<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: January 28, 1997
Value Health, Inc.
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(Exact Name of Registrant as specified in its Charter)
Delaware 0-19039 06-1194838
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of corporation) Identification No.)
22 Waterville Road
Avon, Connecticut 06001
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (860) 678-3400
----------------------
N/A
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. OTHER EVENTS.
On January 15, 1997, Columbia/HCA Healthcare Corporation
("Columbia"), CVH Acquisition Corporation, a wholly owned subsidiary of
Columbia ("Sub"), and Value Health, Inc. ("Value Health") entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Sub
will be merged with and into Value Health (the "Merger"). Upon consummation of
the Merger, Value Health will become a wholly owned subsidiary of Columbia, and
each issued and outstanding share of common stock of Value Health will be
converted into and represent the right to receive 0.58 shares of Columbia
common stock. Cash will be paid in lieu of fractional shares. It is intended
that the Merger will qualify as a "pooling of interests" for accounting
purposes and that the Merger will constitute a tax free reorganization for
federal income tax purposes.
Consummation of the Merger is subject to satisfaction of
certain conditions, including approval of the Merger by the stockholders of
Value Health, receipt of certain regulatory approvals, treatment of the Merger
as a pooling of interests for accounting purposes and the accuracy, in all
material respects, of each party's representations and warranties as of the
effective date of the Merger. A copy of the Merger Agreement has been filed
with this Form 8-K as Exhibit 2, and is hereby incorporated by reference.
A copy of the joint press release of Columbia and Value
Health, dated January 15, 1997, has been filed with this Form 8-K as Exhibit
99, and is hereby incorporated by reference.
On January 15, 1997, the Board of Directors of Value Health
canceled the previously announced stock repurchase program which authorized
Value Health to repurchase shares of common stock of Value Health on the open
market, up to an aggregate amount of $100 million.
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired: None
(b) Pro Forma Financial Information: None
(c) Exhibits:
2 Agreement and Plan of Merger, dated as of January
15, 1997, among Columbia/HCA Healthcare Corporation,
CVH Acquisition Corporation and Value Health, Inc.
99 Press Release, dated January 15, 1997, issued
jointly by Columbia/HCA Healthcare Corporation and
Value Health, Inc.
0224930.02
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
VALUE HEALTH, INC.
Date: January 28, 1997 By:/s/ David M. Wurzer
David M. Wurzer
Senior Vice President and
Chief Financial Officer
<PAGE>
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
January 15, 1997
AMONG
COLUMBIA/HCA HEALTHCARE CORPORATION
CVH ACQUISITION CORPORATION
AND
VALUE HEALTH, INC.
<PAGE>i
TABLE OF CONTENTS
ARTICLE I THE MERGER.......................................................1
Section 1.1 The Merger.................................1
Section 1.2 Effective Date of the Merger...............1
ARTICLE II THE SURVIVING CORPORATION.......................................2
Section 2.1 Certificate of Incorporation...............2
Section 2.2 By-Laws....................................2
Section 2.3 Board of Directors; Officers...............2
Section 2.4 Effects of Merger..........................2
ARTICLE III CONVERSION OF SHARES...........................................2
Section 3.1 Exchange Ratio.............................2
Section 3.2 Parent to Make Certificates Available......3
Section 3.3 Dividends; Stock Transfer Taxes............3
Section 3.4 No Fractional Shares.......................4
Section 3.5 Stock Options..............................5
Section 3.6 Stockholders' Meetings.....................5
Section 3.7 Closing of the Company's Transfer Books....6
Section 3.8 Assistance in Consummation of the Merger...6
Section 3.9 Closing....................................6
Section 3.10 Transfer Taxes.............................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT........................7
Section 4.1 Organization and Qualification.............7
Section 4.2 Capitalization.............................7
Section 4.3 Authority Relative to this Agreement.......8
Section 4.4 Reports and Financial Statements...........9
Section 4.5 Absence of Certain Changes or Events.......9
Section 4.6 Litigation................................10
Section 4.7 Parent Action.............................10
Section 4.8 Financial Advisor.........................10
Section 4.9 Compliance with Applicable Laws...........11
Section 4.10 Liabilities...............................11
Section 4.11 Certain Agreements........................11
Section 4.12 Parent Ownership of Stock.................12
Section 4.13 No Material Adverse Effect................12
Section 4.14 Accounting Matters........................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................13
Section 5.1 Organization and Qualification............13
Section 5.2 Capitalization............................13
Section 5.3 Subsidiaries..............................14
Section 5.4 Authority Relative to this Agreement......15
Section 5.5 Reports and Financial Statements..........16
Section 5.6 Absence of Certain Changes or Events......17
Section 5.7 Litigation................................17
Section 5.8 Employee Benefit Plans....................18
<PAGE>ii
Section 5.9 Labor Matters.............................19
Section 5.10 Company Action............................19
Section 5.11 Financial Advisor.........................20
Section 5.12 Compliance with Applicable Laws...........20
Section 5.13 Liabilities...............................21
Section 5.14 Taxes.....................................21
Section 5.15 Certain Agreements........................22
Section 5.16 Patents, Trademarks, Etc..................22
Section 5.17 No Material Adverse Effect................22
Section 5.18 Accounting Matters........................22
Section 5.19 Representations Under Purchase Agreements.23
Section 5.20 Absence Of Certain Business Practices.....23
Section 5.21 Payments Under CCN Agreement..............23
Section 5.22 Billing Practices.........................23
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING SUB...................24
Section 6.1 Organization..............................24
Section 6.2 Capitalization............................24
Section 6.3 Authority Relative to this Agreement......24
ARTICLE VII CONDUCT OF BUSINESS PENDING THE MERGER........................24
Section 7.1 Conduct of Business by the Company
Pending the Merger........................24
Section 7.2 Conduct of Business by Parent Pending the
Merger....................................26
Section 7.3 Conduct of Business of Sub................27
ARTICLE VIII ADDITIONAL AGREEMENTS........................................27
Section 8.1 Access and Information....................27
Section 8.2 Registration Statement/Proxy Statement....27
Section 8.3 Compliance with the Securities Act........28
Section 8.4 Stock Exchange Listing....................29
Section 8.5 Employee Matters..........................29
Section 8.6 Indemnification...........................29
Section 8.7 HSR Act...................................30
Section 8.8 Additional Agreements.....................31
Section 8.9 Alternative Proposals.....................31
Section 8.10 Advice of Changes; SEC Filings............32
Section 8.11 Restructuring of Merger...................32
