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 (Date of earliest event reported): June 15, 2000 (June 8, 2000)
HEALTH POWER, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-23220 31-1145640
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
1209 Orange Street, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302) 658-7581
_________________________________ No Change ___________________________________
(Former name or former address, if changed since last report)
<PAGE>
Item 5 Other Events.
Health Power, Inc., a Delaware corporation ("Health Power"), has entered
into an Agreement and Plan of Merger dated as of June 8, 2000 (the "Merger
Agreement"), with Security Capital Corporation, a Delaware corporation
("Security Capital"), and HP Acquisition Corporation, a Delaware corporation
which is a subsidiary of Security Capital ("HP Acquisition"). Security Capital
is a public company whose shares of Class A Common Stock are traded on the
American Stock Exchange.
Under the terms of the Merger Agreement, HP Acquisition will be merged with
and into Health Power, with Health Power becoming a subsidiary of Security
Capital. In connection with the merger, the stockholders of Health Power are
anticipated to receive approximately $26.5 million in cash in exchange for their
shares of Common Stock. Security Capital will also assume or pay approximately
$9.75 million in liabilities and expenses of Health Power, including amounts
needed to extinguish certain severance benefits. The anticipated net purchase
price per share to stockholders of Health Power will be in the range of $6.83 to
$6.88. Following the merger, it is expected that all members of the management
team of CompManagement, Inc., Health Power's wholly owned subsidiary, will
remain in their current positions and maintain an equity stake in the surviving
company.
The Merger Agreement was approved by the Board of Directors of Health
Power, as well as Health Power's special committee of Independent Directors. The
merger represents the culmination of an extensive process undertaken by Health
Power and its financial advisor, Raymond James & Associates, Inc., to analyze
the possibilities to maximize shareholder value.
Health Power stockholders owning approximately 47.7% of its outstanding
Common Stock have signed voting agreements to support the merger transaction.
The merger is expected to be completed by the end of the third quarter 2000, or
shortly thereafter. The transaction is contingent upon Security Capital's
obtaining financing for the transaction, approval by a majority of Health
Power's stockholders, clearance under the Hart Scott Rodino Antitrust
Improvements Act of 1976, and other customary conditions for a transaction of
this type. The Merger Agreement provides for Health Power to call a special
meeting of its stockholders as soon as practicable after financing commitments
have been obtained.
A copy of the Merger Agreement is attached as Exhibit 2 to this Form 8-K. A
copy of the press release announcing the parties entering into the Merger
Agreement is attached as Exhibit 99 to this Form 8-K.
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit
No. Description of Exhibit
2 Agreement and Plan of Merger among Security Capital
Corporation, HP Acquisition Corp. and Health Power, Inc.
dated as of June 8, 2000.
99 Press release issued by Health Power, Inc. and Security
Capital Corporation on June 9, 2000.
Schedules and exhibits to the Merger Agreement have not been filed because
Health Power does not believe that they contain information material to an
investment decision which is not otherwise disclosed in the Merger Agreement. A
list has been attached to the Merger Agreement briefly identifying the contents
of the omitted schedules and exhibits. Health Power hereby agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange Commission upon its request.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTH POWER, INC.
Date: June 9, 2000 By /s/ Bernard F. Master, D.O.
Bernard F. Master, D.O.
Chairman, President, and Chief
Executive Officer
<PAGE>
EXHIBIT INDEX
If Incorporated by
Reference, Document
with which Exhibit was
Exhibit No. Description of Exhibit Previously Filed with SEC
----------------------------------------------------------------------------
2 Agreement and Plan of Merger Contained herein.
among Security Capital
Corporation, HP Acquisition Corp.
and Health Power, Inc.dated as
of June 8, 2000
99 Press release issued by Health Contained herein.
Power, Inc. and Security Capital
Corporation on June 9, 2000.
<PAGE>
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
Among
SECURITY CAPITAL CORPORATION,
HP ACQUISITION CORP.
And
HEALTH POWER, INC.
June 8, 2000
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER...................................................1
Background Information...... ..................................................1
Statement of Agreement.........................................................1
ARTICLE I......................................................................2
THE MERGER.....................................................................2
Section 1.1 The Merger................................................2
Section 1.2 Closing...................................................2
Section 1.3 Directors and Officers....................................2
ARTICLE II.....................................................................3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS......3
Section 2.1 Effect on Capital Stock...................................3
(a) Capital Stock of MergerCo............................................3
(b) Cancellation of Treasury Stock and MergerCo-Owned Stock..............3
Section 2.2 Conversion of Securities..................................3
Section 2.3 Company Stock Options and Related Matters.................4
ARTICLE III....................................................................5
PAYMENT FOR SHARES; DISSENTING SHARES..........................................5
Section 3.1 Payment for Shares of Old Common..........................5
Section 3.2 Dissenting Shares.........................................6
ARTICLE IV.....................................................................7
REPRESENTATIONS AND WARRANTIES OF MERGERCO AND PARENT..........................7
Section 4.1 Representations and Warranties of MergerCo................7
(a) Organization.........................................................7
(b) Authorization; Validity of Agreement; Necessary Action...............7
(c) Ownership............................................................7
(d) Consents and Approvals; No Violations................................7
(e) Takeover Laws........................................................8
(f) Formation of MergerCo; No Prior Activities...........................8
Section 4.2 Representations and Warranties of Parent..................8
(a) Organization.........................................................8
(b) Authorization; Validity of Agreement; Necessary Action...............8
(c) Consents and Approvals; No Violations................................8
(d) Takeover Laws........................................................9
(e) Litigation...........................................................9
(f) No Brokers...........................................................9
(g) SEC Documents; Financial Statements..................................9
(h) Compliance with Laws................................................10
(i) Contracts; Debt Instruments.........................................10
(j) Investment Company Act of 1940......................................10
(k) Solvency............................................................10
ARTICLE V.....................................................................11
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................11
Section 5.1 Existence; Good Standing; Authority; Compliance With Law.11
Section 5.2 Authorization, Validity and Effect of Agreements.........12
Section 5.3 Capitalization...........................................13
Section 5.4 Subsidiaries............................................ 13
Section 5.5 No Violation; Consents...................................13
Section 5.6 SEC Documents; Financial Statements......................14
Section 5.7 Litigation.............................................. 15
Section 5.8 Absence of Certain Changes...............................15
Section 5.9 Taxes....................................................15
Section 5.10 Properties...............................................16
Section 5.11 Environmental Matters....................................17
Section 5.12 Employee Benefit Plans...................................18
Section 5.13 Labor Matters............................................20
Section 5.14 No Brokers...............................................20
Section 5.15 Opinion of Financial Advisor.............................20
Section 5.16 Insurance................................................20
Section 5.17 Contracts and Commitments; Indemnity Agreements..........21
Section 5.18 Related Party Transactions...............................21
Section 5.19 DOI Reports..............................................21
Section 5.20 Health Power HMO.........................................22
Section 5.21 Definition of the Company's Knowledge....................22
ARTICLE VI....................................................................22
CONDUCT OF BUSINESS PENDING THE MERGER........................................22
Section 6.1 Conduct of Business by the Company.......................22
Section 6.2 Financing................................................24
ARTICLE VII...................................................................25
ADDITIONAL AGREEMENTS.........................................................25
Section 7.1 Stockholders Meeting; Proxy Materials....................25
Section 7.2 Other Filings............................................27
Section 7.3 Additional Agreements....................................27
Section 7.4 Fees and Expenses....................................... 28
Section 7.5 No Solicitations.........................................28
Section 7.6 Officers' and Directors' Indemnification and Insurance...28
Section 7.7 Access to Information; Confidentiality...................29
Section 7.8 Public Announcements.....................................29
Section 7.9 Notification of Certain Matters..........................29
Section 7.10 Termination of Company Stock Plans.......................30
Section 7.11 Windup of Health Power HMO...............................30
Section 7.12 Termination of Severance Arrangements....................30
ARTICLE VIII..................................................................32
CONDITIONS TO THE MERGER......................................................32
Section 8.1 Conditions to the Obligations of Each Party to
Effect the Merger........................................32
(a) Stockholder Approval................................................32
(b) Hart-Scott-Rodino Act...............................................32
(c) Other Regulatory Approvals..........................................32
(d) Other Consents......................................................32
(e) No Injunctions or Orders; Illegality................................32
Section8.2 Conditions to Obligations of MergerCo and Parent..........32
(a) Representations and Warranties......................................32
(b) Performance and Obligations of the Company..........................33
(c) Material Adverse Change.............................................33
(d) No Restraints.......................................................33
(e) Dissenting Shares...................................................33
(f) Certificates........................................................33
(g) Financing...........................................................33
(h) Health Power HMO....................................................33
(i) Termination of Severance Agreements.................................34
(j) Investment and Employment Agreements with Executive Management......34
Section 8.3 Conditions to Obligations of the Company.................34
(a) Representations and Warranties......................................34
(b) Performance of Obligations of MergerCo and Parent...................34
(c) Material Adverse Change.............................................34
(d) Certificates........................................................34
ARTICLE IX....................................................................34
TERMINATION, AMENDMENT AND WAIVER.............................................34
Section 9.1 Termination..............................................34
Section 9.2 Effect of Termination....................................36
ARTICLE X.....................................................................38
GENERAL PROVISIONS............................................................38
Section 10.1 Notices..................................................38
Section 10.2 Interpretation...........................................39
Section 10.3 Survival.................................................39
Section 10.4 Miscellaneous............................................39
Section 10.5 Assignment...............................................40
Section 10.6 Severability.............................................40
Section 10.7 Choice of Law/Consent to Jurisdiction....................40
Section 10.8 Extension; Waiver........................................40
Section 10.9 Amendment................................................40
Section 10.10 No Agreement Until Executed..............................41
Section 10.11 Parent...................................................41
<PAGE>
INDEX OF DEFINED TERMS
Term Section
1999 Form 10-K Section 5.10(a)
Acquisition Proposal Section 7.1(e)
Agreement Introduction
Break-Up Fee Section 9.2(b)
Bylaws Section 1.1
Cashed Shares Section 3.1(c)
Certificate of Incorporation Section 1.1
Certificate of Merger Section 1.2
Certificates Section 3.1(b)
Closing Section 1.2
Closing Date Section 1.2
CMI Management Team Section 7.12
Code Section 3.1(i)
Commitment Due Date Section 6.2(a)
Company Introduction
Company Board Background Information
Company Disclosure Schedule Article V, Introduction
Company Material Adverse Effect Section 5.1(a)
Company Properties Section 5.10(a)
Company SEC Reports Section 5.6
Company Stock Plans Section 2.3
Company Subsidiary Section 2.1(b)
Company Operating Subsidiaries Section 5.1(b)
Confidentiality Agreement Section 7.7
CTC Section 10.7
Debt Encumbrances Section 5.10(a)
DGCL Background Information
Dissenting Shares Section 3.2
Dr. Master's Employment Agreement Section 7.12
Effective Time Section 1.2
ERISA Section 5.12(a)
Escrow Agent Background Information
Escrow Agreement Background Information
Exchange Act Section 4.1(d)
Exchange Agent Section 3.1(a)
Exchange Fund Section 3.1(a)
Governmental Entity Section 4.1(d)
Health Power HMO Section 5.1(b)
HSR Act Section 4.1(d)
Indebtedness Section 2.2(a)
Indemnity Agreement Section 5.17(b)
Independent Committee Background Information
Injunction Section 8.1(e)
Laws Section 4.2(h)
Material Contracts Section 5.17(a)
Material Deviation From Projections Section 5.1(a)
Merger Background Information
Merger Consideration Section 2.2(a)
MergerCo Introduction
MergerCo Board Section 4.1(b)
MergerCo Common Stock Section 2.1(a)
MergerCo Material Adverse Effect Section 4.1(a)
Necessary Financing Section 6.2(a)
Delaware Courts Section 10.7
Old Common Background Information
Options Section 2.3
Other Filings Section 7.2
Parent Introduction
Parent Material Adverse Effect Section 4.2(a)
Parent/MergerCo Collection Expenses Section 9.2(b)
Parent/MergerCo Expenses Section 9.2(b)
Parent SEC Reports Section 4.2(g)
Parties Background Information
Person Section 10.2
Plan(s) Section 5.12(a)
Preferred Stock Section 5.3
Proposed Financing Commitments Section 6.2(a)
Proxy Statement Section 7.1(a)(ii)(B)
Raymond James Section 5.14
Regulatory Approval(s) Section 5.5
Reporting Tail Coverage Section 7.6(b)
SEC Section 4.2(g)
Securities Act Section 4.2(g)
Severance Agreements Section 7.12
Stockholder Voting Agreement Background Information
Subsidiary Section 10.2
Superior Proposal Section 7.1(e)
Surviving Corporation Section 1.1
Tax Returns Section 5.9(k)
Taxes Section 5.9(j)
Transaction Proposal Section 9.2(c)
Transactions Background Information
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made as of June 8,
2000, among Security Capital Corporation, a Delaware corporation ("Parent"), HP
Acquisition Corp., a Delaware corporation which is direct or indirect subsidiary
of Parent ("MergerCo"), and Health Power, Inc., a Delaware corporation (the
"Company").
Background Information
A. The respective Boards of Directors of Parent, MergerCo and the Company
have each approved the merger of MergerCo with and into the Company (the
"Merger") in accordance with the Delaware General Corporation Law (the "DGCL"),
and, upon the terms and subject to the conditions set forth in this Agreement,
holders of shares of Common Stock, $0.01 par value, of the Company ("Old
Common") that were issued and outstanding immediately prior to the Effective
Time (as hereinafter defined) will, except as otherwise provided herein, be
entitled to the right to receive cash.
B. The Board of Directors of the Company (the "Company Board") has, in
light of and subject to the terms and conditions set forth in this Agreement,
determined that the Merger Consideration (as hereinafter defined) to be paid for
each share of Old Common in the Merger is fair to the stockholders of the
Company and that the Merger is otherwise advisable and fair to and in the best
interests of the Company and its stockholders. An independent committee of the
Company Board consisting of five members of the Company Board, none of whom is
an employee of the Company or any of its Subsidiaries (as defined below) (the
"Independent Committee"), has made the same determinations. Prior to the date
hereof, the Company Board has approved this Agreement and the transactions
contemplated or required hereby, including the Merger (collectively, the
"Transactions"), and has resolved to recommend that the holders of shares of Old
Common approve and adopt this Agreement.
C. Concurrently herewith and as a condition and inducement to Parent's and
MergerCo's willingness to enter into this Agreement with the Company, each of
those persons listed on Exhibit A-1 attached hereto, each of whom is a
stockholder of the Company, has entered into a Stockholder Voting Agreement with
Parent (collectively, the "Stockholder Voting Agreements"), substantially in the
form of Exhibit A-2 attached hereto.
D. Concurrently herewith and as a condition and inducement to the Company's
willingness to enter into this Agreement, Parent or MergerCo has delivered to
U.S. Trust Company of New York, as escrow agent (the "Escrow Agent"), $100,000
by wire transfer of immediately available funds, to be held and disbursed by the
Escrow Agent pursuant to the terms of the Escrow Agreement, by and among Parent,
MergerCo, the Company and the Escrow Agent, as same may be amended after the
date hereof (the "Escrow Agreement"), substantially in the form of Exhibit B
attached hereto.
