accordance
with Section 251(e) of the DGCL, the certificate of incorporation of ASG shall
be amended and restated at the Effective Time in the manner provided in Section
251(c)(4) of the DGCL such that from and after the Effective Time the
Certificate of Incorporation of ASG shall be identical to the Certificate of
Incorporation of the Subsidiary except that such Certificate of Incorporation
shall provide that the Surviving Corporation's name is "America Service Group
Inc".
2.4 By-laws of the Surviving Corporation. The By-laws of the Subsidiary
shall be the By-laws of the Surviving Corporation from and after the Effective
Time and until thereafter altered, amended or repealed in accordance with the
DGCL, the Articles of Incorporation of the Surviving Corporation and the said
By-laws.
A-7
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2.5 Directors and Officers of the Surviving Corporation. The directors and
officers of the Subsidiary immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation.
2.6 Assets, Liabilities, Reserves and Accounts. At the Effective Time, the
assets, liabilities, reserves and accounts of each of the Subsidiary and ASG
shall be taken up on the books of the Surviving Corporation at the amounts at
which they respectively are carried on the books of said corporations
immediately prior to the Effective Time, except as otherwise set forth in this
Plan of Merger and subject to such adjustments, or elimination of intercompany
items, as may be appropriate in giving effect to the Merger in accordance with
generally accepted accounting principles.
2.7 Corporate Acts of the Subsidiary. All corporate acts, plans, policies,
approvals and authorizations of the Subsidiary, its stockholder, its Board of
Directors, committees elected or appointed by the Board of Directors, and all
officers and agents, valid immediately prior to the Effective Time, shall be
those of the Surviving Corporation and shall be as effective and binding thereon
as they were with respect to the Subsidiary to the extent not inconsistent with
the terms of this Plan of Merger.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF ASG.
ASG hereby represents and warrants to MedPartners and the Subsidiary as
follows:
3.1 Organization, Existence and Good Standing. ASG is a Delaware
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. ASG has all necessary corporate power to own its
properties and assets and to carry on its business as presently conducted. ASG
does not, and has not within the two years immediately preceding the date of
this Plan of Merger owned, directly or indirectly, any shares of MedPartners
Common Stock or Common Stock of the Subsidiary.
3.2 ASG Capital Stock. ASG's authorized capital consists of (i) 10,000,000
shares of Common Stock, par value $.01 per share, of which 3,518,711 shares are
issued and outstanding as of the date of this Plan of Merger and no shares are
held in treasury and (ii) 2,000,000 shares of Preferred Stock, par value $.01
per share, of which no shares are issued and outstanding as of the date of this
Plan of Merger and no shares are held in treasury. All of the issued and
outstanding ASG Shares are duly and validly issued, fully paid and
nonassessable. Except as set forth in Exhibit 3.2 to the Disclosure Schedule
delivered to MedPartners and the Subsidiary by ASG at the time of the execution
and delivery of this Plan of Merger (the "ASG Disclosure Schedule"), there are
no options, warrants, or similar rights granted by ASG or any other agreements
to which ASG is a party providing for the issuance or sale by it of any
additional securities which would remain in effect after the Effective Time.
There is no liability for dividends declared or accumulated but unpaid with
respect to any of the ASG Shares. ASG has not made any distributions to any
holders of ASG Shares or participated in or effected any issuance, exchange or
retirement of ASG Shares, or otherwise changed the equity interests of the
holder of ASG Shares in contemplation of effecting the Merger within the two
years immediately preceding the date of this Plan of Merger. Any ASG Shares that
ASG has re-acquired during the two years immediately preceding the date of this
Plan of Merger have been so re-acquired only for purposes other than "business
combinations", as such term is defined in Accounting Principles Board Opinion
No. 16, as amended ("Business Combinations").
3.3 Subsidiaries. Except as set forth on Exhibit 3.3 to the ASG Disclosure
Schedule, ASG does not own stock in and does not control, directly or
indirectly, any other corporation, association or business organization. Except
as set forth on Exhibit 3.3 to the ASG Disclosure Schedule, ASG does not own an
equity interest in, nor does ASG control, directly or indirectly, any other
joint venture or partnership. The outstanding shares of capital stock or other
equity interests of each ASG subsidiary have been duly authorized and are
validly issued, fully paid and nonassessable. Except as set forth on Exhibit 3.3
to the ASG Disclosure Schedule, all shares of Capital Stock or other equity
interest of each ASG subsidiary owned by ASG or any of its subsidiaries are
owned by ASG, either directly or indirectly, free and clear of all liens,
encumbrances, equities and claims.
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3.4 Foreign Qualifications. ASG shall take all actions necessary and
requested by MedPartners to assist MedPartners in ensuring that within thirty
(30) days after the Closing Date ASG is qualified to do business and is in good
standing in each jurisdiction where the nature or character of the property
owned, leased or operated by it or the nature of the business transacted by it
makes such qualification necessary, except where the failure to so qualify would
not have a material adverse effect on its business or operations.
3.5 Power and Authority. Subject to the satisfaction of the conditions
precedent set forth herein, ASG has the corporate power to execute, deliver and
perform this Plan of Merger and all agreements and other documents executed and
delivered or to be executed and delivered by it pursuant to this Plan of Merger,
and, subject to the satisfaction of the conditions precedent set forth herein
has taken all action required by its Amended and Restated Certificate of
Incorporation, By-laws or otherwise, to authorize the execution, delivery and
performance of this Plan of Merger and such related documents. Except as set
forth in Exhibit 3.5 to the ASG Disclosure Schedule, the execution and delivery
of this Plan of Merger does not and, subject to the receipt of required
stockholder and regulatory approvals and any other required third-party consents
or approvals, the consummation of the Merger will not, violate any provisions of
the Amended and Restated Certificate of Incorporation or By-laws of ASG or any
provisions of, or result in the acceleration of any obligation under, any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree, to which ASG is a party, or by which it is bound, or violate any
restrictions of any kind to which it is subject which, if violated or
accelerated would have a material adverse effect on ASG.
3.6 ASG Public Information. ASG has heretofore made available to
MedPartners a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by it with the Securities and
Exchange Commission (the "SEC") (as any such documents have since the time of
their original filing been amended, the "ASG Documents") since January 1, 1996,
which are all the documents (other than preliminary material) that it was
required to file with the SEC since such date. As of their respective dates, the
ASG Documents did not contain any untrue statements of material facts or omit to
state material facts required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the ASG Documents complied in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations promulgated
under such statutes. The financial statements contained in the ASG Documents,
together with the notes thereto, have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
indicated (except as may be indicated in the notes thereto, or, in the case of
the unaudited financial statements, as permitted by Form 10-Q), reflect all
known liabilities of ASG and its consolidated subsidiaries, fixed or contingent,
required to be stated therein, and present fairly the financial condition of ASG
and its consolidated subsidiaries at such dates and the consolidated results of
operations and cash flows of ASG and its consolidated subsidiaries for the
periods then ended. The consolidated balance sheet of ASG at June 30, 1997,
included in the Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1997 of ASG is herein sometimes referred to as the "ASG Balance Sheet".
3.7 Contracts, etc. (a) Except as set forth in Exhibit 3.7 to the ASG
Disclosure Schedule, to ASG's knowledge, all material contracts, leases,
agreements and arrangements to which ASG is a party are (i) legally valid and
binding in accordance with their terms, (ii) in full force and effect, and (iii)
do not violate any federal, state or local law, rule, regulation or ordinance,
and ASG has provided MedPartners and the Subsidiary with copies of all such
documents. To the knowledge of ASG, (i) all parties to such contracts, leases,
agreements and arrangements are in compliance with the provisions of such
contracts, leases, agreements and arrangements, (ii) no party is in default
under such contract, lease agreement or arrangement, and no event has occurred
which, but for the passage of time or the giving of notice or both, would
constitute a default thereunder, except, in each case, where the invalidity of
the lease, contract, agreement or arrangement or the default or breach
thereunder or thereof would not, individually or in the aggregate, have a
material adverse effect on ASG, and (iii) except as set forth in Exhibit 3.7 to
the ASG Disclosure Schedule, ASG has not received any notice of termination or
cancellation or a request to renegotiate any material contracts, leases,
agreements or arrangements.
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(a) Except as set forth in Exhibit 3.7 to the ASG Disclosure Schedule, no
contract or agreement to which ASG is a party will, by its terms, terminate as a
result of the transactions contemplated hereby or require any consent from any
obligor thereto in order to remain in full force and effect immediately after
the Effective Time, except for contracts or agreements which, if terminated,
would not have a material adverse effect on ASG. Set forth on Exhibit 3.7 to the
ASG Disclosure Schedule is a list of all material contracts to which ASG is a
party which cannot be terminated on 90 days notice, without cause.
(b) Except as set forth in Exhibit 3.7 to the ASG Disclosure Schedule, ASG
has not granted any right of first refusal or similar right in favor of any
third party with respect to any material portion of its properties or assets
(excluding liens described in Section 3.8) or entered into any non-competition
agreement or similar agreement restricting its ability to engage in any business
in any location.
3.8 Properties and Assets. ASG owns or leases all of the real and personal
property included in the ASG Balance Sheet (except assets recorded under capital
lease obligations and such property as has been disposed of during the ordinary
course of ASG's business since the date of the ASG Balance Sheet), free and
clear of any liens, claims, charges, exceptions or encumbrances, except for
those (i) if any, which in the aggregate are not material and which do not
materially affect the continued use of such property, or (ii) which are set
forth in Exhibit 3.8 to the ASG Disclosure Schedule.
3.9 Legal Proceedings. Except as listed in Exhibit 3.9 to the ASG
Disclosure Schedule, there are no actions, suits or proceedings pending or, to
the knowledge of ASG, threatened against ASG, at law or in equity, relating to
or affecting ASG, including the ability of ASG to consummate the Merger. ASG
does not know of any justification for any such action, suit or proceeding.
3.10 Subsequent Events. Except as set forth in Exhibit 3.10 to the ASG
Disclosure Schedule or as contemplated by this Plan of Merger, ASG has not,
since the date of the ASG Balance Sheet:
(a) Incurred any material adverse change.
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise), which discharge or satisfaction would have a
material adverse effect on ASG, other than (i) liabilities shown or
reflected on the ASG Balance Sheet or (ii) liabilities incurred since the
date of the ASG Balance Sheet in the ordinary course of business.
(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor which would have a
material adverse effect on ASG, except as may have been required due to
income or operations of ASG since the date of the ASG Balance Sheet.
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are
material to the business or financial condition of ASG.
(e) Sold or transferred any of the assets material to the consolidated
business of ASG, canceled any material debts or claims or waived any
material rights, except in the ordinary course of business.
(f) Granted any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable
by ASG to any officer or employee, consultant or agent (other than normal
increases consistent with past practices), or by means of any bonus or
pension plan, contract or other commitment, increased in a material respect
the compensation of any officer, employee, consultant or agent.
(g) Except for this Plan of Merger and any other agreement executed
and delivered pursuant to this Plan of Merger, entered into any material
transaction other than in the ordinary course of business or permitted
under other Sections of this Plan of Merger.
