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AGREEMENT FOR STATUTORY MERGERS
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HP ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
PROMEDCO MANAGEMENT COMPANY,
WITH
PBMA HEALTH SYSTEMS, INC.
AND
HEALTH PLANS, INC.
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July 25, 1997
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DRAMATIS PERSONAE
Player Office Address Home Address
ProMedCo, Inc.
H. ▇▇▇▇▇ ▇▇▇▇▇ ProMedCo, Inc.
President ▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇ (▇▇▇▇▇▇▇) ▇▇▇-▇▇▇-▇▇▇▇
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Senior Vice President ▇▇▇-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇ Fax ▇▇▇-▇▇▇-▇▇▇▇
Pager: 1-800-759-7243
Pin #5733551
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Senior Vice President
ProMedCo Counsel
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Boult, Cummings, (Gillmor) 1700 Graybar
615-252-2305 ▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇
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E-mail: ▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇ 1600 ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Car ▇▇▇-▇▇▇-▇▇▇▇
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Health Plans, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Health Plans, Inc. ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Table of Contents
ARTICLE 1 DEFINITIONS...................................................1
Affiliate......................................................1
Balance of the HP Consideration................................1
Balance of the HSI Consideration...............................1
COBRA ......................................................1
Closing ......................................................1
Closing Date...................................................1
Code ......................................................1
Consideration..................................................1
Definitive Closing Statements..................................1
Exhibit Volume.................................................1
Final Closing Statement........................................2
GAAP ......................................................2
HP ......................................................2
HP Consideration...............................................2
HP Financial Statements........................................2
HSI ......................................................2
HSI Consideration..............................................2
HSI Merger.....................................................2
Initial Portion of the HP Consideration........................2
Initial Portion of the HSI Consideration.......................2
Inventory......................................................2
IRS ......................................................3
Market Value...................................................3
MergerSub......................................................3
Pension Plan...................................................3
Person ......................................................3
ProMedCo ......................................................3
ProMedCo Stock.................................................3
Shareholder Representative.....................................3
Shareholders...................................................3
Tax Gross Up...................................................4
Tax Value......................................................4
ARTICLE 2. MERGERS AND OTHER TRANSACTIONS..............................4
2.1 Merger of HSI into MergerSub..............................4
2.2 Merger of HP into MergerSub...............................7
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2.3 Cash Mergers...............................................9
2.4 Closing and Effective Date of Merger.......................9
2.5 Further Assurances........................................10
2.6 Dissenting Stockholders of HSI and/or HP..................10
2.7 Nature of Transaction; Further Assurances.................10
2.8 Legend....................................................10
2.9 Additional Transactions at the Closing.....................11
2.10 Consideration Adjustments................................11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE CONSTITUENT
CORPORATIONS...................................................12
3.1 Organization, Corporate Power and Qualification...........12
3.2 Capitalization of the Constituent Corporations............13
3.3 Subsidiaries, Affiliates, Affiliated
Companies and Joint Venture. .............................15
3.4 Financial Statements......................................15
3.5 Absence of Undisclosed Liabilities........................16
3.6 Letters of Credit.........................................16
3.7 Absence of Certain Recent Changes.........................16
3.8 Title to Assets...........................................18
3.9 Contracts.................................................18
3.10 Defaults.................................................20
3.11 Inventory................................................20
3.12 Equipment................................................21
3.13 Investments..............................................21
3.14 Receivables..............................................21
3.15 Powers of Attorney.......................................22
3.16 Guarantees...............................................22
3.17 Permits and Licenses.....................................22
3.18 Bank Accounts............................................22
3.19 Intangible Property Rights...............................22
3.20 Assets Necessary to Business.............................23
3.21 Litigation, etc..........................................23
3.22 Court Orders, Decrees and Laws...........................23
3.23 Taxes....................................................23
3.24 Immigration Act..........................................25
3.25 ERISA....................................................25
3.26 Pension, etc. ...........................................26
3.27 Employee Matters.........................................26
3.28 Insurance and Bonds......................................27
3.29 Labor Matters............................................27
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3.30 Improper Payments.......................................27
3.31 Books of Account; Reports...............................28
3.32 No Finders or Brokers...................................28
3.33 Insider Transactions....................................28
3.34 Authority; Binding Effect...............................28
3.35 Consents and Approvals of Governmental Authorities......28
3.36 Disclosure..............................................29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PROMEDCO AND
MERGERSUB
.............................................................29
4.1 Organization and Standing of ProMedCo and MergerSub......29
4.2 Prospectus; Financial Statements..........................29
4.3 Absence of Certain Changes...............................30
4.4 Authority; Binding Effect................................30
4.5 No Finders or Brokers....................................31
4.6 Defaults.................................................31
4.7 Pending Litigation.......................................31
4.8 Court Orders, Decrees and Laws...........................31
4.9 Consents and Approvals of Governmental Authorities.......31
4.10 Interim Operations of Merger Sub. ......................32
4.11 Disclosure..............................................32
ARTICLE 5 COVENANTS OF PROMEDCO ......................................32
5.1 The Subsidiary...........................................32
5.2 Best Efforts to Secure Consents..........................32
5.3 Information..............................................32
5.4 Corporate Action.........................................33
5.5 Handling of Documents....................................33
5.6 Non-Disclosure...........................................33
5.7 Tax Representation Letter.................................33
ARTICLE 6 COVENANTS OF THE CONSTITUENT CORPORATIONS...................33
6.1 Access and Information...................................33
6.2 Conduct of Business......................................34
6.3 Compliance with Agreement................................34
6.4 Best Efforts to Secure Consents..........................35
6.5 Unusual Events...........................................35
6.6 Interim Financial Statements.............................35
6.7 Stockholders' Meeting....................................35
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6.8 Departmental Violations..................................35
6.9 Insurance Ratings........................................36
6.10 Maintain Insurance Coverage.............................36
6.11 Exclusive Dealings......................................36
6.12 Non-Disclosure..........................................36
6.13 HP Stock Options........................................36
6.14 Tax Representation Letter................................36
6.15 Modification of ERISA Plans..............................36
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE CONSTITU
ENT CORPORATIONS .............................................37
7.1 Representations and Warranties True......................37
7.2 Opinion of Counsel.......................................37
7.3 Authority................................................37
7.4 No Obstructive Proceeding................................37
7.5 Delivery of Certain Documents............................38
7.6 Approval by Stockholders of the Constituent Corporations.38
7.7 Articles of Merger. .....................................38
7.8 Maine Bureau of Insurance................................38
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PROMEDCO
AND MERGERSUB.................................................38
8.1 Representations and Warranties True......................38
8.2 No Obstructive Proceeding................................39
8.3 Opinion of Counsel to the Constituent Corporations.......39
8.4 Consents and Approvals...................................39
8.5 No Adverse Change........................................39
8.6 Stockholder Agreements...................................40
8.7 Shareholder Representations...............................40
8.8 Approval by Stockholders of the Constituent Corporations.40
8.9 Maine Bureau of Insurance................................40
8.10 Delivery of Certain Documents...........................40
8.11 Employment Agreements...................................40
8.12 Articles of Merger......................................40
ARTICLE 9 TERMINATION................................................40
9.1 Optional Termination.....................................40
9.2 Notice of Abandonment. ..................................41
9.3 Mandatory Termination....................................41
9.4 Termination..............................................41
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9.5 Shareholder Representative...............................42
ARTICLE 10 MISCELLANEOUS...............................................43
10.1 Expenses................................................43
10.2 HSR .....................................................43
10.3 Cooperation by ProMedCo.................................43
10.4 Cooperation by Constituent Corporations.................43
10.5 Notices. ...............................................43
10.6 Entire Agreement........................................44
10.7 Governing Law...........................................44
10.8 WAIVER OF TRIAL BY JURY..................................44
10.9 Legal Fees and Costs.....................................45
10.10 Section Headings.......................................45
10.11 Waiver.................................................45
10.12 Nature and Survival of Representations.................45
10.13 Exhibits...............................................45
10.14 Assignment.............................................46
10.15 Binding on Successors and Assigns......................46
10.16 Parties in Interest....................................46
10.17 Amendments.............................................46
10.18 Drafting Party.........................................46
10.19 Counterparts...........................................46
10.20 Press Releases.........................................46
APPENDIX 2.1 ARTICLES OF MERGER AND PLAN OF MERGER FOR THE HSI
MERGER
APPENDIX 2.2 ARTICLES OF MERGER AND PLAN OF MERGER FOR THE HP MERGER
APPENDIX 4.1 BYLAWS OF MERGERSUB
APPENDIX 5.7 PROMEDCO TAX REPRESENTATION LETTER
APPENDIX 6.14 CONSTITUENT CORPORATION TAX REPRESENTATION LETTER
APPENDIX 7.2 OPINION OF COUNSEL TO PROMEDCO
APPENDIX 8.3 OPINION OF COUNSEL TO HP
APPENDIX 8.6 FORM OF STOCKHOLDER AND INDEMNIFICATION AGREEMENT
APPENDIX 8.7 SHAREHOLDER CONTINUITY OF INTEREST CERTIFICATE
APPENDIX 8.11A-C FORMS OF EMPLOYMENT AGREEMENT
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AGREEMENT FOR STATUTORY MERGERS
Agreement for Statutory Mergers ("Agreement"), dated as of July 25,
1997, among ProMedCo Management Company, a Delaware corporation ("ProMedCo"), HP
Acquisition Corp., a Maine corporation and a wholly-owned subsidiary of ProMedCo
( "MergerSub"), PBMA Health Systems, Inc., a Maine corporation ("HSI") and
Health Plans, Inc., a Maine corporation ("HP"; HSI and HP are collectively
referred to herein as the "Constituent Corpora
tions").
The parties hereby agree as follows:
ARTICLE 1 DEFINITIONS
For the purposes of this Agreement, the following definitions shall
apply:
"Affiliate" means with respect to any Party, any entity which controls, is
controlled by, or is under common control with such party all as more
fully set forth in the rules and regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
"Balance of the HP Consideration" is defined in ss. 2.1.7.
"Balance of the HSI Consideration" is defined in ss. 2.2.7.
"COBRA" means Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985, 26 U.S.C. ss. 162 et seq.
"Closing" and "Closing Date" are defined in ss. 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consideration" means $7,500,000 adjusted pursuant to ss. 2.10.
"Constituent Corporations" means HP and HSI..
"CPA Firm" is defined in ss. 2.10(a).
"Definitive Closing Statements" is defined in ss. 2.10.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Exhibit Volume" means the volume of Exhibits referred to in this Agreement
prepared and delivered by HP.
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"Final Closing Statement" is defined in ss. 2.10.
"GAAP" means generally accepted accounting principles.
"HP" means Health Plans, Inc., a Maine corporation.
"HP Consideration" means shares of ProMedCo Stock at valued at Market Value
having an aggregate value equal to the Consideration less the HSI
Consideration; provided how ever, if ProMedCo exercises its option to
effect cash mergers pursuant to ss. 2.3, "HP Consideration" shall mean
cash in an amount equal to the HP Consideration increased by an amount
necessary on a grossed up basis to compensate the HP Shareholders for
the difference between the Federal capital gains tax rate in effect on
the Effective Date and the highest marginal individual Federal Income
Tax rate on the same date and such for any increased state or other tax
liability resulting from ProMedCo's exercising its option to effectuate
cash mergers under ss. 2.3 (the "Tax Gross Up").
"HP Financial Statements" is defined in ss. 3.4.
"HSI" means PBMA Health Systems, Inc., a Maine corporation.
"HSI Consideration" means the amount obtained by multiplying the
Consideration by a fraction, the (x) numerator of which is the number
of shares of HP Common Stock held by HSI immediately prior to the
Closing and (y) the denominator of which is the number of shares of HP
Common Stock outstanding immediately prior to the Closing. The HSI
Consideration shall consist of (A) shares of ProMedCo Stock having an
aggregate value (based on a per share value equal to the Tax Value)
equal to 50% of the total HSI Consideration (increased to the extent,
if any, necessary to reflect payments to dissent ers), as set forth in
ss. 2.1.7 hereof, and (B) cash (including cash paid in lieu of
fractional shares) equal to the total HSI Consideration less the
aggregate value of such shares of ProMedCo Stock (based on a per share
value equal to the greater of the Tax Value or the Market Value);
provided however, if ProMedCo exercises its option to effect cash
mergers pursuant to ss. 2.3, "HSI Consideration" shall consist solely
of cash.
"HSI Merger" is defined in ss. 2.1.
"Initial Portion of the HP Consideration" is defined in ss. 2.2.7.
"Initial Portion of the HSI Consideration" is defined in ss. 2.1.7.
"Inventory" means the inventory of HP.
"IRS" means the Internal Revenue Service.
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"Market Value" means $8.80 per share if the average closing price of ProMedCo
Stock for the five trading days ending two trading days prior to the
Closing is greater than $8.36 and less than $10.56; if such average
closing price is $8.36 or less, "Market Value" shall mean such average
closing price plus $.44; and if such average price is $10.56 or
greater, "Market Value" shall mean such average closing price less
$1.76.
"MergerSub" means HP Acquisition Corp., a Maine corporation and a wholly-owned
subsidiary of ProMedCo.
"Pension Plan" and "Pension Plans" means any "employee pension benefit plan"
listed in Exhibit 3.25.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust or unincorporated organization.
"ProMedCo" means ProMedCo Management Company, a Delaware corporation.
"ProMedCo Stock" means common stock, par value $.01 per share of ProMedCo.
"Shareholder Representative" is defined in ss. 9.5.
"Shareholders" mean the following Persons (including Transferees) who are
shareholders of HSI or HP immediately prior to the Closing; "Current
HSI Shareholders" is defined in ss. 2.1.8 and means the following
persons:
HSI Shareholder Number of HSI Shares
--------------- --------------------
▇▇▇▇ ▇▇▇▇▇▇▇, M.D. 128
▇▇▇▇▇ ▇. ▇▇▇▇, M.D. 128
▇▇▇▇▇▇ ▇▇▇▇▇, M.D. 128
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D. 128
▇▇▇▇▇▇▇ ▇▇▇▇▇, M.D. 128
▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. 609
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D. ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, M.D. 128
▇▇▇▇▇ ▇▇▇▇▇▇, M.D. 128
▇▇▇▇ ▇▇▇▇▇▇, M.D. 128
▇▇. ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ 15
and "HP Shareholders" means those persons who were shareholders of HP
as follows:
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Number of HP Shares to be
HP Shareholder Held at Closing+
-------------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 74,512
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 4,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 7,500
▇▇▇▇▇ ▇▇▇▇▇▇ 7,500
▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ 1,000
▇▇▇▇ ▇▇▇▇▇▇▇▇ 600
▇▇▇▇ ▇▇▇▇▇▇▇▇ 600
▇▇▇▇▇ ▇▇▇▇▇ 500
▇▇▇▇ ▇▇▇▇▇ 500
------------
+ Assumes exercise of options to purchase HP Stock prior to the Closing.
"Tax Gross Up" is defined in the definition of HP Consideration.
"Tax Value" means the lesser of (x) Market Value or (y) the average closing
price of ProMedCo Stock for the five trading days ending two trading
days prior to the Closing less a discount determined by ▇▇▇▇▇ ▇▇▇▇▇▇▇ &
Company, ProMedCo's investment bankers, necessary to reflect, as of the
Closing Date, the economic value of unregistered ProMedCo Stock subject
to the restrictions contemplated by this Agreement, including the
holding period required by Rule 144 of the Securities and Exchange
Commission and the tax representations to be signed by the Shareholders
pursuant to ss. 8.7 hereof.
ARTICLE 2. MERGERS AND OTHER TRANSACTIONS
2.1 Merger of HSI into MergerSub. HSI shall be merged with and into
MergerSub (the "HSI Merger") on the Effective Date (as defined in ss. 2.4
hereof) in accordance with the applicable laws of the State of Maine as provided
in the Articles and Plan of Merger attached hereto as Appendix 2.1, certain
provisions of which are as follows:
2.1.1 Surviving Corporation. MergerSub shall be the surviving
corporation (the "Surviving Corporation") from and after the Effective
Date, and the name of the Surviving Corporation shall be "HP
Acquisition Corp." On the Effective Date, the sepa rate existence of
HSI shall cease, and the Surviving Corporation shall without other
transfer succeed to all the rights and property, subject to all debts
and liabilities, of HSI and MergerSub in the same manner as if the
Surviving Corporation itself had incurred them.
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2.1.2 Articles of Incorporation. From and after the Effective
Date, the Articles of Incorporation of the Surviving Corporation shall
be amended to be the same as the Articles of Incorporation of the
MergerSub.
2.1.3 By-Laws. From and after the Effective Date, the by-laws
of the MergerSub as they exist on the date hereof shall be the by-laws
of the Surviving Corporation.
2.1.4 Directors and Officers. The directors and officers of
MergerSub immedi ately prior to the Effective Date shall be the
officers and directors, respectively, of the Surviving Corporation, to
serve, in both cases, until their successors shall have been elected
and shall qualify or until otherwise provided by law and the Articles
of Incorpo ration and by-laws of the Surviving Corporation.
2.1.5 Exchange of Shares for Cash and/or Securities. The
manner and basis of exchanging and converting the shares of common
stock of the MergerSub and HSI on the Effective Date shall be as
follows:
(a) Common Stock of MergerSub. By virtue of the Merger
and without any action of the holder thereof each
share of common stock of MergerSub outstanding on the
Effective Date shall remain outstanding and unchanged
as a share of the common stock of the Surviving
Corporation.
(b) Common Stock of HSI. By virtue of the merger and
without any action of the holders thereof each share
of (i) the no par value Class A Voting Common Stock
of HSI and (ii) the no par Class B Non-Voting Common
Stock of HSI (collectively the "HSI Common Stock")
outstanding at the Effective Date shall be
reclassified into the right to receive the portion of
the HSI Consideration determined in accordance with
the formula set forth in ss.2.1.7 hereof and
distributable in accordance with the time schedule
set forth in such section, except that any share of
HSI Common Stock then owned by HSI or MergerSub shall
be canceled.
2.1.6 Rights of HSI's Stockholders Pending and Upon Surrender
of Certifi ▇▇▇▇▇. From and after the Effective Date, except as provided
in the Maine Business Corporation Act with respect to rights of
dissenting stockholders, each holder of a certificate representing
shares of HSI Common Stock shall be entitled, upon surrender thereof to
the Surviving Corporation, to receive in exchange therefor the portion
of the Consideration to which such holder would otherwise be entitled
on the basis provided for in ss.2.1.5(b) of this Agreement.
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2.1.7 HSI Exchange Formula. As a result of the Closing, each
share of HSI Common Stock shall be exchanged for the right to receive
the portion of the HSI Consideration obtained by dividing (x) HSI
Consideration, as adjusted pursuant to ss. 2.10, by (y) the number of
shares of HSI Common Stock issued and outstanding immediately prior to
the Effective Date other than those owned by HSI or MergerSub.
Immediately after the Closing, 80% of the HSI Consideration which would
be distributable if no adjustments were made pursuant to ss. 2.10 (the
"Initial Portion of the HSI Consideration") shall be distributed to the
former HSI shareholders, and 120 days after the Effective Date, or on
such later time as is reasonable under the circumstances for ProMedCo
to have computed the adjustments, if any, under ss. 2.10 the balance of
the HSI Consideration due hereunder (the "Balance of the HSI
Consideration"). The Initial Portion of the HSI Consideration shall
include a number of shares of ProMedCo Stock that is sufficient
(regardless of the ultimate amount of the Balance of the HSI
Consideration) to satisfy the requirement set forth in the definition
of HSI Consideration that at least 50 % of HSI Consideration be paid in
ProMedCo Stock. The Surviving Corporation shall not deliver any
fraction of a share of ProMedCo Stock but will deliver a whole number
of shares of ProMedCo Stock rounded up to the next whole number with
the value of the fractional share being reflected in the amount of cash
distributed. Notwithstanding the foregoing, if ProMedCo exercises its
option to effect a cash merger pursuant to ss. 2.3, the HSI
Consideration shall consist of cash only.
2.1.8 Transfers of HSI Stock. HSI agrees that, on and after
the date of this Agreement, it shall not issue any additional shares of
HSI Common Stock or authorize or permit any person who holds HSI Common
Stock on the date of this Agreement (a "Current HSI Shareholder") to
sell, transfer, pledge or dispose of in any manner any shares of HSI
Common Stock; provided, however, that a Current HSI Stockholder may be
permitted by HSI to transfer shares of HSI Common Stock to another
person (the "Transferee") if:
(i) the Transferee executes a joinder to this
Agreement and agrees in writing to execute
and be bound by the Stock and
Indemnification Agreement and all
certificates and other documents furnished
or required to be furnished by HSI
Stockholders pursuant to the Merger
Agreement or the Stock and Indemnification
Agreement;
(ii) such executed documents and agreements are
delivered to counsel to HP and ProMedCo
prior to any transfer of the HSI Common
Stock and are satisfactory in form to such
counsel; and
(iii) the Shareholder Representatives shall revise
and determine in their sole discretion the
allocation of cash and ProMedCo Stock among
the HSI Stockholders who have elected to
receive a portion of HSI
-7-
Consideration as cash in lieu of ProMedCo
Stock so that (a) the Current HSI
Stockholders who are not transferring HSI
Common Stock are not adversely affected by
any such transfer and (b) the ability of the
transactions contemplated by this Agreement
to qualify as tax-free reorganizations is
not adversely affected by such transfers.
By executing the joinder to this Agreement, each Current HSI
Stockholder agrees to be bound by the terms of this ss. 2.1.8 and
agrees that he will not sell, transfer, pledge or dispose of in any
manner any shares of HSI Common Stock except as permitted in compliance
with the terms of this ss. 2.1.8.
2.2 Merger of HP into MergerSub. Immediately after consummation of the
HSI Merger, HP shall be merged with and into MergerSub (the "HP Merger") on the
Effective Date (as defined in ss. 2.4 hereof) in accordance with the applicable
laws of the State of Maine as provided in the Articles and Plan of Merger
attached hereto as Appendix 2.2, certain provisions of which are as follows:
2.2.1 Surviving Corporation. MergerSub shall be the surviving
corporation (the "Surviving Corporation") from and after the Effective
Date, and the name of the Surviving Corporation shall be "Health Plans,
Inc." On the Effective Date, the separate existence of HP shall cease,
and the Surviving Corporation shall without other transfer succeed to
all the rights and property, subject to all debts and liabilities, of
HP and MergerSub in the same manner as if the Surviving Corporation
itself had incurred them.
2.2.2 Articles of Incorporation. From and after the Effective
Date, the Articles of Incorporation of the Surviving Corporation shall
be amended to be the same as the Articles of Incorporation of the
MergerSub except that the name of the Surviving Corporation shall be
"Health Plans, Inc."
2.2.3 By-Laws. From and after the Effective Date, the by-laws
of the MergerSub as they exist on the date hereof shall be the by-laws
of the Surviving Corporation.
2.2.4 Directors and Officers. The directors and officers of
MergerSub immedi ately prior to the Effective Date shall be the
officers and directors, respectively, of the Surviving Corporation, to
serve, in both cases, until their successors shall have been elected
and shall qualify or until otherwise provided by law and the Articles
of Incorpo ration and by-laws of the Surviving Corporation.
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2.2.5 Exchange of Shares for Cash and/or Securities. The
manner and basis of exchanging and converting the shares of common
stock of the MergerSub and HP on the Effective Date shall be as
follows:
(a) Common Stock of MergerSub. By virtue of the Merger
and without any action of the holder thereof each
share of common stock of MergerSub outstanding on the
Effective Date shall remain outstanding and unchanged
as a share of the common stock of the Surviving
Corporation.
(b) Common Stock of HP. By virtue of the merger and
without any action of the holders thereof each share
of (i) the $.01 par value Voting Common Stock of
HP, (ii) the $.01 par value Nonvoting Common Stock of
HP and (iii) the $15.00 par value Nonvoting
Convertible Preferred Stock of, including in each
case shares owned by MergerSub by virtue of the HSI
Merger, (collectively the "HP Common Stock")
outstanding at the Effective Date shall be
reclassified into the right to receive the portion
of the HP Consideration determined in accordance with
the formula set forth in ss. 2.2.7 hereof and
distributable in accordance with the time schedule
set forth in such section, except that any share of
HP Common Stock then owned by HP or MergerSub shall
be canceled.
2.2.6 Rights of HP's Stockholders Pending and Upon Surrender
of Certifi ▇▇▇▇▇. From and after the Effective Date, except as provided
in the Maine Business Corporation Act with respect to rights of
dissenting stockholders, each holder of a certificate representing
shares of HP Common Stock shall be entitled, upon surrender thereof to
the Surviving Corporation, to receive in exchange therefor the portion
of the Consideration to which such holder would otherwise be entitled
on the basis provided for in ss.2.2.5(b) of this Agreement.
2.2.7 HP Exchange Formula. As a result of the Closing, each
share of HP Common Stock, including those held by MergerSub as a result
of the HSI Merger, shall be exchanged for the right to receive the
portion of the HP Consideration obtained by dividing (x) HP
Consideration, as adjusted pursuant to ss. 2.10, by (y) the number of
shares of HP Common Stock issued and outstanding immediately prior to
the Effective Date excluding those shares owned by HP or MergerSub.