E. MergerCo, Parent and the Company (collectively, the "parties") desire to
make certain representations, warranties, covenants and agreements in connection
with the Transactions and to prescribe various conditions to the Transactions.
Statement of Agreement
The parties acknowledge the accuracy of the foregoing Background
Information and agree as follows:
Article I
the Merger
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company and MergerCo shall consummate the
Merger pursuant to which (a) MergerCo shall be merged with and into the Company
and the separate corporate existence of MergerCo shall thereupon cease, (b) the
Company shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware, and (c) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The certificate of
incorporation of the Company (the "Certificate of Incorporation"), as in effect
immediately prior to the Effective Time, shall be amended and restated in its
entirety substantially as set forth in Exhibit 1.1A attached hereto and
thereafter shall be the Certificate of Incorporation until further amended in
accordance with law and the Certificate of Incorporation. The bylaws of the
Company (the "Bylaws"), as in effect immediately prior to the Effective Time,
shall be amended and restated in their entirety substantially as set forth in
Exhibit 1.1B attached hereto and thereafter shall be the Bylaws of the Surviving
Corporation until further amended in accordance with law, the Certificate of
Incorporation and the Bylaws. The Merger shall have the effects specified in the
DGCL.
Section 1.2 Closing. The closing of the Merger (the "Closing") shall take
place at a time and on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver (by the
applicable party entitled to the benefit thereof) of all of the conditions set
forth in Article VIII hereof (other than conditions with respect to actions the
respective parties will take at the Closing itself) (the "Closing Date"), at the
offices of Baker & Hostetler LLP, Capital Square, 65 East State Street,
Columbus, Ohio, unless another time, date or place is agreed to by the parties.
MergerCo and the Company shall duly execute and file a certificate of merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware in accordance with the DGCL on the Closing Date. The Merger shall
become effective as of the time of filing of the Certificate of Merger, or at
such later time agreed to by the parties as is specified in the Certificate of
Merger (the "Effective Time").
Section 1.3 Directors and Officers. The directors and officers of MergerCo
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation until
his respective successor has been elected and qualified.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCKOF THE CONSTITUENT CORPORATIONS
Section 2.1 - Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of Old
Common or any holder of shares of capital stock of MergerCo:
(a) Capital Stock of MergerCo. Each share of the common stock of MergerCo
(the "MergerCo Common Stock") issued and outstanding immediately prior
to the Effective Time shall be converted into and become one fully
paid and nonassessable share of Common Stock, par value $.01 per
share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and MergerCo-Owned Stock. Each share of
Old Common and all other shares of capital stock of the Company that
are owned by the Company or any Subsidiary of the Company (as defined
in Section 10.2) (a "Company Subsidiary") and all shares of Old Common
and other shares of capital stock of the Company owned by MergerCo
shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
Section 2.2 - Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of MergerCo, the Company or the
holders of any shares of Old Common:
(a) Subject to the other provisions of this Section 2.2 and to Section
3.1(i), each share of Old Common issued and outstanding immediately
prior to the Effective Time, excluding (i) shares of Old Common owned
by the Company or any of the Company Subsidiaries or by MergerCo and
(ii) Dissenting Shares (as defined in Section 3.2), shall be converted
into the right to receive the quotient obtained by dividing:
(x) Thirty-Six Million Two Hundred Fifty Thousand Dollars
($36,250,000), minus the sum of (A) the difference between
$4,850,996, which was the amount of outstanding Indebtedness (as
defined below) of the Company and the Company Subsidiaries on a
consolidated basis as at December 31, 1999, and the lesser of (I)
$1,800,000 and (II) the principal amount by which such
Indebtedness is reduced by payments made prior to the Closing (as
defined below), (B) the Option Termination Consideration (as
defined below), (C) the Severance Consideration (as defined
below), and (D) the Company Expenses (as defined below), by
(y) the total number of shares of Old Common issued and outstanding
immediately prior to the Effective Time (excluding all shares of
Old Common held in the Company's treasury) (the "Merger
Consideration"), which Parent shall pay, or cause to be paid, in
cash to the holder thereof, without any interest thereon, upon
surrender and exchange of the Certificate (as defined in Section
3.1) representing such share of Old Common. The Merger
Consideration shall be subject to equitable adjustment in the
event of any stock split, stock dividend, reverse stock split, or
other change in the number of shares of Old Common outstanding
between the date hereof and the Effective Time. The term "Company
Expenses" shall mean an amount equal to all out-of-pocket costs
and expenses, including, without limitation, those which may be
payable after the Closing, incurred by the Company or any Company
Subsidiary in connection with this Agreement and the
Transactions, including, without limitation, the fees and
disbursements of the Company's outside legal counsel,
accountants, consultants and other professional service providers
retained by or on behalf of the Company, together with all other
out-of-pocket costs and expenses incurred by the Company in
connection with analyzing and structuring the Transactions,
negotiating the terms and conditions of this Agreement and any
other agreements or other documents relating to the Transactions,
complying with the terms of this Agreement and causing the
closing conditions set forth herein to be fulfilled. The Company
and Parent shall in good faith consult with one another and
mutually determine the amount of the Company Expenses at least
three (3) business days prior to the Closing, and prior to the
Closing, the Company will keep Parent reasonably informed of the
Company Expenses as incurred to date. As used in this Agreement,
the term "indebtedness or "Indebtedness" shall include, for any
person, (A) indebtedness created, issued or incurred for borrowed
money (whether by loan or the issuance and sale of debt
securities or the sale of property to another person subject to
an understanding or agreement, contingent or otherwise, to
repurchase such property from such person), (B) obligations of
such person to pay the deferred purchase or acquisition price of
property or services, other than trade accounts payable arising,
and accrued expenses incurred, in the ordinary course of
business, (C) indebtedness of another person secured by a lien on
the property of such person, (D) payment obligations of such
person in respect of letters of credit, banker's acceptances or
similar instruments issued or accepted by banks and other
financial institutions for the account of such person, (E)
capital lease obligations of such person, and (F) indebtedness of
another person guaranteed by such person, provided, however, that
no item of "indebtedness" shall be deducted more than once as
"indebtedness" because it falls within more than one of the above
categories.
(b) All such shares of Old Common, when converted as provided in Section
2.2(a), shall no longer be considered outstanding and shall
automatically be canceled and retired and shall cease to exist, and
each Certificate previously evidencing such shares shall thereafter
represent only the right to receive the Merger Consideration. The
holders of Certificates previously evidencing shares of Old Common
outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to the Old Common except as otherwise
provided herein or by law and, upon the surrender of Certificates in
accordance with Section 3.1, shall only have the right to receive for
their shares of Old Common the Merger Consideration, without any
interest thereon.
Section 2.3 - Company Stock Options and Related Matters. As of and subject
to the occurrence of the Effective Time, each outstanding option, warrant or
similar right (including any related stock appreciation right) (an "Option")
issued, awarded or granted pursuant to any plan, agreement or arrangement of the
Company or any Company Subsidiary and entitling the holder thereof to purchase a
share of Old Common or any other capital stock of the Company or any Company
Subsidiary (the "Company Stock Plans") shall be terminated, subject to obtaining
the consents discussed below, and each holder of a terminated Option shall be
entitled to receive, in consideration for the termination of such Option, an
amount in cash (less applicable withholding taxes) equal to one of the
following: (a) for Options with an exercise price per share greater than the
Merger Consideration ("Out of the Money Options"), $1.00 for each Out of the
Money Option terminated; or (b) for Options with an exercise price per share
less than the Merger Consideration ("In the Money Options"), the excess of the
Merger Consideration over the exercise price per share for each In the Money
Option terminated. The total consideration to be paid for the termination of all
Options is hereinafter referred to as the "Option Termination Consideration." At
least five (5) business days prior to the Closing (x) the Company shall deliver
to Parent agreements (in a form reasonably acceptable to Parent) executed by
each director and officer of the Company and any Company Subsidiary holding an
Option acknowledging that the payment made pursuant to this Section 2.3 is being
made in full satisfaction of such individual's rights under the applicable
Company Stock Plans and any option awards granted thereunder, and (y) the
Company shall use commercially reasonable efforts to obtain executed agreements
of the type described in clause (x) from each other holder of an option to
purchase shares of Old Common awarded under the Company Stock Plans. Immediately
prior to the Effective Time, Parent shall pay to the Company an amount equal to
the Option Termination Consideration, and, in turn, the Company shall
immediately pay, or cause to be paid, to each holder of a terminated Option the
Option Termination Consideration to which such holder is entitled to receive
pursuant to such holder's agreement described in clauses (x) and (y) above.
ARTICLE III
PAYMENT FOR SHARES; DISSENTING SHARES
Section 3.1 - Payment for Shares of Old Common.
(a) Prior to the Effective Time, Parent or MergerCo shall appoint a bank
or trust company reasonably acceptable to the Company to act as
exchange agent (the "Exchange Agent"). At or prior to the Effective
Time, Parent or MergerCo shall deposit, or cause to be deposited, with
the Exchange Agent in an account (the "Exchange Fund") the aggregate
Merger Consideration to which holders of shares of Old Common shall be
entitled at the Effective Time pursuant to Section 2.2(a). The Merger
Consideration shall be invested by the Exchange Agent, as directed by
Parent, provided such investments shall be limited to direct
obligations of the United States of America, obligations for which the
full faith and credit of the United States of America is pledged to
provide for the payment of principal and interest, commercial paper
rated of the highest quality by Moody's Investors Services, Inc. or
Standard & Poor's Corporation, or certificates of deposit issued by a
commercial bank having at least $1,000,000,000 in assets; provided,
that no loss on investments made pursuant to this Section 3.1(a) shall
relieve Parent of its obligation to pay the Merger Consideration
pursuant to Section 2.2.
(b) Promptly after the Effective Time, MergerCo shall cause the Exchange
Agent to mail to each record holder of certificates (the
"Certificates") that immediately prior to the Effective Time
represented shares of Old Common a form of letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent.
(c) In effecting the payment of the Merger Consideration with respect to
shares of Old Common represented by Certificates entitled to payment
of the Merger Consideration pursuant to Section 2.2(a) (the "Cashed
Shares"), upon the surrender of each such Certificate, Parent shall
cause the Exchange Agent to pay the holder of such Certificate the
Merger Consideration multiplied by the number of Cashed Shares, in
consideration therefor. Upon such payment such Certificate shall
forthwith be canceled.
(d) From and after the Effective Time until surrendered in accordance with
paragraph (c) above, each Certificate representing shares of Old
Common shall represent solely the right to receive the Merger
Consideration relating thereto. No interest or dividends shall be paid
or accrued on the Merger Consideration. If the Merger Consideration
(or any portion thereof) is to be delivered to any person other than
the person in whose name the Certificate formerly representing shares
of Old Common surrendered therefor is registered, it shall be a
condition to the right to receive such Merger Consideration that the
Certificate so surrendered be properly endorsed or otherwise be in
proper form for transfer and that the person surrendering such shares
of Old Common shall pay to the Exchange Agent any transfer or other
taxes required by reason of the payment of the Merger Consideration to
a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
(e) Promptly following the date which is 180 days after the Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation
all cash, Certificates and other documents in its possession relating
to the Transactions, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a share
of Old Common may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in consideration therefor the Merger
Consideration relating thereto without any interest or dividends
thereon.
(f) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Old
Common which were outstanding immediately prior to the Effective Time.
(g) None of Parent, MergerCo, the Company or the Exchange Agent shall be
liable to any person in respect of any cash from the Exchange Fund
delivered to a public official in good faith pursuant to any
applicable abandoned property, escheat or similar law.
(h) If 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 provision of reasonable and customary
indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration
payable to such person pursuant to this Agreement.
(i) The Surviving Corporation shall be entitled to deduct and withhold
from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of shares of Old Common such amounts as the
Surviving Corporation is required to deduct and withhold with respect
to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by the Surviving
Corporation, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of
Old Common with respect to which such deduction and withholding was
made by the Surviving Corporation.
Section 3.2 - Dissenting Shares. Notwithstanding any other provision of
this Agreement to the contrary, shares of Old Common which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders instead shall be entitled to
receive payment of the appraised value of such shares of Old Common held by them
in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of Old Common under such Section 262 shall thereupon be deemed to have
been converted into and to have become exchangeable, as of the Effective Time,
for the right to receive, without any interest thereon, the Merger Consideration
upon surrender, in the manner provided in Section 3.1, of the Certificate or
Certificates that, immediately prior to the Effective Time, evidenced such
shares of Old Common. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of shares of Old Common, and, prior to the
Effective Time, Parent shall have the right to participate in all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO AND PARENT
Section 4.1 - Representations and Warranties of MergerCo. MergerCo and
Parent, jointly and severally, hereby represent and warrant to the Company that
the statements contained in this Section 4.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 4.1).
(a) Organization. MergerCo is a corporation duly organized, validly
existing and in good standing under the laws of its state of formation
and has all requisite corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to
carry on its business as now being and proposed to be conducted,
except where the failure to be so organized, existing and in good
standing or to have such power, authority, and governmental approvals
would not reasonably be expected to have a material adverse effect on
the business, results of operations or condition (financial or
otherwise) of MergerCo (a "MergerCo Material Adverse Effect").
(b) Authorization; Validity of Agreement; Necessary Action. MergerCo has
all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the Transactions. The execution,
delivery and performance by MergerCo of this Agreement and the
consummation of the Transactions have been duly authorized by the
Board of Directors of MergerCo (the "MergerCo Board") and by the sole
stockholder of MergerCo, and no other corporate action on the part of
MergerCo is necessary to authorize the execution and delivery by
MergerCo of this Agreement and the consummation of the Transactions.
This Agreement has been duly executed and delivered by MergerCo and,
assuming the due and valid authorization, execution and delivery
hereof by the Company, is a valid and binding obligation of MergerCo
enforceable against MergerCo in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights generally and to general principles of
equity. (c) Ownership . MergerCo is a direct or indirect wholly-owned
Subsidiary of Parent.
(d) Consents and Approvals; No Violations. Except for the filing of the
Certificate of Merger in accordance with the DGCL, and such filings,
permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and applicable state or
foreign securities or state "Blue Sky" laws, none of the execution,
delivery or performance of this Agreement by MergerCo, the
consummation by MergerCo of the Transactions or compliance by MergerCo
with any of the provisions hereof will (i) conflict with or result in
any breach of any provision of the certificate of incorporation or
bylaws of MergerCo, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (as
hereinafter defined) with respect to MergerCo, (iii) result in a
violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation
to which MergerCo is a party or by which it or any of its properties
or assets may be bound, or (iv) violate any order, writ, injunction,
decree, statute, rule, regulation or other law applicable to MergerCo
or any of its properties or assets, excluding from the foregoing
clauses (ii), (iii) and (iv) such violations, breaches or defaults
(including, for purposes hereof, the failure to make a filing or to
obtain a permit, authorization, consent or approval) which would not,
individually or in the aggregate, reasonably be expected to (A) have a
MergerCo Material Adverse Effect, (B) impair the ability of MergerCo
to consummate the Transactions, or (C) prevent or materially delay the
consummation of the Transactions. For purposes of this Agreement,
"Governmental Entity" means any governmental or quasi-governmental
authority including, without limitation, any federal, state,
territorial, county, municipal or other governmental or
quasi-governmental agency, board, branch, bureau, commission, court,
department or other instrumentality or political unit or subdivision,
whether domestic or foreign.
