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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: February 9, 1996
(Date of the Earliest Event Reported)
HEALTHSOURCE, INC.
(Exact name of Registrant as specified in its charter)
New Hampshire 1-11538 02-0387748
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification Number)
incorporation)
Two College Park Drive
Hooksett, New Hampshire 03106
(Address of principal executive offices) (Zip Code)
603/268-7000
(Registrant's Telephone Number, including area code)
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Items 1-4. Not applicable.
Item 5. Other Events.
On February 9, 1996, Healthsource, Inc. (the "Company")
announced that it had closed its previously-announced agreement to
acquire the HMO business of Central Massachusetts Health Care, Inc.
("CMHC"), a not-for-profit HMO based in Worcester, Massachusetts,
for $46.5 million in cash, subject to certain post-closing
adjustments. The purchase price is based on a closing net worth of
approximately $7.2 million after adjustments. The purchase price
was derived from the Company's line of credit with Chase Manhattan
Bank and a syndicate of other banks.
Under the terms of the agreement, the operating assets of CMHC were
acquired by a new wholly-owned subsidiary of the Company which was
licensed as an HMO in Massachusetts, named Healthsource CMHC, which
also assumed CMHC's HMO contracts.
As of the closing, CMHC had 83,400 members and operated in
central Massachusetts.
Item 6. Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
4.1 Asset Purchase Agreement dated as of April 10, 1995 by
and between Central Massachusetts Health Care, Inc. and
Healthsource Massachusetts, Inc. (Incorporated by
reference to Exhibit 10.2 to Form 10-Q dated May 9,
1995 for the Quarterly Period ended March 31, 1995.)
4.2 First Amendment to Asset Purchase Agreement dated
November 9, 1995 between Central Massachusetts Health
Care, Inc. and Healthsource Massachusetts, Inc.
4.3 Second Amendment to Asset Purchase Agreement dated
December 11, 1995 between Central Massachusetts Health
Care, Inc. and Healthsource Massachusetts, Inc.
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Item 8. Not applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTHSOURCE, INC.
Dated: February 23, 1996 By: /s/ Thomas M. Congoran
----------------------------
Thomas M. Congoran
Chief Financial Officer
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FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT dated November 9, 1995 ("First
Amendment") by and between CENTRAL MASSACHUSETTS HEALTH CARE, INC., a not-for-
profit corporation organized under the laws of the Commonwealth of
Massachusetts with a principal address at 100 Front Street, Suite 300,
Worcester, Massachusetts 01608 (the "Seller") and HEALTHSOURCE MASSACHUSETTS,
INC., a corporation organized under the laws of the Commonwealth of
Massachusetts with a principal office at c/o Healthsource, Inc., Two College
Park Drive, Hooksett, New Hampshire 03106 (the "Buyer").
WHEREAS, Seller and Buyer entered into a certain Asset Purchase Agreement
dated April 10, 1995 ("Agreement") with respect to the sale by Seller to Buyer
of certain of the assets of Seller to Buyer as more specifically defined in the
Agreement; and
WHEREAS, the Agreement contains certain conditions to Buyer's obligations
to close the transactions contemplated in the Agreement including without
limitation the negotiation and entering into a hospital provider contract with
Medical Center of Central Massachusetts on terms specified in the Agreement;
and
WHEREAS, Seller has not been able to fulfill such condition; and
WHEREAS, Seller has distributed to its participating physicians monies
previously withheld with respect to 1994 services, in an amount of $5,825,000;
and
WHEREAS, Seller and Buyer desire to further clarify other issues
pertaining to the status of the charitable foundation which will ultimately
succeed to all of the rights, obligations and liabilities of the Seller
pursuant to the Agreement and other agreements contemplated therein, issues
pertaining to the Seller's accounting for physician withholds for the year 1995
and certain other issues; and
WHEREAS, Seller and Buyer desire to record their agreement in this First
Amendment.
NOW, THEREFORE, in consideration of the mutual provisions herein set
forth, and
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subject to the terms and conditions hereof, the parties agree as follows:
1. PURCHASE PRICE: The Base Purchase Price as stated in SECTION 3.01 of
the Agreement is hereby changed for all purposes from $62,500,000 to
$57,500,000.
2. HOSPITAL CONTRACT CONDITION: The condition regarding the negotiation
and entering into a hospital provider agreement with MCCM as specified in
SECTION 10.15, SECTION 1(g) and EXHIBIT J of the Agreement is hereby
acknowledged by Seller and Buyer to be met and fulfilled and otherwise waived
by Buyer. Buyer shall not be obligated to assume any contract or agreement
between Seller and MCCM, but may do so if it wishes.