(h) Issued any stock, bonds or other securities or any options or
rights to purchase any of its securities.
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3.11 Accounts Receivable. Since the date of the ASG Balance Sheet, ASG has
not changed any principle or practice with respect to the recordation of
accounts receivable or the calculation of reserves therefor, or any material
collection, discount or write-off policy or procedure. ASG is in compliance with
the terms and conditions of all third-party payor arrangements relating to its
accounts receivable, except to the extent that such noncompliance would not have
a material adverse effect on ASG.
3.12 Tax Returns. ASG has filed all tax returns required to be filed by it
or requests for extensions to file such returns or reports have been timely
filed and granted and have not expired, except to the extent that such failures
to file, taken together, do not have a material adverse effect on ASG. ASG has
made all payments shown as due on such returns. ASG has not been notified that
any tax returns of ASG are currently under audit by the Internal Revenue Service
or any state or local tax agency and has received no notice of any claimed tax
liability of ASG or any ASG shareholder. No agreements have been made by ASG for
the extension of time or the waiver of the statute of limitations for the
assessment or payment of any federal, state or local taxes.
3.13 Employee Benefit Plans; Employment Matters. (a) Except as set forth
in Exhibit 3.13(a) to the ASG Disclosure Schedule, ASG has neither established
nor maintained nor is obligated to make contributions to or under or otherwise
participate in (i) any bonus or other type of incentive compensation plan,
program or arrangement (whether or not set forth in a written document), (ii)
any pension, profit-sharing, retirement or other plan, program or arrangement,
or (iii) any other employee benefit plan, fund or program, including, but not
limited to, those described in Section 3(3) of ERISA. All such plans listed in
Exhibit 3.13(a) (individually, a "ASG Plan" and collectively, the "ASG Plans")
have been operated and administered in all material respects in accordance with,
as applicable, ERISA, the Code, the Age Discrimination in Employment Act of
1967, as amended, and the related rules and regulations adopted by those federal
agencies responsible for the administration of such laws. No act or failure to
act by ASG has resulted in a "prohibited transaction" (as defined in ERISA) with
respect to the ASG Plans that is not subject to a statutory or regulatory
exception and that could have a material adverse effect on ASG. No "reportable
event" (as defined in ERISA, but excluding any event for which notice is waived
under the ERISA regulations) has occurred with respect to any of the ASG Plans
which is subject to Title IV of ERISA. ASG has not previously made, is not
currently making, and is not obligated in any way to make, any contributions to
any multi-employer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980.
(b) Except as set forth in Exhibit 3.13(b) to the ASG Disclosure Schedule,
ASG is not a party to any oral or written (i) union, guild or collective
bargaining agreement which agreement covers employees in the United States (nor
is it aware of any union organizing activity currently being conducted in
respect to any of its employees), (ii) agreement with any executive officer or
other key employee the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction of the nature
contemplated by this Plan of Merger and which provides for the payment of in
excess of Twenty-Five Thousand Dollars ($25,000.00), or (iii) agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Plan of Merger or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Plan of Merger.
3.14 Compliance with Laws in General. Except as set forth in Exhibit 3.14
to the ASG Disclosure Schedule, ASG has not received any notices of, nor to the
best of its knowledge, have there been any, material violations of any federal,
state and local laws, regulations and ordinances relating to its business and
operations, including, without limitation, the Occupational Safety and Health
Act, the Americans with Disabilities Act, the Medicare or applicable Medicaid
statutes and regulations, including billing and coding, and any Environmental
Laws, and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by ASG which, if it were determined
that a violation had occurred, would have a material adverse effect on ASG.
3.15 Regulatory Approvals. Except as disclosed in Exhibit 3.15 to the ASG
Disclosure Schedule, and to the best knowledge of ASG, ASG holds all licenses,
certificates of need and other regulatory approvals
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required or necessary to be applied for or obtained in connection with its
business as presently conducted or as proposed to be conducted, except where the
failure to obtain such license, certificate of need or regulatory approval would
not have a material adverse effect on ASG. All such licenses, certificates of
need and other regulatory approvals relating to the business, operations and
facilities of ASG are in full force and effect, except where any failure of such
license, certificate of need or regulatory approval to be in full force and
effect would not have a material adverse effect on ASG. Any and all past
litigation concerning such licenses, certificates of need and regulatory
approvals, and all claims and causes of action raised therein, has been finally
adjudicated. No such license, certificate of need or regulatory approval has
been revoked, conditioned (except as may be customary) or restricted, and no
action (equitable, legal or administrative), arbitration or other process is
pending, or to the best knowledge of ASG, threatened, which in any way
challenges the validity of, or seeks to revoke, condition or restrict any such
license, certificate of need, or regulatory approval. Subject to compliance with
applicable securities laws and the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR Act"), the consummation of the Merger will not violate
any law or restriction to which ASG is subject which, if violated, would have a
material adverse effect on ASG.
3.16 Commissions and Fees. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Plan of Merger which may be now or hereafter asserted
against MedPartners resulting from any action taken by ASG or its officers,
Directors or agents, or any of them. Exhibit 3.16 to the ASG Disclosure Schedule
sets forth a copy of the agreement between ASG and Equitable Securities
Corporation relating to certain financial advisory services.
3.17 Vote Required. The affirmative vote of the holders of a majority of
the outstanding ASG Shares entitled to vote thereon is the only vote of the
holders of any class or series of ASG capital stock necessary for ASG to approve
this Plan of Merger, the Merger and the transactions contemplated thereby.
3.18 Pooling Matters. To the best knowledge of ASG, neither ASG nor any of
its affiliates has taken or agreed to take any action that (without giving
effect to any actions taken or agreed to be taken by MedPartners or any of its
affiliates) would prevent MedPartners from accounting for the business
combination to be effected by the Merger as a pooling of interests for financial
reporting purposes.
3.19 No Untrue Representations. No representation or warranty by ASG in
this Plan of Merger, and no Exhibit or certificate issued by ASG and furnished
or to be furnished to MedPartners and the Subsidiary pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact in response to the disclosure requested,
or omits or will omit to state a material fact necessary to make the statements
or facts contained therein in response to the disclosure requested not
misleading in light of all of the circumstances then prevailing.
3.20 Medicare and Medicaid. Neither ASG nor any of its affiliates
participates in either the Medicare or Medicaid programs as those programs are
defined in the Medicare Act and the Medicaid Act, respectively, and do not
receive any payments or funds therefrom.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF THE SUBSIDIARY.
The Subsidiary hereby represents and warrants to ASG as follows:
4.1 Organization, Existence and Capital Stock. The Subsidiary is a
corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware. The Subsidiary's authorized capital consists
of 1,000 shares of Common Stock, par value $1.00 per share, all of which shares
are issued and registered in the name of MedPartners. The Subsidiary has not,
within the two years immediately preceding the date of this Plan of Merger,
owned, directly or indirectly, any ASG Shares.
4.2 Power and Authority. The Subsidiary has the corporate power to
execute, deliver and perform this Plan of Merger and all agreements and other
documents executed and delivered, or to be executed and delivered, by it
pursuant to this Plan of Merger, and, subject to the satisfaction of the
conditions precedent set forth herein, has taken all actions required by law,
its Certificate of Incorporation, its By-laws or otherwise, to
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authorize the execution and delivery of this Plan of Merger and such related
documents. The execution and delivery of this Plan of Merger does not and,
subject to the receipt of required regulatory approvals and any other required
third-party consents or approvals, the consummation of the Merger contemplated
hereby will not, violate any provisions of the Certificate of Incorporation or
By-laws of the Subsidiary, or any agreement, instrument, order, judgment or
decree to which the Subsidiary is a party or by which it is bound, violate any
restrictions of any kind to which the Subsidiary is subject, or result in the
creation of any lien, charge or encumbrance upon any of the property or assets
of the Subsidiary.
4.3 Commissions and Fees. There are no claims for brokerage commissions,
investment bankers' fees or finder's fees in connection with the transaction
contemplated by this Plan of Merger resulting from any action taken by the
Subsidiary or any of its officers, directors or agents.
4.4 Legal Proceedings. There are no actions, suits or proceedings pending
or threatened against the Subsidiary, at law or in equity, relating to or
affecting the Subsidiary, including the Merger. The Subsidiary does not know or
have any reasonable grounds to know of any justification for any such action,
suit or proceeding.
SECTION 5.
REPRESENTATIONS AND WARRANTIES OF MEDPARTNERS.
MedPartners hereby represents and warrants to ASG as follows:
5.1 Organization, Existence and Good Standing. MedPartners is a
corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware. MedPartners has all necessary corporate power
to own its properties and assets and to carry on its business as presently
conducted. MedPartners is not, and has not been within the two years immediately
preceding the date of this Plan of Merger, a subsidiary or division of another
corporation, nor has MedPartners within such time owned, directly or indirectly,
any ASG Shares.
5.2 MedPartners Capitalization. MedPartners has an authorized
capitalization of 9,500,000 shares of Preferred Stock, par value $.001 per
share, of which no shares are issued and outstanding, and no shares are held in
treasury, 500,000 shares of Series C Junior Participating Preferred Stock, par
value $.001 per share, of which no shares are issued and outstanding and no
shares are held in treasury and 400,000,000 shares of Common Stock, par value
$.001 per share, of which 194,665,107 shares were issued and outstanding at
August 6, 1997, and no shares are held in treasury. All of the issued and
outstanding shares of MedPartners Common Stock have been duly and validly issued
and are fully paid and nonassessable. Except as set forth in Exhibit 5.2 to the
Disclosure Schedule delivered to ASG by MedPartners at the time of the execution
and delivery of this Plan of Merger (the "MedPartners Disclosure Schedule"),
there are no options, warrants, or similar rights granted by MedPartners or any
affiliate thereof or other agreements to which MedPartners or any such affiliate
is a party providing for the issuance or sale by it of any additional securities
which would remain in effect after the Effective Time. There is no liability for
dividends declared or accumulated but unpaid with respect to any shares of
MedPartners Common Stock. MedPartners has not made any distributions to any
holder of MedPartners Common Stock or participated in or effected any issuance,
exchange or retirement of MedPartners Common Stock, or otherwise changed the
equity interests of holders of MedPartners Common Stock, in contemplation of
effecting the Merger within the two years immediately preceding the date of this
Plan of Merger. Any shares of MedPartners Common Stock that MedPartners has
re-acquired during the two years immediately preceding the date of this Plan of
Merger have been so re-acquired only for purposes other than Business
Combinations.
5.3 MedPartners Common Stock. On the Closing Date, MedPartners will have a
sufficient number of authorized but unissued shares of its Common Stock
available for issuance to the holders of ASG Shares in accordance with the
provisions of this Plan of Merger. The MedPartners Common Stock to be issued
pursuant to this Plan of Merger will, when so delivered, be (i) duly and validly
issued, fully paid and nonassessable and (ii) registered in a registration
statement on Form S-4 filed with the Securities and Exchange Commission ("SEC").