Section 8.12 Letter of the Company's Accountants.......33
Section 8.13 Letter of Parent and Sub's Accountants....33
Section 8.14 Other Matters.............................33
ARTICLE IX CONDITIONS PRECEDENT...........................................33
Section 9.1 Conditions to Each Party's Obligation
to Effect the Merger......................33
Section 9.2 Conditions to Obligation of the Company to
Effect the Merger.........................34
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Section 9.3 Conditions to Obligations of Parent and
Sub to Effect the Merger..................35
ARTICLE X TERMINATION, AMENDMENT AND WAIVER...............................36
Section 10.1 Termination by Mutual Consent.............36
Section 10.2 Termination by Either Parent or
the Company...............................36
Section 10.3 Termination by the Company................37
Section 10.4 Termination by Parent.....................37
Section 10.5 Effect of Termination and Abandonment.....37
Section 10.6 Extension; Waiver.........................38
ARTICLE XI GENERAL PROVISIONS.............................................39
Section 11.1 Non-Survival of Representations,
Warranties and Agreements.................39
Section 11.2 Notices...................................39
Section 11.3 Fees and Expenses.........................40
Section 11.4 Publicity.................................40
Section 11.5 Specific Performance......................40
Section 11.6 Assignment; Binding Effect................40
Section 11.7 Entire Agreement..........................41
Section 11.8 Amendment.................................41
Section 11.9 Governing Law.............................41
Section 11.10 Counterparts..............................41
Section 11.11 Headings and Table of Contents............41
Section 11.12 Interpretation............................41
Section 11.13 Waivers...................................42
Section 11.14 Incorporation of Exhibits.................42
Section 11.15 Severability..............................42
Section 11.16 Subsidiaries..............................42
<PAGE>1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as
of January 15, 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, Parent and the Company desire to effect a business
combination by means of the merger of Sub with and into the Company (the
"Merger");
WHEREAS, the Boards of Directors of Parent, Sub and the
Company have approved the Merger, upon the terms and subject to the conditions
set forth herein;
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests";
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
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
<PAGE>2
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 8.6(a), the Certificate of Incorporation of the 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 Agreement.
Section 2.2 By-Laws. The By-laws of the 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 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 Exchange Ratio. On the Effective Date, by virtue
of the Merger and without any action on the part of any holder of any common
stock, no par value, of the Company ("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.
<PAGE>3
(b) Subject to Section 3.4, each remaining outstanding share
of Company Common Stock shall be converted into 0.58 (the "Exchange Ratio")
fully paid and nonassessable shares of the common stock, $.01 par value, of
Parent ("Parent Common Stock"). Each share of Parent Common Stock issued to
holders of Company Common Stock in the Merger shall be issued together with one
associated preferred stock purchase right (a "Parent Right") in accordance with
the Amended and Restated Rights Agreement dated as of February 10, 1994, between
Parent and Mid-America Bank of Louisville & Trust Company. References herein to
the shares of Parent Common Stock issuable in the Merger shall be deemed to
include the associated Parent Rights.
(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, Parent Common Stock or Company
Common Stock after the date hereof, the Exchange Ratio 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 Parent to Make Certificates Available.
(a) Prior to the Effective Date, Parent shall select an
Exchange Agent, which shall be Parent's Transfer Agent or such other person or
persons reasonably satisfactory to the Company, to act as Exchange Agent for the
Merger (the "Exchange Agent"). As soon as practicable after the Effective Date,
Parent shall make available, and each holder of Company Common Stock will be
entitled to receive, upon surrender to the Exchange Agent of one or more
certificates ("Certificates") representing such stock for cancellation,
certificates representing the number of shares of Parent Common Stock into which
such shares are converted in the Merger and cash in consideration of fractional
shares as provided in Section 3.4 (the "Share Consideration"). Parent Common
Stock into which Company Common Stock shall be converted in the Merger shall be
deemed to have been issued on the Effective Date.
(b) Any holder of shares of Company Common Stock who has not
exchanged his Certificates for Parent Common Stock in accordance with subsection
(a) within twelve months after the Effective Date shall have no further claim
upon the Exchange Agent and shall thereafter look only to Parent and the
Surviving Corporation for payment in respect of his shares of Company Common
Stock. Until so surrendered, Certificates shall represent solely the right to
receive the Share Consideration.
<PAGE>4
Section 3.3 Dividends; Stock Transfer Taxes.
No dividends or other distributions that are declared or made
on Parent Common Stock will be paid to persons entitled to receive certificates
representing Parent Common Stock pursuant to this Agreement until such persons
surrender their Certificates representing Company Common Stock. Upon such
surrender, there shall be paid to the person in whose name the certificates
representing such Parent Common Stock shall be issued (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Date theretofore payable with respect to such whole shares
of Parent Common Stock and not paid, less the amount of any withholding taxes
which may be required thereon, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Date but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Parent Common Stock, less the
amount of any withholding taxes which may be required thereon. In no event shall
the person entitled to receive such dividends be entitled to receive interest on
such dividends. In the event that any certificates representing shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it shall be a
condition of such exchange that the Certificate or Certificates so surrendered
shall be properly endorsed or be otherwise in proper form for transfer and that
the person requesting such exchange shall pay to the Exchange Agent any transfer
or other taxes required by reason of the issuance of certificates for such
shares of Parent Common Stock in a name other than that of the registered holder
of the Certificate or Certificates surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Company Common Stock for
any shares of Parent Common Stock or dividends thereon delivered to a public
official pursuant to any applicable abandoned property, escheat or similar laws.
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 such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
and cash in lieu of fractional shares, and unpaid dividends and distributions on
shares of Parent Common Stock as provided in Section 3.3, deliverable in respect
thereof pursuant to this Agreement.