Immediately after the Closing, 80% of the HP Consideration which would
be distributable if no adjustments were made pursuant to ss. 2.10 (the
"Initial Portion of the HP Consideration") shall be distributed to the
former HP shareholders, and 120 days after the Effective Date, or on
such later time as is reasonable under the circumstances for ProMedCo
to have computed the adjust ments, if any, under ss. 2.10, the balance
of the HP Consideration due hereunder (the "Balance of the HP
Consideration") shall be distributed to the former shareholders of HP.
The combined distributions shall be comprised of the number of shares
of ProMedCo
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Stock, valued at the Market Value per share, having an aggregate value
equal to the portion of the HP Consideration then being distributed.
The Surviving Corporation shall not deliver any fraction of a share of
ProMedCo Stock but will deliver a whole number of shares of ProMedCo
Stock rounded down to a whole number with the value of the fractional
share being paid in cash. Notwithstanding the foregoing, if ProMedCo
exercises its option to effect a cash merger pursuant to ss. 2.3, the
HP Consideration shall consist of cash only.
2.3 Cash Mergers. Notwithstanding the provisions of ▇▇.▇▇. 2.1 and 2.2,
if Market Value is $8.00 or less, ProMedCo and MergerSub shall have the right to
effect the transactions contemplated herein as mergers in which HSI and HP are
the surviving corporation pursuant to which the shareholders of HSI and HP will
receive cash for their shares. If it exercises such option, ProMedCo must effect
both mergers as a condition to effecting either merger, and this Agreement and
the various appendixes hereto will be amended to reflect the fact that ProMedCo
will create two special purpose acquisition corporations, each with the same
articles of incorpo ration and bylaws as MergerSub (except for the name of the
corporation), that the surviving entity in the mergers will be HSI and HP
respectively and that the articles of incorporation and bylaws of the surviving
corporations will be modified as a result of the mergers to include all
operative provisions of the articles of incorporation and bylaws of the special
purpose acquisi tion corporations. ProMedCo may effect cash mergers only if such
modifications contain such provisions as each of the affected parties deems
appropriate to ensure that the transactions are properly structured from a tax
point of view as taxable acquisitions of the stock of HSI and HP and do not
result in corporate level taxation or result in incremental tax liability to the
HP employee shareholders taking into account the Tax Gross Up, as defined in
Section 1 under "HP Consideration." The parties shall cooperate in making all
necessary regulatory filings to effectuate the restructured transactions.
2.4 Closing and Effective Date of Merger. At the closing (the
"Closing"), which shall be held within five days after satisfaction of the
conditions set forth in Articles 7 and 8 (or at such later date as shall be
agreeable to HP and ProMedCo but in no event later than September 16, 1997) (the
"Closing Date") at the offices of Ropes & ▇▇▇▇ in Boston, MA, in addition to
other actions contemplated hereunder, (i) HSI and MergerSub shall execute in
accordance with the Maine Business Corporation Act, and shall cause to be filed
and recorded with the appropri ate offices under the laws of the State of Maine,
copies of the Articles of Merger relating to the HSI Merger and such officers'
certificates and other documents as may be necessary or appro priate in the
opinion of counsel to ProMedCo to cause the Merger to become effective under the
laws of the State of Maine and (ii) HP and MergerSub shall execute in accordance
with the Maine Business Corporation Act, and shall cause to be filed and
recorded with the appropriate offices under the laws of the State of Maine,
copies of Articles of Merger relating to the HP Merger and such officers'
certificates and other documents as may be necessary or appropriate in the
opinion of counsel to ProMedCo to cause the Merger to become effective under the
laws of
9
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the State of Maine. The Mergers shall become effective at the time the Secretary
of the State of Maine issues a Certificates of Merger in response to the
aforesaid filings of the Articles of Merger (the "Effective Date").
2.5 Further Assurances. The Surviving Corporation, through its
appropriate officers and directors, is hereby authorized, in the name of the
ProMedCo or MergerSub, either Constituent Corporation or itself, to execute,
acknowledge and deliver all instruments of further assurance and to do all such
acts and things as it may, at any time, deem necessary or desirable to vest in
the Surviving Corporation any property or rights of either Constituent
Corporation or ProMedCo or MergerSub, or to carry out any of the purposes
expressed in this Agreement.
2.6 Dissenting Stockholders of HSI and/or HP. Each stockholder of
either Constituent Corporation, if any, who becomes entitled, pursuant to ss.
909 of the Maine Business Corporation Act, to payment of the fair value of his
HSI or HP Common Stock, as the case may be, (a "Dissenting Stockholder") shall
receive payment therefor from the Surviving Corporation but only after the value
thereof shall have been agreed upon or finally determined pursuant to such
provisions. Neither Constituent Corporation shall, except with the prior written
consent of ProMedCo, voluntarily make any payment with respect to or settle or
offer to settle any demand for such payment. Shares of Constituent Corporation
Common Stock acquired by either Constituent Corporation or the Surviving
Corporation from Dissenting Stockholders shall be canceled.
2.7 Nature of Transaction; Further Assurances. The parties intend that
the transac tions contemplated hereby shall constitute a tax free
reorganizations pursuant to ss. 368(a) of the Internal Revenue Code of 1986, as
amended, (the "Code") and shall use their best efforts to avoid any actions not
contemplated hereby which are inconsistent with such intention. ProMedCo,
MergerSub, HSI and HP, respectively, shall take all such action as may be neces
sary or appropriate to effectuate the transactions contemplated hereby.
2.8 Legend. The certificates representing the ProMedCo Common Stock
issued to the former stockholders of HSI and HP as the result of the mergers
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE OF FERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHE CATED UNLESS AND UNTIL SUCH SHARES ARE
REGISTERED UNDER SUCH ACT, OR SUCH STATE LAWS, OR AN OPINION OF COUNSEL
IS FURNISHED TO THE COMPANY (WHICH OPINION AND COUNSEL ▇▇▇ ▇▇▇▇▇▇ SAME
SHALL BE REASONABLY SATISFACTORY TO THE COM PANY) TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED."
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2.9 Additional Transactions at the Closing. At the Closing HP shall
enter into employment agreements in the forms attached as Appendices 8.11A
through C hereto (the "Employment Agreements") with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
(Appendix 8.11A), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D., M.B.A. (Appendix 8.11B) and ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, C.P.A., and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (Appendix 8.11C).
2.10 Consideration Adjustments.
(a) Definitive Closing Statements. Within 120 days after the Closing or by such
time as is reasonable under the circumstances, ProMedCo shall prepare and
deliver to the HSI and HP Shareholders and the Shareholder Representative a
final combined balance sheet of HSI and HP as of the Closing Date ("Final
Closing Statement"). ProMedCo covenants that the Final Closing Statement
shall be true, complete and accurate and will present fairly the assets and
liabilities of HSI and HP as at the Closing Date, calculated in accordance
with GAAP as presented in the HSI and HP Financial Statements (as defined
inss.3.4), and the requirements of this Agreement. The HSI and HP
Shareholders and the Shareholder Represen tative and their representatives
shall be provided access to the books and records of HSI and HP as
necessary to verify the accuracy of such calcula tions. If within 30
business days of receipt of the Final Closing Statement, the Shareholder
Representative fails to deliver to ProMedCo written notice specifying any
unacceptable entries on the Final Closing State ments and the reasons
therefor, then such Final Closing Statement shall constitute the Definitive
Closing Statements. If the Shareholder Represen tative timely and duly
delivers such notice within 30 business days of receipt thereof, the
parties shall attempt in good faith to resolve the differ ences, and if
they are unable to do so, within 20 days thereafter either party may
deliver the Final Closing Statement to a "big six" accounting firm mutually
acceptable to ProMedCo and the Shareholder Representa tive (the "CPA
Firm"), who shall have 20 business days to review the Final Closing
Statement and make such adjustments thereto as it deems necessary to ensure
that the Final Closing Statement has been prepared in accordance with GAAP
as presented in the HSI and HP Financial State ments calculated on a
consistent basis and the requirements of this Agree ment and conform to
consistently applied generally accepted accounting principles. The Final
Closing Statement as so adjusted shall constitute the Definitive Closing
Statement and shall be binding on ProMedCo and the HSI and Shareholders. If
the total amount payable by ProMedCo pursuant to clause (b) below increases
from that shown on the Final Closing State ment, ProMedCo shall pay the
fees and expenses of the CPA Firm, other wise such fees and expenses shall
be borne by the HSI and HP Sharehold ers.
(b) Balance Sheet Adjustment. To the extent that the Definitive Closing
Statement shows assets at Closing net of liabilities to be different from
$3,601,573 plus the proceeds from any exercise of stock options under HP's
stock option plan on and after April 30, 1997, the Consideration shall be
increased or reduced, as the case may be, to the nearest $.1.00 on a dollar
for dollar basis.
Any reduction in the Consideration resulting from this ss. 2.10 shall be accom
plished by first reducing the Balance of HSI and HP Consideration and if
such reductions exhaust the Balance of the HSI and HP Consideration, then
the HSI and HP Shareholders shall return within 10 days after a demand
therefor by ProMedCo, sufficient additional shares of ProMedCo Stock and
cash from the Initial Portion of the HSI and HP Consideration to fully
satisfy the reduction in Consideration. Any reductions of the HSI
Consideration resulting under this clause (b) shall consist of such
portions of cash and ProMedCo Stock as are consistent with the provisions
of ss. 2.1.7.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE CONSTITUENT
CORPORATIONS
As of the date of this Agreement, the Constituent Corporations hereby
represent and warrant to ProMedCo and MergerSub as follows (each representation
and warranty hereunder shall be deemed to be made only by a Constituent
Corporation as to itself, and not as to the other Constituent Corporation):
3.1 Organization, Corporate Power and Qualification. Each of the
Constituent Corporations is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maine and has full corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as and where it is now being conducted, to enter into this
Agreement, and to perform its obligations contemplated hereby. Each of the
Constituent Corporations is duly qualified as a foreign corporation to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business transacted by
it makes such qualification necessary. Each of the Constitu ent Corporations is
qualified as a foreign corporation to do business in the states and foreign
countries listed in Exhibit 3.1A of the Exhibit Volume which is a volume of all
Exhibits referred to in this Agreement (the "Exhibit Volume"). No jurisdiction
where one of the Constituent Corporations is not presently qualified as a
foreign corporation has made any assertion that either of the Constituent
Corporation's business or ownership of property makes qualification as a
11
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foreign corporation in such jurisdiction necessary. A copy of the Articles of
Incorporation and all amendments thereto as of the date hereof and a copy of the
by-laws, as amended to the date hereof of each of the Constituent Corporations
(both certified by the Secretary of such Constitu ent Corporation), are included
as Exhibit 3.1B of the Exhibit Volume and are true, accurate and complete as of
the date hereof. Neither of the Constituent Corporation is in material default
under or in material violation of any provision of its Articles of Incorporation
or bylaws.
3.2 Capitalization of the Constituent Corporations.
(a) The authorized capital stock of HSI consists : (i) 2,000 shares of Class A
Voting Common Stock without par value, of which as of the date hereof 1,068
shares are issued and outstanding and (ii) 1,000 shares of Class B
Non-Voting Common Stock without par value, of which as of the date hereof
708 shares are issued and outstanding (collectively the "HSI Stock"). All
of such issued shares have been duly authorized by all necessary corporate
action on the part of HSI and are validly issued and outstanding, fully
paid and non-assessable. No assessments have been made with respect to such
stock which have not been fully satisfied. Except as set forth in Exhibit
3.2A of the Exhibit Volume, there are no other authorized and outstanding
or authorized equity securities of HSI of any class, kind or character, and
there are no outstanding rights, contracts, rights to sub scribe,
conversion rights, exchange rights, warrants, options, calls, puts or other
agreements or commitments of any character to which HSI is a party or by
which it is bound relating to the capital stock of HSI or any securities
convertible or exchangeable or exercisable for any shares of stock of any
class of capital stock of HSI. HSI has no treasury stock that has not been
canceled as of the date hereof. Except for the transactions contemplated by
this Agreement, there are not any agreements or understandings among HSI's
stockholders to which HSI is a party or by which it is bound with respect
to the voting of shares of the HSI Stock on any matter. Except as set forth
on Exhibit 3.2A, the HSI Stock is subject to no pledge or other lien to
which HSI is a party or by which it is bound. No shares of the capital
stock of HSI are reserved for any purpose, except stock reserved for
issuance upon the exercise of outstanding options as described above; there
are no preemptive or similar rights with respect to the issuance, sale or
other transfer (whether present, past or future) of the capital stock of
HSI and there are no agreements or other obligations (contingent or
otherwise) which may require HSI to issue, repurchase or otherwise acquire
any shares of its capital stock or any other securities. There are no
outstanding or authorized stock appreciation/phantom stock or similar
rights with respect to HSI. Except as set forth on Exhibit 3.2B, there are
no voting trusts, proxies, or any other agreements or understandings to
which HSI is a party or by which it is bound with respect to the voting
stock of HSI.
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(b) The authorized capital stock of HP consists : (i) 1,000,000 shares of
Voting Common Stock, $.01 par value, of which as of the date hereof 150,012
shares are issued and outstanding; (ii) 1,000,000 shares of Nonvoting
Common Stock, $.01 par value, of which as of the date hereof 100 shares are
issued and outstanding; and (iii) 200,000 shares of Nonvoting Convertible
Preferred Stock, $15.00 par value, of which as of the date hereof zero (0)
shares are issued and outstanding (collectively, the Voting Common Stock,
Nonvoting Common Stock and Nonvot ing Convertible Preferred Stock are
referred to herein as the "HP Stock"). All of such issued shares have been
duly authorized by all necessary corporate action on the part of HP and are
validly issued and outstanding, fully paid and non-assessable. In addition,
there have been duly reserved for issuance upon the exercise of outstanding
options 216,988 shares of Voting Common Stock and 252,400 shares of
Nonvoting Common Stock, which upon such exercise will be duly authorized,
validly issued, fully paid, non-assessable and owned of record by the
holders listed on Exhibit 3.2B. No assessments have been made with respect
to such stock which have not been fully satisfied. Except as set forth in
Exhibit 3.2B of the Exhibit Volume, there are no other authorized and
outstanding or authorized equity securities of HP of any class, kind or
character, and there are no outstanding rights, contracts, rights to
subscribe, conversion rights, exchange rights, warrants, options, calls,
puts or other agreements or commitments of any character to which HP is a
party or by which it is bound relating to the capital stock of HP or any
securities convertible or exchangeable or exercisable for any shares of
stock of any class of capital stock of HP. HP has no treasury stock that
has not been canceled as of the date hereof. Except for the transactions
contem plated by this Agreement, there are not any agreements or
understandings among HP's stockholders to which HP is a party or by which
it is bound with respect to the voting of shares of the HP Stock on any
matter. The HP Stock is subject to no pledge or other lien to which HP is a
party or by which it is bound. No shares of the capital stock of HP are
reserved for any purpose, except stock reserved for issuance upon the
exercise of outstanding options as described above and except for stock
reserved for issuance to third-party purchasers of HP as described in
Exhibit 3.2B; there are no preemptive or similar rights with respect to the
issuance, sale or other transfer (whether present, past or future) of the
capital stock of HP and there are no agreements or other obligations
(contingent or otherwise) which may require HP to issue, repurchase or
otherwise acquire any shares of its capital stock or any other securities.
There are no outstanding or authorized stock appreciation/phantom stock or
similar rights with respect to HP. Except as set forth on Exhibit 3.2B,
there are no voting trusts, proxies, or any other agreements or
understandings to which HP is a party or by which it is bound with respect
to the voting stock of HP.
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3.3 Subsidiaries, Affiliates, Affiliated Companies and Joint Venture.
Except as set forth on Exhibit 3.3, neither Constituent Corporation has any
direct or indirect ownership interest in, by way of stock ownership or
otherwise, any corporation, association or business enterprise.
3.4 Financial Statements.
(a) Exhibit 3.4A consists of the following financial statements of HSI: (i)
balance sheet of HSI at December 31, 1995 and the related statement of
operations, stockholders' equity and cash flow for the year then ended,
together with the opinion thereon of ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, LLC, certified
public accountants; (ii) unaudited balance sheet of HSI at December 31,
1996 and the related state ment of operations, stockholders' equity and
cash flow for the year then ended; and (iii) the unaudited balance sheet of
HSI as of April 30, 1997 and unaudited statement of operations of HSI for
the four months then ended (the audited and unaudited financial statements
and the related notes being herein called "HSI Financial Statements").
(b) Exhibit 3.4B consists of the following financial statements of HP: (i)
balance sheet of HP at December 31, 1995, and at December 31, 1996, and the
related statement of operations, stockholders' equity and cash flow for the
years then ended, together with the opinion thereon of ▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇, LLC, certi fied public accountants for the fiscal year ending
December 31, 1995 and of Ernst & Young, LLP for the fiscal year ending
December 31, 1996; and (ii) the unau dited balance sheet of HP as of April
30, 1997 and unaudited statement of operations of HP for the four months
then ended (the audited and unaudited financial statements and the related
notes being herein called "HP Financial State ments"; the HP Financial
Statements together with the HSI Financial Statements are collectively
referred to herein as the "Constituent Corporation Financial Statements").
The Constituent Corporation Financial Statements have been based upon the
information contained in the books and records of Constituent Corporation and
present fairly the financial condition of the relevant Constituent Corporation
as at the respective dates thereof and the results of its operations for the
periods ended at the respective dates thereof, in each case prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved and with prior periods, except that in the
unaudited portion of the Constituent Corporation Financial Statements do not
contain certain footnote information. The Constituent Corporation Financial
Statements do not contain any material inaccuracy and do not suffer from any
material omissions.
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3.5 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the Constituent Corporation Financial
Statements and except for liabilities, commitments and obligations incurred in
the ordinary course of business accruing after April 30, 1997 and except as set
forth on Exhibit 3.5 , the Constituent Corporations as of April 30, 1997 had, or
will have at Closing, no liabilities, claims or obligations (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not known to the
Constituent Corporations or any directors, officers or employees of the
Constituent Corporations, whether due to become payable and regardless of when
or by whom asserted) which would be required to be reflected in a balance sheets
of the Constituent Corporations or the notes thereto prepared in accordance with
GAAP. .
3.6 Letters of Credit. Except as disclosed in Exhibit 3.6 hereto, there
are no outstand ing letters of credit issued at the request of either
Constituent Corporation to any suppliers or obligees of either Constituent
Corporation with respect to the operations of either Constituent Corporation.
3.7 Absence of Certain Recent Changes. Except as expressly provided in
this Agreement or as set forth on Exhibit 3.7 in alphabetical order
corresponding to the following subsections, since April 30, 1997, and through
the Closing Date, neither Constituent Corporation has been nor will have:
(a) except in the usual and ordinary course of its business,
consistent with past practice, and in an amount which is usual
and normal incurred any indebtedness, guaranteed any
indebtedness or sold any of its assets;
(b) suffered any damage, destruction or casualty loss, whether or
not covered by insurance, in excess of $10,000;
(c) suffered the resignation or other termination of any
management personnel of either Constituent Corporation, or the
loss of or other termination of a business relationship with
any material customers or suppliers of the Constituent Corpora
tions' businesses, taken as a whole;
(d) increased the regular rate of compensation payable by it to
any employee, stock holder, or any physician other than normal
merit and cost of living increases gran ▇▇▇ in the ordinary
course of business; or increased such compensation by bonus,
percentage, compensation service award or similar arrangement
theretofore in ef fect for the benefit of any of its
employees, and no such increase is required;
(e) established or agreed to establish, amended or terminated any
pension, retirement or welfare plan or arrangement for the
benefit of its employees not theretofore in effect;
15
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(f) suffered any change in its financial condition, assets,
liabilities, operations, business, prospects or business or
suffered any other event or condition of any character which
individually or in the aggregate has, or might have, a
material ad verse effect on the Constituent Corporations;
(g) issued any shares of stock of any class, or made, granted or
entered into any subscriptions, options, warrants, convertible
securities, rights, calls, agreements, commitments or rights
affecting or relating in any manner whatsoever to any
equitable interests in either Constituent Corporation other
than as expressly contemplated by this Agreement;
(h) declared or paid any dividend or other distribution on any
class of its capital stock or purchased or redeemed any of its
capital stock;
(i) made any direct or indirect purchase, redemption or other
acquisition by such Constituent Corporations, made any
commitment, plan or agreement by such Constituent Corporations
to purchase, redeem or otherwise acquire any shares of their
capital stock or other equitable interests;
(j) experienced any labor organizational efforts, strikes or
complaints other than grievance procedures in the ordinary
course of business or entered into any collective bargaining
agreements with any union;
(k) made any single capital expenditure which exceeded $10,000 or
made aggregate capital expenditures which exceeded $25,000;
(l) except with respect to liens or encumbrances arising by
operation of law, permit ▇▇▇ or allowed any of its assets
(real, personal or mixed, tangible or intangible) to be
subjected to any mortgage, pledge, lien, security interest,
encumbrance, restric tion or charge of any kind;
(m) written down the value of any of its assets, or written off as
uncollectible any notes or accounts receivable, except for
write-downs and write-offs in the ordi nary course of business
and consistent with past practice, none of which are material
to the Constituent Corporations, taken as a whole, or revalued
any of its assets;
(n) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, ac crued, contingent or otherwise)
other than in the usual and ordinary course of business;
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(o) suffered any extraordinary losses, canceled any debts or
waived any claims or rights of substantial value, whether or
not in the usual and ordinary course of bus iness;
(p) paid, lent or advanced any amount to, or sold, transferred or leased
any properties or assets (real, personal or mixed, tangible or intangible) to,
or entered into any agreement or arrangement with, any stockholder of either
Constituent Corporation or any of the officers or directors of either
Constituent Corporation or of any "af filiate" or "associate" of any of its
officers or directors (as such terms are defined in the rules and regulations of
the Securities and Exchange Commission under the Securities Act of 1933, as
amended), except for reimbursement of ordinary and reasonable business expenses
related to the business of one of the Constituent Corporations and compensation
to officers at rates not exceeding the rates of compensation at April 30, 1997
or except as expressly contemplated by this Agreement;
(q) amended, terminated or otherwise altered (whether by action or
inaction) any contract, agreement or license of significant
value to which either Constituent Corporation is a party,
except in the ordinary course of business;
(r) entered into a material transaction other than in the ordinary
course of business or made any change in any method of
accounting or accounting practice;
(s) canceled, or failed to continue, insurance coverages; or
(t) agreed, whether in writing or otherwise, to take any action
described in this ss. 3.7.
3.8 Title to Assets. Neither Constituent Corporation owns any real
property. The owned personal property is subject to no liens or encumbrances
except the security interests of record set forth on Exhibit 3.8 of the Exhibit
Volume, which Exhibit is a copy of a Uniform Commer cial Code search as of a
recent date duly obtained by the Constituent Corporations and which search shows
security interests of record relating to such assets in every place where such
security interests are legally required to be filed and includes copies of all
such financing state ments. All of the assets of the Constituent Corporations
other than goodwill have a fair market or realizable value at least equal to the
value thereof as reflected in the Constituent Corporation Financial Statements.
3.9 Contracts. Exhibit 3.9 of the Exhibit Volume contains a copy of
each contract, lease, agreement and other instrument to which either Constituent
Corporations is a party or is bound which involves an unperformed commitment or
obligation (contingent or otherwise) of more than $25,000 in the aggregate. A
complete and correct copy of each such contract, lease, agreement and instrument
has been made available to ProMedCo. Except as noted in such
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Exhibit, (i) all such contracts, leases and agreements are in full force and
effect, (ii) there has been, to the best of the Constituent Corporations'
knowledge, no threatened cancellation thereof, and (iii) there are, to the best
of the Constituent Corporations' knowledge, no outstanding disputes thereunder.
Except as described in Exhibit 3.9, there are no employment agreements or other
agreements to which either Constituent Corporation is a party or by which either
Constitu ent Corporation is bound that contain any severance or termination pay
liabilities or obligations.
Except for contracts, leases, agreements and instruments contained in
Exhibit 3.9 or listed in the other Schedules hereto (and except for purchase
contracts and orders for inventory in the ordinary course of business consistent
with past practice), neither Constituent Corporation is, as of the date of this
Agreement, a party to or bound by any:
(a) material agreement or contract not made in the ordinary course of business;
(b) employee collective bargaining agreement or other contract with any labor
union;
(c) covenant not to compete;
(d) lease or similar agreement under which either Constituent Corporation is a
lessor or sublessor of any material real property owned or leased by one of
the Constitu ent Corporations or any portion of premises otherwise occupied
by one of the Constituent Corporations;
(e) (i) lease or similar agreement under which (A) one of the Constituent
Corpora tions is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by a third party or (B)
one of the Constituent Corporations is a lessor or sublessor of any
tangible personal property owned by one of the Constituent Corporations,
(ii) continuing contract for the future purchase of materials, supplies or
equipment, or (iii) management, service, consulting or other similar type
of contract, in any such case which has a future liability in excess of
$25,000, and which is not terminable by such Constituent Corporation for a
cost of less than $10,000;
(f) license or other agreement relating in whole or in part to, trademarks
(including, but not limited to, any license or other agreement under which
such Constituent Corporations has the right to use any of the same owned or
held by a third party);
(g) agreement or contract under which such Constituent Corporation has borrowed
or lent any money or issued any note, bond, indenture or other evidence of
indebted ness or directly or indirectly guaranteed indebtedness,
liabilities or obligations of others for an amount in excess of $10,000
(other than (i) endorsements for the
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purpose of collection in the ordinary course of business, (ii) agreements or
contracts between the Constituent Corporations, and (iii) advances to
employees of one of the Constituent Corporations in the ordinary course of
business);
(h) mortgage, pledge, security agreement, deed of trust or other document
granting a lien (including liens upon properties acquired under conditional
sales, capital leases or other title retention or security devices but
excluding operating leases) other than liens reflected in the notes to the
Constituent Corporation Financial Statements; or
(i) other agreement, contract, lease, license, commitment or instrument to
which such Constituent Corporation is a party or by or to which such
Constituent Corpora tions or any of its assets or businesses are bound or
subject, which has an aggregate future liability in excess of $10,000 and
is not terminable by such Constituent Corporations for a cost of less than
$10,000.
