<PAGE>
SCHEDULE 14A INFORMATION
PRELIMINARY COPY
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[X] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
VALUE HEALTH, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-----------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14(a)-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, no par value
2) Aggregate number of securities to which transaction applies:
54,632,577
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$20.50
4) Proposed maximum aggregate value of transaction:
$1,119,967,829
5) Total fee paid:
$223,994
[_] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
$400,762
2) Form, Schedule or Registration Statement No.:
Registration Statement on Form S-4 (Reg. No. 333-21307)
3)Filing Party:
Columbia/HCA Healthcare Corporation
4) Date Filed:
February 6, 1997
<PAGE>
PRELIMINARY COPY--APRIL 18, 1997
[VALUE HEALTH LETTERHEAD]
, 1997
To the Stockholders of Value Health, Inc.:
Enclosed are a Notice of Special Meeting of Stockholders, a Proxy Statement
and a Proxy for a Special Meeting of Stockholders (the "Special Meeting") of
Value Health, Inc. ("Value Health") to be held on , 1997, at 10:00 a.m.,
local time, at the Avon Old Farms Hotel, Routes 10 and 44, Avon, Connecticut.
At the Special Meeting, you will be asked to consider and vote on a proposal
to approve and adopt an Amended and Restated Merger Agreement pursuant to
which a wholly owned subsidiary of Columbia/HCA Healthcare Corporation
("Columbia") will be merged with and into Value Health, which will thereupon
become a subsidiary of Columbia. The terms of the Merger Agreement provide
that holders of Value Health Common Stock will receive $20.50 in cash for each
share of Value Health Common Stock owned as of the effective date of the
merger (other than shares held by stockholders, if any, who properly exercise
their dissenters' rights of appraisal under Delaware law). Details of the
proposed transaction are set forth in the accompanying Proxy Statement, which
you should read carefully.
After careful consideration, the Board of Directors of Value Health has
determined that the proposed merger is fair to and in the best interests of
Value Health and its stockholders. Accordingly, the Board of Directors has
unanimously approved the Merger Agreement and recommends that all stockholders
vote for its approval and adoption.
All stockholders are invited to attend the Special Meeting in person. The
affirmative vote of a majority of the outstanding shares of Value Health
Common Stock will be necessary for approval and adoption of the Merger
Agreement.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN
THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
If you attend the Special Meeting in person you may, if you wish, vote
personally on all matters brought before the Special Meeting even if you have
previously returned your Proxy.
Sincerely,
Robert E. Patricelli
Chairman of the Board,President and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
PRELIMINARY COPY--APRIL 18, 1997
VALUE HEALTH, INC.
22 WATERVILLE ROAD
AVON, CONNECTICUT 06001
---------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
---------------
To the Stockholders of Value Health, Inc.:
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Value Health, Inc. ("Value Health") will be held on , 1997,
at 10:00 a.m., local time, at the Avon Old Farms Hotel, Routes 10 and 44,
Avon, Connecticut, for the following purposes:
(1) to consider and vote on a proposal to approve and adopt an Amended
and Restated Agreement and Plan of Merger dated as of April 14, 1997 (the
"Amended and Restated Merger Agreement"), among Columbia/HCA Healthcare
Corporation, CVH Acquisition Corporation ("Columbia Sub") and Value Health,
pursuant to which, among other things, (a) Columbia Sub would be merged
with and into Value Health (the "Merger"), and (b) each share of Value
Health Common Stock owned as of the effective date of the Merger would be
converted into the right to receive $20.50 in cash (other than shares held
by stockholders, if any, who properly exercise their dissenters' rights of
appraisal under Delaware law), as described in the accompanying Proxy
Statement;
(2) to consider and vote upon a proposal to approve an adjournment of the
Special Meeting to another time and/or place for the purpose of soliciting
additional proxies in the event that there are not sufficient votes at the
time of the Special Meeting to approve the Amended and Restated Merger
Agreement (the "Adjournment Proposal"); and
(3) to transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Notwithstanding stockholder approval of the foregoing Proposal (1), Value
Health reserves the right to abandon the Merger at any time prior to the
consummation of the Merger under the terms and conditions set forth in Section
8.7 of the Amended and Restated Merger Agreement.
The Board of Directors of Value Health has fixed the close of business on
April 28, 1997, as the record date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting, and only
stockholders of record at such time will be entitled to notice of and to vote
at the Special Meeting. A list of Value Health stockholders entitled to vote
at the Special Meeting will be available for examination, during ordinary
business hours, at the principal offices of Value Health, 22 Waterville Road,
Avon, Connecticut, for ten days prior to the Special Meeting.
A form of Proxy and a Proxy Statement containing more detailed information
with respect to the matters to be considered at the Special Meeting accompany
this notice.
You are cordially invited and urged to attend the Special Meeting in person,
but if you are unable to do so, please complete, sign, date and promptly
return the enclosed Proxy in the enclosed, self-addressed, stamped envelope.
If you attend the Special Meeting and desire to revoke your Proxy and vote in
person you may do so. In any event, a Proxy may be revoked at any time before
it is voted.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDED AND RESTATED
MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE APPROVAL AND
ADOPTION OF THE AMENDED AND RESTATED MERGER AGREEMENT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH IS BEING
SOLICITED BY THE BOARD OF DIRECTORS, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING. AN ADDRESSED RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
By Order of the Board of Directors,
Paul M. Finigan
Secretary
Avon, Connecticut
, 1997
<PAGE>
PRELIMINARY COPY--APRIL 18, 1997
VALUE HEALTH, INC.
22 WATERVILLE ROAD
AVON, CONNECTICUT 06001
----------------
PROXY STATEMENT
----------------
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON , 1997
This Proxy Statement (the "Proxy Statement") is furnished in connection with
the solicitation of proxies by the Board of Directors of Value Health, Inc., a
Delaware corporation ("Value Health"), for use in connection with a Special
Meeting of Stockholders of Value Health which is to be held on , 1997, or
any adjournment(s) or postponement(s) thereof (the "Special Meeting"). At the
Special Meeting, the stockholders of Value Health will consider and vote upon
(i) a proposal to approve and adopt an Amended and Restated Agreement and Plan
of Merger, dated as of April 14, 1997 (the "Amended and Restated Merger
Agreement"), among Columbia/HCA Healthcare Corporation, a Delaware corporation
("Columbia"), CVH Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of Columbia ("Columbia Sub"), and Value Health, pursuant to
which Columbia Sub would be merged with and into Value Health (the "Merger")
and (ii) a proposal to approve an adjournment of the Special Meeting to
another time and/or place for the purpose of soliciting additional proxies in
the event that there are not sufficient votes at the time of the Special
Meeting to approve the Amended and Restated Merger Agreement (the "Adjournment
Proposal"). As a result of the Merger, each of the then outstanding shares of
Common Stock, no par value, of Value Health (the "Value Health Common Stock")
would be converted into the right to receive $20.50 in cash (other than shares
held by stockholders, if any, who properly exercise their dissenters' rights
of appraisal under Delaware law).
The stockholders of Value Health also will consider and vote upon such other
business as may properly come before the Special Meeting.
A copy of the Amended and Restated Merger Agreement is attached hereto as
Appendix A. The summaries of portions of the Amended and Restated Merger
Agreement set forth in this Proxy Statement do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, the text
of the Amended and Restated Merger Agreement.
THE VALUE HEALTH BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDED AND
RESTATED MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND
ADOPTION OF THE AMENDED AND RESTATED MERGER AGREEMENT AND THE ADJOURNMENT
PROPOSAL.
----------------
This Proxy Statement is first being mailed to the stockholders of Value
Health on or about , 1997.
----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.......... 1
The Parties.... 1
Special Meeting
of
Stockholders.. 2
Vote Required.. 2
The Merger..... 2
THE SPECIAL
MEETING......... 6
Matters to Be
Considered at
the Special
Meeting....... 6
Vote Required.. 6
Voting of
Proxies....... 6
Revocability of
Proxies....... 6
Record Date;
Shares
Entitled to
Vote; Quorum.. 7
Solicitation of
Proxies....... 7
Miscellaneous.. 7
THE MERGER....... 8
General........ 8
Background of
the Merger.... 8
Reasons for the
Merger;
Recommendation
of the Board
of Directors.. 12
Opinion of
Financial
Advisor....... 14
Interests of
Certain
Persons in the
Merger........ 18
Columbia's
Source of
Funds......... 20
Certain Other
Effects of the
Merger........ 20
Accounting
Treatment..... 20
Certain Federal
Income Tax
Consequences.. 20
Regulatory
Approvals..... 21
THE AMENDED AND
RESTATED MERGER
AGREEMENT....... 22
The Merger..... 22
Payment
Procedures.... 22
Representations
and
Warranties.... 23
Certain
Covenants..... 24
No Solicitation
of
Transactions.. 24
Indemnification
and
Insurance..... 25
Conditions..... 25
Termination.... 26
Termination
Fee........... 27
Expenses....... 27
Amendment and
Waiver........ 27
Alternative
Merger
Structure..... 27
DISSENTING
STOCKHOLDERS'
RIGHTS OF
APPRAISAL....... 28
SELECTED
FINANCIAL DATA.. 31
MARKET PRICES.... 31
Dividend
Policy........ 31
BENEFICIAL
OWNERSHIP OF
VALUE HEALTH
COMMON STOCK.... 32
STOCKHOLDER PRO-
POSALS.......... 33
OTHER MATTERS.... 33
DOCUMENTS INCOR-
PORATED BY REF-
ERENCE.......... 34
APPENDIX A--
AMENDED AND RE-
STATED AGREEMENT
AND PLAN OF
MERGER.......... A-1
APPENDIX B--OPIN-
ION OF MERRILL
LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED.... B-1
APPENDIX C--SEC-
TION 262 OF THE
DELAWARE GENERAL
CORPORATION
LAW............. C-1
</TABLE>
(ii)
<PAGE>
SUMMARY
As used in this Proxy Statement, "Value Health" refers to Value Health, Inc.
and "Columbia" refers to Columbia/HCA Healthcare Corporation, and, unless the
context otherwise requires, their respective subsidiaries and affiliated
partnerships. The information contained in this Proxy Statement with respect to
Value Health and its affiliates has been supplied by Value Health, and the
information with respect to Columbia and its affiliates has been supplied by
Columbia.
THE PARTIES
Value Health
Value Health provides specialty managed health care benefit programs and
health care information services. Value Health's specialty managed health care
programs are designed to manage costs and maintain quality in selected health
care sectors that are of particular concern to employers and other benefit plan
sponsors due to their size, rapid cost escalation and potential for
overutilization. These areas include prescription drugs, mental health and
substance abuse, workers' compensation management and disease management. Value
Health's health care information services are based upon the use of clinical
and data analysis to guide health care decision-making.
Value Health was incorporated in Delaware in March 1987 for the purpose of
acquiring and developing specialty managed health care businesses meeting its
strategic objectives. From 1987 to 1996, Value Health made over 20 acquisitions
of companies in the prescription drug, mental health and substance abuse,
workers' compensation and information services fields. Value Health's principal
executive offices are located at 22 Waterville Road, Avon, Connecticut 06001,
and its telephone number at such address is (860) 678-3400.
Columbia
Columbia is one of the largest providers of health care services, with
facilities in 37 states and two foreign countries. As of December 31, 1996,
Columbia operated 321 general, acute care hospitals and 22 psychiatric
hospitals. In addition, as part of its comprehensive health care networks,
Columbia operates facilities that provide a broad range of outpatient and
ancillary services. For the year ended December 31, 1996, Columbia generated
operating revenues of $19.9 billion and net income of $1.5 billion.
Columbia's primary objective is to provide to the markets it serves a
comprehensive array of quality health care services in the most cost effective
manner possible. Columbia's general, acute care hospitals usually provide a
full range of services commonly available in hospitals to accommodate such
medical specialties as internal medicine, general surgery, cardiology,
oncology, neurosurgery, orthopedics and obstetrics, as well as diagnostic and
emergency services. Outpatient and ancillary health care services are provided
by Columbia's general, acute care hospitals as well as at freestanding
facilities operated by Columbia, including rehabilitation facilities,
outpatient surgery and diagnostic centers, home health care agencies and other
facilities. In addition, Columbia operates psychiatric hospitals which
generally provide a full range of mental health care services in inpatient,
partial hospitalization and outpatient settings.
Columbia, through various predecessor entities, began operations on July 1,
1988. Columbia was incorporated in Nevada in January 1990 and reincorporated in
Delaware in September 1993. Columbia's principal executive offices are located
at One Park Plaza, Nashville, Tennessee 37203, and its telephone number at such
address is (615) 327-9551.
Columbia Sub
Columbia Sub is a wholly owned subsidiary of Columbia and was formed by
Columbia to effect the Merger and has had no prior business. Upon consummation
of the Merger, Columbia Sub's separate corporate existence will cease.
1
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
This Proxy Statement relates to a Special Meeting of Stockholders of Value
Health (the "Special Meeting"). At the Special Meeting, the stockholders of
Value Health will consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger dated as of April 14, 1997 (the "Amended and
Restated Merger Agreement") among Columbia, Columbia Sub and Value Health,
pursuant to which Columbia Sub would be merged with and into Value Health (the
"Merger").
The Special Meeting will be held on , , 1997, at 10:00 a.m., local
time, at the Avon Old Farms Hotel, Routes 10 and 44, Avon, Connecticut. The
record date for stockholders of Value Health entitled to notice of and to vote
at the Special Meeting is as of the close of business on April 28, 1997. Voting
rights for Value Health are vested in the holders of the Common Stock, no par
value, of Value Health ("Value Health Common Stock"), with each share of Value
Health Common Stock entitled to one vote on each matter coming before the
stockholders. As of , 1997 there were shares of Value Health Common
Stock outstanding, held by approximately holders of record.
VOTE REQUIRED
The favorable vote of the holders of a majority of the outstanding shares of
Value Health Common Stock is required for the approval and adoption of the
Amended and Restated Merger Agreement and the transactions contemplated
thereby. Any Value Health stockholder present (including broker non-votes) at
the Special Meeting, but who abstains from voting, shall be counted for
purposes of determining whether a quorum exists. With respect to the approval
and adoption of the Amended and Restated Merger Agreement and the transactions
contemplated thereby, an abstention (or broker non-vote) has the same effect as
a vote against the proposal. As of , 1997, directors, executive officers
and affiliates of Value Health were beneficial owners of approximately % of
the outstanding shares of Value Health Common Stock (excluding shares
which may be acquired upon exercise of options or other rights which are
exercisable within 60 days of , 1997).
THE MERGER
Conversion of Securities. Upon consummation of the transactions contemplated
by the Merger Agreement, (a) Columbia Sub will be merged with and into Value
Health and (b) each issued and outstanding share of Value Health Common Stock
(other than shares held by stockholders, if any, who properly exercise their
dissenters' rights of appraisal under Delaware law) will be converted into the
right to receive $20.50 in cash (the "Merger Consideration").
Recommendation of the Board of Directors. The Board of Directors of Value
Health has unanimously approved the Amended and Restated Merger Agreement and
unanimously recommends a vote FOR approval and adoption of the Amended and
Restated Merger Agreement by the stockholders of Value Health. The Board of
Directors of Value Health believes that the terms of the Merger are fair to and
in the best interests of Value Health and its stockholders. For a discussion of
the factors considered by the Board of Directors in reaching its decision, see
"The Merger--Reasons for the Merger; Recommendation of the Board of Directors."
Opinion of Financial Advisor. Value Health retained Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") to act as its exclusive financial
advisor in connection with a possible business combination. On April 14, 1997,
Merrill Lynch rendered to the Value Health Board its written opinion (the
"Merrill Lynch Opinion") that, as of such date and based upon and subject to
the factors and assumptions set forth therein, the Merger Consideration was
fair to the holders of Value Health Common Stock (other than Columbia and its
affiliates) from a financial point of view. The full text of the Merrill Lynch
Opinion, which sets forth the assumptions made, matters considered, and
qualifications and limitations on the review undertaken by Merrill Lynch, is
attached as Appendix B to this Proxy Statement, is incorporated herein by
reference and should be read in its entirety. See "The Merger--Opinion of
Financial Advisor."
2
<PAGE>
Interests of Certain Persons in the Merger. In considering the recommendation
of the Board of Directors of Value Health with respect to the Amended and
Restated Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain members of the management of Value
Health and the Board of Directors of Value Health have certain interests in the
Merger that are in addition to the interests of stockholders of Value Health
generally (including, without limitation, benefits up to approximately $24.8
million in the aggregate which will be received by the top six executive
officers of Value Health under change in control provisions contained in
various agreements and benefit plans, the adoption of consulting and
noncompetition agreements, severance arrangements and the acceleration of stock
options). See "The Merger--Interests of Certain Persons in the Merger" and "The
Amended and Restated Merger Agreement--Indemnification and Insurance."
Conditions to the Merger. The obligations of Columbia and Value Health to
consummate the Merger are subject to the satisfaction of certain conditions,
including, among others, (i) obtaining Value Health stockholder approval, (ii)
the absence of any injunction prohibiting consummation of the Merger, and (iii)
the receipt of all consents, authorizations, orders and approvals under
insurance holding company or similar statutes regulating managed care or
insurance organizations. The obligations of each of Value Health and Columbia
to effect the Merger are also subject to the satisfaction or waiver by the
other party prior to the Effective Date of the condition that the other party
shall have performed in all material respects all obligations required to be
performed by it under the Amended and Restated Merger Agreement and the
representations and warranties of the other party and its subsidiaries set
forth in the Amended and Restated Merger Agreement shall be true in all
material respects as of the Effective Date. The obligation of Columbia to
effect the Merger is also subject to the condition that, from the date of the
Amended and Restated Merger Agreement through the Effective Date, there shall
not have occurred any change, individually or together with other changes, that
has had, or would reasonably be expected to have, a material adverse change in
the financial condition, business, results of operations or prospects of Value
Health and its subsidiaries, taken as a whole. See "The Amended and Restated
Merger Agreement--Conditions."
Effective Date of the Merger. The Merger will become effective upon the
filing of a Certificate of Merger with the Secretary of State of the State of
Delaware, which certificate will be filed as promptly as practicable after
Value Health stockholder approval has been obtained and all other conditions to
the Merger have been satisfied or waived. Subject to the satisfaction (or
waiver) of the other conditions to the obligations of Columbia and Value Health
to consummate the Merger, it is currently expected that the Merger will be
consummated on , 1997 or as soon thereafter as such conditions are
satisfied. The date when the Merger will become effective is referred to in
this Proxy Statement as the "Effective Date."
Exchange of Value Health Stock Certificates. Upon consummation of the Merger,
each holder of a certificate or certificates representing shares of Value
Health Common Stock ("Certificates") outstanding immediately prior to the
Effective Date will, upon the surrender thereof (duly endorsed, if required) to
a designated exchange agent (the "Payment Agent"), be entitled to receive the
Merger Consideration. After the Effective Date, the Payment Agent will mail a
letter of transmittal with instructions to all holders of record of Value
Health Common Stock as of the Effective Date for use in surrendering their
Certificates in exchange for the Merger Consideration. Certificates should not
be surrendered until the letter of transmittal and instructions are received.
See "The Amended and Restated Merger Agreement--Exchange Procedures."
Dissenters' Rights. Under Delaware law, appraisal rights with respect to the
Merger may be available to stockholders of Value Health. Appraisal rights with
respect to the Merger are only available if such holders (i) neither vote for
approval of the Merger nor consent thereto in writing; and (ii) comply with the
other statutory requirements of the Delaware General Corporation Law, including
the requirement that any stockholder wishing to exercise such right must
deliver a written demand for appraisal to the Secretary of Value Health before
the vote is taken on the Amended and Restated Merger Agreement. See "Dissenting
Stockholders' Rights of Appraisal" and Appendix C to this Proxy Statement.
3
<PAGE>
Certain Federal Income Tax Consequences. The receipt of cash for shares of
Value Health Common Stock in the Merger or pursuant to the exercise of
dissenters' appraisal rights will be a taxable transaction for federal income
tax purposes and may also be a taxable transaction under applicable state,
local, foreign and other laws. See "The Merger--Certain Federal Income Tax
Consequences."
Accounting Treatment. The Merger will be accounted for as a purchase for
accounting and financial reporting purposes. See "The Merger--Accounting
Treatment."
Termination. The Amended and Restated Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Date, before or
after the approval by the stockholders of Value Health, in a number of
circumstances, which include, among others: (a) by the mutual consent of Value
Health and Columbia by action of their respective Boards of Directors; (b) by
action of the Board of Directors of either Value Health or Columbia if (i) the
Merger shall not have been consummated by August 31, 1997, provided that the
terminating party shall not have breached in any material respect its
obligations under the Amended and Restated Merger Agreement in any manner that
shall have proximately contributed to the failure to consummate the Merger,
(ii) the approval and adoption of the Amended and Restated Merger Agreement by
Value Health's stockholders shall not have been obtained at a stockholders'
meeting duly convened for such purpose (or any adjournment or postponement
thereof), or (iii) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the Amended and Restated
Merger Agreement which shall have become final and nonappealable (provided that
the terminating party used all reasonable efforts to remove such injunction,
order or decree); (c) by action of the Board of Directors of Value Health, if
(i) in the exercise of its good faith judgment as to its fiduciary duties to
its stockholders imposed by law, the Board of Directors of Value Health
determines that such termination is required by reason of an Alternative
Proposal (hereinafter defined) being made for Value Health, (ii) there has been
a breach by Columbia or Columbia Sub of any representation or warranty
contained in the Amended and Restated Merger Agreement which would have or
would be reasonably likely to have a material adverse effect on the business,
properties, assets, condition (financial or otherwise), liabilities or results
of operations of Columbia and its subsidiaries taken as a whole, or (iii) there
has been a material breach by Columbia of any covenant or agreement contained
in the Amended and Restated Merger Agreement which is not curable or, if
curable, is not cured within 30 days after written notice of such breach; or
(d) by action of the Board of Directors of Columbia, if (i) the Board of
Directors of Value Health shall have withdrawn or modified in a manner adverse
to Columbia its approval or recommendation of the Amended and Restated Merger
Agreement or the Merger or shall have recommended an Alternative Proposal to
Value Health stockholders, (ii) there has been a breach by Value Health of any
representation or warranty contained in the Amended and Restated Merger
Agreement which would have or would be reasonably likely to have a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), liabilities or results of operations of Value Health and its
subsidiaries taken as a whole, or (iii) there has been a material breach by
Value Health of any covenant or agreement contained in the Amended and Restated
Merger Agreement which is not curable or, if curable, is not cured within 30
days after written notice of such breach. See "The Amended and Restated Merger
Agreement--Termination."
Termination Fee. If (a) Value Health terminates the Amended and Restated
Merger Agreement because its Board of Directors, in the exercise of its good
faith judgment as to its fiduciary duties to its stockholders imposed by law,
determines that such termination is required by reason of an Alternative
Proposal being made for Value Health, (b) an Alternative Proposal is made and
the Amended and Restated Merger Agreement is terminated by either Value Health
or Columbia by reason of the stockholders of Value Health not approving the
Amended and Restated Merger Agreement at the Special Meeting, (c) Columbia
terminates the Amended and Restated Merger Agreement because the Board of
Directors of Value Health shall have withdrawn or modified in a manner
4
<PAGE>
adverse to Columbia its approval or recommendation of the Amended and Restated
Merger Agreement or the Merger or shall have recommended an Alternative
Proposal to Value Health stockholders, or (d) any person shall have made an
Alternative Proposal and thereafter the Amended and Restated Merger Agreement
is terminated for any reason other than those set forth in clauses (a), (b) or
(c) above, and within 12 months thereafter, any Alternative Proposal shall have
been consummated, then in any of these cases Value Health (or the successor
thereto) is required to pay a fee in cash of $45,000,000 to Columbia. See "The
Amended and Restated Merger Agreement--Termination Fee."
5
<PAGE>
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of Value Health Common Stock will consider
and vote upon a proposal to approve and adopt the Amended and Restated Merger
Agreement and the Adjournment Proposal. Value Health stockholders will also
consider and vote upon such other matters as may properly be brought before
the Special Meeting.
THE VALUE HEALTH BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDED AND
RESTATED MERGER AGREEMENT AND RECOMMENDS THAT VALUE HEALTH STOCKHOLDERS VOTE
FOR THE APPROVAL AND ADOPTION OF THE AMENDED AND RESTATED MERGER AGREEMENT AND
THE ADJOURNMENT PROPOSAL.
VOTE REQUIRED
The favorable vote of the holders of a majority of the outstanding shares of
Value Health Common Stock is required for the approval and adoption of the
Amended and Restated Merger Agreement. The favorable vote of holders of a
majority of the shares of Value Health Common Stock represented in person or
by a properly executed proxy is required to approve the Adjournment Proposal.
At , 1997, Value Health's directors, executive officers and affiliates
may be deemed to be beneficial owners of shares of Value Health Common
Stock (excluding shares which may be acquired upon exercise of options
and other rights which are exercisable within 60 days of , 1997), or
approximately % of the then outstanding shares of Value Health Common Stock.
The directors and executive officers of Value Health (beneficially owning %
of the then outstanding shares of Value Health Common Stock) have indicated
that they intend to vote their shares for approval and adoption of the Amended
and Restated Merger Agreement and the Adjournment Proposal.
Holders of Value Health Common Stock have the right to demand appraisal
rights in connection with the Merger and, subject to certain conditions
provided under the Delaware General Corporation Law, to receive payment for
the fair value of their shares. See "Dissenting Stockholder's Rights of
Appraisal" and Appendix C.