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5.4 Subsidiaries and Affiliated Entities. (a) Attached as Exhibit 5.4 to
the MedPartners Disclosure Schedule is a list of all subsidiaries of MedPartners
(individually, a "MedPartners Subsidiary", and collectively, the "MedPartners
Subsidiaries") and their states of incorporation and all professional
corporations or professional associations (the "MedPartners Professional
Corporations") of which MedPartners has control and their states of
incorporation. Except as set forth in Exhibit 5.4 to the MedPartners Disclosure
Schedule, MedPartners does not control, directly or indirectly, any other
corporation, association, partnership or business organization. The outstanding
shares of capital stock or other equity interests of each MedPartners Subsidiary
have been duly authorized and are validly issued, fully paid and nonassessable.
All shares of capital stock or other equity interest of each MedPartners
Subsidiary owned by MedPartners or any of its subsidiaries are owned by
MedPartners, either directly or indirectly, free and clear of all liens,
encumbrances, equities or claims.
(b) Also disclosed in Exhibit 5.4 to the MedPartners Disclosure Schedule is
a list of all general or limited partnerships in which a general partner is
MedPartners, a MedPartners Subsidiary or another partnership controlled by
MedPartners (individually a "MedPartners Partnership" and collectively, the
"MedPartners Partnerships"), and all limited liability companies in which
MedPartners or a MedPartners Subsidiary is a member (individually, a
"MedPartners LLC"; the MedPartners Professional Corporations and the MedPartners
LLCs being collectively called the "Other MedPartners Entities"), and their
states of organization.
(c) Except as set forth in Exhibit 5.4, neither MedPartners nor any
MedPartners Subsidiary controls, directly or indirectly, any other joint venture
or partnership.
(d) Although the financial results of the medical groups affiliated with
MedPartners physician practice management business are consolidated for
accounting purposes on the MedPartners Balance Sheet, the terms "MedPartners
Subsidiary" and "Other MedPartners Entity" do not include any affiliated medical
groups.
5.5 Organization, Existence and Good Standing of MedPartners Subsidiaries
and Other MedPartners Entities. (a) Each MedPartners Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its respective state of incorporation. Each MedPartners Subsidiary and each
MedPartners Professional Corporation has all necessary corporate power to own
its properties and assets and to carry on its business as presently conducted.
(b) Each MedPartners Partnership that is a limited partnership is validly
formed, each MedPartners Partnership that is a general partnership has been duly
organized, and each MedPartners Partnership is in good standing under the laws
of its respective state of organization. Each MedPartners Partnership has all
necessary power to own its property and assets and to carry on its business as
presently conducted.
(c) Each MedPartners LLC that is a limited liability company is validly
formed and in good standing under the laws of its respective state of
organization. Each MedPartners LLC has all necessary power to own its property
and assets and to carry on its business as presently conducted.
5.6 Foreign Qualifications. MedPartners, each MedPartners Subsidiary and
each MedPartners LLC is qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the nature or character of the
property owned, leased or operated by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
so qualify would not have a material adverse effect on MedPartners.
5.7 Subsidiary Common Stock. MedPartners owns, beneficially and of record,
all of the issued and outstanding shares of Common Stock, par value $1.00 per
share, of the Subsidiary (the "Subsidiary Common Stock"), which are validly
issued and outstanding, fully paid and nonassessable, free and clear of all
liens and encumbrances. MedPartners has, or will by the Effective Time have,
taken all such actions as may be required in its capacity as the sole
stockholder of the Subsidiary to approve the Merger.
5.8 Power and Authority. MedPartners has corporate power to execute,
deliver and perform this Plan of Merger and all agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to this
Plan of Merger, and, subject to the satisfaction of the conditions precedent set
forth herein has
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taken all actions required by law, its Certificate of Incorporation, its By-laws
or otherwise, to authorize the execution and delivery of this Plan of Merger and
such related documents. The execution and delivery of this Plan of Merger does
not and, subject to the receipt of required regulatory approvals and any other
required third-party consents or approvals, the consummation of the Merger
contemplated hereby will not, violate any provisions of the Certificate of
Incorporation or By-laws of MedPartners, or any provision of, or result in the
acceleration of any obligation under, any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which MedPartners is
a party or by which it is bound, or violate any restrictions of any kind to
which MedPartners is subject. The execution and delivery of this Plan of Merger
has been approved by the Board of Directors of MedPartners.
5.9 MedPartners Public Information. MedPartners has heretofore made
available to ASG a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by it or its predecessors,
MedPartners, Inc. and MedPartners/Mullikin Inc., with the SEC (as any such
documents have since the time of their original filing been amended, the
"MedPartners Documents") since January 1, 1996, which are all the documents
(other than preliminary material) that it was required to file with the SEC
since such date. As of their respective dates, the MedPartners Documents did not
contain any untrue statements of material facts or omit to state material facts
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. As of
their respective dates, the MedPartners Documents complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, and the rules and regulations promulgated under such statutes. The
financial statements contained in the MedPartners Documents, together with the
notes thereto, have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods indicated
(except as may be indicated in the notes thereto, or, in the case of the
unaudited financial statements, as permitted by Form 10-Q), reflect all known
liabilities of MedPartners, fixed or contingent, required to be stated therein,
and present fairly the financial condition of MedPartners at said dates and the
consolidated results of operations and cash flows of the Parent for the periods
then ended. The consolidated balance sheet of MedPartners at June 30, 1997,
included in the Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1997 of MedPartners is herein sometimes referred to as the "MedPartners
Balance Sheet".
5.10 Legal Proceedings. Except as disclosed in Exhibit 5.10, or in the
MedPartners Documents, there is no pending or threatened litigation,
governmental investigation, condemnation or other proceeding against or relating
to or affecting MedPartners or the transactions contemplated by this Plan of
Merger, which if resolved adversely to MedPartners, would have a material
adverse effect on MedPartners and, to the knowledge of MedPartners, no basis for
any such action exists.
5.11 Subsequent Events. Except as set forth in Exhibit 5.11 to the
MedPartners Disclosure Schedule, MedPartners has not, since the date of the
MedPartners Balance Sheet:
(a) Incurred any material adverse change.
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on
the MedPartners Balance Sheet or (ii) liabilities incurred since the date
of the MedPartners Balance Sheet in the ordinary course of business, which
discharge or satisfaction would have a material adverse effect on
MedPartners.
(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor which would have a
material adverse effect on MedPartners, except as may have been required
due to income or operations of MedPartners since the date of the
MedPartners Balance Sheet.
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are
material to the consolidated business or financial condition of
MedPartners.
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(e) Sold or transferred any of the assets material to the consolidated
business of MedPartners, canceled any material debts or claims or waived
any material rights, except in the ordinary course of business.
(f) Granted any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable
by MedPartners to any officer or employee, consultant or agent (other than
normal merit increases), or by means of any bonus or pension plan, contract
or other commitment, increased in a material respect the compensation of
any officer, employee, consultant or agent.
(g) Except for this Plan of Merger and any other agreement executed
and delivered pursuant to this Plan of Merger, entered into any material
transaction other than in the ordinary course of business or permitted
under other Sections of this Plan of Merger.
(h) Issued any stock, bonds or other securities or any options or
rights to purchase any of its securities (other than stock issued upon the
exercise of outstanding options under MedPartners' stock option plans or
stock options granted under such plans), except as set forth in Exhibit
5.11(h) to the MedPartners Disclosure Schedule.
5.12 Compliance with Laws in General. MedPartners has not received any
notices of material violations of any federal, state and local laws, regulations
and ordinances relating to its business and operations, including, without
limitation, the Occupational Safety and Health Act, the Americans with
Disabilities Act, the Medicare or applicable Medicaid statutes and regulations
and any Environmental Laws, and no notice of any pending inspection or violation
of any such law, regulation or ordinance has been received by MedPartners which,
if it were determined that a violation had occurred, would have a material
adverse effect on MedPartners.
5.13 Regulatory Approvals. Except as disclosed in the MedPartners
Documents or in Exhibit 5.13 to the MedPartners Disclosure Schedule, MedPartners
and each MedPartners Subsidiary, as applicable, holds all licenses, certificates
of need and other regulatory approvals required or necessary to be applied for
or obtained in connection with its business as presently conducted or as
proposed to be conducted, except where the failure to obtain such license,
certificate of need or regulatory approval would not have a material adverse
effect on MedPartners. All such licenses, certificates of need and other
regulatory approvals relating to the business, operations and facilities of
MedPartners and each MedPartners Subsidiary are in full force and effect, except
where any failure of such license, certificate of need or regulatory approval to
be in full force and effect would not have a material adverse effect on
MedPartners. Any and all past litigation concerning such licenses, certificates
of need and regulatory approvals, and all claims and causes of action raised
therein, has been finally adjudicated. No such license, certificate of need or
regulatory approval has been revoked, conditioned (except as may be customary)
or restricted, and no action (equitable, legal or administrative), arbitration
or other process is pending, or to the best knowledge of MedPartners,
threatened, which in any way challenges the validity of, or seeks to revoke,
condition or restrict any such license, certificate of need, or regulatory
approval. Subject to compliance with applicable securities laws and the HSR Act,
the consummation of the Merger will not violate any law or restriction to which
MedPartners is subject which, if violated, would have a material adverse effect
on MedPartners.
5.14 Investment Intent. MedPartners is acquiring the ASG Shares hereunder
for its own account and not with a view to the distribution or sale thereof, and
MedPartners has no understanding, agreement or arrangement to sell, distribute,
partition or otherwise transfer or assign all or any part of the ASG Shares to
any other person, firm or corporation.
5.15 Commissions and Fees. There are no claims for brokerage commissions,
investment bankers' fees or finder's fees in connection with the transactions
contemplated by this Plan of Merger resulting from any action taken by
MedPartners or any of its officers, directors or agents.
5.16 No Stockholder Vote Required. No vote is required of the holders of
the outstanding capital stock of MedPartners to approve this Plan of Merger, the
Merger and the transactions contemplated hereby.
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5.17 No Untrue Representations. No representation or warranty by
MedPartners in this Plan of Merger, and no Exhibit or certificate issued by
MedPartners and furnished or to be furnished to ASG pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact in response to the disclosure requested,
or omits or will omit to state a material fact necessary to make the statements
or facts contained therein in response to the disclosure requested not
misleading in light of all of the circumstances then prevailing.
SECTION 6.
ACCESS TO INFORMATION AND DOCUMENTS.
6.1 Access to Information. Between the date hereof and the Closing Date,
ASG will give to MedPartners and its counsel, accountants and other
representatives full access to all the personnel, properties, documents,
contracts, personnel files and other records of ASG and shall furnish
MedPartners with copies of such documents and with such information with respect
to the affairs of ASG as MedPartners may from time to time reasonably request.
ASG will disclose and make available to MedPartners and its representatives all
books, contracts, accounts, personnel records, letters of intent, papers,
records, communications with regulatory authorities and other documents relating
to the business and operations of ASG. In addition, ASG shall make available to
MedPartners all such banking, investment and financial information as shall be
necessary to allow for the efficient integration of ASG's banking, investment
and financial arrangements with those of MedPartners at the Effective Time.
6.2 Return of Records. If the transactions contemplated hereby are not
consummated and this Plan of Merger terminates, each party agrees to promptly
return all documents, contracts, records or properties of the other party and
all copies thereof furnished pursuant to this Section 6 or otherwise. All
information disclosed by any party or any affiliate or representative of any
party shall be deemed to be "Confidential Information" under the terms of the
Confidentiality Agreement between ASG and MedPartners (the "Confidentiality
Agreement").
