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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
AMENDMENT NO. 1
TO
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
HEALTHSOURCE, INC.
(Name of Subject Company)
CHC ACQUISITION CORP.
CIGNA CORPORATION
(Bidders)
COMMON STOCK, $.10 PAR VALUE
(Title of Class of Securities)
42221E 10 4
(CUSIP Number of Class of Securities)
THOMAS J. WAGNER, ESQ.
CIGNA CORPORATION
ONE LIBERTY PLACE
PHILADELPHIA, PENNSYLVANIA 19192
215-761-6028
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on behalf of Bidders)
COPY TO:
C. DOUGLAS KRANWINKLE, ESQ.
O'MELVENY & MYERS LLP
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
212-326-2000
MARCH 7, 1997
(Date of Event Which Requires Filing Statement on Schedule 13D)
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CALCULATION OF FILING FEE
TRANSACTION VALUATION* $1,551,656,244
AMOUNT OF FILING FEE $310,331.25
* Estimated for purposes of calculating the amount of the filing fee
only. The amount assumes the purchase of 71,340,517 shares of common
stock, $.10 par value (the "Shares"), of Healthsource, Inc. (the
"Company") at a price per Share of $21.75 in cash (the "Offer Price").
Such number of shares represents all the Shares outstanding as of
January 31, 1997 plus all Shares issuable pursuant to options granted
under the Company's stock option and employee stock purchase plans,
pension plans and other similar employee benefit plans.
[X] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount previously paid: $310,331.25
Form or registration no.: Schedule 14D-1
Filing parties: CHC Acquisition Corp. and CIGNA Corporation
Date filed: March 6, 1997
(Continued on following pages)
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This Amendment No. 1 to Tender Offer Statement on Schedule
14D-1 and Amendment No. 1 to Schedule 13D amends and supplements the Tender
Offer Statement on Schedule 14D-1 and Schedule 13D originally filed on March 6,
1997 (the "Schedule 14D-1") by CHC Acquisition Corp., a New Hampshire
corporation (the "Purchaser"), and CIGNA Corporation, a Delaware corporation
("Parent"), relating to the tender offer by the Purchaser to purchase all
outstanding shares of common stock, par value $.10 per share, of Healthsource,
Inc., a New Hampshire corporation (the "Company"), at a price of $21.75 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated March 6, 1997 and the related Letter of
Transmittal. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Schedule 14D-1. The Purchaser and Parent hereby
amend and supplement the Schedule 14D-1 as follows:
ITEM 10. ADDITIONAL INFORMATION
(e) On March 7, 1997, Betty Grayson Kurzweil and Robert
Grayson, as trustees under the will of Florence Rosenman (together, the
"Plaintiffs"), filed a putative class action in the Superior Court of Merrimack
County for the State of New Hampshire (the "Complaint"). The Complaint asserts
one cause of action alleging breaches of fiduciary duties against the Company
and each of the Company's directors (the "Director Defendants"), and alleging
aiding and abetting of such breaches of fiduciary duties by Parent.
The Complaint alleges that the February 28, 1997 announcement
that the Company had signed a definitive agreement to merge with Parent failed
to indicate whether the Company had engaged a financial advisor to evaluate the
Company or had made any attempt to "seek out other potential suitors for the
Company." As a result, the Plaintiffs allege that the Director Defendants failed
to adequately evaluate the Company's value as a potential merger or acquisition
candidate and/or did not act to enhance the Company's value as such a candidate.
The Complaint further alleges that Parent disregarded the alleged breach of
fiduciary duty and thus aided and abetted the alleged breach. The Complaint
seeks unspecified monetary damages. Parent believes that the lawsuit is without
merit. A copy of the Complaint is filed herewith as Exhibit (g)(1) and is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit (g)(1) Complaint filed in the Superior Court, Merrimack County, of
the State of New Hampshire in an action titled Betty Grayson
Kurzweil and Robert Grayson, as trustees under the will of
Florence Rosenman, on behalf of themselves and all others
similarly situated v. Healthsource, Inc. et. al.
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SIGNATURES
After due inquiry and to the best of their knowledge and
belief, the undersigned certify that the information set forth in this statement
is true, complete and correct.
Dated: March 12, 1997
CHC ACQUISITION CORP.