VOTING OF PROXIES
Shares of Value Health Common Stock represented by properly executed proxies
received at or prior to the Special Meeting will be voted at the Special
Meeting in the manner specified by the holders of such shares. Properly
executed proxies which do not contain voting instructions will be voted FOR
approval and adoption of the Amended and Restated Merger Agreement and
Adjournment Proposal. Any stockholder present in person or by proxy (including
broker non-votes) at the Special Meeting, but who abstains from voting, shall
be counted for purposes of determining whether a quorum exists. An abstention
(or broker non-vote) on the Amended and Restated Merger Agreement has the same
effect as a vote against the proposal. Abstention from voting on the
Adjournment Proposal will have the practical effect of voting against such
proposal since it is one less vote for approval. Broker non-votes on the
Adjournment Proposal will have no impact on such proposal since they are not
considered "shares present" for voting purposes.
If any other matters are properly presented at the Special Meeting for
consideration, the person or persons named in the form of proxy enclosed
herewith and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment, unless the proxy indicates otherwise.
Management of Value Health has no knowledge of any matters to be presented at
the Special Meeting other than those matters referred to and described herein.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person or otherwise revoking a proxy. Attendance at
the Special Meeting will not in and of itself constitute revocation of a
proxy. A stockholder may revoke a proxy at any time prior to its exercise by
delivering to Paul M. Finigan, Secretary of Value Health, 22 Waterville Road,
Avon, Connecticut 06001, a duly executed revocation or a proxy bearing a later
date or by voting in person at the Special Meeting.
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RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of Value Health Common Stock at the close of business
on April 28, 1997 will be entitled to receive notice of and to vote at the
Special Meeting. At , 1997, Value Health had outstanding shares of
Value Health Common Stock. A majority of the outstanding shares of Value
Health Common Stock entitled to vote must be represented in person or by proxy
at the Special Meeting in order for a quorum to be present at the Special
Meeting.
SOLICITATION OF PROXIES
Value Health will bear the cost of the solicitation of proxies from its
stockholders, except that Columbia and Value Health will share equally the
cost of printing and mailing this Proxy Statement. In addition to solicitation
by mail, the directors, officers and employees of Value Health may solicit
proxies from stockholders of Value Health by telephone or telegram or in
person. Such persons will not be additionally compensated, but will be
reimbursed for reasonable out-of-pocket expenses incurred in connection with
such solicitation. Arrangements will also be made with brokerage firms,
nominees, fiduciaries and other custodians, for the forwarding of solicitation
materials to the beneficial owners of shares held of record by such persons,
and Value Health will reimburse such persons for their reasonable out-of-
pocket expenses in connection therewith.
Georgeson & Company, Inc. will assist in the solicitation of proxies by
Value Health for a fee of approximately $6,500 plus reimbursement of
reasonable out-of-pocket expenses.
MISCELLANEOUS
Representatives of Coopers & Lybrand L.L.P., Value Health's independent
auditors, are expected to be present at the Special Meeting. Such
representatives will be afforded an opportunity to make a statement, if they
desire to do so, and are expected to be available to respond to appropriate
questions.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS
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THE MERGER
GENERAL
The Amended and Restated Merger Agreement provides for a business
combination between Columbia and Value Health in which a wholly owned
subsidiary of Columbia would be merged with and into Value Health and the
holders of Value Health Common Stock would be entitled to receive $20.50 in
cash (the "Merger Consideration") for each outstanding share of Value Health
Common Stock (other than shares held by stockholders, if any, who properly
exercise their dissenters' rights of appraisal under Delaware law). The
discussion in this Proxy Statement of the Merger and the description of the
Merger's principal terms are subject to and qualified in their entirety by
reference to the Amended and Restated Merger Agreement, a copy of which is
attached to this Proxy Statement as Appendix A and which is incorporated
herein by reference.
BACKGROUND OF THE MERGER
During the past three years, Value Health has evolved into a company focused
on four core businesses: pharmacy benefit management, mental health
management, workers' compensation management and disease management.
Currently, Value Health's pharmacy benefit management ("PBM") business,
conducted through its ValueRx, Inc. subsidiary ("ValueRx"), contributes a
majority of Value Health's revenues and operating profit.
Changes in the healthcare industry in recent years have resulted in
differences between the growth prospects of ValueRx and those of Value
Health's other businesses. Over the past three years, pharmaceutical companies
have completed acquisitions of three key players in the PBM industry, leaving
few significant consolidation opportunities remaining for ValueRx. In
addition, pricing pressures, in particular from these three vertically
integrated participants in the PBM industry, have compressed margins and
created investor concerns. Given the relative size of the PBM business within
Value Health, management believes these recent developments have adversely
affected the market value of the Value Health Common Stock.
To address the above and other concerns, the Board of Directors of Value
Health (the "Value Health Board") began in June 1996 to explore a range of
strategic alternatives, and in particular a plan to separate Value Health into
two companies by means of a tax-free spin-off distribution (the "Planned
Distribution") of all of the common stock of ValueRx to the holders of the
Value Health Common Stock. The Value Health Board also considered several
other alternatives which included (i) continuing to operate Value Health under
its current multi-product structure, (ii) merging ValueRx with one of its
major competitors and possibly issuing shares of the merged entity to the
public, (iii) growing Value Health's managed mental health business through
acquisitions or spinning-off this business and (iv) spinning-off Value
Health's disease management subsidiary, Value Health Sciences, Inc. The Value
Health Board rejected the first alternative of continuing to operate the
current business because this did not address the significant problem of the
undervaluation of the Value Health Common Stock. On a preliminary basis, Value
Health explored merging ValueRx with other PBMs, but was not able to find a
suitable merger partner. With respect to (iii) and (iv) above, the Value
Health Board rejected these alternatives in favor of the Planned Distribution
because the Value Health Board believed that its managed mental health and
disease management businesses, once separated from ValueRx's PBM business,
would be more highly valued.
Later in June 1996 and again in August 1996, Robert E. Patricelli, Chairman,
President and Chief Executive Officer of Value Health, met with Richard L.
Scott, Chairman and Chief Executive Officer of Columbia, to discuss
developments in the health care industry and various ways in which Value
Health and Columbia might work together, building on certain existing
customer-vendor relationships already in place between the two companies. Mr.
Patricelli and Mr. Scott had previously met through various health care
industry associations.
In mid-September 1996, Mr. Scott called Mr. Patricelli and expressed an
interest in exploring a possible combination of Value Health and Columbia. Mr.
Patricelli indicated to Mr. Scott that the Company was not for sale and that
the Company was in the planning stages of another strategic alternative. No
meetings or further discussions were scheduled at that time. On September 27,
1996 the Value Health Board continued its
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consideration of strategic options and asked management to prepare a final
recommendation with regard to the Planned Distribution. On October 7, 1996 the
Value Health Board approved a recommendation that the company proceed with a
tax-free spin-off of ValueRx, and the company publicly announced that plan on
October 9, 1996.
Under the Planned Distribution, the Value Health stockholders would have
held stock both in Value Health, which would not have had any ownership
interest in ValueRx, and in ValueRx. The Planned Distribution was intended to
enable the management teams at Value Health and ValueRx to better focus on the
profitable growth opportunities in their respective markets. The Value Health
Board believed that ValueRx would have been better positioned after the
Planned Distribution to capitalize on its clinical and financial independence
in an industry which has experienced significant vertical integration. The
Value Health Board further believed that the Planned Distribution would have
allowed investors to better evaluate the merits of ValueRx and the remaining
Value Health businesses, enhancing the likelihood that each would achieve
appropriate stock market recognition for its performance. Value Health
expected that the Planned Distribution, in part through an anticipated
expansion of the price/earnings multiple accorded to the non-PBM business,
would enhance its ability to acquire, through stock-for-stock transactions,
and to develop, specialty businesses based on health care provider networks
and practice management.
In late October and early November 1996, subsequent to the announcement of
the Planned Distribution, Value Health and Merrill Lynch, Value Health's
financial advisor, were contacted separately by Columbia and Columbia's
financial advisor and by MedPartners, Inc. ("MedPartners"), about the
possibility of a tax-free business combination in which the Value Health
stockholders would receive the acquiror's stock in exchange for their Value
Health Common Stock. As a result of these initial contacts, representatives of
Value Health requested that Columbia and MedPartners each submit by December
2, 1996 a written offer to the Value Health Board setting forth the
significant terms of a proposed transaction. Notwithstanding these initial
contacts and the subsequent discussions referred to below, Value Health and
ValueRx continued with their preparations for the Planned Distribution.
On December 2, 1996, Value Health received letters from both Columbia and
MedPartners proposing stock-for-stock merger transactions. Columbia proposed
an exchange ratio and collar mechanism that would have provided a value of
between approximately $21.50 and $22.50 per share of Value Health Common
Stock, based on the then current market value of the Common Stock, $.01 par
value, of Columbia ("Columbia Common Stock"), and MedPartners proposed a fixed
exchange ratio, without any collar mechanism, that would provide value of
approximately $21.50 per share of Value Health Common Stock, based on the then
current market value of MedPartners' common stock.
On December 3, 1996, the Value Health Board met to discuss, among other
things, the contacts and proposals by Columbia and MedPartners and the
implications of such contacts and proposals on the Planned Distribution. At
the conclusion of that meeting, Merrill Lynch was instructed to advise
Columbia that, if the Value Health Board were to decide that a sale of Value
Health were in the best interests of the Value Health stockholders, Columbia
would be the favored merger partner, but that it would have to increase the
consideration it was offering to a value of $25.00 per share of Value Health
Common Stock. Merrill Lynch was instructed to advise MedPartners that its
offer was inadequate and that Value Health was pursuing other discussions.
As a result of further contacts between representatives of Value Health and
representatives of Columbia and MedPartners, each of Columbia and MedPartners
submitted to Value Health revised written proposals in anticipation of a
December 13, 1996 meeting of the Value Health Board. MedPartners proposed a
stock-for-stock merger in which each share of Value Health Common Stock would
have been exchanged for MedPartners' common stock having a value of
approximately $26.00 per share of Value Health Common Stock, based on the then
current market value of MedPartners' common stock. MedPartners' proposal,
however, contained a number of contingencies, including a contingency as to
completion to its own satisfaction of additional due diligence investigation
of Value Health's business. Although MedPartners' offer did not contain a
collar mechanism, Value Health was orally advised that MedPartners might be
willing to consider a collar. The revised Columbia offer
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proposed a stock-for-stock merger transaction that, based on the then current
market value of the Columbia Common Stock, would have provided value of
approximately $22.75 per share of Value Health Common Stock.
Following the December 13, 1996 meeting of the Value Health Board,
representatives of Value Health and MedPartners scheduled due diligence
examinations of each company, which were completed during the week of December
16, 1996. Value Health also provided to MedPartners a form of merger agreement
that Value Health would consider signing if the Value Health Board were to
decide that a sale of Value Health were in the best interests of the Value
Health stockholders. Based on the relative valuations of the offers submitted,
Value Health advised Columbia that its offer was inadequate.
Soon thereafter, a third company contacted both Value Health and Merrill
Lynch and indicated an interest in entering into a business combination with
Value Health. This third company was given an opportunity to provide Value
Health with a specific proposal but did not pursue the matter and no proposal
was submitted.
At a meeting of the Value Health Board held on December 24, 1996, Mr.
Patricelli updated the Board on events that had transpired since the December
13 Value Health Board meeting, including indications that MedPartners was
continuing to raise contingencies, but that discussions were continuing.
On January 2, 1997, Mr. Scott called Mr. Patricelli to determine whether
Columbia would be given an opportunity to recommence discussions with Value
Health concerning a business combination. Mr. Patricelli indicated that price
was still the most significant issue, and Mr. Scott indicated a willingness to
increase the Columbia offer subject to the opportunity to conduct a due
diligence examination. On January 4, 1997, representatives of Columbia were
provided with the form of merger agreement that previously had been provided
to MedPartners, and from January 5 though January 7, 1997, Columbia conducted
its due diligence examination of Value Health.
On January 8 and 9, 1997, Value Health received revised proposals from both
Columbia and MedPartners. The revised Columbia offer proposed a stock-for-
stock merger transaction that would provide value of approximately $24.00 per
share of Value Health Common Stock, without contingencies, based on the then
current market value of the Columbia Common Stock. The revised offer of
MedPartners proposed a stock-for-stock merger transaction that would provide
value of approximately $23.50 per share of Value Health Common Stock, based on
the then current market value of MedPartners' common stock, and continued to
raise several contingencies which required resolution before entering into any
agreement. The Columbia offer letter was accompanied by a "markup" of the
merger agreement that had been delivered to Columbia by Value Health. The most
significant issues raised by Columbia in its markup related to the elimination
of a proposal that a collar mechanism be included, and the narrowing of
certain closing conditions and termination rights in favor of Columbia. The
revised offer from MedPartners was not accompanied by the requested comments
on the draft merger agreement that previously had been delivered to it by
Value Health.
At a meeting held on January 10, 1997, the Value Health Board considered the
proposals from both Columbia and MedPartners as well as the Planned
Distribution. The Value Health Board discussed with legal counsel the terms
and conditions proposed by Columbia in its "markup" of Value Health's merger
agreement and discussed with Merrill Lynch both Columbia's and MedPartners'
offers and Merrill Lynch's preliminary assessment of the comparison of the
Planned Distribution to the two offers. In addition, management reviewed with
the Value Health Board the risks and opportunities facing the Value Health
businesses in 1997. Based on these presentations and discussions, the general
sense of the Value Health Board was that a transaction providing consideration
approximately equal to that of the then current Columbia offer might be
preferable to the Planned Distribution. The Value Health Board instructed
management and Merrill Lynch to proceed with discussions with Columbia with a
view toward strengthening the economic and legal aspects of its proposal. The
Value Health Board chose the revised Columbia proposal over the revised
proposal of MedPartners because, among other things, (i) the Columbia proposal
offered a higher per share consideration based on the then current market
values of the proposed acquirors' common stocks, (ii) MedPartners continued to
raise the contingencies it had first
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raised more than four weeks earlier, (iii) Columbia had provided a markup of
Value Health's draft merger agreement that provided a reasonable basis for
negotiation of a definitive agreement and (iv) the Value Health Board
concluded that the Columbia Common Stock as consideration in a transaction had
a greater potential for appreciation, both pre- and post-acquisition, than did
MedPartners' common stock.
From January 11 through January 15, 1997, representatives of Value Health
and Columbia met to negotiate the terms of a merger agreement (the "Initial
Agreement"). At meetings held on January 14 and 15, 1997, the Value Health
Board was apprised of the status of the negotiations and, at the Value Health
Board meeting held on January 15, 1997, the Value Health Board approved the
Initial Agreement pursuant to which each share of Value Health Common Stock
would have been exchanged for 0.58 of a share of Columbia Common Stock (the
"Exchange Ratio") in a tax-free transaction intended to have been accounted
for as a pooling of interests (the "Initial Transaction"). On January 15,
1997, the last reported sale prices per share of the Value Health Common Stock
and the Columbia Common Stock on the New York Stock Exchange ("NYSE")
Composite Tape were $20.25 and $40.25, respectively. The Initial Agreement was
executed and delivered on the evening of January 15, 1997.
In the latter half of March 1997, several articles appeared in The Wall
Street Journal, The New York Times and other media reporting on a federal
investigation of Columbia's El Paso, Texas facilities and raising issues
regarding certain of Columbia's billing practices, physician arrangements and
hospital acquisition practices. By March 31, 1997, the price of the Columbia
Common Stock had fallen considerably from its price at the time the Initial
Agreement was executed -- $40.25 per share -- to a price of $33.63 per share.
Beginning on March 27, 1997, Columbia officials began to inquire informally of
Value Health management about the possibility of amending the Initial
Agreement to change the merger accounting from a pooling of interests to a
purchase transaction.
The Value Health Board met on March 31, 1997 to discuss these developments
and to consider its options under the Initial Agreement. At this meeting, the
Value Health Board directed management and legal counsel to undertake due
diligence regarding the matters apparently under investigation at Columbia
and, if the opportunity presented, to explore restructuring the transaction
under purchase accounting, including switching the consideration to cash. In
addition, the Value Health Board asked Merrill Lynch to consider whether it
could deliver an updated fairness opinion in light of recent events. Merrill
Lynch responded that it would need to undertake additional due diligence
before it could be in a position to advise the Value Health Board. Value
Health and its outside counsel then commenced the due diligence directed by
the Value Health Board.
Also during this period, MedPartners' investment banker informed Merrill
Lynch that MedPartners was interested in renewing its prior discussions with
Value Health. Merrill Lynch advised Value Health of these informal contacts,
and Value Health responded through Merrill Lynch that the Initial Agreement
specifically precluded such discussions and that Value Health intended to
strictly honor these provisions.
On the morning of April 10, 1997, Mr. Scott called Mr. Patricelli to propose
that the proposed merger be converted to purchase accounting so that Columbia
could undertake a significant share repurchase. That evening, Mr. Patricelli
met with Mr. Scott and proposed an improvement in the financial terms of the
transaction for Value Health stockholders and urged Mr. Scott to consider
either a cash transaction or a stock transaction with a financial collar to
provide downside protection. On April 11, 1997, Mr. Scott called Mr.
Patricelli to express a preference for a cash transaction, and proposed paying
$20.00 per share for each outstanding share of Value Health Common Stock.
After a period of negotiation, Mr. Patricelli and Mr. Scott ultimately agreed
that each would recommend to their respective Boards that Columbia acquire
Value Health for a price of $20.50 per share.
While this negotiation was being carried on, MedPartners' investment banker
suggested to Merrill Lynch that MedPartners might be prepared to deliver a
proposal to acquire the outstanding shares of Value Health Common Stock for a
fixed number of shares of MedPartners' common stock, having a then current
value of $23.50 per share of Value Health Common Stock, without any collar or
price protection.
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During the afternoon of April 11, 1997, the Value Health Board met to
discuss Columbia's proposed modifications to the Initial Transaction and also
discussed the possibility that MedPartners might propose a stock-for-stock
merger valued at approximately $23.50 per share of Value Health Common Stock.
At this meeting Merrill Lynch orally advised that, subject to updating due
diligence of Value Health, it anticipated that it could deliver an opinion
that the proposal by Columbia to pay $20.50 per share of Value Health Common
Stock was fair from a financial point of view to the Value Health
stockholders. The Value Health Board then authorized management to negotiate
definitive terms of an amended merger agreement with Columbia based on
Columbia's proposal to acquire the outstanding shares of Value Health Common
Stock for $20.50 per share (the "Amended Transaction"). From April 11 through
April 14, 1997, representatives of Value Health and Columbia negotiated the
final terms of the Amended Transaction.
In an unsolicited letter to the Value Health Board dated April 14, 1997,
MedPartners proposed to acquire Value Health in a merger transaction in which
each outstanding share of Value Health Common Stock outstanding would be
exchanged for 1.112 shares of MedPartners' common stock in a tax free
transaction accounted for as a pooling of interests, which would provide value
of approximately $23.50 per share of Value Health Common Stock, based on the
closing sale price per share of MedPartners' common stock on April 11, 1997 of
$21.13 (the "MedPartners April 14 Proposal"). Although MedPartners indicated
in its letter that it was prepared to sign a merger agreement in the same form
as the Initial Agreement, it conditioned the signing of a definitive agreement
on the negotiation of mutually acceptable terms, final approval of
MedPartners' Board of Directors and the completion of confirmatory due
diligence. The MedPartners April 14 Proposal did not contain any collar or
other price protection mechanism.
At a meeting held on April 14, 1997, the Value Health Board met to discuss
the MedPartners April 14 Proposal and was presented with a substantially final
draft of the Amended and Restated Merger Agreement reflecting the Amended
Transaction. At this meeting, Merrill Lynch delivered to the Value Health
Board its opinion as to the fairness of the Merger Consideration, from a
financial point of view, to the holders of the Value Health Common Stock. At
the meeting, the Value Health Board discussed, along with Merrill Lynch, their
concerns regarding the MedPartners April 14 Proposal, particularly the
difficulty with evaluating the value of the MedPartners April 14 Proposal in
light of its lack of a collar or other price protection and the current
volatility in the equity markets, as well as the execution risk of attempting
to reach a definitive agreement given the conditions of the MedPartners April
14 Proposal. It was further discussed that entering into the Amended and
Restated Merger Agreement would not preclude the Value Health Board from
subsequently considering and negotiating the terms of an unsolicited, bona
fide acquisition proposal. In light of all of the foregoing, the Value Health
Board determined that the Amended Transaction was more attractive than the
MedPartners April 14 Proposal. The Value Health Board then rejected the
MedPartners April 14 Proposal and gave final approval to the terms of the
Amended and Restated Merger Agreement. The Amended and Restated Merger
Agreement was executed and delivered on the evening of 14, 1997. See "--
Reasons for the Merger; Recommendation of the Board of Directors" for a
discussion of the factors considered by the Value Health Board in reaching its
decision.
Merrill Lynch provided advice to Value Health during the course of its
negotiations with respect to the evaluation of various proposed forms of
merger consideration. Merrill Lynch provided Value Health with financial
analyses and information substantially similar to the analyses and information
provided to the Value Health Board described under "--Opinion of Financial
Advisor."
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
For the reasons discussed under "--Background of the Merger," on October 7,
1996, the Value Health Board directed management of Value Health to proceed
with plans for the Planned Distribution. Subsequent to the announcement of the
Planned Distribution, as described under "--Background of the Merger, " the
Board
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had the opportunity to evaluate acquisition proposals from Columbia and
MedPartners and, without committing to a sale of Value Health, to explore
improvements in those offers and to evaluate those offers in light of the
Planned Distribution.
Prior to executing the Initial Agreement, the Value Health Board considered,
without assigning relative weights to, the following factors: (i) the terms and
conditions of the proposed Merger, including the consideration to be received
by the Value Health stockholders; (ii) the status, terms and conditions of
discussions concerning a possible business combination with MedPartners; (iii)
the financial condition, results of operations, business, market position,
prospects and strategic objectives of Value Health and ValueRx, both with and
without regard to the Planned Distribution; (iv) the financial condition,
results of operations, business, market position, prospects, management
strength and strategic objectives of Columbia; (v) the relative attractiveness
of the Columbia Common Stock and MedPartners' common stock as merger
consideration; (vi) the likelihood that, for federal income tax purposes, no
gain would have been recognized by Value Health stockholders with respect to
the Columbia Common Stock received in exchange for their Value Health Common
Stock; and (vii) the opinion of Merrill Lynch as to the fairness of the
Exchange Ratio, from a financial point of view, to the holders of the Value
Health Common Stock.
In considering the Amended Transaction, the Value Health Board proceeded on
the basis that it was contractually committed to the Initial Transaction and
sought to determine whether the Amended Transaction was an improvement over the
Initial Transaction. The Value Health Board also weighed the Amended
Transaction against the MedPartners April 14 Proposal.
The Value Health Board determined that the Amended Transaction provided
superior value to the Value Health stockholders, as compared with the Initial
Transaction, based on its consideration of, without assigning relative weights
to, the following factors: (i) the significant increase in value of the
consideration to be received by the Value Health stockholders under the Amended
Transaction based on the then current market value of the Columbia Common
Stock; (ii) the certainty of value provided by the cash consideration in the
Amended Transaction; (iii) the risk inherent in the fixed Exchange Ratio of the
Initial Transaction due to the market uncertainty stemming from the federal
investigation into certain business practices at Columbia's El Paso facilities
and the significant decline in the price of the Columbia Common Stock since
January 15, 1997; (iv) the volatility of the equity markets generally; and (v)
the opinion by Merrill Lynch as to the fairness of the Merger Consideration,
from a financial point of view, to the holders of Value Health Common Stock.
Merger Consideration. Under the Initial Transaction, each share of Value
Health Common Stock would have been exchanged for 0.58 of a share of Columbia
Common Stock, which had a market value of $17.84 per share of Value Health
Common Stock as of the close of business on April 11, 1997, the last full
trading day prior to the Value Health Board's approval of the Amended
Transaction. Under the Amended Transaction, Value Health stockholders would
receive $20.50 in cash for each share of Value Health Common Stock, or a
premium of 15% over the market value as of such date. The Value Health Board
considered the change in form and amount of the consideration offered by
Columbia to be favorable to its determination.
Market Uncertainty. Under the Initial Transaction, which did not have a
collar or price protection, Value Health stockholders would have received a
fixed number of shares of Columbia Common Stock. As a result of the significant
decline in the price of the Columbia Common Stock since January 15, 1997, the
value that each Value Health stockholder was to receive fell from $23.35 per
share as of the close of business on January 15, 1997 to $17.84 as of the close
of business on April 11, 1997. Under the Amended Transaction, each Value Health
stockholder will receive $20.50 for each share of Value Health Common Stock
regardless of any further decline or increase in the price of the Columbia
Common Stock. In considering a possible increase in the price of the Columbia
Common Stock, the Value Health Board noted the market uncertainty due to the
federal investigation into certain business practices at Columbia's El Paso
facilities, as well as the volatility of the equity markets generally. The
Value Health Board considered these interrelated factors as favorable to its
determination that the Amended Transaction was superior to the Initial
Transaction.
Fairness Opinion. The Value Health Board considered as favorable to its
determination the opinion of Merrill Lynch as to the fairness of the Merger
Consideration, from a financial point of view, to the holders of the Value
Health Common Stock. Important to the Value Health Board's determination was
that in delivering its
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opinion, Merrill Lynch considered both the Initial Transaction and the
MedPartners April 14 Proposal. The Board placed significant weight on the
Merrill Lynch opinion and on Merrill Lynch's presentation to the Value Health
Board.
The MedPartners April 14 Proposal. The Value Health Board also considered
the status, terms and conditions of discussions concerning a possible business
combination with MedPartners and determined that such status, terms and
conditions were supportive of the Value Health Board's recommendation to enter
into and recommend stockholder approval of the Amended and Restated Merger
Agreement. In this regard, the Value Health Board rejected the MedPartners
April 14 Proposal based primarily on the lack of a collar or other price
protection in light of the current volatility in the equity markets, the
existence of conditions to reaching a definitive agreement, such as completion
of confirmatory due diligence, and concerns over factors influencing the
timing of closing any such transaction such as regulatory filings and
approvals. The Value Health Board also placed significant weight on the fact
that the Amended and Restated Merger Agreement contains a "fiduciary out"
provision that permits Value Health to consider and negotiate the terms of an
unsolicited, bona fide acquisition proposal if the Value Health Board
determines such action to be necessary in order for the Board to comply with
its fiduciary duties to stockholders imposed by law.