6.3 Effect of Access. (a) Nothing contained in this Section 6 shall be
deemed to create any duty or responsibility on the part of either party to
investigate or evaluate the value, validity or enforceability of any contract,
lease or other asset included in the assets of the other party.
(b) With respect to matters as to which any party has made express
representations or warranties herein, the parties shall be entitled to rely upon
such express representations and warranties irrespective of any investigations
made by such parties, except to the extent that such investigations result in
actual knowledge of the inaccuracy or falsehood of particular representations
and warranties.
SECTION 7.
COVENANTS.
7.1 Preservation of Business. From the date of this Agreement, ASG will
use its reasonable best efforts to preserve the business organization of ASG
intact, to keep available to MedPartners and the Surviving Corporation the
services of the present employees of ASG, and to preserve for MedPartners and
the Surviving Corporation the goodwill of the suppliers, customers and others
having business relations with ASG.
7.2 Material Transactions. Except as contemplated by this Agreement, prior
to the Effective Time, neither ASG nor any ASG Subsidiary nor other ASG Entities
will (other than as required pursuant to the terms of this Plan of Merger and
the related documents), without first obtaining the written consent of
MedPartners:
(a) Encumber any asset or enter into any transaction or make any
contract or commitment relating to the properties, assets and business of
ASG, other than in the ordinary course of business or as otherwise
disclosed herein.
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(b) Enter into any employment contract which is not terminable upon
notice of 30 days or less, at will, and without penalty to ASG except as
provided herein.
(c) Enter into any contract or agreement (i) which cannot be performed
within three months or less, or (ii) which involves the expenditure of over
Twenty-Five Thousand Dollars ($25,000.00).
(d) Issue or sell, or agree to issue or sell, any shares of capital
stock or other securities of ASG.
(e) Make any payment or distribution to the trustee under any bonus,
pension, profit-sharing or retirement plan or incur any obligation to make
any such payment or contribution which is not in accordance with ASG's
usual past practice, or make any payment or contributions or incur any
obligation pursuant to or in respect of any other plan or contract or
arrangement providing for bonuses, executive incentive compensation,
pensions, deferred compensation, retirement payments, profit-sharing or the
like, establish or enter into any such plan, contract or arrangement, or
terminate any plan.
(f) Extend credit to anyone, except in the ordinary course of business
consistent with prior practices.
(g) Guarantee the obligation of any person, firm or corporation,
except in the ordinary course of business consistent with prior practices.
(h) Amend its Amended and Restated Certificate of Incorporation or
By-laws.
(i) Take any action of a character described in Section 3.10(a) to
3.10(h), inclusive.
7.3 Meeting of Stockholders. ASG will take all steps necessary in
accordance with its Amended and Restated Certificate of Incorporation and Bylaws
to call, give notice of, convene and hold meetings of its stockholders (the
"Stockholder Meeting") as soon as practicable after the effectiveness of the
Registration Statement (as defined in Section 7.4 hereof), for the purpose of
approving and adopting this Plan of Merger and the transactions contemplated
hereby and for such other purposes as may be necessary. Unless this Plan of
Merger shall have been validly terminated as provided herein, the Board of
Directors of ASG (subject to the provision of Section 8.1(d) hereof) will (i)
recommend to its stockholders the approval and adoption of this Plan of Merger,
the transactions contemplated hereby and any other matters to be submitted to
the stockholders in connection therewith, to the extent that such approval is
required by applicable law in order to consummate the Merger, and (ii) use its
reasonable, good faith efforts to obtain the approval by its stockholders of
this Plan of Merger and the transactions contemplated hereby.
7.4 Registration Statement. (a) MedPartners shall prepare and file with
the SEC and any other applicable regulatory bodies, as soon as reasonably
practicable, a Registration Statement on Form S-4 with respect to the shares of
the MedPartners Common Stock to be issued in the Merger (the "Registration
Statement"), and will otherwise proceed promptly to satisfy the requirements of
the Securities Act, including Rule 145 thereunder. Such Registration Statement
shall contain a proxy statement of ASG containing the information required by
the Exchange Act (the "Proxy Statement"). MedPartners shall use its reasonable
best efforts to cause the Registration Statement to be declared effective and to
maintain such effectiveness until all of the shares of the MedPartners Common
Stock covered thereby have been distributed. MedPartners shall promptly amend or
supplement the Registration Statement to the extent necessary in order to make
the statements therein not misleading or to correct any statements which have
become false or misleading. MedPartners shall use its reasonable best efforts to
have the Proxy Statement approved by the SEC under the provisions of the
Exchange Act. MedPartners shall provide ASG with copies of all filings made
pursuant to this Section 7.4 and shall consult with ASG on responses to any
comments made by the Staff of the SEC with respect thereto.
(b) The information specifically designated as being supplied by ASG for
inclusion or incorporation by reference in the Registration Statement shall not,
at the time the Registration Statement is declared effective, at the time the
Proxy Statement is first mailed to holders of ASG Common Stock, at the time of
the Stockholder Meeting and at the Effective Time, 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, not misleading.
The information specifically designated as being supplied by ASG for inclusion
or incorporation by
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reference in the Proxy Statement shall not, at the date the Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed to holders of ASG
Common Stock, at the time of the Stockholder Meeting and at the Effective Time,
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 the light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to ASG, or its officers or directors, should be discovered by ASG which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, ASG shall promptly inform MedPartners. All
documents, if any, that ASG is responsible for filing with the SEC in connection
with the transactions contemplated hereby will comply as to form and substance
in all material respects with the applicable requirements of the Securities Act
and the rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(c) The information specifically designated as being supplied by
MedPartners for inclusion or incorporation by reference in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, at the time the Proxy Statement is first mailed to holders of the ASG
Common Stock, at the time of the Stockholder Meeting and at the Effective Time,
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, not misleading. The information specifically designated as being
supplied by MedPartners for inclusion or incorporation by reference in the Proxy
Statement in connection with the Stockholder Meeting shall not, at the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to holders of ASG Common Stock, at the time of the Stockholder Meeting or at the
Effective Time, 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, not misleading. If at any time prior to the Effective
Time any event or circumstance relating to MedPartners or its officers or
Directors, should be discovered by MedPartners which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
MedPartners should promptly inform ASG and shall promptly file such amendment to
the Registration Statement. All documents that MedPartners is responsible for
filing with the SEC in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
(d) Prior to the Closing Date, MedPartners shall use its reasonable best
efforts to cause the shares of MedPartners Common Stock to be issued pursuant to
the Merger to be registered or qualified under all applicable securities or Blue
Sky laws of each of the states and territories of the United States, and to take
any other actions which may be necessary to enable the Common Stock to be issued
pursuant to the Merger to be distributed in each such jurisdiction.
(e) Prior to the Closing Date, MedPartners shall file a Subsequent Listing
Application with the NYSE relating to the shares of MedPartners Common Stock to
be issued in connection with the Merger, and shall cause such shares of
MedPartners Common Stock to be listed on the NYSE, upon official notice of
issuance prior to the Closing Date.
(f) ASG shall furnish all information to MedPartners with respect to ASG
and ASG Subsidiaries as MedPartners may reasonably request for inclusion in the
Registration Statement or the Proxy Statement and shall otherwise cooperate with
MedPartners in the preparation and filing of such documents.
7.5 Exemption from State Takeover Laws. ASG shall take all reasonable
steps necessary and within its power to exempt the Merger from the requirements
of any state takeover statute or other similar state law which would prevent or
impede the consummation of the transactions contemplated hereby.
7.6 HSR Act Compliance. MedPartners and ASG shall promptly make their
respective filings, and shall thereafter use their reasonable best efforts to
promptly make any required submissions, under the HSR Act with respect to the
Merger and the transactions contemplated hereby. MedPartners and ASG will use
their respective reasonable best efforts to obtain all other permits,
authorizations, consents and approvals from third parties and governmental
authorities necessary to consummate the Merger and the transactions contemplated
hereby.
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7.7 Public Disclosures. MedPartners and ASG will consult with each other
before issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Plan of Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation except as may be required by applicable law or requirements of The
New York Stock Exchange, Inc. (the "NYSE") or the Nasdaq Stock Market, as the
case may be. The parties shall issue a joint press release, mutually acceptable
to MedPartners and ASG, promptly upon execution and delivery of this Plan of
Merger.
7.8 Resignation of ASG Directors. On or prior to the Closing Date, ASG
shall deliver to MedPartners evidence satisfactory to MedPartners of the
resignation of the directors of ASG, such resignations to be effective on the
Closing Date.
7.9 Notice of Subsequent Events. Each party hereto shall notify the other
parties of any changes, additions or events of which they have knowledge which
would cause any material change in or material addition to any Exhibit to its
Disclosure Schedule delivered by the notifying party under this Plan of Merger,
promptly after the occurrence of the same. If the effect of such change or
addition would, individually or in the aggregate with the effect of changes or
additions previously disclosed pursuant to this Section 7.9, constitute a
material adverse effect on the notifying party, the non-notifying party may,
within ten days after receipt of such notice, elect to terminate this Plan of
Merger. If the non-notifying party does not give written notice of such
termination within such 10-day period, the non-notifying party shall be deemed
to have consented to such change or addition and shall not be entitled to
terminate this Plan of Merger by reason thereof.
7.10 No Solicitations. ASG shall not, directly or indirectly, furnish
information and access, in response to unsolicited requests therefor, to any
corporation, partnership, person or other entity or group, participate in
discussions and negotiate with such corporation, partnership, person or other
entity or group concerning any proposal to acquire such party upon a merger,
purchase of assets, purchase of or tender offer for shares of its Common Stock
or similar transaction (an "Acquisition Transaction"). ASG shall notify
MedPartners of any unsolicited request for information and access in connection
with a possible Acquisition Transaction involving such party, such notification
to include the identity of such third party and the proposed terms of such
possible Acquisition Transaction.
7.11 Other Actions. Subject to the provisions of Section 7.6 hereof, none
of ASG, MedPartners and the Subsidiary shall knowingly or intentionally take any
action, or omit to take any action, if such action or omission would, or
reasonably might be expected to, result in any of its representations and
warranties set forth herein being or becoming untrue in any material respect, or
in any of the conditions to the Merger set forth in this Plan of Merger not
being satisfied, or (unless such action is required by applicable law) which
would materially adversely affect the ability of ASG or MedPartners to obtain
any consents or approvals required for the consummation of the Merger without
imposition of a condition or restriction which would have a material adverse
effect on the Surviving Corporation or which would otherwise materially impair
the ability of ASG or MedPartners to consummate the Merger in accordance with
the terms of this Plan of Merger or materially delay such consummation.
7.12 Accounting Methods. Neither MedPartners or ASG shall change, in any
material respect, its methods of accounting in effect at its most recent fiscal
year end, except as required by changes in generally accepted accounting
principles, if applicable, as concurred by such parties' independent
accountants.