Section 3.4 No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant
<PAGE>5
to Section 3.1(b). Notwithstanding any other provision of this Agreement, each
holder of Company Common Stock exchanged pursuant to the Merger who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock
(after taking into account all Certificates delivered by such holder) shall
receive, in lieu thereof, cash in an amount equal to such fractional part of a
share of Parent Common Stock multiplied by the per-share value of the Parent
Common Stock based on the average sale price thereof for the 10 business days
next preceding the Effective Date, using for each such business day the
composite closing sale price on the New York Stock Exchange (the "NYSE"), as
reported in each case in the following day's edition of The Wall Street
Journal.
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
Parent Shares (a "Substitute Option") equal to the number of shares of Common
Stock subject to such Option multiplied by the Exchange Ratio (rounded to the
nearest whole share, with 0.5 shares being rounded up). The per share exercise
price for each Substitute Option shall be the current exercise price per share
of Common Stock divided by the Exchange Ratio (rounded up to the nearest full
cent), and each Substitute Option otherwise shall 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, 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.
(b) 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 Parent Shares 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
<PAGE>6
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 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 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 Agreement.
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 Parent Common
Stock and/or cash as provided in Sections 3.1(b) and 3.4.
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
Agreement. Parent shall cause Sub to perform all of its obligations in
connection with this Agreement.
Section 3.9 Closing. The closing of the transactions
contemplated by this Agreement (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.
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
<PAGE>7
with the Merger other than transfer or stamp taxes payable in respect of
transfers pursuant to the fourth sentence of Section 3.3 (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.
Parent 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 make such qualification
necessary, except where the failure to be so qualified will not, individually
or in the aggregate, 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"). Complete and correct copies as of the date hereof of
the Certificate of Incorporation and By-laws of Parent have been delivered to
the Company as part of a disclosure schedule delivered by Parent to the Company
in connection with this Agreement (the "Parent Disclosure Schedule").
Section 4.2 Capitalization. The authorized capital stock of
Parent consists of 800,000,000 shares of Parent Common Stock, 25,000,000 shares
of non-voting common stock, $.01 par value, and 25,000,000 shares of preferred
stock, $.01 par value. As of December 31, 1996, 650,498,476 shares of Parent
Common Stock and 21,000,000 shares of non-voting common stock were validly
issued and outstanding, fully paid, and nonassessable, and no shares of
preferred stock were issued and outstanding and there have been no material
changes in such numbers 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 Parent's shareholders may vote issued or
outstanding. All of the shares of Parent Common Stock issuable in accordance
with this Agreement in exchange for Company Common Stock at the Effective Date
in accordance with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid and
<PAGE>8
nonassessable and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including any
preemptive rights of any stockholder of Parent created by Parent.
Section 4.3 Authority Relative to this Agreement. Parent has
the corporate power to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by Parent's Board of Directors. The 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 Agreement and the transactions contemplated hereby. Except as
disclosed in Section 4.3 of 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 executing and carrying out this 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 Parent Material Adverse Effect or prevent the consummation
of the transactions contemplated hereby and thereby and (B) the laws and
regulations referred to in the next sentence. Except as disclosed in Section
4.3 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 Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (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 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
<PAGE>9
Adverse Effect or prevent the consummation of the transactions contemplated
hereby or thereby.
Section 4.4 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 and
December 31, 1995, as filed with the Securities and Exchange Commission (the
"Commission"), (ii) Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996, June 30, 1996 and September 30, 1996, as filed with the Commission,
(iii) proxy statements related to all meetings of its shareholders (whether
annual or special) since January 1, 1996, and (iv) all other reports or
registration statements filed by Parent with the Commission since December 31,
1995, except for preliminary material (in the case of clauses (iii) and (iv)
above) and except for registration statements on Form S-8 relating to employee
benefit plans (clauses (i) through (iv) being referred to herein collectively
as the "Parent SEC Reports"). As of their respective dates, the Parent 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 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 audited
consolidated financial statements and unaudited interim financial statements of
Parent included in the Parent 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 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 subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments, any other adjustments
described therein and the fact that certain information and notes have been
condensed or omitted in accordance with the Exchange Act and the rules
promulgated thereunder; and are in all material respects, in accordance with
the books of account and records of the Parent and its subsidiaries.
Section 4.5 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Reports or as disclosed in Section 4.6 of the
Parent Disclosure Schedule, since September
<PAGE>10
30, 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 Parent 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 Parent Material Adverse Effect;
(iii) any entry into any commitment or transaction material to Parent 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 split, combination or reclassification of any of Parent'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 Parent's
capital stock; or (vii) any agreement (whether or not in writing), arrangement
or understanding to do any of the foregoing.
Section 4.6 Litigation. Except as disclosed in Parent's
Annual Report on Form 10-K for the year ended December 31, 1995, or the
Parent's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996 or as disclosed in Section 4.6 of the
Parent Disclosure Schedule, there is no suit, action or proceeding pending or,
to the knowledge of Parent, threatened against Parent or any of its
subsidiaries having or which, alone or in the aggregate, would reasonably be
expected to have a Parent 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 Parent or
any of its subsidiaries having, or which would reasonably be expected to have,
either alone or in the aggregate, any such Parent Material Adverse Effect.
Section 4.7 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 Agreement is advisable and in the best interests of
Parent and its stockholders.
Section 4.8 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 Agreement
based upon arrangements made by or on behalf of Parent.
<PAGE>11
Section 4.9 Compliance with Applicable Laws. Parent and 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"), including, without limitation, applicable state
insurance and health commissions, except for such permits, licenses, variances,
exemptions, orders and approvals the failure of which to hold would not have a
Parent Material Adverse Effect (the "Parent Permits"). The Parent and its
Subsidiaries are in compliance with the terms of the Parent Permits, except for
such failures to comply, which singly or in the aggregate, has not had, or
would not reasonably be expected to have, a Parent Material Adverse Effect.
Except as disclosed in the Parent SEC Reports filed prior to the date of this
Agreement, the businesses of Parent and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, including, without limitation, applicable state insurance and health
commissions, except for possible violations which individually or in the
aggregate has not had, or would not reasonably be expected to have, a Parent
Material Adverse Effect. To the knowledge of Parent, no investigation or review
by any Governmental Entity, including, without limitation, applicable state
insurance and health commissions, with respect to Parent or any of its
Subsidiaries is pending, or threatened, nor has any Governmental Entity
indicated an intention to conduct the same, other than those the outcome of
which have not had, or would not reasonably be expected to have, a Parent
Material Adverse Effect.