THE BOARD OF DIRECTORS OF VALUE HEALTH UNANIMOUSLY RECOMMENDS THAT VALUE
HEALTH STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF THE AMENDED
AND RESTATED MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR
Value Health retained Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") to act as its exclusive financial advisor in connection with
a possible business combination. On April 14, 1997, Merrill Lynch rendered to
the Value Health Board its written opinion (the "Merrill Lynch Opinion") that,
as of such date and based upon and subject to the factors and assumptions set
forth therein, the Merger Consideration was fair to the holders of Value
Health Common Stock (other than Columbia and its affiliates) from a financial
point of view. In connection with the execution of the Initial Agreement,
Merrill Lynch provided a fairness opinion and made a presentation to the Value
Health Board with respect to the fairness to the holders of Value Health
Common Stock from a financial point of view of the Exchange Ratio provided in
the Initial Agreement. In connection with the rendering of such opinion and
presentation, Merrill Lynch performed various analyses some of which are only
applicable to a transaction in which stock consideration is delivered to the
shareholders of the acquired company. In preparing the Merrill Lynch Opinion,
based upon market, economic and other conditions as they existed on, and could
be evaluated as of, the date of the Merrill Lynch Opinion, Merrill Lynch
updated the material analyses relevant to a transaction in which cash
consideration is delivered to the shareholders of the acquired company. See
below for a summary of such analyses.
The full text of the Merrill Lynch Opinion, which sets forth the assumptions
made, matters considered, and qualifications and limitations on the review
undertaken by Merrill Lynch, is attached as Appendix B to this Proxy Statement
and is incorporated herein by reference. The summary of the Merrill Lynch
Opinion set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of such opinion. Stockholders of Value Health are
urged to read such opinion in its entirety. The Merrill Lynch Opinion was
provided to the Value Health Board for its information and is directed only to
the fairness from a financial point of view of the Merger Consideration to the
holders of Value Health Common Stock (other than Columbia and its affiliates),
does not address the merits of the underlying decision by Value Health to
engage in the Merger and does not constitute a recommendation to any Value
Health stockholder as to how such stockholder should vote on the proposed
Merger or any transaction related thereto.
The Merger Consideration was determined through negotiations between
Columbia and Value Health and was approved by the Value Health Board. Merrill
Lynch provided advice to Value Health during the course of such negotiations
with respect to the evaluation of possible amounts and forms of consideration
from a financial point of view. Merrill Lynch provided Value Health with
financial analyses and information substantially similar to the analyses and
information provided to the Value Health Board described below.
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The summary set forth below does not purport to be a complete description of
the analyses underlying the Merrill Lynch 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
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial analysis
or summary description. In arriving at its opinion, Merrill Lynch did not
attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, Merrill Lynch believes that its
analyses must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, Value Health or Columbia. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, estimates of the value of businesses
or securities do not purport to be appraisals or to reflect the prices at
which such businesses or securities might actually be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty. In
addition, as described above, the Merrill Lynch Opinion was among several
factors taken into consideration by the Value Health Board in making its
determination to approve the Amended and Restated Merger Agreement.
Consequently, the Merrill Lynch analyses described below should not be viewed
as determinative of the decision of the Value Health Board or Value Health's
management with respect to the fairness of the Merger Consideration.
In arriving at its opinion, Merrill Lynch, among other things, reviewed
certain publicly available business and financial information relating to each
of Value Health and Columbia, as well as the Amended and Restated Merger
Agreement. Merrill Lynch also reviewed certain other information, including
financial forecasts for Value Health provided to it by Value Health, and met
with members of senior management and representatives of Value Health to
discuss its business and prospectS. Merrill Lynch also reviewed a copy of a
letter dated April 14, 1997 to the Company from MedPartners, proposing to
acquire the Company in a stock for stock merger transaction.
Merrill Lynch also considered certain financial and stock market data for
Value Health and compared that data with similar data for other publicly held
companies that Merrill Lynch deemed to be comparable to Value Health. In
addition, Merrill Lynch considered the financial terms of certain other
business combination transactions which Merrill Lynch deemed relevant. Merrill
Lynch reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as it deemed
necessary, including its assessment of general economic, market and monetary
conditions.
In preparing its opinion, Merrill Lynch relied on the accuracy and
completeness of all information supplied or otherwise made available to
Merrill Lynch discussed with or reviewed by or for Merrill Lynch, or publicly
available and further relied on the assurance of management of Value Health
that they were not aware of any facts that would make such information
inaccurate or misleading. Merrill Lynch has not assumed any responsibility for
independently verifying such information, has not undertaken an independent
appraisal of the assets or liabilities of Value Health and has not conducted a
physical inspection of the properties or facilities of Value Health. With
respect to the financial forecast information furnished to or discussed with
Merrill Lynch by Value Health or its representatives, Merrill Lynch assumed
that they were reasonably prepared and reflected the best currently available
estimates and judgment of Value Health's management as to the expected future
financial performance of Value Health and that in all material respects they
will be realized in the amounts and times indicated thereby. Merrill Lynch
expressed no view as to such financial forecast information or the assumptions
on which they were based.
Merrill Lynch was not authorized by Value Health or the Value Health Board
to solicit, nor did it solicit third-party indications of interest for the
acquisition of all or any part of Value Health. Although Merrill Lynch
considered the April 14 Proposal in rendering the Merrill Lynch Opinion,
Merrill Lynch expressed no opinion as
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<PAGE>
to the relative value of the Merger Consideration as compared to the
consideration that may be proposed to be delivered pursuant to any other
transaction proposal which the Company has received or may receive, including
the April 14 Proposal.
The following is a brief summary of the material analyses presented by
Merrill Lynch to the Value Health Board of Directors in connection with the
rendering of the Merrill Lynch Opinion. The Merrill Lynch Opinion is
necessarily based upon market, economic and other conditions as they existed
on, and could be evaluated as of, the date of such opinion.
Valuation of Value Health
Discounted Cash Flow Analysis. Using a discounted cash flow methodology,
Merrill Lynch calculated a range of per share values for the Value Health
Common Stock based on projections prepared by management of Value Health, a
range of terminal earnings before interest, taxes, depreciation and
amortization ("EBITDA") multiples of 6.0x to 8.0x, a range of terminal net
income multiples of 13.0x to 15.0x and a range of discount rates of 13% to
17%. The summary reference range of per share values for the Value Health
Common Stock resulting from the analysis was $18.00 to $25.00 as compared to
the Merger Consideration of $20.50.
Comparable Acquisition Transaction Analysis. Merrill Lynch reviewed certain
publicly available information regarding 22 selected health care related
acquisitions including selected acquisitions of pharmacy benefit management
("PBM") companies, health maintenance organizations ("HMOs"), behavioral
health care companies and workers compensation management companies and
calculated historical and forward (to the extent of available information)
EBITDA multiples, earnings before interest and taxes ("EBIT") multiples and
net income multiples for such acquisitions. Among the three PBM company
acquisitions, MedPartners acquisition of Caremark International, Inc. (May
1996), Merck & Co., Inc.'s acquisition of Systemed, Inc. (April 1996) and
Value Health's acquisition of Diagnostek, Inc. (March 1995), the analysis
indicated transaction value as a multiple of (i) forward EBITDA ranging from
8.9x to 11.9x with a mean of 10.4x, (ii) forward EBIT ranging from 10.2x to
14.0x with a mean of 12.1x and (iii) forward net income ranging from 9.1x to
20.8x with a mean of 15.3x. Among the twelve HMO acquisitions, CIGNA
Corporation's proposed acquisition of Healthsource, Inc. (February 1997),
Sierra Health Services Incorporated's abandoned acquisition of Physicians
Corporation of America (November 1996), Foundation Health Corporation's
acquisition of Health Systems International (October 1996), Pacificare Health
Systems Inc.'s acquisition of FHP International Corporation (August 1996),
Aetna Inc.'s acquisition of U.S. Healthcare, Inc. (April 1996), United
Healthcare Corp.'s acquisition of Healthwise of America, Inc. (February 1996),
WellPoint Health Networks Inc.'s abandoned acquisition of Health Systems
International Incorporated (April 1995), United HealthCare Corp.'s acquisition
of GenCare Health Systems, Inc. (September 1994), Foundation Health's
acquisition of Intergroup Healthcare Corporation (July 1994), United
HealthCare Corp.'s acquisition of Ramsay HMO Inc. (February 1994), FHP
International's acquisition of TakeCare, Inc. (January 1994) and United
HealthCare's acquisition of HMO America Inc. (May 1993), the analysis
indicated, excluding multiples from CIGNA's acquisition of Healthsource and
Foundation Health's acquisition of Health Services International from the
calculations of mean multiples, offer value as a multiple of (i) last twelve
months ("LTM") earnings per share ("EPS") ranging from 13.0x to 52.2x with a
mean of 29.6x and (ii) forward EPS ranging from 10.9x to 34.0 with a mean of
22.1x. Among the five behavioral health care company acquisitions, Foundation
Health Corp.'s acquisition of Managed Health Network Inc. (January 1996),
Magellan Health Services, Inc.'s acquisition of Green Spring Health Services
Inc. (October 1995), Kohlberg Kravis Roberts & Co.'s acquisition of Merit
Behavioral Care Corporation (July 1995), Value Health's acquisition of
Preferred Health Care Limited (September 1993) and Medco Containment Services
Inc.'s acquisition of American Biodyne, Inc., the analysis indicated offer
value as a multiple of LTM net income ranging from 26.5x to 45.9x with a mean
of 37.0x and transaction value as a multiple of (i) LTM EBITDA ranging from
8.5x to 19.1x with a mean of 13.9x and (ii) LTM EBIT ranging from 9.3x to
24.5x with a mean of 17.9x. Among the selected comparable workers compensation
management company acquisitions, Value Health's acquisitions of MedView
Services, Incorporated ("MedView") and Community Care Network, Inc. ("CCN"),
only the MedView acquisition had available information to calculate multiples
and the analyses indicated transaction value as a multiple of (i) LTM EBITDA
was 8.7x and (ii) LTM EBIT was 11.7x. Merrill
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Lynch placed particular emphasis on forward EBITDA, EBIT and net income
multiples of comparable PBM companies and noted that certain acquisition
transactions involving pharmaceutical company acquisitions of PBM companies
are not comparable to the Merger because in such transactions the acquiror,
unlike Value Health, could integrate its business such that it could
potentially increase the sale of certain pharmaceutical products thereby
enabling the acquiror to place a higher valuation on such transactions than a
buyer without such opportunities. Based on its comparison of such multiples,
Merrill Lynch calculated a summary reference range of per share values of the
Value Health Common Stock of $22.00 to $28.00 as compared to the Merger
Consideration of $20.50. Merrill Lynch noted, however, that the trading
multiples for the one PBM transaction with cash consideration (Merck's
acquisition of Systemed) were significantly lower than the multiples from
which the $22.00 to $28.00 summary reference range was derived and the
multiples represented by the Merger.
No company utilized in the comparable transaction analysis was identical to
Value Health. Accordingly, an analysis of the results of this comparison is
not purely mathematical; rather, it involves complex considerations and
judgments primarily concerning differences in historical and projected
financial, operating and trading characteristics of the companies involved in
such other transactions and the circumstances surrounding such transactions.
Break-Up Analysis. Merrill Lynch calculated ranges of estimated values for
Value Health's business segments, ValueRx, Value Behavioral Health,
CCN/Medview and Value Health Sciences, using discounted cash flow analyses,
comparable acquisition transaction analyses and comparable public trading
analyses for each business segment and assuming tax liabilities that would be
incurred upon the sale of all of the business segments other than ValueRx.
Based on such calculations, Merrill Lynch calculated a summary reference range
of hypothetical equity values per share for the Value Health Common Stock of
$18.50 to $24.00 as compared to the Merger Consideration of $20.50.
Spin-off/Restructuring Analysis. Merrill Lynch compared the hypothetical
value of Value Health after giving effect to the Planned Distribution,
including a spin-off of ValueRx and a restructuring of Value Health. Merrill
Lynch's analysis of Value Health's hypothetical value emphasized calculations
and comparisons of forward price/earnings multiples, estimated long-term
growth rates and the relationship between such multiples and growth rates.
Merrill Lynch compared ValueRx to two selected PBM companies, four selected
institutional pharmacy management companies, and two preferred provider
organizations/third party administrators ("PPO/TPAs") and compared Value
Health excluding ValueRx to three behavioral care providers, 12 HMOs and two
PPO/TPAs. Merrill Lynch calculated summary reference ranges of current and
long-term hypothetical equity values per share for the Value Health Common
Stock of $16.00 to $21.00 and $17.00 to $23.00, respectively, as compared to
the Merger Consideration of $20.50.
Pursuant to a letter agreement between Value Health and Merrill Lynch, Value
Health agreed to pay Merrill Lynch (i) $500,000 upon Value Health's execution
of the Initial Agreement and (ii) an additional fee in an amount equal to 0.6%
of the aggregate purchase price paid in the Merger or certain other business
combinations involving Value Health, payable upon the closing of the Merger or
such other business combination, provided that any fee paid to Merrill Lynch
pursuant to clause (i) will be deducted from any fee to which Merrill Lynch is
entitled pursuant to clause (ii). Upon the consummation of the Merger, Merrill
Lynch will be entitled to the fees described in the preceding sentence in the
aggregate amount of approximately $8 million. Value Health also agreed to
reimburse Merrill Lynch for its reasonable out-of-pocket expenses, including
certain reasonable fees and disbursements of its legal counsel. Additionally,
Value Health agreed to indemnify Merrill Lynch and certain related persons for
certain liabilities related to or arising out of its engagement, including
liabilities under the federal securities laws.
Value Health interviewed several financial advisors and retained Merrill
Lynch based upon Merrill Lynch's experience and expertise. Merrill Lynch is an
internationally recognized investment banking and advisory firm. Merrill
Lynch, as part of its investment banking business, is continuously engaged in
the valuation of businesses
17
<PAGE>
and securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Merrill Lynch has, in the past, provided financial advisory and/or
financing services to Value Health and/or Columbia and may continue to do so
and has received, and may receive, fees for the rendering of such services. In
the ordinary course of its business, Merrill Lynch and its affiliates may
actively trade the debt and equity securities of Value Health and Columbia
(and anticipate trading after the Merger in the securities of Columbia) for
their own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors of Value Health
with respect to the Amended and Restated Merger Agreement and the transactions
contemplated thereby, stockholders should be aware that certain members of the
management of Value Health and the Board of Directors of Value Health have
certain interests in the Merger that are in addition to the interests of
stockholders of Value Health generally (including, without limitation,
benefits up to approximately $24.8 million in the aggregate which will be
received by the top six executive officers of Value Health under change in
control provisions contained in various agreements and benefit plans, the
adoption of consulting and noncompetition agreements, severance arrangements
and the acceleration of stock options as described below). Described below are
certain of such interests in the Merger of the executive officers and
directors of Value Health.
Employment Agreements. Value Health's executive officers have pre-existing
employment agreements that generally provide that if, within 24 months
following the closing of a "Strategic Transaction," (a) the executive officer
is terminated without cause or (b) the executive officer terminates his
employment due to either a material reduction in responsibility, authority or
compensation, or a requirement that the executive relocate, then the executive
officer is entitled to receive, depending on the executive involved, a lump-
sum payment equal to either three times or two and one-half times the sum of
the executive officer's base compensation and annual performance bonus at the
target level for the year in which such termination occurs. If his employment
is terminated within 24 months following the Merger, each of Messrs.
Patricelli (Chairman, President and Chief Executive Officer of Value Health),
Shulman (President of Value Health's Pharmacy & Disease Management Group),
Buncher (President of Value Health's Health Plans Group), Finigan (Senior Vice
President, General Counsel and Secretary of Value Health), Wurzer (Senior Vice
President, Treasurer and Chief Financial Officer of Value Health) and Goss
(Senior Vice President for Strategy and Development of Value Health) would be
entitled to receive severance payments of $4,095,000, $2,205,000, $1,837,000,
$875,000, $840,000 and $840,000, respectively. In addition, in the event of a
termination or constructive termination of employment as described above, the
executive officer is entitled to continue to receive the same health benefits
for up to one year following termination of employment. In the event any
executive officer is asked to continue employment with Value Health after the
Merger, the severance payments indicated above will be paid as a signing bonus
upon that individual's execution of a one-year employment agreement and an
appropriate noncompetition agreement reasonably satisfactory to Columbia and
such executive officer. In addition to the foregoing, Messrs. Finigan, Wurzer
and Goss are entitled, pursuant to the terms of their employment agreements,
to receive transaction bonuses of $1,500,000, $1,500,000 and $1,000,000,
respectively, upon consummation of a Strategic Transaction. These transaction
bonuses initially were approved in connection with the Planned Distribution,
and, because the Merger also would constitute a "Strategic Transaction," would
be payable upon completion of the Merger.
Stock Option Plans. Upon consummation of the Merger, all options (the "Value
Health Options") to purchase Value Health Common Stock outstanding as of the
Effective Date under any Value Health stock option plan (collectively, the
"Value Health Stock Option Plans"), whether or not then exercisable, will be
assumed by Columbia and converted into and become a right with respect to
Columbia Common Stock. See "The Merger Agreement--The Merger." If the
employment of any of the executive officers of Value Health is terminated
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within 24 months following the Merger, pursuant to the terms of their
respective employment agreements, all unvested Value Health Options will
immediately become vested and exercisable. The following table sets forth,
with respect to each of the executive officers of Value Health, the number of
vested Value Health Options and the number of unvested Value Health Options,
the vesting of which would be accelerated if such executive officer's
employment with Value Health were terminated within 24 months following the
Merger. Each of the options listed below has an exercise price of $18.375 per
share of Value Health Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF VESTED UNVESTED VALUE
NAME VALUE HEALTH OPTIONS HEALTH OPTIONS
---- -------------------- --------------
<S> <C> <C>
Robert E. Patricelli........................ 107,500 317,300
Steven J. Shulman........................... 35,250 305,500
James E. Buncher............................ -- 200,000
Paul M. Finigan............................. 5,000 136,167
David M. Wurzer............................. 4,500 126,667
William J. Goss............................. -- 155,000
</TABLE>
Consulting and Non-Competition Agreements. Value Health has entered into
Consulting and Non-Competition Agreements with Robert E. Patricelli, Chairman,
President and Chief Executive Officer of Value Health, and Steven J. Shulman,
President, Pharmacy & Disease Management Group of Value Health, effective as
of the Effective Date, pursuant to which each of Messrs. Patricelli and
Shulman have agreed to provide certain consulting services to Value Health for
a period of one year and have agreed to refrain from competing with the
business of Value Health for a period of three years after the Effective Date.
Under such agreements, Value Health has agreed to pay Messrs. Patricelli and
Shulman $4,500,000 and $3,000,000, respectively.
Tax Gross-Up. Under Sections 280G and 4999 of the Code, certain payments and
benefits provided to Value Health employees under the plans and agreements
described above may not be fully deductible by Value Health, and such payments
and benefits may be subject to a 20% excise tax payable by the recipient. The
employment agreements referred to above generally provide that if an excise
tax is imposed on a covered employee on any of these amounts, the employee
will be provided a gross-up payment to permit the employee to receive a net
amount equal to what would have been received had the excise tax not been
imposed. Should such sections of the Code apply, certain of the payments and
benefits described above may not be fully deductible by Value Health and the
gross-up payments would become payable and may also be nondeductible.
Indemnification and Insurance. As provided in the Amended and Restated
Merger Agreement, Columbia is required to indemnify, defend and hold harmless
officers, directors and employees of Value Health and its subsidiaries (the
"Indemnified Parties") from and against all losses, expenses, claims, damages
or liabilities arising out of the transactions contemplated by the Amended and
Restated Merger Agreement to the fullest extent permitted or required under
applicable law, including without limitation the advancement of expenses.
Columbia has agreed that all rights to indemnification existing in favor of
the directors, officers or employees of Value Health as provided in Value
Health's certificate of incorporation or bylaws, with respect to matters
occurring through the Effective Date, shall survive the Merger and continue in
full force and effect for a period of not less than six years from the
Effective Date. In addition, for a period of three years after the Effective
Date and subject to certain limitations, Columbia is obligated to maintain in
effect policies of directors' and officers' liability insurance that are
substantially no less advantageous to the Indemnified Parties than the
policies presently maintained by Value Health. See "The Amended and Restored
Merger Agreement--Indemnification and Insurance."
COLUMBIA'S SOURCE OF FUNDS
The total amount of funds necessary to consummate the Merger and pay related
expenses is expected to be approximately $1.14 billion (based upon the
54,632,577 shares of Value Health Common Stock outstanding as of March 31,
1997 and an estimate of $20 million for the aggregate costs and expenses that
will be incurred in
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connection with the Amended and Restated Merger Agreement and the transactions
contemplated thereby). Columbia expects to obtain such funds through a
combination of additional borrowings under its existing commercial paper
program and borrowings under its existing revolving credit facilities (the
"Credit Facilities") by and among Columbia and several banks and other
financial institutions pursuant to which Chemical Bank acts as Agent and CAF
Loan Agent (as defined in the Credit Facilities). The Credit Facilities
consist of a $2.0 billion five-year revolving credit agreement and a $2.0
billion 364-day revolving credit agreement. As of December 31, 1996, Columbia
had approximately $1.7 billion of credit available under the Credit
Facilities. Interest is payable generally at either LIBOR plus .115% to .35%
(depending on Columbia's credit rating), the prime lending rate or a
competitive bid rate. The Credit Facilities contain customary covenants which
include (i) limitations on additional debt, (ii) limitations on sales of
assets, mergers and changes of ownership and (iii) maintenance of certain
interest coverage ratios.
CERTAIN OTHER EFFECTS OF THE MERGER
If the Merger is consummated, the holders of Value Health Common Stock will
not have an opportunity to continue their equity interest in Value Health as
an ongoing corporation and therefore will not share in future earnings or
growth, if any, of Value Health. In addition, if the Merger is consummated,
public trading of the Value Health Common Stock will cease to be quoted on the
NYSE.
ACCOUNTING TREATMENT
The Merger will be accounted for by Columbia as a "purchase" for accounting
and financial reporting purposes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for shares of Value Health Common Stock in the Merger or
pursuant to the exercise of dissenters' appraisal rights will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign or other tax laws.
Generally, a stockholder will recognize gain or loss for such purposes equal
to the difference between the cash received and such stockholder's adjusted
tax basis for the shares of Value Health Common Stock. For federal income tax
purposes, such gain or loss will be a capital gain or loss if the shares of
Value Health Common Stock are a capital asset in the hands of the stockholder,
and a long-term capital gain or loss if the shares of Value Health Common
Stock are a capital asset in the hands of the stockholder and the stockholder
has held the Value Health Common Stock for more than one year, as of the
Effective Date. There are limitations on the deductibility of capital losses.
The receipt of cash by a stockholder pursuant to the Merger (or exercise of
dissenter's rights of appraisal) may be subject to backup withholding at the
rate of 31% unless the stockholder (i) is a corporation or comes within
certain other exempt categories, or (ii) provides a certified taxpayer
identification number on Form W-9 and otherwise complies with the backup
withholding rules. Backup withholding is not an additional tax; any amounts so
withheld may be credited against the federal income tax liability of the
stockholder subject to the withholding.
The summary of tax consequences set forth above is for general information
only. The tax treatment of each stockholder will depend in part upon his or
her particular situation. Special tax consequences not described herein may be
applicable to particular classes of taxpayers, such as financial institutions,
tax-exempt organizations, broker-dealers, persons who are not citizens or
residents of the United States and stockholders who acquired the shares of
Value Health Common Stock through the exercise of Value Health Options (as
defined below) or otherwise as compensation. ALL STOCKHOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO
THEM, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND FOREIGN
LAWS.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger cannot be consummated until notifications
have been given and certain information has been furnished to the FTC and the
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Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting-period requirements have been satisfied. Columbia and Value
Health each filed notification and report forms under the HSR Act with the FTC
and the Antitrust Division on January 31, 1997. The required waiting period
under the HSR Act has expired. At any time before or after consummation of the
Merger, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of Columbia or Value Health. At any time
before or after the Effective Date, and notwithstanding that the HSR Act
waiting period has expired, any state could take such action under the
antitrust laws as it deems necessary or desirable. Such action could include
seeking to enjoin the consummation of the Merger or seeking divestiture of
Value Health or businesses of Columbia or Value Health by Columbia. Private
parties may also seek to take legal action under the antitrust laws under
certain circumstances.
Value Health is the direct parent of Value Health Reinsurance, Inc. ("Value
Health Re"), and Value Health Re is the direct parent of Wellington Insurance
Company ("Wellington"). Both Value Health Re and Wellington are domestic
insurers domiciled in the State of Arizona. Section 20-481.02 of the Arizona
Revised Statutes (the "Arizona Code") requires approval by the director (the
"Director") of the Arizona Department of Insurance (the "Department") of the
indirect acquisition of Value Health Re and Wellington by Columbia pursuant to
the Merger. On February 4, 1997, Columbia made a preliminary filing of a Form
A with the Director in accordance with the Arizona Code. On April 18, 1997,
Columbia filed Amendment No. 1 to its Form A (the "Arizona Amendment") with
the Department. The Arizona Amendment amended the preliminary Form A to, among
other things, reflect the terms of the Amended and Restated Merger Agreement.
Under Section 20-481.07 of the Arizona Code, the Director is required to hold
a public hearing on the Merger within thirty days of the filing of a final
Form A (but not prior to twenty days after such filing). The Department has
advised Columbia that it will not schedule a hearing date until after it has
received a copy of the final Proxy Statement.