3.10 Defaults. Neither Constituent Corporation is in material default
under, nor has any event occurred which, with the lapse of time or action by a
third party, would constitute a material default under any outstanding
indenture, mortgage, contract instrument, or agreement to which such Constituent
Corporation is a party or by which such Constituent Corporation is bound. The
execution, delivery and performance of this Agreement by the Constituent Corpora
tions and the consummation by the Constituent Corporations of the transactions
contemplated by this Agreement will not (i) violate, subject to compliance with
the applicable requirements of the Maine Insurance Holding Company Act, federal
and state securities laws any provision of, or result in the breach of, or
constitute a default under, any law the violation of which would result in a
significant liability to either Constituent Corporation, or any order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal;
(ii) constitute a material violation of or a material default under, or a
material conflict with, any term or provision of the Articles of Incorporation
or by-laws of either Constituent Corporation or any contract, commitment,
indenture, lease, instrument or other agreement to which either Constituent
Corporation is a party or is bound; or (iii) cause, or, to the best knowledge of
the Constituent Corporations, give any party grounds to cause (with or without
notice, the passage of time or both) the maturity of any liability or obligation
of either Constituent Corporation to be accelerated or increase any such
liability or obligation.
3.11 Inventory. All inventory of the Constituent Corporations, as
reflected in the Constituent Corporation Financial Statements or otherwise,
consists of a quality and quantity usable and saleable in the ordinary course of
business and is carried on the balance sheet included in the Constituent
Corporation Financial Statements at the lower of cost or market, except for
items of obsolete materials and materials of below standard quality, all of
which have been written down in the balance sheet included in the Constituent
Corporation Financial Statements to realizable market value or for which
adequate reserves have been provided in the
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balance sheet included in the Constituent Corporation Financial Statements. The
present quantity of all inventory of the Constituent Corporations is reasonable
and warranted in the present circumstances of the businesses conducted by the
Constituent Corporations. The only transactions related thereto since April 30,
1997 have been additions or sales in the ordinary course of business.
3.12 Equipment. All assets of the Constituent Corporations consisting
of equipment, whether reflected in the Constituent Corporation Financial
Statements or otherwise, are well maintained and in good operating condition,
except for reasonable wear and tear and except for items which have been written
down in the Constituent Corporation Financial Statements to a realizable market
value or for which adequate reserves have been provided in the Constituent
Corporation Financial Statements. The present quantity of all such equipment of
the Constitu ent Corporations is reasonable and warranted in the present course
of the businesses conducted by the Constituent Corporations. The only
transactions related thereto since April 30, 1997, have been additions thereto
in the ordinary course of business. Exhibit 3.12 contains a list of equipment
additions since April 30, 1997.
3.13 Investments. Except as reflected in the balance sheet of April 30,
1997 contained in the Constituent Corporation Financial Statements, neither
Constituent Corporation has any investments in, and does not have outstanding
any advances to, any other firms, persons or corporations.
3.14 Receivables. All notes and accounts receivable of the Constituent
Corporations shown on the April 30, 1997 balance sheets contained in the
Constituent Corporation Financial Statements and all those arising since such
date have arisen in the ordinary course of business. As of the Closing, the
notes and accounts receivable of the Constituent Corporations will be
collectible in the ordinary course of business without resort to litigation or
subjection to counterclaim or offset as follows: (a) the notes and accounts
receivable set forth on the April 30, 1997 balance sheet contained in the
Constituent Corporation Financial Statements less the reserves for uncollectible
notes and accounts receivable set forth on the balance sheet, (b) plus the notes
and accounts receivable of the Constituent Corporations arising since their
respective balance sheet dates, (c) less the notes and accounts receivable
referred to in (a) and (b) which have been collected prior to the Closing Date
and less a reserve for uncollectible notes and accounts arising subsequent to
the balance sheet dates which bears the same ratio to said subsequent notes and
accounts as the reserves set forth on the balance sheet bear to the notes and
accounts receivable set forth on such balance sheets.
3.15 Powers of Attorney. Exhibit 3.15 lists any outstanding powers of
attorney related to either Constituent Corporation and a summary statement of
the terms thereof.
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3.16 Guarantees. Included as Exhibit 3.16 in the Exhibit Volume is a
list and brief description of all guarantee and matters of suretyship of the
Constituent Corporations.
3.17 Permits and Licenses. Included as Exhibit 3.17 in the Exhibit
Volume is a schedule of permits and licenses, listing and briefly describing
each permit, license or similar authorization from each governmental authority
issued with respect to the operation or owner ship of properties by each of the
Constituent Corporations together with the designation of the respective
expiration dates of each, and also listing and briefly describing each
association in which either Constituent Corporation is a member and each
association or governmental au thority by which either Constituent Corporation
is accredited or otherwise recognized. To the best knowledge of the Constituent
Corporations, neither Constituent Corporation is required to obtain any
additional permits, licenses or similar authorizations (including, without
limitation, any additional certificates of need) from any governmental authority
for the proper conduct of its business or to become a member of or accredited by
any association or governmental authority other than those listed on Exhibit
3.17 in the Exhibit Volume except where failure to obtain such license, permit,
accreditation or membership would not have a material adverse effect on the
Constituent Corporations, taken as a whole. All of such permits, licenses and
authorizations listed on Exhibit 3.19 are valid and in full force and effect in
accordance with their respective terms.
3.18 Bank Accounts. Exhibit 3.18 of the Exhibit Volume is a true and
complete list as of the date hereof of all banking institutions in which the
Constituent Corporation have accounts, lines of credit, letters of credit, or
safety deposit boxes, plus the numbers thereof and the names of the persons
authorized to have access thereto.
3.19 Intangible Property Rights. Exhibit 3.19A lists all patents,
patent applications, inventions, licenses, trade names, trademarks, service
marks, brandmarks, copyrights or registrations or applications therefor,
franchises and other assets of like kind (such assets and rights herein called
"Rights"), used in the business of either Constituent Corporation, or which are
registered in the name of either Constituent Corporation. The expiration dates,
if any, of each of the Rights are also set forth in Exhibit 3.19A. Each of the
Constituent Corporations owns and possesses or has valid, existing and legally
binding property rights or licenses to all Rights used in the conduct of its
business; such Rights are adequate for the conduct of the business of each of
the Constituent Corporations and will not be adversely affected by the
transactions contemplated hereby; and, to the best of the Constituent
Corporations' knowledge, any Rights owned by such Constituent Corporation are
not being infringed or violated by any other person or entity. Neither
Constituent Corporation has granted any licenses thereunder to others. No
products sold by either Constituent Corporation infringe the Rights of others.
All licenses granted to either Constituent Corporation by others with respect to
its business are set forth in the Exhibit 3.19B. No holder of any equity
security, general or limited partner, or director, officer, employee or agent of
such owns, directly or indirectly, in whole or in part, any Rights which the
business of either Constituent Corporation has used, or the use of which is
necessary
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for the business of such Constituent Corporation as now conducted. Each
Constituent Corpora tion owns or has valid, existing and legally binding
property rights or licenses to all technology, data, processes, formulas, trade
secrets and the like used in the operation of its business (herein called
"Know-How"), free of any equities, claims, liens or encumbrances, and neither
Constitu ent Corporation has granted any license or right thereto to others.
3.20 Assets Necessary to Business. Each Constituent Corporation
presently has and at Closing will have good and marketable title to all of its
property and assets, real, personal and mixed, tangible and intangible.
3.21 Litigation, etc. Except as set forth in Exhibit 3.21 of the
Exhibit Volume, there is no material litigation, arbitration, governmental
claim, investigation or proceeding pending or, to the best knowledge of the
Constituent Corporations, threatened against either Constituent Corporation at
law or in equity, before any court, arbitral tribunal or governmental agency.
There is no reasonable basis for material claims to be hereafter made against
either Constituent Corporation, except as set forth in Exhibit 3.23. All claims
and litigations against either Constituent Corporation are fully covered by
insurance, except as set forth in Exhibit 3.23.
3.22 Court Orders, Decrees and Laws. There is not outstanding or, to
the best knowledge of the Constituent Corporations, threatened any order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal
against or affecting either Constituent Corporation or any of its assets which
would materially interfere with its ability to conduct its business. Each
Constituent Corporation is in material compliance with all applicable federal,
state and local laws, regulations and administrative orders which are material
to its business, and neither Constituent Corporation has received any notices of
alleged violations thereof except as disclosed in Exhibit 3.22 hereof. To the
best knowledge of the Constituent Corporations, no governmental authorities are
presently conducting proceedings against either Constituent Corporation and no
such investigation or proceeding is pending or being threatened.
3.23 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes, fees,
levies, duties, tariffs, imposts, and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including (without limitation)
(i) income, franchise, profits, gross receipts, ad valorem, net worth,
value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, with holding, employment,
social security, workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premi ums, windfall
profits, transfer and gains taxes, and (ii) interest, penalties, addi
tional taxes and additions to tax imposed with respect thereto; and "Tax Re
turns" shall mean returns, reports, and information statements with respect
to Taxes required to be filed with the IRS or any other federal, foreign,
state or provincial taxing authority, domestic or foreign, including,
without limitation, consolidated, combined and unitary tax returns.
(b) Other than as disclosed in Exhibit 3.23A, (i) Each of the Constituent
Corporations has filed all Tax Returns required to be filed by it, (ii)
each of the Constituent Corporations has paid and discharged all Taxes due
in connection with or with respect to the periods or transactions covered
by such Tax Returns and have paid all other Taxes as are due, except such
as are being contested in good faith by appropriate proceedings (to the
extent that any such proceedings are required) and with respect to which
such Constituent Corporation is maintaining adequate reserves, and (iii)
there are no other Taxes that would be due if asserted by a taxing
authority, except with respect to which such Constituent Corporation is
maintaining reserves to the extent currently required unless the failure to
do so could not reasonably be expected to have a material adverse effect.
Except as does not involve or would not result in liability to such
Constituent Corporation that could reasonably be expected to have a
material adverse effect: (i) there are no tax liens on any assets of either
Constituent Corporation; and (ii) neither Constituent Corporation has
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax. The accruals and
reserves for Taxes (including deferred taxes) reflected in on the
Constituent Corporation Financial Statements are sufficient for the payment
of all unpaid federal, state, county and local taxes accrued for or
applicable to all periods (or portions thereof) ending immediately prior to
the consummation of the transactions contemplated by this Agreement
(including interest and penalties, if any, thereon and Taxes being
contested) in accordance with generally accepted accounting principles.
(c) Neither Constituent Corporation is, or has been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. Neither Constituent Corporation owns any property of a character, the
indirect transfer of which, pursuant to this Agreement, would give rise to
any material documentary, stamp or other transfer tax.
(d) Copies of each of the Constituent Corporation's last two federal state and
local income tax returns are included as Exhibit 3.23B of the Exhibit
Volume. Each Constituent Corporation has withheld from each payment made to
employees of such Constituent Corporation the amount of all taxes
(including, but not limited to, federal, state and local income taxes and
Federal Insurance Contribution Act taxes) required to be withheld therefrom
and all amounts customarily withheld
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therefrom, and have set aside all other employee contributions or payments
customarily set aside with respect to such wages and have paid or will pay
the same to, or have deposited or will deposit such payment with, the
proper tax receiving officers or other appropriate authorities. Neither
Constituent Corpora tion will be required as a result of a change in method
of accounting for a taxable period ending on or prior to the Closing Date
to include any adjustment in taxable income for any taxable period (or
portion thereof) beginning after the Closing Date. Neither Constituent
Corporation has been a member of an affiliated group (as defined in
ss.1504(a) of the Code) other than one of which such Constituent
Corporation was the common parent. Neither Constituent Corporation is a
party to or bound by any tax sharing agreement or has any current or
potential contrac tual obligation to indemnify any other person with
respect to taxes. Neither Constituent Corporation is, nor will become,
obligated as a result of the transac tions contemplated by this Agreement
so long as such transactions qualify as tax-free reorganizations (under any
contract entered into on or before the Closing Date) to make any payments
that will be non-deductible under ss.280G of the Code.
3.24 Immigration Act. Each Constituent Corporation is in compliance
with the terms and provisions of the Immigration Act in all material respects.
For each employee (as defined in 8 C.F.R. 274a.1(f)) of either Constituent
Corporation for whom compliance with the Immigra tion Act by such Constituent
Corporation is required, such Constituent Corporation has obtained and retained
a complete and true copy of each such employee's Form I-9 (Employment Eligibil
ity Verification Form) and all other records or documents prepared, procured or
retained by such Constituent Corporation pursuant to the Immigration Act. There
are no violations or potential violations of the Immigration Act by either
Constituent Corporation. Neither Constituent Corporation has been cited, fined,
served with a Notice of Intent to Fine or with a Cease and Desist Order, nor, to
the Constituent Corporations' knowledge, has any action or administrative
proceeding been initiated or threatened against either Constituent Corporation,
by reason of any actual or alleged failure to comply with the Immigration Act.
3.25 ERISA.
(a) Except as listed in Exhibit 3.25 of the Exhibit Volume, neither Constituent
Corporation has any "employee benefit plans", as such term is defined under
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or any other plan or similar arrangement, written or
other wise, which provides any type of pension or welfare benefit to any of
its directors, employees, or former employees.
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(b) With respect to all of the plans listed in Exhibit 3.25, the Constituent
Corporations have has delivered to ProMedCo true and exact copies of (i)
all plan docu ments embodying the provisions of such plans, together with
all amendments thereto, (ii) all summary plan descriptions and summaries of
material modifica tions pertaining thereto, (iii) copies of the most recent
Internal Revenue Service determination letters, if any, relating to such
plans, (iv) copies of the last three (3) years' Annual Report (Form 5500
series), required to be filed with respect to such plans with the Internal
Revenue Service, together with all Schedules and attach ments thereto,
including, without limitation, copies of the plan audits and/or actuarial
valuations, (v) copies of all contract administration agreements between
either Constituent Corporation and third party administrators, and (vi)
copies of all participant-related forms currently in use in connection with
such plans including, without limitation, salary reduction agreements and
beneficiary designations.
(c) No "prohibited transaction", as such term is defined under Section 4975(c)
of the Code or under Section 406 of ERISA, and the respective regulations
thereunder, has occurred or is occurring with respect to any "employee
benefit plan" main tained by either Constituent Corporation or with respect
to any trustee or adminis trator thereof.
3.26 Pension, etc.
(a) Neither Constituent Corporation has ever maintained or been required to
contrib ute to a pension plan subject to Title IV of ERISA.
(b) With respect to each "employee benefit pension plan" within the meaning of
ERISA Section 3(2) listed on Exhibit 3.25, there are not in existence any
liabilities other than those liabilities shown on the Annual Reports (Form
5500 series) delivered to ProMedCo in connection herewith. No material
change with respect to the matters covered by the most recent Annual Report
for each Pension Plan has occurred since the filing date thereof. The terms
and operation of each Pen sion Plan have complied, and are in compliance,
with the applicable provisions of ERISA and the Code. All Pension Plans
have at all times been and are qualified under Section 401(a) of the Code,
except for those Pension Plans set forth in Exhibit 3.26 of the Exhibit
Volume. None of the Pension Plans listed in Exhibit 3.25 is unfunded.
3.27 Employee Matters. Included as Exhibit 3.27A of the Exhibit Volume
is a list of all employees of the Constituent Corporations. The Constituent
Corporations have made available in writing to ProMedCo the annual rates of
compensation of all such employees, including a list of all people who were paid
bonuses in the last twelve months plus the amount
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thereof. Except as set forth in Exhibit 3.9, no written employment agreement to
which either Constituent Corporation is a party requires longer than a four-week
notice before termination or agreement to lend to or guarantee any loan to an
employee or an agreement relating to a bonus, severance pay or similar plan,
agreement, arrangement or understanding. Exhibit 3.27B of the Exhibit Volume is
a brief description of employee benefits of each Constituent Corporations.
3.28 Insurance and Bonds. Exhibit 3.28 contains a description of all
fire, liability and other insurance coverage maintained by each Constituent
Corporation during the past two years, including the amounts and losses and
risks covered. All of the foregoing insurance policies are with reputable
companies and are fully paid as to all premiums heretofore due. Exhibit 3.28
also contains a list and brief description of all bonds outstanding on the date
hereof which either Constituent Corporation has furnished or otherwise provided
in connection with the operation of its business, including but not limited to
any performance bonds, bid bonds, fidelity bonds, completion bonds, labor and
material payment bonds, and bonds required by any Federal, state, county or
local laws, together with the respective amounts of the bonds and the applicable
corporate or other surety. Such bonds are in such amounts, and against such
losses and risks, as are generally maintained for comparable businesses. The
Constituent Corporations have delivered to ProMedCo true and correct copies of
all such bonds.
3.29 Labor Matters. There are no collective bargaining agreements with
any labor union to which either Constituent Corporation is a party or by which
it is bound, and neither Constituent Corporation is currently negotiating with a
labor union. No employees of either Constituent Corporation have ever petitioned
for a representation election. Each Constituent Corporation is in material
compliance with all applicable laws respecting employment and em ployment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. There is no unfair labor practice
complaint against either Constituent Corporation pending before the National
Labor Relations Board. There is no labor strike, dispute, slowdown or stoppage
actually pending or, to its knowledge, threatened against or affecting either
Constituent Corporation. No grievance which might have a material adverse effect
on the Constituent Corporations, taken as a whole, or the conduct of their
businesses nor any such arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the knowledge of the
Constituent Corporations, no claim therefor exists. Neither Constituent
Corporation has experienced any employee strikes during the last three years.
The Constituent Corporations ProMedCo of any such labor dispute, petition for
representative election or negotiations with any labor union which shall arise
before the Closing Date. Except as may be required by ss.4980B of the Code or
applicable state health care continuation coverage statutes, neither Constituent
Corporation has any liability under any plan or arrangement which provides
welfare benefits, including medical and life insurance, to any current or future
retiree or terminated employee.
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3.30 Improper Payments. Neither Constituent Corporation nor any officer
or employee of either Constituent Corporation have made any bribes, kickbacks or
other improper payments on behalf of either Constituent Corporation or received
any such payments from vendors, suppliers or other persons contracting with
either Constituent Corporation.
3.31 Books of Account; Reports. The books of account of the Constituent
Corpora tions are accurate and complete in all material respects and have been
maintained in accordance with applicable sound business practices.
3.32 No Finders or Brokers. Neither Constituent Corporation nor any
officer or director of either Constituent Corporation has engaged any finder or
broker in connection with the transactions contemplated hereunder.
3.33 Insider Transactions. There are no contracts, leases or
commitments to which either Constituent Corporation is a party or by which
either Constituent Corporation is bound, directly or indirectly, with any
director of either Constituent Corporation or any Vice President or higher
officer of either Constituent Corporation or any Affiliate of any such director
or officer aside from the employment agreements included in Exhibit 3.9.
3.34 Authority; Binding Effect. Subject to shareholder approval, the
execution, delivery and performance of this Agreement and all other agreements,
instruments and docu ments contemplated hereby and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of each Constituent Corporation, and no other proceedings or
actions on the part of either Constituent Corporation are necessary to authorize
this Agreement and the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each Constituent
Corporation. This Agreement constitutes the valid and binding agreement of each
Constituent Corporation enforceable in accordance with its terms (except as the
same may be restricted, limited or delayed by applicable bankruptcy or other
laws affecting creditors' rights generally and except as to the remedy of
specific performance which may not be available under the laws of various
jurisdictions) assuming that this Agreement has been duly authorized, delivered
and executed by ProMedCo and MergerSub and constitutes the valid and binding
obligation of ProMedCo and MergerSub enforceable against ProMedCo and MergerSub
in accordance with its terms (except as enforceability against ProMedCo and
MergerSub may be restricted, limited or delayed to the same extent as referred
to in the parenthetical phrase immediately above).
3.35 Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with any
governmental or regulatory authority is required in connection with the
execution and delivery of this Agreement by either Constituent Corporation and
the consummation of the transactions contemplated hereby except for filing and
recording of appropriate merger documents and issuance of a Certificates of
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Merger as required by the law of the State of Maine, the filing of a Form A
regarding the change of ownership with, and obtaining approval thereof from, the
Maine Bureau of Insurance.
3.36 Disclosure. No representation or warranty by the Constituent
Corporations in this Agreement and no statement in this Agreement or any
document or certificate furnished or to be furnished to ProMedCo and MergerSub
pursuant hereto contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make the
statements contained therein not misleading. The Constituent Corporations have
dis closed to ProMedCo all facts known to the Constituent Corporations material
to the assets, liabilities, business, operation and property of the Constituent
Corporations. There are no facts known to the Constituent Corporations unique to
the Constituent Corporations not yet disclosed which would adversely affect the
future operations of the Constituent Corporations, taken as a whole.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PROMEDCO AND
MERGERSUB
ProMedCo and MergerSub hereby represent and warrant as follows:
4.1 Organization and Standing of ProMedCo and MergerSub. ProMedCo and
MergerSub are corporations duly organized, validly existing and in good standing
under the laws of the states of Delaware and Maine respectively; have full
corporate power and authority to conduct their businesses as now being
conducted; and are duly qualified to do business in each jurisdiction in which
the nature of the property owned or leased or the nature of the businesses
conducted by them requires such qualification. Copies of the Articles of
Incorporation and Bylaws of MergerSub as they shall exist immediately prior to
the Closing are attached hereto as Appendix 4.1.
4.2 Prospectus; Financial Statements.
(a) Prospectus. ProMedCo has delivered to the Constituent Corporations a copy
of its Prospectus dated March 12, 1997 as filed with the Securities and
Exchange Commission ("SEC") and complete and correct copies of all other
reports and other filings filed by ProMedCo with the SEC pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since
January 1, 1994, through the date hereof (such reports and other filings
are collectively referred to herein as the "ProMedCo Exchange Act
Filings"). As of their respective dates, the ProMedCo Exchange Act Filings
complied in all material respects with the published rules and regulations
of the SEC with respect thereto and did not contain any untrue statement of
a material fact or omit to state a material fact required to be
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stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The description
of ProMedCo, its business and other salient features contained in the
Prospectus as modified by the ProMedCo Exchange Act Filings are correct in
all material respects and may be relied upon by a prudent investor
contemplating an investment in ProMedCo Stock.
(b) ProMedCo Financial Statements. The Prospectus contains the ▇▇▇▇▇▇▇ dated
balance sheet of ProMedCo and its subsidiaries at December 31, 1996, and at
December 31, 1995, and the related consolidated statement of operations,
stockholders' equity and cash flows for the years then ended, together with
the opinion thereon of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., LLP, certi fied public
accountants. The financial statements included in the ProMedCo Exchange Act
Filings have been based upon the information contained in the books and
records of ProMedCo and present fairly the financial condition of ProMedCo
and its subsidiaries as at the respective dates thereof and the results of
their operations for the periods ended at the respective dates thereof, in
each case prepared in conformity with gener ally accepted accounting
principles applied on a consistent basis through out the periods involved
and with prior periods, except as stated in the unaudited portion of the
financial statements.
4.3 Absence of Certain Changes. Since March 3, 1997, there has not been
any change in the assets, liabilities or financial condition of ProMedCo and its
subsidiaries other than changes which, in the aggregate, have not been
materially adverse; any material adverse change in the business of ProMedCo and
its subsidiaries; or any damage, destruction, casualty or loss materially and
adversely affecting the business or property of ProMedCo and its subsidiaries.
4.4 Authority; Binding Effect. The execution, delivery and performance
of this Agreement and all other agreements, instruments and documents
contemplated hereby and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action of ProMedCo and
MergerSub, and no other proceedings or actions on the part of ProMedCo and
MergerSub are necessary to authorize this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by ProMedCo and MergerSub. This Agreement constitutes the valid and
binding agreement of ProMedCo and MergerSub enforceable in accordance with its
terms (except as the same may be restricted, limited or delayed by applicable
bankruptcy or other laws affecting creditors' rights generally and except as to
the remedy of specific performance which may not be available under the laws of
various jurisdictions) assuming that this Agreement has been duly authorized,
delivered and executed by the Constituent Corporations and constitutes the valid
and binding obligations, enforceable against the Constituent Corporations in
accordance with its
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terms (except as enforceability against the Constituent Corporations may be
restricted, limited or delayed to the same extent as referred to in the
parenthetical phrase immediately above).