Section 4.10 Liabilities. As of the date hereof, except as
disclosed in Section 4.10 of the Parent Disclosure Schedule, since the date of
the latest balance sheet of Parent contained in the Parent SEC Reports neither
Parent 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 Parent 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 Parent SEC Reports. To the best knowledge of Parent, as of
September 30, 1996, there was no basis for any claim or liability of any nature
against Parent or its Subsidiaries, whether absolute, accrued, contingent or
otherwise, which has had, or would reasonably be expected to have, a Parent
Material Adverse Effect, other than as reflected in the Parent SEC Reports or
disclosed in Section 4.10 of the Parent Disclosure Schedule.
Section 4.11 Certain Agreements. Except as disclosed in the
Parent SEC Reports filed prior to the date of this Agreement or as disclosed in
Section 4.11 of the Parent Disclosure Schedule,
<PAGE>12
neither Parent nor any of its Subsidiaries is a party to any oral or written
contract, agreement or commitment that is having or is reasonably likely to
have a Parent Material Adverse Effect. Neither the Parent nor any of its
Subsidiaries is in default (with or without 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 Parent Benefit Plan, whether
or not such default has been waived, which default, alone or in the aggregate
with other such defaults, would have a Parent Material Adverse Effect.
Section 4.12 Parent Ownership of Stock. As of the date hereof
Parent does not beneficially own any shares of Company Common Stock.
Section 4.13 No Material Adverse Effect. 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 4.14 Accounting Matters. Neither Parent nor, to its
best knowledge, any of its affiliates, has through the date hereof, taken or
agreed to take any action that would prevent the Company from accounting for
the business combination to be effected by the Merger as a "pooling of
interests" in accordance with Accounting Principles Board Opinion No. 16, the
interpretive releases issued pursuant thereto and the pronouncements of the
Commission. To the actual knowledge of the executive officers of Parent, Parent
has not taken any action which would prevent the Merger from constituting a
reorganization within the meaning of Section 368(a) of the Code. Parent has
received a letter from Ernst & Young LLP, a copy of which is attached to
Section 4.14 of the Parent Disclosure Schedule, with respect to the eligibility
of Parent for "pooling of interests" accounting treatment.
<PAGE>13
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 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 January
9, 1997, 54,412,726 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 January 9, 1997, except for
(i) options to acquire 5,116,559 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
<PAGE>14
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) ("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 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, 1995, or as disclosed in Section 5.3 of the Company
<PAGE>15
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 Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Company's Board of Directors. This 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 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 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,
<PAGE>16
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 and December
31, 1995, as filed with the Commission, (ii) Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, as
filed with the Commission, (iii) proxy statements related to all meetings of
its shareholders (whether annual or special) since January 1, 1996 and (iv) all
other reports or registration statements filed by the Company with the
Commission since December 31, 1995, except for preliminary material (in the
case of clauses (iii) and (iv) 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 (iv) being referred to herein collectively as the "Company 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 and unaudited interim 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 subject, in the case of the
unaudited interim financial statements, to normal year-end audit adjustments
and any other adjustments described therein and the fact that certain
information and notes have been condensed or omitted in accordance with the
Exchange Act and the rules promulgated thereunder; and are in all material
respects, in accordance with the books of account and records of the Company
and its Subsidiaries.
<PAGE>17
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 September 30, 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, 1995, or the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 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
<PAGE>18
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
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 Agreement will not, either alone or upon the occurrence of
subsequent events, result in any
<PAGE>19
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) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made under
any 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
<PAGE>20
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 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.
<PAGE>21
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 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
Agreement, the consummation of the Merger and the 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
Exchange Ratio 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 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 Governmental Entities 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
<PAGE>22
(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 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 September 30, 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 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
<PAGE>23
assessments of any nature whatsoever together with all interest, penalties and
additions imposed with respect to such amounts. Each of the Company 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 (beta) 280G.
Section 5.15 Certain Agreements. Except as disclosed in the
Company SEC Reports filed prior to the date of this 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
<PAGE>24
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 Accounting Matters. Neither the Company nor, to
its best knowledge, any of its affiliates, has through the date hereof, taken
or agreed to take any action that would prevent Parent from accounting for the
business combination to be effected by the Merger as a "pooling of interests"
in accordance with Accounting Principles Board Opinion No. 16, the interpretive
releases issued pursuant thereto and the pronouncements of the Commission. To
the actual knowledge of the executive officers of the Company, the Company has
not taken any action which would prevent the Merger from constituting a
reorganization within the meaning of Section 368(a) of the Code. The Company
has received a letter from Coopers & Lybrand LLP, a copy of which is attached
to Section 5.18 of the Company Disclosure Schedule, with respect to the
eligibility of the Company for "pooling of interests" accounting treatment.
Section 5.19 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 5.19 of the
Company Disclosure Schedule (for which no representation or warranty is made
under this Section 5.19), 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.
<PAGE>25
Section 5.20 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 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 5.21 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 September 30, 1996 in the amount of
$53,200,000.
Section 5.22 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 5.22 of the Company Disclosure Schedule.
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 Agreement.
Section 6.2 Capitalization. The authorized capital stock of
Sub consists of 1,000 shares of Common Stock, par value $.01 per
<PAGE>26
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 Agreement and to carry out its obligations
hereunder. The execution and delivery of this 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 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 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.
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,
<PAGE>27
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 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
<PAGE>28
shall it permit any of its Subsidiaries to, except as required to
comply with applicable law and except as provided in Section 8.5
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 foregoing cases in accordance with pre-existing contractual
provisions or in the ordinary course of business consistent with past
practice;
(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; and
(vi) the Company shall not, nor shall it permit any
of its Subsidiaries to, take or cause to be taken any action, whether
before or after the Effective Date, which would disqualify the Merger
as a "pooling of interests" for accounting purposes or as a
"reorganization" within the meaning of Section 368(a) of the Code;
provided that the foregoing shall not prohibit the Company from (consistent with
clause (vi) above) 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 Agreement: (a) 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; and (b) the Parent shall not, nor shall it permit any of
its Subsidiaries to, take or cause to be taken any action, whether before or
after the Effective Date, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the meaning
of Section 368(a) of the Code.