Although domiciled in the State of Arizona, Wellington has written an
average of more gross premiums in the State of California than in the State of
Arizona over the past three fiscal years, and such gross premiums constitute
33% or more of Wellington's total gross premiums written everywhere in the
United States for such three year period. As a result, Wellington is deemed to
be a "commercially domiciled insurer" in the State of California pursuant to
Section 1215.13 of the California Insurance Code (the "California Code"), and
is therefore required to comply with the provisions of the California Code.
Section 1215.2 of the California Code requires approval by the California
Commissioner of Insurance (the "Commissioner") of the indirect acquisition of
Wellington by Columbia pursuant to the Merger. Accordingly, on April 8, 1997
Columbia filed a Form A with the California Department of Insurance pursuant
to the California Code. On April , 1997, Columbia filed Amendment No. 1 to
its Form A (the "California Amendment") with the Commissioner. The California
Amendment amended the Form A to, among other things, reflect the terms of the
Amended and Restated Merger Agreement. The information required to be
disclosed in the California Form A is substantially the same as the
information required to be disclosed in the Arizona Form A. Pursuant to
Section 1215.2(d) of the California Code, the Commissioner must approve or
disapprove the Merger within sixty days of receipt of a substantially
completed Form A. If the Commissioner does not approve the Merger but fails to
disapprove the Merger within such sixty day period, the Merger may proceed.
Value Health is the indirect parent of Value Behavioral Health of
California, Inc. ("VBH-CA") and Value HealthPlan of California, Inc. ("VHP").
Both VBH-CA and VHP are licensed to provide or arrange for the provision of
certain health care services pursuant to provisions of the California Health
Care Service Plan Act (the "Act") and the regulations promulgated thereunder
(the "Regulations"), and are subject to regulation thereunder by the State of
California Department of Corporations (the "DOC"). The DOC has informed VBH-CA
and VHP that each of them is required to obtain the approval of the DOC prior
to the indirect acquisition of VBH-CA and VHP by Columbia pursuant to the
Merger. Without accepting the DOC's position, on April 18, 1997, Value Health
caused VBH-CA and VHP to submit to the DOC the requested filings seeking DOC
approval. The Act requires the DOC to act on such filings on or before May 18,
1997.
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THE AMENDED AND RESTATED MERGER AGREEMENT
The following is a brief summary of certain provisions of the Amended and
Restated Merger Agreement, a copy of which is attached as Appendix A to this
Proxy Statement and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Amended and
Restated Merger Agreement.
THE MERGER
Pursuant to the Amended and Restated Merger Agreement, subject to the terms
and conditions thereof, as of the Effective Date (as defined below), Columbia
Sub will be merged with and into Value Health and the separate existence of
Columbia Sub shall thereupon cease, and Value Health, as the corporation
surviving the Merger (the "Surviving Corporation"), shall by virtue of the
Merger continue its existence under the laws of the State of Delaware. The
Merger will have the effects specified in the Delaware General Corporation Law
(the "DGCL").
Upon the satisfaction or waiver of all conditions to the Merger, and
provided that the Amended and Restated Merger Agreement has not been
terminated or abandoned, Columbia and Value Health will cause a Certificate of
Merger to be executed, acknowledged and filed with the Secretary of State of
the State of Delaware as provided in Section 251 of the DGCL (the "Certificate
of Merger"). The date the Merger becomes effective is referred to herein as
the "Effective Date."
As a result of the Merger and without any action on the part of the holders
thereof, each share of Value Health Common Stock issued and outstanding as of
the Effective Date (other than shares held by holders of Value Health Common
Stock who perfect their statutory dissenters' rights) will be converted into
the right to receive $20.50 in cash and will cease to be outstanding and will
be cancelled and retired. Each holder of a certificate representing any such
shares of Value Health Common Stock (each, a "Certificate") will thereafter
cease to have any rights with respect to such shares of Value Health Common
Stock, except the right to receive without interest, the Merger Consideration
(as described in "--Payment Procedures") upon the surrender of such
Certificate. Each share of Value Health Common Stock held in Value Health's
treasury or held by Columbia or any of its subsidiaries as of the Effective
Date will cease to be outstanding and will be cancelled and retired without
payment of any consideration therefor.
By virtue of the Merger, all options (the "Value Health Options")
outstanding as of the Effective Date under any Value Health stock option plan
(collectively, the "Value Health Stock Option Plans"), whether or not then
exercisable, will be assumed by Columbia and converted into and become a right
with respect to Columbia Common Stock. Each Value Health Option assumed by
Columbia will be exercisable upon the same terms and conditions as under the
applicable Value Health Stock Option Plans and applicable option agreements
issued thereunder, and Columbia will assume the Value Health Stock Option
Plans for such purposes. Pursuant to the Amended and Restated Merger
Agreement, from and after the Effective Date, (i) each Value Health Option
assumed by Columbia may be exercised solely for Columbia Common Stock, (ii)
the number of shares of Columbia Common Stock subject to each Value Health
Option will be equal to the product (rounded to the nearest whole share) of
(A) the number of shares of Value Health Common Stock subject to the original
Value Health Option immediately prior to the Effective Date, times (B) the
Option Exchange Ratio (as defined below) and (iii) the per share exercise
price for each such Value Health Option will be equal to (A) the per share
exercise price for the share of Value Health Common Stock otherwise
purchasable pursuant to each Value Health Option immediately prior to the
Effective Date divided by (B) the Option Exchange Ratio (rounded up to the
nearest full cent). No Value Health Options will be accelerated by reason of
the Merger unless the agreement or arrangement under which it was granted or
by which it is otherwise governed specifically provides for such acceleration.
For purposes of the foregoing, the term "Option Exchange Ratio" means the
ratio of (x) $20.50 to (y) the average of the closing prices per share of the
Columbia Common Stock on the NYSE, as reported in The Wall Street Journal, for
each of the ten trading days immediately preceding the Effective Date.
PAYMENT PROCEDURES
Promptly after the Effective Date, a designated paying agent (the "Paying
Agent") will mail to each person who was, as of the Effective Date, a holder
of record of shares of Value Health Common Stock, a letter of
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transmittal to be used by such holders in forwarding their Certificates, and
instructions for effecting the surrender of the Certificates in exchange for
the Merger Consideration. Upon surrender to the Paying Agent of a Certificate
for cancellation, together with such letter of transmittal, the holder of such
Certificate will be entitled to receive the Merger Consideration which such
holder has the right to receive in respect of the Certificate surrendered (as
described below), and the Certificate so surrendered will be cancelled. VALUE
HEALTH STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A
LETTER OF TRANSMITTAL.
On or after the Effective Date, there will be no transfers on the transfer
books of Value Health of shares of Value Health Common Stock which were
outstanding immediately prior to the Effective Date.
Any portion of the aggregate cash Merger Consideration that is unclaimed by
the former stockholders of Value Health one year after the Effective Date will
be delivered to Columbia. Any former stockholders of Value Health who have not
theretofore complied with the exchange procedures in the Amended and Restated
Merger Agreement may thereafter look to Columbia only as general creditors for
payment of their Merger Consideration deliverable in respect of each share of
Value Health Common Stock such stockholder holds. Notwithstanding the
foregoing, none of Value Health, Columbia, the Paying Agent or any other
person will be liable to any former holder of shares of Value Health Common
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
No interest will be paid or accrued on the Merger Consideration payable upon
surrender of Certificates.
In the event that any Certificate has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Columbia, the
posting by such person of a bond in such reasonable amount as Columbia may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Paying Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration payable in respect
thereof.
REPRESENTATIONS AND WARRANTIES
The Amended and Restated Merger Agreement contains various customary
representations and warranties of the parties thereto. The Amended and
Restated Merger Agreement includes representations and warranties by Value
Health relating to, among other things: (a) the due organization, power and
standing and similar corporate matters; (b) its capital structure; (c)
subsidiaries of Value Health; (d) the authorization, execution, delivery and
enforceability of the Amended and Restated Merger Agreement; (e) conflicts
under charters or bylaws, violations of any instruments or law and required
consents or approvals; (f) certain documents filed by Value Health with the
Securities and Exchange Commission (the "Commission") and the accuracy of
information contained therein; (g) the absence of certain changes; (h)
litigation; (i) retirement and other employee benefit plans of Value Health;
(j) labor matters involving Value Health; (k) corporate action approving the
Amended and Restated Merger Agreement; (l) brokers' and finders' fees with
respect to the Merger; (m) compliance with applicable laws; (n) material
liabilities; (o) taxes and tax returns of Value Health; (p) material
agreements; (q) absence of material adverse changes; and (r) accounting
matters.
The Amended and Restated Merger Agreement includes representations and
warranties by Columbia relating to, among other things: (a) the due
organization, power and standing of Columbia and similar corporate matters;
(b) the authorization, execution, delivery and enforceability of the Amended
and Restated Merger Agreement; (c) conflicts under charter or bylaws,
violations of any instruments or law and required consents or approvals; (d)
certain documents filed by Columbia with the Commission and the accuracy of
information contained therein; (e) corporate action approving the Amended and
Restated Merger Agreement; (f) brokers' and finders' fees with respect to the
Merger; (g) absence of material adverse changes; and (h) the financial
capability of Columbia to consummate the Merger.
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CERTAIN COVENANTS
Value Health has agreed (and has agreed to cause its subsidiaries), among
other things, prior to the consummation of the Merger, unless Columbia agrees
in writing or as otherwise required or permitted by the Amended and Restated
Merger Agreement, (i) to conduct its operations according to its usual,
regular and ordinary course in substantially the same manner as theretofore
conducted, (ii) promptly to notify Columbia of any change or event that has
had, or could reasonably be expected to have, a material adverse effect on the
business, properties, assets, condition (financial or otherwise), liabilities
or results of operations of Value Health and its subsidiaries taken as a whole
and (iii) promptly to deliver to Columbia true and correct copies of any
report, statement or schedule filed with the Commission subsequent to April
14, 1997. In addition, Value Health has agreed that, among other things, prior
to the consummation of the Merger, unless Columbia agrees in writing or as
otherwise required or permitted by the Amended and Restated Merger Agreement,
it shall not (and shall cause its subsidiaries not to) (i) amend its
certificate of incorporation or bylaws, (ii) except pursuant to the exercise
of certain options, warrants, conversion and certain other contractual rights,
issue any shares of capital stock, effect any stock split or otherwise change
its capitalization as it existed on April 14, 1997, (iii) grant, confer or
award any option, warrant, conversion right or other right not existing on
April 14, 1997 to acquire shares of its capital stock, subject to certain
exceptions, (iv) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers, directors or
employees, except in accordance with pre-existing contractual provisions and
except for normal increases consistent with past practice, (v) adopt any new
employee benefit plan or amend any existing employee benefit plan in any
material respect, (vi) declare or pay any dividend to its stockholders or make
any other payment on its capital stock or (vii) sell, lease or otherwise
dispose of any of its assets, except in the ordinary course of business.
Columbia has agreed (and has agreed to cause its subsidiaries), among other
things, prior to the consummation of the Merger, unless Value Health agrees in
writing or as otherwise required or permitted by the Amended and Restated
Merger Agreement, (i) to conduct its operations in the usual, regular and
ordinary course in substantially the same manner as theretofore conducted
except where the failure to so act would not adversely affect Columbia's
ability to pay the aggregate Merger Consideration to the holders of Value
Health Common Stock, (ii) promptly to notify Value Health of any change or
event that has had, or could reasonably be expected to have, a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), liabilities or results of operations of Columbia and its
subsidiaries taken as a whole and (iii) promptly to deliver to Value Health
true and correct copies of any report, statement or schedule filed with the
Commission subsequent to April 14, 1997.
Both Value Health and Columbia have agreed to cooperate in the prompt
preparation and filing of certain documents under federal and state securities
laws and with applicable government entities.
NO SOLICITATION OF TRANSACTIONS
Value Health has agreed that it will not, and will direct and use its best
efforts to cause its officers and directors, employees, agents and
representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of
the assets or any equity securities of, Value Health or any of its significant
subsidiaries (any such proposal or offer being hereinafter referred to as an
"Alternative Proposal"), or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Alternative Proposal, or release any third party from
any obligations under any existing standstill agreement or arrangement
relating to any Alternative Proposal, or otherwise facilitate any effort or
attempt to make or implement an Alternative Proposal. Value Health has agreed
to cease immediately and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted prior to the date of
the Amended and Restated Merger Agreement with respect to any of the foregoing
and to take the necessary steps to inform the appropriate individuals or
entities of these obligations. Value Health has also agreed to notify Columbia
immediately if any such inquiries or proposals are received by, any such
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information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with it, provided that the Board of
Directors of Value Health may (i) furnish information to, or enter into
discussions or negotiations with, any person or entity that makes an
unsolicited bona fide proposal to acquire Value Health pursuant to a merger,
consolidation, share exchange, business combination, purchase of a substantial
portion of its assets or other similar transaction, if, and only to the extent
that, (a) the Board of Directors of Value Health determines in good faith that
such action is required for the Board of Directors to comply with its
fiduciary duties to stockholders imposed by law, (b) prior to furnishing such
information to, or entering into discussions or negotiations with, the other
person or entity, Value Health provides written notice to Columbia to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, the other person or entity and (c) Value Health keeps
Columbia promptly informed of the status and all material terms and conditions
of any such discussions or negotiations (including identities of parties) and,
if any such proposal or inquiry is in writing, furnishes a copy of such
proposal or inquiry to Columbia as soon as practicable after the receipt
thereof and (ii) to the extent applicable, comply with Rule 14e-2 promulgated
under the Securities Exchange Act of 1934, as amended, with regard to an
Alternative Proposal.
INDEMNIFICATION AND INSURANCE
As provided in the Amended and Restated Merger Agreement, Columbia is
required to indemnify, defend and hold harmless the officers, directors and
employees of Value Health and its subsidiaries (the "Indemnified Parties")
from and against all losses, expenses, claims, damages or liabilities arising
out of the transactions contemplated by the Amended and Restated Merger
Agreement to the fullest extent permitted or required under applicable law,
including without limitation the advancement of expenses. Columbia has agreed
that all rights to indemnification existing in favor of the directors,
officers or employees of Value Health as provided in Value Health's
certificate of incorporation or bylaws, with respect to matters occurring
through the Effective Date, shall survive the Merger and continue in full
force and effect for a period of not less than six years from the Effective
Date.
For a period of three years after the Effective Date, Columbia is obligated
to cause the surviving corporation to maintain in effect policies of
directors' and officers' liability insurance covering certain Indemnified
Parties presently covered by Value Health insurance policies that are
substantially no less advantageous to such Indemnified Parties than the
policies presently maintained by Value Health, provided that Columbia shall
not be required in order to maintain such coverage to pay an annual premium in
excess of two times the current annual premium paid by Value Health for its
existing coverage (the "Cap") and provided, further, that if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual
premium in excess of the Cap, Columbia shall only be required to obtain as
much coverage as can be obtained by paying an annual premium equal to the Cap.
CONDITIONS
The respective obligations of Value Health and Columbia to consummate the
Merger are subject to the fulfillment of each of the following conditions,
including, among others: (a) the Amended and Restated Merger Agreement and the
transactions contemplated thereby shall have been approved and adopted by the
requisite vote of the holders of the issued and outstanding shares of capital
stock of Value Health entitled to vote thereon; (b) none of the parties to the
Amended and Restated Merger Agreement shall be subject to any order or
injunction against the consummation of the transactions contemplated by the
Amended and Restated Merger Agreement; (c) 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 Amended and Restated Merger
Agreement shall have been obtained or made (except where the failure to obtain
or make any such consent, authorization, order, approval, filing or
registration would not have a material adverse effect on the business of
Columbia and Value Health (and their respective subsidiaries), taken as a
whole, following the Effective Date); and (d) all consents, authorizations,
orders and approvals required under insurance holding company statutes or
similar statutes regulating managed care or insurance organizations shall have
been obtained.
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The obligations of each of Value Health and Columbia to effect the Merger
are also subject to the satisfaction or waiver by the other party prior to the
Effective Date of the condition that the other party shall have performed in
all material respects all obligations required to be performed by it under the
Amended and Restated Merger Agreement and the representations and warranties
of the other party and its subsidiaries set forth in the Amended and Restated
Merger Agreement shall be true in all material respects as of the Effective
Date. The obligation of Columbia to effect the Merger is further subject to
the condition that, from the date of the Amended and Restated Merger Agreement
through the Effective Date, there shall not have occurred any change,
individually or together with other changes, that has had, or would reasonably
be expected to have, a material adverse change in the financial condition,
business, results of operations or prospects of Value Health and its
subsidiaries, taken as a whole.
TERMINATION
The Amended and Restated Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Date, before or after the
approval by the stockholders of Value Health: (a) by the mutual consent of
Value Health and Columbia by action of their respective Boards of Directors;
(b) by action of the Board of Directors of either Value Health or Columbia if
(i) the Merger shall not have been consummated by August 31, 1997, provided
that the terminating party shall not have breached in any material respect its
obligations under the Amended and Restated Merger Agreement in any manner that
shall have proximately contributed to the failure to consummate the Merger,
(ii) the adoption of the Amended and Restated Merger Agreement and the
approval of the transactions contemplated thereby by Value Health's
stockholders shall not have been obtained at a meeting duly convened for such
purpose (or at any adjournment or postponement thereof), or (iii) a United
States federal or state court of competent jurisdiction or a United States
federal or state governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Amended and Restated Merger Agreement and
such order, decree, ruling or other action shall have become final and non-
appealable; provided, that the party seeking to terminate the Amended and
Restated Merger Agreement pursuant to this clause (iii) shall have used all
reasonable efforts to remove such injunction, order or decree; (c) by action
of the Board of Directors of Value Health, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its stockholders imposed by law,
the Board of Directors of Value Health determines that such termination is
required by reason of an Alternative Proposal being made for Value Health,
(ii) there has been a breach by Columbia or Columbia Sub of any representation
or warranty contained in the Amended and Restated Merger Agreement which would
have or would be reasonably likely to have a material adverse effect on the
business, properties, assets, condition (financial or otherwise), liabilities
or results of operations of Columbia and its subsidiaries taken as a whole or
(iii) there has been a material breach by Columbia of any covenant or
agreement contained in the Amended and Restated Merger Agreement which is not
curable or, if curable, is not cured within 30 days after written notice of
such breach; or (d) by action of the Board of Directors of Columbia, if (i)
the Board of Directors of Value Health shall have withdrawn or modified in a
manner adverse to Columbia its approval or recommendation of the Amended and
Restated Merger Agreement or the Merger, or shall have recommended an
Alternative Proposal to Value Health stockholders, (ii) there has been a
breach by Value Health of any representation or warranty contained in the
Amended and Restated Merger Agreement which would have or would be reasonably
likely to have a material adverse effect on the business, properties, assets,
condition (financial or otherwise), liabilities or results of operations of
Value Health and its subsidiaries taken as a whole or (iii) there has been a
material breach by Value Health of any covenant or agreement contained in the
Amended and Restated Merger Agreement which is not curable or, if curable, is
not cured within 30 days after written notice of such breach. In the event of
the termination of the Amended and Restated Merger Agreement pursuant to (b),
(c) or (d) above, nothing in the Amended and Restated Merger Agreement shall
prejudice the ability of the non-breaching party to seek damages from any
other party for any breach of the Amended and Restated Merger Agreement,
including without limitation, attorneys' fees and the right to pursue any
remedy at law or in equity; provided, that in the event Columbia has received
an Alternative Proposal Fee (as defined under "--Termination Fee"), it shall
not (i) have any rights whatsoever in respect of or in connection with the
representations and warranties of Value Health, (ii) assert or pursue in any
manner,
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directly or indirectly, any claim or cause of action based in whole or in part
upon alleged tortious or other interference with rights under the Amended and
Restated Merger Agreement against any entity or person submitting an
Alternative Proposal or (iii) assert or pursue in any manner, directly or
indirectly, any claim or cause of action against Value Health or any of its
officers or directors based in whole or in part upon its or their receipt,
consideration, recommendation or approval of an Alternative Proposal.
TERMINATION FEE
If (a) Value Health terminates the Amended and Restated Merger Agreement
because its Board of Directors, in the exercise of its good faith judgment as
to its fiduciary duties to its stockholders imposed by law, determines that
such termination is required by reason of an Alternative Proposal being made
for Value Health, (b) an Alternative Proposal is made and the Amended and
Restated Merger Agreement is terminated by either Value Health or Columbia by
reason of the stockholders of Value Health not approving the Amended and
Restated Merger Agreement at the Special Meeting, (c) Columbia terminates the
Amended and Restated Merger Agreement because the Board of Directors of Value
Health shall have withdrawn or modified in a manner adverse to Columbia its
approval or recommendation of the Amended and Restated Merger Agreement or the
Merger or shall have recommended an Alternative Proposal to Value Health
stockholders or (d) any person shall have made an Alternative Proposal and
thereafter the Amended and Restated Merger Agreement is terminated for any
reason other than those set forth in clauses (a), (b) or (c) above, and within
12 months thereafter, any Alternative Proposal shall have been consummated,
then Value Health (or the successor thereto) is required to pay a fee in cash
of $45,000,000 to Columbia (the "Alternative Proposal Fee"), within two days
of such termination.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Amended and Restated Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expenses,
except as otherwise provided in the Amended and Restated Merger Agreement. The
Amended and Restated Merger Agreement provides that the following expenses
will be shared equally by Columbia and Value Health: (a) the filing fee in
connection with the HSR Act filing, (b) the filing fee in connection with the
filing of this Proxy Statement and the Registration Statement on Form S-4 (as
contemplated by the Initial Agreement) with the Commission and (c) the
expenses incurred in connection with printing and mailing this Proxy Statement
and the printing of such Registration Statement. If the Merger is consummated,
it is estimated that the aggregate costs and expenses incurred by both
Columbia and Value Health in connection with the Amended and Restated Merger
Agreement and the transactions contemplated thereby will be $20 million.
AMENDMENT AND WAIVER
The parties may modify or amend the Amended and Restated Merger Agreement by
written agreement at any time before the Effective Date, to the extent
permitted by applicable law. The conditions to each party's obligation to
consummate the Merger may be waived by the other party in whole or in part to
the extent permitted by applicable law.
ALTERNATIVE MERGER STRUCTURE
Columbia and Value Health reserve the right to change the structure of the
Merger so that Value Health merges into Columbia Sub rather than Columbia Sub
merging into Value Health, or as a merger of Value Health into Columbia, with
Columbia being the surviving corporation. Stockholder approval of the Amended
and Restated Merger Agreement shall be deemed to include approval of these
alternative structures of the Merger.
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DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL
Record holders of Value Health Common Stock are entitled to appraisal rights
with respect to the Merger under Section 262 of the DGCL.
The DGCL sets forth certain rights and remedies applicable to stockholders
of record of Value Health (each, a "Stockholder") who may object to the
Merger. These rights are available only to stockholders holding shares of
Value Health Common Stock outstanding immediately prior to the Effective Date
and which are held by holders who shall not have voted in favor of the Merger
or consented thereto in writing and who shall have demanded properly in
writing an appraisal for such shares in accordance with Section 262 of the
DGCL and who shall not have withdrawn such demand or otherwise have forfeited
appraisal rights (collectively, "Dissenting Shares"). Set forth below is a
summary of Stockholders' rights as provided by Section 262 of the DGCL. A copy
of Section 262 of the DGCL is attached to this Proxy Statement as Appendix C.
The following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Appendix C.
This discussion and Appendix C should be reviewed carefully by any holder who
wishes to exercise statutory appraisal rights or who wishes to preserve the
right to do so, because the failure to comply with the procedures set forth
herein or therein will result in the loss of such appraisal rights. Any
Stockholder who contemplates the assertion of appraisal rights is urged to
consult his own counsel.
Under Section 262 of the DGCL, when a merger is to be submitted for approval
at a meeting of stockholders, a constituent corporation, not less than 20 days
prior to the meeting, must notify each of the holders of its stock for which
appraisal rights are available that such appraisal rights are available and
include in each such notice a copy of Section 262. This Proxy Statement shall
constitute such notice to Stockholders.
Stockholders who desire to exercise their appraisal rights must satisfy all
of the following conditions. Any such Stockholder must be a stockholder of
record of Value Health from the date he makes a written demand for appraisal
(as described below) through the Effective Date and must continuously hold his
Dissenting Shares throughout the period between such dates. A written demand
for appraisal of the Dissenting Shares must be delivered to the Secretary of
Value Health before the taking of the vote of Stockholders on the Amended and
Restated Merger Agreement. Such vote will take place at the Special Meeting.
The demand will be sufficient if it reasonably informs Value Health of the
identity of the Stockholder and that the Stockholder intends thereby to demand
the appraisal of his Dissenting Shares. This written demand for appraisal of
Dissenting Shares must be in addition to and separate from any proxy or vote
abstaining from or voting against the Amended and Restated Merger Agreement.
Although a Stockholder must vote against, abstain from voting, or fail to vote
on the Amended and Restated Merger Agreement to preserve his rights to
appraisal, such vote against, failure to vote, or abstention from voting will
not, of itself, constitute a demand for appraisal within the meaning of
Section 262 of the DGCL.
Holders of Dissenting Shares electing to exercise their appraisal rights
under Section 262 of the DGCL must neither vote for approval of the Amended
and Restated Merger Agreement nor consent thereto in writing. A Stockholder
who signs and returns a proxy card without expressly specifying a vote against
approval of the Amended and Restated Merger Agreement or a direction to
abstain, by checking the applicable box on the proxy card enclosed herewith,
will effectively have thereby waived such Stockholder's appraisal rights as to
those shares because, in the absence of express instructions to the contrary,
such shares will be voted in favor of the Amended and Restated Merger
Agreement. Accordingly, a Stockholder who desires to perfect his appraisal
rights with respect to any Dissenting Shares must, as one of the procedural
steps involved in such perfection, either (i) refrain from executing and
returning a proxy card and from voting in person in favor of the Amended and
Restated Merger Agreement or (ii) check either the "Against" or the "Abstain"
box next to the proposal on such card or affirmatively vote in person against
the Amended and Restated Merger Agreement or register in person an abstention
with respect thereto.