4.5 No Finders or Brokers. Neither ProMedCo nor MergerSub nor any
officer or director thereof has engaged any finder or broker in connection with
the transactions contem plated hereunder.
4.6 Defaults. Neither ProMedCo nor any of its subsidiaries is in
default under, nor has any event occurred which, with the lapse of time or
action by a third party, would result in a material default under, any
outstanding indenture, mortgage, contract, instrument or agreement to which
ProMedCo or any of its subsidiaries is bound. The execution, delivery and perfor
▇▇▇▇▇ of this Agreement by ProMedCo and the consummation by ProMedCo of the
transactions contemplated by this Agreement will not (i) violate, subject to
compliance with the applicable requirements of the Maine Insurance Holding
Company Act, federal and state securities laws, or result in the breach of, or
constitute a default under, any law the violation of which would result in a
significant liability to ProMedCo, or, to the best knowledge of ProMedCo, any
order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal; (ii) constitute a material violation of or a material
default under, or a material conflict with, any term or provision of the
Articles of Incorporation or by-laws of ProMedCo or any of its subsidiaries or
any material contract, commitment, indenture, lease, instrument or other
agreement to which ProMedCo or any of its subsidiaries is a party or is bound;
or (iii) cause, or, to the best knowl edge of ProMedCo, give any party grounds
to cause (with or without notice, the passage of time or both) the maturity of
any liability or obligation of ProMedCo or any of its subsidiaries to be
accelerated or increase any such liability or obligation.
4.7 Pending Litigation. There are no proceedings pending or, to the
knowledge of ProMedCo, threatened, against or affecting ProMedCo or any of its
subsidiaries in any court or before any governmental authority or arbitration
board or tribunal which involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of ProMedCo or any of its subsidiaries considered as a whole.
4.8 Court Orders, Decrees and Laws. There is not outstanding or, to
ProMedCo's knowledge, threatened any order, writ, injunction or decree of any
court, governmental agency or arbitration tribunal against or affecting ProMedCo
or any of its subsidiaries or any of their assets which would significantly
interfere with their ability to conduct their businesses. To ProMedCo's
knowledge, ProMedCo and its subsidiaries are in compliance with all applicable
federal, state and local laws, regulations and administrative orders which are
material the business of ProMedCo and its subsidiaries. No governmental
authorities are presently conduct ing any investigation or proceeding against
ProMedCo or any of its subsidiaries and, to ProMedCo's knowledge, no such
investigation or proceeding is pending or being threatened.
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4.9 Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with any
governmental or regulatory authority is required in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby except for filing and recording of appropriate
merger documents and issuance of a Certificate of Mergers as required by the law
of the State of Maine, obtaining all approvals required under the Maine
Insurance Holding Company Act and compliance with all federal and state
securities filing requirements.
4.10 Interim Operations of Merger Sub. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby. As of the date hereof and the Effective Date, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Merger Sub has
not and will not have incurred, directly or indirectly through any subsidiary,
any obligations or liabilities or engaged in any business activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
Person.
4.11 Disclosure. No representation or warranty by ProMedCo or MergerSub
in this Agreement and no statement in this Agreement or any document or
certificate furnished or to be furnished to the Constituent Corporations
pursuant hereto contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make the
statements contained therein not misleading.
ARTICLE 5 COVENANTS OF PROMEDCO
ProMedCo hereby covenants and agrees as follows:
5.1 The Subsidiary. Prior to the Closing Date, ProMedCo shall provide
Subsidiary with a sufficient number of shares of ProMedCo Common Stock for
distribution to the shareholders of the Constituent Corporations in accordance
with this Agreement.
5.2 Best Efforts to Secure Consents. ProMedCo will cooperate with the
Constituent Corporations and shall use its best efforts to secure before the
Closing all necessary consents and approvals needed to satisfy all the
conditions precedent to the obligations of the Constituent Corporations
hereunder and to consummate the transactions contemplated hereby, including
securing the required approval of the Maine Bureau of Insurance.
5.3 Information. ProMedCo shall promptly provide to the Constituent
Corporations upon reasonable request any information or documents reasonably
necessary for the Constituent Corporations or their stockholders to make an
informed judgment as to the advisability of consummating the transactions
contemplated hereby or to verify the representations and warranties of MergerSub
herein. Until the Closing Date ProMedCo shall notify the Constituent
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Corporations of any matter which may be materially adverse to ProMedCo and shall
keep the Constituent Corporations fully informed of such events.
5.4 Corporate Action. ProMedCo and MergerSub will take all necessary
corporate and other action and use its best efforts to obtain all consents,
approvals and amendments of agreements required of them to carry out the
transactions contemplated by this Agreement and to satisfy the conditions
specified herein. Neither ProMedCo nor the MergerSub shall take any action
intended to make any of the representations and warranties contained in Article
4 of this Agreement untrue or incorrect at and as of the Effective Date unless
such action is contemplated by this Agreement.
5.5 Handling of Documents. With respect to information provided by the
Constituent Corporations pursuant to this Agreement prior to the Closing,
ProMedCo and MergerSub shall keep all such information confidential which is not
in the public domain, except to the extent that such information (i) becomes
generally available to the public other than as a result of a disclosure
directly or indirectly by ProMedCo, (ii) was known by ProMedCo on a non-confiden
tial basis prior to disclosure to ProMedCo by the Constituent Corporations
pursuant to this Agreement or (iii) becomes available to ProMedCo on a
non-confidential basis from a source (other than one of the Constituent
Corporations) which is entitled to disclose the same, and to exercise the same
care in handling such information as they would exercise with similar
information of their own.
5.6 Non-Disclosure. ProMedCo will keep confidential and not disclose to
any third party any information relating to the business of the Constituent
Corporations, whether acquired by ProMedCo before or after the Closing Date,
which ProMedCo has not made generally available to the public.
5.7 Tax Representation Letter. ProMedCo is prepared to, and will,
deliver at Closing a tax representation letter in substantially the form
attached hereto as Appendix5.7.
ARTICLE 6 COVENANTS OF THE CONSTITUENT CORPORATIONS
The Constituent Corporations hereby jointly and severally covenant and
agree as follows:
6.1 Access and Information. Between the date of this Agreement and the
Effective Date; the Constituent Corporations will: (i) provide to the ProMedCo
and its officers, attorneys, accountants and other representatives, during
normal business hours, or otherwise if ProMedCo deems necessary, free and full
access to all of the properties, assets, agreements, commitments, books,
records, accounts, tax returns, and documents of the Constituent Corporations
and permit them to make copies thereof; (ii) furnish the ProMedCo and its
representatives with all informa tion concerning the business, properties and
affairs of the Constituent Corporations as
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ProMedCo requests and certified by the officers, if requested; (iii) cause the
independent public accountants of the Constituent Corporations to make available
to ProMedCo and its representa tives all financial information relating to the
Constituent Corporations requested, including all working papers pertaining to
audits and reviews made heretofore by such auditors; (iv) furnish ProMedCo true
and complete copies of all financial and operating statements of the Constituent
Corporations; (v) permit access to customers and suppliers for consultation or
verification of any information obtained by ProMedCo and use their best efforts
to cause such customers and suppliers to cooperate with the ProMedCo in such
consultation and in verifying such informa tion; and (vi) cause their employees,
accountants and attorneys to make disclosure of all material facts known to them
affecting the financial condition and business operations of the Constituent
Corporations and to cooperate fully with any audit, review, investigation or
examination made by ProMedCo and its representatives, including, without
limitation, with respect to:
(a) The books and records of each Constituent Corporation;
(b) The reports of state and federal regulatory examinations;
(c) Leases, contracts and commitments between either Constituent
Corporation and any other person; and
(d) Physical examination of the Equipment and Furnishings.
6.2 Conduct of Business. Between the date hereof and the Effective
Date, except as otherwise expressly approved in writing by ProMedCo, each
Constituent Corporation shall conduct its businesses only in the ordinary course
thereof consistent with past practice and shall take no action intended to make
any the representations and warranties contained in Article 3 of this Agreement
untrue or incorrect at and as of the Effective Date unless such action is contem
plated by this Agreement. The Constituent Corporations will use their
commercially reasonable efforts to, consistent with conducting their businesses
in accordance with reasonable business judgment, preserve the their businesses
intact; and use their commercially reasonable efforts to keep available to
ProMedCo and MergerSub the services of the present employees of the Constituent
Corporations (except those dismissed for cause or those who voluntarily
discontinue their employment) and preserve for ProMedCo and MergerSub the
goodwill of the suppliers, patients and others having business relations with
the Constituent Corporations.
6.3 Compliance with Agreement. The Constituent Corporations shall not
undertake any course of action inconsistent with satisfaction of the conditions
applicable to it set forth in this Agreement, and shall do all such acts and
take all such measures as may be reasonably necessary to comply with the
representations, agreements, conditions and other provisions of this Agreement.
The Constituent Corporations shall give ProMedCo prompt written notice of any
change in any information contained in the representations and warranties made
in Article 3 hereof and on the Exhibits referred to therein (provided, however,
that such notice shall not limit
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ProMedCo's rights under ss. 8.1 hereof) and of any condition or event which
constitutes a default of any covenant or agreement made in Article 6 or in any
other section hereof.
6.4 Best Efforts to Secure Consents. The Constituent Corporations will
cooperate with ProMedCo and shall use its best efforts to secure before the
Closing Date all necessary consents and approvals needed to satisfy all the
conditions precedent to the obligations of ProMedCo and MergerSub and to
consummate the transactions contemplated hereby, including securing the required
approval of the Maine Bureau of Insurance.
6.5 Unusual Events. Until the Effective Date, the Constituent
Corporations shall supplement or amend all relevant Exhibits in the Exhibit
Volume with respect to any matter thereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in such Exhibits; provided, however, that for the
purposes of the rights and obligations of the parties hereunder, any such
supplemental disclosure shall not be deemed to have been disclosed as of the
date Constituent Corporations delivers to ProMedCo the Exhibit Volume pursuant
to ss. 9.1 of this Agreement, and shall not be deemed to amend or supplement any
Exhibits or to prevent or cure any misrepresentation, breach of warranty or
breach of covenant made as of the date of this Agreement, unless agreed to in
writing by ProMedCo; provided further, however, that such supplemental
disclosure shall cure any such misrepresentation or breach if, despite such
supplemental disclosure, ProMedCo consummates the Closing (whether or not it
expressly waives such misrepresentation or breach).
6.6 Interim Financial Statements. Within 30 days after the end of each
calendar month subsequent to the date of this Agreement and prior to the
Effective Date, the Constituent Corporations shall deliver to ProMedCo unaudited
balance sheets of each Constituent Corpora tion as at the end of such calendar
month together with the related statement of operations. All such financial
statements shall fairly present the financial position, results of operations
and changes in financial condition during the periods indicated, in accordance
with generally accepted accounting principles consistently applied, except that
note information may be omitted in such statements, subject to normal year-end
audit adjustments, but only if such adjustments are of a normal, recurring type
and are not material in the aggregate.
6.7 Stockholders' Meeting. Promptly after the date hereof, each
Constituent Corpora tion shall call a meeting of its stockholders (to be held as
soon as practicable after said ProMedCo approval) for the purpose of considering
and acting upon the Merger relating to it, to recommend approval of such Merger
to its stockholders, and use its best efforts to obtain the necessary
stockholder approval.
6.8 Departmental Violations. All notes or notices of violations of law
or municipal ordinances, orders or requirements noted in or issued by the
Departments of Buildings, Fire, Labor, Health, or any other State or Municipal
Department having jurisdiction against or
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affecting the business, property or assets of either Constituent Corporation
shall be complied with prior to the Closing Date. All such notes or notices,
after the date hereof and prior to the Closing Date, shall be complied with by
the Constituent Corporations prior to the Closing Date. Upon written request,
the Constituent Corporations shall furnish ProMedCo and MergerSub with an
authorization to make the necessary searches for such notes or notices.
6.9 Insurance Ratings. Each Constituent Corporation shall take all
action reasonably requested by ProMedCo to enable it to succeed to the Workers'
Compensation and Unemploy ment Insurance ratings, insurance policies, deposits
and other interests of such Constituent Corporation and other ratings for
insurance or other purposes established by such Constituent Corporation.
ProMedCo shall not be obligated to succeed to any such rating, insurance policy,
deposit or other interest, except as it may elect to do so.
6.10 Maintain Insurance Coverage. From the date hereof until the
Closing, the Constituent Corporations shall maintain and cause to be maintained
in full force and effect the existing insurance on the Assets and the operations
of the Constituent Corporations and shall provide, upon request by ProMedCo,
evidence satisfactory to ProMedCo that such insurance continues to be in effect
and that all premiums due have been paid.
6.11 Exclusive Dealings. During the period from the date of this
Agreement to the Closing Date, or until the earlier termination of this
Agreement pursuant to Article 9, each Constituent Corporation shall refrain from
taking any actions, directly or indirectly, to encour age, initiate, or engage
in discussions or negotiations with, or provide any information to, any
corporation, partnership, person, or other entity or group, other than ProMedCo
and MergerSub, concerning the purchase of such Constituent Corporation or its
assets, or any merger, joint venture or similar transaction involving such
Constituent Corporation and will not enter into any such transaction.
6.12 Non-Disclosure. Each Constituent Corporation will keep
confidential and not disclose to any third party any information relating to the
business of ProMedCo, whether acquired by such Constituent Corporation before or
after the Closing Date, which ProMedCo has not made generally available to the
public.
6.13 HP Stock Options. Prior to the Closing HP shall eliminate all
outstanding stock options which elimination may be effected by exercise thereof.
6.14 Tax Representation Letter. Each Constituent Corporation is
prepared to, and will, deliver a tax representation letter in substantially the
form attached as Appendix 6.14.
6.15 Modification of ERISA Plans. If after ProMedCo reviews the
materials constitut ing Exhibits 3.25 and 3.26 it determines that any of the
employee benefit plans of the Constituent Corporations are not in compliance
with ERISA or could result in liabilities to ProMedCo after
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the Effective Date which are not in the ordinary course of its business, the
Constituent Corpora tions will use their best efforts to bring such plans in
compliance with ERISA or to terminate them prior to the Closing.
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
CONSTITUENT CORPORATIONS
All obligations of the Constituent Corporations which are to be
discharged under this Agreement at the Closing are subject to the performance,
at or prior to the Closing, of all covenants and agreements contained herein
which are to be performed by ProMedCo and MergerSub at or prior to the Closing
and to the fulfillment at, or prior to, the Closing, of each of the following
conditions (unless expressly waived in writing by the Constituent Corporations
at any time at or prior to the Closing):
7.1 Representations and Warranties True. All of the representations and
warranties made by ProMedCo and MergerSub contained in Article 4 of this
Agreement shall have been true in all material respects as of the date of this
Agreement, and ProMedCo and MergerSub shall have performed and complied in all
material respects with all covenants and conditions required by this Agreement
to be performed or complied with by them prior to or at the Closing; and the
Constituent Corporations shall have been furnished with a certificate of the
President or any Vice President of ProMedCo and MergerSub, dated the Closing
Date, in such officer's capacity, certifying to the truth of such
representations and warranties as of the date hereof and to the fulfillment of
such covenants and conditions.
7.2 Opinion of Counsel. The Constituent Corporations shall have been
furnished with an opinion dated the Closing Date of Boult, Cummings, ▇▇▇▇▇▇▇ &
▇▇▇▇▇, PLC, counsel to ProMedCo, in form and substance satisfactory to the
Constituent Corporations, in substantially the form attached hereto as Appendix
7.2.
7.3 Authority. All action required to be taken by or on the part of
ProMedCo and MergerSub to authorize the execution, delivery and performance of
this Agreement by ProMedCo and MergerSub and the Articles of Merger by MergerSub
including any required federal or state securities filings and the consummation
of the transactions contemplated hereby shall have been duly and validly taken
by the Board of Directors of ProMedCo and MergerSub.
7.4 No Obstructive Proceeding. No action or proceedings shall have been
instituted by a governmental agency, commission or authority against, and no
order, decree or judgment of any court, agency, commission or governmental
authority shall be subsisting against, either Constituent Corporation, or the
officers or directors of either Constituent Corporation, which seeks to, or
would, render it unlawful as of the Closing to effect the transactions
contemplated hereby in accordance with the terms hereof, and no such action
shall seek damages in a material
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amount by reason of the transactions contemplated hereby. Also, no substantive
legal objection to the transactions contemplated by this Agreement shall have
been received from or threatened by any governmental department or agency.
7.5 Delivery of Certain Documents. At the Closing, ProMedCo shall
deliver to the Constituent Corporations copies of the Articles of Incorporation
of ProMedCo and MergerSub certified (not more than 30 days prior to the Closing
Date) by the appropriate governmental authorities and copies of resolutions of
the Boards of Directors of ProMedCo and MergerSub and the consent of ProMedCo as
the sole stockholder of MergerSub, certified by the secretary or assistant
secretary of ProMedCo and MergerSub approving and authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. In addition ProMedCo and MergerSub shall deliver an executed copy of the
tax representation letter in substantially the form attached hereto as
Appendix5.7.
7.6 Approval by Stockholders of the Constituent Corporations. The
stockholders of each Constituent Corporation shall have approved the Merger
pertaining to it in accordance with the Maine Business Corporation Act.
7.7 Articles of Merger. Merger Sub shall have executed the Articles of
Merger (and any other documents required to be filed in connection with the
mergers of the Constituent Corporations and Merger Sub) and the Articles of
Merger shall have been filed with the Maine Secretary of State in accordance
with the Maine Business Corporation Act.
7.8 Maine Bureau of Insurance. The Maine Bureau of Insurance shall have
granted all approvals required under the Maine Insurance Holding Company Act to
be obtained by ProMedCo in connection with the transactions contemplated hereby.
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PROMEDCO
AND MERGERSUB
All obligations of ProMedCo and MergerSub which are to be discharged
under this Agreement at the Closing are subject to the performance, at or prior
to the Closing, of all covenants and agreements contained herein which are to be
performed by the Constituent Corporations at or prior to the Closing and to the
fulfillment at or prior to the Closing of each of the following conditions
(unless expressly waived in writing by ProMedCo and MergerSub at any time at or
prior to the Closing):
8.1 Representations and Warranties True. All of the representations and
warranties of the Constituent Corporations contained in Article 3 of this
Agreement shall have been true as of the date of this Agreement and the
Constituent Corporations shall have performed or complied in all material
respects with all covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing. ProMedCo and
MergerSub shall be
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furnished with a certificate of the President or any Vice President of each
Constituent Corpora tion, dated the Closing Date, in such person's corporate
capacity, certifying to the truth of such representations and warranties as of
the date hereof and to the fulfillment of such covenants and conditions.
8.2 No Obstructive Proceeding. No action or proceedings shall have been
instituted by a governmental agency, commission or authority against, and no
order, decree or judgment of any court, agency, commission or governmental
authority shall be subsisting against, ProMedCo, MergerSub or the officers or
directors of ProMedCo or MergerSub which seeks to, or would, render it unlawful
as of the Closing to effect the transactions contemplated hereby in accordance
with the terms hereof, and no such action shall seek damages in a material
amount by reason of the transaction contemplated hereby. Also, no substantive
legal objection to the transactions contemplated by this Agreement shall have
been received from or threatened by any govern mental department or agency.
8.3 Opinion of Counsel to the Constituent Corporations. The Constituent
Corpora tions shall have delivered to ProMedCo and MergerSub at the Closing an
opinion of Ropes & ▇▇▇▇, counsel to the Constituent Corporations, dated the
Closing Date, in substantially the form attached hereto as Appendix 8.3.
8.4 Consents and Approvals. Each of the parties to any agreement or
instrument to which either of the Constituent Corporation is a party or by which
it is bound under which the transactions contemplated hereby would constitute or
result in a default or acceleration of obligations shall have given such consent
as may be necessary to permit the consummation of the transactions contemplated
hereby without constituting or resulting in a default or acceleration under such
agreement or instrument, and any consents required from any public or regulatory
agency or organization having jurisdiction shall have been given.
8.5 No Adverse Change. From the date of this Agreement until the
Closing, the operations of the Constituent Corporations shall have been
conducted in the ordinary course of business consistent with past practice and
from the date of the Constituent Corporation Financial Statements until the
Closing no event shall have occurred or have been threatened which has or would
have a material and adverse affect upon the financial condition, assets,
liabilities, operations, prospects or business of the Constituent Corporations,
taken as a whole; and the Constituent Corporations shall have not sustained any
loss or damage to their assets, whether or not insured, or union activity that
affects materially and adversely their ability to conduct their businesses,
taken as a whole.
8.6 Stockholder Agreements. All of the Shareholders of the Constituent
Corporations shall have executed and delivered a stockholder agreement in the
form attached hereto as Appendix 8.6 (the "Stockholder Agreements").
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8.7 Shareholder Representations. Each of the Shareholders shall have
executed and delivered a Continuity of Interest Certificate in the form attached
hereto as Appendix 8.7.
8.8 Approval by Stockholders of the Constituent Corporations. The
stockholders of each Constituent Corporation shall have approved the Merger
pertaining to it in accordance with the Maine Business Corporation Act.
8.9 Maine Bureau of Insurance. The Maine Bureau of Insurance shall have
granted all approvals required under the Maine Insurance Holding Company Act to
be obtained by ProMedCo in connection with the transactions contemplated hereby.
8.10 Delivery of Certain Documents. At the Closing, the Constituent
Corporations shall have delivered to ProMedCo copies of the Articles of
Incorporation of each Constituent Corporation certified (not more than 30 days
prior to the Closing Date) by the appropriate governmental authorities and
copies of resolutions of the stockholders of each Constituent Corporation and of
the Board of Directors of each Constituent Corporation, certified by the
secretary of such Constituent Corporation, approving and authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. In addition the Constituent Corporations shall
have delivered copies of the tax representation letter in substantially the form
attached as Appendix 6.14.
8.11 Employment Agreements. HP shall have delivered to ProMedCo
Employment Agreements, in the forms attached hereto as Appendix 8.11A through C,
executed by each of the persons listed in ss. 2.9.
8.12 Articles of Merger. Each Constituent Corporation shall have
executed the Articles of Merger (and any other documents required to be filed in
connection with the merger of such Constituent Corporation and Merger Sub) and
the Articles of Merger shall have been filed with the Maine Secretary of State
in accordance with the Maine Business Corporation Act.
ARTICLE 9 TERMINATION
9.1 Optional Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Effective
Date, notwithstanding stock holder approval as follows:
(a) By the mutual consent of ProMedCo and the Constituent
Corporations; or
(b) By the Constituent Corporations, if any of the conditions set
forth in Article 7 shall not have met or waived by September
17, 1997; provided that the Constitu ent Corporations shall
not be entitled to terminate this Agreement pursuant to this
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ss. 9.1(b) if breach of this Agreement by either Constituent
Corporations has prevented the consummation of the
transactions contemplated hereby; or
(c) By ProMedCo, if any of the conditions provided in Article 8
hereof have not been met or waived by September 17, 1997;
provided that ProMedCo shall not be enti tled to terminate
this Agreement pursuant to this ss. 9.1(c) if ProMedCo's
breach of this Agreement has prevented the consummation of the
transactions contemplated hereby.
Notwithstanding anything to the contrary set forth herein, the parties
acknowledge and agree that the Exhibits referred to in Article 3 herein were not
prepared or delivered to ProMedCo or MergerSub prior to or contemporaneously
with the execution of this Agreement. By July 31, 1997, the Constituent
Corporations shall deliver to ProMedCo and MergerSub all the Exhibits referred
to in Article 3, to be prepared in accordance with Article 3 of this Agreement,
and ProMedCo may, at its discretion, within seven days after its receipt of such
Exhibits, terminate this Agreement by notice to the Constituent Corporations if
any information contained in any of such Exhibits or any information obtained by
ProMedCo pursuant to ss. 6.3 of this Agreement by such date shall establish that
any representation or warranty of the Constituent Corporations con tained in
Article 3 of this Agreement or any information previously furnished to ProMedCo
or MergerSub by the Constituent Corporations concerning the Constituent
Corporations shall not be true and accurate in all material respects as of the
date of this Agreement or in the opinion of ProMedCo, any of such Exhibits shall
disclose facts which shall be materially adverse con cerning the financial
condition, business or operations of Constituent Corporations, taken as a whole,
as of the date of this Agreement or as of the date of such disclosure.
9.2 Notice of Abandonment. In the event of such termination by either
ProMedCo or the Constituent Corporations pursuant to ss. 9.1 above, written
notice shall forthwith be given to the other party hereto.
9.3 Mandatory Termination. If the Closing has not occurred by September
30, 1997, this Agreement shall automatically terminate and no longer be of any
force or effect.
9.4 Termination. In the event this Agreement is terminated as provided
above, ProMedCo and MergerSub shall deliver to the Constituent Corporations all
documents (and copies thereof in its possession) concerning the Constituent
Corporations and its subsidiaries previously delivered by the Constituent
Corporations to ProMedCo and MergerSub; and, except as expressly provided in
Section IV of the Binding Letter of Intent by and between ProMedCo and HP dated
as of June 9, 1997, none of the parties nor any of their respective partners,
shareholders, directors, or officers shall have any liability to the other party
for costs, expenses, loss of anticipated profits, consequential damages, or
otherwise, except for any deliberate breach of any of the provisions of this
Agreement.