7.13 Pooling and Tax-Free Reorganization Treatment. Neither MedPartners
nor ASG shall intentionally take or cause to be taken any action, whether on or
before the Effective Time, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the meaning
of Section 368(a) of the Code.
7.14 Affiliate and Pooling Agreements. MedPartners and ASG will each use
their respective reasonable, good faith efforts to cause each of their
respective Directors and executive officers and each of their respective
"affiliates" (within the meaning of Rule 145 under the Securities Act) to
execute and deliver to MedPartners as soon as practicable an agreement in the
form attached hereto as Exhibit 7.14 relating to the
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disposition of shares of ASG Common Stock and shares of MedPartners Common Stock
held by such person and the shares of MedPartners Common Stock issuable pursuant
to this Plan of Merger.
7.15 Cooperation. (a) MedPartners and ASG shall together, or pursuant to
an allocation of responsibility agreed to between them, (i) cooperate with one
another in determining whether any filings required to be made or consents
required to be obtained in any jurisdiction prior to the Effective Time in
connection with the consummation of the transactions contemplated hereby and
cooperate in making any such filings promptly and in seeking to obtain timely
any such consents, (ii) use their respective best efforts to cause to be lifted
any injunction prohibiting the Merger, or any part thereof, or the other
transactions contemplated hereby, and (iii) furnish to one another and to one
another's counsel all such information as may be required to effect the
foregoing actions.
(b) Subject to the terms and conditions herein provided, and unless this
Plan of Merger shall have been validly terminated as provided herein, each of
MedPartners and ASG shall use all reasonable efforts (i) to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on such party (or any subsidiaries or affiliates of such
party) with respect to the Plan of Merger and to consummate the transactions
contemplated hereby and (ii) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any governmental entity and/or any other public or private third party which is
required to be obtained or made by such party or any of its subsidiaries or
affiliates in connection with this Plan of Merger and the transactions
contemplated hereby. Each of MedPartners and ASG will promptly cooperate with
and furnish information to the other in connection with any such burden suffered
by, or requirement imposed upon, either of them or any of their subsidiaries or
affiliates in connection with the foregoing.
7.16 ASG Stock Options. (a) As soon as reasonably practicable after the
Effective Time, MedPartners shall deliver to the holders of ASG stock options,
appropriate notices setting forth such holders' rights pursuant to any stock
option plans under which such ASG stock options were issued and any stock option
agreements evidencing such options which shall continue in full force and effect
on the same terms and conditions (subject to the adjustments required by Section
2.1(d) or this Section 7.16 after giving effect to the Merger and the assumption
of such options by MedPartners as set forth herein) as in effect immediately
prior to the Effective Time. MedPartners shall comply with the terms of the
stock option plans, and the stock option agreements as so adjusted, and shall
use its reasonable best efforts to ensure, to the extent required by, and
subject to the provisions of, such plans or agreements, that ASG stock options
which qualified as incentive stock options prior to the Effective Time shall
continue to qualify as incentive stock options after the Effective Time.
(b) MedPartners shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of MedPartners Common Stock for delivery
upon exercise of ASG stock options assumed by MedPartners in accordance with
Section 2.1(d). As soon as practicable after the Effective Time, MedPartners
shall file with the SEC a registration statement on Form S-8 with respect to
shares of MedPartners Common Stock subject to such assumed ASG stock options and
shall use its best efforts to maintain the effectiveness of a registration
statement or registration statements covering such options (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such ASG stock options remain outstanding. MedPartners shall administer the
plans assumed pursuant to Section 2.1(d) hereof in a manner that complies with
Rule 16b-3 promulgated under the Exchange Act to the extent the applicable plan
complied with such rule prior to the Merger.
(c) Except to the extent otherwise agreed to by the parties, all
restrictions or limitations on transfer and vesting with respect to ASG stock
options awarded under any plan, program, or arrangement of ASG or any of its
subsidiaries, to the extent that such restrictions or limitations shall not have
already lapsed, shall remain in full force and effect with respect to such
options after giving effect to the Merger and the assumption by MedPartners as
set forth above.
7.17 Publication of Combined Results. MedPartners agrees that MedPartners
shall cause publication of the combined results of operations of MedPartners and
ASG in its Quarterly Report on Form 10-Q which shall contain a full calendar
month of such combined results, provided however that such period shall be
tolled
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for such period as the financial statements required for the preparation of such
financial statements for such publication are not reasonably available to
MedPartners. For purposes of this Section 7.13, the term "publication" shall
have the meaning provided in SEC Accounting Series Release No. 135.
SECTION 8.
TERMINATION, AMENDMENT AND WAIVER.
8.1 Termination. This Plan of Merger may be terminated at any time prior
to the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the holders of ASG Common Stock:
(a) by mutual written consent of MedPartners, the Subsidiary and ASG;
(b) by either MedPartners or ASG:
(i) if, upon a vote at a duly held meeting of stockholders or any
adjournment thereof, any required approval of the holders of ASG Common
Stock shall not have been obtained;
(ii) if the Merger shall not have been consummated on or before
March 31, 1998, unless the failure to consummate the Merger is the
result of a willful and material breach of this Plan of Merger by the
party seeking to terminate this Plan of Merger; provided, however, that
the passage of such period shall be tolled for any part thereof (but not
exceeding 60 days in the aggregate) during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or the
calling or holding of a meeting of stockholders;
(iii) if any court of competent jurisdiction or other governmental
entity shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become
final and nonappealable;
(iv) in the event of a material breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Plan of Merger which (A) would give rise to the failure of a condition
set forth in Section 9.2(a) or (b) or Section 9.3(a) or (b), as
applicable, and (B) cannot be or has not been cured within 30 days after
the giving of written notice to the breaching party of such breach (a
"Material Breach") (provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or other
agreement contained in this Plan of Merger); or
(v) if either MedPartners or ASG gives notice of termination
pursuant to Section 7.8;
(c) by either MedPartners or ASG in the event that (i) all of the
conditions to the obligation of such party to effect the Merger set forth
in Section 9.1 shall not have been satisfied and (ii) any condition to the
obligation of such party to effect the Merger set forth in Section 9.2 (in
the case of MedPartners) or Section 9.3 (in the case of ASG) is not capable
of being satisfied prior to the end of the period referred to in Section
8.1(b)(ii); or
(d) by ASG, if ASG's Board of Directors shall have (i) determined, in
the exercise of its fiduciary duties under applicable law, not to recommend
the Merger to the holders of ASG Shares or shall have withdrawn such
recommendation or (ii) approved, recommended or endorsed any Acquisition
Transaction (as defined in Section 7.8) other than this Merger or (iii)
resolved to do any of the foregoing.
(e) by ASG, if the arithmatic average of the closing prices per share
of the MedPartners Common Stock, as reported on the New York Stock Exchange
Composite Tape, during any consecutive thirty (30)-trading day period
between the date hereof and the date five trading days before the ASG
meeting of stockholders to consider the Merger is less than eighty percent
(80%) of the closing price per share of MedPartners Common Stock as
reported on the New York Stock Exchange Composite Tape on the date
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this Plan of Merger is executed and delivered, and MedPartners has received
written notice of the decision to terminate this Plan of Merger within two
trading days after any such thirty (30)-trading day period.
8.2 Effect of Termination. In the event of termination of this Plan of
Merger as provided in Section 8.1, this Plan of Merger shall forthwith become
void and have no effect, without any liability or obligation on the part of any
party, other than the provisions of Sections 6.2 and 8.6, and except to the
extent that such termination results from the willful and material breach by a
party of any of its representations, warranties, covenants or other agreements
set forth in this Plan of Merger.
8.3 Amendment. This Plan of Merger may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the holders of ASG Shares; provided however, that after such
approval there shall be made no amendment that pursuant to Section 251(d) of the
DGCL requires further approval by such stockholders without such further
approval. This Plan of Merger may not be amended except by an instrument in
writing signed on behalf of each of the parties.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Plan of Merger or in any
document delivered pursuant to this Plan of Merger or (c) subject to the proviso
of Section 8.3, waive compliance with any of the agreements or conditions
contained in this Plan of Merger. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this Plan of
Merger to assert any of its rights under this Plan of Merger or otherwise shall
not constitute a waiver of such rights, except as otherwise provided in Section
7.6.
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Plan of Merger pursuant to Section 8.1, an amendment of this
Plan of Merger pursuant to Section 8.3, or an extension or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of MedPartners,
the Subsidiary or ASG, action by its Board of Directors or the duly authorized
designee of the Board of Directors.
8.6 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, except that expenses (other than legal, accounting and
investment banking costs, which shall be paid by the party incurring such
expenses) incurred in connection with preparing, filing, printing and mailing
the Proxy Statements and the Registration Statement shall be shared equally by
MedPartners and ASG.
SECTION 9.
CONDITIONS TO CLOSING.
9.1 Mutual Conditions. The respective obligations of each party to effect
the Merger shall be subject to the satisfaction, at or prior to the Closing
Date, of the following conditions (any of which may be waived in writing by
MedPartners, the Subsidiary and ASG):
(a) None of MedPartners, the Subsidiary or ASG nor any of their
respective subsidiaries shall be subject to any order, decree or injunction
by a court of competent jurisdiction which (i) prevents or materially
delays the consummation of the Merger or (ii) would impose any material
limitation on the ability of MedPartners effectively to exercise full
rights of ownership of the Common Stock of the Surviving Corporation or any
material portion of the assets or business of ASG, taken as a whole.
(b) No statute, rule or regulation shall have been enacted by the
government (or any governmental agency) of the United States or any state
that makes the consummation of the Merger and any other transaction
contemplated hereby illegal.
(c) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
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(d) The holders of shares of ASG Common Stock shall have approved the
adoption of this Agreement and any other matters submitted to them for the
purpose of approving the transactions contemplated hereby.
(e) The shares of MedPartners Common Stock to be issued in connection
with the Merger shall have been listed on the NYSE, upon official notice of
issuance, and shall have been issued in transactions qualified or exempt
from registration under applicable securities or Blue Sky laws of such
states and territories of the United States as may be required.
(f) The Merger shall qualify for "pooling of interests" accounting
treatment.
(g) MedPartners, the Subsidiary and ASG shall have received all
consents, waivers, approvals and authorizations of third parties with
respect to all material contracts, leases, service agreements and
management agreements to which such entities are parties, which consents,
waivers, approvals and authorizations are required of such third parties by
such documents, in form and substance acceptable to MedPartners or ASG, as
the case may be, except where the failure to obtain such consent, approval
or authorization would not have a material effect on the business of the
Surviving Corporation.
(h) The Registration Statement shall have been declared effective and
no stop order with respect to the Registration Statement shall be in
effect.
9.2 Conditions to Obligations of MedPartners and the Subsidiary. The
obligations of MedPartners and the Subsidiary to consummate the Merger and the
other transactions contemplated hereby shall be subject to the satisfaction, at
or prior to the Closing Date, of the following conditions (any of which may be
waived by MedPartners and the Subsidiary):
(a) Each of the agreements of ASG to be performed at or prior to the
Closing Date pursuant to the terms hereof shall have been duly performed in
all material respects, and ASG shall have performed, in all material
respects, all of the acts required to be performed by it at or prior to the
Closing Date by the terms hereof.