A demand for appraisal must be executed by or for the Stockholder, fully and
correctly, exactly as such Stockholder's name appears on the certificate or
certificates representing his Dissenting Shares. If the Dissenting Shares are
owned of record by more than one person, as in a joint tenancy or tenancy in
common, such demand must be executed by all joint owners. An authorized agent,
including an agent for two or more joint owners,
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may execute the demand for appraisal for a Stockholder; however, the agent
must identify the record owner and expressly disclose the fact that, in
exercising the demand, such person is acting as agent for the record owner. If
a Stockholder holds Dissenting Shares through a broker who in turns holds the
shares through a central securities depository nominee, a demand for appraisal
of such Dissenting Shares must be made by or on behalf of the depository
nominee and must identify the depository nominee as the holder of record.
A record owner, such as a broker, fiduciary or other nominee who holds
Dissenting Shares as a nominee for others, may exercise appraisal rights with
respect to the Dissenting Shares held for all or less than all beneficial
owners of Dissenting Shares as to which such person is the record owner. In
such case, the written demand must set forth the number of Dissenting Shares
covered by such demand. Where the number of Dissenting Shares is not expressly
stated, the demand will be presumed to cover all Dissenting Shares outstanding
in the name of such record owner. A person having a beneficial interest in
Dissenting Shares that are held of record in the name of another person must
act promptly to cause the record holder to follow the steps summarized herein
properly and in a timely manner to perfect whatever appraisal rights are
available.
A Stockholder who elects to exercise appraisal rights must mail or deliver
his written demand to: Paul M. Finigan, Esq., Secretary, Value Health, Inc.,
22 Waterville Road, Avon, CT, 06001.
The written demand for appraisal must specify the Stockholder's name and
mailing address, the number of Dissenting Shares owned, and a statement that
the Stockholder is thereby demanding appraisal of his Dissenting Shares.
Within 10 days after the Effective Date, the Surviving Corporation will
provide notice of the Effective Date to all Stockholders who have complied
with Section 262 of the DGCL. Upon written request, the Surviving Corporation
will furnish each Stockholder who has complied with the requirements of
Section 262 of the DGCL a statement setting forth the aggregate number of
Dissenting Shares not voted in favor of the Amended and Restated Merger
Agreement with respect to which demands for appraisal have been received and
the aggregate number of holders of such Dissenting Shares.
With 120 days after the Effective Date, either the Surviving Corporation or
any Stockholder who has complied with the required conditions of Section 262
of the DGCL may file a petition in the Delaware Court of Chancery (the
"Chancery Court"), with a copy served on the Surviving Corporation in the case
of a petition filed by a Stockholder, demanding a determination of the fair
value of the Dissenting Shares of all dissenting Stockholders. There is no
present intent on the part of Columbia to cause the Surviving Corporation to
file an appraisal petition and Stockholders seeking to exercise appraisal
rights should not assume that the Surviving Corporation will file such a
petition or that the Surviving Corporation will initiate any negotiations with
respect to the fair value of the Dissenting Shares. Accordingly, Stockholders
who desire to have their Dissenting Shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the
time periods and in the manner prescribed in Section 262 of the DGCL. Within
120 days after the Effective Date, any Stockholder who has theretofore
complied with the applicable provisions of Section 262 of the DGCL will be
entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of Dissenting Shares not voting
in favor of the Amended and Restated Merger Agreement and with respect to
which demands for appraisals were received by Value Health and the number of
holders of such Dissenting Shares. Such statement must be mailed within 10
days after written request therefor has been received by the Surviving
Corporation or within 10 days after expiration of the period for delivery of
demands for appraisal, whichever is later. Within 20 days of the filing of a
petition by a Stockholder with the Chancery Court, or contemporaneous with the
filing of a petition by the Surviving Corporation, the Surviving Corporation
must file with the Chancery Court a verified list containing the names and
addresses of the Stockholders who have demanded payment for their Dissenting
Shares and with whom agreements as to the value of their Dissenting Shares
have not been reached.
If a petition for appraisal is timely filed, all Stockholders who have
complied with Section 262 of the DGCL will become entitled to such a
determination. The Chancery Court will hold a hearing on such petition through
which it will determine which Stockholders are entitled to appraisal rights
and will appraise the Dissenting
29
<PAGE>
Shares owned by such Stockholders. The Chancery Court may require Stockholders
who have demanded an appraisal for the Dissenting Shares and who hold such
Dissenting Shares represented by certificates to submit their certificates to
the Register in Chancery for notation thereon of the pendency of the appraisal
proceedings; if any such Stockholder fails to comply with such direction, the
Chancery Court may dismiss the proceedings as to such Stockholder. Where
proceedings are not dismissed, the appraisal will be based upon the Chancery
Court's determination of the fair value of such Dissenting Shares exclusive of
any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. In determining fair value, the
Chancery Court is to take into account all relevant factors. In Weinberger v.
UOP, Inc., decided in 1983, the Delaware Supreme Court discussed the factors
that could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "[f]air price obviously requires
consideration of all relevant factors involving the value of a company...."
The Delaware Supreme Court stated that in making this determination of fair
value, the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which could be
ascertained as of the date of the merger which throw any light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not
the product of speculation, may be considered." Section 262 of the DGCL,
however, provides that fair value is to be "exclusive of any element of value
arising from the accomplishment or expectation of the merger."
Stockholders considering seeking appraisal should recognize that the fair
value of the Dissenting Shares determined under Section 262 of the DGCL could
be more than, the same as or less than the consideration that Stockholders are
entitled to receive pursuant to the Amended and Restated Merger Agreement if
they do not seek appraisal of their Dissenting Shares, and opinions of
investment banking firms as to fairness, from a financial point of view, are
not opinions as to fair value under Section 262 of the DGCL. The cost of the
appraisal proceeding may be determined by the Chancery Court and levied
against the parties as the Chancery Court deems equitable in the
circumstances, including, if the Chancery Court found equitable justification
therefor, against the Surviving Corporation or any affiliate thereof which may
be a party to the proceeding. Upon application of a dissenting Stockholder,
the Chancery Court may order that all or a portion of the expenses incurred by
any dissenting Stockholder in connection with the appraisal proceeding,
including without limitation, reasonable attorneys' fees and the fees and
expenses of experts, be charged pro rata against the value of all the
Dissenting Shares entitled to appraisal. In the absence of such a
determination or assessment, each party bears its own expenses.
Any Stockholder who has duly demanded appraisal in compliance with Section
262 of the DGCL will not, after the Effective Date, be entitled to vote his
Dissenting Shares for any purpose, subject to such demand or to receive
payment of dividends or other distributions on such Dissenting Shares, except
for dividends or distributions payable to Stockholders of record at a date
prior to the Effective Date.
At any time within 60 days after the Effective Date, any Stockholder shall
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Amended and Restated Merger Agreement; after this period, the
Stockholder may withdraw such demand for appraisal only with the consent of
the Surviving Corporation. If no petition for appraisal is filed with the
Chancery Court within 120 days after the Effective Date, Stockholders' rights
to appraisal shall cease, and all Stockholders shall be entitled to receive
only the consideration provided in the Amended and Restated Merger Agreement.
Inasmuch as the Surviving Corporation will have no obligation to file such a
petition and the Surviving Corporation has no present intention to do so, any
Stockholder who desires such a petition to be filed is advised to file it on a
timely basis. Any Stockholder may withdraw such Stockholder's demand for
appraisal by delivering to the Surviving Corporation a written withdrawal of
such demand for appraisal and acceptance of the Merger, except (i) that any
such attempt to withdraw made more than 60 days after the Effective Date will
require written approval of the Surviving Corporation and (ii) that no
appraisal proceeding in the Chancery Court shall be dismissed as to any
Stockholder without the approval of the Chancery Court, and such approval may
be conditioned upon such terms as the Chancery Court deems just.
30
<PAGE>
SELECTED FINANCIAL DATA
The selected historical financial data of Value Health presented below for
each of the last five fiscal years have been derived from Value Health's
historical consolidated financial statements. The following data should be
read in conjunction with the consolidated financial statements and notes
thereto of Value Health included in the Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1996, which are incorporated by reference in
this Proxy Statement. See "Documents Incorporated by Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total Revenues: $1,963,775 $1,868,539 $1,620,667 $1,116,000 $732,085
Earnings (Loss):
Earnings (Loss) From
Continuing
Operations........... $ 64,329 $ (27,967) $ 59,521 $ 14,930 $ 26,718
Earnings (Loss) Per
Share From Continuing
Operations........... $ 1.17 $ (0.51) $ 1.10 $ 0.28 $ 0.55
Total Assets............ $1,101,224 $ 904,035 $ 791,542 $ 713,679 $588,658
Long Term Liabilities... $ 91,971 $ 6,580 $ 19,668 $ 22,570 $ 27,384
Weighted Average Number
of Common Shares
Outstanding............ 54,844 54,343 54,191 52,443 48,145
Cash Dividends Declared
Per Common Share....... -- -- -- -- --
</TABLE>
MARKET PRICES
The table below sets forth, for the calendar quarters indicated, the high
and low sales prices per share reported on the NYSE Composite Tape for the
Value Health Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995:
First Quarter............................................... $40.75 $34.00
Second Quarter.............................................. 40.50 31.88
Third Quarter............................................... 39.38 24.63
Fourth Quarter.............................................. 29.00 21.25
1996:
First Quarter............................................... 28.25 21.00
Second Quarter.............................................. 29.88 23.63
Third Quarter............................................... 25.00 14.63
Fourth Quarter.............................................. 20.88 16.63
1997:
First Quarter .............................................. 25.50 17.63
Second Quarter (through , 1997).........................
</TABLE>
On April 14, 1997, the last trading day preceding the public announcement of
the execution of the Amended and Restated Merger Agreement, the last reported
sale price per share of the Value Health Common Stock on the NYSE Composite
Tape was $17.75. On , 1997, the last full trading day prior to the date of
this Proxy Statement, the last reported sale price per share of Value Health
Common Stock on the NYSE Composite Tape was $ . STOCKHOLDERS ARE URGED TO
OBTAIN A CURRENT PRICE QUOTATION FOR THE VALUE HEALTH COMMON STOCK.
DIVIDEND POLICY
No dividends have been declared or paid on the Value Health Common Stock
since Value Health's incorporation.
31
<PAGE>
BENEFICIAL OWNERSHIP OF VALUE HEALTH COMMON STOCK
The following table sets forth certain information regarding beneficial
ownership of Value Health's Common Stock as of April 10, 1997 (i) by each
person who is known by Value Health to own beneficially more than 5% of the
outstanding shares of Value Health Common Stock, (ii) by each director of
Value Health, (iii) by each of the executive officers of Value Health and (iv)
by all executive officers and directors of Value Health as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME AND ADDRESS OWNED(1) PERCENTAGE
---------------- ------------ ----------
<S> <C> <C>
Warburg, Pincus Capital Company, L.P.(2)............. 7,772,510 14.2%
466 Lexington Avenue
New York, New York
Travelers Group Inc.(3).............................. 2,718,175 5.0%
388 Greenwich Street
New York, New York 10013
Robert E. Patricelli(4).............................. 1,844,408 3.4%
Steven J. Shulman(5)................................. 131,813 *
James E. Buncher..................................... 1,406 *
Paul M. Finigan(6)................................... 5,100 *
William J. Goss...................................... 3,797 *
William J. McBride(7)................................ 52,900 *
Walter J. McNerney(8)................................ 30,000 *
David J. McDonnell(9)................................ 338,364 *
Rodman W. Moorhead, III(2)........................... 7,772,510 14.2%
Constance B. Newman(10).............................. 27,500 *
John L. Vogelstein(2)................................ 7,772,510 14.2%
Hicks B. Waldron(11)................................. 24,000 *
All executive officers and directors as a group (13
persons)(2)(12)..................................... 10,237,695 18.4%
</TABLE>
- --------
* Less than 1%
(1) The persons and entities named in the table have sole voting and
investment power with respect to all shares shown as beneficially owned by
them, except as noted in the footnotes below.
(2) The sole general partner of Warburg, Pincus Capital Company, L.P.
("Warburg") is Warburg, Pincus & Co., a New York general partnership
("WP"). E.M. Warburg, Pincus & Co., LLC, a New York limited liability
company ("EMW LLC") manages Warburg. The members of EMW LLC are
substantially the same as the partners of WP. Lionel I. Pincus is the
Managing Partner of WP and the Managing Member of EMW LLC and may be
deemed to control both WP and EMW LLC. WP, as the sole general partner of
Warburg, has a 20% interest in the profits of Warburg. Mr. Moorhead, a
Director of the Company, is a Member and Senior Managing Director of EMW
LLC and a general partner of WP. Mr. Vogelstein, a Director of the
Company, is a Member, Vice Chairman and President of EMW LLC and a general
partner of WP. As such, Mr. Moorhead and Mr. Vogelstein may be deemed to
have an indirect pecuniary interest (within the meaning of Rule 16a-1
under the Exchange Act) in an indeterminate portion of the shares
beneficially owned by Warburg, EMW LLC and WP. All of the shares indicated
as owned by Mr. Moorhead and Mr. Vogelstein are owned directly by Warburg
and are included because of their affiliation with Warburg. Mr. Moorhead
and Mr. Vogelstein disclaim "beneficial ownership" of these shares within
the meaning of Rule 13d-3 under the Exchange Act, except to the extent of
their indirect pecuniary interest.
(3) Travelers Group Inc. ("Travelers"), on behalf of certain of its
subsidiaries, filed an amendment to its Schedule 13G dated March 7, 1997,
pursuant to Section 13 of the Exchange Act, and the foregoing information
is derived from such Schedule 13G. Travelers disclaims beneficial
ownership of all such shares.
32
<PAGE>
(4) Includes 107,500 shares of Value Health Common Stock which Mr. Patricelli
has the right to acquire within 60 days of April 10, 1997, upon exercise
of outstanding options. Also includes 10,000 shares of Value Health Common
Stock held by Mr. Patricelli's wife as to which Mr. Patricelli disclaims
beneficial ownership.
(5) Includes 35,250 shares of Value Health Common Stock which Mr. Shulman has
the right to acquire within 60 days of April 10, 1997, upon exercise of
outstanding options. Also includes 30,000 shares of Value Health Common
Stock held by Mr. Shulman's wife and 500 shares of Value Health Common
Stock held by his children as to which Mr. Shulman disclaims beneficial
ownership.
(6) Includes 5,000 shares of Value Health Common Stock which Mr. Finigan has
the right to acquire within 60 days of April 10, 1997, upon exercise of
outstanding options.
(7) Includes 48,200 shares of Value Health Common Stock which Mr. McBride has
the right to acquire within 60 days of April 10, 1997, upon exercise of
outstanding options.
(8) Includes 30,000 shares of Value Health Common Stock which Mr. McNerney has
the right to acquire within 60 days of April 10, 1997, upon exercise of
outstanding options.
(9) Includes 289,801 shares of Value Health Common Stock which Mr. McDonnell
has the right to acquire within 60 days of April 10, 1997, upon exercise
of outstanding options.
(10) Includes 27,240 shares of Value Health Common Stock which Ms. Newman has
the right to acquire within 60 days of April 10, 1997, upon exercise of
outstanding options.
(11) Includes 22,500 shares of Value Health Common Stock which Mr. Waldron has
the right to acquire within 60 days of April 10, 1997, upon exercise of
outstanding options.
(12) Includes 569,991 shares of Value Health Common Stock which executive
officers and directors as a group have the right to acquire within 60
days of April 10, 1997, upon exercise of outstanding options.
STOCKHOLDER PROPOSALS
As described in Value Health's proxy statement relating to its 1996 Annual
Meeting of Stockholders, in order for proposals of stockholders to be
considered for inclusion in the proxy statement for the 1997 Annual Meeting of
Stockholders of Value Health (if the Merger is not consummated), such
proposals must have been received by the Secretary of Value Health by November
29, 1996. No such proposals were received by Value Health's Secretary by such
date.
OTHER MATTERS
The Value Health Board of Directors has no knowledge of any business to be
presented for consideration at the Special Meeting other than as described in
this Proxy Statement. Should any such other matters properly come before the
Special Meeting or any adjournment thereof, the persons named in the enclosed
Proxy will have discretionary authority to vote such Proxy in accordance with
their best judgment on such other matters and with respect to matters incident
to the conduct of the Special Meeting.
33
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS RELATING TO VALUE
HEALTH WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS DELIVERED, ON WRITTEN OR
ORAL REQUEST, WITHOUT CHARGE, FROM VALUE HEALTH, INC., 22 WATERVILLE ROAD,
AVON, CONNECTICUT 06001, ATTENTION: PAUL M. FINIGAN, SECRETARY, TELEPHONE:
(860) 678-3400. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH
REQUEST SHOULD BE MADE BY , 1997. COPIES OF DOCUMENTS SO REQUESTED WILL
BE SENT BY FIRST CLASS MAIL, POSTAGE PAID WITHIN ONE BUSINESS DAY OF THE
RECEIPT OF SUCH REQUEST.
The following Value Health documents are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended December 31, 1996 (as
amended by the Annual Report on Form 10-K/A filed April 17, 1997).
2. Current Reports on Form 8-K dated January 28, 1997 and April 16, 1997.
All documents filed by Value Health with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior
to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and shall be a part hereof from the date of filing of such
documents. Any statements contained in a document incorporated by reference
herein or contained in this Proxy Statement shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document which also is incorporated by
reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except
as so modified or superseded.
34
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
APRIL 14, 1997
AMONG
COLUMBIA/HCA HEALTHCARE CORPORATION
CVH ACQUISITION CORPORATION
AND
VALUE HEALTH, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I. THE MERGER..................................................... A-1
Section 1.1. The Merger............................................. A-1
Section 1.2. Effective Date of the Merger........................... A-1
ARTICLE II. THE SURVIVING CORPORATION..................................... A-1
Section 2.1. Certificate of Incorporation........................... A-1
Section 2.2. By-Laws................................................ A-2
Section 2.3. Board of Directors; Officers........................... A-2
Section 2.4. Effects of Merger...................................... A-2
ARTICLE III. CONVERSION OF SHARES......................................... A-2
Section 3.1. Merger Consideration................................... A-2
Section 3.2. Payment Procedures..................................... A-2
Section 3.3. Dissenting Shares...................................... A-3
Section 3.4. [Reserved]............................................. A-4
Section 3.5. Stock Options.......................................... A-4
Section 3.6. Stockholders' Meetings................................. A-4
Section 3.7. Closing of the Company's Transfer Books................ A-5
Section 3.8. Assistance in Consummation of the Merger............... A-5
Section 3.9. Closing................................................ A-5
Section 3.10. Transfer Taxes......................................... A-5
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT...................... A-5
Section 4.1. Organization and Qualification......................... A-5
Section 4.2. Authority Relative to this Agreement................... A-5
Section 4.3. Reports and Financial Statements....................... A-6
Section 4.4. Parent Action.......................................... A-6
Section 4.5. Financial Advisor...................................... A-6
Section 4.6. Parent Ownership of Stock.............................. A-6
Section 4.7. No Material Adverse Effect............................. A-6
Section 4.8. Financial Capability................................... A-6
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. A-7
Section 5.1. Organization and Qualification......................... A-7
Section 5.2. Capitalization......................................... A-7
Section 5.3. Subsidiaries........................................... A-7
Section 5.4. Authority Relative to this Agreement................... A-8
Section 5.5. Reports and Financial Statements....................... A-8
Section 5.6. Absence of Certain Changes or Events................... A-9
Section 5.7. Litigation............................................. A-9
Section 5.8. Employee Benefit Plans................................. A-9
Section 5.9. Labor Matters.......................................... A-11
Section 5.10. Company Action......................................... A-11
Section 5.11. Financial Advisor...................................... A-12
Section 5.12. Compliance with Applicable Laws........................ A-12
Section 5.13. Liabilities............................................ A-12
Section 5.14. Taxes.................................................. A-12
Section 5.15. Certain Agreements..................................... A-13
Section 5.16. Patents, Trademarks, Etc............................... A-13
Section 5.17. No Material Adverse Effect............................. A-13
Section 5.18. Representations Under Purchase Agreements.............. A-13
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
Section 5.19. Absence Of Certain Business Practices.............. A-13
Section 5.20. Payments Under CCN Agreement....................... A-14
Section 5.21. Billing Practices.................................. A-14
Section 5.22 Conduct of Business by the Company................. A-14
ARTICLE VI. REPRESENTATIONS AND WARRANTIES REGARDING SUB............... A-14
Section 6.1. Organization....................................... A-14
Section 6.2. Capitalization..................................... A-14
Section 6.3. Authority Relative to this Agreement............... A-14
ARTICLE VII. CONDUCT OF BUSINESS PENDING THE MERGER.................... A-15
Conduct of Business by the Company Pending the
Section 7.1. Merger............................................. A-15
Section 7.2. Conduct of Business by Parent Pending the Merger... A-16
Section 7.3. Conduct of Business of Sub......................... A-16
ARTICLE VIII. ADDITIONAL AGREEMENTS.................................... A-16
Section 8.1. Access and Information............................. A-16
Section 8.2. Proxy Statement.................................... A-16
Section 8.3. Employee Matters................................... A-17
Section 8.4. Indemnification.................................... A-17
Section 8.5. HSR Act............................................ A-18
Section 8.6. Additional Agreements.............................. A-18
Section 8.7. Alternative Proposals.............................. A-18
Section 8.8. Advice of Changes; SEC Filings..................... A-19
Section 8.9. Restructuring of Merger............................ A-19
Section 8.10. Other Matters...................................... A-19
ARTICLE IX. CONDITIONS PRECEDENT....................................... A-19
Conditions to Each Party's Obligation to Effect the
Section 9.1. Merger............................................. A-19
Conditions to Obligation of the Company to Effect
Section 9.2. the Merger......................................... A-20
Conditions to Obligations of Parent and Sub to
Section 9.3. Effect the Merger.................................. A-20
ARTICLE X. TERMINATION, AMENDMENT AND WAIVER........................... A-20
Section 10.1. Termination by Mutual Consent...................... A-20
Section 10.2. Termination by Either Parent or the Company........ A-20
Section 10.3. Termination by the Company......................... A-21
Section 10.4. Termination by Parent.............................. A-21
Section 10.5. Effect of Termination and Abandonment.............. A-21
Section 10.6. Extension; Waiver.................................. A-22
ARTICLE XI. GENERAL PROVISIONS......................................... A-22
Non-Survival of Representations, Warranties and
Section 11.1. Agreements......................................... A-22
Section 11.2. Notices............................................ A-22
Section 11.3. Fees and Expenses.................................. A-23
Section 11.4. Publicity.......................................... A-23
Section 11.5. Specific Performance............................... A-23
Section 11.6. Assignment; Binding Effect......................... A-23
Section 11.7. Entire Agreement................................... A-24
Section 11.8. Amendment.......................................... A-24
Section 11.9. Governing Law...................................... A-24
Section 11.10. Counterparts....................................... A-24
Section 11.11. Headings and Table of Contents..................... A-24
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
Section 11.12. Interpretation........................................ A-24
Section 11.13. Waivers............................................... A-24
Section 11.14. Incorporation of Exhibits............................. A-24
Section 11.15. Severability.......................................... A-24
Section 11.16. Subsidiaries.......................................... A-25
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "Amended and
Restated Agreement"), dated as of April 14, 1997, by and among Columbia/HCA
Healthcare Corporation, a Delaware corporation ("Parent"), CVH Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of Parent
("Sub"), and Value Health, Inc., a Delaware corporation (the "Company"):
W I T N E S S E T H:
WHEREAS, on January 15, 1997, Parent, Sub and the Company entered into an
agreement and plan of merger (the "Initial Agreement") to effect a business
combination by means of the merger of Sub with and into the Company (the
"Merger");
WHEREAS, the Initial Agreement provided for the exchange of the outstanding
shares of common stock, no par value, of the Company ("Company Common Stock")
for shares of common stock, $.01 par value, of Parent ("Parent Common Stock")
pursuant to the Merger;
WHEREAS, Parent, Sub and the Company desire to amend and restate the Initial
Agreement to, among other things, provide that the outstanding shares of
Company Common Stock be exchanged for cash rather than Parent Common Stock;
WHEREAS, the Boards of Directors of Parent, Sub and the Company have
approved the Merger as modified by the terms of this Amended and Restated
Agreement, upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
ARTICLE I.
The Merger
Section 1.1. The Merger. Upon the terms and subject to the conditions
hereof, on the Effective Date (as defined in Section 1.2), Sub shall be merged
into the Company and the separate existence of Sub shall thereupon cease, and
the Company, as the corporation surviving the Merger (the "Surviving
Corporation"), shall by virtue of the Merger continue its corporate existence
under the laws of the State of Delaware.
Section 1.2. Effective Date of the Merger. The Merger shall become effective
at the date and time (the "Effective Date") when a properly executed
Certificate of Merger is duly filed with the Secretary of State of the State
of Delaware, which filing shall be made as soon as practicable following
fulfillment of the conditions set forth in Article IX hereof, or at such time
thereafter as is provided in such Certificate of Merger.
ARTICLE II.
The Surviving Corporation
Section 2.1. Certificate of Incorporation. Subject to Section 8.4(a), the
Certificate of Incorporation of Sub shall be the Certificate of Incorporation
of the Surviving Corporation after the Effective Date, and thereafter may be
amended in accordance with its terms and as provided by law and this Amended
and Restated Agreement.
A-1
<PAGE>
Section 2.2. By-Laws. The By-laws of Sub as in effect on the Effective Date
shall be the By-laws of the Surviving Corporation, and thereafter may be
amended in accordance with its terms and as provided by law and this Amended
and Restated Agreement.
Section 2.3. Board of Directors; Officers. The directors of Sub immediately
prior to the Effective Date shall be the directors of the Surviving
Corporation, and the officers of the Company immediately prior to the
Effective Date shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected and qualified.