(e) Takeover Laws. MergerCo was not, immediately prior to the execution of
this Agreement and the Stockholder Voting Agreements, an "interested
stockholder" of the Company within the meaning of Section 203 of the
DGCL.
(f) Formation of MergerCo; No Prior Activities. MergerCo was formed solely
for the purpose of engaging in the transactions contemplated by this
Agreement and has not engaged in any business activities or conducted
any operations other than in connection with its incorporation or
organization and the transactions contemplated by this Agreement.
Section 4.2 - Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company that the statements contained in this
Section 4.2 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4.2).
(a) Organization. Parent is a corporation duly organized, validly existing
and in good standing under the laws of its state of formation and has
all requisite corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure
to be so organized, existing and in good standing or to have such
power, authority, and governmental approvals would not reasonably be
expected to have a material adverse effect on the business, results of
operations or condition (financial or otherwise) of Parent (a "Parent
Material Adverse Effect").
(b) Authorization; Validity of Agreement; Necessary Action. Parent has all
requisite power and authority to execute and deliver this Agreement
and to consummate the Transactions. The execution, delivery and
performance by Parent of this Agreement and the consummation of the
Transactions have been duly authorized by all necessary action on the
part of Parent and no other action on the part of Parent is necessary
to authorize the execution and delivery by Parent of this Agreement
and the consummation of the Transactions. This Agreement has been duly
executed and delivered by Parent and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a
valid and binding obligation of Parent enforceable against Parent in
accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors'
rights generally and to general principles of equity.
(c) Consents and Approvals; No Violations. Except for such filings,
permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR
Act, and state or foreign securities or state "Blue Sky" laws, none of
the execution, delivery or performance of this Agreement by Parent,
the consummation by Parent of the Transactions or compliance by Parent
with any of the provisions hereof will (i) conflict with or result in
any breach of any provision of the certificate of incorporation or
bylaws of Parent, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity with
respect to Parent, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement
or other instrument or obligation to which Parent is a party or by
which it or any of its properties or assets may be bound, or (iv)
violate any order, writ, injunction, decree, statute, rule, regulation
or other law applicable to Parent or any of its properties or assets,
excluding from the foregoing clauses (ii), (iii) and (iv) such
violations, breaches or defaults (including, for purposes hereof, the
failure to make a filing or to obtain a permit, authorization, consent
or approval) which would not, individually or in the aggregate,
reasonably be expected to (A) have a Parent Material Adverse Effect,
(B) impair the ability of Parent to consummate the Transactions, or
(C) prevent or materially delay the consummation of the Transactions.
(d) Takeover Laws. Parent was not, immediately prior to the execution of
this Agreement and the Stockholder Voting Agreements, an "interested
stockholder" of the Company within the meaning of Section 203 of the
DGCL.
(e) Litigation. There are no actions, suits, proceedings, investigations
or claims pending or, to the knowledge of Parent, threatened against
MergerCo or Parent, at law or in equity, or before or by any court,
commission, governmental department, board, bureau, agency,
administrative officer or executive, or instrumentality, whether
federal, state, local or foreign, or before any arbitrator, that
would, individually or in the aggregate, reasonably be expected to
prevent or materially delay the consummation of the Transactions or to
have a Parent Material Adverse Effect or a MergerCo Material Adverse
Effect, as the case may be.
(f) No Brokers. Neither Parent nor MergerCo has entered into any contract,
arrangement or understanding with any person which may result in the
obligation of such entity or the Company to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or consummation of the
Transactions, except that Capital Partners, Inc. (or its affiliate)
will receive an investment banking fee in connection with the
consummation of the Transactions.
(g) SEC Documents; Financial Statements. Each periodic report,
registration statement, definitive proxy statement and other document
filed by Parent with the Securities and Exchange Commission (the
"SEC") since January 1,1998 (as such documents have since the time of
their filing been amended, the "Parent SEC Reports"), as of their
respective dates, complied in all material respects with the
requirements of the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act") or the
Exchange Act, as the case may be, applicable to such Parent SEC
Reports, and none of the Parent SEC Reports when filed contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, except for such statements, if any, as have
been modified by subsequent filings prior to the date hereof. The
Parent SEC Reports include all the documents (other than preliminary
material) that Parent was required to file with the SEC since January
1, 1998. The financial statements of Parent included in the Parent SEC
Reports, as of their respective filing dates with the SEC, complied as
to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q
of the SEC) and present fairly the consolidated financial position of
Parent and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the
periods then ended (subject in the case of the unaudited statements,
to normal, year-end audit adjustments). Since December 31, 1999,
neither Parent nor any of its subsidiaries has incurred any
liabilities or obligations, whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether due or
to become due, except (i) as and to the extent set forth on the
audited balance sheet of Parent and its subsidiaries as of December
31, 1999 (including the notes thereto) (the "Parent Balance Sheet"),
(ii) for liability under this Agreement, (iii) as incurred after
December 31, 1999 in the ordinary course of business and consistent
with past practices, (iv) as described in the Parent SEC Reports filed
and publicly available as of the date hereof, or (v) as would not,
individually or in the aggregate, reasonably be expected to have a
MergerCo Material Adverse Effect or a Parent Material Adverse Effect,
as the case may be.
(h) Compliance with Laws. Except as specifically disclosed in the Parent
SEC Reports filed and publicly available prior to the date hereof,
MergerCo and Parent are in compliance with all applicable laws,
statutes, orders, rules, regulations, policies or guidelines
promulgated, or judgments, decisions or orders entered, by any
federal, state, local or foreign court or governmental authority
(collectively, "Laws") applicable to Parent or its Subsidiaries, or to
their respective businesses or properties, except where the failure to
comply would not, individually or in the aggregate, reasonably be
expected to have a MergerCo Material Adverse Effect or a Parent
Material Adverse Effect, as the case may be.
(i) Contracts; Debt Instruments. Neither Parent nor any of its
Subsidiaries has received a written notice that Parent or any of its
Subsidiaries is in violation of or in default under any material loan
or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other material contract,
agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound, nor does any
such violation or default exist, except to the extent such violation
or default would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect or a MergerCo
Material Adverse Effect, as the case may be.
(j) Investment Company Act of 1940. Neither Parent nor any of its
Subsidiaries is, or at the Effective time will be, required to be
registered under the Investment Company Act of 1940, as amended.
(k) Solvency. Assuming that the representations and warranties of the
Company contained in this Agreement or in any instrument delivered by
the Company pursuant to this Agreement are correct and complete
without giving effect to any materiality or knowledge qualification
included in any such representation or warranty, then, immediately
after giving effect to the Transactions and the closing of the
financing contemplated by this Agreement, (i) the Surviving
Corporation shall be able to pay its debts as they become due and
shall own assets having a fair salable value greater than the amounts
required to pay its debts (including the amount that is reasonably
likely to become payable in respect of all contingent liabilities),
and (ii) the Surviving Corporation shall have adequate capital to
carry on its business. No transfer of property is being made, or
caused to be made, and no obligation is being incurred, or caused to
be incurred, by Parent or MergerCo in connection with the Transactions
and the closing of the financing contemplated by this Agreement with
the intent to hinder, delay or defraud either present or future
creditors of Parent, MergerCo or the Surviving Corporation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and MergerCo that the
statements contained in this Article V are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article V), except as set forth in the disclosure
schedule, arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Article V, delivered at or prior to the execution
hereof to Parent and MergerCo (the "Company Disclosure Schedule").
Section 5.1 Existence; Good Standing; Authority; Compliance With Law.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company is
duly licensed or qualified to do business as a foreign corporation and
is in good standing under the laws of each jurisdiction in which the
ownership of its property or the conduct of its business makes such
qualification necessary, except where the failure to be so licensed or
qualified or in good standing would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on
the business, assets, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company and the Company
Subsidiaries taken as a whole (a "Company Material Adverse Effect").
Without limiting any other events or occurrences which may constitute
a Company Material Adverse Effect, a Company Material Adverse Effect
shall be deemed to have occurred for purposes of this Agreement if, as
at the end of any calendar month during the Company's 2000 fiscal year
preceding the Closing, the actual consolidated results of operations
(as measured by EBITDA) of the Company and its consolidated
Subsidiaries for the portion of such fiscal year completed through the
end of such calendar month deviate, in terms of less favorable
results, by more than ten percent (10%) from the Company's projected
consolidated results of operations (as measured by EBITDA) through the
end of such period, as delivered in writing by the Company to Parent
prior to the date hereof (a "Material Deviation from Projections").
The Company has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now
being and proposed to be conducted.
(b) Except as set forth in Section 5.1(b) of the Company Disclosure
Schedule, each of the Company Operating Subsidiaries (as defined
below) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being and proposed to
be conducted, and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in
good standing would not reasonably be expected to have a Company
Material Adverse Effect. For purposes of this Agreement, the term
"Company Operating Subsidiaries" shall mean all of the Company
Subsidiaries other than Health Power HMO, Inc., an Ohio corporation
and a Subsidiary of the Company ("Health Power HMO"). Health Power HMO
is a corporation duly organized under the laws of Ohio.
(c) Except as set forth in Section 5.1(c) of the Company Disclosure
Schedule, each of the Company and the Company Operating Subsidiaries
possess, and has possessed since January 1, 1998, all licenses,
permits, variances, exemptions, orders and other authorizations and
approvals of all Governmental Entities required to conduct their
respective businesses as now conducted or proposed to be conducted by
them (the "Company Permits"), except where the failure to possess such
licenses, permits, variances, exemptions, orders, authorizations or
approvals has not had, or would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. The
Company and each of the Company Operating Subsidiaries are, and at all
times since January 1, 1998, have been, in compliance with the terms
of the Company Permits, except where the failure so to comply has not
had, or would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
(d) Section 5.1(d) of the Company Disclosure Schedule contains a true and
complete list of all regulatory undertakings, orders or other
commitments of any nature, which are not embodied in applicable Laws
or specifically disclosed in the Company SEC Reports (as defined
below) filed and publicly available prior to the date of this
Agreement, entered into by the Company or any of the Company Operating
Subsidiaries with any regulatory entity, including any insurance or
other regulatory bodies, which undertakings, orders or other
commitments limit or purport to limit the business of the Company or
any of the Company Operating Subsidiaries as presently conducted or as
the same may be conducted in the future. Except as specifically
disclosed in the Company SEC Reports filed and publicly available
prior to the date of this Agreement, the conduct of the respective
businesses of the Company and each of the Company Operating
Subsidiaries is, and at all times since January 1, 1998 has been, in
compliance with all Laws applicable to the Company or to any of the
Company Operating Subsidiaries or to their respective businesses or
properties, except for noncompliance which has not had, or would not
reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. Except as disclosed in Company SEC
Reports filed and publicly available after December 31, 1999 and prior
to the date hereof, no investigation or review by any Governmental
Entity with respect to the Company or any of the Company Subsidiaries
(including, without limitation, Health Power HMO) is pending or, to
the knowledge of the Company, threatened, other than those which would
not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect.
Section 5.2 - Authorization, Validity and Effect of Agreements. Each of the
Company and the Company Subsidiaries, as applicable, has all requisite power and
authority to enter into the Transactions and to execute and deliver this
Agreement, and (other than, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the total outstanding
voting power of the shares of Old Common, as required by the DGCL) to perform
its obligations hereunder and to consummate the Transactions. The Company Board,
at a meeting duly called and held on May 9, 2000, (i) determined that this
Agreement and the Merger are advisable, and fair to and in the best interests of
the holders of shares of Old Common, (ii) approved this Agreement and the
Transactions (and, for purposes of Section 203 of the DGCL, also specifically
approved the Stockholder Voting Agreements), and (iii) resolved to recommend
that the holders of shares of Old Common approve and adopt this Agreement.
Subject only to the approval of this Agreement by the holders of shares of Old
Common, the execution by the Company of this Agreement and the consummation of
the Transactions have been duly authorized by all requisite corporate action on
the part of the Company. This Agreement has been duly executed and delivered by
the Company and, subject to approval by the holders of shares of Old Common, and
assuming due and valid authorization, execution and delivery thereof by MergerCo
and Parent, constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally and to general principles of equity.
Section 5.3 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of Old Common and 5,000,000 shares of Preferred
Stock, $0.01 par value (the "Preferred Stock"). As of the date of this
Agreement: (i) no shares of Preferred Stock were issued or outstanding; and (ii)
no shares of Old Common and no shares of Preferred Stock were held in the
treasury of the Company or owned by any Company Subsidiary. All such issued and
outstanding shares of Old Common are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in
Section 5.3 of the Company Disclosure Schedule: (a) there are no outstanding
bonds, debentures, notes or other securities or obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shares of Old Common on any
matter, (b) there are no outstanding options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate the Company to issue, transfer or sell any shares of capital stock or
any other securities of the Company or any Company Subsidiary, (c) there are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock, partnership
interests or any other securities of the Company or any Company Subsidiary, (d)
there are no equity equivalents (including any phantom stock or stock
appreciation rights, whether cash or other), performance shares, interests in
the ownership or earnings of the Company or any Company Subsidiary or other
similar rights issued by the Company or any Company Subsidiary, and (e) neither
the Company nor any Company Subsidiary is under any obligation, contingent or
otherwise, by reason of any agreement or understanding to register the offer and
sale or resale of any of its securities under the Securities Act. As of the date
hereof, there are no declared but unpaid dividends outstanding with respect to
the Old Common.
Section 5.4 - Subsidiaries. Section 5.4 of the Company Disclosure Schedule
sets forth a list of the Company Subsidiaries. Except as set forth in Section
5.4 of the Company Disclosure Schedule, the Company owns directly or indirectly
each of the outstanding shares of capital stock or other equity interests of
each of the Company Subsidiaries free and clear of all liens, pledges, security
interests, claims or other encumbrances. Each of the outstanding shares of
capital stock of each of the Company Subsidiaries that is a corporation is duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights. Except as set forth in Section 5.4 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary owns directly or indirectly any
interest or investment (whether equity or debt) in any corporation, partnership,
limited liability company, joint venture, business trust or other person (other
than investments in short-term investment securities and trade receivables), nor
is the Company or any Company Subsidiary subject to any obligation or
requirement to provide for or obtain or make any such interest or investment.