39
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9.5 Shareholder Representative.
(a) Appointment. By their execution of the Joinder at the foot of
this Agreement, the Shareholders of the Constituent
Corporations irrevocably constitute and appoint ▇▇▇▇▇ ▇▇▇▇▇▇▇,
M.D., and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ to as the agents and
attorneys-in-fact of the Shareholders (collectively the
"Shareholder's Representa tive") to act for and on behalf of
each of the Shareholders with respect to all matters arising
in connection with this Agreement, including but not limited
to, the power and authority, in the Shareholder's
Representative's sole discretion, to:
(i) take any action contemplated to be taken by,
and receive any notices contemplated to be
given to, the Shareholder's Representa tive
under this Agreement;
(ii) negotiate, determine, defend and settle any
dispute which my arise this Agreement
between the Shareholder's Representative and
the other parties thereto and to accept
service of process in connection therewith;
and
(iii) make, execute, acknowledge and deliver any
release, assurance, receipt, request,
instruction, notice, agreement, certificate
or other instrument, and to generally do any
and all things and to take any and all
actions which my be requisite, proper or
advisable in connection with this Agreement.
(b) Indemnification of Shareholder's Representative. Each
Shareholder shall indemnify and hold the Shareholder's
Representative harmless with respect to anything done by the
Shareholder's Representative in good faith in connection with
their responsibilities hereunder and to reimburse the
Shareholder's Represen tative, in proportion to their
respective interests in the Balance of the ProMedCo Shares for
any costs or expenses, including attorneys' fees, incurred by
the Shareholder's Representative in the satisfaction of their
responsibilities hereunder.
(c) Selection of Successor. If the Shareholder Representative or
any successor Shareholder Representative shall die, become
disabled, or otherwise be unable to continue to act as a
Shareholder Representative hereunder, the Shareholders who
formerly received a majority of HP and HSI Consideration,
within fifteen (15) days of such occurrence, shall appoint a
successor Shareholder Representative and shall promptly notify
the other parties hereto in writing of the identify of such
successor.
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ARTICLE 10 MISCELLANEOUS
10.1 Expenses. All expenses of the preparation of this Agreement and of
the transac tions contemplated hereby, including, without limitation, counsel
fees, accounting fees, investment adviser's fees and disbursements, shall be
borne by the respective parties incurring such expense, whether or not such
transactions are consummated.
10.2 HSR. Each party hereto acknowledges that it has received advice of
counsel that, based on the aggregate amount of the HP and HSI Consideration and
the size of the parties as revealed in the Constituent Financial Statements and
the ProMedCo financial statements referred to herein, it is not necessary for
any party hereto to file any ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Report pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act with respect to the mergers
contemplated hereby with the FTC or the Antitrust Division.
10.3 Cooperation by ProMedCo. In the event either Constituent
Corporation is required to defend against any action, suit or proceeding arising
out of a claim pertaining to the business or operations of such Constituent
Corporation, ProMedCo shall provide such assistance and cooperation, including,
without limitation, witnesses and documentary or other evidence as may
reasonably be requested by such Constituent Corporation in connection with its
defense.
10.4 Cooperation by Constituent Corporations. In the event ProMedCo is
required to defend against any action, suit or proceeding arising out of a claim
pertaining to a liability assumed by ProMedCo pursuant to this Agreement
relating to the business or operations of either Constituent Corporation, such
Constituent Corporation shall provide such assistance and cooperation, including
without limitation, witnesses and documentary or other evidence, as may
reasonably be requested by ProMedCo in connection with its defense.
10.5 Notices. All notices, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered in
person or mailed by certified mail or registered mail (postage prepaid), sent by
reputable overnight courier service (charges prepaid) or sent via facsimile:
To the Constituent Corporations: c/o Health Plans, Inc.
Foreside Place
▇▇▇ ▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(PO Box 9746
Portland, ME 04104-5040)
Attn: Chief Executive Officer
With a copy to: Ropes & ▇▇▇▇
41
-▇▇-
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To ProMedCo and MergerSub c/o ProMedCo Management Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to Boult, Cummings, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, PLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
or to such other address as either the Constituent Corporations or ProMedCo may
designate by notice to the other.
10.6 Entire Agreement. This Agreement and the Appendices, Exhibits,
schedules and documents delivered pursuant hereto constitute the entire contract
between the parties hereto pertaining to the subject matter hereof and supersede
all prior and contemporaneous agreements, understandings, negotiations and
discussions, whether written or oral, of the parties, and there are no
representations, warranties or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the parties to be bound thereby.
10.7 Governing Law. THE VALIDITY AND CONSTRUCTION OF THIS AGREE
MENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MAINE.
10.8 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT OF JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY MATTER ARISING HEREUNDER.
10.9 Legal Fees and Costs. In the event either party elects to incur
legal expenses to enforce or interpret any provision of this Agreement, the
prevailing party will be entitled to recover such legal expenses, including,
without limitation, reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party shall be
entitled.
10.10 Section Headings. The Section headings are for reference only and
shall not limit or control the meaning of any provision of this Agreement.
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10.11 Waiver. No delay or omission on the part of any party hereto in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Agreement.
10.12 Nature and Survival of Representations.
(a) All statements contained in any certificate delivered by or on
behalf of any of the parties to this Agreement pursuant hereto in connection
with the transactions contemplated hereby shall be deemed to be representations
and warranties made by the respective parties hereunder.
(b) Except as otherwise provided in this Section 10.12, the covenants,
representations, warranties and agreements made by the parties each to the other
in this Agreement or pursuant hereto shall survive any investigation made by or
on behalf of any other party hereto. All of the representations and warranties
included or provided for herein by the Constituent Corporations, ProMedCo and
MergerSub shall survive for a period of one (1) year after the Closing Date;
provided, however, that the representations and warranties set forth in ▇▇.▇▇.
3.2, 3.8, 3.21, 3.25 and 3.26 shall until expiration of the relevant statute of
limitations, if longer.
(c) Any disclosure made with reference to one or more sections of this
Agreement or the Exhibit Volume shall be deemed disclosed with respect to any
section of this Agreement or the Exhibit Volume to which such disclosure
reasonably relates.
(d) For purposes of this Agreement, "knowledge" shall mean the actual
knowledge, after reasonable inquiry, of the directors and officers of the party
to which it refers.
10.13 Exhibits. All Exhibits, Appendices, schedules and documents
referred to in or at tached to this Agreement are integral parts of this
Agreement as if fully set forth herein and all statements appearing therein
shall be deemed to be representations.
10.14 Assignment. No party hereto shall assign this Agreement without
first obtaining the written consent of the other party.
10.15 Binding on Successors and Assigns. Subject to ss. 10.14, this
Agreement shall inure to the benefit of and bind the respective heirs,
administrators, successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give any
person other than the parties to this Agreement or their respective successors
or permitted assigns any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein, it being the
intention of the parties to this Agreement that this Agreement shall be for the
sole and exclusive benefit of such parties or such successors and assigns and
not for the benefit of any other person.
43
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10.16 Parties in Interest. Nothing in this Agreement is intended to
confer any right on any person other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to modify or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third person any right of
subrogation or action over against any party to this Agreement.
10.17 Amendments. This Agreement may be amended, but only in writing,
signed by the parties hereto, at any time prior to the Closing, before or after
approval hereof by the stockholders of the Constituent Corporations, with
respect to any of the terms contained herein, but after such stockholder
approval, no amendment shall be made which reduces the consider ation per share
paid each such stockholder without the further approval of such stockholders.
10.18 Drafting Party. The provisions of this Agreement, and the
documents and instruments referred to herein, have been examined, negotiated,
drafted and revised by counsel for each party hereto and no implication shall be
drawn nor made against any party hereto by virtue of the drafting of this
Agreement.
10.19 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall comprise one and the same instrument.
10.20 Press Releases. ProMedCo, MergerSub and Constituent Corporations
shall cooperate with each other in releasing information concerning this
Agreement and the transac tions contemplated hereby. Each of the parties to this
Agreement shall furnish to the others drafts of all releases prior to
publication. Nothing contained in this Agreement shall prevent any party to this
Agreement at any time from furnishing any information to any governmental body
or agency.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PROMEDCO MANAGEMENT COMPANY
By
Its
Name
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HP ACQUISITION CORP
By
Its
Name
HEALTH PLANS, INC.
By
Its
Name
PBMA HEALTH SYSTEMS, INC.
By
Its
Name
45
-46-
JOINDER BY SHAREHOLDERS
The undersigned Shareholders of Health Plans, Inc. and PBMA Health
Systems, Inc., each a Maine corporation, hereby join the above Agreement for
Statutory Merger for the purpose of being bound by the provisions of Sections
2.1.8 and 9.5 thereof.
▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇ ▇. ▇▇▇▇, M.D.
▇▇▇▇▇▇ ▇▇▇▇▇, M.D.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇▇▇ ▇▇▇▇▇, M.D.
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
▇▇▇▇▇▇ ▇▇▇▇, M.D.
▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
▇▇▇▇ ▇▇▇▇▇▇. M.D.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
47
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LIST OF APPENDICES
Number Description
2.1 Articles of Merger and Plan of Merger for the HSI Merger
2.2 Articles of Merger and Plan of Merger for the HP Merger
4.1 Bylaws of MergerSub
5.7 ProMedCo Tax Representation Letter
6.14 Constituent Corporation Tax Representation Letter
7.2 Form of opinion of ProMedCo's counsel to be delivered at the Closing
8.3 Form of opinion of HP's counsel to be delivered at the Closing
8.6 Form of stockholder and indemnification agreement
8.7 Shareholder Continuity of Interest Certificate
8.11A-C Forms of Employment Agreement
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LIST OF EXHIBITS
Number Description
3.1A List of States in which each Constituent Corporation is qualified to do
business
3.1B Copies of the Constituent Corporations' Articles of Incorporation and
Bylaws
3.2A HSI Capitalization
3.2B HP Capitalization
3.3 Subsidiaries of the Constituent Corporations.
3.4A HSI Financial Statements
3.4B HP Financial Statements
3.7 Exceptions to Absence of Recent Changes Representation
3.8 Recent UCC reports on assets of the Constituent Corporations
3.9 Contracts
3.10 Exceptions to No Default Representation
3.15 Powers of Attorney
3.16 Guarantees
3.17 Permits and licenses
3.18 Bank Accounts
3.19A Patents, etc.
3.19B Licenses
3.21 Litigation
3.22 Notices of Violations
3.23A Exceptions to Tax Representation
3.23B Past Tax Returns
3.25 List of Employee Benefit Plans
3.26 List of Employee Benefit Plans not qualified underss.401(a) of the
Internal Revenue Code
3.27A List of employees
3.27B Description of Employee Benefits
3.28 List of Insurance coverages and bonds
▇▇
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▇▇▇▇▇▇▇▇ 2.1
ARTICLES OF MERGER AND PLAN OF MERGER FOR THE HSI MERGER
EXHIBIT A
PLAN OF MERGER
of
PBMA Health Systems, Inc.
with and into
HP Acquisition Corp.
Pursuant to Section 901 of the Maine Business Corporation Act
Pursuant to this Plan of Merger, PBMA Health Systems, Inc., a Maine
corporation ("HSI") will be merged (the "Merger") with and into HP Acquisition
Corp., a Maine corporation ("MergerSub"). In the Merger, MergerSub will be the
surviving corporation (the "Surviving Corporation"). The terms and conditions of
the Merger and the consideration to be paid by the Surviving Corporation upon
surrender of each outstanding share of HSI not owned by MergerSub are as set
forth below:
1. Effective Date. The Merger shall be effective (the "Effective Date")
on the date on which the Articles of Merger with respect to the Merger shall
have been duly executed and filed in the office of the Secretary of State of
Maine in accordance with the provisions of the Maine Business Corporation Act.
2. Articles of Incorporation. From and after the Effective Date, the
Articles of Incor poration of the Surviving Corporation shall be amended to be
the same as the Articles of Incor poration of the MergerSub except that the name
of the Surviving Corporation shall be "HP Acquisition Corp."
3. By-Laws. From and after the Effective Date, the by-laws of the
MergerSub as they exist on the date hereof shall be the by-laws of the Surviving
Corporation.
4. Directors and Officers. The directors and officers of MergerSub
immediately prior to the Effective Date shall be the officers and directors,
respectively, of the Surviving Corpora tion, to serve, in both cases, until
their successors shall have been elected and shall qualify or until otherwise
provided by law and the Articles of Incorporation and by-laws of the Surviving
Corporation.
1
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5. Exchange of Shares for Cash and/or Securities. The manner and basis
of exchang ing and converting the shares of common stock of the MergerSub and
HSI on the Effective Date shall be as follows:
(a) Common Stock of MergerSub. By virtue of the Merger and without any action
of the holder thereof each share of common stock of MergerSub outstanding
on the Effective Date shall remain outstanding and unchanged as a share of
the common stock of the Surviving Corporation.
(b) Common Stock of HSI. By virtue of the merger and without any action of the
holders thereof each share of (i) the no par value Class A Voting Common
Stock of HSI and (ii) the Class B Non-Voting Common Stock of HSI
(collectively the "HSI Common Stock") outstanding at the Effec tive Date
shall be reclassified into the right to receive the portion of the HSI
Consideration determined in accordance with the formula set forth in ss. 7
hereof and distributable in accordance with the time schedule set forth in
the Merger Agreement, except that any share of HSI Common Stock then owned
by HSI shall be canceled.
6. Rights of HSI's Stockholders Pending and Upon Surrender of
Certificates. From and after the Effective Date, except as provided in the Maine
Business Corporation Act with respect to rights of dissenting stockholders, each
holder of a certificate representing shares of HSI Common Stock shall be
entitled, upon surrender thereof to the Surviving Corporation, to receive in
exchange therefor the portion of the Consideration to which such holder would
otherwise be entitled on the basis provided for in this Plan of Merger.
7. Exchange Formula. As a result of the Closing, each share of HSI
Common Stock shall be exchanged for the right to receive the portion of the HSI
Consideration obtained by dividing (x) HSI Consideration, as adjusted pursuant
to ss. 2.10 of the Merger Agreement, by (y) the number of shares of HSI Common
Stock issued and outstanding immediately prior to the Effective Date other than
those owned by HSI or MergerSub. Each former HSI Shareholder entitled to receive
HSI consideration shall have the right to elect to receive a portion of the HSI
Consideration distribution to him or her as cash in lieu of ProMedCo Stock
consistent with the following restrictions: the HSI Consideration shall be
comprised of (x) the number of shares of ProMedCo Stock, valued at the Tax Value
per share, equal to at least 50% of the portion of the HSI Consideration then
being distributed (including cash paid in lieu of fractional shares), and (y)
cash in the amount determined by subtracting the aggregate Tax Value of such
shares from the HSI Consideration. The Surviving Corporation shall not deliver
any fraction of a share of ProMedCo Common Stock but will deliver a whole number
of shares of ProMedCo Common Stock rounded up to the next whole number with the
value of the fractional share being reflected in the amount of cash distributed.
ProMedCo shall have the option in its sole discretion of
-3-
effecting a cash merger if the price per share of ProMedCo common stock is less
than $8.00 in the agreed-upon period prior to closing.
8. HSI Stock Transfer Books. From and after the Effective Date, the
transfer of the shares of HSI Common Stock outstanding prior to the Effective
Date shall not be made on the stock transfer books.
9. Vesting of Rights in the Surviving Corporation. Immediately upon
filing the Articles of Merger, HSI shall cease its separate existence; all the
properties (real, personal and mixed), rights, immunities, privileges,
franchises, choses in action and all other assets of HSI shall vest in the
Surviving Corporation without further act; and the Surviving Corporation shall
assume all the liabilities, duties and obligations of HSI.
10. Assumption of Responsibilities. The Surviving Corporation shall
assume and accept responsibility for any obligations of HSI accruing to
shareholders of HSI other than MergerSub under the Maine Business Corporation
Act arising from the effectuation of this Plan of Merger.
11. Merger Agreement. To the extent the provisions of the Merger
Agreement are not inconsistent with this Plan of Merger, such provisions shall
govern the rights of HSI and MergerSub.
12. Definitions. For the purposes of this Plan of Merger, the following
definitions shall apply; certain other terms are defined elsewhere in this Plan
of Merger.
"Consideration" means the amount defined in the Merger Agreement as
"Consideration," which amount shall be no less than $7,500,000.
"Effective Date" is defined in ss. 1 hereof.
"HP Common Stock" means, collectively, (i) the $.01 par value Voting Common
Stock of Health Plans, Inc., (ii) the $.01 par value B Nonvoting Common
Stock of Health Plans, Inc. and (iii) the $15.00 par value Nonvoting
Convertible Preferred Stock of Health Plans, Inc.
"HSI" means PBMA Health Systems, Inc., a Maine corporation.
"HSI Common Stock" is defined in ss. 5(b) hereof.
"HSI Consideration" means the amount obtained by multiplying the
Consideration by a fraction, the (x) numerator of which is the number
of shares of HP Common Stock held
3
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by HSI immediately prior to the Closing and (y) the denominator of
which is the number of shares of HP Common Stock outstanding
immediately prior to the Closing. The HSI Consideration shall consist
of (A) shares of ProMedCo Stock having an aggregate value (based on a
per share value equal to the Tax Value) equal at least to 50% of the
total HSI Consideration (increased to the extent, if any, necessary to
reflect payments to dissent ers), as set forth in ss. 7 hereof, , and
(B) cash (including cash paid in lieu of fractional shares) equal to
the total HSI Consideration less the aggregate value of such shares of
ProMedCo Stock (based on a per share value equal to the greater of the
Tax Value or the Market Value).
"Market Value" means $8.80 per share if the average closing price of ProMedCo
$.01 par value common stock for the five trading days ending two
trading days prior to the Closing is greater than $8.36 and less than
$10.56; if such average closing price is $8.36 or less, "Market Value"
shall mean such average closing price plus $.44; and if such average
price is $10.56 or greater, "Market Value" shall mean such average
closing price less $1.76.
"Merger Agreement" means the Agreement for Statutory Mergers dated as of
July26, 1997 among ProMedCo, MergerSub, HSI and Health Plans, Inc., a
Maine corporation.
"MergerSub" means HP Acquisition Corp., a Maine corporation and a wholly-owned
subsidiary of ProMedCo.
"ProMedCo" means ProMedCo Management Company, a Delaware corporation.
"Surviving Corporation" is defined in the preamble hereof.
"Tax Value" means the lesser of (x) Market Value or (y) the average closing
price of ProMedCo Stock for the five trading days ending two trading
days prior to the Closing under the Merger Agreement less a discount
determined by ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, ProMedCo's investment bankers,
necessary to reflect, as of the Closing Date, the economic value of
unregistered ProMedCo Stock subject to the restrictions contemplated by
this Agreement, including the holding period required by Rule 144 of
the Securities and Exchange Commission and the tax representations to
be signed by the Shareholders pursuant to ss. 8.7 of the Merger
Agreement.
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APPENDIX 2.2
ARTICLES OF MERGER AND PLAN OF MERGER FOR THE HP MERGER
EXHIBIT A
PLAN OF MERGER
of
Health Plans, Inc.
with and into
HP Acquisition Corp.
Pursuant to Section 901 of the Maine Business Corporation Act
Pursuant to this Plan of Merger, Health Plans, Inc., a Maine
corporation ("HP") will be merged (the "Merger") with and into HP Acquisition
Corp., a Maine corporation ("MergerSub"). In the Merger MergerSub will be the
surviving corporation (the "Surviving Corporation"). The terms and conditions of
the Merger and the consideration to be paid by the Surviving Corpora tion upon
surrender of each outstanding share of HP not owned by MergerSub are as set
forth below:
1. Effective Date. The Merger shall be effective (the "Effective Date")
on the date on which the Articles of Merger with respect to the Merger shall
have been duly executed and filed in the office of the Secretary of State of
Maine in accordance with the provisions of the Maine Business Corporation Act,
immediately after the effectiveness of the merger of PBMA Health Systems, Inc.,
a Maine corporation, with and into MergerSub.
2. Articles of Incorporation. From and after the Effective Date, the
Articles of Incor poration of the Surviving Corporation shall be amended to be
the same as the Articles of Incor poration of the MergerSub except that the name
of the Surviving Corporation shall be "Health Plans, Inc."
3. By-Laws. From and after the Effective Date, the by-laws of the
MergerSub as they exist on the date hereof shall be the by-laws of the Surviving
Corporation.
4. Directors and Officers. The directors and officers of MergerSub
immediately prior to the Effective Date shall be the officers and directors,
respectively, of the Surviving Corpora tion, to serve, in both cases, until
their successors shall have been elected and shall qualify or until otherwise
provided by law and the Articles of Incorporation and by-laws of the Surviving
Corporation.
1
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5. Exchange of Shares for Cash and/or Securities. The manner and basis
of exchang ing and converting the shares of common stock of the MergerSub and HP
on the Effective Date shall be as follows:
(a) Common Stock of MergerSub. By virtue of the Merger and without any action
of the holder thereof each share of common stock of MergerSub outstanding
on the Effective Date shall remain outstanding and unchanged as a share of
the common stock of the Surviving Corporation.
(b) Common Stock of HP. By virtue of the merger and without any action of the
holders thereof each share of (i) the $.01 par value Voting Common Stock of
HP, (ii) the $.01 par value B Nonvoting Common Stock of HP and (iii) the
$15.00 par value Nonvoting Convertible Preferred Stock of HP, including in
each instance those shares owned by MergerSub by virtue of the HSI Merger
(collectively the "HP Common Stock") outstand ing at the Effective Date
shall be reclassified into the right to receive the portion of the HP
Consideration determined in accordance with the formula set forth inss.7
hereof and distributable in accordance with the time schedule set forth in
such section, except that any share of HP Common Stock then owned by HP or
MergerSub shall be canceled.
6. Rights of HP's Stockholders Pending and Upon Surrender of
Certificates. From and after the Effective Date, except as provided in the Maine
Business Corporation Act with respect to rights of dissenting stockholders, each
holder of a certificate representing shares of HP Common Stock shall be
entitled, upon surrender thereof to the Surviving Corporation, to receive in
exchange therefor the portion of the Consideration to which such holder would
otherwise be entitled on the basis provided for in this Plan of Merger.
7. Exchange Formula. As a result of the Merger, each share of HP Common
Stock, including those shares owned by MergerSub by virtue of the HSI Merger,
shall be exchanged for the right to receive the portion of the HP Consideration
obtained by dividing (x) HP Consider ation by (y) the number of shares of HP
Common Stock issued and outstanding immediately prior to the Effective Date
excluding the shares owned by MergerSub. The HP Consideration shall be
distributed in accordance with the terms and time schedule set forth in the
Merger Agreement. The deemed value per share of ProMedCo common stock, for
purposes of calculat ing the HP Consideration, shall be the Market Value. The
Surviving Corporation shall not deliver any fraction of a share of ProMedCo
Common Stock but will deliver a whole number of shares of ProMedCo Common Stock
rounded down to the next whole number with the value of the fractional share
being reflected in the amount of cash distributed. ProMedCo shall have the
option in its sole discretion of effecting a cash merger if the price per share
of ProMedCo common stock is less than $8.00 in the agreed-upon period prior to
closing. In the event of such
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election by ProMedCo, the HP Consideration shall be grossed up to account for
the adverse tax consequences of a cash-only merger to the HP shareholders, as
set forth in greater detail in the Merger Agreement.
8. HP Stock Transfer Books. From and after the Effective Date, the
transfer of the shares of HP Common Stock outstanding prior to the Effective
Date shall not be made on the stock transfer books.
9. Vesting of Rights in the Surviving Corporation. Immediately upon
filing the Articles of Merger, HP shall cease its separate existence; all the
properties (real, personal and mixed), rights, immunities, privileges,
franchises, choses in action and all other assets of HP shall vest in the
Surviving Corporation without further act; and the Surviving Corporation shall
assume all the liabilities, duties and obligations of HP.
10. Assumption of Responsibilities. The Surviving Corporation shall
assume and accept responsibility for any obligations of HP accruing to
shareholders of HP other than MergerSub under the Maine Business Corporation Act
arising from the effectuation of this Plan of Merger.
11. Merger Agreement. To the extent the provisions of the Merger
Agreement are not inconsistent with this Plan of Merger, such provisions shall
govern the rights of HP and MergerSub.
12. Definitions. For the purposes of this Plan of Merger, the following
definitions shall apply; certain other terms are defined elsewhere in this Plan
of Merger.
"Effective Date" is defined in ss. 1 hereof.
"HP Common Stock" is defined in ss. 5 hereof.
"HP Consideration" means shares of ProMedCo Stock at valued at Market Value
having an aggregate value equal to the Consideration less the HSI
Consideration.