(b) The representations and warranties of ASG set forth in Section
3.10(a) shall be true and correct as of the date of this Plan of Merger and
as of the Closing Date. The representations and warranties of ASG set forth
in this Plan of Merger that are qualified as to materiality shall be true
and correct, and those that are not so qualified shall be true and correct
in all material respects, as of the date of this Plan of Merger and as of
the Closing as though made at and as of such time, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so qualified
shall be true and correct in all material respects, as of such earlier
date); provided, however, that ASG shall not be deemed to be in breach of
any such representations or warranties by taking any action permitted (or
approved by MedPartners) under Section 7.2 or otherwise permitted herein.
MedPartners and the Subsidiary shall have been furnished with a
certificate, executed by a duly authorized officer of ASG, dated the
Closing Date, certifying in such detail as MedPartners and the Subsidiary
may reasonably request as to the fulfillment of the foregoing conditions.
(c) MedPartners shall have received an opinion from Haskell Slaughter
& Young, L.L.C. to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, which
opinion may be based upon reasonable representations of fact provided by
officers of MedPartners, the Subsidiary and ASG.
(d) MedPartners shall have received an opinion from King & Spalding
substantially to the effect set forth in Exhibit 9.2(d) hereto.
(e) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Plan of Merger shall have been obtained or made, except
for filings in connection with the Merger and any other documents required
to be filed after the Effective Time.
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(f) MedPartners shall have received an undertaking from holders
("Holders") of options to purchase not less than 516,000 shares of ASG
stock (such number to be reduced by the number of shares with respect to
which Holders have made cashless exercises of options since the date of
this Plan of Merger) that if they should exercise such options prior to or
after (as contemplated by Section 2.1(d) hereof) the Effective Time, such
exercises will be cashless exercises.
9.3 Conditions to Obligations of ASG. The obligations of ASG to consummate
the Merger and the other transactions contemplated hereby shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions
(any of which may be waived by ASG):
(a) Each of the agreements of MedPartners and the Subsidiary to be
performed at or prior to the Closing Date pursuant to the terms hereof
shall have been duly performed, in all material respects, and MedPartners
and the Subsidiary shall have performed, in all material respects, all of
the acts required to be performed by them at or prior to the Closing Date
by the terms hereof.
(b) The representations and warranties of MedPartners set forth in
Section 5.11(a) shall be true and correct as of the date of the Plan of
Merger and as of the Closing Date. The representations and warranties of
MedPartners set forth in this Plan of Merger that are qualified as to
materiality shall be true and correct, and those that are not so qualified
shall be true and correct in all material respects, as of the date of this
Plan of Merger and as of the Closing as though made at and as of such time,
except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties that
are qualified as to materiality shall be true and correct, and those that
are not so qualified shall be true and correct in all material respects, as
of such earlier date). ASG shall have been furnished with a certificate,
executed by duly authorized officers of MedPartners and the Subsidiary,
dated the Closing Date, certifying in such detail as ASG may reasonably
request as to the fulfillment of the foregoing conditions.
(c) ASG shall have received an opinion from King & Spalding to the
effect that the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code, which opinion may be based upon reasonable
representations of fact provided by officers of MedPartners, the Subsidiary
and ASG.
(d) ASG shall have received an opinion from Haskell Slaughter & Young,
L.L.C. substantially to the effect set forth in Exhibit 9.3(d) hereto.
(e) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Plan of Merger shall have been obtained or made, except
for filings in connection with the Merger and any other documents required
to be filed after the Effective Time.
SECTION 10.
MISCELLANEOUS.
10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Plan of Merger or in any instrument
delivered pursuant to this Plan of Merger shall survive the Effective Time.
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10.2 Notices. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery or by
facsimile and overnight courier to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to MedPartners:
MedPartners, Inc.
3000 Galleria Tower, Suite 1000
Birmingham, Alabama 35244
Facsimile: (205) 982-7709
Attention: J. Brooke Johnston, Jr., Esq.
Senior Vice President and General Counsel
with a copy to:
Haskell Slaughter & Young, L.L.C.
1200 AmSouth Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35203
Facsimile: (205) 324-1133
Attention: Robert E. Lee Garner, Esq.
If to ASG:
America Service Group Inc.
Suite 300
105 WestPark Drive
Brentwood, TN 37027
Attention: Michael Catalano, Esq.
Executive Vice President and General Counsel
with a copy to:
King & Spalding
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1763
Facsimile: (404) 572-5100
Attention: Philip A. Theodore, Esq.
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications with the overnight courier.
10.3 Further Assurances. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Plan of Merger.
10.4 Indemnification. MedPartners and Subsidiary agree that all rights to
indemnification for acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers of ASG as
provided in its articles of incorporation or bylaws shall survive the Merger and
shall continue in full force and effect in accordance with their terms. The
provisions of this Section 10.4 are intended to be for the benefit of, and shall
be enforceable by, each such indemnified party and each such indemnified party's
heirs and representatives.
10.5 Governing Law. This Plan of Merger shall be interpreted, construed
and enforced in accordance with the laws of the State of Delaware, applied
without giving effect to any conflicts-of-law principles.
10.6 "Including". The word "including", when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation", "but not limited to", or words of
similar import) is used with
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<PAGE> 86
reference to the word "including" or the similar items or matters, but rather
shall be deemed to refer to all other items or matters that could reasonably
fall within the broadest possible scope of the general statement, term or
matter.
10.7 "Knowledge". "To the knowledge", "to the best knowledge, information
and belief", or any similar phrase shall be deemed to refer to the knowledge of
the Chairman of the Board, Chief Executive Officer or Chief Financial Officer of
a party and to include the assurance that such knowledge is based upon a
reasonable investigation, unless otherwise expressly provided.
10.8 "Material adverse change" or "material adverse effect". "Material
adverse change" or "material adverse effect" means, when used in connection with
ASG or MedPartners, any change, effect, event or occurrence that has, or is
reasonably likely to have, individually or in the aggregate, a material adverse
impact on the business or financial position of such party and its subsidiaries
taken as a whole; provided, however, that "material adverse change" and
"material adverse effect" shall be deemed to exclude the impact of (i) changes
in generally accepted accounting principles, (ii) changes in applicable law, and
(iii) any changes resulting from any restructuring or other similar charges or
write-offs taken by ASG with the consent of MedPartners; provided, however, that
no such charges or write-offs will be taken if such would adversely affect
pooling-of-interests accounting treatment for the Merger. Moreover, it shall not
be deemed a "material adverse change" or "material adverse effect" so long as
future financial performance shall be consistent with discussions between the
parties in connection with the Merger.
10.9 "Hazardous Materials". The term "Hazardous Materials" means any
material which has been determined by any applicable governmental authority to
be harmful to the health or safety of human or animal life or vegetation,
regardless of whether such material is found on or below the surface of the
ground, in any surface or underground water, airborne in ambient air or in the
air inside any structure built or located upon or below the surface of the
ground or in building materials or in improvements of any structures, or in any
personal property located or used in any such structure, including, but not
limited to, all hazardous substances, imminently hazardous substances, hazardous
wastes, toxic substances, infectious wastes, pollutants and contaminants from
time to time defined, listed, identified, designated or classified as such under
any Environmental Laws (as defined in Section 10.10) regardless of the quantity
of any such material.
10.10 Environmental Laws. The term "Environmental Laws" means any federal,
state or local statute, regulation, rule or ordinance, and any judicial or
administrative interpretation thereof, regulating the use, generation, handling,
storage, transportation, discharge, emission, spillage or other release of
Hazardous Materials or relating to the protection of the environment.
10.11 Captions. The captions or headings in this Plan of Merger are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this Plan of
Merger.
10.12 Integration of Exhibits. All Exhibits attached to this Plan of
Merger are integral parts of this Plan of Merger as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all purposes
and not only in connection with the specific representation in which they are
explicitly referenced.
10.13 Entire Agreement. This instrument, including all Exhibits attached
hereto and the Confidentiality Agreement, contains the entire agreement of the
parties and supersedes any and all prior or contemporaneous agreements between
the parties, written or oral, with respect to the transactions contemplated
hereby. Such agreement may not be changed or terminated orally, but may only be
changed by an agreement in writing signed by the party or parties against whom
enforcement of any waiver, change, modification, extension, discharge or
termination is sought.
10.14 Counterparts. This Plan of Merger may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
10.15 Binding Effect. This Plan of Merger shall be binding on, and shall
inure to the benefit of, the parties hereto, and their respective successors and
assigns, and no other person shall acquire or have any right
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<PAGE> 87
under or by virtue of this Plan of Merger. No party may assign any right or
obligation hereunder without the prior written consent of the other parties.
10.16 No Rule of Construction. The parties acknowledge that this Plan of
Merger was initially prepared by MedPartners, and that all parties have read and
negotiated the language used in this Plan of Merger. The parties agree that,
because all parties participated in negotiating and drafting this Plan of
Merger, no rule of construction shall apply to this Plan of Merger which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Plan of Merger.
IN WITNESS WHEREOF, MedPartners, the Subsidiary and ASG have caused this
Plan and Agreement of Merger to be executed by their respective duly authorized
officers, all as of the day and year first above written.
MEDPARTNERS, INC.
By: /s/ LARRY R. HOUSE
------------------------------------
Larry R. House
Chairman, President and
Chief Executive Officer
ASG MERGER CORPORATION
By: /s/ LARRY R. HOUSE
------------------------------------
Larry R. House
President
AMERICA SERVICE GROUP INC.
By: /s/ SCOTT L. MERCY
------------------------------------
Scott L. Mercy
President and
Chief Executive Officer
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<PAGE> 88
ANNEX B
FORM OF OPINION OF
EQUITABLE SECURITIES CORPORATION
, 1997
Board of Directors
America Service Group Inc.
105 Westpark Drive, Suite 300
Brentwood, Tennessee 37027
Gentlemen:
We understand that America Service Group Inc., a Delaware corporation
("ASG"), has entered into a Plan and Agreement of Merger, dated as of October 1,
1997 (the "Merger Agreement"), with MedPartners, Inc., a Delaware corporation
("MedPartners"), and ASG Merger Corporation, a Delaware corporation that is a
wholly owned subsidiary of MedPartners. The Merger Agreement provides that, at
the effective time of the merger (the "Merger") provided for in the Merger
Agreement, each outstanding share of common stock of ASG ("ASG Common Stock")
will be exchanged for the right to receive 0.71 shares of common stock of
MedPartners (the "Merger Consideration"). The terms and conditions of the Merger
are more fully set forth in the Merger Agreement. Capitalized terms used but not
defined herein have the meanings ascribed to such terms in the Merger Agreement.
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to ASG and its stockholders of the Merger
Consideration.
Equitable Securities Corporation ("Equitable"), as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Equitable will receive a fee for rendering this opinion. Equitable has performed
investment banking and financial advisory services for ASG from time to time for
which Equitable has received compensation, including acting as advisor to ASG in
connection with the Merger. In the ordinary course of its business, Equitable
trades the equity securities of ASG for its own account and for the accounts of
Equitable's customers and, accordingly, Equitable may at any time hold a long or
short position in such securities.