Section 5.5 - No Violation; Consents. None of the execution, delivery or
performance of this Agreement, the consummation by the Company of the
Transactions or compliance by the Company with any of the provisions hereof will
(a) conflict with or result in a breach of any provisions of the certificate of
incorporation, bylaws, or other organizational documents of the Company or of
any Company Subsidiary, (b) except as set forth in Section 5.5(b) of the Company
Disclosure Schedule, violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
or in a right of termination or cancellation of, or accelerate the performance
required by, or result in the loss of a material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties of the Company or the Company Subsidiaries under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
lease, license, permit, contract, agreement or other obligation or instrument to
which the Company or any of the Company Subsidiaries is a party, or by which the
Company or any of the Company Subsidiaries or any of their properties is bound,
(c) except for (i) the filing of the Certificate of Merger in accordance with
the DGCL, (ii) filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Exchange Act, the
HSR Act, and applicable state or foreign securities or state "Blue Sky" laws,
and (iii) permits, authorizations, consents and approvals, and other applicable
requirements (other than those covered by clause (ii) immediately above) of
state Governmental Entities with regulatory authority over the Company or any
Company Subsidiary (each, individually, a Regulatory Approval" and,
collectively, the "Regulatory Approvals"; each such requisite Regulatory
Approval being identified in Section 5.5(c) of the Company Disclosure Schedule),
require any filing with, or permit, authorization, consent or approval of, any
Governmental Entity, or (d) assuming that the Regulatory Approvals are obtained,
violate any Law applicable to the Company or any Company Subsidiary or any of
their respective properties or assets, excluding from the foregoing clauses (b),
(c) (other than subdivision (iii) thereof) and (d) (other than any violation
that would result from the failure to obtain any Regulatory Approval), such
violations, breaches or defaults which would not, individually or in the
aggregate, reasonably be expected to (A) have a Company Material Adverse Effect,
(B) impair the ability of the Company to consummate the Transactions, or (C)
prevent or materially delay the consummation of the Transactions. The Company
has no reason to believe that any Governmental Entity, including, without
limitation, the Ohio Bureau of Worker's Compensation, will impose, in connection
with the Transactions, an open enrollment period with respect to any of the
Company's managed care organization activities, whether based on express
regulatory authority to do so or by informal request made in accordance with
standard administrative practices or procedures.
Section 5.6 - SEC Documents; Financial Statements. Each periodic report,
registration statement, definitive proxy statement and other document filed by
the Company with the SEC since January 1,1998 (as such documents have since the
time of their filing been amended, the "Company SEC Reports"), as of their
respective dates, complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, applicable to such
Company SEC Reports, and none of the Company SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except for such
statements, if any, as have been modified by subsequent filings prior to the
date hereof. The Company SEC Reports include all the documents (other than
preliminary material) that the Company was required to file with the SEC since
January 1, 1998. The financial statements of the Company included in the Company
SEC Reports, as of their respective filing dates with the SEC, complied as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) and present fairly the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject in the case of the unaudited statements, to normal, year-end
audit adjustments). Since December 31, 1999, neither the Company nor any of its
subsidiaries has incurred any liabilities or obligations, whether absolute,
accrued, fixed, contingent, liquidated, unliquidated or otherwise and whether
due or to become due, except (i) as and to the extent set forth on the audited
balance sheet of the Company and its subsidiaries as of December 31, 1999
(including the notes thereto) (the "Company Balance Sheet"), (ii) for liability
under this Agreement, (iii) as incurred after December 31, 1999 in the ordinary
course of business and consistent with past practices, (iv) as described in the
Company SEC Reports filed and publicly available as of the date hereof or (v) as
could not, individually, or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
Section 5.7 - Litigation. Except as disclosed in the Company SEC Reports or
as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, there are no actions, suits, proceedings,
investigations or claims pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of the Company Subsidiaries, or any of
their respective assets or against or involving any of their respective
officers, directors or employees in connection with the business or affairs of
the Company or any Company Subsidiary, including, without limitation, any claims
for indemnification arising under any agreement to which the Company or any
Company Subsidiary is a party, whether at law or in equity, or before or by any
court, commission, governmental department, board, bureau, agency,
administrative officer or executive, or instrumentality (including, without
limitation any actions, suits, proceedings or investigations with respect to the
Transactions), whether federal, state, local or foreign, or before any
arbitrator.
Section 5.8 - Absence of Certain Changes. Except as set forth in Section
5.8 of the Company Disclosure Schedule, since December 31, 1999, the Company and
the Company Operating Subsidiaries have conducted their businesses in the
ordinary course of business, consistent with past practice, and there have not
been: (a) any events or occurrences that have had, or would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect or (b) any action taken by the Company or any of the Company Operating
Subsidiaries that would require the consent of MergerCo under Section 6.1 if
taken after the execution of this Agreement.
Section 5.9 - Taxes.
(a) The Company and each Company Subsidiary (i) has filed (or the Company
has timely filed on their behalf) when due (taking into account
extensions) with the appropriate Federal, state, local, foreign and
other governmental agencies, all income and other material Tax Returns
(as defined below) required to be filed by them, and all such Tax
Returns were, at the time of filing, correct and complete in all
material respects and (ii) has either paid when due or has established
adequate accruals on their books and records (exclusive of any accrual
for deferred taxes to reflect timing differences between book and tax
accounting) for all income and other material Taxes (as defined below)
of the Company and its Subsidiaries (including the Company Balance
Sheet with respect to Taxes accrued as of December 31, 1999),
including Taxes being contested in good faith. There are no Tax liens
upon any property of the Company or any Company Subsidiary except
liens for current Taxes not yet due and payable, and there are no
material Taxes claimed in writing by any Taxing authority and received
by the Company or any such Subsidiary that, in the aggregate, would
result in any Tax liability in excess of the amount of the accruals
for such Taxes (exclusive of any accrual for deferred Taxes), and the
Company and each Company Subsidiary have or will establish in
accordance with their normal accounting practices and procedures
accruals and reserves that are adequate for the payment of all income
and other material Taxes not yet due and payable and attributable to
any period preceding the Closing. None of the Company nor any Company
Subsidiary has filed a consent to the application of Section 341(f)(2)
of the Code.
(b) No audit, assessment or other examination relating to Taxes by any
Taxing authority is pending with respect to any material Taxes due and
payable by the Company or any Company Subsidiary.
(c) Neither the Company nor any predecessor corporation, nor any of their
respective Subsidiaries, has executed or filed with the Internal
Revenue Service or any other Governmental Entity or any other Taxing
authority any agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any
Taxes.
(d) Neither the Company nor any Company Subsidiary is a party to or is
bound by (or will prior to the Closing become a party to or bound by)
any Tax indemnity, Tax sharing or Tax allocation agreement or other
similar arrangement which includes a party other than the Company and
the Company Subsidiaries. Neither the Company nor any of its
Subsidiaries has been a member of an affiliated group other than one
of which Company was the common parent, or filed or been included in a
combined, consolidated or unitary Tax return other than one filed by
the Company (or a return for a group consisting solely of its
Subsidiaries and predecessors).
(e) The Company has not agreed, nor is it required, to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(f) Neither the Company nor any Company Subsidiary is or has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code and Parent or MergerCo is not
required to withhold tax on the purchase of the stock of the Company
pursuant to the Merger by reason of Section 1445 of the Code.
(g) The Company and each Company Subsidiary has withheld and paid over all
Taxes required to have been withheld and paid over and complied with
all information reporting and backup withholding requirements
(including maintenance of required records with regard thereto) in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party.
(h) Except as set forth in Section 5.9(i) of the Company Disclosure
Schedule, neither the Company nor the Company Subsidiary has entered
into any compensatory arrangements with respect to the performance of
services which payment thereunder could result in a nondeductible
expense to the Company or the Company Subsidiary pursuant to Code
Section 162(m).
(i) For purposes of this Agreement, "Tax" or "Taxes" means all federal,
state, local and foreign income, property, sales, franchise,
employment, payroll, withholding, estimated minimum, excise and other
taxes, tariffs and governmental charges of any nature whatsoever,
together with any interest, penalties, assessments, deficiencies or
additions to tax with respect thereto.
(j) For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements and other information required to be
supplied to a taxing authority in connection with Taxes, including any
amendments thereof.
Section 5.10 - Properties.
(a) All of the real estate properties owned or leased by the Company or
any of the Company Subsidiaries are set forth in Section 5.10(a) of
the Company Disclosure Schedule. Except as set forth in Section
5.10(a) of the Company Disclosure Schedule, the Company or a Company
Subsidiary owns good and marketable title to each of the owned real
properties identified in Section 5.10(a) of the Company Disclosure
Schedule (the "Company Properties") free and clear of liens,
mortgages, or deeds of trust, security interests or other encumbrances
on title or leasehold interest which secure the payment of money
(collectively, "Debt Encumbrances"), other than Debt Encumbrances
which secure indebtedness which is disclosed in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999 (the
"1999 Form 10-K"), or in a Company SEC Report filed subsequent to the
filing of the 1999 Form 10-K.
(b) The Company and each Company Operating Subsidiary owns or leases all
machinery, equipment and other tangible personal property and assets
necessary for the conduct of its business as presently conducted,
except where the absence of such ownership or leasehold interest would
not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect. The Company and each Company
Operating Subsidiary owns good title, free and clear of all Debt
Encumbrances, to all of the personal property and assets reflected in
the 1999 Form 10-K or in a Company SEC Report filed subsequent to the
filing of the 1999 Form 10-K, except for (i) assets which have been
disposed of to nonaffiliated third parties in the ordinary course of
business (except as set forth in Section 5.10(b) of the Company
Disclosure Schedule) or (ii) Debt Encumbrances which secure
indebtedness which is disclosed in the 1999 Form 10-K or in a Company
SEC Report filed subsequent to the filing of the 1999 Form 10-K.
(c) Except as set forth on Section 5.10(c) of the Company Disclosure
Schedule, the computer systems of each of the Company and the Company
Subsidiaries, including all hardware and software (collectively, the
"Computer Systems"), are presently serving the needs of the Company
and the Company Subsidiaries adequately. There are no infringement
suits, actions or proceedings pending or, to the Company's knowledge,
threatened, with respect to the Computer Systems.
(d) Except as set forth in Section 5.10(d) of the Company Disclosure
Schedule, the Company or one of the Company Operating Subsidiaries is
the owner of, or a licensee under a valid license for, all items of
intangible property which are material to the business of the Company
or any of the Company Operating Subsidiaries as currently conducted,
including, without limitation, trade names, unregistered trademarks
and service marks, brand names, patents and copyrights. There are no
claims pending or, to the Company's knowledge, threatened, that the
Company or any of its Subsidiaries is in violation of any such
intangible property of any third party which would, individually or in
the aggregate, have a Company Material Adverse Effect. No material
infringement of any proprietary right owned by or licensed by or to
the Company or any of its Subsidiaries is known to the Company.
Section 5.11 - Environmental Matters.
(a) No written notice, notification, demand, request for information,
citation, summons, complaint or order has been received by the Company
or any of its Subsidiaries, no complaint has been served on the
Company or any of its Subsidiaries, no penalty has been assessed and,
to the knowledge of the Company, no investigation is pending or has
been threatened (each, an "Action") by any Governmental Entity or
other party with respect to any (i) alleged violation by the Company
or any of its Subsidiaries of any Environmental Law, (ii) alleged
failure by the Company or any such Subsidiary to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with the conduct of its business
or (iii) Regulated Activity, in each case where such Action has had,
or would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries has any Environmental
Liabilities that has had, or could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
There has been no release of Hazardous Substances into the environment
or violation of any Environmental Law in either case by the Company or
any such Subsidiary which in either case has had, or would reasonably
be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) For the purposes of this Agreement, the following terms have the
following meanings:
"Environmental Laws" means any and all Federal, state, local
and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, codes, injunctions and
governmental restrictions relating to the environment or to
emissions, discharges or releases of Hazardous Substances
into the environment or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Substances or the clean-up or other remediation thereof.
"Environmental Liabilities" means all liabilities which (i)
arise under Environmental Laws and (ii) relate to Regulated
Activities occurring or conditions existing on or prior to
the Effective Time.
"Hazardous Substances" means any pollutants, contaminants,
toxic, radioactive, caustic or otherwise hazardous substance
or waste, including petroleum, its derivatives, by-products
and other hydrocarbons and medical or infectious waste that
is regulated under or by any applicable Environmental Law.
"Regulated Activity" means any generation, treatment,
storage, recycling, transportation, disposal or release of
any Hazardous Substances.
Section 5.12 - Employee Benefit Plans.
(a) Section 5.12(a) of the Company Disclosure Schedule contains a true and
complete list of each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each severance
or termination pay, medical, surgical, hospitalization, life insurance
and other "welfare" plan, fund or program (within the meaning of
section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"); each "pension" plan, fund or program (within the
meaning of section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Company would be deemed a
"single employer" within the meaning of section 4001(b) of ERISA, or
to which the Company or an ERISA Affiliate is party, whether written
or oral, for the benefit of any employee or former employee of the
Company or any Subsidiary of the Company (individually, a "Plan" and,
collectively, the "Plans") or with respect to which the Company or any
ERISA Affiliate otherwise has any liability. Neither the Company, any
Subsidiary of the Company nor any ERISA Affiliate has any legal
commitment to create any additional employee benefit plan, fund,
program, agreement or arrangement, or modify or change any existing
Plan that would affect any employee (an "Employee") or former employee
of the Company or any Subsidiary of the Company.
(b) With respect to each Plan, the Company has heretofore delivered or
made available to Parent and MergerCo true and complete copies of each
of the following documents:
(i) a copy of the Plan and any amendments thereto (or if the Plan is
not a written Plan, a description thereof);
(ii) a copy of the three (3) most recent annual reports and actuarial
reports, if required under ERISA, and the most recent report
prepared with respect thereto in accordance with Statement of
Financial Accounting standards No. 87;
(iii)a copy of the most recent Summary Plan Description required
under ERISA with respect thereto, and all supplements or
modifications thereto;
(iv) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof; and
(v) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify
under section 401 of the Code.
(c) No Plan in existence during the six years preceding the date of this
Agreement is or was subject to Title IV of ERISA. Neither the Company
nor any Company Subsidiary has ever contributed to, or been required
to contribute to, a "multiemployer pension plan," as defined in
section 3(37) of ERISA.
(d) All contributions required to be made with respect to any Plan on or
prior to the Closing Date have been or will be timely made on or prior
to the Closing Date and all contributions for any period ending on or
before the Effective Date which are not yet due have been accrued in
accordance with the past custom and practice of the Company and the
Company Subsidiaries. All premiums or other payments which are due and
payable have been paid with respect to each Plan which is an employee
welfare benefit plan, as defined in Section 3(1) of ERISA
(e) Neither the Company nor any Subsidiary of the Company nor, to the
knowledge of the Company, any trustee or administrator thereof, has
engaged in a transaction in connection with which the Company or any
Subsidiary of the Company or any trustee or administrator thereof
would reasonably be expected to be subject to either a material civil
penalty assessed pursuant to section 409 or 502(i) of ERISA or a
material tax imposed pursuant to section 4975 or 4976 of the Code.
(f) To the knowledge of the Company, each Plan has been operated and
administered in all material respects in accordance with its terms and
applicable Laws, including but not limited to ERISA and the Code.
(g) Each plan intended to be "qualified" within the meaning of section
401(a) of the Code has received a favorable determination letter to
the effect that the Plan is so qualified and that its related trust
maintained thereunder is exempt from taxation under section 501(a) of
the Code.
(h) Except as set forth in Section 5.12(h) of the Company Disclosure
Schedule, no Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former
employees of the Company or any Subsidiary of the Company for any
significant period (in no event more than three (3) months) extending
beyond their retirement or other termination of service, other than
(i) coverage mandated by applicable Laws, (ii) death benefits under
any "pension plan," or (iii) benefits the full cost of which is borne
by the current or former employee (or his beneficiary).
(i) No amounts payable under the Plans will fail to be deductible for
federal income tax purposes by virtue of section 280G of the Code.
(j) Except as set forth in Section 5.12(j) of the Company Disclosure
Schedule or as expressly provided in this Agreement, the consummation
of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer of the Company or
any ERISA Affiliate to severance pay, unemployment compensation or any
other payment, or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation or benefits due any such employee
or officer.