Section 2.4. Effects of Merger. The Merger shall have the effects set forth
in Section 259 of the Delaware General Corporation Law (the "DGCL").
ARTICLE III.
Conversion of Shares
Section 3.1. Merger Consideration. On the Effective Date, by virtue of the
Merger and without any action on the part of any holder of any Company Common
Stock:
(a) All shares of Company Common Stock which are held by the Company or
any subsidiary of the Company, and any shares of Company Common Stock owned
by Parent, Sub or any other subsidiary of Parent, shall be canceled.
(b) Each remaining outstanding share of Company Common Stock shall be
converted into and represent the right to receive $20.50 in cash (the
"Merger Consideration") in accordance with Section 3.2.
(c) In the event of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares with respect to, or
rights issued in respect of, Company Common Stock after the date hereof,
the Merger Consideration shall be adjusted accordingly.
(d) Each issued and outstanding share of capital stock of Sub shall be
converted into and become one fully paid and nonassessable share of common
stock of the Surviving Corporation.
Section 3.2. Payment Procedures.
(a) Prior to the Effective Date, Parent shall select a Payment Agent, which
shall be Parent's Transfer Agent or such other person or persons reasonably
satisfactory to the Company, to act as Payment Agent for the Merger (the
"Payment Agent").
(b) As soon as practicable after the Effective Date (but in no event more
than five days thereafter), Parent shall instruct the Payment Agent to mail to
each holder of a certificate or certificates evidencing shares of Company
Common Stock (other than Dissenting Shares, as defined in Section 3.3)
("Certificates") (A) a letter of transmittal (which shall include a Substitute
Form W-9 and shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of such
Certificates to the Payment Agent) and (B) instructions to effect the
surrender of the Certificates in exchange for the Merger Consideration. Each
holder of Company Common Stock, upon surrender to the Payment Agent of such
holder's Certificates with the letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions,
shall be paid the amount to which such holder is entitled, pursuant to this
Amended and Restated Agreement, of cash as payment of the Merger Consideration
(without any interest accrued thereon). Until so surrendered, each Certificate
shall after the Effective Date represent for all purposes only the right to
receive the Merger Consideration. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to
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such Certificate, the Paying Agent will deliver in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration payable in respect
thereof pursuant to this Amended and Restated Agreement.
(c) At the Closing of the transactions contemplated by this Amended and
Restated Agreement (the "Closing"), Parent shall deposit in trust with the
Payment Agent, for the ratable benefit of the holders of Company Common Stock,
the appropriate amount of cash to which such holders are entitled pursuant to
this Amended and Restated Agreement for payment of the Merger Consideration
(the "Payment Fund"). The Payment Agent shall, pursuant to irrevocable
instructions, make the payments to the holders of Company Common Stock as set
forth in this Amended and Restated Agreement.
(d) If any delivery of the Merger Consideration is to be made to a person
other than the registered holder of the Certificates surrendered in exchange
therefor, it shall be a condition to such delivery that the Certificate so
surrendered shall be properly endorsed or be otherwise in proper form for
transfer and that the person requesting such delivery shall (i) pay to the
Payment Agent any transfer or other taxes required as a result of delivery to
a person other than the registered holder or (ii) establish to the
satisfaction of the Payment Agent that such tax has been paid or is not
payable.
(e) Any portion of the Payment Fund that remains undistributed to the
holders of Company Common Stock as of the first anniversary of the Effective
Date shall be delivered to Parent upon demand, and any holder of Company
Common Stock who has not theretofore complied with the exchange requirements
of this Section shall have no further claim upon the Payment Agent and shall
thereafter look only to Parent for payment of the Merger Consideration.
(f) If a Certificate has not been surrendered prior to the date on which any
receipt of Merger Consideration would otherwise escheat to or become the
property of any governmental agency, such Certificate shall, to the extent
permitted by applicable law, be deemed to be canceled and no money or other
property will be due to the holder thereof.
(g) The Payment Agent may invest cash in the Payment Fund, as directed by
Parent, on a daily basis, provided that all such investments shall be in
obligations of or guaranteed by the United States of America with remaining
maturities not exceeding 180 days, in commercial paper obligations receiving
the highest rating from either Moody's Investors Services, Inc. or Standard &
Poor's Corporation, or in certificates of deposit or banker's acceptances of
commercial banks with capital exceeding $500 million (collectively, "Permitted
Investments"). The maturities of Permitted Investments shall be such as to
permit the Payment Agent to make prompt payment to former stockholders of the
Company entitled thereto as contemplated by this Section. Parent shall
promptly replenish the Payment Fund to the extent of any losses incurred as a
result of Permitted Investments. Any interest and other income resulting from
such investments shall be paid to Parent. If for any reason (including losses)
the Payment Fund is inadequate to pay the amounts to which holders of Company
Common Stock shall be entitled under this Amended and Restated Agreement,
Parent shall in any event be liable for payment thereof. The Payment Fund
shall not be used for any purpose not specifically provided for in this
Amended and Restated Agreement.
Section 3.3. Dissenting Shares. (a) Notwithstanding any other provision of
this Amended and Restated Agreement to the contrary, shares of Company Common
Stock that are outstanding immediately prior to the Effective Date and which
are held by holders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal for such shares in accordance with Section 262 of the DGCL and who
shall not have withdrawn such demand or otherwise have forfeited appraisal
rights (collectively, the "Dissenting Shares") shall not be converted into or
represent the right to receive the Merger Consideration. Such holders shall be
entitled to receive payment of the appraised value of such shares, except that
all Dissenting Shares held by holders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective Date, for the right
to receive, without any interest thereon, the Merger Consideration, upon
surrender of the Certificates evidencing such shares.
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(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to any demands
for appraisal, or offer to settle, or settle, any such demands.
Section 3.4. [Reserved].
Section 3.5. Stock Options. (a) Each of the Company's stock option plans,
each of which is set forth in Section 3.5(a) of the Company Disclosure
Schedule (as defined in Section 5.1) (the "Option Plans"), and each option to
acquire shares of Common Stock outstanding immediately prior to the Effective
Date thereunder, whether vested or unvested (each, an "Option" and
collectively, the "Options"), shall be assumed by the Parent at the Effective
Date, and each such Option shall become an option to purchase a number of
shares of Parent Common Stock (a "Substitute Option") (rounded to the nearest
whole share, with 0.5 shares being rounded up) equal to the number of shares
of Company Common Stock subject to such Option multiplied by the Option
Exchange Ratio (as defined below). The per share exercise price for each
Substitute Option shall be the current exercise price per share of Company
Common Stock divided by the Option Exchange Ratio (rounded up to the nearest
full cent), and each Substitute Option otherwise shall after the Effective
Date be subject to all of the other terms and conditions of the original
Option to which it relates (including, without limitation, all provisions
relating to acceleration of vesting). Prior to the Effective Date, the Company
shall take such additional actions as are necessary under applicable law and
the applicable agreements and Option Plans to ensure that each outstanding
Option shall, from and after the Effective Date, represent only the right to
purchase, upon exercise, shares of Parent Common Stock. Except as set forth in
Section 3.5(a) of the Company Disclosure Schedule, the vesting of no Option
shall be accelerated by reason of the Merger unless the agreement or
arrangement under which it was granted or by which it is otherwise governed
specifically provides for such acceleration. For avoidance of doubt, it is the
intention of Parent and the Company that the Substitute Options be identical
in all respects to the Options (except for the number and type of shares for
which they shall be exercisable and the exercise price thereof) and that,
without limitation, (i) all terms of the plans under which such Options were
issued and (ii) all policies set forth in Sections 3.5 and 5.8 of the Company
Disclosure Schedule, shall apply thereto from and after the Effective Date.
(b) For purposes of this Amended and Restated Agreement, the term "Option
Exchange Ratio" shall mean the ratio of (x) $20.50 to (y) the average of the
closing prices per share of the Parent Common Stock on the New York Stock
Exchange, as reported in the Wall Street Journal, for each of the ten trading
days immediately preceding the Effective Date.
(c) As soon as practicable after the Effective Date, Parent shall cause to
be included under a registration statement on Form S-8 of Parent all shares of
Parent Common Stock which are subject to Substitute Options, and shall
maintain the effectiveness of such registration statement until all Substitute
Options have been exercised, expired or forfeited.
Section 3.6. Stockholders' Meetings. The Company shall take all action
necessary, in accordance with applicable law and its Certificate of
Incorporation and By-laws, to convene a special meeting of the holders of
Company Common Stock (the "Company Meeting") as promptly as practicable for
the purpose of considering and taking action upon this Amended and Restated
Agreement. Subject to the exercise of its good faith judgment as to its
fiduciary duties to its stockholders imposed by law, as advised by outside
counsel, the Board of Directors of the Company will recommend that holders of
Company Common Stock vote in favor of and approve the Merger and the adoption
of the Amended and Restated Agreement at the Company Meeting. At the Company
Meeting, all of the shares of Company Common Stock then owned by Parent, Sub,
or any other subsidiary of Parent, or with respect to which Parent, Sub, or
any other subsidiary of Parent holds the power to direct the voting, will be
voted in favor of approval of the Merger and adoption of this Amended and
Restated Agreement.
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Section 3.7. Closing of the Company's Transfer Books. At the Effective Date,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall be made thereafter. In the event that,
after the Effective Date, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration
as provided in Sections 3.1(b) and 3.2.
Section 3.8. Assistance in Consummation of the Merger. Each of Parent, Sub
and the Company shall provide all reasonable assistance to, and shall
cooperate with, each other to bring about the consummation of the Merger as
soon as possible in accordance with the terms and conditions of this Amended
and Restated Agreement. Parent shall cause Sub to perform all of its
obligations in connection with this Amended and Restated Agreement.
Section 3.9. Closing. The Closing shall take place (i) at the offices of
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022, at 9:00 A.M. local time on the day which is at least one
business day after the day on which the last of the conditions set forth in
Article IX (other than those that can only be fulfilled on the Effective Date)
is fulfilled or waived or (ii) at such other time and place as Parent and the
Company shall agree in writing.
Section 3.10. Transfer Taxes. Parent and Company shall cooperate in the
preparation, execution and filing of all returns, applications or other
documents regarding any real property transfer, stamp, recording, documentary
or other taxes (including, without limitation, any New York State Real Estate
Transfer Tax) and any other fees and similar taxes which become payable in
connection with the Merger other than transfer or stamp taxes payable in
respect of transfers pursuant to Section 3.2(d)(i) (collectively, "Transfer
Taxes"). From and after the Effective Date, Parent shall pay or cause to be
paid, without deduction or withholding from any amounts payable to the holders
of Company Common Stock, all Transfer Taxes.
ARTICLE IV.
Representations and Warranties of Parent
Parent represents and warrants to the Company as follows:
Section 4.1. Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has the corporate power to carry on its business as it is now
being conducted or currently proposed to be conducted.
Section 4.2. Authority Relative to this Agreement. Section Authority
Relative to this Agreement;. Parent has the corporate power to enter into this
Amended and Restated Agreement and to carry out its obligations hereunder. The
execution and delivery of this Amended and Restated Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by Parent's Board of Directors. The Amended and Restated Agreement constitutes
a valid and binding obligation of Parent enforceable in accordance with its
terms except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought. No other corporate proceedings on the part
of Parent are necessary to authorize the Amended and Restated Agreement and
the transactions contemplated hereby. Except as disclosed in Section 4.2 of
the disclosure schedule delivered by Parent to the Company in connection with
this Amended and Restated Agreement (the "Parent Disclosure Schedule"), Parent
is not subject to or obligated under (i) any charter, by-law, indenture or
other loan document provision or (ii) any other contract, license, franchise,
permit, order, decree, concession, lease, instrument, judgment, statute, law,
ordinance, rule or regulation applicable to Parent or any of its subsidiaries
or their respective properties or assets, which would be breached or violated,
or under which there would be a default (with or without notice or lapse of
time, or both), or under which there would arise a right of termination,
cancellation, modification or acceleration of any obligation or the loss of a
material benefit, by its
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executing and carrying out this Amended and Restated Agreement other than, in
the case of clause (ii) only, (A) any breaches, violations, defaults,
terminations cancellations, modifications, accelerations or losses which,
either singly or in the aggregate, has not had, or would not reasonably be
expected to have, a material adverse effect on the business, properties,
assets, condition (financial or otherwise), liabilities or results of
operations of Parent and its subsidiaries taken as a whole (a "Parent Material
Adverse Effect") or prevent the consummation of the transactions contemplated
hereby and (B) the laws and regulations referred to in the next sentence.
Except as disclosed in Section 4.2 of the Parent Disclosure Schedule, or in
connection, or in compliance, with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Exchange
Act, and the corporation, securities or blue sky laws or regulations of the
various states, no filing or registration with, or authorization, consent or
approval of, any public body or authority is necessary for the consummation by
Parent of the Merger or the other transactions contemplated by this Amended
and Restated Agreement other than filings, registrations, authorizations,
consents or approvals the failure of which to make or obtain has not had, or
would not reasonably be expected to have, a Parent Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby or thereby.
Section 4.3. Reports and Financial Statements. Parent has previously
furnished the Company with true and complete copies of its (i) Annual Report
on Form 10-K for the fiscal years ended December 31, 1994, December 31, 1995
and December 31, 1996, as filed with the Securities and Exchange Commission
(the "Commission"), (ii) proxy statements related to all meetings of its
shareholders (whether annual or special) since January 1, 1996, and (iii) all
other reports or registration statements filed by Parent with the Commission
since December 31, 1996, except for preliminary material (in the case of
clauses (ii) and (iii) above) and except for registration statements on Form
S-8 relating to employee benefit plans (clauses (i) through (iii) being
referred to herein collectively as the "Parent SEC Reports"). As of their
respective dates, the Parent SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements included in the Parent SEC Reports: have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes thereto);
present fairly, in all material respects, the financial position of Parent and
its subsidiaries as at the dates thereof and the results of their operations
and cash flows for the periods then ended; and are in all material respects,
in accordance with the books of account and records of the Parent and its
subsidiaries.
Section 4.4. Parent Action. The Board of Directors of Parent (at a meeting
duly called and held) has by the requisite vote of all directors present
determined that the Amended and Restated Agreement is advisable and in the
best interests of Parent and its stockholders.
Section 4.5. Financial Advisor. Parent represents and warrants that, except
for Furman Selz LLC, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger
or the transactions contemplated by this Amended and Restated Agreement based
upon arrangements made by or on behalf of Parent.
Section 4.6. Parent Ownership of Stock. As of the date hereof Parent does
not beneficially own any shares of Company Common Stock.
Section 4.7. No Material Adverse Effect. As of the date of this Amended and
Restated Agreement, except as disclosed in the Parent SEC Reports, Parent is
not aware of any fact which, alone or together with another fact, has had, or
would reasonably be expected to have, a Parent Material Adverse Effect.
Section 4.8. Financial Capability. Parent has, or has available, sufficient
funds to pay the aggregate Merger Consideration payable to the Company's
stockholders on the terms and the subject to the conditions contemplated by
this Amended and Restated Agreement.
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ARTICLE V.
Representations and Warranties of the Company
The Company represents and warrants to Parent and Sub as follows:
Section 5.1. Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to carry on its business as it
is now being conducted or currently proposed to be conducted. The Company is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not have a
material adverse effect on the business, properties, assets, condition
(financial or otherwise), liabilities or results of operations of the Company
and its subsidiaries taken as a whole (a "Company Material Adverse Effect").
Complete and correct copies as of the date hereof of the Certificate of
Incorporation and By-laws of the Company and each of its Significant
Subsidiaries (as defined in Section 5.3) are attached to Section 5.1 of the
disclosure schedule delivered by the Company to Parent prior to execution and
delivery of this Amended and Restated Agreement (the "Company Disclosure
Schedule"). The Certificate of Incorporation and By-laws of the Company are in
full force and effect. The Company is not in violation of any provision of its
Certificate of Incorporation or By-laws.
Section 5.2. Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock, no par value, and
1,000,000 shares of preferred stock, $0.01 par value. As of March 31, 1997,
54,632,577 shares of Company Common Stock were validly issued and outstanding,
fully paid and nonassessable, and no shares of preferred stock were
outstanding and (except for issuances upon the exercise of outstanding
options) there have been no changes in such numbers of shares through the date
hereof. As of the date hereof, there are no bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which the Company's
shareholders may vote issued or outstanding. As of April 12, 1997, except for
(i) options to acquire 5,379,705 shares of Company Common Stock, (ii) shares
of Company Common Stock issuable pursuant to the Company's Employee Stock
Purchase Plan, (iii) preferred stock purchase rights issued pursuant to the
Rights Agreement, dated as of February 24, 1994, between the Company and Bank
of Boston, N.A., as rights agent, as amended (the "Rights Agreement"), and
(iv) as set forth in Section 5.2 of the Company Disclosure Schedule, there are
no options, warrants, calls or other rights, agreements or commitments
presently outstanding obligating the Company to issue, deliver or sell shares
of its capital stock or debt securities, or obligating the Company to grant,
extend or enter into any such option, warrant, call or other such right,
agreement or commitment, and there have been no changes in such numbers
through the date hereof. After the Effective Date, the Surviving Corporation
will have no obligation to issue, transfer or sell any shares of capital stock
of the Company or the Surviving Corporation pursuant to any Company Employee
Benefit Plan (as defined in Section 5.8).
Section 5.3. Subsidiaries. The only Subsidiaries (as defined in Section
11.16) of the Company are disclosed in Section 5.3 of the Company Disclosure
Schedule; provided that there may be excluded from such Schedule any
Subsidiaries that are currently not actively engaged in any business and which
do not, individually and in the aggregate, have material liabilities or
obligations. Each Significant Subsidiary (as such term is defined in Rule 1-02
of Regulation S-X under the Securities Act of 1933, as amended (the
"Securities Act")) ("Significant Subsidiary") of the Company has been named in
the Company SEC Reports (as hereinafter defined). Each Subsidiary of the
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation (except where the failure
to be validly existing and in good standing would not be material to the
business of such Subsidiary) and has the corporate power to carry on its
business as it is now being conducted or currently proposed to be conducted.
Each Subsidiary of the Company is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary except where the failure to be so
qualified, when taken together with all such failures, has not had, or would
not reasonably be expected to have, a Company Material Adverse Effect. Section
5.3 of the Company
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Disclosure Schedule contains, with respect to each Subsidiary of the Company,
its name and jurisdiction of incorporation and, with respect to each
Subsidiary that is not wholly owned, the number of issued and outstanding
shares of capital stock and the number of shares of capital stock owned by the
Company or a Subsidiary. All the outstanding shares of capital stock of each
Subsidiary of the Company are validly issued, fully paid and nonassessable,
and those owned by the Company or by a Subsidiary of the Company are owned
free and clear of any liens, claims or encumbrances. Except as set forth in
Section 5.3 of the Company Disclosure Schedule, there are no existing options,
warrants, calls or other rights, agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of any of
the Subsidiaries of the Company. Except as set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, or as
disclosed in Section 5.3 of the Company Disclosure Schedule and except for
wholly owned subsidiaries which are formed after the date hereof in the
ordinary course of business consistent with past practice, the Company does
not directly or indirectly own any interest in any other corporation,
partnership, joint venture or other business association or entity.
Section 5.4. Authority Relative to this Agreement. The Company has the
corporate power to enter into this Amended and Restated Agreement and to carry
out its obligations hereunder. The execution and delivery of this Amended and
Restated Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Company's Board of Directors. This
Amended and Restated Agreement constitutes a valid and binding obligation of
the Company enforceable in accordance with its terms except as enforcement may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought.
Except for the approval of the holders of a majority of the shares of Company
Common Stock, no other corporate proceedings on the part of the Company are
necessary to authorize this Amended and Restated Agreement and the
transactions contemplated hereby. Except as set forth in Section 5.4 of the
Company Disclosure Schedule, the Company is not subject to or obligated under
(i) any charter, by-law, indenture or other loan document provision or (ii)
any other contract, license, franchise, permit, order, decree, concession,
lease, instrument, judgment, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or their respective
properties or assets which would be breached or violated, or under which there
would be a default (with or without notice or lapse of time, or both), or
under which there would arise a right of termination, cancellation,
modification or acceleration of any obligation or the loss of a material
benefit, by its executing and carrying out this Amended and Restated
Agreement, other than, in the case of clause (ii) only, (A) any breaches,
violations, defaults, terminations, cancellations, modifications,
accelerations or losses which, either singly or in the aggregate, have not
had, or would not reasonably be expected to have, a Company Material Adverse
Effect or prevent the consummation of the transactions contemplated hereby and
(B) the laws and regulations referred to in the next sentence. Except as
disclosed in Section 5.4 of the Company Disclosure Schedule or, with respect
to the Merger or the transactions contemplated thereby, in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act, the
Exchange Act, and the corporation, securities or blue sky laws or regulations
of the various states, no filing or registration with, or authorization,
consent or approval of, any public body or authority is necessary for the
consummation by the Company of the Merger or the other transactions
contemplated hereby, other than filings, registrations, authorizations,
consents or approvals the failure of which to make or obtain has not had, or
would not reasonably be expected to have, a Company Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby.
Section 5.5. Reports and Financial Statements. The Company has previously
furnished Parent with true and complete copies of its (i) Annual Reports on
Form 10-K for the fiscal years ended December 31, 1994, December 31, 1995 and
December 31, 1996, as filed with the Commission, (ii) proxy statements related
to all meetings of its shareholders (whether annual or special) since January
1, 1996 and (iii) all other reports or registration statements filed by the
Company with the Commission since December 31, 1996, except for preliminary
material (in the case of clauses (ii) and (iii) above) and except for
registration statements on Form S-8 relating to employee benefit plans, which
are all the documents that the Company was required to file with the
Commission since that date (clauses (i) through (iii) being referred to herein
collectively as the "Company
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SEC Reports"). As of their respective dates, the Company SEC Reports complied
as to form in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations of
the Commission thereunder applicable to such Company SEC Reports. As of their
respective dates, the Company SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements of the Company included in the Company SEC
Reports comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission
with respect thereto. The financial statements included in the Company SEC
Reports: have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein
or in the notes thereto); present fairly, in all material respects, the
financial position of the Company and its Subsidiaries as at the dates thereof
and the results of their operations and cash flow for the periods then ended;
and are in all material respects, in accordance with the books of account and
records of the Company and its Subsidiaries.
Section 5.6. Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports or as disclosed in Section 5.6 of the Company
Disclosure Schedule, since December 31, 1996, there has not been (i) any
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of
business) individually or in the aggregate that has had, or would reasonably
be expected to have, a Company Material Adverse Effect; (ii) any damage,
destruction or loss, whether or not covered by insurance, which has had, or
would reasonably be expected to have, a Company Material Adverse Effect; (iii)
any entry into any commitment or transaction material to the Company and its
Subsidiaries taken as a whole (including, without limitation, any borrowing or
sale of assets) except in the ordinary course of business consistent with past
practice; (iv) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to its capital
stock; (v) any material change in its accounting principles, practices or
methods; (vi) any repurchase or redemption with respect to its capital stock;
(vii) any split, combination or reclassification of any of the Company's
capital stock or the issuance or authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, shares of the
Company's capital stock; (viii) any grant of or any amendment of the terms of
any option to purchase shares of capital stock of the Company; (ix) any
granting by the Company or any of its Subsidiaries to any director, officer or
employee of the Company or any of its Subsidiaries of (A) any increase in
compensation (other than in the case of employees in the ordinary course of
business consistent with past practice) or (B) any increase in severance or
termination pay; (x) any entry by the Company or any of its Subsidiaries into
any employment, severance, bonus or termination agreement with any director,
officer or employee of the Company or any of its Subsidiaries; or (xi) any
agreement (whether or not in writing), arrangement or understanding to do any
of the foregoing.
Section 5.7. Litigation. Except as disclosed in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 or as disclosed in Section
5.7 of the Company Disclosure Schedule, there is no suit, action or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries which, either alone or in the aggregate, has had or
would reasonably be expected to have a Company Material Adverse Effect, nor is
there any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against the Company or any of its subsidiaries having, or which
would reasonably be expected to have, either alone or in the aggregate, any
such Company Material Adverse Effect.
Section 5.8. Employee Benefit Plans. (a) Section 5.8 of the Company
Disclosure Schedule hereto sets forth a list of all "employee benefit plans",
as defined in Section 3(3) of ERISA, and all other material employee benefit
arrangements or payroll practices, including, without limitation, any such
arrangements or payroll practices providing severance pay, sick leave,
vacation pay, salary continuation for disability, retirement benefits,
deferred compensation, bonus pay, incentive pay, stock options (including
those held by Directors, employees, and consultants), hospitalization
insurance, medical insurance, life insurance, scholarships or tuition
reimbursements, that are maintained by the Company, any Subsidiary of the
Company or any Company ERISA
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Affiliate (as defined below) or to which the Company, any Subsidiary of the
Company or any Company ERISA Affiliate is obligated to contribute thereunder
for current or former employees, independent contractors, consultants and
leased employees of the Company, any Subsidiary of the Company or any Company
ERISA Affiliate (the "Company Employee Benefit Plans").
(b) None of the Company Employee Benefit Plans is a "multiemployer plan", as
defined in Section 4001(a)(3) of ERISA (a "Multiemployer Plan"), and neither
the Company nor any Company ERISA Affiliate presently maintains such a plan.
None of the Company, any Subsidiary or Company ERISA Affiliate (subject to the
knowledge of the Company, in the case of any Subsidiary or Company ERISA
Affiliate acquired by the Company, for periods prior to such acquisition), has
withdrawn in a complete or partial withdrawal from any Multiemployer Plan, nor
has any of them incurred any material liability due to the termination or
reorganization of such a Multiemployer Plan.
(c) No Company Benefit Plan nor the Company has incurred any material
liability or penalty under Section 4975 of the Code or Section 502(i) of
ERISA.
(d) Except as set forth in Section 5.8 of the Company Disclosure Schedule,
the Company does not maintain or contribute to any plan or arrangement which
provides or has any liability to provide life insurance or medical or other
employee welfare benefits to any employee or former employee upon his
retirement or termination of employment, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided.