3. WORCESTER SURGICAL CENTER: Buyer agrees to negotiate in good faith
with Worcester Surgical Center, Inc. after Closing towards establishing a
mutually satisfactory provider relationship. Any long term agreement must be
subject to both parties' best interests.
4. 1995 ACCOUNTING: In addition to deducting the Physician Withholds
(as defined in SECTION 5 below) from Seller's "Risk Fund" line item of the
Estimated and Final Balance Sheets as required in SECTION 4.01 of the
Agreement, for all purposes in preparation of Seller's 1995 financial
statements (and for any interim period during 1995 as required by SECTION 10.09
of the Agreement) and for purposes of preparation of the Estimated Balance
Sheet and the Final Balance Sheet, all liability to participating physicians
for return of 1995 Physician Withholds (as defined in SECTION 5 below) shall be
recorded as a liability of Seller on the aforementioned financial statements.
5. PHYSICIAN WITHHOLD AND FEE DISTRIBUTION: Seller and Buyer agree that
SECTION 2.09 of the Agreement is hereby amended to read as follows:
"Seller has paid the fees withheld from its participating physicians
for the calendar year 1994 (the "Physician Withholds") in the amount of
$5,825,000 to its participating physicians and shall provide Buyer with proof
of such payments at Closing. After Closing, Buyer shall pay to participating
physicians of Seller ("Physicians") all amounts withheld (or to be withheld)
from Physicians for the calendar year 1995 (the "1995 Physician Withholds").
Buyer shall provide Seller with proof of payment of the 1995 Physician
Withholds promptly after such amounts are paid. Buyer shall assume no
liability whatsoever for the payment of physician withholds for any
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period before the calendar year 1995, the Physician Withholds, or for payment
of any amounts to physicians beyond the amount of the 1995 Physician
Withholds.
6. 1995 LOSSES OFFSET: SECTION 4.01(B) is deleted in its entirety.
7. SUCCESSOR TO SELLER: Seller and Buyer agree and acknowledge that
after Closing of the transactions contemplated in the Agreement, Seller shall
not transfer any material portion of its assets or capital (including without
limitation the Purchase Price paid by Buyer), except for transfer of some or
all of the Seller's assets or capital (including the Purchase Price paid by
Buyer) to a charitable foundation to be established by Seller or to another
appropriate charitable successor to Seller upon terms approved in advance by
the Attorney General of the Commonwealth of Massachusetts ("Attorney General").
Prior to and as a condition precedent to any such transfer, any such foundation
or successor of Seller shall have (i) specifically assumed in a writing
acceptable to Buyer all rights and obligations of Seller (including without
limitation indemnification obligations, duties, covenants and liabilities)
pursuant to the Agreement and this First Amendment and other agreements
referred to herein or delivered by or on behalf of Seller at Closing (including
without limitation joining in the Non-Competition Agreement referred to in
SECTION 10.13 and in the form of EXHIBIT D of the Agreement); and (ii) given
reasonable assurance to Buyer in a writing acceptable to Buyer that transfer of
any material part of such foundation's or successor's assets or capital
(including the Purchase Price) will not occur. In addition to all other rights
and remedies of Buyer for breach of this SECTION 7, and notwithstanding
anything to the contrary, if any, contained in the Agreement, Buyer shall be
entitled to preliminary and permanent injunctive relief restraining Seller from
doing or continuing to do any act in violation of this SECTION 7 and ordering
Seller to cause its successor to assume fully the obligations of Seller
pursuant to the Agreement and this Amendment as required in this SECTION 7
without showing or proving any actual damage sustained by Buyer, it being
acknowledged and agreed by the parties that a breach of this SECTION 7 by
Seller will cause irreparable injury to Buyer for which money damages will not
provide a total and adequate remedy.
8. APPROVAL AND CONFIRMATION BY MASSACHUSETTS ATTORNEY GENERAL. As a
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condition to Closing Seller shall have received and delivered to Buyer a
written approval and confirmation by the Attorney General (and any court of
competent jurisdiction otherwise approving the transactions contemplated in the
Agreement) to the provisions of this First Amendment (including without
limitation SECTION 7 hereof), which approval and confirmation shall also
confirm that all of Buyer's rights under the Agreement against Seller shall be
enforceable fully against Seller and any successor of Seller, including without
limitation that Seller or any such successor of Seller shall be and shall
remain liable to Buyer for all retained liabilities and all indemnification
obligations of Seller to Buyer pursuant to the Agreement.
9. TERMINATION: The termination date as stated in SECTION 18 part (ii)
and (iii) of the Agreement is hereby changed from September 30, 1995 to
December 31, 1995 with the parties to make a good faith effort to close
effective as of November 30, 1995.