In connection with our opinion, we have reviewed, among other things, the
Merger Agreement, and certain financial and other information with respect to
certain managed care, physician practice management and, correctional services
providers that was publicly available or furnished to us, including financial
analyses, financial forecasts and reports. We held discussions with the
management and representatives of ASG concerning the historical and current
operations of ASG, its financial condition and prospects and financial
projections, as well as the strategic and operating benefits anticipated from
the Merger. In addition, we: (i) considered, to the extent available, the
financial terms of certain other transactions recently effected which we
considered comparable to the Merger; (ii) compared certain financial positions
and operating results of ASG and MedPartners; (iii) reviewed the potential pro
forma financial effects of the Merger; and (iv) conducted such other financial
studies, analyses and investigations and reviewed such other factors as we
deemed appropriate for purposes of this opinion.
In rendering this opinion, we have relied, without assuming any
responsibility for independent verification, on the accuracy and completeness of
all financial and other information reviewed by us that was publicly available
or furnished to us by or on behalf of ASG and MedPartners. We have assumed that
the financial forecasts which we examined were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgment of the
management of ASG. We have also assumed, with your consent, that: (a) the
strategic and operating benefits of the Merger anticipated by the management and
representatives of ASG will be realized; (b) the Merger will be accounted for
under the pooling-of-interests method of
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<PAGE> 89
accounting in accordance with generally accepted accounting principles; (c) the
Merger will be treated as a tax-free reorganization for federal income tax
purposes; and (d) all material liabilities (contingent or otherwise) of
MedPartners are as set forth in the financial statements of MedPartners or as
otherwise disclosed to us in connection with this engagement. We have not made
an independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of MedPartners. Our opinion is based upon economic, market and
other conditions existing on the date hereof and does not address the fairness
of the Merger Consideration to the stockholders of ASG as of any other date, or
any other aspect of the Merger. Our opinion does not constitute a recommendation
to any shareholder of ASG as to whether or not that shareholder should vote to
approve the Merger. Furthermore, we express no opinion as to the price or
trading range at which shares of ASG Common Stock or the common stock of
MedPartners will trade following the announcement of the Merger, or as to the
price or trading range at which shares of the common stock of MedPartners will
trade following consummation of the Merger.
It is understood that this letter is for the information of the Board of
Directors of ASG only and may not be used for any other purpose without our
prior written consent; however, the opinion rendered hereby may be disclosed in
the Prospectus-Proxy Statement relating to the Merger to be filed with the
Securities and Exchange Commission, so long as each inclusion and reference is
in form and substance satisfactory to Equitable.
Based upon and subject to the foregoing, it is our opinion, as investment
bankers, that the Merger Consideration to be paid by MedPartners in connection
with the Merger is fair, from a financial point of view, to ASG and its
stockholders.
Very truly yours,
EQUITABLE SECURITIES CORPORATION
By:
--------------------------------------
Title:
--------------------------------------
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<PAGE> 90
ANNEX C
AMERICA SERVICE GROUP INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS, , 1997
The undersigned hereby appoints Scott L. Mercy and Michael Catalano, jointly
and severally, as proxy for the undersigned, with full power of substitution, to
represent the undersigned and to vote all of the shares of the common stock of
America Service Group Inc. ("ASG") which the undersigned is entitled to vote at
the special meeting (the "Special Meeting") of stockholders of ASG to be held on
, 1997, and at any and all adjournments thereof, to:
1. Approve and adopt the Agreement and Plan of Merger, dated as of October
1, 1997 (the "Merger Agreement"), by and among MedPartners, Inc.
("MedPartners"), ASG Merger Corporation ("Subsidiary") and ASG whereby
(i) the Subsidiary will merge with and into ASG and become a
wholly-owned subsidiary of MedPartners and (ii) each share of common
stock, par value $0.01 per share, of ASG will be converted, upon the
consummation of the Merger, into the right to receive 0.71 of a share of
Common Stock, par value $0.001 per share, of MedPartners.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS OF ASG RECOMMENDS A VOTE FOR THIS PROPOSAL.
2. Approve, in the discretion of the persons named above, any other matters
that may properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and will be
voted as directed herein. If this proxy is returned and no direction is given,
this proxy will be voted FOR the proposals in paragraph 1 and, in the discretion
of the proxies, upon such other business as may properly come before the Special
Meeting, and any adjournment or postponement thereof.
Dated , 1997
-----------------
-----------------------------
Signature of Stockholder
-----------------------------
Title
-----------------------------
Signature, if held jointly
When shares are held by
joint tenants, both should
sign. When signing as
attorney, executor,
administrator, trustee,
guardian, corporate officer or
partner, please give full
title as such. If a
corporation, please sign in
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person. This Proxy votes all
shares held in all capacities.
PLEASE MARK, SIGN, DATE AND MAIL PROMPTLY.
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<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
MEDPARTNERS, INC.
Section 102(b)(7) of the DGCL grants corporations the right to limit or
eliminate the personal liability of their directors in certain circumstances in
accordance with provisions therein set forth. The MedPartners Certificate of
Incorporation contains a provision eliminating or limiting director liability to
MedPartners and its stockholders for monetary damages arising from acts or
omissions in the director's capacity as a director. The provision does not,
however, eliminate or limit the personal liability of a director (i) for any
breach of such director's duty of loyalty to MedPartners or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under the Delaware statutory
provision making directors personally liable, under a negligence standard, for
unlawful dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision offers persons who serve on the Board of Directors of MedPartners
protection against awards of monetary damages resulting from breaches of their
duty of care (except as indicated above). As a result of this provision, the
ability of MedPartners or a stockholder thereof to successfully prosecute an
action against a director for a breach of his duty of care is limited. However,
the provision does not affect the availability of equitable remedies such as an
injunction or rescission based upon a director's breach of his duty of care. The
SEC has taken the position that the provision will have no effect on claims
arising under the federal securities laws.
Section 145 of the DGCL grants corporations the right to indemnify their
directors, officers, employees and agents in accordance with the provisions
therein set forth. The MedPartners Bylaws provide for mandatory indemnification
rights, subject to limited exceptions, to any director, officer, employee, or
agent of MedPartners who, by reason of the fact that he or she is a director,
officer, employee, or agent of MedPartners, is involved in a legal proceeding of
any nature. Such indemnification rights include reimbursement for expenses
incurred by such director, officer, employee, or agent in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
the DGCL.
MedPartners has entered into agreements with all of its directors and its
executive officers pursuant to which MedPartners has agreed to indemnify such
directors and executive officers against liability incurred by them by reason of
their services as a director or executive officer to the fullest extent
allowable under applicable law. In addition, MedPartners has purchased insurance
containing customary terms and conditions as permitted by Delaware law on behalf
of its directors and officers, which may cover liabilities under the Securities
Act of 1933.
See Item 22 of this Registration Statement on Form S-4.
ITEM 21. EXHIBITS
Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S> <C>
(2)-1 -- Agreement and Plan of Merger, dated as of October 1, 1997
among MedPartners, Inc., ASG Merger Corporation and America
Service Group Inc., attached to this Registration Statement
as Annex A to the Prospectus-Proxy Statement for ASG, is
hereby incorporated herein by reference. List of Exhibits to
Agreement and Plan of Merger.
(3)-1 -- MedPartners, Inc. Third Restated Certificate of
Incorporation, filed as Exhibit (3)-1 to MedPartners Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, is hereby incorporated herein by reference.
</TABLE>
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<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S> <C>
</TABLE>
(4)-1 -- MedPartners, Inc. Stockholders' Rights Agreement, filed as
Exhibit (4)-1 to MedPartners' Registration Statement on Form
S-4 (Registration No. 333-00774), is hereby incorporated
herein by reference.
(4)-2 -- Amendment No. 1 to the Rights Plan of MedPartners, Inc.,
filed as Exhibit (4)-2 to MedPartners Annual Report on Form
10-K for the fiscal year ended December 31, 1996, is hereby
incorporated herein by reference.
(4)-3 -- Amendment No. 2 to the Rights Agreement of MedPartners,
Inc., filed as Exhibit (4)-2 to MedPartners' Registration
Statement on Form S-3 (Registration No. 333-17339), is
hereby incorporated herein by reference.
(5) -- Opinion of Haskell Slaughter & Young L.L.C., as to the
legality of the shares of MedPartners Common Stock being
registered.
(8)-1 -- Opinion of Haskell Slaughter & Young L.L.C. as to certain
federal income tax consequences of the Merger.
(8)-2 -- Opinion of King & Spalding as to certain federal income tax
consequences of the Merger.*
(23)-1 -- Consent of Ernst & Young LLP. See pages immediately
following the signature pages to the Registration Statement.
(23)-2 -- Consent of Ernst & Young LLP. See pages immediately
following the signature pages to the Registration Statement.
(23)-3 -- Consent of Haskell Slaughter & Young L.L.C. (included in the
opinions filed as Exhibit (5) and (8)-1).
(23)-4 -- Consent of King & Spalding (included in the opinion filed as
Exhibit (8)-2).
(23)-5 -- Consent of Equitable Securities Corporation (included in the
opinion attached to this Registration Statement as Annex B
to the Prospectus-Proxy Statement for ASG is hereby
incorporated herein by reference).
(23)-6 -- Consent of Price Waterhouse LLP. See the pages immediately
following the signature pages to the Registration Statement.
(24) -- Powers of Attorney. See the signature page to the original
filing of this Registration Statement.
(99)-1 -- ASG Proxy attached to this Registration Statement as Annex C
to the Prospectus-Proxy Statement for ASG is hereby
incorporated herein by reference.
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE> 93
The undersigned registrant hereby undertakes:
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offerings of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(2) The undersigned Registrant hereby undertakes as follows: that
prior to any public re-offering of the securities registered hereunder
through use of the Prospectus-Proxy Statement which is part of the
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that
such re-offering prospectus will contain the information called for by the
applicable registration form with respect to re-offerings by persons who
may be deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(3) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(4) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not subject of and
included in the registration statement when it became effective.
(5) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the Registration Statement through the date of responding to the
request.
II-3
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama on October 21, 1997
MEDPARTNERS, INC.
By /s/ LARRY R. HOUSE
------------------------------------
Larry R. House
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Larry R. House and Harold O. Knight, Jr., and
each of them, his attorney-in-fact with power of substitution for him in any and
all capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this Registration Statement
relates, or other instructions he deems necessary or appropriate, and to file
the same, with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact or his substitute may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ LARRY R. HOUSE Chairman of the Board and October 21, 1997
------------------------------------------------------ Chief Executive Officer
Larry R. House and Director
/s/ HAROLD O. KNIGHT, JR. Executive Vice President October 21, 1997
------------------------------------------------------ and Chief Financial
Harold O. Knight, Jr. Officer (Principal
Financial and Accounting
Officer)
/s/ RICHARD M. SCRUSHY Director October 21, 1997
------------------------------------------------------
Richard M. Scrushy
/s/ LARRY D. STRIPLIN, JR. Director October 21, 1997
------------------------------------------------------
Larry D. Striplin, Jr.