"HSI Consideration" means the amount obtained by multiplying the
Consideration by a fraction, the (x) numerator of which is the number
of shares of HP Common Stock held immediately prior to the Closing and
(y) the denominator of which is the number of shares of HP Common Stock
outstanding immediately prior to the Closing. Pursuant to ss. 7, at
least 50% of the HSI Consideration shall consist of (x) shares of
ProMedCo Stock having a per share value equal to the Tax Value thereof
and (y) cash equal to HSI Consideration less the aggregate value such
shares of ProMedCo Stock based on the Tax Value of each share.
▇
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"▇▇▇ ▇▇▇▇▇▇" is defined in ss. 2.1 of the Merger Agreement.
"Market Value" means $8.80 per share if the average closing price of ProMedCo
$.01 par value common stock for the five trading days ending two
trading days prior to the Closing is greater than $8.36 and less than
$10.56; if such average closing price is $8.36 or less, "Market Value"
shall mean such average closing price plus $.44; and if such average
price is $10.56 or greater, "Market Value" shall mean such average
closing price less $1.76.
"Merger Agreement" means the Agreement for Statutory Mergers dated July26, 1997
among ProMedCo, MergerSub, HP and PBMA Health Systems, Inc., a Maine
corporation.
"MergerSub" means HP Acquisition Corp., a Maine corporation and a wholly-owned
subsidiary of ProMedCo.
"ProMedCo" means ProMedCo Management Company, a Delaware corporation.
"Surviving Corporation" is defined in the preamble hereof.
"Tax Value" means the lesser of (x) Market Value or (y) the average closing
price of ProMedCo Stock for the five trading days ending two trading
days prior to the Closing under the Merger Agreement less a discount
determined by ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, ProMedCo's investment bankers,
necessary to reflect, as of the Closing Date, the economic value of
unregistered ProMedCo Stock subject to the restrictions contemplated by
this Agreement, including the holding period required by Rule 144 of
the Securities and Exchange Commission and the tax representations to
be signed by the Shareholders pursuant to ss. 8.7 of the Merger
Agreement.
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APPENDIX 4.1
BYLAWS OF
HP ACQUISITION CORP.
ARTICLE I
OFFICES
Section 1.1 Registered Office. The registered office shall be in the
City of Augusta, State of Maine.
Section 1.2 Other Offices. The corporation may also have offices at
such other places both within and without the State of Maine, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1 Annual Meeting. An annual meeting of shareholders of the
corporation shall be held on such date and at such time as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting. At such meeting, the shareholders shall elect directors and transact
such other business as may properly be brought before the meeting.
Section 2.2 Special Meetings. Special meetings of the shareholders for
any purpose whatsoever may be called at any time by the president, the board of
directors, or the holders of not less than ten percent of all shares entitled to
vote at such meeting.
Section 2.3 Place of Meetings. All meetings of shareholders for any
purpose or purposes may be held at such places, within or without the State of
Maine, as may from time to time be fixed by the board of directors or as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2.4 Notice. Written notice stating the place, day and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given not less than ten nor more than
sixty days before the date of the meeting, either personally or by mail.
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Section 2.5 Quorum of Shareholders. The holders of a majority of the
shares issued and outstanding and entitled to vote at such meeting, present in
person or represented by proxy shall constitute a quorum for the transaction of
business at all meetings of the shareholders.
Section 2.6 Voting of Shares. Except as otherwise provided by statute
or the articles of incorporation, each holder of record of shares of stock of
the Corporation having voting power shall be entitled at each meeting of the
shareholders to one vote for every share of such stock standing in his or her
name on the record books of shareholders of the corporation on the date on which
such notice of the meeting is mailed, unless some other day is fixed by the
board of directors for the determination of shareholders of record.
Section 2.7 Voting List. The officer who has charge of the stock
transfer books for shares of the corporation shall prepare at least ten days
before every meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, including the
address of each shareholder and the number of voting shares held by each
shareholder. For a period of ten days prior to such meeting, such list shall be
kept open to the examination of any shareholder, for any purpose germane to the
meeting, during ordinary business hours, either at a place within the city where
the meeting is to be held and which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where said meeting is to be
held. Such list shall be produced at such meeting and at all times during such
meeting shall be subject to inspection by any shareholder. The original stock
transfer books shall be prima facie evidence as to who are the shareholders
entitled to examine such list or stock transfer books.
Section 2.8 Treasury Stock. The corporation shall not vote, directly or
indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes.
Section 2.9 Consent of Shareholders in Lieu of Meeting. Whenever the
vote of shareholders at a meeting thereof is required or permitted to be taken
for or in connection with any corporate action, the meeting, the notice thereof,
and the vote of shareholders can be dispensed with, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of all of the
issued and outstanding stock.
ARTICLE III
DIRECTORS
Section 3.1 Powers of Directors. The business and affairs of the
corporation shall be managed by its board of directors which shall have and may
exercise all such powers of the corporation, subject to the restrictions imposed
by law, the articles of incorporation, or these bylaws.
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Section 3.2 Number and Qualification. The number of directors which
shall constitute the entire board of directors shall be determined by resolution
of the board of directors at any meeting thereof or by the shareholders at any
meeting thereof. Directors need not be residents of Maine or shareholders of the
corporation.
Section 3.3 Election and Term of Office. The directors shall be elected
annually by the shareholders, except as provided in Section 3.4 of these bylaws.
Each director shall hold office until the next succeeding annual meeting of
shareholders and until his or her successor shall have been elected or until his
or her earlier death, resignation, or removal. The board of directors may, by
resolution, appoint one of its members as chairman to preside over meetings of
the board of directors. The position of chairman of the board of directors shall
not be an office of the corporation.
Section 3.4 Vacancies. Any vacancy occurring in the board of directors
by reason of death, resignation, or removal may be filled by affirmative vote of
a majority of the remaining directors, although less than a quorum of the board
of directors. Such vacancy may also be filled by affirmative vote of the
majority of the shareholders. A director elected to fill a vacancy shall be
elected for the unexpired term of his or her predecessor in office or until his
or her death, resignation, retirement, disqualification, or removal.
Section 3.5 Resignation of Directors. Any director may resign from
office at any time by delivering a written resignation to the secretary of the
corporation, and such resignation shall be effective upon delivery of such
resignation to the secretary.
Section 3.6 Removal of Directors. Any director may be removed with or
without cause at any time by the shareholders.
Section 3.7 Place of Meetings. Regular or special meetings of the board
of directors may be held either within or without the State of Maine.
Section 3.8 Regular Meetings. Regular meetings of the board of
directors may be held without notice at such times and places as may be
designated from time to time as may be determined by the board of directors.
Section 3.9 Special Meetings. Special meetings of the board of
directors may be called by the president or any director on twenty-four (24)
hours notice to each director, either personally or by telephone, mail, telegram
or other means of telecommunications. Neither the business to be transacted at,
nor the purpose of, any special meeting of the board of directors need be
specified in the notice or waiver of notice of any special meeting.
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Section 3.10 Quorum of Directors. At all meetings of the board of
directors, a majority of the directors shall constitute a quorum for the
transaction of business and the act or a majority of the directors present at
any meeting at which there is a quorum shall be an act of the board of
directors. If a quorum is not present at a meeting, a majority of the directors
present may adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present.
Section 3.11 Committees. The board of directors may, by resolution
passed by a majority of the entire board, designate one or more committees,
including, if they shall so determine, an executive committee, each such
committee to consist of one or more of the directors of the corporation. Any
such designated committee shall have and may exercise such of the powers and
authority of the board of directors in the management of the business and
affairs of the corporation as may be provided in such resolution, except that no
such committee shall have the power or authority of the board of directors in
reference to amending the articles of incorporation, adopting an agreement of
merger or consolidation, recommending to the shareholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the shareholders a dissolution of the corporation or a
revocation of a dissolution of the corporation, or amending, altering or
repealing the bylaws or adopting new bylaws for the corporation and, unless such
resolution or the articles of incorporation expressly so provides, no such
committee shall have the power or authority to authorize the issuance of stock.
The board of directors shall have the power at any time to change the number and
members of any such committee, to fill vacancies and to discharge any such
committee.
Section 3.12 Compensation of Directors. The board of directors shall
have authority to determine, from time to time, the amount of compensation, if
any, which shall be paid to its members for their services as directors and as
members of committees of the board of directors. The board of directors shall
also have power in its discretion to provide for and to pay to directors
rendering services to the corporation not ordinarily rendered by directors as
such, special compensation appropriate to the value of such services as
determined by the board of directors from time to time. Nothing herein contained
shall be construed to preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
Section 3.13 Action by Unanimous Written Consent. Any action required
or permitted to be taken at a meeting of the board of directors or any committee
may be taken without a meeting if a consent in writing, setting forth the
actions so taken, is signed by all of the members of the board of directors or
such committee, as the case may be.
Section 3.14 Minutes of Meetings. The board of directors shall keep
regular minutes of its proceedings and such minutes shall be placed in the
minute book of the corporation. Committees of the board of directors shall
maintain a separate record of the minutes of their proceedings.
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ARTICLE IV
NOTICES AND TELEPHONE MEETINGS
Section 4.1 Notice. Any notice to directors or shareholders shall be in
writing and shall be delivered personally or by mail, telegram, telex, cable,
telecopier or similar means to the directors or shareholders at their respective
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be deposited in the United
States mail, postage prepaid. Any notice required or permitted to be given by
telegram, telex, cable, telecopier, or similar means shall be deemed to be
delivered and given at the time transmitted.
Section 4.2 Waiver of Notice. Whenever by law, the articles of
incorporation, or these bylaws, notice is required to be given to any
shareholder, director, or committee member of the corporation, a waiver thereof
in writing signed by the person or persons entitled to such notice, whether
before or after the time notice should have been given, shall be equivalent to
the giving of such notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
Section 4.3 Telephone and Similar Meetings. Shareholders, directors, or
committee members may participate in and hold a meeting by means of a conference
telephone or similar communications equipment by means of which persons
participating in the meeting can hear each other. Participation in such a
meeting shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE V
OFFICERS
Section 5.1 Officers. The corporation shall have a president and a
secretary and such other officers and assistant officers as the board may deem
desirable to conduct the affairs of the corporation. The position of chairman of
the board of directors shall not be an office of the corporation. Any two or
more offices may be held by the same person. No officer need be a shareholder or
a director.
Section 5.2 Powers and Duties of Officers. The officers of the
corporation shall have the powers and duties generally ascribed to the
respective offices, and such additional authority or duty as may from time to
time be established by the board of directors.
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Section 5.3 Removal and Resignation. Any officer appointed by the board
of directors may be removed by the board of directors whenever, in the judgment
of the board of directors, the best interests of the corporation will be served
thereby. Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of receipt of
such notice or at a later time specified therein, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 5.4 Term and Vacancies. The officers of the corporation shall
hold office until their successors are elected or appointed, or until their
death, resignation, or removal from office. Any vacancy occurring in any office
of the corporation by death, resignation, removal, or otherwise, may be filled
by the board of directors.
Section 5.5 Compensation. The salaries of all officers of the
corporation shall be fixed by the board of directors. The board of directors
shall have the power to enter into contracts for the employment and compensation
of officers on such terms as the board of directors deems advisable. No officer
shall be disqualified from receiving a salary or other compensation by reason of
the fact that he or she is also a director of the corporation.
ARTICLE VI
CERTIFICATES AND SHAREHOLDERS
Section 6.1 Certificates for Shares. The certificates for shares of
stock of the Corpora tion shall be in such form as shall be approved by the
board of directors in conformity with law and the articles of incorporation.
Every certificate for shares issued by the corporation must be signed by the
President or a Vice President and the Secretary or an Assistant Secretary under
the seal of the corporation. Any or all of the signatures on the face of the
certificate may be facsimile. Such certificates shall bear a legend or legends
in the form and containing the restrictions to be stated thereon by the Maine
Business Corporation Act (the "Maine Code"), other provisions of law, the
articles of incorporation or these bylaws. Certificates shall be consecutively
numbered and shall be entered as they are issued. Each certificate shall state
on the face thereof the holder's name, the number and class of shares, the par
value of such shares, and such other matters as may be required by law, the
articles of incorporation or these bylaws.
Section 6.2 Lost, Stolen, or Destroyed Certificates. The board of
directors, the executive committee, or the president of the corporation may
direct a new certificate or certificates representing shares to be issued in
place of any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen, or destroyed, upon the making of an affidavit
of the fact by the person claiming the certificate or certificates to be lost,
stolen, or destroyed. When authorizing such issue of a new certificate the board
of directors, the executive committee or the president may require the owner of
such lost, stolen, or destroyed certificate, or his or her legal representative,
to advertise the same in such manner as it or he or she shall require and/or
give
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the corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 6.3 Transfer of Shares. Shares of stock of the corporation
shall be transferable only on the books of the corporation by the holder thereof
in person or by the holder's duly authorized attorneys or legal representatives.
Upon surrender to the corporation or the transfer agent of the corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
Section 6.4 Registered Shareholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments, a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such shares on the part of any person, whether or not it shall
have actual or other notice thereof, except as otherwise provided by law.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Dividends. Dividends upon the outstanding shares of the
corporation, subject to the provisions of the applicable statutes and of the
articles of incorporation, may be declared by the board of directors at any
annual, regular or special meeting. Dividends may be declared and paid in cash,
in property, or in shares of the corporation, or in any combination thereof.
Section 7.2 Reserves. There may be set aside out of any funds of the
corporation available for dividends such sum or sums as the board of directors
from time to time in their sole and absolute discretion think proper as a
reserve to meet contingencies, or to equalize dividends, or to repair or
maintain any property of the corporation, or for such other purpose as the board
of directors shall think conducive to the interest of the corporation, and the
board of directors may modify or abolish any such reserve in the manner in which
it was created.
Section 7.3 Signature of Negotiable Instruments. All checks or demands
for money and notes of the corporation shall be signed by such officer or
officers or such other person or persons as the board of directors may from time
to time designate.
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Section 7.4 Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors; provided, that if such fiscal year is not fixed
by the board of directors it shall be the calendar year.
Section 7.5 Books of the Corporation. The books of the corporation may
be kept, subject to the provisions of the applicable statutes, within or outside
of the State of Maine, at such place or places as may from time to time be
designated by the board of directors or as the business of the corporation may
require.
Section 7.6 Seal. The seal, if any, of the corporation shall be in such
form as may be approved from time to time by the board of directors. If the
board of directors approves a seal, the affixation of such seal shall not be
required to create a valid and binding obligation against the corporation.
Section 7.7 Securities of Other Corporations. Unless otherwise ordered
by the board of directors, the president or the secretary of the corporation
shall have full power and authority on behalf of the corporation to attend, to
vote and to grant proxies to be used at any meeting of shareholders of such
other corporation in which the corporation may hold stock. The board of
directors may confer like powers upon any other person or persons.
Section 7.8 Fixed Record Date. In order that the corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date which shall be not more than sixty 60 days before the
date of such meeting, nor more than 60 days prior to any other action.
Section 7.9 Amendment. The power to alter, amend, or repeal these
bylaws or to adopt new bylaws is vested in the board of directors.
Section 7.10 Right to Indemnification.
(A) Each person (hereinafter an "indemnitee") who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
was a director, officer or agent of the corporation or any predecessor
corporation or is or was serving at the request of the corporation or any
predecessor corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee
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or agent, shall be indemnified and held harmless by the corporation to the
fullest extent authorized by the Maine Code, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss (including
attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in connec
tion therewith, and such indemnification shall continue with respect to an
indemnitee who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the indemni tee's heirs, executors and administrators;
provided, however, that, except as provided in paragraph (B) hereof with respect
to proceedings to enforce rights to indemnification, the corporation shall
indemnify any such indemnitee only if such proceeding (or part thereof) was
authorized by the board of directors of the corporation or any predecessor
corporation. The right to indemnification conferred in this section shall be a
contract right and shall include the right to be paid by the corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that,
if the Maine Code requires, an advancement of expenses incurred by an indemnitee
shall be made only upon delivery to the corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this section or otherwise.
(B) If a claim under paragraph (A) of this section is not paid in full
by the corporation within 60 days after a written claim has been received by the
corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of such suit, or in a suit brought by the corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) any suit by the
corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in the Maine Code. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Maine Code, nor an actual determination by the corporation (including its
board of directors, independent legal counsel, or its shareholders) that the
indemnitee has not met such applicable standard of conduct shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit
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brought by the indemnitee, be a defense of such suit. In any suit brought by the
indemnitee to enforce a right of indemnification or to an advancement of
expenses hereunder, or by the corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this section or otherwise shall be on the corporation.
(C) The rights to indemnification and to the advancement of expenses
conferred in this section shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the corporation's
certificate of incorporation, by agreement, by vote of shareholders or by
disinterested directors or otherwise. Any repeal or modification of this Section
7.10 shall not adversely affecting any rights or protection of an indemnitee
hereunder at the time of such repeal or modification.
(D) The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense, liability or loss
under the Maine Code.
Section 7.11 Invalid Provisions. If any provision of these bylaws is
held to be illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable; these bylaws shall be construed and enforced
as if such illegal, invalid, or unenforceable provision had never comprised a
part hereof; and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision there shall be added automatically as a part
of these bylaws a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
Section 7.12 Headings. The headings used in these bylaws are for
reference purposes only and do not affect in any way the meaning or
interpretation of these bylaws.
The above bylaws were duly adopted as the bylaws of the corporation
effective as of the 18th day of June, 1997.
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APPENDIX 5.7
[FORM OF PROMEDCO AND HP ACQUISITION CORP. TAX REPRESENTATION
LETTER]
_________ __, 1997
To the parties to the Agreement for Statutory Mergers referred to herein (other
than the signatories hereto) and the Shareholders referred to in the Agreement
for Statutory Mergers
Ladies and Gentlemen:
Pursuant to an Agreement for Statutory Mergers, dated as of July 25,
1997, (the "Merger Agreement") made and entered into by and among ProMedCo
Management Company, a Delaware corporation ("ProMedCo"), Health Plans, Inc., a
Maine corporation ("HP"), PBMA Health Systems, Inc., a Maine corporation and HP
Acquisition Corp., a Maine corporation ("Merger Sub"), each Constituent
Corporation will merge with and into Merger Sub in a transaction in which each
share of Common Stock of the Constituent Corporation will be converted into the
right to receive the Merger Consideration (the "Mergers"). Unless otherwise
indicated, capitalized terms not defined herein have the meanings set forth in
the Merger Agreement.
ProMedCo and Merger Sub represent that the following statements are
true, correct, and complete:
1. The fair market value of the ProMedCo stock and cash in lieu of
fractional shares of ProMedCo stock received by each Constituent
Corporation shareholder will be approxi mately equal to the fair market
value of the Constituent Corporation stock surrendered in exchange
therefor.
2. The payment of cash to Constituent Corporation shareholders in lieu of
issuing fractional shares of ProMedCo stock is solely to avoid the
expense of issuing fractional shares and is not separately bargained
for consideration.
3. None of the compensation, if any, received by any shareholder-employees
of HP will be separate consideration for, or allocable to, any of their
shares of HP stock; none of the
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shares of ProMedCo stock received by any shareholder-employees will be
separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees will be for
services actually rendered and will be commen surate with amounts paid
to third parties bargaining at arm's-length for similar services.
4. Following the Mergers, Merger Sub will hold at least 90 percent of the fair
market value of the Constituent Corporations' net assets and at least 70
percent of the fair market value of the Constituent Corporations' gross
assets held by the Constituent Corporations immediately prior to the Merger
and received by MergerSub in the Mergers. For purposes of this
representation, amounts paid by the Constituent Corporations or Merger Sub
to dissenters, amounts paid by the Constituent Corporations or Merger Sub
to shareholders who receive cash or other property in lieu of fractional
shares of ProMedCo stock or otherwise, amounts used by the Constituent
Corporations or Merger Sub to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made
by Constituent Corporations will be included as assets of the Constituent
Corporations or Merger Sub, respectively, immediately prior to the Mergers.
5. Following the Mergers, Merger Sub will continue the Constituent
Corporations' historic business or use a significant portion of the
Constituent Corporations' historic business assets in a business.
6. ProMedCo and Merger Sub will pay their respective expenses, if any,
incurred in connection with the Mergers.
7. There is no intercorporate indebtedness existing between ProMedCo and
either Constitu ent Corporation or between Merger Sub and either
Constituent Corporation that was issued, acquired, or will be settled
at a discount.
8. Prior to the Mergers, ProMedCo will be in control of Merger Sub within
the meaning of Section 368(c) of the Internal Revenue Code.
9. ProMedCo has no plan or intention to reacquire any of its stock issued
in the transaction.
10. ProMedCo has no plan or intention to liquidate Merger Sub; to merge
Merger Sub with or into another corporation (except for the Merger); to
sell or otherwise dispose of the stock of Merger Sub except for
transfers of stock to corporations controlled by ProMedCo; or to cause
Merger Sub to sell or otherwise dispose of any of its assets or of any
of the assets acquired from the Constituent Corporations, except for
dispositions made in the ordinary course of business or transfers of
assets to a corporation controlled by Merger Sub.
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11. ProMedCo does not own, nor has it owned during the past five years,
directly or indi rectly, any shares of the stock of either of the
Constituent Corporations.
12. Neither ProMedCo nor Merger Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
13. No stock of Merger Sub will be issued in the Mergers.
14. ProMedCo has no plan or intention to cause Merger Sub to issue
additional stock that would result in a ProMedCo losing control of
Merger Sub within the meaning of Section 368(c) of the Internal Revenue
Code.
PROMEDCO MANAGEMENT COMPANY
By:
Name:
Title:
HP ACQUISITION CORP.
By:
Name:
Title:
3
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APPENDIX 6.14
[FORM OF CONSTITUENT CORPORATION TAX REPRESENTATION LETTER]
[FORM OF MERGERSUB TAX REPRESENTATION LETTER WITH
RESPECT TO PROMEDCO STOCK HELD AFTER THE HSI MERGER]
__________ __, 1997
To the parties to the Agreement for Statutory Mergers referred to herein (other
than the signatory hereto) and the Shareholders referred to in the Agreement for
Statutory Mergers
Ladies and Gentlemen:
Pursuant to an Agreement for Statutory Merger, dated as of July 25,
1997, (the "Merger Agreement") made and entered into by and among ProMedCo
Management Company, a Delaware corporation ("ProMedCo"), Health Plans, Inc., a
Maine corporation ("HP"), PBMA Health Systems, Inc., a Maine corporation and HP
Acquisition Corp., a Maine corporation ("Merger Sub"), ___ [Acronym for relevant
Constituent Corporation] will merge with and into Merger Sub in a transaction in
which each share of __ Common Stock will be converted into the right to receive
the Merger Consideration (the "Merger"). Unless otherwise indicated, capitalized
terms not defined herein have the meanings set forth in the Merger Agreement.
__ represents that the following statements are true, correct, and complete:
1. The fair market value of the ProMedCo stock and cash in lieu of fractional
shares of ProMedCo stock received by each __ shareholder will be
approximately equal to the fair market value of the __ stock surrendered in
exchange therefor.
2. There is no plan or intention by the shareholders of __ who own one (1%)
percent or more of the outstanding __ stock at any time beginning on July
25, 1997 and continuing through the date of the Merger to sell, exchange or
otherwise dispose (by short sale or otherwise) of ProMedCo shares received
in the Merger, and to the best of the knowledge of the management of __,
there is no plan or intention on the part of the remaining shareholders of
__ to sell, exchange, or otherwise dispose of a number of shares of
ProMedCo stock received in the Merger that would reduce the __
shareholders' owner ship of ProMedCo stock to a number of shares having a
value, as of the Effective Time, of less than 50 percent of the value of
all of the formerly outstanding stock of __ as of the same date. For
purposes of this representation, shares of __ stock exchanged for cash or
other property, surrendered by dissenters or exchanged for cash in lieu of
fractional
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shares of ProMedCo stock will be treated as outstanding __ stock on the
date of the Merger. Moreover, shares of __ stock and shares of ProMedCo
stock held by __ shareholders and otherwise sold, redeemed, or disposed
of prior or subsequent to the Merger will be considered in making this
representation.
3. Following the Merger, Merger Sub will hold at least 90 percent of the fair
market value of __'s net assets and at least 70 percent of the fair market
value of __'s gross assets held immediately prior to the Merger. For
purposes of this representation, amounts paid by __ or Merger Sub to
dissenters, amounts paid by __ or Merger Sub to shareholders who receive
cash or other property in lieu of fractional shares of ProMedCo stock or
other wise, amounts used by __ or Merger Sub to pay reorganization
expenses, and all redemp tions and distributions (except for regular,
normal dividends) made by __ will be included as assets of __ or Merger
Sub, respectively, immediately prior to the Merger.
4. ____ and the shareholders of __ will pay their respective expenses, if any,
incurred in connection with the Merger.
5. There is no intercorporate indebtedness existing between ProMedCo and
__ or between Merger Sub and __ that was issued, acquired, or will be
settled at a discount.
6. At the time of the Merger, __ will not have outstanding any warrants,
options, convert ible securities, or any other type of right pursuant
to which any person could acquire stock in __ that, if exercised or
converted, would affect ProMedCo's acquisition or retention of control
of __, as defined in Section 368(c) of the Internal Revenue Code.
7. On the date of the Merger, the fair market value of the assets of __
will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which the assets are subject.