10. EFFECT OF AMENDMENT: Except as otherwise amended by this First
Amendment, all terms, conditions and provisions of the Agreement shall remain
unchanged and continue to be effective and binding upon the parties hereto.
11. NO WAIVERS: Seller and Buyer agree that any actions taken in
anticipation of or in connection with the Closing, and the execution of this
First Amendment will in no way be considered as a waiver or modification of any
of the terms of the Asset Purchase Agreement or other material agreements
executed by the parties or any rights of the parties pursuant thereto, except
as otherwise set forth in this First Amendment.
12. TERMS OF AGREEMENT: Except as specifically amended in this First
Amendment, all terms and provisions of the Agreement shall remain unchanged and
continue to be effective and binding upon the parties hereto.
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IN WITNESS WHEREOF, the parties have executed this First Amendment to
Asset Purchase Agreement as of the date first written above.
WITNESS: CENTRAL MASSACHUSETTS HEALTH
CARE, INC. ("SELLER")
/s/ Emily J. KellY By: /s/ John M. Powell
- ------------------------ ----------------------------
Duly Authorized
HEALTHSOURCE MASSACHUSETTS, INC.
/s/ Daniel N. Gregoire By: /s/ Norman C. Payson
- ------------------------ ----------------------------
Norman C. Payson, M.D.
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SECOND AMENDMENT
TO
ASSET PURCHASE AGREEMENT
SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT dated December 11, 1995
("Second Amendment") by and between CENTRAL MASSACHUSETTS HEALTH CARE, INC., a
not-for-profit corporation organized under the laws of the Commonwealth of
Massachusetts with a principal address at 100 Front Street, Suite 300,
Worcester, Massachusetts 01608 (the "Seller") and HEALTHSOURCE MASSACHUSETTS,
INC., a corporation organized under the laws of the Commonwealth of
Massachusetts with a principal office at c/o Healthsource, Inc., Two College
Park Drive, Hooksett, New Hampshire 03106 (the "Buyer").
WHEREAS, Seller and Buyer entered into a certain Asset Purchase Agreement
dated April 10, 1995 and amended by the First Amendment to Asset Purchase
Agreement dated November 9, 1995 ("First Amendment") (hereinafter such Asset
Purchase Agreement and First Amendment, shall be collectively referred to as
the "Agreement") with respect to the sale by Seller to Buyer of certain of the
assets of Seller to Buyer as more specifically defined in the Agreement; and
WHEREAS, Seller and Buyer desire to amend the Agreement.
NOW, THEREFORE, in consideration of the mutual provisions herein set
forth, and subject to the terms and conditions hereof, the parties agree as
follows:
1. SUCCESSORS TO SELLER/TRANSFER OF PURCHASE PRICE. Seller and Buyer
agree that SECTIONS 7 AND 8 of the First Amendment shall be deleted in their
entirety and the following is hereby agreed upon: Seller and Buyer agree and
acknowledge that after Closing of the transactions contemplated in the
Agreement, Seller shall not under any circumstances transfer any of its assets
or capital (including without limitation the Purchase Price paid by Buyer), for
a period of not less than one (1) year from the Closing Date, and after such
period Seller may only transfer some or all of the Seller's assets or capital
(including the Purchase Price paid by Buyer)
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to a charitable foundation to be established by Seller or to another
appropriate charitable successor to Seller upon terms and approved in advance
by the Attorney General of the Commonwealth of Massachusetts ("Attorney
General"). Prior to and as a condition precedent to any such transfer, EITHER:
(i) any such foundation or successor of Seller shall have (a) specifically
assumed in a writing acceptable to Buyer all rights and obligations of Seller
(including without limitation indemnification obligations, duties, covenants,
liabilities not assumed by Buyer and other liabilities) pursuant to the
Agreement and this Second Amendment and other agreements referred to herein or
delivered by or on behalf of Seller at Closing (including without limitation
joining in the Non-Competition Agreement referred to in SECTION 10.13 and in
the form of EXHIBIT D of the Agreement), and (b) given reasonable assurance to
Buyer in a writing acceptable to Buyer that transfer of any material part of
such foundation's or successor's assets or capital (including the Purchase
Price) will not occur; OR (ii) Seller shall have procured and paid for
insurance covering the above-mentioned obligations and liabilities of Seller in
a form and amount and from an insurer acceptable to Buyer. In addition to all
other rights and remedies of Buyer for breach of this SECTION 1, and
notwithstanding anything to the contrary, if any, contained in the Agreement,
Buyer shall be entitled to preliminary and permanent injunctive relief
restraining Seller from doing or continuing to do any act in violation of this
SECTION 1 and ordering Seller to cause its successor to assume fully the
obligations of Seller pursuant to the Agreement and this Amendment as required
in this SECTION 1 without showing or proving any actual damage sustained by
Buyer, it being acknowledged and agreed by the parties that a breach of this
SECTION 1 by Seller will cause irreparable injury to Buyer for which money
damages will not provide a total and adequate remedy. As a condition to
Closing Seller shall have received and delivered to Buyer a written order of a
court of competent jurisdiction in a form acceptable to Buyer approving the
transactions contemplated in and the provisions of the Agreement and this
Second Amendment.