/s/ CHARLES W. NEWHALL III Director October 21, 1997
------------------------------------------------------
Charles W. Newhall III
/s/ TED H. MCCOURTNEY Director October 21, 1997
------------------------------------------------------
Ted H. McCourtney
/s/ WALTER T. MULLIKIN, M.D. Director October 21, 1997
------------------------------------------------------
Walter T. Mullikin, M.D.
/s/ JOHN S. MCDONALD, J.D. Director October 21, 1997
------------------------------------------------------
John S. McDonald, J.D.
/s/ ROSALIO J. LOPEZ, M.D. Director October 21, 1997
------------------------------------------------------
Rosalio J. Lopez, M.D.
</TABLE>
II-4
<PAGE> 95
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ C.A. LANCE PICCOLO Director October 21, 1997
------------------------------------------------------
C.A. Lance Piccolo
/s/ ROGER L. HEADRICK Director October 21, 1997
------------------------------------------------------
Roger L. Headrick
/s/ HARRY M. JANSEN KRAEMER, JR. Director October 21, 1997
------------------------------------------------------
Harry M. Jansen Kraemer, Jr.
</TABLE>
II-5
<PAGE> 96
EXHIBIT (23)-1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" in the
Registration Statement (Form S-4, No. 333- ) and the related Prospectus
of MedPartners, Inc. for the registration of shares of its Common Stock and the
incorporation by reference therein of our report dated February 3, 1997, with
respect to the consolidated financial statements of MedPartners, Inc. for the
year ended December 31, 1996, included in its Annual Report on Form 10-K/A for
the year ended December 31, 1996, our report dated March 28, 1997, with respect
to the consolidated financial statements and schedule of America Service Group
Inc. for the year ended December 31, 1996, included in its Annual Report on Form
10-K for the year ended December 31, 1996, and our report dated August 25, 1997
with respect to the consolidated financial statements of MedPartners, Inc. for
the year ended December 31, 1996, included in its Current Report on Form 8-K
dated August 27, 1997, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Birmingham, Alabama
October 20, 1997
<PAGE> 97
EXHIBIT (23)-6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus of America
Service Group Inc. constituting part of this Registration Statement on Form S-4
of MedPartners, Inc. of our report dated March 11, 1996, except as to Note 15,
which is as of March 28, 1996 appearing on page F-3 of America Service Group's
Annual Report on Form 10-K for the year ended December 31, 1995. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page F-24 of such Annual Report on Form
10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Linthicum, Maryland
October 20, 1997
<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S> <C>
(2)-1 -- Agreement and Plan of Merger, dated as of October 1, 1997
among MedPartners, Inc., ASG Merger Corporation and America
Service Group Inc., attached to this Registration Statement
as Annex A to the Prospectus-Proxy Statement for ASG, is
hereby incorporated herein by reference. List of Exhibits to
Agreement and Plan of Merger.
(3)-1 -- MedPartners, Inc. Third Restated Certificate of
Incorporation, filed as Exhibit (3)-1 to MedPartners Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, is hereby incorporated herein by reference.
(4)-1 -- MedPartners, Inc. Stockholders' Rights Agreement, filed as
Exhibit (4)-1 to MedPartners' Registration Statement on Form
S-4 (Registration No. 333-00774), is hereby incorporated
herein by reference.
(4)-2 -- Amendment No. 1 to the Rights Plan of MedPartners, Inc.,
filed as Exhibit (4)-2 to MedPartners Annual Report on Form
10-K for the fiscal year ended December 31, 1996, is hereby
incorporated herein by reference.
(4)-3 -- Amendment No. 2 to the Rights Agreement of MedPartners,
Inc., filed as Exhibit (4)-2 to MedPartners' Registration
Statement on Form S-3 (Registration No. 333-17339), is
hereby incorporated herein by reference.
(5) -- Opinion of Haskell Slaughter & Young L.L.C., as to the
legality of the shares of MedPartners Common Stock being
registered.
(8)-1 -- Opinion of Haskell Slaughter & Young L.L.C. as to certain
federal income tax consequences of the Merger.
(8)-2 -- Opinion of King & Spalding as to certain federal income tax
consequences of the Merger.*
(23)-1 -- Consent of Ernst & Young LLP. See pages immediately
following the signature pages to the Registration Statement.
(23)-2 -- Consent of Ernst & Young LLP. See pages immediately
following the signature pages to the Registration Statement.
(23)-3 -- Consent of Haskell Slaughter & Young L.L.C. (included in the
opinions filed as Exhibit (5) and (8)-1).
(23)-4 -- Consent of King & Spalding (included in the opinion filed as
Exhibit (8)-2).
(23)-5 -- Consent of Equitable Securities Corporation (included in the
opinion attached to this Registration Statement as Annex B
to the Prospectus-Proxy Statement for ASG is hereby
incorporated herein by reference).
(23)-6 -- Consent of Price Waterhouse LLP. See the pages immediately
following the signature pages to the Registration Statement.
(24) -- Powers of Attorney. See the signature page to the original
filing of this Registration Statement.
(99)-1 -- ASG Proxy attached to this Registration Statement as Annex C
to the Prospectus-Proxy Statement for ASG is hereby
incorporated herein by reference.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 5
[LETTERHEAD] HASKELL SLAUGHTER & YOUNG, L.L.C.
October ____, 1997
MedPartners, Inc.
3000 Galleria Tower, Suite 1000
Birmingham, Alabama 35244-2331
RE: REGISTRATION STATEMENT ON FORM S-4 --
MEDPARTNERS, INC. / AMERICA SERVICE GROUP INC.
OUR FILE NO. 48367-077
Gentlemen:
We have served as counsel for MedPartners, Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Company"),
in connection with the registration under the Securities Act of 1933, as
amended, pursuant to the Company's Registration Statement on Form S-4, as
amended (Commission File No. 333-_____) (the "Registration Statement"), of up to
3,524,045 shares of Common Stock, par value $.001 per share, of the Company (the
"Shares") to be issued pursuant to that certain Agreement and Plan of Merger,
dated as of October 1, 1997, by and among the Company, ASG Merger Corporation, a
Delaware corporation, and America Service Group Inc., a Delaware corporation.
This opinion is furnished to you pursuant to the requirements of the
Registration Statement.
In connection with this opinion, we have examined and are familiar with
originals or copies (certified or otherwise identified to our satisfaction) of
such documents, corporate records and other instruments relating to the
incorporation of the Company and to the authorization and issuance of the Shares
and the authorization and adoption of the Agreement as we have deemed necessary
and appropriate.
<PAGE> 2
MedPartners, Inc.
October ____, 1997
Page 2
Based upon the foregoing, and having regard for such legal
considerations as we have deemed relevant, it is our opinion that:
1. The Shares have been duly authorized.
2. Upon issuance, sale and delivery of the Shares as contemplated
in the Registration Statement and the Agreement, the Shares will be legally
issued, fully paid and nonassessable.
We do hereby consent to the reference to our firm under the heading
"Legal Matters" in the Registration Statement and to the filing of this Opinion
as an Exhibit thereto.
Very truly yours,
HASKELL SLAUGHTER & YOUNG, L.L.C.
By
--------------------------------------
Robert E. Lee Garner
<PAGE> 1
EXHIBIT (8)-1
[Haskell Slaughter & Young, L.L.C. Letterhead]
MedPartners, Inc.
3000 Galleria Tower, Suite 1000
Birmingham, Alabama 35244
RE: PLAN AND AGREEMENT OF MERGER BY AND AMONG
MEDPARTNERS, INC., ASG MERGER CORPORATION AND
AMERICA SERVICE GROUP INC.
Gentlemen:
We have acted as counsel to MedPartners, Inc., a Delaware corporation
("MedPartners"), in connection with the proposed merger (the "Merger") of ASG
Merger Corporation, a Delaware corporation ("Subsidiary") and wholly-owned
subsidiary of MedPartners, with and into America Service Group Inc., a Delaware
corporation ("ASG"), pursuant to the terms of the Plan and Agreement of Merger,
dated as of October 1, 1997 (the "Plan of Merger"), by and among MedPartners,
Subsidiary and ASG, as described in more detail in the Plan of Merger and in the
Registration Statement on Form S-4 (Commission File No. 333-__________) to be
filed by MedPartners with the Securities and Exchange Commission, as amended
(the "Registration Statement"). This opinion is being provided in satisfaction
of the conditions set forth in Section 9.2(c) of the Plan of Merger. All
capitalized terms, unless otherwise specified, have the meaning assigned to them
in the Registration Statement.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Plan of Merger, (ii) the Registration Statement, and (iii) such other
documents as we have deemed necessary or appropriate in order to enable us to
render the opinion below. In our examination, we have assumed the genuineness of
all signatures, the legal capacity of all natural persons, the authenticity of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified, conformed or photostatic copies
and the authenticity of the originals of such copies. In rendering the opinion
set forth below, we have relied upon certain written representations and
covenants of MedPartners, Subsidiary, ASG and certain ASG stockholders which are
annexed hereto (the "Representations and Warranties").
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, pertinent judicial authorities, interpretive rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant.
Based upon and subject to the foregoing and assuming that, as of the
Effective Time of the Merger and following the Merger there will be no acts or
omissions which will violate or be inconsistent with any of the Representations
and Warranties, we are of the opinion that:
<PAGE> 2
(i) Provided the Merger qualifies as a statutory merger
under the General Corporation Law of the State of Delaware, the Merger
will constitute a reorganization within the meaning of Section 368(a)
of the Code, and MedPartners, Subsidiary and ASG will each be a "party
to the reorganization" within the meaning of Section 368(b) of the
Code;
(ii) No gain or loss will be recognized by MedPartners,
Subsidiary or ASG as a result of the Merger;
(iii) No gain or loss will be recognized by an ASG
stockholder who receives solely shares of MedPartners Common Stock in
exchange for ASG Common Stock;
(iv) The receipt of cash by a ASG stockholder in lieu of
fractional shares of MedPartners Common Stock will be treated as if the
fractional shares were distributed as part of the exchange and then
were redeemed by MedPartners. These payments will be treated as having
been received as distributions in full payment in exchange for the
stock redeemed as provided in Section 302(a) of the Code, provided the
redemption is not essentially equivalent to a dividend;
(v) The tax basis of the shares of MedPartners Common
Stock received by an ASG stockholder will be equal to the tax bases of
the ASG Common Stock exchanged therefor, excluding any basis allocable
to a fractional share of MedPartners Common Stock for which cash is
received; and
(vi) The holding period of the shares of MedPartners
Common Stock received by an ASG stockholder will include the holding
period or periods of the ASG Common Stock exchanged therefor, provided
that the ASG Common Stock is held as a capital asset within the meaning
of Section 1221 of the Code at the Effective Time of the Merger.
The Merger should have no immediate federal income tax consequences to
MedPartners stockholders.
Except as set forth above, we express no opinion as to the tax
consequences, whether federal, state, local or foreign, to any party to the
Merger or of any transactions related to the Merger or contemplated by the Plan
of Merger.
-2-
<PAGE> 3
We hereby consent to the reference to our Firm under the headings
"Federal Income Tax Consequences" and "Legal Matters" in the Prospectuses which
form a part of the Registration Statement, and to the filing of this opinion as
an Exhibit thereto.
Very truly yours,
- 3 -