(e) Except as set forth on Section 5.8 of the Company Disclosure Schedule,
the execution of, and performance of the transactions contemplated in, this
Amended and Restated Agreement will not, either alone or upon the occurrence
of subsequent events, result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee. The only severance agreements or severance policies applicable to
the Company or its Subsidiaries in the event of a change of control of the
Company are the agreements and policies specifically referred to in Section
5.8 of the Company Disclosure Schedule (and, in the case of such agreements,
the form of which is attached to the Company Disclosure Schedule). Each
executive officer of the Company (as such term is defined in Rule 3b-7 under
the Exchange Act) and each of the individuals identified on Section 5.8(e) of
the Company Disclosure Schedule is a party to a non-competition agreement with
the Company or a Significant Subsidiary, as the case may be, and copies of the
forms of such non-competition agreements are attached to Section 5.8 of the
Company Disclosure Schedule.
(f) None of the Company Employee Benefit Plans is a "single employer plan",
as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of
ERISA, and neither the Company nor any Company ERISA Affiliate presently
maintains such a plan. None of the Company, any of its Subsidiaries or any
ERISA Affiliate has any material liability under Section 4062 of ERISA to the
Pension Benefit Guaranty Corporation or to a trustee appointed under Section
4042 of ERISA. None of the Company, any Subsidiary, or any Company ERISA
Affiliate (subject to the knowledge of the Company, in the case of any
Subsidiary or Company ERISA Affiliate acquired by the Company, for periods
prior to such acquisition) has engaged in any transaction described in Section
4069 of ERISA.
(g) Each Company Employee Benefit Plan that is intended to qualify under
Section 401 of the Code, and each trust maintained pursuant thereto, has been
determined to be exempt from federal income taxation under Section 501 of the
Code by the IRS, and, to the Company's knowledge, nothing has occurred with
respect to the operation or organization of any such Company Employee Benefit
Plan and there have been no amendments to any such Company Employee Benefit
Plan that would cause the loss of such qualification or exemption or the
imposition of any material liability, penalty or tax under ERISA or the Code.
(h) Except as set forth on Section 5.8(h) of the Company Disclosure
Schedule, all contributions (including all employer contributions and employee
salary reduction contributions) required to have been made under any
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of the Company Employee Benefit Plans to any funds or trusts established
thereunder or in connection therewith have been made by the due date thereof
and no contributions have been made to the Company Employee Benefit Plans that
would be considered non-deductible under the Code.
(i) There has been no material violation of ERISA or the Code with respect
to the filing of applicable reports, documents and notices regarding the
Company Employee Benefit Plans with the Secretary of Labor or the Secretary of
the Treasury or the furnishing of required reports, documents or notices to
the participants or beneficiaries of the Company Employee Benefit Plans.
(j) True, correct and complete copies of the following documents, with
respect to each of the Company Benefit Plans, have been delivered or made
available to the Parent by the Company: (i) all plans and related trust
documents and any other instruments or contracts under which the Company
Employee Benefit Plans are operated, and amendments thereto; (ii) the Forms
5500 for the past three years and (iii) summary plan descriptions.
(k) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Company's knowledge, threatened, against the
Company Employee Benefit Plans, the assets of any of the trusts under such
plans or the plan sponsor or the plan administrator, or, to the Company's
knowledge, against any fiduciary of the Company Employee Benefit Plans with
respect to the operation of such plans (other than routine benefit claims).
(l) The Company Employee Benefit Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA and
the Code (including rules and regulations thereunder) and other applicable
federal and state laws and regulations.
For purposes of this Amended and Restated Agreement, "Company ERISA
Affiliate" means any business or entity which is a member of the same
"controlled group of corporations," under "common control" or an "affiliated
service group" with an entity within the meanings of Sections 414(b), (c) or
(m) of the Code, or required to be aggregated with the entity under Section
414(o) of the Code, or is under "common control" with the entity, within the
meaning of Section 4001(a)(14) of ERISA, or any regulations promulgated or
proposed under any of the foregoing Sections.
Section 5.9. Labor Matters. Except as set forth in Section 5.9 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
There is no unfair labor practice or labor arbitration proceeding pending or,
to the knowledge of the executive officers of the Company, threatened against
the Company or its Subsidiaries relating to their business, except for any
such proceeding which has not had, or would not reasonably be expected to
have, a Company Material Adverse Effect. To the best knowledge of the Company,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company or any of its Subsidiaries. There is no labor strike,
material slowdown or material work stoppage or lockout actually pending or, to
the best knowledge of the Company, threatened against or affecting the Company
or its Subsidiaries and neither the Company nor any Subsidiary has experienced
any strike, material slowdown or material work stoppage or lockout since
August 1, 1995.
Section 5.10. Company Action. The Board of Directors of the Company (at a
meeting duly called and held) has by the requisite vote of all directors
present (a) determined that the Merger is advisable and fair and in the best
interests of the Company and its shareholders, (b) approved the Merger in
accordance with the provisions of Section 251 of the DGCL, (c) recommended the
approval of this Amended and Restated Agreement and the Merger by the holders
of the Company Common Stock and directed that the Merger be submitted for
consideration by the Company's shareholders at the Company Meeting and (d)
taken all necessary steps to ensure that a Distribution Date (as defined in
the Rights Agreement) has not occurred and will not occur as a result of the
execution and delivery of the Amended and Restated Agreement, the consummation
of the Merger and the
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other transactions contemplated hereby nor will the Rights Agreement otherwise
be applicable or any redemption or other fees be payable in respect thereof.
Section 5.11. Financial Advisor. The Company has received the opinion of
Merrill Lynch & Co. to the effect that, as of the date hereof, the Merger
Consideration is fair to the holders of Company Common Stock from a financial
point of view. The Company represents and warrants that, (i) except for
Merrill Lynch & Co. and Lazard Freres & Co. LLC, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Amended and Restated Agreement based upon arrangements made by or on
behalf of the Company, and (ii) the fees and commissions payable to the
Company's financial advisors, as contemplated by this Section, will not exceed
the aggregate amount set forth in those certain letters, dated December 4,
1996, from Merrill Lynch & Co., and dated as of November 19, 1996, from Lazard
Freres & Co. LLC, in each case to the Company, a copy of each of which is
attached to the Company Disclosure Schedule.
Section 5.12. Compliance with Applicable Laws. The Company and each of its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all courts, administrative agencies or commissions or other
governmental authorities or instrumentalities, domestic or foreign (each, a
"Governmental Entity"), material to the business of the Company or such
Subsidiary, as the case may be, including, without limitation, applicable
state insurance and health commissions, and other Governmental Entities
regulating exclusive provider organizations, preferred provider organizations,
medical utilization review organizations or third-party administrators (the
"Company Permits"). The Company and its Subsidiaries are in compliance in all
material respects with the terms of the Company Permits, except for such
failures to comply which, singly or in the aggregate, would not be material to
the business of the Company or such Subsidiary, as the case may be. Except as
disclosed in the Company SEC Reports filed prior to the date of this Amended
and Restated Agreement or in Section 5.12 of the Company Disclosure Schedule,
the Company and each of its Subsidiaries are in compliance in all material
respects with all laws, including applicable Medicare and Medicaid laws,
ordinances and regulations of any Governmental Entity, including, without
limitation, applicable state insurance and health commissions, and other
Governmental Entities regulating exclusive provider organizations, preferred
provider organizations, medical utilization review organizations or third-
party administrators, except where the failure to comply would not be material
to the business of the Company or such Subsidiary, as the case may be. Except
as disclosed in Section 5.12 of the Company Disclosure Schedule, to the
knowledge of the Company, no investigation or review by any Governmental
Entity, including, without limitation, applicable state insurance and health
commissions, with respect to the Company or any of its Subsidiaries is
pending, or threatened, nor has any Governmental Entity, including, without
limitation, applicable state insurance and health commissions, indicated an
intention to conduct the same, other than those the outcome of which would not
be material to the business of the Company or such Subsidiary, as the case may
be.
Section 5.13. Liabilities. As of the date hereof, except as disclosed in
Section 5.13 of the Company Disclosure Schedule, since the date of the latest
balance sheet of the Company contained in the Company SEC Reports neither the
Company nor any of its Subsidiaries has incurred any material liabilities or
obligations (absolute, accrued, contingent or otherwise) of the type that is
required to be disclosed in the Company SEC Reports (including the financial
statements contained therein), other than liabilities incurred in the ordinary
course of business and liabilities which are disclosed or provided for in the
most recent Company SEC Reports. To the best knowledge of the Company, as of
December 31, 1996, there was no basis for any claim or liability of any nature
against the Company or its Subsidiaries, whether absolute, accrued, contingent
or otherwise, which has had, or would reasonably be expected to have, a
Company Material Adverse Effect, other than as reflected in the Company SEC
Reports or disclosed in Section 5.13 of the Company Disclosure Schedule.
Section 5.14. Taxes. (a) For the purposes of this Amended and Restated
Agreement, the term "Tax" shall include all Federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise and other taxes, duties and assessments of any
nature whatsoever together with all interest, penalties and additions imposed
with respect to such amounts. Each of the Company
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and its subsidiaries has filed all material Tax returns required to be filed
by any of them and has paid (or the Company has paid on its behalf), or has
set up an adequate reserve for the payment of, all Taxes required to be paid
in respect of the periods covered by such returns. The information contained
in such Tax returns is true, complete and accurate in all material respects.
Except as disclosed in Section 5.14 of the Company Disclosure Schedule,
neither the Company nor any Subsidiary of the Company is delinquent in the
payment of any material Tax, assessment or governmental charge, except where
such delinquency has not had, or would not reasonably be expected to have, a
Company Material Adverse Effect. Except as disclosed in Section 5.14 of the
Company Disclosure Schedule, no deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of its Subsidiaries that have
not been finally settled or paid in full, and no requests for waivers of the
time to assess any such Tax are pending. Except as set forth in Section 5.14
of the Company Disclosure Schedule, none of the Company and its Subsidiaries
is obligated, or is reasonably expected to be obligated, to make any payments,
or is a party to any agreement that under certain circumstances would obligate
it, or reasonably be expected to obligate it, to make any payments that will
not be deductible under Code (S) 280G.
Section 5.15. Certain Agreements. Except as disclosed in the Company SEC
Reports filed prior to the date of this Amended and Restated Agreement or in
Section 5.15 of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries is a party to any oral or written contract, agreement or
commitment that would reasonably be expected to have a Company Material
Adverse Effect. Except as disclosed in Section 5.15 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is in default (or
would be in default with notice or lapse of time, or both) under any
indenture, note, credit agreement, loan document, lease, license or other
agreement including, but not limited to, any Company Benefit Plan, whether or
not such default has been waived, which default, alone or in the aggregate
with other such defaults, has had, or would reasonably be expected to have, a
Company Material Adverse Effect. The Company has made available to Parent true
and complete copies of all contracts, agreements and understandings relating
to those clients, the loss of any one of which has had, or would reasonably be
expected to have, a Company Material Adverse Effect.
Section 5.16. Patents, Trademarks, Etc. Except as set forth in Section 5.16
of the Company Disclosure Schedule, the Company and its Subsidiaries owns or
has valid rights to use all patents, trademarks, trade names, service marks,
trade secrets, copyrights and licenses and other proprietary intellectual
property rights and licenses as are material to the businesses of the Company
and its subsidiaries (the "Intellectual Property"), and the Company does not
have any knowledge of any conflict with the rights of the Company and its
Subsidiaries therein or any knowledge of any conflict by them with the rights
of others therein which have had, or would reasonably be expected to have, a
Company Material Adverse Effect. Neither the Merger nor the transactions
contemplated hereby will materially adversely affect the rights of the Company
or any of its Subsidiaries in respect of any of the Intellectual Property.
Section 5.17. No Material Adverse Effect. Except as disclosed in the
Company SEC Reports or in the Company Disclosure Schedule, the Company is not
aware of any fact which, alone or together with another fact, which has had,
or would reasonably be expected to have, a Company Material Adverse Effect.
Section 5.18. Representations Under Purchase Agreements. The Company has
made available to Parent copies of all purchase agreements relating to
acquisitions, including the related disclosure schedules, pursuant to which
the Company has purchased the assets and operations of any other business, in
each such case for a purchase price of in excess of $100 million, within the
three-year period immediately preceding the date hereof ("Purchase
Agreements"). Except with respect to any Purchase Agreements set forth in
Section 5.18 of the Company Disclosure Schedule (for which no representation
or warranty is made under this Section 5.18), to the best knowledge of the
Company, such Purchase Agreements (and the acquisitions of assets and
operations of businesses thereunder), when taken as a whole, have not had, and
would not reasonably be expected to have, a Company Material Adverse Effect.
Section 5.19. Absence Of Certain Business Practices. During the past five
years, none of the Company's officers, employees or agents, nor any other
person acting on behalf of any of them or the Company, has, directly
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or indirectly, given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other person that has had, or
would reasonably be expected to have, a Company Material Adverse Effect.
Section 5.20. Payments Under CCN Agreement. The maximum amount of payment
obligations of the Company under Article I of that certain Acquisition
Agreement, dated as of May 18, 1994, by and among the Company, Community Care
Network, Inc., Alliance Healthcare Foundation and the other individuals named
therein, including any payments made thereunder through the date hereof, will
not exceed $120,000,000. The Company has made payments under Article I of such
agreement through December 31, 1996 in the amount of $58,600,000.
Section 5.21. Billing Practices. The Company has timely complied with its
billing obligations under those contractual arrangements with pharmaceutical
manufacturers pursuant to which it receives payments based upon the volume of
pharmaceuticals the Company manages or purchases from such manufacturers,
except in cases where the failure to timely bill in the past has not affected
in any meaningful manner the Company's ability to collect amounts owed to it
under such contractual arrangements and except as set forth in Section 5.21 of
the Company Disclosure Schedule.
Section 5.22. Conduct of Business by the Company. Except as set forth on
Section 5.22 of the Company Disclosure Schedule, from January 15, 1997 through
the date hereof, the Company has complied with Section 7.1 of the Initial
Agreement.
ARTICLE VI.
Representations and Warranties Regarding Sub
Parent and Sub jointly and severally represent and warrant to the Company as
follows:
Section 6.1 Organization. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Sub has
not engaged in any business since it was incorporated other than in connection
with its organization and the transactions contemplated by this Amended and
Restated Agreement.
Section 6.2. Capitalization. The authorized capital stock of Sub consists of
1,000 shares of Common Stock, par value $.01 per share, 1,000 shares of which
are validly issued and outstanding, fully paid and nonassessable and are owned
by Parent free and clear of all liens, claims and encumbrances.
Section 6.3. Authority Relative to this Agreement. Sub has the corporate
power to enter into this Amended and Restated Agreement and to carry out its
obligations hereunder. The execution and delivery of this Amended and Restated
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by its Board of Directors and sole shareholder, and no
other corporate proceedings on the part of Sub are necessary to authorize this
Amended and Restated Agreement and the transactions contemplated hereby.
Except as referred to herein or in connection, or in compliance, with the
provisions of the HSR Act, the Securities Act, the Exchange Act and the
environmental, corporation, securities or blue sky laws or regulations of the
various states, no filing or registration with, or authorization, consent or
approval of, any public body or authority is necessary for the consummation by
Sub of the Merger or the transactions contemplated by this Amended and
Restated Agreement, other than filings, registrations, authorizations,
consents or approvals the failure to make or obtain would not prevent the
consummation of the transactions contemplated hereby.
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ARTICLE VII.
Conduct of Business Pending the Merger
Section 7.1. Conduct of Business by the Company Pending the Merger. Prior to
the Effective Date, unless Parent shall otherwise agree in writing:
(i) Except as set forth in Section 7.1(i) of the Company Disclosure
Schedule, the Company shall, and shall cause its Subsidiaries to, carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall, and shall
cause its Subsidiaries to, use their reasonable efforts to preserve intact
their present business organizations and preserve their relationships with
customers, suppliers and others having business dealings with them to the
end that their goodwill and on-going businesses shall be unimpaired at the
Effective Date. The Company shall, and shall cause its Subsidiaries to, (a)
maintain insurance coverages and its books, accounts and records in the
usual manner consistent with prior practices; (b) comply in all material
respects with all laws, ordinances and regulations of Governmental Entities
applicable to the Company and its subsidiaries; (c) maintain and keep its
properties and equipment in good repair, working order and condition,
ordinary wear and tear excepted; and (d) perform in all material respects
its obligations under all material contracts and commitments to which it is
a party or by which it is bound;
(ii) Except as set forth in Section 7.1(i) of the Company Disclosure
Schedule and except as required by this Amended and Restated Agreement, the
Company shall not and shall not propose to (A) sell or pledge or agree to
sell or pledge any capital stock owned by it in any of its subsidiaries
(subject to the fiduciary duties of the Company's Board of Directors, as
advised by outside counsel), (B) amend its Certificate of Incorporation or
By-laws, (C) split, combine or reclassify its outstanding capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of
the Company, or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or (D) directly or
indirectly redeem, purchase or otherwise acquire or agree to redeem,
purchase or otherwise acquire any shares of Company capital stock;
(iii) the Company shall not, nor shall it permit any of its Subsidiaries
to, (A) issue, deliver or sell or agree to issue, deliver or sell any
additional shares of, or rights of any kind to acquire any shares of, its
capital stock of any class, any indebtedness having the right to vote on
which the Company's shareholders may vote or any option, rights or warrants
to acquire, or securities convertible into, shares of capital stock other
than issuances of Company Common Stock pursuant to employment agreements as
in effect on the date hereof, the exercise of stock options outstanding on
the date hereof or granted prior to the Effective Date under (x) automatic
grants under the Company's 1991 Non Employee Director Stock Option Plan or
(y) the Company's Employee Stock Purchase Plan; (B) acquire, lease or
dispose or agree to acquire, lease or dispose of any capital assets or any
other assets other than in the ordinary course of business; (C) incur
additional indebtedness or encumber or grant a security interest in any
asset or enter into any other material transaction other than in each case
in the ordinary course of business; (D) acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity
interest in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, except that the Company may create new wholly owned Subsidiaries
in the ordinary course of business consistent with past practice; or (E)
enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(iv) except as disclosed in Section 7.1(iv) of the Company Disclosure
Schedule, the Company shall not, nor shall it permit any of its
Subsidiaries to, except as required to comply with applicable law and
except as provided in Section 3.5 or Section 8.3 hereof, enter into any new
(or amend any existing) Company Benefit Plan or any new (or amend any
existing) employment, severance or consulting agreement, grant any general
increase in the compensation of directors, officers or employees (including
any such increase pursuant to any bonus, pension, profit-sharing or other
plan or commitment) or grant any increase in the compensation payable or to
become payable to any director, officer or employee, except in any of the
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foregoing cases in accordance with pre-existing contractual provisions or
in the ordinary course of business consistent with past practice; and
(v) the Company shall not, nor shall it permit any of its Subsidiaries
to, make any investments in non-investment grade securities exceeding
$1,000,000 in the aggregate; provided, however, that the Company will be
permitted to create new wholly owned Subsidiaries in the ordinary course of
business;
provided that the foregoing shall not prohibit the Company from paying cash
bonuses or awards, or making other awards to the extent set forth in Section
7.1A of the Company Disclosure Schedule, to its employees as compensation for
services rendered to the Company in 1996 under the Company Benefit Plans
consistent with past practice.
Section 7.2. Conduct of Business by Parent Pending the Merger. Prior to the
Effective Date, unless the Company shall otherwise agree in writing or except
as otherwise required by this Amended and Restated Agreement, Parent shall,
and shall cause its Subsidiaries to, carry on their respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted except where the failure to so act would not adversely
affect Parent's ability to pay the aggregate Merger Consideration payable to
the Company's stockholders.
Section 7.3. Conduct of Business of Sub. During the period from the date of
this Amended and Restated Agreement to the Effective Date, Sub shall not
engage in any activities of any nature except as provided in or contemplated
by this Amended and Restated Agreement.
ARTICLE VIII.
Additional Agreements
Section 8.1. Access and Information. Each of the Company and Parent and
their respective subsidiaries shall afford to the other and to the other's
accountants, counsel and other representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree)
throughout the period prior to the Effective Date to all of its properties,
books, contracts, commitments, records and personnel and, during such period,
each shall furnish promptly to the other (i) a copy of each report, schedule
and other document filed or received by it pursuant to the requirements of
federal or state securities laws, and (ii) all other information concerning
its business, properties and personnel as the other may reasonably request.
Each of the Company and Parent shall hold, and shall cause their respective
employees and agents to hold, in confidence all such information in accordance
with the terms of the Confidentiality Agreements dated November 8, 1996
between Parent and the Company.
Section 8.2. Proxy Statement. Parent and the Company shall cooperate and
promptly prepare, and the Company shall file with the Commission as soon as
practicable, a proxy statement with respect to the Company Meeting (the "Proxy
Statement"), which shall comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder. The Company shall use all reasonable efforts, and Parent will
cooperate with the Company, to have the Proxy Statement cleared by the
Commission as promptly as practicable. The Company shall, as promptly as
practicable, provide copies of any written comments received from the
Commission with respect to the Proxy Statement to Parent and advise Parent of
any oral comments with respect to the Proxy Statement received from the
Commission. Parent agrees that none of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement and each amendment or supplement thereto, at the time of mailing
thereof and at the time of the Company Meeting, will contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company agrees
that none of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the Proxy Statement and each
amendment or supplement thereto, at the time of mailing thereof and at the
time of the Company Meeting, will contain an untrue statement
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of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. For purposes of the
foregoing, it is understood and agreed that information concerning or related
to Parent will be deemed to have been supplied by Parent and information
concerning or related to the Company and the Company Meeting shall be deemed
to have been supplied by the Company. The Company will provide Parent with a
reasonable opportunity to review and comment on any amendment or supplement to
the Proxy Statement prior to filing such with the Commission, and will provide
Parent with a copy of all such filings made with the Commission. No amendment
or supplement to the information supplied by Parent for inclusion in the Proxy
Statement shall be made without the approval of Parent, which approval shall
not be unreasonably withheld or delayed.
Section 8.3. Employee Matters. As of the Effective Date, the employees of
the Company and each Subsidiary shall continue employment with the Surviving
Corporation and the Subsidiaries, respectively, in the same positions and at
the same level of wages and/or salary and without having incurred a
termination of employment or separation from service; provided, however,
except as may be specifically required by applicable law or any contract, the
Surviving Corporation and the Subsidiaries shall not be obligated to continue
any employment relationship with any employee for any specific period of time.
Except with respect to the Option Plans to be terminated by the Company as
provided by Section 3.5(a) hereof, as of the Effective Date, the Surviving
Corporation shall be the sponsor of the Company Employee Benefit Plans
sponsored by the Company immediately prior to the Effective Date, and Parent
shall cause the Surviving Corporation and the Subsidiaries to satisfy all
obligations and liabilities under such Company Employee Benefit Plans. As soon
as practicable after the Effective Date, Parent shall provide benefits to
employees of Company and its Subsidiaries which are substantially similar to
the benefits provided to similarly situated employees of Parent and its
Subsidiaries. To the extent any employee benefit plan, program or policy of
the Parent or its affiliates is made available to the employees of the
Surviving Corporation or its Subsidiaries: (i) service with the Company and
the Subsidiaries by any employee prior to the Effective Date shall be credited
for eligibility and vesting purposes under such plan, program or policy, but
not for benefit accrual purposes, and (ii) with respect to any welfare benefit
plans to which such employees may become eligible, Parent shall cause such
plans to provide credit for any co-payments or deductibles by such employees
and waive all pre-existing condition exclusions and waiting periods, other
than limitations or waiting periods that have not been satisfied under any
welfare plans maintained by the Company and the Subsidiaries for their
employees prior to the Effective Date.
Section 8.4. Indemnification. (a) From and after the Effective Date, Parent
shall indemnify, defend and hold harmless the officers, directors and
employees of the Company and its subsidiaries who were such at any time prior
to the Effective Date (the "Indemnified Parties") from and against all losses,
expenses, claims, damages or liabilities arising out of the transactions
contemplated by this Amended and Restated Agreement to the fullest extent
permitted or required under applicable law, including without limitation the
advancement of expenses. Parent agrees that all rights to indemnification
existing in favor of the directors, officers or employees of the Company as
provided in the Company's Certificate of Incorporation or By-Laws, as in
effect as of the date hereof, with respect to matters occurring through the
Effective Date, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Date. Parent
agrees to cause the Surviving Corporation to maintain in effect for not less
than three years after the Effective Date the current policies of directors'
and officers' liability insurance maintained by the Company with respect to
matters occurring on or prior to the Effective Date; provided, however, that
the Surviving Corporation may substitute therefor policies of at least the
same coverage (with carriers comparable to the Company's existing carriers)
containing terms and conditions which are no less advantageous to the
Indemnified Parties; and provided, further, that Parent shall not be required
in order to maintain or procure such coverage to pay an annual premium in
excess of 200% of the current annual premium paid by the Company for its
existing coverage (the "Cap"); and provided, further, that if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual
premium in excess of the Cap, Parent shall only be required to obtain as much
coverage as can be obtained by paying an annual premium equal to the Cap.
(b) In the event that any action, suit, proceeding or investigation relating
hereto or to the transactions contemplated by this Amended and Restated
Agreement is commenced, whether before or after the Effective
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Date, the parties hereto agree to cooperate and use their respective
reasonable efforts to vigorously defend against and respond thereto.
Section 8.5. HSR Act. The Company and Parent shall use their best efforts to
file as soon as practicable notifications required under the HSR Act (and not
heretofore obtained) in connection with the Merger and the transactions
contemplated hereby, and to respond as promptly as practicable to any
inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
Section 8.6. Additional Agreements. (a) Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Amended and Restated Agreement, including using all reasonable efforts to
obtain all necessary waivers, consents and approvals, to effect all necessary
registrations and filings (including, but not limited to, filings under the
HSR Act and with all applicable Governmental Entities) and to lift any
injunction to the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible).