By: /s/ ROBERT L. ROSE
Name: Robert L. Rose
Title: President
CIGNA CORPORATION
By: /s/ MORDECAI SCHWARTZ
Name: Mordecai Schwartz
Title: Vice President
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EXHIBIT INDEX
EXHIBIT PAGE NO.
(g)(1) Complaint filed in the Superior Court, Merrimack
County, of the State of New Hampshire in an action
titled Betty Grayson Kurzweil and Robert Grayson, as
trustees under the will of Florence Rosenman, on behalf
of themselves and all others similarly situated v.
Healthsource, Inc. et. al.
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STATE OF NEW HAMPSHIRE
MERRIMACK, SS SUPERIOR COURT
WRIT OF SUMMONS
BETTY GRAYSON KURZWEIL and ROBERT GRAYSON, as
trustees under the will of FLORENCE ROSENMAN, on
behalf of themselves and all others similarly
situated
v.
HEALTHSOURCE, INC., MERWYN BAGAN, M.D., PAUL D. BARON, M.D.,
ROBERT S. CATHCART, III, M.D., ROBERT H. BILBRO, M.D.,
DANIEL F. EUBANK, M.D., ROBERT A. LEIPOLD, M.D.,
FRANCIS G. MIDDLETON, M.D., NORMAN C. PAYSON, M.D.
DANIEL W. SCHALL, M.D., J HAROLD CHANDLER and CIGNA CORPORATION
NOW COME the plaintiffs Betty Grayson Kurzweil and Robert Grayson, as
trustees under the will of Florence Rosenman, of 140 Mountain Avenue,
Springfield, New Jersey 07081, on behalf of themselves and all others similarly
situated and respectfully complains against the defendants and allege as
follows:
PARTIES
1. Plaintiffs are the owners of shares of defendant Healthsource.
2. Defendant Healthsource is a corporation organized and existing
under the laws of the State of New Hampshire. Healthsource maintains its
principal offices at 2 College Park Drive, Hooksett, New Hampshire 03106.
Healthsource manages healthcare and provides a broad range of managed healthcare
products through various subsidiaries. The Company owns health maintenance
organizations ("HMOs") in New England, upstate New York and the Central,
Southeastern and South Central United States.
3. Defendant Merwyn Bagan, M.D., ("Bagan") is Chairman of the Board of
Healthsource and maintains his principal office at 2 College Park Drive,
Hooksett, New Hampshire 03106.
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4. Defendant Paul D. Baron, M.D., ("Baron") is a Director of
Healthsource and maintains his principal office at 2 College Park Drive,
Hooksett, New Hampshire 03106.
5. Defendant Robert S. Cathcart, III, M.D., ("Cathcart") is a
Director of Healthsource and maintains his principal office at 2 College
Park Drive, Hooksett, New Hampshire 03106.
6. Defendant Robert H. Bilbro, M.D., ("Bilbro") is a Director of
Healthsource and maintains his principal office at 2 College Park Drive,
Hooksett, New Hampshire 03106.
7. Defendant Daniel F. Eubank, M.D., ("Eubank") is a Director of
Healthsource and maintains his principal office at 2 College Park Drive,
Hooksett, New Hampshire 03106.
8. Defendant Robert A. Leipold, M.D., ("Leipold") is a Director of
Healthsource and maintains his principal office at 2 College Park Drive,
Hooksett, New Hampshire 03106.
9. Defendant Francis G. Middleton, M.D., ("Middleton") is a Director
of Healthsource and maintains his principal office at 2 College Park Drive,
Hooksett, New Hampshire 03106.
10. Defendant Normal C. Payson, M.D., ("Payson") is President, Chief
Executive Officer and a Director of Healthsource and maintains his
principal office at 2 College Park Drive, Hooksett, New Hampshire 03106.
11. Defendant David W. Schall, M.D., ("Schall") is a Director of
Healthsource and maintains his principal office at 2 College Park Drive,
Hooksett, New Hampshire 03106.
12. Defendant J. Harold Chandler, M.D., ("Chandler") is a Director of
Healthsource and maintains his principal office at 2 College Park Drive,
Hooksett, New Hampshire 03106.
13. The foregoing individual directors of Healthsource (collectively
the "Director Defendants"), owe fiduciary duties to Healthsource and its
shareholders.
14. Cigna Corporation ("Cigna") is a Delaware corporation with
executive offices at One Liberty Place, Philadelphia, Pennsylvania 19192- 1550.