2. SPECIAL INDEMNIFICATION: Seller hereby indemnifies and holds Buyer
harmless from any and all loss, damage, claims, actions, suits, proceedings or
expenses (including without
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limitation legal, accounting and other expenses) relating to any challenge by
any party to the transactions contemplated in the Agreement, as amended (the
"Transaction"), either before or at any time after Closing. Buyer shall also
have the right to rescind entirely the Transaction either before or after
Closing in the event any final non-appealable order of a court of competent
jurisdiction or other regulatory authority orders a material change in the
terms of the Transaction or requires any change in the Purchase Price to be
paid by Buyer.
3. SECTION 4 of the First Amendment is deleted in its entirety and
replaced with the following:
"1995 ACCOUNTING: In addition to deducting the Physician Withholds
(as defined in SECTION 5 below) from Seller's "Risk Fund" line item
of the Estimated and Final Balance Sheets as required in SECTION 4.01
of the Agreement, for all purposes in preparation of Seller's 1995
financial statements (and for any interim period during 1995 as
required by SECTION 10.09 of the Agreement) and for purposes of
preparation of the Estimated Balance Sheet and the Final Balance
Sheet, a liability to participating physicians for return of 1995
Physician Withholds (as defined in SECTION 5 below) in the amount of
$3.2 million shall be recorded as a liability of Seller on the
aforementioned 1995 financial statements, Estimated Balance Sheet and
Final Balance Sheet. Recording of this liability shall have the
effect of reducing the tangible net worth of Seller by $3.2 million
and shall cause a corresponding $3.2 million reduction in the
purchase price to be paid by Buyer."
4. SECTION 5 of the First Amendment is deleted in its entirety and
replaced with the following:
"PHYSICIAN WITHHOLD AND FEE DISTRIBUTION: Seller and Buyer agree
that SECTION 2.09 of the Agreement is hereby amended to read as
follows:
'Seller has paid the fees withheld from its participating physicians
for the calendar year 1994 (the "Physician Withholds") in the amount
of $5,825,000 to its participating physicians and shall provide Buyer
with proof of such payments at Closing. After
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Closing, Buyer shall pay to participating physicians of Seller
("Physicians") $3.2 million of the amount withheld (or to be
withheld) from Physicians for the calendar year 1995 (such $3.2
million amount is referred to as the "1995 Physician Withholds").
Seller and Buyer agree that the definition of all "Assets" of
Seller to be conveyed to Buyer shall include all cash and Acceptable
Financial Assets (as defined in SECTION 2.06 of the Agreement) of
Seller including but not limited to cash and investment assets
sufficient to pay the $3.2 million 1995 Physician Withholds. Buyer
shall provide Seller with proof of payment of the $3.2 million 1995
Physician Withholds promptly after such amounts are paid. Buyer
shall assume no liability whatsoever for the payment of physician
withholds for any period before the calendar year 1995, the
Physician Withholds, or for payment of any amounts to physicians
beyond the $3.2 million 1995 Physician Withholds.'"
5. TERMINATION: The termination date as stated in SECTION 18, Part (ii)
and (iii) of the Agreement and in SECTION 9 of the First Amendment is hereby
changed to February 28, 1996.
6. EFFECT OF AMENDMENT: Except as otherwise amended by this Second
Amendment, all terms, conditions and provisions of the Agreement shall remain
unchanged and continue to be effective and binding upon the parties hereto.
7. NO WAIVERS: Seller and Buyer agree that any actions taken in
anticipation of or in connection with the Closing, and the execution of this
Second Amendment will in no way be considered as a waiver or modification of
any of the terms of the Asset Purchase Agreement or other material agreements
executed by the parties or any rights of the parties pursuant thereto, except
as otherwise set forth in this Second Amendment.
8. TERMS OF AGREEMENT: Except as specifically amended in this Second
Amendment, all terms and provisions of the Agreement shall remain unchanged and
continue to be effective and binding upon the parties hereto.
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