Section 7.3 Conduct of Business of Sub. During the period
from the date of this Agreement to the Effective Date, Sub shall
<PAGE>29
not engage in any activities of any nature except as provided in or
contemplated by this 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 Registration Statement/Proxy Statement. Parent and
the Company shall cooperate and promptly prepare, and Parent shall file with
the Commission as soon as practicable, a Registration Statement on Form S-4
(the "Form S-4") under the Securities Act, with respect to the Parent Common
Stock issuable in the Merger, portions of which Registration Statement shall
also serve as the proxy statement with respect to the Company Meeting (the
"Proxy Statement/Prospectus"). The respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange Act
and the rules and regulations thereunder. Parent shall use all reasonable
efforts, and the Company will cooperate with Parent, to have the Form S-4
declared effective by the Commission as promptly as practicable and to keep the
Form S-4 effective as long as is necessary to consummate the Merger. Parent
shall, as promptly as practicable, provide copies of any written comments
received from the Commission with respect to the Form S-4 to the Company and
advise the Company of any oral comments with respect to the Form S-4 received
from the Commission. Parent shall use its best efforts to obtain, prior to the
effective date of the Form S-4, all necessary state securities law or "Blue
Sky" permits or approvals required to carry out the transactions contemplated
by the Merger Agreement and will pay all expenses
<PAGE>30
incident thereto. Parent agrees that none of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Form S-4
or the Proxy Statement/Prospectus (i) in the case of the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Company Meeting, or (ii) in the case of
the Form S-4 and each amendment or supplement thereto, at the time it is filed
or becomes effective, 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 Form S-4 or the Proxy Statement/Prospectus (i) in the case of
the Proxy Statement/Prospectus and each amendment or supplement thereto, at the
time of mailing thereof and at the time of the Company Meeting, or, (ii) in the
case of the Form S-4 or any amendment or supplement thereto, at the time it is
filed or becomes effective, 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. 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.
No amendment or supplement to the Proxy Statement/Prospectus will be made by
Parent or the Company without the approval of the other party. Parent will
advise the Company, promptly after it receives notice thereof, of the time when
the Form S-4 has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the qualification of
Parent Common Stock issuable in connection with the Merger for offering or sale
in any jurisdiction, or any request by the Commission for amendment of the
Proxy Statement/Prospectus or the Form S-4 or comments thereon and responses
thereto or requests by the Commission for additional information.
Section 8.3 Compliance with the Securities Act. At least 30
days prior to the Effective Date, the Company shall deliver to Parent a list of
names and addresses of those persons who were, in the Company's reasonable
judgment, at the record date for the Company Meeting, "affiliates" (each such
person, an "Affiliate") of the Company within the meaning of Rule 145 of the
rules and regulations promulgated under the Securities Act. The Company shall
use all reasonable efforts to deliver or cause to be delivered to Parent, prior
to the Effective Date, from each of the Affiliates of the Company identified in
the foregoing list, an Affiliate Letter in the form attached hereto as Exhibit
8.3 (an "Affiliate Letter"). Parent shall be entitled to place
<PAGE>31
legends as specified in such Affiliate Letters on the certificates evidencing
any Parent Company Common Stock to be received by such Affiliates pursuant to
the terms of the Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for the Parent Company Common Stock, consistent with the
terms of such Affiliate Letters.
Section 8.4 Stock Exchange Listing. Parent shall use its best
efforts to list on the NYSE, upon official notice of issuance, the Parent
Common Stock to be issued pursuant to the Merger.
Section 8.5 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 assumed by the Parent as provided
by Section 3.5(a) hereto, 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 8.6 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
<PAGE>32
Date (the "Indemnified Parties") from and against all losses, expenses, claims,
damages or liabilities arising out of the transactions contemplated by this
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
Agreement is commenced, whether before or after the Effective Date, the parties
hereto agree to cooperate and use their respective reasonable efforts to
vigorously defend against and respond thereto.
Section 8.7 HSR Act. The Company and Parent shall use their
best efforts to file as soon as practicable notifications under the HSR Act 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.
<PAGE>33
Section 8.8 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 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 Agreement,
the proper officers and/or directors of Parent, the Company and the Surviving
Corporation shall take all such necessary action.
(c) Following the Effective Date, Parent shall use its best
efforts to conduct the business, and shall cause the Surviving Corporation to
use its best efforts to conduct its business, except as otherwise contemplated
by this Agreement, in a manner which would not jeopardize the characterization
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
Section 8.9 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
<PAGE>34
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 8.9; 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 8.9 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 under the Exchange Act with regard to an Alternative Proposal.
Nothing in this Section 8.9 shall (x) permit the Company to terminate this
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 Agreement (it being agreed that during the term of this
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 Agreement.
Section 8.10 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 SEC or any other
state or federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
<PAGE>35
Section 8.11 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 Agreement shall be deemed
appropriately modified to reflect such form of merger.
Section 8.12 Letter of the Company's Accountants. The Company
shall use its reasonable efforts to cause to be delivered to Parent and Sub at
the time of mailing of the Proxy Statement Prospectus a "comfort" letter from
Coopers & Lybrand, of the kind contemplated by the Statement of Auditing
Standards with respect to Letters to Underwriters promulgated by the American
Institute of Certified Public Accountants (the "AICPA Statement"), dated the
date of such mailing, in form and substance reasonably satisfactory to Parent
and Sub, in connection with the procedures undertaken by them with respect to
the financial statements of the Company contained in the Form S-4 and the other
matters contemplated by the AICPA Statement and customarily included in comfort
letters relating to transactions similar to the Merger.
Section 8.13 Letter of Parent and Sub's Accountants. Parent
and Sub shall use their respective reasonable efforts to cause to be delivered
to the Company at the time of mailing of the Proxy Statement Prospectus a
"comfort" letter from Ernst & Young LLP, of the kind contemplated by the AICPA
Statement, dated the date of such mailing, in form and substance reasonably
satisfactory to the Company, in connection with the procedures undertaken by
them with respect to the financial statements of Parent contained in the Form
S-4 and the other matters contemplated by the AICPA Statement and customarily
included in comfort letters relating to transactions similar to the Merger.