(k) There are no pending or, to the knowledge of the Company, threatened
or anticipated, claims by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving any
such Plan (other than routine claims for benefits).
Section 5.13 - Labor Matters. Neither the Company nor any Company
Subsidiary is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor union
organization. Except as set forth in Section 5.13 of the Company Disclosure
Schedule, there is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of the Company Subsidiaries. Except as set forth in Section 5.13 of the
Company Disclosure Schedule, to the 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 of
any of the Company Subsidiaries.
Section 5.14 - No Brokers. Neither the Company nor any of the Company
Subsidiaries has entered into any contract, arrangement or understanding with
any person which may result in the obligation of such entity or MergerCo to pay
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or consummation of
the Transactions, except that the Company has retained Raymond James &
Associates, Inc. ("Raymond James") as its financial advisor in connection with
the Transactions. The Company has furnished to MergerCo complete and correct
copies of all agreements between the Company and Raymond James pursuant to which
such firm would be entitled to any payment relating to the transactions
contemplated by this Agreement.
Section 5.15 - Opinion of Financial Advisor. On May 9, 2000, Raymond James
orally delivered to the Company Board its opinion to the effect that, as of such
date, the consideration to be received by the holders of shares of Old Common
pursuant to the Merger Agreement is fair from a financial point of view to such
holders (the "Fairness Opinion"). Raymond James has assured the Company Board
that it will deliver such opinion in written form to the Company Board at such
time as the Company may request. A copy of the form of such written opinion to
be so delivered has been provided to Parent.
Section 5.16 - Insurance. The Company and each of the Company Subsidiaries
are insured by financially sound and reputable insurers, unaffiliated with the
Company, with respect to their properties and the conduct of their businesses in
such amounts and against such risks as are sufficient for compliance with law
and as are, to the knowledge of the Company, in accordance with normal industry
practice.
Section 5.17 - Contracts and Commitments; Indemnity Agreements.
(a) Section 5.17(a) of the Company Disclosure Schedule lists each written
and, to the knowledge of the Company, each oral contract, agreement,
instrument, arrangement or understanding, to which either the Company
or any Company Subsidiary is a party, including all amendments and
supplements thereto, which is material to the business operations,
assets, properties, or conditions (financial or otherwise) of the
Company or any Company Subsidiary (collectively, the "Material
Contracts" and each a "Material Contract"). Without limiting the
foregoing, any contract, agreement, instrument, arrangement or
understanding between the Company or any Company subsidiary, on the
one hand, and any insurance agent or representative, insurance agency
or other association of insurance agents or representatives, on the
other hand, shall be deemed to be a Material Contract for purposes of
this Agreement if such contract, agreement, instrument, arrangement or
understanding, either individually or in the aggregate with one or
more other contracts, agreements, instruments, arrangements or
understandings that are related to the same contractual relationship,
represent more than three percent (3%) of the Company's consolidated
revenues for the Company's fiscal year ended December 31, 1999, or
more than three percent (3%) of its projected annual revenues for the
fiscal year ending December 31, 2000. Except as set forth in Section
5.17(a) of the Disclosure Schedule, the Company is not in breach or
default of any Material Contract, and to the Company's knowledge, no
other party thereto is in breach or default thereof, except where such
breach or default would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in Section 5.17(a) of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is a
party to, or has any obligation under, any contract or agreement,
written or oral, which contains any covenants currently or
prospectively limiting the freedom of the Company or any of its
Subsidiaries to engage in any line of business or to compete with any
person.
(b) Section 5.17(b) of the Company Disclosure Schedule lists each written
and, to the knowledge of the Company, each oral, contract, agreement,
instrument, arrangement or understanding, to which either the Company
or any Company Subsidiary is a party, including all amendments and
supplements thereto ("Indemnity Agreements"), pursuant to which the
Company or any Company Subsidiary has agreed to indemnify any
director, officer, employee or agent of the Company or any Company
Subsidiary in connection with matters arising out of the performance
of their respective duties to, or services for, the Company or any
Company Subsidiary. The Company has delivered correct and complete
copies of all such Indemnity Agreements to the Company. As of the date
hereof, there is no "Proceeding" (as defined in the Indemnity
Agreements) pending or, to the knowledge of the Company, threatened,
which would reasonably be likely to give rise to a claim for
indemnification pursuant to any such agreement, the certificate of
incorporation or by-laws of the Company or any Company Subsidiary, or
applicable Law.
Section 5.18 - Related Party Transactions. Except as set forth in Section
5.18 of the Company Disclosure Schedule, the Company SEC Reports set forth a
list of all arrangements, agreements and contracts entered into by the Company
or any of the Company Subsidiaries (which are or will be in effect as of or
after the date of this Agreement) involving payments in excess of $60,000 with
any person who is an officer, director or affiliate of the Company or any of the
Company Subsidiaries, any relative of any of the foregoing, or any entity of
which any of the foregoing is an affiliate.
Section 5.19 - DOI Reports. The Company has made available to Parent at the
Company's offices true, correct and complete copies of all material reports
filed by the Company or any of the Company Operating Subsidiaries regarding the
activities of the Company and the Company Subsidiaries in the States of Ohio,
Kentucky, Indiana, West Virginia and Washington with, and any license
applications filed by the Company in such States with, and all material
correspondence regarding such activities and license applications sent to, or
received by the Company or any of the Company Operating Subsidiaries from,
applicable insurance and other regulatory bodies since January 1, 1998. Each
material report required to be filed by the Company or any of the Company
Operating Subsidiaries with applicable insurance and other regulatory bodies
since January 1, 1998 (as such documents have since the time of their filing
been amended, the "DOI Reports") has been filed. As of their respective dates,
the DOI Reports complied in all material respects with the requirements of the
applicable Laws applicable to such DOI Reports, and none of the DOI Reports
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except for such statements, if any, as have been modified by
subsequent filings prior to the date hereof.
Section 5.20 - Health Power HMO. Health Power HMO operated a health
maintenance organization (an "HMO") in Ohio until April 30, 1999. Effective May
1, 1999, the certificate of authority of Health Power HMO was revoked by the
Ohio Department of Insurance ("ODI") for failure to meet statutory financial
requirements. Since that time, and in accordance with the ODI revocation order,
Health Power HMO has been winding-up its business under the supervision of ODI,
but without judicial involvement. The final windup is being conducted in
accordance with Health Power HMO's Plan of Final Distribution and Windup dated
March 17, 2000, as amended (the "Final Windup Plan"), a true and correct copy of
which has been furnished to Parent and MergerCo. The Final Windup Plan has been
approved by ODI. In accordance with the Final Windup Plan, Health Power HMO
distributed approximately $3.0 million to its creditors on or about March 27,
2000, and approximately $1.025 million to its remaining creditors on or about
May 12, 2000. Health Power HMO does not have sufficient assets to pay the claims
of all of its creditors.
Section 5.21 - Definition of the Company's Knowledge. As used in this
Agreement, the phrase "to the knowledge of the Company" or any similar phrase
means the knowledge of Dr. Bernard F. Master, Robert J. Bossart, Jonathan R.
Wagner, Richard T. Kurth, Paul A. Miller, Daniel R. Sullivan, and Randy E.
Jones, the executive officers of the Company.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 - Conduct of Business by the Company. During the period from
the date of this Agreement to the Effective Time, except as otherwise
contemplated by this Agreement or to the extent Parent shall otherwise consent
in writing, the Company shall, and shall cause each of the Company Operating
Subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice, and use commercially reasonable efforts to
preserve intact their present business organizations, keep available the
services of their present officers and employees, and preserve their
relationships with customers, suppliers, and others having business dealings
with them. Without limiting the generality of the foregoing, neither the Company
nor any of the Company Operating Subsidiaries will (except as expressly required
or permitted by this Agreement or set forth in Section 6.1 of the Company
Disclosure Schedule or as contemplated by the Transactions or to the extent that
Parent shall otherwise consent in writing):
(a)(i) declare, set aside or pay any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect of
any of its capital stock (other than dividends or distributions by any
Company Subsidiary to the Company), (ii) split, combine or reclassify any
of its capital stock, (iii) repurchase, redeem or otherwise acquire any of
its securities, except, in the case of this clause (iii), for the
acquisition of shares of Old Common from holders of Options in full or
partial payment of the exercise price payable by such holders upon exercise
of Options outstanding on the date of this Agreement, or (iv) authorize for
issuance, issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities (including indebtedness having the right
to vote) or equity equivalents (including, without limitation, stock
appreciation rights), other than the issuance of shares of Old Common upon
the exercise of Options outstanding on the date of this Agreement in
accordance with their present terms;
(b)(i) make any capital expenditure or expenditures which,
individually, is in excess of $100,000 or, in the aggregate, are in excess
of $250,000, (ii) acquire any material assets outside of the ordinary
course of business consistent with past practice, or (iii) sell, lease,
encumber, transfer or dispose of any material assets outside the ordinary
course of business consistent with past practice;
(c)(i) except pursuant to credit facilities in existence on the date
hereof in accordance with the current terms of such facilities, (A) create,
incur, issue, assume, maintain or permit to exist any long-term or
short-term Indebtedness or (B) other than in the ordinary course of
business consistent with past practice, make any loans, advances or capital
contributions to, or investments in, any other person;
(d) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than any payment, discharge or satisfaction (i) in the ordinary course of
business consistent with past practice, or (ii) as permitted or required by
this Agreement;
(e) change any of the accounting principles or practices used by it
(except as required by the SEC, applicable Laws or generally accepted
accounting principles applied on a consistent basis, in which case written
notice shall be provided to Parent prior to any such change);
(f) except as required by applicable Laws, (i) enter into, adopt,
amend or terminate any Plan, (ii) enter into, adopt, amend or terminate any
agreement, arrangement, plan or policy between the Company or any of the
Company Operating Subsidiaries on the one hand and one or more of their
directors, officers or employees who has a base compensation in excess of
$100,000 on the other hand, (iii) increase in any manner the compensation
or fringe benefits paid or provided to any such director, officer or
employee described in the preceding clause (ii) or pay to any such person
any benefit not required by any Plan or arrangement as in effect as of the
date hereof, or (iv) except in the ordinary course of business consistent
with past practice, increase in any manner the compensation or fringe
benefits of any employee not described in clause (ii) or pay to any such
employee any benefit not required by any Plan or arrangement in effect as
of the date hereof;
(g) approve or adopt any amendments to its certificate of
incorporation or bylaws;
(h) adopt or propose to adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation
or a dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(i) without the prior written consent of Parent, which shall not be
unreasonably withheld, make or change any Tax election, file a consent
under Code Section 341(f) regarding collapsible corporations, or settle or
compromise any material liability for Taxes of the Company or any of the
Company Subsidiaries, except to the extent that negotiations for such
settlement or compromise are in process at the time of the execution of
this Agreement, provided that the existence of such negotiations, and the
related substantive issues, have been disclosed to Parent;
(j) enter into any transaction or arrangement which would be required
to be listed in Section 5.18 of the Company Disclosure Schedule (Related
Party Transactions) if in effect or existence as of the date of this
Agreement;
(k) enter into any non-competition or other agreement which may
restrict, in any material respect, the conduct of the respective businesses
of the Company or any of the Company Subsidiaries;
(l) settle or compromise any pending or threatened suit, action, or
claim relating to the Transactions;
(m) enter into, or amend in any material respect, any agreement
pursuant to which the Company or any Company Operating Subsidiary agrees,
or has agreed, to indemnify any director, officer, employee or agent of the
Company or any Company Operating Subsidiary in connection with matters
arising out of the performance of their respective duties to, or services
for, the Company or any Company Subsidiary or obtain additional directors'
or officers' liability insurance other than that contemplated by Section
7.6(b); or
(n) enter into an agreement, or otherwise commit, to take any of the
foregoing actions.
Section 6.2 - Financing.
(a) Commencing on the date hereof, Parent will proceed in good faith and
use its commercially reasonable efforts to obtain, as soon as
reasonably practicable, but in any event on or prior to July 31, 2000,
or such later date (i) not later than August 14, 2000, as specified in
writing by Parent to the Company, provided that it is still proceeding
in good faith and using commercial reasonable efforts to obtain, or
(ii) which is otherwise agreed to in writing by Parent and the Company
(the "Commitment Due Date"), commitments for financing in connection
with the Transactions which, in the aggregate, would provide financing
in the amount of not less than $34,500,000 (the "Necessary
Financing"), on terms and conditions which are reasonably satisfactory
to Parent, and which, in Parent's judgment, would be Reasonably
Acceptable to the Company (as defined below) (the "Proposed Financing
Commitments"). Parent will provide the Company with true and correct
copies of the Proposed Financing Commitments, when and if obtained,
promptly after Parent's receipt thereof. Not later than three (3)
business days after its receipt from Parent of the Proposed Financing
Commitments, the Company shall either notify Parent in writing that
the Proposed Financing Commitments are Reasonably Acceptable to the
Company or notify Parent in writing that, in the Company's good faith
judgment, and for the specific reasons which shall be stated in such
notice, the Proposed Financing Commitments are not Reasonably
Acceptable to the Company. In the absence of such notice, the Proposed
Financing Commitments shall be deemed Reasonably Acceptable to the
Company as at the close of business on the last day of such three (3)
day period. Proposed Financing Commitments which are confirmed by the
Company as being Reasonably Acceptable to the Company or which are
deemed to be Reasonably Acceptable to the Company in accordance with
the foregoing provisions of this Section 6.2(a) shall be deemed to be
"Acceptable Financing Commitments" for purposes of Article IX of this
Agreement. Proposed Financing Commitments shall be deemed to be
"Reasonably Acceptable" to the Company if the commitment letters in
respect thereof contain commercially reasonable terms and conditions,
including, without limitation, with respect to syndication and the
absence of material adverse changes between the commitment date and
Closing, for a transaction of this nature.
(b) During the period preceding the Effective Time or the termination of
this Agreement, and subject to its obligations under applicable
securities Laws, Parent will keep the Company reasonably informed with
respect to material events outside the ordinary course of business of
Parent or its Subsidiaries that could reasonably be expected to affect
adversely, in any material respect, the financing for the Transactions
or Parent's potential to obtain such financing. During such period,
Parent will not seek to combine the financing for the Transactions
with the financing for any other acquisition in which it may be
engaged either directly or through another Subsidiary.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Stockholders Meeting; Proxy Materials .
(a) Unless the Company Board shall take any action permitted by Section
7.1(e) below, the Company Board, shall, in accordance with applicable
Laws:
(i) as soon as reasonably practicable after Proposed Financing
Commitments Reasonably Acceptable to the Company have been
obtained, or, if such Proposed Financing Commitments have not yet
been obtained by the Commitment Due Date, but neither party has
terminated this Agreement pursuant to Section 9.1(b)(i) hereof,
then, as soon as reasonably practicable after the right of
termination set forth in Section 9.1(b)(1) has expired, duly
call, give notice of, convene and hold a special meeting of
stockholders of the Company for the purpose of considering and
taking action upon this Agreement and the Transactions;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to this Agreement and the Transactions (the "Proxy
Statement"), and use its commercially reasonable efforts to (A)
obtain and furnish the information required to be included by the
SEC in the Proxy Statement and, after consultation with Parent,
respond promptly to any comments made by the SEC with respect to
the preliminary Proxy Statement and cause the Proxy Statement to
be mailed to its stockholders, (B) obtain the necessary approval
of this Agreement by its stockholders, and (C) include in the
Proxy Statement the recommendation of the Company Board and the
Independent Committee that stockholders of the Company vote in
favor of the approval of this Agreement. Provided that Parent is
complying with its obligations set forth in the first sentence of
Section 6.2(a), the Company shall commence and continue
preparation of the preliminary Proxy Statement promptly following
the date hereof with a view toward being in a position to file it
with the SEC as soon as reasonably practicable, but within an
approximately one (1) week period after Financing Commitments
Reasonably Satisfactory to the Company have been obtained. The
Company will include the written Fairness Opinion in the Proxy
Statement.