Cigna is one of the largest healthcare companies in the United States, offering
a wide range of group medical, dental, disability and life
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insurance products. Cigna substantially and knowingly participated in and is
benefitting from breaches of fiduciary duties alleged herein, and therefore is
liable as a aider and abettor thereof.
CLASS ACTION ALLEGATIONS
15. Plaintiffs brings this action on their own behalf and as a class
action pursuant to New Hampshire Superior Court Rule 27-A on behalf of all
shareholders of defendant Healthsource (except defendants herein and any person,
firm, trust, corporation or other entity related to or affiliated with any of
the defendants) or their successors in interest, who have been or will be
adversely affected by the conduct of defendants alleged herein.
16. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As of
February 21, 1997, there were 63,800,000 shares of defendant Healthsource's
common stock outstanding owned by thousands of shareholders of record scattered
throughout the United States.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over any questions affecting any
individual members. The common questions include, inter alia, the following:
i. Whether one or more of the defendants has engaged in a
plan and scheme to enrich themselves at the expense of defendant Healthsource's
public stockholders;
ii. Whether the Defendant Directors have breached their
fiduciary duties owed by them to plaintiffs and members of the Class, and/or
have aided and abetted in such breach, by virtue of their participation and/or
acquiescence and by their other conduct complained of herein;
iii. Whether defendants have failed to fully disclose the true
value of defendant Healthsource's assets and earning power and the future
financial benefits which they expect to derive from the merger with Cigna;
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iv. Whether the Defendant Directors have wrongfully failed and
refused to seek a purchase of Healthsource at the highest possible price and,
instead, have sought to chill potential offers and allow the valuable assets of
defendant Healthsource to be acquired by defendant Cigna at an unfair and
inadequate price;
v. Whether defendant Cigna has induced or aided and abetted
breaches of fiduciary duty by members of Healthsource's Board of Directors;
vi. Whether plaintiffs and other members of the Class will be
irreparably damaged by the transactions complained of herein; and
vii. Whether defendants have breached or aided and abetted the
breaches of the fiduciary and other common law duties owed by them to plaintiffs
and the other members of the Class.
17. Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. The
claims of plaintiffs are typical of the claims of the other members of the Class
and plaintiffs have the same interest as the other members of the Class.
Accordingly, plaintiffs are adequate representatives of the Class and will
fairly and adequately protect the interests of the Class.
18. Plaintiffs anticipate that there will not be any difficulty in
the management of this litigation.
19. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action.
FACTUAL BACKGROUND
20. On February 28, 1997, Healthsource announced the signing of a
definitive agreement to merge with Cigna valued at approximately $1.7 billion or
$21.75 per Healthsource share. Cigna announced that it expected to commence a
tender offer for all outstanding Healthsource shares within five business days.
Though the offer price includes a premium over Healthsource's closing price of
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$16-7/8 on February 27, 1997 it is significantly below Healthsource's high of
$40.375 on April 1, 1996.
21. Defendants' announcement fails to indicate if defendants engaged a
financial advisor or obtained an independent fairness opinion of a financial
advisor to evaluate the transactions' value and it fairness to plaintiffs and
the Class members. There is also no indication of whether or not the board of
directors voted on the transaction or if they did vote of how they voted. There
is no evidence of defendants making any efforts, through the engagement of a
financial advisor or otherwise, to undertake an adequate evaluation of the
Company's worth as a potential merger/acquisition candidate. Additionally, there
is no indication that defendants engaged any financial or investment banking
advisors to attempt to seek out other potential suitors for the Company or make
any general efforts to shop the Company to the highest bidder as their fiduciary
duties require. No efforts were made by defendants to effectively expose the
Company to the marketplace in an effort to create an active and open auction for
Healthsource to maximize its value for its shareholders. In effect defendants
breached fiduciary duties owed by them to the public shareholders of the Company
by failing to take any steps to maximize the value of the shareholdings of
plaintiffs and the Class.
22. The proposed merger transaction is wrongful, unfair and harmful to
Healthsource's public stockholders, the Class members, and represents an attempt
by defendants to aggrandize the personal and financial positions and interests
of board members at the expense of and to the detriment of the stockholders of
the Company. The proposed transaction will deny plaintiffs and other Class
members their rights to share appropriately in the true value of the Company's
assets and future growth in profits and earnings, while usurping the same for
the benefit of defendant Cigna at an unfair and inadequate price.