(b) In case at any time after the Effective Date any further action is
necessary or desirable to carry out the purposes of this Amended and Restated
Agreement, the proper officers and/or directors of Parent, the Company and the
Surviving Corporation shall take all such necessary action.
Section 8.7. Alternative Proposals. Prior to the Effective Date, the Company
agrees (a) that neither it nor any of its Subsidiaries shall, and it shall
direct and use its best efforts to cause its officers, directors, employees,
agents and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a
merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, the Company or any of its Significant Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Alternative Proposal")
or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
an Alternative Proposal, or release any third party from any obligations under
any existing standstill agreement or arrangement relating to any Alternative
Proposal, or otherwise facilitate any effort or attempt to make or implement
an Alternative Proposal; (b) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing, and it will
take the necessary steps to inform the individuals or entities referred to
above of the obligations undertaken in this Section 8.7; and (c) that it will
notify Parent immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it; provided,
however, that nothing contained in this Section 8.7 shall prohibit the Board
of Directors of the Company from (i) furnishing information to or entering
into discussions or negotiations with, any person or entity that makes an
unsolicited bona fide proposal to acquire the Company pursuant to a merger,
consolidation, share exchange, purchase of a substantial portion of assets,
business combination or other similar transaction, if, and only to the extent
that, (A) the Board of Directors of the Company determines in good faith that
such action is required for the Board of Directors to comply with its
fiduciary duties to stockholders imposed by law, (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company provides written notice to Parent to the effect that it
is furnishing information to, or entering into discussions or negotiations
with, such person or entity and (C) the Company keeps Parent promptly informed
of the status and all material terms and conditions of any such discussions or
negotiations (including identities of parties) and, if any such proposal or
inquiry is in writing, furnishes a copy of such proposal or inquiry to Parent
as soon as practicable after the receipt thereof; and (ii) to the extent
applicable, complying with Rule 14e-2 promulgated
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under the Exchange Act with regard to an Alternative Proposal. Nothing in this
Section 8.7 shall (x) permit the Company to terminate this Amended and
Restated Agreement (except as specifically provided in Article X hereof), (y)
permit the Company to enter into any agreement with respect to an Alternative
Proposal during the term of this Amended and Restated Agreement (it being
agreed that during the term of this Amended and Restated Agreement, the
Company shall not enter into any agreement with any person that provides for,
or in any way facilitates, an Alternative Proposal (other than a
confidentiality agreement in customary form)), or (z) affect any other
obligation of the Company under this Amended and Restated Agreement.
Section 8.8. Advice of Changes; SEC Filings. The Company shall confer on a
regular basis with Parent on operational matters. Parent and the Company shall
promptly advise each other orally and in writing of any change or event that
has had, or could reasonably be expected to have, a Company Material Adverse
Effect or a Parent Material Adverse Effect, as the case may be. The Company
and Parent shall promptly provide each other (or their respective counsel)
copies of all filings made by such party with the Commission or any other
state or federal Governmental Entity in connection with this Amended and
Restated Agreement and the transactions contemplated hereby.
Section 8.9. Restructuring of Merger. Upon the mutual agreement of Parent
and the Company, the Merger shall be restructured in the form of a forward
subsidiary merger of the Company into Sub, with Sub being the surviving
corporation, or as a merger of the Company into Parent, with Parent being the
surviving corporation. In such event, this Amended and Restated Agreement
shall be deemed appropriately modified to reflect such form of merger.
Section 8.10. Other Matters. The Company hereby agrees that its covenants,
representations and warranties (including the Company Disclosure Schedule to
the extent it relates thereto) in this Amended and Restated Agreement, insofar
as they relate to its Subsidiaries, are made as though Value Oncology
Sciences, Inc. ("VOS") were a Subsidiary; provided that (i) this Section 8.10
shall not be deemed to require the Company to cause VOS to take any action or
to refrain from taking any action and (ii) the representations and warranties
made in this Amended and Restated Agreement, insofar as they would relate to
VOS, shall be deemed to be made to the best knowledge of the Company.
ARTICLE IX.
Conditions Precedent
Section 9.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the following conditions:
(a) This Amended and Restated Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote of the
holders of the Company Common Stock.
(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order by any federal
or state court in the United States of competent jurisdiction which
prevents the consummation of the Merger shall have been issued and remain
in effect (each party agreeing to use its reasonable efforts to have any
such injunction lifted).
(d) 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 Amended and Restated Agreement shall have been obtained or made,
except for filings in connection with the Merger and any other documents
required to be filed after the Effective Date and except where the failure
to have obtained or made any such consent, authorization, order, approval,
filing or registration would not have a Material Adverse Effect on the
business of Parent and the Company (and their respective Subsidiaries),
taken as a whole, following the Effective Date.
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(e) All consents, authorizations, orders and approvals required under
insurance holding company statutes or similar statutes regulating managed
care or insurance organizations required in connection with the execution,
delivery and performance of this Amended and Restated Agreement shall have
been obtained.
Section 9.2. Condition to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the condition, unless
waived by the Company, that Parent and Sub shall have performed in all
material respects their agreements contained in this Amended and Restated
Agreement required to be performed on or prior to the Effective Date, and the
representations and warranties of Parent and Sub contained in this Amended and
Restated Agreement shall be true in all material respects when made and on and
as of the Effective Date as if made on and as of such date (except to the
extent they relate to a particular date), except as expressly contemplated or
permitted by this Amended and Restated Agreement, and the Company shall have
received a certificate of the President or Chief Executive Officer or a Vice
President of Parent and Sub to that effect.
Section 9.3. Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the additional
following conditions, unless waived by Parent:
(a) The Company shall have performed in all material respects its
agreements contained in this Amended and Restated Agreement required to be
performed on or prior to the Effective Date, and the representations and
warranties of the Company contained in this Amended and Restated Agreement
shall be true in all material respects when made and on and as of the
Effective Date as if made on and as of such date (except to the extent they
relate to a particular date), except as expressly contemplated or permitted
by this Amended and Restated Agreement, and Parent and Sub shall have
received a certificate of the President or Chief Executive Officer or a
Vice President of the Company to that effect; provided, however, that a
representation and warranty shall be deemed to be true and correct as of
the Effective Date if such representation and warranty would have been true
and correct as of such date but for the occurrence of an event referred to
in Section 9.3(a) of the Company Disclosure Schedule.
(b) From the date of this Amended and Restated Agreement through the
Effective Date, there shall not have occurred any change (other than a
change resulting from events referred to in Section 9.3(a) of the Company
Disclosure Schedule), individually or together with other changes, that has
had, or would reasonably be expected to have, a material adverse change in
the financial condition, business, results of operations or prospects of
the Company and its Subsidiaries, taken as a whole.
ARTICLE X.
Termination, Amendment and Waiver
Section 10.1. Termination by Mutual Consent. This Amended and Restated
Agreement may be terminated and the Merger may be abandoned at any time prior
to the Effective Date, before or after the approval of this Amended and
Restated Agreement by the stockholders of the Company, by the mutual consent
of Parent and the Company.
Section 10.2. Termination by Either Parent or the Company. This Amended and
Restated Agreement may be terminated and the Merger may be abandoned by action
of the Board of Directors of either Parent or the Company if (a) the Merger
shall not have been consummated by August 31, 1997, or (b) the approval of the
Company's stockholders required by Section 3.6 shall not have been obtained at
a meeting duly convened therefor or at any adjournment or postponement
thereof, or (c) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Amended and
Restated Agreement and such order, decree, ruling or other action shall have
become final and non-appealable; provided, that the party seeking to
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<PAGE>
terminate this Amended and Restated Agreement pursuant to this clause (c)
shall have used all reasonable efforts to remove such injunction, order or
decree; and provided, in the case of a termination pursuant to clause (a)
above, that the terminating party shall not have breached in any material
respect its obligations under this Amended and Restated Agreement in any
manner that shall have proximately contributed to the failure to consummate
the Merger by August 31, 1997.
Section 10.3. Termination by the Company. This Amended and Restated
Agreement may be terminated and the Merger may be abandoned at any time prior
to the Effective Date, before or after the adoption and approval by the
stockholders of the Company referred to in Section 3.6, by action of the Board
of Directors of the Company, if (a) in the exercise of its good faith judgment
as to fiduciary duties to its stockholders imposed by law, the Board of
Directors of the Company determines that such termination is required by
reason of an Alternative Proposal being made, or (b) there has been a breach
by Parent or Sub of any representation or warranty contained in this Amended
and Restated Agreement which would have or would be reasonably likely to have
a Parent Material Adverse Effect, or (c) there has been a material breach of
any of the covenants or agreements set forth in this Amended and Restated
Agreement on the part of Parent, which breach is not curable or, if curable,
is not cured within 30 days after written notice of such breach is given by
the Company to Parent.
Section 10.4. Termination by Parent. This Amended and Restated Agreement may
be terminated and the Merger may be abandoned at any time prior to the
Effective Date, by action of the Board of Directors of Parent, if (a) the
Board of Directors of the Company shall have withdrawn or modified in a manner
adverse to Parent its approval or recommendation of this Amended and Restated
Agreement or the Merger or shall have recommended an Alternative Proposal to
the Company stockholders, (b) there has been a breach by the Company of any
representation or warranty contained in this Amended and Restated Agreement
which has had, or would be reasonably expected to have, a Company Material
Adverse Effect, (c) there has been a material breach of any of the covenants
or agreements set forth in this Amended and Restated Agreement on the part of
the Company, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by Parent to the Company
or (d) a change or changes having the effect specified in Section 9.3(b) shall
have occurred.
Section 10.5. Effect of Termination and Abandonment. (a) In the event that
(x) any person shall have made an Alternative Proposal and thereafter this
Amended and Restated Agreement is terminated either by the Company pursuant to
Section 10.3(a) or by either party pursuant to Section 10.2(b), (y) the Board
of Directors of the Company shall have withdrawn or modified in a manner
adverse to Parent its approval or recommendation of this Amended and Restated
Agreement or the Merger or shall have recommended an Alternative Proposal to
the Company stockholders and Parent shall have terminated this Amended and
Restated Agreement pursuant to Section 10.4(a) or (z) any person shall have
made an Alternative Proposal and thereafter this Amended and Restated
Agreement is terminated for any reason other than those set forth in clauses
(x) or (y) above and within 12 months thereafter any Alternative Proposal
shall have been consummated, then the Company shall promptly, but in no event
later than two days after such termination, pay Parent a fee of $45,000,000,
which amount shall be payable by wire transfer of same day funds. The Company
acknowledges that the agreements contained in this Section 10.5(a) are an
integral part of the transactions contemplated in this Amended and Restated
Agreement, and that, without these agreements, Parent and Sub would not enter
into this Amended and Restated Agreement; accordingly, if the Company fails to
promptly pay the amount due pursuant to this Section 10.5(a), and, in order to
obtain such payment, Parent or Sub commences a suit which results in a
judgment against the Company for the fee set forth in this Section 10.5(a),
the Company shall pay to Parent its costs and expenses (including attorneys'
fees) in connection with such suit, together with interest on the amount of
the fee at the rate of 12% per annum.
(b) In the event of termination of this Amended and Restated Agreement and
the abandonment of the Merger pursuant to this Article X, all obligations of
the parties hereto shall terminate, except the obligations of the parties
pursuant to this Section 10.5 and Section 11.3 and except for the provisions
of Sections 11.5, 11.6,
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11.7, 11.9, 11.11, 11.12 and 11.15. Moreover, in the event of termination of
this Amended and Restated Agreement pursuant to Section 10.2, 10.3 or 10.4,
nothing herein shall prejudice the ability of the non-breaching party from
seeking damages from any other party for any breach of this Amended and
Restated Agreement, including without limitation, attorneys' fees and the
right to pursue any remedy at law or in equity; provided that following
termination of this Amended and Restated Agreement upon the occurrence of any
of the events described in clauses (x), (y) or (z) of Section 10.5, and
provided that the fee payable pursuant to Section 10.5 shall after such
termination be paid, neither Parent nor Sub shall (i) have any rights
whatsoever in respect of or in connection with the representations and
warranties of the Company, (ii) assert or pursue in any manner, directly or
indirectly, any claim or cause of action based in whole or in part upon
alleged tortious or other interference with rights under this Amended and
Restated Agreement against any entity or person submitting an Acquisition
Proposal or (iii) assert or pursue in any manner, directly or indirectly, any
claim or cause of action against the Company or any of its officers or
directors based in whole or in part upon its or their receipt, consideration,
recommendation, or approval of an Acquisition Proposal.
Section 10.6. Extension; Waiver. At any time prior to the Effective Date,
any party hereto, by action taken by its Board of Directors, may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XI.
General Provisions
Section 11.1 Non-Survival of Representations, Warranties and Agreements. All
representations and warranties set forth in this Amended and Restated
Agreement shall terminate at the Effective Date. All covenants and agreements
set forth in this Amended and Restated Agreement shall survive in accordance
with their terms.
Section 11.2. Notices. All notices or other communications under this
Amended and Restated Agreement shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person,
by cable, telegram, telex or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Company:
Value Health, Inc.
22 Waterville Road
Avon, CT 06001
Attention: General Counsel
Telecopy No.: (203) 676-8695
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Michael A. Schwartz, Esq.
Telecopy No.: (212) 821-8111
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<PAGE>
If to Parent or Sub:
Columbia/HCA Healthcare Corporation
One Park Plaza
Nashville, TN 37203
Attention: General Counsel
Telecopy No.: (615) 320-2496
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Jeffrey Bagner
Telecopy No.: (212) 859-4000
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section.
Section 11.3. Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Amended and Restated
Agreement and the transactions contemplated by this Amended and Restated
Agreement shall be paid by the party incurring such expenses, whether or not
the Merger is consummated except as expressly provided herein and except that
(a) the filing fee in connection with the HSR Act filing, (b) the filing fee
in connection with the filing of the Registration Statement on Form S-4 (as
contemplated by the Initial Agreement) (the "Form S-4") or Proxy Statement
with the Commission and (c) the expenses incurred in connection with printing
and mailing the Proxy Statement and printing the Form S-4, shall be shared
equally by the Company and Parent.
Section 11.4. Publicity. So long as this Amended and Restated Agreement is
in effect, Parent, Sub and the Company agree to consult with each other in
issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Amended and Restated
Agreement, and none of them shall issue any press release or make any public
statement prior to such consultation, except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
exchange. The commencement of litigation relating to this Amended and Restated
Agreement or the transactions contemplated hereby or any proceedings in
connection therewith shall not be deemed a violation of this Section 11.4.
Section 11.5. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Amended and Restated Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Amended and Restated Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section 11.6. Assignment; Binding Effect. Neither this Amended and Restated
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Amended and Restated Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Amended and
Restated Agreement to the contrary, nothing in this Amended and Restated
Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Amended and
Restated Agreement; provided that the Indemnified Parties shall be third-party
beneficiaries of Parent's agreement contained in Section 8.4 hereof.
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<PAGE>
Section 11.7. Entire Agreement. This Amended and Restated Agreement, the
Exhibits, the Company Disclosure Schedule, the Parent Disclosure Schedule, the
Confidentiality Agreement dated November 8, 1996, between the Company and
Parent and any documents delivered by the parties in connection herewith and
therewith constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Amended and Restated Agreement shall be
binding upon any party hereto unless made in writing and signed by all parties
hereto.
Section 11.8. Amendment. This Amended and Restated Agreement may be amended
by the parties hereto, by action taken by their respective Boards of
Directors, at any time before or after approval of matters presented in
connection with the Merger by the stockholders of the Company, but after any
such stockholder approval, no amendment shall be made which by law requires
the further approval of stockholders without obtaining such further approval.
This Amended and Restated Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 11.9. Governing Law. This Amended and Restated Agreement shall be
governed by and construed in accordance with the laws of the State of
Delaware, without regard to its rules of conflict of laws.
Section 11.10. Counterparts. This Amended and Restated Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
Section 11.11 Headings and Table of Contents. Headings of the Articles and
Sections of this Amended and Restated Agreement and the Table of Contents are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
Section 11.12 Interpretation. In this Amended and Restated Agreement, unless
the context otherwise requires, words describing the singular number shall
include the plural and vice versa, and words denoting any gender shall include
all genders and words denoting natural persons shall include corporations and
partnerships and vice versa.
Section 11.13 Waivers. At any time prior to the Effective Date, the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors, may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
documents delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party. Except as provided in
this Amended and Restated Agreement, no action taken pursuant to this Amended
and Restated Agreement, including, without limitation, any investigation by or
on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Amended and Restated Agreement. The
waiver by any party hereto of a breach of any provision hereunder shall not
operate or be construed as a waiver of any prior or subsequent breach of the
same or any other provision hereunder.
Section 11.14. Incorporation of Exhibits. The Company Disclosure Schedule,
the Parent Disclosure Schedule and all Exhibits attached hereto and referred
to herein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
Section 11.15 Severability. Any term or provision of this Amended and
Restated Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Amended and Restated Agreement or
affecting the validity or enforceability of any of the terms or provisions
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of this Amended and Restated Agreement in any other jurisdiction. If any
provision of this Amended and Restated Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 11.16 Subsidiaries. As used in this Amended and Restated Agreement,
the word "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, of
which such party directly or indirectly owns or controls at least a majority
of the securities or other interests having by their terms ordinary voting
power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization, or
any organization of which such party is a general partner.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Amended and
Restated Agreement to be signed by their respective officers thereunder duly
authorized all as of the date first written above.
Columbia/HCA Healthcare Corporation
/s/ Richard L. Scott
-------------------------------------
By: Richard L. Scott
Title: Chairman of the Board and
Chief Executive Officer
CVH Acquisition Corporation
/s/ Stephen T. Braun
-------------------------------------
By: Stephen T. Braun
Title: Vice President
Value Health, Inc.
/s/ Robert E. Patricelli
-------------------------------------
By: Robert E. Patricelli
Title: Chairman of the Board and
Chief Executive Officer
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<PAGE>
INVESTMENT BANKING
[LOGO OF MERRILL LYNCH APPEARS HERE]
Corporate and
Institutional
Client Group
World Financial
Center
North Tower
New York, New York
10281-1330
212 449 1000
April 14, 1997
Board of Directors
Value Health, Inc.
22 Waterville Road
Avon, Connecticut 06001
Members of the Board:
You have informed us that Value Health, Inc. (the "Company"), Columbia/HCA
Healthcare Corporation (the "Acquiror"), and a newly formed wholly owned
subsidiary of the Acquiror (the "Acquisition Sub") propose to enter into an
Amended and Restated Agreement and Plan of Merger dated as of April 14, 1997
(the "Agreement") pursuant to which the Acquisition Sub will be merged with
and into the Company in a transaction (the "Merger") in which each outstanding
share of common stock, no par value, of the Company (the "Company Shares") not
owned directly or indirectly by the Acquiror or the Company will be converted
into the right to receive $20.50 in cash per share (the "Merger
Consideration").
You have asked us whether, in our opinion, the Merger Consideration is fair
to the holders of the Company Shares (other than the Acquiror and its
affiliates) from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
that we deemed relevant relating to the Company and the Acquiror and
the respective industries in which they operate;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of the Company furnished to us by the Company;
(3) Conducted discussions with members of senior management and
representatives of the Company concerning the foregoing, including its
businesses and prospects;
(4) Reviewed the historical market prices and trading activity for the
Company Shares and compared them with those of certain publicly traded
companies that we deemed to be comparable to the Company;
(5) Compared the historical and projected results of operations of the
Company with those of certain companies that we deemed to be comparable
to the Company;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other mergers and acquisitions that we deemed to be
relevant;
(7) Reviewed a draft of the Agreement in the form provided to us and have
assumed that the final form of such agreement will not vary in any
manner that is material to our analysis;
(8) Reviewed a copy of a letter dated April 14, 1997 to the Company from
MedPartners, Inc. ("MedPartners") proposing to acquire the Company,
subject to certain conditions, in a merger transaction with a fixed
exchange ratio of 1.112 shares of MedPartners common stock for each
Company Share (the "MedPartners Proposal"); and
(9) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
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In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available and have further
relied on the assurances of management of the Company that they are not aware
of any facts that would make such information inaccurate or misleading. We have
not assumed any responsibility for independently verifying such information and
we have not undertaken an independent evaluation or appraisal of any of the
assets or liabilities of the Company or been furnished with any such evaluation
or appraisal, nor have we conducted a physical inspection of the properties or
facilities of the Company. With respect to the financial forecast information
furnished to or discussed with us by the Company or its representatives, we
have assumed that they have been reasonably prepared and reflect the best
currently available estimates and judgment of the Company's management as to
the expected future financial performance of the Company and that in all
material respects they will be realized in the amounts and time indicated
thereby. We express no view as to such financial forecast information or the
assumptions on which they were based.
Our opinion is necessarily based upon market, economic and other conditions
as they exist on, and can be evaluated as of, the date hereof. Our opinion does
not address the merits of the underlying decision by the Company to engage in
the Merger and does not constitute a recommendation to any shareholder as to
how such shareholder should vote on the proposed Merger or any matter related
thereto.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of the Company. Although we have considered the MedPartners Proposal
in rendering this opinion, we express no opinion as to the relative value of
the Merger Consideration as compared to the consideration that may be proposed
to be delivered pursuant to any other transaction proposal which the Company
has received or may receive, including the MedPartners Proposal.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. In addition, the Company has
agreed to indemnify us for certain liabilities arising out of our engagement.
We have, in the past, provided financial advisory and/or financing services to
the Company and/or the Acquiror and may continue to do so and have received,
and may receive, fees for the rendering of such services. In the ordinary
course of our business, we may actively trade in the securities of the Company
and the Acquiror (and anticipate trading after the Merger in the securities of
Acquiror) for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
On the basis of and subject to the foregoing, we are of the opinion, as of
the date hereof, that the Merger Consideration is fair from a financial point
of view to the holders of the Company Shares other than the Acquiror and its
affiliates.
This opinion is for the use and benefit of the Board of Directors of the
Company in its evaluation of the Merger and shall not be used for any other
purpose without our prior written consent.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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APPENDIX C
DELAWARE GENERAL CORPORATION LAW
SECTION 262
262 APPRAISAL RIGHTS--
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S) 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the words
"stock" and "share" mean and include what is ordinarily meant by those words
and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251 (other than a merger effected pursuant to (S)
251(g) of this title), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)(S)
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
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date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as
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the Court may direct. Payment shall be so made to each such stockholder, in
the case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 299, L.
'96, eff. 2-1-96 and Ch. 349, L. '96, eff. 7-1-96.)
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PRELIMINARY COPY VALUE HEALTH, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS OF VALUE HEALTH, INC.
, 1997
The undersigned stockholder of Value Health, Inc. ("Value Health") hereby
appoints [Robert E. Patricelli] and [Steven J. Shulman], and each of them, the
lawful proxies of the undersigned, with full powers of substitution and
revocation, to vote on behalf of the undersigned all shares of Value Health
common stock, no par value (the "Value Health Common Stock"), which the
undersigned is entitled to vote at the special meeting of the stockholders of
Value Health to be held on , 1997 (the "Special Meeting"), at 10:00 a.m.
at the Avon Old Farms Hotel, Routes 10 and 44, Avon, Connecticut 06001, and at
any and all adjournments and postponements thereof, upon all matters presented
before the Special Meeting, and does hereby ratify and confirm all that said
proxies or their substitutes may lawfully do by virtue hereof. The undersigned
hereby acknowledges receipt of the Notice of Special Meeting of Stockholders,
and hereby instructs said proxies to vote said shares of Value Health Common
Stock as indicated hereon.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
STOCKHOLDER. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, EXECUTED PROXIES WILL BE
VOTED FOR APPROVAL AND ADOPTION OF THE AMENDED AND RESTATED MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, THE ADJOURNMENT PROPOSAL AND IN THE
DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED POSTAGE-
PAID ENVELOPE.
(1) APPROVE AND ADOPT THE AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER,
DATED AS OF APRIL 14, 1997 (THE "MERGER AGREEMENT"), BY AND AMONG COLUMBIA/HCA
HEALTHCARE CORPORATION ("COLUMBIA"), CVH ACQUISITION CORPORATION, A WHOLLY
OWNED SUBSIDIARY OF COLUMBIA ("COLUMBIA SUB"), AND VALUE HEALTH, WHEREBY (I)
COLUMBIA SUB WILL MERGE WITH AND INTO VALUE HEALTH, WHICH WILL THEREUPON BECOME
A SUBSIDIARY OF COLUMBIA (THE "MERGER"), AND (II) EACH STOCKHOLDER OF VALUE
HEALTH WILL RECEIVE FOR EACH SHARE OF VALUE HEALTH COMMON STOCK HELD AS OF THE
EFFECTIVE DATE OF THE MERGER, $20.50 IN CASH.
FOR AGAINST ABSTAIN
[_] [_] [_]
(2) APPROVE AN ADJOURNMENT OF THE SPECIAL MEETING TO ANOTHER TIME AND/OR PLACE
FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES IN THE EVENT THAT THERE ARE
NOT SUFFICIENT VOTES AT THE TIME OF THE SPECIAL MEETING TO APPROVE THE MERGER
AGREEMENT.
FOR AGAINST ABSTAIN
[_] [_] [_]
THE BOARD OF DIRECTORS OF VALUE HEALTH UNANIMOUSLY RECOMMENDS A VOTE FOR THESE
PROPOSALS.
Dated ________________________, 1997
____________________________________
Signature of Stockholder
Name: ______________________________
Title: _____________________________
____________________________________
Signature of Stockholder (if held
jointly)
Name: ______________________________
Title: _____________________________
NOTE: Please sign exactly as your name appears on the stock certificate. If
joint owners, both owners should sign this Proxy. When signing as attorney,
executor, administrator, trustee, guardian or corporate officer, please give
your full title as such. If a corporation, please sign in full corporate name
by the duly authorized officer. If a partnership, please sign in partnership
name by an authorized person.