(b) MergerCo and Parent shall furnish all information about themselves,
their business and operations and their owners and all financial
information to the Company as may be reasonably necessary in
connection with the preparation of the Proxy Statement. The Company
shall give Parent and MergerCo and their counsel, and counsel to the
Independent Committee, the opportunity to review, prior to their being
filed with, or sent to the SEC, (i) the Proxy Statement and (ii) all
amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments. Each of
the Company, MergerCo and Parent agrees to correct promptly any
information provided by it for use in the Proxy Statement if and to
the extent that such information shall have become false or misleading
in any material respect, and the Company further agrees to take all
necessary steps to cause the Proxy Statement as so corrected to be
filed with the SEC and to be disseminated to the stockholders of the
Company, in each case, to the extent required by applicable Laws. The
Company shall notify MergerCo and Parent of the receipt of any
comments of the SEC with respect to the preliminary Proxy Statement.
(c) The Company represents and warrants that (i) none of the information
supplied by the Company specifically for inclusion or incorporation by
reference in (A) the Proxy Statement, or (B) the Other Filings (as
hereinafter defined) will, at the respective times filed with the SEC
or other Governmental Entity and, in addition, in the case of the
Proxy Statement, as of the date it or any amendment or supplement
thereto is mailed to stockholders and at the time of any meeting of
stockholders to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading, and (ii) the Proxy Statement, insofar as it
relates to the Company or other information supplied by the Company
for inclusion therein, will comply as to form in all material respects
with the requirements of the Exchange Act. The Company makes no
representation, warranty or covenant with respect to information
concerning MergerCo or Parent or their affiliates included in the
Proxy Statement or information supplied by MergerCo or Parent or their
affiliates for inclusion in the Proxy Statement.
(d) Parent represents and warrants that none of the information supplied
by MergerCo or Parent or their affiliates specifically for inclusion
or incorporation by reference in (i) the Proxy Statement, or (ii) the
Other Filings, will, at the respective times filed with the SEC or
other Governmental Entity and, in addition, in the case of the Proxy
Statement, as of the date it or any amendment or supplement thereto is
mailed to stockholders and at the time of any meeting of stockholders
to be held in connection with the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not
misleading. MergerCo and Parent make no representations, warranties or
covenants with respect to information concerning the Company included
in the Proxy Statement or information supplied by the Company for
inclusion in the Proxy Statement.
(e) The Company Board shall be permitted to (i) not recommend to the
Company's stockholders that they vote in favor of the approval of this
Agreement or (ii) withdraw or modify in a manner adverse to Parent and
MergerCo its recommendation to the Company's stockholders that they
vote in favor of this Agreement, but in each of cases (i) and (ii)
only if and to the extent that the Company has complied with Section
7.5, a Superior Proposal (as defined below) is pending at the time the
Company Board determines to take any such action or inaction and the
Company Board determines in good faith, based upon the advice of its
outside legal counsel, that such action or inaction is necessary for
the Company Board to comply with its fiduciary duties under applicable
Laws, provided that no such failure to recommend, or withdrawal or
modification shall be made unless the Company shall have delivered to
Parent a written notice advising Parent that the Company Board has
received a Superior Proposal and identifying the person making such
Superior Proposal; provided, further, that nothing contained in this
Agreement shall prevent the Company Board from complying with Rules
14d-9 and 14e-2 under the Exchange Act with regard to an Acquisition
Proposal (as defined below). For purposes of this Agreement, "Superior
Proposal" means any bona fide written Acquisition Proposal for all of
the outstanding shares of Old Common or all or substantially all of
the assets of the Company and the Company Subsidiaries, which is based
upon definitive written financing agreements, or other written
commitments reasonably satisfactory to the Board, that reasonably
assure the availability of financing sufficient to complete the
transaction, and which contains terms that the Company Board
determines in good faith (based on the advice of Raymond James or
other financial advisor engaged by the Company in connection with such
transaction) are more favorable to the Company's stockholders than
this Agreement and the Merger. For purposes of this Agreement,
"Acquisition Proposal" means any offer or proposal for, or any
indication of interest in, a merger, consolidation, share exchange or
other business combination involving the Company or any Company
Subsidiary or the acquisition of any equity interest in, or a
substantial portion of the assets of, the Company or any Company
Subsidiary, other than the transactions contemplated by this
Agreement.
Section 7.2 - Other Filings. Each of the Company, Parent and MergerCo shall
properly prepare and file any other filings required of such party under the
Exchange Act or any other federal or state law relating to the Merger and the
Transactions (including filings, if any, required under the HSR Act)
(collectively, the "Other Filings"), with a view to toward being in a position
to make all Other Filings as soon as reasonably practicable, but within an
approximately three (3) week period, after the preliminary Proxy Statement is
filed. Each of the Company, Parent and MergerCo shall promptly notify the other
of the receipt of any comments on, or any request for amendments or supplements
to, any of the Other Filings by the SEC or any other Governmental Entity or
official, and each of the Company, Parent and MergerCo shall supply the other
with copies of all correspondence between it and each of its Subsidiaries and
representatives, on the one hand, and the SEC or the members of its staff or any
other appropriate governmental official, on the other hand, with respect to any
of the Other Filings. Each of the Company, Parent and MergerCo shall use its
commercially reasonable efforts to obtain and furnish the information required
to be included in any of the Other Filings.
Section 7.3 - Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the parties agrees to use commercially reasonable
efforts (a) to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the Transactions and to cooperate with each other in
connection with the foregoing, including the taking of such actions as are
necessary to obtain any necessary consents, approvals, orders, exemptions or
authorizations by or from any public or private third party, including without
limitation any that are required to be obtained under any federal, state or
local law or regulation or any contract, agreement or instrument to which
MergerCo, the Company or any Company Subsidiary is a party or by which any of
their respective properties or assets are bound, (b) to defend all lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
Transactions, (c) to cause to be lifted or rescinded any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the Transactions, (d) to effect all necessary registrations and
Other Filings, including without limitation filings under the HSR Act, if any,
and submissions of information requested by any Governmental Entity and (e) to
execute and deliver any additional instruments necessary to consummate the
Transactions and to carry out fully the purposes of this Agreement. The Company
will use its commercially reasonable efforts to ensure that the conditions set
forth in Sections 8.1 and 8.2 hereof are satisfied, insofar as such matters are
within the control of the Company, and MergerCo and Parent will use their
commercially reasonable efforts to ensure that the conditions set forth in
Sections 8.1 and 8.3 hereof are satisfied, insofar as such matters are within
the control of MergerCo and Parent.
Section 7.4 - Fees and Expenses. Except as set forth in Section 9.2 hereof,
whether or not the Merger is consummated, all fees, costs and expenses incurred
in connection with this Agreement and the Transactions shall be paid by the
party incurring such costs or expenses.
Section 7.5 - No Solicitations.
(a) The Company shall not, directly or indirectly, through any officer,
director, employee, investment banker, attorney, representative or
agent of the Company or any Company Subsidiary, (i) solicit, initiate
or encourage any inquiries or proposals that constitute, or would
reasonably be expected to lead to, an Acquisition Proposal, (ii)
engage in negotiations or discussions concerning, or provide any
non-public information or data to any person relating to, any
Acquisition Proposal, or (iii) agree to, approve or recommend any
Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent the Company or the
Company Board from (A) furnishing nonpublic information or data to, or
entering into discussions or negotiations with, any person in
connection with an unsolicited Acquisition Proposal, if and only to
the extent that the Company Board determines in good faith, based upon
the advice of its outside legal counsel, that such action is necessary
for the Company Board to comply with its fiduciary duties under
applicable Laws and prior to furnishing such non-public information
to, or entering into discussions or negotiations with, such person,
the Company or the Company Board received from such person an executed
customary confidentiality agreement, provided, that in the event that
any term of such confidentiality agreement is more favorable to such
person than the Confidentiality Agreement (as defined below), (x) the
Company shall promptly (and in no event later than 24 hours after
execution thereof) notify Parent of the more favorable provisions of
such confidentiality agreement and (y) the Confidentiality Agreement
shall automatically be deemed to have been amended to provide Parent
with the benefit of the more favorable term(s); or (B) complying with
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard
to an Acquisition Proposal. The Company hereby represents and warrants
that, as of the date hereof, it is not engaged in any activities,
discussions or negotiations with any other person with respect to any
of the foregoing.
(b) The Company shall (i) promptly (and in no event later than 24 hours
after receipt of any Acquisition Proposal) notify Parent after receipt
by it (or its advisors) of an Acquisition Proposal by any person,
identifying such person, (ii) promptly notify Parent after receipt of
any request for nonpublic information relating to it or any of the
Company Subsidiaries or for access to it or any of such Subsidiaries'
properties, books or records by any person, identifying such person
and the information requested by such person, that may be considering
making, or has made, an Acquisition Proposal, and promptly provide
Parent with any nonpublic information which is given to such person
pursuant to this Section 7.5(b), and (iii) keep Parent advised of the
status and principal financial terms of any such Acquisition Proposal,
indication or request. The Company shall give Parent at least 24
hours' advance notice of any information to be supplied to any person
making such Acquisition Proposal.
(c) Nothing in this Section 7.5 shall (i) permit the Company to terminate
this Agreement other than pursuant to Article IX hereof or (ii) affect
any other obligation of the Company under this Agreement.
Section 7.6 - Officers' and Directors' Indemnification and Insurance.
(a) The certificate of incorporation of the Surviving Corporation shall
contain provisions for the indemnification of directors and officers
of the Company no less favorable than set forth in Exhibit 1.1A
hereto, and Parent and MergerCo agree that, for the benefit of the
Company's directors and officers in office prior to the Effective
Time, such provisions shall remain continuously in effect for a period
of at least six (6) years following the Effective Time.
(b) Parent and the Surviving Corporation shall use their commercially
reasonable efforts to cause to be maintained in effect for six (6)
year from the Effective Time the Company's current policies of
directors' and officers' liability insurance to the extent that it
provides coverage for events occurring prior to the Effective Time.
(c) Parent and the Surviving Corporation shall not take, or cause to be
taken, any action to modify or terminate the Indemnification
Agreements, except in accordance with the terms thereof and applicable
Law.
Section 7.7 - Access to Information; Confidentiality. From the date hereof
until the Effective Time, the Company shall, and shall cause each of the Company
Subsidiaries and each of the Company's and Company Subsidiaries' officers,
employees and agents to, afford to Parent and MergerCo and to the officers,
employees and agents of Parent and MergerCo, respectively, complete access at
all reasonable times to all of the Company's and the Company's Subsidiaries'
respective properties, books, records and contracts, and shall furnish Parent
and MergerCo such financial, operating and other data and information as Parent
and MergerCo may reasonably request. Parent and MergerCo shall hold in
confidence all such information on the terms and subject to the conditions
contained in that certain agreement between Raymond James and Capital Partners
dated July 26, 1999 (the "Confidentiality Agreement"). Parent and MergerCo each
hereby agrees to be bound by the terms and conditions of the Confidentiality
Agreement with the same force and effect as if it had executed the
Confidentiality Agreement as Capital Partners, and the Company is an intended
third party beneficiary of the obligations of MergerCo arising thereunder. At
the Effective Time, the Confidentiality Agreement shall terminate, except as
otherwise expressly provided therein.
Section 7.8 - Public Announcements. The Company and Parent shall consult
with each other before issuing any press release or otherwise making any public
statement with respect to this Agreement or any of the Transactions and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public statement as may be
required by law if it has (a) used its reasonable best efforts to consult with
the other party and to obtain such party's consent but has been unable to do so
in a timely manner and (b) faxed a copy of such press release or public
statement to such other party at a reasonable time prior to issuing such release
or making such statement. In this regard, the parties agree that the initial
press release to be issued with respect to the Merger will be in a form agreed
to by the parties hereto prior to the execution of this Agreement.
Section 7.9 - Notification of Certain Matters.
(a) The Company shall, upon obtaining knowledge of any of the following,
promptly notify Parent thereof in writing: (i) any Company Material
Adverse Effect; (ii) any change which makes it likely that any
representation or warranty set forth in this Agreement regarding the
Company or any Company Subsidiary will not be true in any material
respect as of the Closing or which would be likely to cause any
condition to the obligations of any party to effect the Merger not to
be satisfied; (iii) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
condition to the obligations of any party to effect the Merger not to
be satisfied; (iv) the failure of the Company to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it pursuant to this Agreement which would be likely to
cause any condition to the obligations of any party to effect the
Merger not to be satisfied; (v) any notice or other communication from
any Governmental Entity in connection with the Merger; or (vi) any
actions, suits, claims, investigations or other proceedings (or other
manifestation to the Company of an awareness of and present intention
to assert a claim in any such proceeding) commenced or threatened
against the Company or any of the Company Subsidiaries which, if
pending on the date of this Agreement, would have resulted in any of
the representations and warranties set forth in Section 5.7 being
untrue or inaccurate (if not disclosed on the Company Disclosure
Schedule) or which relate to the consummation of the Merger; provided,
however, that the delivery of any notice pursuant to this Section
7.9(a) shall not cure any breach of any representation or warranty or
otherwise limit or affect the remedies available to Parent and
MergerCo.
(b) MergerCo or Parent shall, upon obtaining knowledge of any of the
following, promptly notify the Company thereof in writing: (i) any
Parent or MergerCo Material Adverse Effect; (ii) any change which
makes it likely that any representation or warranty set forth in this
Agreement regarding Parent or MergerCo will not be true in any
material respect as of the Closing or which would be likely to cause
any condition to the obligations of any party to effect the Merger not
to be satisfied; (iii) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
condition to the obligations of any party to effect the Merger not to
be satisfied; (iv) the failure of Parent or MergerCo to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it pursuant to this Agreement which would be likely to
cause any condition to the obligations of any party to effect the
Merger not to be satisfied; (v) any notice or other communication from
any Governmental Entity in connection with the Merger; or (vi) any
actions, suits, claims, investigations or other proceedings (or other
manifestation to the Company of an awareness of and present intention
to assert a claim in any such proceeding) commenced or threatened
against Parent or MergerCo which, if pending on the date of this
Agreement, would have resulted in any of the representations and
warranties set forth in Section 4.2(e) being untrue or inaccurate or
which relate to the consummation of the Merger; provided, however,
that the delivery of any notice pursuant to this Section 7.9(b) shall
not cure any breach of any representation or warranty or otherwise
limit or affect the remedies available to the Company.