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CAUSE OF ACTION AGAINST ALL DEFENDANTS
23. Defendants other than Cigna, acting in concert, have violated
their fiduciary duties owed to the public shareholders of Healthsource and put
their own personal interest and the interests of defendant Cigna ahead of the
interests of the Healthsource public shareholders and have used their control
positions as officers and directors of Healthsource for the purpose of reaping
personal gain for board members at the expense of Healthsource's public
shareholders.
24. The Directors Defendants apparently failed to (1) undertake an
adequate evaluation of Healthsource's worth as a potential merger/acquisition
candidate; (2) take adequate steps to enhance Healthsource's value and/or
attractiveness as a merger/acquisition candidate; (3) effectively expose
Healthsource to the marketplace in an effort to create an active and open
auction for Healthsource; or (4) act independently so that the interests of
public shareholders would be protected. Instead, defendants have set an exchange
price for the shares
of Healthsource stock that does not reflect the true value of Healthsource and
without an appropriate premium.
25. While the Directors Defendants of Healthsource should seek out
other possible purchasers of the assets of Healthsource or its stock in a manner
designed to obtain the highest possible price for Healthsource's shareholders,
or seek to enhance the value of Healthsource for all its current shareholders,
they have instead resolved to wrongfully allow Cigna to obtain the valuable
assets of Healthsource at a bargain price, which under the circumstances here,
disproportionately benefits Cigna.
26. The aforesaid tactics pursued by the defendants are, and will
continue to be, wrongful, unfair and harmful to Healthsource's public
shareholders, and are an attempt by certain defendants to aggrandize their
personal positions, interests and finances at the expense of and to the
detriment of the Healthsource public stockholders. The aforesaid maneuvers by
the defendants will deny members of the Class their right to share appropriately
in the true value of Healthsource's valuable
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assets, future earnings and profitable businesses to the same extent as they
would as Healthsource's shareholders.
27. In contemplating, planning and/or effecting the foregoing
specified acts and in pursuing and structuring the Transaction, defendants
are not acting in good faith toward plaintiffs and the Class, and have
breached, and are breaching their fiduciary duties to plaintiffs and the
Class.
28. Because the Directors Defendant (and those acting in concert with
them) dominate and control the business and corporate affairs of Healthsource
and because they are in possession of private corporate information concerning
Healthsource's businesses and future prospects, there exists an imbalance and
disparity of knowledge and economic power between the defendants and the public
shareholders of Healthsource which makes it inherently unfair to Healthsource's
public shareholders.
29. Defendant Cigna has acted and is acting with knowledge or with
reckless disregard that the other defendants are in breach of their fiduciary
duties to Healthsource's public shareholders and have participated in such
breaches of fiduciary duties by the directors of Healthsource and thus are
liable as aiders and abettors.
30. By reason of the foregoing acts, practices and course of conduct,
the Directors Defendants have failed to use the required care and diligence in
the exercise of their fiduciary obligations owed to Healthsource and its public
shareholders and have otherwise failed to discharge their duties as prescribed
by RSA 293-A:8.30(a).
31. As a result of the actions of the defendants, plaintiffs and the
Class have been and will be damaged in that they will not receive the fair value
of Healthsource's assets and business in exchange for their Healthsource's
shares, and have been and will be prevented from obtaining a fair price for
their shares of Healthsource common stock.
32. The plaintiffs request a jury trial on their damage claims.
WHEREFORE, the plaintiffs respectfully pray that this Honorable Court
enter judgment against defendants Healthsource, Inc. Merwyn Bagan, M.D.,
Paul D. Baron, M.D., Robert S.
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Cathcart, III, M.D., Robert H. Bilbro, M.D., Daniel F. Eubank, M.D., Robert A.
Leipold, M.D., Francis G. Middleton, M.D., Norman C. Payson, M.D., Daniel W.
Schall, M.D., J. Harold Chandler and Cigna Corporation in an amount within the
jurisdictional limits of this Honorable Court.
COUNSEL FOR PLAINTIFF:
Frederick E. Upshall, Jr.
UPSHALL, COOPER & TEMPLE, P.A.
10 Green Street, P.O. Box 867
Concord, NH 03302-0867
(603) 225-2791
OF COUNSEL:
Shane T. Rowley
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ LLP
270 Madison Avenue
New York, NY 10016
(212) 545-4600
Jeffrey G. Smith
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ LLP
270 Madison Avenue
New York, NY 10016
(212) 545-4600
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