8. The liabilities of __ assumed by Merger Sub and the liabilities to
which the transferred assets of __ are subject were incurred by __ in
the ordinary course of its business.
9. __ is not an investment company as defined in Section 368(a)(2)(F)(iii)
and (iv) of the Internal Revenue Code.
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10. __ is not under the jurisdiction of a court in a title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Internal Revenue
Code.
[CONSTITUENT CORPORATION ]
By:
Name:
Title:
3
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APPENDIX 7.2
OPINION OF COUNSEL TO PROMEDCO
The Closing opinion of Boult, Cummings, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, PLC, special
counsel to ProMedCo and MergerSub which is called for by ss. 7.2 of the
Agreement, shall be dated the Closing Date and shall be to the following effect:
[Letterhead of Boult, Cummings, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, PLC]1
[Closing Date]
PBMA Health Systems, Inc.
Health Plans, Inc.
[Address]
Ladies and Gentlemen:
We have acted as counsel to HP Acquisition Corporation, a Maine
corporation ("MergerSub"), and ProMedCo Management Company, a Delaware
corporation ("ProMedCo") in connection with the preparation of the Agreement for
Statutory Mergers dated as of July 25, 1997 (the "Acquisition Agreement") and
have participated on behalf of MergerSub and ProMedCo in connection with the
merger of PBMA Health Systems, Inc. ("HSI") and Health Plans, Inc. ("HP") with
and into MergerSub. This Opinion Letter is provided to you at the request of
ProMedCo pursuant to Section 7.2 of the Acquisition Agreement. Except as
otherwise indicated herein, capitalized terms used in this Opinion Letter are
defined as set forth in the Acquisition Agreement or the Accord (see below).
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The attorneys in this firm are
licensed to practice law in the State of Tennessee and consequently the law
covered by the opinions expressed herein
--------
1Draft only; subject to internal firm review.
1
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is limited to the Federal Law of the United States, the corporate law of the
States of Delaware and Maine and in reliance on public documents issued by the
States of Delaware and Maine and certificates of officers of ProMedCo and
MergerSub.
We have relied upon factual representations made by MergerSub in
Article 3 of the Acquisition Agreement.
Based upon the foregoing and subject to the foregoing, we are of the
opinion that:
1. The Agreement is enforceable against ProMedCo and MergerSub.
2. The ProMedCo Stock has been duly authorized, validly issued and is
non-assessable.
3. Execution and delivery by ProMedCo and MergerSub of, and performance
of their agreements in, the Agreement do not (i) violate the Constituent
Documents, (ii) breach, or result in a default under, any existing obligation of
MergerSub or ProMedCo under contracts dealing with money borrowed by either such
corporation known to us, or (iii) breach or otherwise violate any existing
obligation of MergerSub or ProMedCo under Court Orders identified in Article 4
of the Acquisition Agreement and the Schedules pertaining thereto.
4. Execution and delivery by MergerSub and ProMedCo of, and performance
by each such corporation of its agreements in, the Agreement do not violate
applicable provisions of statutory law or regulation.
The General Qualifications apply to the opinions set forth above.
This Opinion Letter may be relied upon by you only in connection with
the transaction and may not be used or relied upon by you or any other person
for any purpose whatsoever, except to the extent authorized in the Accord,
without in each instance, our prior written consent.
Very truly yours,
BOULT, CUMMINGS, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, PLC
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APPENDIX 8.3
OPINION OF COUNSEL TO THE CONSTITUENT CORPORATIONS
The Closing opinion of Messrs. Ropes & ▇▇▇▇, counsel to the Constituent
Corporations which is called for by ss. 8.3 of the Agreement, shall be dated the
Closing Date and shall be to the effect that:
[FORM OF ROPES & ▇▇▇▇ OPINION]
______ __, 1997
ProMedCo Management Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
HP Acquisition Corporation
[Address]
Ladies and Gentlemen:
This opinion is being furnished to you pursuant to Section 8.3 of the
Agreement for Statutory Mergers dated as of _________ __, 1997 (the "Merger
Agreement") among each of you, Health Plans, Inc., a Maine corporation (the
"Company"), and PBMA Health Systems, Inc., a Maine corporation, in connection
with the closing held this day under the Merger Agreement. Terms defined in the
Merger Agreement and not otherwise defined herein are used herein with the
meanings so defined.
We have acted as counsel for the Company in connection with the Merger
Agreement and the transactions contemplated thereby and as such are familiar
with the proceedings taken by the Company in connection with the Merger
Agreement. While we have examined and relied on such certificates, documents and
records, and have made such examination of law, as we have deemed necessary to
enable us to render the opinions expressed below, we have not for purposes of
rendering such opinions undertaken a general factual or legal investigation into
the business and affairs of the Company.
We have participated in the preparation of the Merger Agreement and
have examined counterparts, executed by the Company, of the Merger Agreement. We
have examined and relied as to matters of fact (other than facts constituting
conclusions of law) upon the representations and
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warranties of the Company set forth in the Merger Agreement and in certificates
of the Company delivered in connection therewith and herewith. We have assumed
in rendering our opinions expressed in paragraph 1 below that each of you, as
the case may be, have all requisite power and authority and have taken all
necessary action to execute and deliver the Merger Agreement and to effect the
transactions contemplated thereby. For purposes of rendering the opinion
expressed in paragraph 5 below, we have assumed your satisfaction of the
statutorily prescribed conditions to merger, including without limitation
approval of the merger by the Maine Bureau of Insurance.
The opinions expressed below are limited to matters governed by the
laws of The Commonwealth of Massachusetts and the federal laws of the United
States. We call your attention to the fact that the Merger Agreement provides
that it is to be governed by and construed in accordance with the internal laws
of the State of Maine. For purposes of rendering the opinions expressed herein,
we have assumed that the Merger Agreement provides that it is to be governed by
and construed in accordance with the internal laws of The Commonwealth of
Massachusetts. We also express no opinion as to state securities or blue sky
laws.
Based on and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated and validly existing
under the laws of The State of Maine and is in good standing with the Office of
the Secretary of State of The State of Maine. The Company has corporate powers
adequate (i) to enter into, execute and deliver the Merger Agreement and to
consummate the transactions contemplated thereby and (ii) to own or lease its
properties and carry on its business as now conducted by it. The Company is duly
qualified to do business as a foreign corporation in __________ and _________.
2 . The Merger Agreement has been duly authorized, executed and
delivered by the Company, and is (subject to the qualifications stated in the
penultimate paragraph hereof) a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
3. The authorized capital stock of the Company on the date hereof
consists of: (i) 1,000,000 shares of Voting Common Stock, par value $.01 per
share, of which __________ shares are issued and outstanding; (ii) 1,000,000
shares of Nonvoting Common Stock, par value $.01 per share, of which ____ shares
are issued and outstanding; and (iii) 200,000 shares of Nonvoting Convertible
Preferred Stock, par value $15.00 per share, of which as of the date hereof zero
(0) shares are issued and outstanding (collectively, the Voting Common Stock,
Nonvoting Common Stock and Nonvoting Convertible Preferred Stock of the Company
are referred to herein as the "Company Capital Stock"). The outstanding shares
of the Company Capital Stock have been duly authorized and validly issued, and
are fully paid and nonassessable.
4. Under existing provisions of law, no approval of, or authorization
or other action by, or filing with, any federal or Maine governmental authority
is required to be obtained or made by the
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Company in connection with the execution, delivery or performance of the Merger
Agreement, except for (a) the filing of the Articles of Merger of the Company
into HP Acquisition Corporation and other appropriate merger documents, if any,
as required by the laws of The State of Maine and (b) such approvals,
authorizations or filings as have been obtained or made.
5. The execution and delivery of the Merger Agreement by the Company do
not, and the performance by the Company of the terms thereof applicable to it
will not, result in any violation by it of, or be in conflict with, constitute a
default under or result in the creation of a lien or right of termination as a
result of a change of ownership or control under, any term or provision of (a)
the Articles of Incorporation or the By-laws of the Company, or (b) any federal
or Maine law, statute or governmental regulation (other than any federal or
state securities laws).
6. To the best of our knowledge, except as set forth on Exhibit A
hereto or Exhibit __ to the Merger Agreement, after having made due inquiry of
the Company but without having investigated any governmental records or court
dockets other than those referred to below, there is no governmental action or
proceeding and no litigation pending or threatened against the Company which
seeks to prevent or enjoin performance of or places in question the validity or
enforceability of the Merger Agreement.
In connection with our opinion expressed in paragraph 6 above, we have
caused the docket of the U.S. District Court for the District of Maine in
___________ and the Superior Courts for Kennebec and Cumberland Counties to be
searched through _____ __, 1997 for the prior _____ year period for the filing
of any action that names the Company as a defendant.
Our opinion that the Merger Agreement is a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms is subject to (i) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties generally and (ii) general principles
of equity, regardless of whether enforcement is sought in proceedings in equity
or at law. Such opinions are also subject to the qualifications that (i) the
enforceability of the provisions of the Merger Agreement providing
indemnification may be affected by public policy considerations or court
decisions which may limit the right of the indemnified party to obtain
indemnification involving such party's fault; and (ii) we express no opinion as
to the enforceability of the provisions of the Merger Agreement waiving the
right to a jury trial.
The foregoing opinion is solely for your benefit and may not be relied
on by any other person.
Very truly yours,
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APPENDIX 8.6
FORM OF STOCKHOLDER AND INDEMNIFICATION AGREEMENT
PROMEDCO MANAGEMENT COMPANY
STOCK AND INDEMNIFICATION AGREEMENT
STOCK AND INDEMNIFICATION AGREEMENT (the "Agreement") is made as of
this __th day of ____, 1997 between the person whose signature and name are
affixed to the foot of this Agreement as "Stockholder" ("Stockholder") and
ProMedCo Management Company, a Delaware corporation, ("ProMedCo").
RECITALS:
PBMA Health Systems, Inc. ("HSI") and Health Plans, Inc. ("HP"), both
Maine corporations (collectively the "Constituent Corporations") have entered
into a Agreement for Statutory Merger dated as of July 25, 1997 (the "Merger
Agreement") with ProMedCo and HP Acquisition Corporation, a Maine corporation
("MergerSub") which is a wholly owned subsidiary of ProMedCo. Pursuant to the
Merger Agreement Stockholder, as a former shareholder of one of the Constituent
Corporations, has received or will receive certain shares of ProMedCo common
stock (such shares, as adjusted in accordance with the terms of the Merger
Agreement, herein referred to as the "Shares"). All capitalized terms used in
this Agreement not otherwise defined herein shall have the meanings as assigned
to them in the Merger Agreement.
The parties agree as follows:
ARTICLE 1
REPRESENTATIONS AND ACKNOWLEDGMENTS BY STOCKHOLDER
1.1. Experience in Business and Financial Matters. Stockholder
represents and warrants that Stockholder has such knowledge and experience in
business and financial matters, or competent professional advice concerning
ProMedCo, that Stockholder is capable of evaluating the merits and risks of
owning the Shares.
1.2. Information regarding ProMedCo. Stockholder acknowledges that
Stockholder has had and continues to have the opportunity to obtain from
ProMedCo any additional information, to the extent possessed or obtainable
without unreasonable effort and expense, necessary to evaluate the merits and
risks of owning the Shares and Stockholder has concluded, based on the
information presented to Stockholder, including without limitation a Prospectus
dated March 12, 1997 relating to ProMedCo's recent public offering of Common
Stock, Stockholder's own understanding of
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investments of this nature and of this investment in particular, and the advice
of such consultants as Stockholder has deemed appropriate, that Stockholder
wishes to own the Shares.
1.3. Unregistered Stock. Stockholder acknowledges that the Shares being
acquired have not been registered under the Securities Act of 1933, or under the
Blue Sky or other securities laws of certain states, and, therefore, that
Stockholder must bear the economic risk of the investment for an indefinite
period of time, as the Shares cannot be sold or offered for sale unless the
Shares are subsequently so registered or an exemption from registration is
available. Stockholder also understands that there is no market for the resale
of the Shares and that there is no certainty that a market will develop.
1.4. Securities Legend. Stockholder understands that any document
evidencing the Shares will bear a restrictive legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED
UNDER SUCH ACT, OR SUCH STATE LAWS, OR AN OPINION OF COUNSEL IS
FURNISHED TO THE COMPANY (WHICH OPINION AND COUNSEL RENDERING SAME
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY) TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED."
Stockholder also understands that the records of ProMedCo will indicate
the restrictions on transferability and sale noted above in this Section 1.4 and
stop transfer instructions have been or will be placed with respect to the
Shares so as to restrict the transfer thereof. Stockholder agrees not to dispose
of any of the Shares unless ProMedCo receives an opinion of counsel acceptable
to it that the Shares can be transferred without violation of the registration
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission, and any applicable state securities laws or
regulations, or ProMedCo receives evidence satisfactory to it that the Shares
have been validly registered under the Securities Act and any applicable state
securities laws. Notwithstanding the foregoing, ProMedCo shall not approve any
transfer of shares that is inconsistent with the intent of the parties to
qualify the transaction as a tax-free reorganization as set forth in ss. 2.1 of
the Merger Agreement.
1.5. Investment Intent. Stockholder is acquiring the Shares solely for
investment for his or her own account; Stockholder has no present agreement,
understanding, intent or arrangement to subdivide, sell, assign or transfer any
part or all of his Shares, or any interest therein, to any other person.
Stockholder has sufficient and adequate means to provide for his or her current
needs and personal contingencies and has no need for liquidity with respect to
an investment in ProMedCo.
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1.6. ProMedCo's Limited Operating History. Stockholder is aware of and
understands that ProMedCo has been in operation for approximately one year, and
has a limited financial or operating history and that the Shares are speculative
investments which involve a risk of loss by him of his investment. Stockholder
understands ProMedCo's future operations are subject to many significant risks.
1.7. No Representations Regarding Future Profits. Stockholder has not
relied on any representation by any person, whether such representation was made
directly or indirectly, regarding the amount, percentage or type of profit or
loss to be realized, if any, from an investment in the Shares. Stockholder
further acknowledges that the prior experience of ProMedCo or any other person
is not in any way a prediction of the results which Stockholder may obtain as a
result of his investment in the Shares.
ARTICLE 22
INDEMNIFICATION
2.1 Grant of Indemnity. Subject to the limitations set forth in this
Section 2.1, Stockholder agrees, on a several basis, and not jointly and
severally, with all other Stockholders, to indemnify, defend and hold ProMedCo
and MergerSub and their Affiliates and its and their respective officers and
directors, harmless from and against any claims, losses, liabilities,
obligations, lawsuits, deficiencies, damages or expenses of whatever nature,
whether known or unknown, accrued, absolute, contingent or otherwise (including
(without limitation) interest, penalties, reasonable attorneys' fees, reasonable
costs of investigation incurred by ProMedCo and MergerSub in connection with any
demand, action, suit, proceeding, assessment or judgment incident to any of the
foregoing) and all amounts paid in defense or settlement of the foregoing,
suffered or incurred by ProMedCo or MergerSub (singularly, a "ProMedCo Loss";
collectively, "ProMedCo Losses") as a result of the occurrence of any of the
following: (i) a breach of any obligation, representation, warranty, covenant or
agreement made by HP in the Merger Agreement or any agreement furnished or
required to be furnished pursuant to the Merger Agreement or because any
representation or warranty by HP contained in the Merger Agreement, in any
document furnished or required to be furnished pursuant to this Agreement by HP
to ProMedCo or MergerSub or any of their representatives, or any documents
furnished to ProMedCo and MergerSub in connection with the Closing hereunder,
shall be false.
2.2 Limitation on Liability. The Stockholder and the other Stockholders
shall be severally (and not jointly and severally) liable under this Section 2.1
in respect of ProMedCo Losses only to the extent the aggregate of such ProMedCo
Losses exceeds $250,000, in which case, such Stockholder shall be liable under
this Section 2.1 for the amount of such ProMedCo Losses in excess of $250,000,
allocated to such Stockholder, up to a maximum aggregate amount of 50% of the
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2This Article except for Sections 2.6, 2.7 and 2.8 will be omitted from
the Agreement to be signed by the former HSI shareholders.
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Consideration (as defined in the Merger Agreement) allocated to such
Stockholder. All payments to ProMedCo or MergerSub pursuant to this Section 2.1
in each case shall be net of (i) income tax benefits to ProMedCo or MergerSub to
the extent realized by such Person in the tax year in which the ProMedCo Losses
occurred, and (ii) insurance proceeds, if any when actually received by ProMedCo
or MergerSub, provided, however, that ProMedCo or MergerSub shall retain the
right in its sole discretion to determine whether to pursue such claims by,
through or against an insurer or to bring such claims directly or indirectly
against the Stockholder pursuant to this Section 2.1
2.3 Representation, Cooperation and Settlement.
(a) ProMedCo and MergerSub shall give prompt notice to the Shareholder
Representative of any claim against ProMedCo or MergerSub which might give
rise to a claim based on the indemnity contained in this Article 2, stating
the nature and basis of the claim and the amount thereof.
(b) In the event any claim, action, suit or proceeding is brought against
ProMedCo or MergerSub with respect to which one or more Shareholders may
have liability under the indemnity contained in this Article 2, ProMedCo
and MergerSub shall permit the Shareholder Representative to assume the
defense of any such claim or any litigation resulting from such claim,
provided that ProMedCo and MergerSub shall not be required to permit the
Shareholder Representative to assume the defense of any third party claim
which if not first paid, discharged, or otherwise complied with would
result in an interruption or cessation of the conduct of MergerSub's
business or any material part thereof. Failure by the Shareholder
Representative to notify ProMedCo and MergerSub of its election to defend
any such claim or action by a third party within thirty (30) days after
notice thereof shall have been given by ProMedCo and MergerSub, shall be
deemed a waiver of any such election. If the Shareholder Representative
assumes the defense of such claim or litigation resulting therefrom, the
obligations of the Shareholder Representative hereunder as to such claim
shall include taking all steps reasonably necessary in the defense or
settlement of such claim or litigation resulting in the defense or
settlement of such claim or litigation resulting therefrom, including the
retention of counsel satisfactory to ProMedCo and MergerSub, and holding
ProMedCo and MergerSub harmless from and against any and all damage
resulting from, arising out of, or incurred with respect to any settlement
approved by the Shareholder Representative or any judgment in connection
with such claim or litigation resulting therefrom. The Shareholder
Representative shall not, in the defense of such claim or litigation,
consent to the entry of any judgment (other than a judgment of dismissal on
the merits with costs) except with the written consent of ProMedCo and
MergerSub nor enter into any settlement (except with the written consent of
ProMedCo and MergerSub) which does not include as an unconditional term
thereof the giving by the claimant or the
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plaintiff to ProMedCo and MergerSub a release from all
liability in respect to such claim or litigation.
(c) If the Shareholder Representative shall not assume the defense of any such
claim by a third party or litigation resulting therefrom, ProMedCo and
MergerSub may defend against such claim or litigation in such manner as it
deems appropriate. The Shareholder Representative shall, in accordance with
the provisions hereof, promptly reimburse ProMedCo and MergerSub for the
amount of any settlement reasonably entered into by ProMedCo and MergerSub
and for all damage incurred by ProMedCo and MergerSub in connection with
the defense against or settlement of such claim or litigation.
2.4. Exclusive Remedy. This Section 2.4 shall provide ProMedCo's and
MergerSub's sole and exclusive remedy against the Stockholders for any and all
ProMedCo Losses sustained or incurred by ProMedCo, MergerSub and their
Affiliates and its and their respective officers and directors, and their
respective successors and assigns.
2.5. Right to Tender Stock. Each Stockholder shall have the right to
satisfy its obligations to pay the amount of any ProMedCo Loss by tendering to
ProMedCo for cancellation such number of shares of ProMedCo common stock, based
on the Deemed Value of the ProMedCo common stock (as defined below), equal to
the amount of such ProMedCo Loss; provided that this right shall exist only if,
after taking into account such tender of ProMedCo common stock, together with
any cash payments contemporaneously made by the Stockholder, the Stockholder
satisfies in full of his obligations to pay when du the amount of such ProMedCo
Loss. For purposes of this Section 2.5, the Deemed Value of ProMedCo common
stock shall be $8.80 per share.
2.6. Release. The Stockholder agrees to execute at the time of
execution of this Agreement a general release in the form attached hereto as
Exhibit A.
2.7. Tax Loss Indemnification. Stockholder agrees to indemnify, defend
and hold ProMedCo and MergerSub and their Affiliates and all other Stockholders
(the "Tax Indemnified Parties") harmless from and against any Tax or Taxes (as
such terms are defined in the Merger Agreement) (including (without limitation)
interest, penalties, reasonable attorneys' fees, reasonable costs of
investigation incurred by the Tax indemnified Parties in connection with any
demand, action, suit, proceeding, assessment or judgment incident to any Tax or
Taxes) and all mounts paid in defense or settlement of the foregoing, suffered
or incurred by any of the Indemnified Parties (singularly, a "Tax Loss";
collectively, "Tax Losses") as a result of the breach of any obligation,
covenant or agreement made by Stockholder in the Merger Agreement or this
Agreement or because any certification, representation or warranty by
Stockholder contained in the Merger Agreement, this Agreement or in any
certificate or other document furnished or required to be furnished by
Stockholder pursuant to the Merger Agreement or this Agreement shall be false.
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2.8. Third Party Beneficiaries. The parties hereto agree that, for
purposes of Section 2.7, all other Stockholders of the Constituent Corporations
shall be third party beneficiaries of this Agreement.
ARTICLE 3
NOTICES
All notices, demands and other communications required or permitted
hereunder shall be made in writing and be deemed communicated on the date when
delivered in person or when delivered, if mailed by certified mail, postage
prepaid, sent to the address set forth at the foot of this Agreement or to such
other address as either Stockholder or ProMedCo may designate by notice to the
other.
ARTICLE 4
MISCELLANEOUS
4.1 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether written or oral, of the parties, and there
are no representations, warranties or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein.
4.2 Governing Law. The validity and construction of this
Agreement shall be governed by the laws of the State of Delaware.
4.3 Section Headings. The section headings are for reference only
and shall not limit or control the meaning of any provision of this Agreement.
4.4 Waiver. No delay or omission on the part of any party hereto in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Agreement.
4.5 Successors and Assigns. This Agreement shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
4.6 Amendments. This Agreement may be amended, but only in writing,
signed by the parties hereto.
4.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall comprise one and the same instrument.
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4.8 Severability. Each section and subsection of this Agreement
constitutes a separate and distinct undertaking, covenant and/or provision
hereof. Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law. In the event
that any provision of this Agreement shall finally be determined by a competent
court or tribunal to be unlawful or unenforceable, such provision shall be
deemed severed from this Agreement, but every other provision of this Agreement
shall remain in full force and effect, and in substitution for any such
provision held unlawful or unenforceable, there shall be substituted a provision
of similar import reflecting the original intent of the parties hereto to the
extent permissible under law.
4.9 Termination. Except for the provisions of Section 1.4 of this
Agreement, which the parties hereto agree shall survive the termination of this
Agreement and for so long as the Stockholder shall own any Shares, this
Agreement shall terminate upon the first to occur of (i) a successful completion
of a Qualified Public Offering by ProMedCo or (ii) upon the mutual written
agreement of the parties hereto.
4.10 Arbitration. Any controversy or claim arising out of or relating
to this Agreement or the breach thereof will be settled by binding arbitration
in accordance with the rules of commercial arbitration of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Such
arbitration shall occur within the County of Tarrant, State of Texas, unless the
parties mutually agree to have such proceedings in some other locale. The
arbitrator(s) may in any such proceeding award attorneys' fees and costs to the
prevailing party.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ProMedCo Notice Address: PROMEDCO MANAGEMENT COMPANY
ProMedCo Management Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ By:
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Stockholder Address: STOCKHOLDER:
Printed Name
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EXHIBIT A
GENERAL RELEASE
KNOW ALL PERSONS BY THESE PRESENTS that, in consideration of the
covenants, warranties and representations to, and of the further consideration
set forth in, the Agreement for Statutory Merger dated as of July 25, 1997, by
and among ProMedCo Management Company ("ProMedCo"), HP Acquisition Corp., Health
Plans, Inc. and PBMA Health Systems, Inc. and the Stock and Indemnification
Agreement dated as of _______ __, 1997, by and among the undersigned Stockholder
and ProMedCo (collectively, the "ProMedCo Agreements"), the receipt and
sufficiency of which are hereby acknowledged, the undersigned Stockholder and
his or its predecessors, successors, corporate parents, subsidiaries,
affiliates, present or former trustees, stockholders, directors, officers,
attorneys, agents, employees, heirs, executors, administrators and assigns
(hereinafter collectively referred to as the "Releasors") do hereby release and
forever discharge Health Plans, Inc., PBMA Health Systems, Inc., present or
former stockholders of each, and their predecessors, successors, corporate
parents, subsidiaries, affiliates, present or former trustees, directors,
officers, attorneys, agents and employees (hereinafter collectively referred to
as the "Releasees"), and each of the aforesaid, from all claims, actions, causes
of action, suits, contracts, controversies, agreements, representations,
warranties and liabilities whatsoever, both in law and equity, which they now
have or ever had from the beginning of time to the date of execution of this
Agreement, against the Releasees, including, without limiting the generality of
the foregoing, of and from any and all matters which were or could have been
complained of in the lawsuit entitled PBMA Health Systems, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇,
M.D., ▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D., ▇▇▇▇▇ ▇▇▇▇▇▇, M.D., ▇▇▇▇▇▇ ▇▇▇▇, M.D. and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, M.D. v. ▇▇▇▇▇ ▇. ▇▇▇▇, M.D., ▇▇▇▇ ▇▇▇▇▇▇▇, M.D., ▇▇▇▇▇▇▇ ▇▇▇▇▇, M.D.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D., ▇▇▇▇▇▇ ▇▇▇▇▇, M.D. and ▇▇▇▇▇ ▇▇▇▇▇▇, Cumberland Superior
Court, Civil Action No. CV-97-271, except for such obligations and
responsibilities of the Releasees as arise from the terms of the ProMedCo
Agreements. This General Release shall be governed by and construed in
accordance with the laws of the State of Maine.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of _____,
1997.