Section 8.14 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 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 8.14 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
Agreement, insofar as they would relate to VOS, shall be deemed to be made to
the best knowledge of the Company.
<PAGE>36
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 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) The Form S-4 shall have become effective in accordance
with the provisions of the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the Commission and
remain in effect and all necessary approvals under state securities laws
relating to the issuance or trading of the Parent Common Stock to be issued to
stockholders of the Company in connection with the Merger shall have been
obtained.
(d) 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).
(e) Parent and the Company shall have received letters from
Ernst & Young LLP and Coopers & Lybrand to the effect that the Merger qualifies
for "pooling of interests" accounting treatment if consummated in accordance
with this Agreement.
(f) 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 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.
<PAGE>37
(g) 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 Agreement shall have been obtained.
(h) The Parent Common Stock to be issued to Company
stockholders in connection with the Merger shall have been approved for listing
on the NYSE, subject only to official notice of issuance.
Section 9.2 Conditions 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 additional
following conditions, unless waived by the Company:
(a) Parent and Sub shall have performed in all material
respects their agreements contained in this Agreement required to be performed
on or prior to the Effective Date, and the representations and warranties of
Parent and Sub contained in this 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 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.
(b) The Company shall have received an opinion, dated the
Effective Date, from Willkie Farr & Gallagher, based upon certificates and
letters from the Company, Parent and Sub and certain stockholders of the
Company, to the effect that the Merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code. In rendering such opinion, such
counsel may receive and rely upon representations of fact contained in
certificates and letters as specified in the preceding sentence.
(c) The Company shall have received a "comfort" letter from
Ernst & Young LLP, of the kind contemplated by the AICPA Statement, dated the
Effective Date, in form and substance reasonably satisfactory to the Company, in
connection with the procedures undertaken by them with respect to the financial
statements of Parent contained in the Form S-4 and the other matters
contemplated by the AICPA Statement and customarily included in comfort letters
relating to transactions similar to the Merger.
<PAGE>38
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 Agreement required to be performed on or prior
to the Effective Date, and the representations and warranties of the Company
contained in this 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 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) Parent and Sub shall have received a "comfort" letter from
Coopers & Lybrand, of the kind contemplated by the AICPA Statement, dated the
Effective Date, in form and substance reasonably satisfactory to Parent, in
connection with the procedures undertaken by them with respect to the financial
statements of the Company contained in the Form S-4 and the other matters
contemplated by the AICPA Statement and customarily included in comfort letters
relating to transactions similar to the Merger.
(c) Parent and Sub shall have received an opinion, dated the
Effective Date, from Fried, Frank, Harris, Shriver & Jacobson, based upon
certificates and letters from the Company, Parent and Sub and certain
stockholders of the Company, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, such counsel may receive and rely upon representations of fact
contained in certificates and letters as specified in the preceding sentence.
(d) From the date of this 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.
<PAGE>39
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination by Mutual Consent. This 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 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 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 Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to terminate this 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 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 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 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 Agreement on the part of Parent, which breach is not curable or,
if curable, is not cured within
<PAGE>40
30 days after written notice of such breach is given by the Company to Parent.
Section 10.4 Termination by Parent. This 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 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 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 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(d) 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 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 Agreement or the
Merger or shall have recommended an Alternative Proposal to the Company
stockholders and Parent shall have terminated this Agreement pursuant to
Section 10.4(a) or (z) any person shall have made an Alternative Proposal and
thereafter this 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
Agreement, and that, without these agreements, Parent and Sub would not enter
into this 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 Agreement and the
abandonment of the Merger pursuant to this Article X, all
<PAGE>41
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, 11.7, 11.9, 11.11, 11.12 and 11.15.
Moreover, in the event of termination of this 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 Agreement, including without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity; provided that following termination of
this 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
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 Agreement
shall terminate at the Effective Date. All covenants and agreements set forth
in this Agreement shall survive in accordance with their terms.
<PAGE>42
Section 11.2 Notices. All notices or other communications
under this 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
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 Agreement
and the transactions contemplated by this 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
Form S-4 or Proxy Statement/Prospectus with the Commission and (c) the expenses
incurred in connection with printing and mailing the Form S-4 and the Proxy
<PAGE>43
Statement/Prospectus, shall be shared equally by the Company
and Parent.
Section 11.4 Publicity. So long as this 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 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 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 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 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
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement 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 Agreement to the contrary, nothing in this 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 Agreement; provided that
the Indemnified Parties shall be third-party beneficiaries of Parent's agreement
contained in Section 8.6 hereof.
Section 11.7 Entire Agreement. This 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
<PAGE>44
parties with respect thereto. No addition to or modification of any provision
of this Agreement shall be binding upon any party hereto unless made in writing
and signed by all parties hereto.
Section 11.8 Amendment. This 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
Mergers by the stockholders of the Company and Parent, 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
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 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 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 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 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
<PAGE>45
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 Agreement, no action taken pursuant to this 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
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
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 Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this 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 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.
<PAGE>46
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this 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: President and Chief
Executive Officer
CVH ACQUISITION CORPORATION
/s/ Richard L. Scott
By: Richard L. Scott
Title: President and Chief
Executive Officer
VALUE HEALTH, INC.
/s/ Robert E. Patricelli
By: Robert E. Patricelli
Title: Chairman of the Board
and Chief Executive Officer
<PAGE>
EXHIBIT 8.3
FORM OF AFFILIATE LETTER
__________, 1997
Columbia/HCA Healthcare Corporation
One Park Plaza
Nashville, Tennessee 37203
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of Value Health, Inc., a Delaware corporation
("Company"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of January __, 1997 (the "Agreement"), between Columbia/HCA Healthcare
Corporation, a Delaware corporation ("Columbia"), CVH Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Columbia ("Merger Sub"),
and Company, Merger Sub will be merged with and into Company (the "Merger").
As a result of the Merger, I may receive shares of Common Stock,
par value $.01 per share, of Columbia (which shares shall be referred to herein
as the "Columbia Securities") in exchange for shares owned by me of Common
Stock, no par value, of Company.