Section 7.10 - Termination of Company Stock Plans. Prior to the Effective
Time, the Company Board (or, if appropriate, any committee thereof) shall adopt
such resolutions or take such other actions as are required to (i) effect the
transactions contemplated by Section 2.3 and (ii) with respect to any stock
option, stock appreciation or other stock benefit plan of the Company or any of
its Subsidiaries not addressed by the preceding clause (i), ensure that,
following the Effective Time, no participant therein shall have any right
thereunder to acquire any capital stock of the Surviving Corporation or any
affiliate thereof.
Section 7.11 - Windup of Health Power HMO. The Company shall cause Health
Power HMO to complete its windup in accordance with the Final Windup Plan.
Section 7.12 - Termination of Severance Arrangements. Each of Robert J.
Bossart, Randy E. Jones, Richard T. Kurth, Paul A. Miller, Daniel R. Sullivan,
and Jonathan R. Wagner (collectively, the "CMI Management Team") have entered
into an Executive Severance Benefits Agreement with the Company dated as of
August 26, 1999, and certain of the CMI Management Team have entered into
employment agreements of varying dates which contain severance agreements
(collectively, the "Severance Agreements"). In addition, Dr. Bernard F. Master
has entered into an Employment Agreement with CompManagement, Inc. dated as of
May 1, 1999, as amended as of January 1, 2000 (as so amended, "Dr. Master's
Employment Agreement"). Prior to the Effective Time, each member of the CMI
Management Team is to enter into a Termination of Severance Agreement (as
hereinafter defined), and Dr. Master is to enter into a Termination of
Employment Agreement (as hereinafter defined). At or prior to the Effective
Time, the Company shall pay to each of the members of the CMI Management Team
and to Dr. Master the consideration due and payable to such person under his
Termination of Severance Agreement or Termination of Employment Agreement, as
the case may be. The total consideration to be paid by the Company under the
Termination of Severance Agreements and Termination of Employment Agreement is
hereinafter referred to the "Severance Consideration".
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 - Conditions to the Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver, where permissible, at or prior to the
Closing Date, of each of the following conditions:
(a) Stockholder Approval. This Agreement, including the Merger, shall
have been approved and adopted by the affirmative vote of the
stockholders of the Company to the extent required by the DGCL and the
certificate of incorporation of the Company.
(b) Hart-Scott-Rodino Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
(c) Other Regulatory Approvals. Any consent, authorization, order or
approval of (or filing or registration with) any Governmental Entity
required to be made or obtained by the Company or any of the Company
Subsidiaries or MergerCo, as the case may be, or their respective
affiliates, in connection with the execution, delivery and performance
of the Agreement shall have been obtained or made on terms and
conditions reasonably satisfactory to each of Parent and the Company,
except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not,
individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect or a MergerCo Material Adverse Effect,
as the case may be, or would not, individually or in the aggregate,
materially impair or significantly delay the ability of the Company
and MergerCo to consummate the Merger.
(d) Other Consents. Any consent or approval by any third party that is
required in order to prevent a breach of, a default under, or a
termination, change in the terms or conditions or modification of, any
instrument, contract, lease, license or other agreement shall have
been obtained on terms and conditions reasonably satisfactory to each
of Parent and the Company, except where such breach, default,
termination or change would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect or a
MergerCo Material Adverse Effect, as the case may be, or would not,
individually or in the aggregate, materially impair or significantly
delay the ability of the Company and MergerCo to consummate the
Merger.
(e) No Injunctions or Orders; Illegality. No preliminary or permanent
injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a Governmental Entity (an "Injunction"),
nor any statute, rule, regulation or executive order promulgated or
enacted by any Governmental Entity, shall be in effect which would (i)
make the consummation of the Merger illegal, or (ii) otherwise prevent
or prohibit the consummation of any of the Transactions, including the
Merger.
Section 8.2 - Conditions to Obligations of MergerCo and Parent. The
obligations of MergerCo and Parent to effect the Merger are further subject to
the following conditions:
(a) Representations and Warranties. Those representations and warranties
of the Company set forth in this Agreement which are qualified by
materiality or a Company Material Adverse Effect or words of similar
effect shall be true and correct as of the Closing Date as though made
on and as of the Closing Date (except to the extent such
representations and warranties expressly relate to a specific date, in
which case such representations and warranties shall be true and
correct as of such date), and those representations and warranties of
the Company set forth in this Agreement which are not so qualified
shall be true and correct in all material respects as of the Closing
Date as though made on and as of the Closing Date (except to the
extent such representations and warranties expressly relate to a
specific date, in which case such representations and warranties shall
be true and correct in all material respects as of such date).
(b) Performance and Obligations of the Company. The Company shall have
performed all obligations required to be performed by it under this
Agreement on or before the Closing Date, including, without
limitation, the covenants contained in Articles 6 and 7 hereof, in all
material respects.
(c) Material Adverse Change. There shall not have occurred between the
date of this Agreement and the Closing any change or changes
concerning the Company or the Company Subsidiaries which had, or would
reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, including, without limitation, a
Material Deviation From Projections.
(d) No Restraints. No Injunction or any Law promulgated or enacted by any
Governmental Entity after the date hereof, shall be pending,
threatened or in effect which would affect adversely, in any material
respect, the right of the Surviving Corporation or any Company
Operating Subsidiary to own or operate any material portion of its
respective businesses, properties or assets after the Merger or compel
the Surviving Corporation or any Company Operating Subsidiary to
dispose of or hold separate any material portion of its respective
businesses, properties or assets.
(e) Dissenting Shares. The number of Dissenting Shares shall not exceed
ten percent (10%) of the outstanding shares of Old Common.
(f) Certificates. The Company shall have furnished such certificates of
its officers or the officers of the Company Subsidiaries to evidence
compliance with the conditions applicable to the Company and the
Company Subsidiaries in Section 8.1 and this Section 8.2 as may be
reasonably requested by Parent or MergerCo.
(g) Financing. Parent shall have obtained the Necessary Financing in
accordance with the Acceptable Financing Commitments or if, Acceptable
Financing Commitments were not obtained but neither party terminated
this Agreement pursuant to Section 9.1(b)(i), Parent shall have
obtained the Necessary Financing on terms and conditions reasonably
satisfactory to Parent.
(h) Health Power HMO. Health Power HMO shall have completed its windup in
accordance with the Final Windup Plan, there shall be no actions,
suits, proceedings, investigations or claims pending, or to the
knowledge of the Company, threatened, against or affecting the Company
or any of the Company Subsidiaries (including Health Power HMO) before
or by any court, commission, governmental department, board, bureau,
agency, administrative officer or executive, or instrumentality
relating to Health Power HMO, and Health Power HMO shall have been
terminated from supervision by the Ohio Department of Insurance
pursuant to an Order of the Director of the Department of Insurance.
(i) Termination of Severance Agreements. Each member of the CMI Management
Team shall have executed and delivered a Termination of Executive
Severance Benefits Agreement substantially in the form attached hereto
as Exhibit 8.2(i)-1 (collectively, the "Termination of Severance
Agreements"), and Dr. Master shall have executed and delivered a
Termination of Employment Agreement substantially in the form attached
hereto as Exhibit 8.2(i)-2 (the "Termination of Employment
Agreement").
(j) Investment and Employment Agreements with Executive Management. Each
member of the CMI Management Team shall have executed and delivered
investment and employment agreements with the Surviving Corporation,
effective as of the Effective Time, containing terms and conditions
reasonably satisfactory to Parent.
Section 8.3 - Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. Those representations and warranties
of MergerCo and Parent set forth in this Agreement which are qualified
by materiality or a MergerCo Material Adverse Effect or a Parent
Material Adverse Effect, as the case may be, or words of similar
effect shall be true and correct as of the Closing Date as though made
on and as of the Closing Date (except to the extent such
representations and warranties expressly relate to a specific date, in
which case such representations shall be true and correct as of such
date), and those representations and warranties of MergerCo and Parent
set forth in this Agreement which are not so qualified shall be true
and correct in all material respects as of the Closing Date as though
made on the Closing Date (except to the extent such representations
and warranties expressly relate to a specific date, in which case such
representations and warranties shall be true and correct in all
material respects as of such date).
(b) Performance of Obligations of MergerCo and Parent. MergerCo and Parent
shall have performed all obligations required to be performed by them
under this Agreement on or before the Closing Date, including, without
limitation, the covenants contained in Articles 6 and 7 hereof, in all
material respects.
(c) Material Adverse Change. There shall not have occurred any change or
changes concerning MergerCo and Parent between the date of this
Agreement and the Closing Date which would, individually or in the
aggregate, reasonably be expected to have a MergerCo Material Adverse
Effect or a Parent Material Adverse Effect, as the case may be.
(d) Certificates. Parent and MergerCo shall have furnished such
certificates of their respective officers to evidence compliance with
the conditions applicable to Parent and MergerCo in Section 8.1 and
this Section 8.3 as may be reasonably requested by the Company.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 - Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after stockholder approval
thereof:
(a) by the mutual written consent of Parent and the Company;
(b) by either of the Company or Parent:
(i) if Acceptable Financing Commitments are not in place by the
Commitment Due Date or, if later, the date which is three (3)
business days after the Parent has provided Proposed Financing
Commitments to the Company, provided that such right of
termination shall expire if not exercised by either party within
three (3) business days after such right of termination becomes
exercisable; or
(ii) if the stockholders of the Company shall have voted on the Merger
and this Agreement and the votes shall not have been sufficient
to satisfy the condition set forth in Section 8.1(a); or
(iii)if any Governmental Entity shall have issued an Injunction or
taken any other action, which permanently restrains, enjoins or
otherwise prohibits the Merger, and such Injunction shall have
become final and non-appealable; or
(iv) if, without any material breach by the terminating party of its
obligations under this Agreement, the Merger shall not have
occurred on or before December 31, 2000; or
(c) by the Company:
(i) in connection with entering into a definitive agreement to effect
a Superior Acquisition Proposal in accordance with Section 7.5
hereof; provided, however, that prior to terminating this
Agreement pursuant to this Section 9.1(c)(i), (A) the Company
shall have paid the Break-Up Fee and Parent/MergerCo Expenses (as
those terms are hereinafter defined) as set forth in Section
9.2(b), and (B) the Company shall have provided Parent with five
days' prior written notice of the Company's decision so to
terminate. Such notice shall indicate in reasonable detail the
terms and conditions of such Superior Acquisition Proposal,
including, without limitation, the amount and form of the
proposed consideration and whether such Superior Acquisition
Proposal is subject to any material conditions; or
(ii) if MergerCo or Parent shall have breached in any material respect
any of their respective representations, warranties, covenants or
other agreements contained in this Agreement (except where such
representations, warranties, covenants or other agreements are
qualified by materiality or MergerCo Material Adverse Effect or
Parent Material Adverse Effect, in which case MergerCo's or
Parent's breach, as the case may be, shall not be qualified as to
materiality), which breach cannot be or has not been cured within
15 days after the giving of written notice thereof to MergerCo or
Parent;
or
(d) by Parent:
(i) if the Company shall have breached in any material respect any of
its representations, warranties, covenants or other agreements
contained in this Agreement (except where such representations,
warranties, covenants or other agreements are qualified by
materiality or Company Material Adverse Effect, in which case the
Company's breach shall not be qualified as to materiality), which
breach cannot be or has not been cured within 15 days after the
giving of written notice thereof to the Company; or
(ii) if (A) in accordance with Section 9.1(c)(i) hereof, the Company
enters into a definitive agreement to effect a Superior
Acquisition Proposal, or (B) the Company Board withdraws or
modifies in any manner adverse to MergerCo or Parent its approval
or recommendation of this Agreement to the stockholders of the
Company; or
(iii)at any time following the date 30 days after notice is delivered
by the Company in accordance with Section 7.5 concerning the
receipt of an Acquisition Proposal unless, prior to termination
under this Section 9.1(d)(iii), the Company provides written
notice to Parent that such Acquisition Proposal has been rejected
or withdrawn or that the Company is no longer engaged in
negotiations or discussions with the other persons involved in
connection therewith, provided that the 30-day period shall be
reduced with respect to any subsequent Acquisition Proposal made
by or on behalf of any such person (or its affiliates) whose
Acquisition Proposal was previously rejected or withdrawn as
provided in this Section 9.1(d)(iii) to a number of days equal to
the greater of (A) 20, minus the number of days lapsed from the
receipt of any notice of any prior Acquisition Proposal from such
person until the rejection or withdrawal of any such prior
Acquisition Proposal(s) and (B)10; or
(iv) if there shall have occurred any change or changes concerning the
Company or the Company Subsidiaries between the date of this
Agreement and the Closing which had, or would reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
Section 9.2 - Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to Section
9.1, this Agreement shall forthwith become null and void and have no
effect, without any liability on the part of any party or their
respective officers or directors, except (i) as set forth in Section
7.4, this Article 9, and Article 10, and (ii) that nothing herein
shall relieve any party from liability for (x) any willful or
intentional breach of any representations or warranties contained in
this Agreement, or (y) any breach of any covenant or agreement
contained in this Agreement.
(b) If the Company terminates this Agreement pursuant to Section
9.1(c)(i), or Parent terminates this Agreement pursuant to Sections
9.1(d)(ii) or 9.1(d)(iii), then the Company shall pay to Parent an
amount in cash equal to the Parent/MergerCo Expenses (not in excess of
the sum of $500,000, plus any costs and expenses incurred by Parent or
MergerCo to enforce their rights to receive the amounts due pursuant
to this Section 9.2 ("Parent/MergerCo Collection Expenses")) and the
Break-Up Fee. For purposes of this Agreement, the "Break-Up Fee" shall
be an amount equal to $1,000,000. For purposes of this Agreement,
"Parent/MergerCo Expenses" shall mean an amount equal to all of
Parent's and MergerCo's out-of-pocket costs and expenses incurred in
connection with this Agreement and the Transactions, including,
without limitation, reasonable fees and disbursements of its outside
legal counsel, accountants, consultants and other professional service
providers retained by or on behalf of Parent or MergerCo, together
with all other out-of-pocket costs and expenses incurred by MergerCo
or Parent in connection with analyzing and structuring the
Transactions, negotiating the terms and conditions of this Agreement
and any other agreements or other documents relating to the
Transactions, arranging financing (including without limitation
commitment fees), conducting due diligence and other activities
related to this Agreement and the Transactions, plus Parent/MergerCo
Collection Expenses.
(c) If this Agreement is terminated pursuant to Section 9.1(b)(ii), the
Company shall pay to Parent an amount in cash equal to Parent/MergerCo
Expenses. In addition, if within 12 months following any such
termination of this Agreement, the Company or any Company Subsidiaries
accepts a written offer for, or otherwise enters in to an agreement to
consummate or consummates, a Transaction Proposal (as defined below)
with another person, upon the signing of a definitive agreement
relating to such Transaction Proposal, or, if no such agreement is
signed, then upon consummation of such Transaction Proposal, the
Company shall pay to Parent the Break-Up Fee. As used in this Section
9.2(c), "Transaction Proposal" shall mean a proposal or offer (other
than by another party hereto) (i) to acquire beneficial ownership (as
defined under Rule 13(d) of the Exchange Act) of 50% or more of the
outstanding capital stock of the Company or any Company Subsidiaries
holding 50% or more of the assets of the Company and its Subsidiaries
pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, tender offer or exchange offer or
similar transaction, including, without limitation, any single or
multi-step transaction or series of related transactions which is
structured to permit such third party to acquire beneficial ownership
of 50% or more of the outstanding capital stock of the Company or any
Company Subsidiaries holding 50% or more of the assets of the Company
and its Subsidiaries, (ii) to purchase 50% or more of the business or
assets of the Company and its Subsidiaries or (iii) to otherwise
effect a business combination involving the Company or any of its
Subsidiaries holding 50% or more of the assets of the Company and its
Subsidiaries.