I represent, warrant and covenant to Columbia that in the event
I receive any Columbia Securities as a result of the Merger:
A. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable limitations
upon my ability to sell, transfer or otherwise dispose of the Columbia
Securities to the extent I felt necessary, with my counsel or counsel for
Company.
B. I have been advised that the issuance of Columbia Securities
to me pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been advised
that, since at the time the Merger was submitted for a vote of the stockholders
of Company, I may be deemed to have been an affiliate of Company and the
distribution by me of the Columbia Securities has not been registered under the
Act, I may not sell, transfer or otherwise dispose of the Columbia Securities
issued to me in the Merger unless (i) such sale, transfer or other disposition
has been
i
<PAGE>
registered under the Act, (ii) such sale, transfer or other disposition is made
in conformity with Rule 145 promulgated by the Commission under the Act, or
(iii) in the opinion of counsel reasonably acceptable to Columbia, or pursuant
to a "no action" letter obtained by the undersigned from the staff of the
Commission, such sale, transfer or other disposition is otherwise exempt from
registration under the Act. For purposes of this letter, Willkie Farr &
Gallagher shall be deemed counsel reasonably acceptable to Columbia.
C. I understand that Columbia is under no obligation to register
the sale, transfer or other disposition of the Columbia Securities by me or on
my behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
D. I also understand that stop transfer instructions will be
given to Columbia's transfer agents with respect to the Columbia Securities and
that there will be placed on the certificates for the Columbia Securities issued
to me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED ______________ BETWEEN THE REGISTERED HOLDER
HEREOF AND COLUMBIA/HCA HEALTHCARE CORPORATION, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF COLUMBIA/HCA
HEALTHCARE CORPORATION."
E. I also understand that unless (i) the transfer by me of my
Columbia Securities has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145 or (ii) in the opinion of counsel
reasonably acceptable to Columbia, any resale by my transferee would not be
subject to Rule 145, Columbia reserves the right to put the following legend on
the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE
ii
<PAGE>
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in
paragraphs D and E above shall be removed by delivery of substitute certificates
without such legend if such legend is not required for purposes of the Act or
this Agreement. It is understood and agreed that such legends and the stop
orders referred to above will be removed if (i) two years shall have elapsed
from the date the undersigned acquired the Columbia Securities received in the
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) three years shall have elapsed from the date the undersigned
acquired the Columbia Securities received in the Merger and the provisions of
Rule 145(d)(3) are then available to the undersigned, or (iii) Columbia has
received either an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to Columbia, or a "no action" letter obtained by the
undersigned from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
I further represent to and covenant with Columbia that I will
not sell, transfer or otherwise dispose of any Columbia Securities received by
me in the Merger or any other shares of the capital stock of Columbia until
after such time as results covering at least 30 days of combined operations of
Company and Columbia have been published by Columbia, in the form of a quarterly
earnings report, an effective registration statement filed with the Commission,
a report to the Commission on Form 10-K, 10-Q or 8-K, or any other public filing
or announcement which includes such combined results of operations. Columbia
shall notify the "affiliates" of the publication of such results.
iii
<PAGE>
Execution of this letter should not be considered an admission
on my part that I am an "affiliate" of Company as described in the first
paragraph of this letter or as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.
Very truly yours,
________________________
Name:
Accepted this_____ day of
_______________ , 1997 by
COLUMBIA/HCA HEALTHCARE CORPORATION
By:__________________________
Name:________________
Title:_______________
iv
<PAGE>
- -----------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER,
DATED AS OF JANUARY 15, 1997,
AMONG COLUMBIA/HCA HEALTHCARE CORPORATION,
CVH ACQUISITION CORPORATION
AND
VALUE HEALTH, INC.
COMPANY DISCLOSURE SCHEDULE
- -----------------------------------------------------------------------------
<PAGE>
COMPANY DISCLOSURE SCHEDULE INDEX
<TABLE>
<S> <C> <C>
Section 3.5(a) Stock Options See Schedule 3.5(a)
Section 5.1 Organization and Qualification See Schedule 5.1
Section 5.2 Capitalization See Schedule 5.2
Section 5.3 Subsidiaries See Schedule 5.3
Section 5.4 Authority Relative to this Agreement See Schedule 5.4
Section 5.6 Absence of Certain Changes or Events See Schedule 5.6
Section 5.7 Litigation No Schedule
Section 5.8 Employee Benefit Plans See Schedule 5.8
Section 5.8(e) Employee Benefit Plans See Schedule 5.8(e)
Section 5.9 Labor Matters See Schedule 5.9
Section 5.11 Financial Advisor Merrill Lynch & Co. and Lazard Freres &
Co., LLC Letters Attached
Section 5.12 Compliance with Applicable Laws See Schedule 5.12
Section 5.13 Liabilities See Schedule 5.13
Section 5.14 Taxes See Schedule 5.14
Section 5.15 Certain Agreements No Schedule
Section 5.16 Patents, Trademarks, etc. See Schedule 5.16
Section 5.18 Accounting Matters Coopers & Lybrand LLP Letter Attached
Section 5.19 Representations under Purchase Agreements See Schedule 5.19
Section 5.22 Billing Practices See Schedule 5.22
Section 7.1(i) Conduct of the Business of the Company See Schedule 7.1(i)
Pending the Merger
Section 7.1(iv) Conduct of the Business of the Company See Schedule 7.1(iv)
Pending the Merger
Section 7.1A Conduct of the Business of the Company See Schedule 7.1A
Pending the Merger
Section 9.3(a) Conditions to Obligations of Parent and See Schedule 9.3(a)
Sub to Effect the Merger
</TABLE>
<PAGE>
---------------------------------------------------
AGREEMENT AND PLAN OF MERGER,
DATED AS OF JANUARY 15, 1997,
AMONG COLUMBIA/HCA HEALTHCARE CORPORATION,
CVH ACQUISITION CORPORATION
AND
VALUE HEALTH, INC.
ATTACHMENTS TO COMPANY DISCLOSURE SCHEDULE
----------------------------------------------------
<PAGE>
ATTACHMENT INDEX
Tabs
Section 3.5(a) Stock Options.............................. 1
Section 5.1 Organization and Qualification............. 2
Section 5.3 Subsidiaries............................... 3
Section 5.4 Authority Relative to this Agreement 4
Section 5.8 Employee Benefit Plans..................... 5
Section 5.11 Financial Advisor.......................... 6
Section 5.18 Accounting Matters ....................... 7
<PAGE>
- -----------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER,
DATED AS OF JANUARY 15, 1997,
AMONG COLUMBIA/HCA HEALTHCARE CORPORATION,
CVH ACQUISITION CORPORATION
AND
VALUE HEALTH, INC.
PARENT DISCLOSURE SCHEDULE
- -----------------------------------------------------------------------------
<PAGE>
PARENT DISCLOSURE SCHEDULE INDEX
<TABLE>
<S> <C> <C>
Section 4.1 Organization and Qualification No Schedule
Restated Certificate and Bylaws Attached
Section 4.2 Capitalization No Schedule
Section 4.3 Authority Relative to this Agreement See Schedule 4.3
Section 4.4 Reports and Financial Statements No Schedule
Section 4.5 Absence of Certain Changes or Events See Schedule 4.5
Section 4.6 Litigation See Schedule 4.6
Section 4.7 Parent Action No Schedule
Section 4.8 Financial Advisor No Schedule
Section 4.9 Compliance with Applicable Laws No Schedule
Section 4.10 Liabilities No Schedule
Section 4.11 Certain Agreements No Schedule
Section 4.12 Parent Ownership of Stock No Schedule
Section 4.13 No Material Adverse Effect No Schedule
Section 4.14 Accounting Matters Ernst & Young Letter Attached
</TABLE>
<PAGE>
The preceding schedules have been omitted from the Form 8-K
filing. Value Health, Inc. will provide the Commission with copies of such
schedules upon request.
<PAGE>
News Release
INVESTOR CONTACTS: MEDIA CONTACTS:
Victor L. Campbell, Columbia Jeff Prescott, Columbia
(615) 344-2053 (615) 344-5708
Christopher M. Byrd, Value Health Judith Hyfield-Starr, Value Health
(860) 678-3419 (860) 678-3472
COLUMBIA AND VALUE HEALTH ANNOUNCE PLANNED $1.3 BILLION MERGER
NASHVILLE, Tenn. & AVON, Conn., Jan. 15, 1997 - Columbia/HCA Healthcare
Corporation (NYSE: COL) and Value Health, Inc., (NYSE: VH) today announced a
definitive agreement to merge the companies in a $1.3 billion tax free,
stock-for-stock transaction. It is anticipated that the proposed merger will be
accounted for as a pooling-of-interests.
The proposal calls for Value Health, a $1.9 billion specialty
healthcare services company, to merge with a subsidiary of Columbia. Each Value
Health shareholder will receive .58 shares of Columbia common stock in exchange
for each Value Health share held. Through the merger, Columbia expects to issue
approximately 35 million shares of its common stock to Value Health
stockholders, bringing Columbia's total outstanding shares to approximately 716
million.
The proposed merger will include Value Health's four business units:
ValueRx, the nation's largest independent pharmacy benefit management company;
Value Behavioral
<PAGE>
Health, the nation's largest provider of managed behavioral healthcare;
Community Care Network/MedView, a workers' compensation and group health network
and cost management company; and Value Health Sciences, an information
technology company which develops disease management programs.
Following the merger, ValueRx and Columbia Pharmacy Solutions will be
combined, bringing total members to more than 28 million and adding more than
2,500 commercial and wholesale customers. ValueRx manages approximately $2.2
billion of pharmaceutical purchases through its retail and mail-order pharmacy
operations, and represents approximately 80 percent of Value Health's revenues.
Columbia presently purchases approximately $500 million of pharmaceuticals
annually.
Value Behavioral Health provides services to more than 20 million
members through contacts with 1,000 private and public sector companies.
Columbia is a leading provider of behavioral health with 147 locations.
Community Care Network/MedView will combine with Columbia's OneSource
Health Network, a group health and workers' compensation network. The combined
organization will provide service to more than 4 million group health and 25
million workers' compensation members. Value Health Sciences will expand
Columbia's outcomes measurement and best demonstrated practices programs.
"Value Health fits well into Columbia's integrated delivery system and
increases our ability to be a full service provider of healthcare services for
our patients and customers," said Richard L. Scott, Chairman and Chief
Executive Officer of Columbia.
-2-
<PAGE>
"With more than 50 million members in its general medical, mental health,
prescription drug, and workers' compensation network arrangements, Value Health
will provide an important component of Columbia's comprehensive healthcare
solution."
"As we seek to secure our company's future place in the tumultuous
healthcare industry realignment, we looked to Columbia as a company that uses
its size to the benefit of patients, communities, employees and shareholders,"
said Robert E. Patricelli, Chairman and Chief Executive Officer of Value Health.
"Columbia offers us new markets for our products, an innovative environment that
will foster continued growth, and a demonstrated record of success in quality
improvement, cost control and performance measurement."
The merger requires approval of Value Health stockholders and clearance
under the Hart-Scott-Rodino Antitrust Improvements Act and other customary
conditions. It is anticipated that the merger will be complete by mid-1997.
Value Health, Inc. is a provider of specialty benefit programs to large
corporations, insurance carriers, managed care organizations, and federal,
state, and local governments. The company's businesses include: pharmacy benefit
management; mental health and substance abuse management; workers' compensation,
disability and group health management; and disease management.
Columbia is the nation's largest provider of healthcare services with
facilities in 37 states, England and Switzerland. Columbia's networks include
344 hospitals, 135 surgery centers, more than 500 home health locations, and a
nationwide pharmacy benefit
-3-
<PAGE>
management company. The company is building comprehensive networks of healthcare
services, including home health, rehabilitation and skilled nursing units, in
local markets around the country. In 1996 Columbia and its more than 285,000
employees and 75,000 affiliated physicians provided more than 40 million patient
visits.
(Columbia's address on the World Wide Web is
http://www.columbia.net)
(For Value Health press releases, call Company News on Call 1-800-758-5804,
ext. 932938)
-4-