(d) The obligation to pay the Break-Up Fee and/or the Parent/MergerCo
Expenses, as the case may be, pursuant to Section 9.2 shall be in
addition to the expenses to be paid by the Company pursuant to Section
7.4. Absent fraud, the payment of the Break-Up Fee and the
Parent/MergerCo Expenses to Parent under the circumstances described
in this Section 9.2 shall be the sole and exclusive remedy at law or
in equity to which Parent and/or MergerCo, and their respective
officers, directors, representatives and affiliates, shall be entitled
in the event this Agreement is terminated under circumstances such
that the Break-Up Fee and the Parent/MergerCo Expenses are payable.
The Company shall make all such payments promptly (and in any event
within two days of receipt by the Company of written notice from
Parent) by wire transfer of immediately available funds to an account
designated by Parent. (e) The Escrow Funds (as defined in the Escrow
Agreement) shall be paid as follows:
(i) If this Agreement is terminated pursuant to Section 9.1(a),
Section 9.1(c)(i), any provision of Section 9.1(d), or, except as
provided in clause (ii) of this Section 9.2(e), any provision of
Section 9.1(b), then, in any such case, all Escrow Funds shall be
paid to Parent in accordance with the terms of the Escrow
Agreement.
(ii) If (A) this Agreement is terminated by the Company or Parent
pursuant to Section 9.1(b)(iv), (B) at the time of such
termination, Parent has no other right to terminate this
Agreement under Section 9.1, including, without limitation, under
Section 9.1(b)(iv), other than by reason of the failure of the
Necessary Financing to be provided, and (C) the Necessary
Financing was not provided based primarily on the failure of one
or more conditions other than the inability to syndicate or the
occurrence of a material adverse change with respect to the
Company and its Subsidiaries, as such conditions were set forth
in the Acceptable Financing Commitments (or other written
commitments obtained by Parent after the Commitment Due Date if
neither party terminated the Agreement pursuant to Section
9.1(b)(i)), then all Escrow Funds shall be paid to the Company in
accordance with the terms of the Escrow Agreement.
(iii)If this Agreement is terminated by the Company pursuant to
Section 9.1(c)(ii), then all Escrow Funds shall be paid to the
Company in accordance with the terms of the Escrow Agreement.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 - Notices. All notices, requests, demands, claims, and other
communications hereunder (collectively, a "Notice") shall be in writing and
shall be deemed given when delivered personally to that party (including
personal delivery, expedited courier, or messenger service) at the address set
forth below, telecopied (which is confirmed) to the telecopy number for that
party set forth below, or three (3) business days after sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed to that
party as set forth below:
(a) if to Parent or MergerCo:
Security Capital Corporation
c/o Capital Partners Inc.
One Pickwick Plaza, Suite 310
Greenwich, Connecticut 06830
Attention: Brian D. Fitzgerald, Chairman
Facsimile: (203) 625-0423
with a copy to:
Finn Dixon & Herling LLP
One Landmark Square, Suite 1400
Stamford, Connecticut 06901
Attention: Harold B. Finn III, Esq.
Facsimile: (203) 348-5777
(b) if to the Company:
Health Power, Inc.
c/o CompManagement, Inc.
6377 Emerald Parkway
Dublin, Ohio 43016
Attention: Robert J. Bossart, Chief Executive Officer
Facsimile: (614) 790-8208
with a copy to:
Baker & Hostetler LLP
Capitol Square, Suite 2100
65 East State Street
Columbus, Ohio 43215-4260
Attention: Alec Wightman, Esq.
Facsimile: (614) 462-2616
Any party may change the address to which Notices hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
Section 10.2 - Interpretation. When a reference is made in this Agreement
to a subsidiary or subsidiaries of Parent, MergerCo or the Company, the word
"Subsidiary" means any corporation more than 50% of whose outstanding voting
securities, or any partnership, joint venture or other entity more than 50% of
whose total equity interest, is directly or indirectly owned by Parent, MergerCo
or the Company, as the case may be. When a reference is made in this Agreement
to a "person", such word means any individual, partnership, firm, corporation,
association, joint venture, trust or other entity. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 10.3 - Survival. The representations and warranties made herein
shall not survive the termination of this Agreement or the Effective Time. This
Section 10.3 shall not limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after termination of this Agreement
or the Effective Time.
Section 10.4 - Miscellaneous. This Agreement (a) constitutes, together with
the Confidentiality Agreement, the Company Disclosure Schedule and the Exhibits
hereto, the entire agreement and supersedes all of the prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, (b) subject to Section 10.5, shall be
binding upon and inure to the benefits of the parties and their respective
successors and assigns and is not intended to confer upon any other person
(except as set forth below) any rights or remedies hereunder and (c) may be
executed in two or more counterparts which together shall constitute a single
agreement. Section 7.6 is intended to be for the benefit of those persons
described therein, and the covenants contained therein may be enforced by such
persons. The parties 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 Delaware Court (as hereinafter defined), this being in addition to
any other remedy to which they are entitled at law or in equity. Any
requirements for the securing or posting of any bond with respect to such remedy
are hereby waived by each of the parties.
Section 10.5 - Assignment. Except as expressly permitted by the terms
hereof, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties without the prior written
consent of the other parties.
Section 10.6 - Severability. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 10.7 - Choice of Law/Consent to Jurisdiction. All disputes, claims
or controversies arising out of or relating to this Agreement or the
negotiation, validity or performance of this Agreement or the Transactions 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, except with respect to
matters of corporate law and governance, as opposed to contract law. Each of the
parties hereby irrevocably and unconditionally consents to submit to the sole
and exclusive jurisdiction of the courts of the State of Delaware and of the
United States located in the State of Delaware (the "Delaware Courts") for any
litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement, or the Transactions (and agrees not
to commence any litigation relating thereto except in such courts), waives any
objection to the laying of venue of any such litigation in the Delaware Courts
and agrees not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in any inconvenient forum. Each of the parties
hereto agrees, (a) to the extent such party is not otherwise subject to service
of process in the State of Delaware, to appoint and maintain an agent in the
State of Delaware as such party's agent for acceptance of legal process, and (b)
that service of process may also be made on such party by prepaid certified mail
with a proof of mailing receipt validated by the United States Postal Service
constituting evidence of valid service. Service made pursuant to (a) or (b)
above shall have the same legal force and effect as if served upon such party
personally within the State of Delaware. For purposes of implementing the
parties' agreement to appoint and maintain an agent for service of process in
the State of Delaware, Parent and MergerCo each do hereby appoint The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware ("CTC"), as their agent and the Company
does hereby also appoint CTC, at such address, as its agent.
Section 10.8 - Extension; Waiver. At any time prior to the Effective Time,
the parties, by action taken or authorized by their respective Boards of
Directors, or committees thereof, as the case may be, 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; (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document delivered pursuant hereto; and (c) waive compliance by the other
parties with any of the agreements or conditions contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of such party. The
failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
Section 10.9 - Amendment. This Agreement may be amended by the parties by
an instrument in writing signed on behalf of each of the parties at any time
before the Effective Time; provided, however, that after this Agreement is
approved by the Company's stockholders, no such amendment or modification shall
reduce the amount or change the form of consideration to be delivered to the
stockholders of the Company.
Section 10.10 - No Agreement Until Executed. Irrespective of negotiations
among the parties or the exchanging of drafts of this Agreement, this Agreement
shall not constitute or be deemed to evidence a contract, agreement, arrangement
or understanding among the parties hereto unless and until (a) the Company Board
has approved, for purposes of Section 203 of the DGCL and any applicable
provision of the Certificate of Incorporation, the terms of this Agreement, and
(b) this Agreement is executed by the parties.
Section 10.11 Parent.
(a) Subject to Section 10.11(c), Parent hereby unconditionally and
irrevocably guarantees to the Company the performance of each of
the obligations and the undertakings of MergerCo under this
Agreement when and to the extent the same are required to be
performed and subject to all of the terms and conditions hereof.
If MergerCo shall fail to perform any obligation or undertaking
of MergerCo under this Agreement when and to the extent the same
is required to be performed, Parent will upon written demand from
the Company forthwith perform or cause to be performed such
obligation or undertaking, as the case may be.
(b) Subject to Sections 10.11(a) and (c), the obligations of Parent
under this guaranty are absolute and unconditional, are not
subject to any counterclaim, set off, deduction, abatement or
defense based upon any claim Parent may have against the Company
(except for any of the foregoing that MergerCo may have against
the Company under the terms of this Agreement or otherwise), and
shall remain in full force and effect without regard to (i) any
insolvency, bankruptcy, dissolution, liquidation, reorganization
or the like of MergerCo at or prior to the Closing or (ii) any
transfer of shares of capital stock of MergerCo, or any
assignment by MergerCo of any of its rights or obligations under
this Agreement to a wholly owned subsidiary of MergerCo or
Parent.
(c) Notwithstanding any provision of this Agreement to the contrary,
Parent shall not have any liability whatsoever under this
guaranty after the Effective Time, whether based upon events
occurring prior to or after the Effective Time.
[remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SECURITY CAPITAL CORPORATION
By /s/ Brian D. Fitzgerald
(Name) Brian D. Fitzgerald
(Title) Chairman
HP ACQUISITION CORP.
By /s/ Brian D. Fitzgerald
(Name) Brian D. Fitzgerald
(Title) President
HEALTH POWER, INC.
By /s/ Bernard F. Master, D.O.
(Name) Bernard F. Master, D.O.
(Title) Chairman
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A-1 Persons Entering Into Stockholders Voting Agreements
Exhibit A-2 Form of Stockholders Voting Agreements
Exhibit B Form of Escrow Agreement
Exhibit 1.1A Amended and Restated Certificate of Incorporation of
Surviving Corporation
Exhibit 1.1B Amended and Restated Bylaws of Surviving Corporation
Exhibit 8.2(j)-1 Form of Termination of Executive Severance Benefits
Agreements for Robert J. Bossart, Randy E. Jones,
Richard T. Kurth, Paul A. Miller, Daniel R. Sullivan,
and Jonathan R. Wagner
Exhibit 8.2(j)-2 Form of Termination of Employment Agreement for
Bernard F. Master, D.O.
Schedules of Health Power, Inc.
Schedule 5.3-Outstanding Securities
Schedule 5.4-Subsidiaries
Schedule 5.5(c)-Regulatory Approvals
Schedule 5.9(h)-Exceptions to Deductibility under Section 162(m)
Schedule 5.10(a)-Real Estate Properties; Ownership of Real Estate Properties
Schedule 5.10(d)-Exceptions to Ownership or Licensure of Proprietary Rights
Schedule 5.12(a)-Plans
Schedule 5.12(j)-Severance, Unemployment or Related Payments
Schedule 5.13-Labor Matters
Schedule 5.17(a)-Contracts and Commitments
Schedule 5.17(b)-Indemnity Agreements
<PAGE>
EXHIBIT 99
COLUMBUS, OH and GREENWICH, CT - Security Capital Corporation (AMEX:SCC) and
Health Power, Inc. (OTC:HPWR) announced today the signing of a definitive
agreement to merge. Pursuant to the terms of the agreement, HPI would become a
subsidiary of SCC and stockholders of Health Power would receive approximately
$26.5 million in cash in exchange for their shares. Security Capital would also
assume or pay approximately $9.75 million in liabilities and expenses of Health
Power, including amounts needed to extinguish certain severance benefits. The
anticipated net purchase price per share to stockholders of Health Power will be
in the range of $6.83 to $6.88. Following the merger, it is expected that all
members of the CompManagement management team will remain in their current
positions and maintain an equity stake in the company.
The merger was approved by the Board of Directors of Security Capital and Health
Power, as well as Health Power's special committee of Independent Directors (the
"Special Committee"). The merger represents the culmination of an extensive
process undertaken by Health Power and its financial advisor, Raymond James &
Associates, Inc., to analyze the possibilities to maximize shareholder value.
"We believe that this transaction is in the best interest of our stockholders,"
said Dr. Bernard F. Master, the Health Power Chairman. "The Special Committee
conducted a comprehensive and inclusive process and we feel this merger will
ensure that our stockholders receive a fair value for their investment."
Health Power, Inc., through its operating subsidiaries CompManagement, Inc. and
CompManagement Health Systems, provides cost containment and operating medical
management services to employers in Ohio, Indiana, Kentucky, West Virginia and
Washington. These subsidiaries assist employers in minimizing the costs of
workers' and unemployment compensation.
Security Capital, a diversified holding company based in Greenwich, Connecticut,
is affiliated with Capital Partners, a private equity investment firm. Security
Capital currently operates three subsidiary companies in two distinct
industries. Each subsidiary has a high degree of operating autonomy and has its
own Chief Executive Officer and management team. The management team of each
subsidiary maintains an equity position in their company.
Brian Fitzgerald, Chairman of Security Capital indicated that the acquisition of
Health Power met Security Capital's financial and qualitative criteria and
operating philosophy for acquiring a company. Mr. Fitzgerald indicated he was
looking forward to working with this management team.
Bob Bossart, CEO of CompManagement, said the relationship with Security Capital
will provide CompManagement with the ability and autonomy to expand its business
outside Ohio and to increase the development of products that can be added to
the current mix of disability management products.
Health Power stockholders, representing approximately 47.7% of the company's
outstanding common stock, have signed voting agreements to support the
transaction. The merger is expected to be completed by the end of the third
quarter 2000, or shortly thereafter. The transaction is contingent upon Security
Capital's obtaining financing for the transaction, approval by a majority of
Health Power's stockholders, clearance under the Hart Scott Rodino Antitrust
Improvements Act of 1976, and other customary conditions for a transaction of
this type. The agreement provides for Health Power to call a special meeting of
its stockholders as soon as practicable after financing commitments have been
obtained.
Some of the information in this press release contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The words "believe," "expect," "anticipate," "project," and similar
expressions, among others, identify forward-looking statements. Forward-looking
statements speak only as of the date the statement was made. These
"forward-looking statements" are subject to certain risks, uncertainties, and
other factors that could cause the actual results to differ materially from
those projected, anticipated, or implied. Such risks, uncertainties, and factors
that might cause such a difference include, but are not limited to, (1) the
ability to obtain favorable financing and the terms of such financing, (2)
changes in the interest rate environment, (3) general economic or business
conditions, either nationally or in the states or regions in which the companies
do business, which may be less favorable than expected, (4) legislative or
regulatory changes, which may adversely affect the businesses in which the
companies are engaged, and (5) changes which may occur in the securities
markets. These and other risks, uncertainties, and factors that could materially
affect financial results are further discussed in the Security Capital and
Health Power filings with the Securities and Exchange Commission.
This release is neither an offer to sell nor a solicitation of an offer to by
the securities of either company, nor a solicitation of a proxy. Any such offer
or solicitation will only be made in compliance with applicable securities law.
Contact:
Robert J. Bossart, CEO, CompManagement, Inc. (614) 760-2400
Brian D. Fitzgerald, Chairman, Security Capital Corporation (203) 625-0770