-------------------------
Name:
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Then personally appeared before me __________________, who is known to
me and who acknowledged to me that (s)he fully read and understood the foregoing
General Release and that his (her) signing of the General Release is his (her)
free act and deed and who in my presence signed the foregoing General Release on
________, 1997.
Before me,
Notary Public
My Commission expires:
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APPENDIX 8.7
CONTINUITY OF INTEREST CERTIFICATE FOR CONSTITUENT CORPORATION
SHAREHOLDERS
To the parties to the Agreement for Statutory Mergers referred to herein and the
Shareholders (other than the the signatory hereto) referred to in the Agreement
for Statutory Mergers
The undersigned is aware that pursuant to an Agreement for Statutory
Merger, dated as of July 25, 1997, (the "Merger Agreement") made and entered
into by and among ProMedCo Management Company, a Delaware corporation
("ProMedCo"), HP Acquisition Corp., a Maine corporation ("Merger Sub"), and the
Constituent Corporations, each Constituent Corporation will merge with and into
Merger Sub in a transaction in which each share of Constituent Corporation
Common Stock will be converted into the right to receive the HSI or HP
Consideration (the "Merger"). Unless otherwise indicated, capitalized terms not
defined herein have the meanings set forth in the Merger Agreement.
The undersigned hereby represents and warrants to ProMedCo, Merger Sub
and the shareholders of the Constituent Corporation in which the undersigned
owns stock that:
(a) The undersigned has, and as of the Effective Time of the Merger will have,
no plan or intention to sell, give, pledge, hypothecate, exchange,
distribute, otherwise dispose of, or reduce the risk of ownership of or
transfer (by short sale or otherwise) (collectively, a "Transfer") any of
the ProMedCo stock received in the Merger. Shares of HP stock, if any, and
shares of ProMedCo stock (including shares of HP stock, if any, acquired
pursuant to the exercise, at or prior to the Effective Time, of options to
acquire HP stock) held by HP shareholders and Transferred prior or
subsequent to the Merger will be considered in making this representation.
(b) The undersigned is not aware of or participating in any plan on the part of
the shareholders of the Constituent Corporation in which the undersigned
holds stock to Transfer ProMedCo stock received in the Merger.
(c) The undersigned will pay its expenses, if any, incurred in the Merger.
(d) None of the compensation, if any, received by the undersigned will be
separate consideration for, or allocable to, any of its shares of
Constituent Corporation stock; none of the shares of ProMedCo stock
received by the undersigned will be separate consideration for, or
allocable to, any employment agreement; and the compensation received by
the undersigned will be for services actually rendered and will be
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commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
(e) The undersigned did not acquire any shares of Constituent Corporation stock
in contemplation of the Merger and has no plan to acquire any additional
shares of Constituent Corporation stock between the date hereof and the
Effective Time.
The undersigned understands and acknowledges that (i) ProMedCo, Merger
Sub and the shareholders of the Constituent Corporations may rely on the truth
and accuracy of the representations contained in this Certificate, and (ii)
legal counsel to ProMedCo and HP will rely on the truth and accuracy of the
representations contained in this Certificate in delivering any opinions as to
certain federal income tax consequences of the Merger. If any of the
representations contained herein ceases to be true at any time on or prior to
the Effective Time of the Merger, the undersigned shall deliver to the
Constituent Corporation in which the undersigned holds stock and to legal
counsel to ProMedCo and such Constituent Corporation a written statement to that
effect.
By:
Address:
Date:
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APPENDIX 8.11A
FORM OF ▇▇▇▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made as of August __, 1997, between ProMedCo
Management Company a Delaware corporation (the "Company"), and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ ("Executive").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company hereby employs Executive, and Executive accepts
employment with the Company, under the terms and conditions set forth in this
Agreement for the period beginning on the date hereof and ending as provided in
paragraph 4 hereof (the "Employment Period"). The date on which Executive ceases
to be employed by the Company and/or its Subsidiaries (as defined below) or its
successors or assigns is referred to herein as the "Termination Date."
2. Position and Duties.
(a) During the Employment Period, Executive shall perform such duties for the
Company, its affiliates and its Subsidiaries as the Company may direct in
its sole discretion. Executive shall serve as Senior Vice President of the
Company, and President and Chief Executive Officer of Health Plans, Inc., a
subsidiary of the Company. Executive will be based in Boston,
Massachusetts, and travel as required to effectively manage Health Plans,
Inc. in Portland, Maine, or as otherwise required in his capacity as an
officer of the Company.
(b) Executive shall devote Executive's best efforts and full business time and
attention (except for: (a) permitted vacation periods and reasonable
periods of illness or other incapacity and (b) service on the Board of
Directors of Blue Tee to the business and affairs of the Company, its
affiliates and its Subsidiaries. Executive shall perform such duties and
responsibilities to the best of Executive's abilities in a diligent,
trustworthy, businesslike and efficient manner.
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(c) For purposes of this Agreement, "Subsidiaries" shall mean any corporation
of which the securities having at least 50% of the voting power in electing
directors are, at the time of determination, owned by the Company, directly
or through one or more Subsidiaries.
3. Compensation and Benefits.
(a) For and in consideration of the termination of a certain Employment
Agreement entered into between New England Affiliated Health Plans, Inc.
and Executive, dated as of the 1st day of September, 1992, and as
subsequently amended, Company hereby agrees to pay to Executive the sum of
$560,000 in cash, payable on the Closing Date of that certain transaction
entered into between the Company and Health Plans, Inc., (the
"Transaction").
(b) During the Employment Period, Executive's Base Salary (the "Base Salary")
shall be $240,000 per annum or such higher rate as the Compensation
Committee may designate from time to time. The Base Salary shall be subject
to annual increases of no less than the increase in the Consumer Price
Index for all goods and services, U.S. All City Average Report, published
by the United States Department of Labor for the preceding 12 months. The
Base Salary shall be payable in regular install ments in accordance with
the Company's general payroll practices.
(c) The Company shall reimburse Executive for all reasonable expenses incurred
by him in the course of performing his duties under this Agreement which
are consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of
such expenses.
(d) In addition to the Base Salary, the Company may award a bonus to Executive
following the end of each fiscal year during the Employment Period based
upon the Company's achievement of operating goals during such fiscal year.
The percentage and goals shall be as approved by the Compensation Committee
of the Board of Directors for each such fiscal year, and will typically be
structured such that a portion will be payable after the end of the fiscal
year (the "Current Portion") with the remaining balance payable in equal
amounts after the end of each of the following three fiscal years, provided
Executive is still employed by Company on such payment dates. The Current
Portion of the bonus, if any, shall be payable upon determination of the
amount due, approximately 75 days after the end of the fiscal year.
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(e) In addition to the Base Salary and any bonuses payable to Executive
pursuant to this paragraph, during the Employment Period Executive shall be
entitled to participate in all benefit plans adopted by Company for its
Health Plans subsidiary including:
(i) term life insurance, health insurance and disability
insurance coverage,
(ii) annual paid vacation in accordance with Company's
policies as from time to time established.
Such benefit plans may be modified from time to time to ensure
compliance with ERISA and then existing Company policies.
4. Term.
(a) The Employment Period is for a term of three years ending on August __,
2000, provided that (i) the Employment Period shall terminate prior to such
date upon Executive's resignation, death or permanent disability or
incapacity (as determined by the Board in its good faith judgment) and (ii)
the Employment Period may be terminated by the Company at any time prior to
such date For Cause (as defined below) or Without Cause. The Employment
Period is automatically extended for successive years unless notice to the
contrary is given not later than ninety (90) days preceding the end of the
final year of the contract, and all terms of this Agreement shall remain in
full force and effect (unless otherwise specified herein) for any such
renewal term.
(b) If the Employment Period is terminated by the Company Without Cause prior
to the third anniversary of the date of this Agreement, Executive shall be
entitled to receive his Base Salary, as in effect immediately prior to the
Termination Date, through the third anniversary of this Agreement, or one
year, whichever is greater, so long as Executive has not breached the
provisions of paragraphs 5, 6 and 7 hereof. The payments described in this
paragraph 4(b) shall be payable in regular installments in accordance with
the Company's general payroll practice. The amounts payable pursuant to
this paragraph 4(b) shall be reduced by the amount of any compensation
Executive receives with respect to any other employment or consulting
during the period, however, nothing contained herein shall impose on
Executive an affirmative duty to seek or accept other employment Upon
request from time to time, Executive shall furnish the Company with a true
and complete certificate specifying any such compensation due to or
received by him.
(c) If the Employment Period is terminated by the Company For Cause or is
terminated as a result of Executive's resignation (except for "Good Reason"
as hereinafter
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defined) or normal expiration of the Agreement, Executive
shall be entitled to receive only his Base Salary through the
Termination Date.
(d) If the Employment Period is terminated by Executive for Good Reason, the
termination will be treated under this Agreement as if the Company had
terminated Executive's employment Without Cause under Paragraph 4(b). The
following shall constitute Good Reason for termination by the Executive:
(i) Failure of the Company to continue the Executive in the position of
Senior Vice President of the Company; (ii) material diminution in the
nature or scope of the Executive's responsibilities, duties or authority
unless performance related; (iii) material failure of the Company to
provide the Executive compensation and benefits in accordance with the
terms of paragraph 3 hereof following notice and ten business days to cure;
or (iv) relocation of the Executive's principal worksite more than 25 miles
from its current site, without Executive's agreement in writing.
(e) All of Executive's rights to fringe benefits and bonuses hereunder (if any)
accruing after the termination of the Employment Period shall cease upon
termination, provided however, if Employment Period is terminated by the
Company Without Cause ((4(b) above)), term life, health and disability
insurance will continue through the third anniversary of this Agreement, or
one year, which ever is greater, so long as Executive has not breached the
provisions of paragraphs 5, 6 and 7 hereof.
(f) Except as specifically provided otherwise in paragraph 5, for purposes of
this Agreement, "Cause" shall mean (i) the commission of a felony or a
crime involving moral turpitude, (ii) the commission of any act involving
dishonesty, embezzlement or fraud with respect to the Company or any of its
Subsidiaries, (iii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iv) failure to
perform duties as reasonably directed by the Company's CEO, (v) gross
negligence or willful misconduct with respect to the Company or any of its
Subsidiaries, (vi) Executive's violation of the non-competition provisions
of Section 7, (vii) Executive's material breach of any duty owed to the
Company, including without limitation the duty of loyalty, or (vii) any
other material breach of this Agreement, all of the above as determined
solely by the CEO of the Company. Cause shall not include acts or failure
to act if Executive has exercised substantial efforts in good faith to
perform the duties reasonably assigned or appropriate to his position, as
determined solely by the CEO.
(g) If a "Change of Control" occurs and the Employment Period is terminated or
Executive voluntarily resigns within 12 months, such termination shall
constitute a termination Without Cause. For this purpose, a "Change of
Control" occurs when:
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- any "Person" or "Group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934 ("Exchange Act")), other than
the Executive or the Founders (▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
H. ▇▇▇▇▇ ▇▇▇▇▇, E. ▇▇▇▇▇▇ ▇▇▇▇▇▇, and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇), or an entity the majority of the voting
stock of which is owned or controlled by the
Executive or the Founders becomes the "beneficial
owner" (within the meaning of Rule 13d-3 and/or Rule
13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all
shares that such Person has the right to acquire
without condition, other than the passage of time,
whether such right is exercisable immediately or only
after the passage of time), directly or indirectly
30% or more of the total voting power of the then
outstanding voting stock of the Company; or
- the Company consolidates with or merges into another
Person or conveys, transfers or leases all or
substantially all of its assets to any Person, or any
corporation consolidates with or merges into the
Company pursuant to a transaction in which the
outstanding voting stock of the Company is changed
into or exchanged for cash, securities or other
property, other than a transaction between the
Company and (i) an Affiliate of the Company, or (ii)
any other entity owned or controlled by the Founders.
(h) In the event the Company chooses to relocate the operations of
Health Plans outside of Portland Maine, and Executive chooses
to terminate his Employment Period instead of relocating with
the operations of Health Plans, such termination shall
constitute a termination Without Cause for purposes of
determining severance arrangements under this Agreement.
5. Liquidated Damages. The parties agree that the execution of this
Employment Agreement is of substantial value to the Company, in conjunction with
its consummation of the Transaction. Accordingly, Executive agrees that
liquidated damages will be assessed against the Executive should Executive
breach the terms and conditions of this Agreement, either by Material Default
(as hereinafter defined) in execution of the duties assigned thereunder, or by
the Early Termination (as hereinafter defined)of such Agreement. The amount of
such liquidated damages shall be assessed as follows:
Months 1-12 70.76% of Issued Shares
Months 13-24 42.45% of Issued Shares
Months 25-36 17.69% of Issued Shares
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This amount has been determined by both parties to be fair compensation for the
expenses and damages that will be suffered by the Company. Such shares will be
returned by Executive to the Company within ten (10) days of the date of breach
by the Executive.
Material Default, for purposes of this paragraph, shall be defined as follows:
(i) conviction of a felony or other crime involving moral turpitude;
(ii) fraud, embezzlement or other dishonesty with respect to the
Company or Health Plan;
(iii) willful failure to perform or gross negligence in performance after
specific notice and ten business days to cure.
Early Termination, for purposes of this paragraph, shall be defined as
termination of this Agreement for any reason other than as follows:
(i) death
(ii) disability as that term is defined in the Company's then current
long term disability policy.
(iii) Good Cause as defined in Paragraph 3(d) herein;
(iv) Change in Control as defined in Paragraph 3(g) herein.
6. Confidential Information. The Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
concerning the business or affairs of the Company, any of its affiliates or any
Subsidiary ("Confidential Information") are the property of the Company or such
affiliate or Subsidiary, as the case may be. Therefore, Executive agrees not to
disclose to any unauthorized person or use for Executive's own account any
Confidential Information without the prior written consent of the Company,
unless and to the extent that the aforementioned matters become generally known
to and available for use by the public other than as a result of Executive's
acts or omissions to act in violation of this Agreement. Executive shall deliver
to the Company at the termination of the Employment Period, or at any other time
the Company may request, all memoranda, notes, plans, records, reports, computer
tapes and software and other documents and data (and copies thereof) relating to
the Confidential Information, Work Product or the business of the Company, any
of its affiliates or any Subsidiary which Executive may then possess or have
under her control.
7. Inventions and Patents. Executive agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to the Company's
or any of its Subsidiaries' actual or anticipated business, research and
development or existing or future products or services and which are conceived,
developed or made by Executive while employed by the Company and/or its
Subsidiaries ("Work Product") belong to the Company or such Subsidiary.
Executive will promptly disclose such Work Product to the Board and perform all
actions reasonably requested by the Board (whether
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during or after the Employment Period) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney and
other instruments).
8. Non-Compete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with the
Company he will become familiar with the information concerning the
Company, its affiliates, Subsidiaries and its predecessors and that his
services have been and will be of special, unique and extraordinary value
to the Company. Therefore, Executive agrees that, during the Employment
Period and for the period of two years thereafter, the Executive shall not
directly or indirectly own, manage, control, participate in, consult with,
render services for, or in any manner engage in any business competing with
the business of the Company or its Subsidiaries as such businesses exist or
are in process on the date of the termination of Executive's employment,
within any geographic area in which the Company, its affiliates or its
Subsidiaries engage or plan to engage in such businesses. Nothing herein
shall prohibit Executive from being a passive owner of not more than 3% of
the outstanding stock of any class of a corporation which is publicly
traded, so long as Executive has no active participa tion in the business
of such corporation.
(b) During the non-compete Period, executive shall not directly or indirectly
through another entity (i) induce or attempt to induce any employee of the
Company, any of its affiliates or any Subsidiary to leave the employ of the
Company or such affiliate or Subsidiary, or in any way interfere with the
relationship between the Company, any of its affiliates or any Subsidiary
and any employee thereof, (ii) hire any person who was an employee of the
Company, any of its affiliates or any Subsidiary at any time during the
Employment Period, or (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of the Company, any of its
affiliates or any subsidiary to cease doing business with the Company or
such affiliate or Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Company, any of its affiliates or any Subsidiary.
(c) If Executive is terminated by the Company Without Cause or the Company is
liquidated, the Non-compete provisions of this Agreement will also
terminate upon the Termination Date or date of liquidation.
9. Enforcement. If, at the time of enforcement of paragraph 5, 6 or 7
of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
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Because Executive's services are unique and because Executive has access to
Confidential Information and Work Product, the parties hereto agree that money
damages would be an inadequate remedy for any breach of this Agreement.
Therefore, in the event of a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof (without posting a bond or
other security).
10. Executive Representation. Executive hereby represents and warrants
to the Company that (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by an employment agreement, non-compete agreement or
confidentiality agreement with any other person or entity, and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms.
11. Survival. Paragraphs 5, 6 and 7 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period, unless such termination was Without Cause, or due to a
liquidation of the Company. Additionally, if this Agreement is terminated by
Executive for Good Reason, Paragraphs 6 and 7 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period .
12. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the Address indicated below:
Notice to Executive: _______________________________
-------------------------------
Notices to Company: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
13. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in
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such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
14. Complete Agreement. This Agreement, in conjunction with those other
Agreements entered into between the Company and Health Plans, Inc. for purpose
of transacting a statutory merger, embody the complete agreement and
understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may be related to the subject matter hereof in any way.
15. Counterparts. This Agreement may be executed in separate counter-
parts, each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
16. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Texas or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Texas. In furtherance of the
foregoing, the internal law of the State of Texas shall control the
interpretation and construction of this Agreement, even though under that
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
18. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
19. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
20. No Strict Construction; Interpretation. The language used in this
agreement will be deemed to be the language chosen by the parties hereto to
express their mutual intent and no rule of strict construction will be applied
against any person. The term "including" as used in this Agreement is used to
list items by way of example and shall not be deemed to constitute a limitation
of any term or provision contained herein. As used in this Agreement, the
singular or plural number shall be deemed to include the other whenever the
context so requires.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ProMedCo Management Company "Executive"
BY:_______________________________ ___________________________
H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and CEO
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APPENDIX 8.11B
FORM OF ▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT
[The ▇▇▇▇▇▇▇ Agreement is being negotiated directly between
ProMedCo and ▇▇. ▇▇▇▇▇▇▇ and will be attached to the execution form of this
agreement it will be based on Appendix 8.11C]
▇▇
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▇▇▇▇▇▇▇▇ 8.11C
GENERIC FORM OF EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made as of ______, 1997, between ProMedCo
Management Company a Delaware corporation (the "Company"), and
__________________ ("Employee").
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee
accepts employment with the Company, under the terms and conditions set forth in
this Agreement for the period beginning on the date hereof and ending as
provided in paragraph 4 hereof (the "Employment Period"). The date on which
Employee ceases to be employed by the Company and/or its Subsidiaries (as
defined below) or its successors or assigns is referred to herein as the
"Termination Date."
2. Position and Duties.
(a) During the Employment Period, Employee shall perform such
duties for the Company, its affiliates and its Subsidiaries as
the Company may specify in its sole discretion. Employee shall
serve as _____________________ of the Company.
(b) Employee shall devote Employee's best efforts and full
business time and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity)
to the business and affairs of the Company, its affiliates and
its Subsidiaries. Employee shall perform such duties and
responsibilities to the best of Employee's abilities in a
diligent, trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
corporation of which the securities having at least 50% of the
voting power in electing directors are, at the time of
determination, owned by the Company, directly or through one
or more Subsidiaries.
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3. Compensation and Benefits.
(a) During the Employment Period, Employee's Base Salary (the "Base Salary")
shall be $_______ per annum or such higher rate as the Compensation
Committee may designate from time to time. The Base Salary shall be subject
to annual increases of no less than the increase in the Consumer Price
Index for all goods and services, U.S. All City Average Report, published
by the United States Department of Labor for the preceding 12 months. The
Base Salary shall be payable in regular installments in accordance with the
Company's general payroll practices.
(b) The Company shall reimburse Employee for all reasonable expenses incurred
by him/her in the course of performing his/her duties under this Agreement
which are consistent with the Company's policies in effect from time to
time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(c) In addition to the Base Salary, the Company may award a bonus to Employee
following the end of each fiscal year during the Employment Period based
upon the Company's achievement of operating goals during such fiscal year.
The percentage and goals shall be as approved by the Compensation Committee
of the Board of Directors for each such fiscal year, provided Employee is
still employed by Company on such payment dates. The bonus, if any, shall
be payable upon determination of the amount due, approximately 75 days
after the end of the fiscal year.
(d) In addition to the Base Salary and any bonuses payable to Employee pursuant
to this paragraph, during the Employment Period Employee shall be entitled
to participate in all benefit plans adopted by Company for all or a select
group of its employees, including:
(i) term life insurance, health insurance and disability insurance
coverage,
(ii) participation in a stock option program with grants as approved
by the Option Committee from time to time, with an initial grant
of _______ shares exercisable at ______, and
(iii) annual paid vacation in accordance with Company's policies as
from time to time established.
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4. Term.
(a) The Employment Period is for a term of ___ year(s) ending on __________,
____, provided that (i) the Employment Period shall terminate prior to such
date upon Employee's resignation, death or permanent disability or
incapacity (as determined by the Board in its good faith judgment) and (ii)
the Employment Period may be terminated by the Company at any time prior to
such date For Cause (as defined below) or Without Cause. The Employment
Period is automatically extended for successive years unless notice to the
contrary is given not later than ninety (90) days preceding the end of the
final year of the contract.
(b) If the Employment Period is terminated by the Company Without Cause prior
to the second anniversary of the date of this Agreement, Employee shall be
entitled to receive his/her Base Salary, as in effect immediately prior to
the Termination Date, plus the average of bonuses paid during the prior
three years, through the second anniversary of this Agreement, or one year,
whichever is greater, so long as Employee has not breached the provisions
of paragraphs 5, 6 and 7 hereof. The Base Salary and bonus payments
described in this paragraph 4(b) shall be payable in regular installments
in accordance with the Company's general payroll practice.
(c) If the Employment Period is terminated by the Company For Cause or is
terminated as a result of Employee's resignation or normal expiration of
the Agreement, Employee shall be entitled to receive only his/her Base
Salary through the Termination Date. In the case of normal expiration, any
earned bonus which is due will be paid.
(d) All of Employee's rights to fringe benefits and bonuses hereunder (if any)
accruing after the termination of the Employment Period shall cease upon
termination, provided however, if Employment Period is terminated by the
Company Without Cause ((4(b) above)), term life, health and disability
insurance will continue through the second anniversary of this Agreement,
or one year, which ever is greater, so long as Employee has not breached
the provisions of paragraphs 5, 6 and 7 hereof.
(e) For purposes of this Agreement, "Cause" shall mean (i) the commission of a
felony or a crime involving moral turpitude, (ii) the commission of any act
involving dishonesty, embezzlement or fraud with respect to the Company or
any of its Subsidiaries, (iii) conduct tending to bring the Company or any
of its Subsidiaries into substantial public disgrace or disrepute, (iv)
failure to perform duties as reasonably directed by the Company's CEO, (v)
gross negligence or willful misconduct with respect to the Company or any
of its Subsidiaries, (vi) Employee's violation of the non-competition
provisions of Section 7, (vii) Employee's material
3
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breach of any duty owed to the Company, including without
limitation the duty of loyalty, or (vii) any other material
breach of this Agreement, all of the above as determined
solely by the CEO of the Company. Cause shall not include acts
or failure to act if Employee has exercised substantial
efforts in good faith to perform the duties reasonably
assigned or appropriate to his/her position, as determined
solely by the CEO.
5. Confidential Information. The Employee acknowledges that the
information, observations and data obtained by him/her while employed by the
Company concerning the business or affairs of the Company, any of its affiliates
or any Subsidiary ("Confidential Information") are the property of the Company
or such affiliate or Subsidiary, as the case may be. Therefore, Employee agrees
not to disclose to any unauthorized person or use for Employee's own account any
Confidential Information without the prior written consent of the Company,
unless and to the extent that the aforementioned matters become generally known
to and available for use by the public other than as a result of Employee's acts
or omissions to act. Employee shall deliver to the Company at the termination of
the Employment Period, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Work Product or the business of the Company, any of its affiliates
or any Subsidiary which Employee may then possess or have under his/her control.
6. Inventions and Patents. Employee agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to the Company's
or any of its Subsidiaries' actual or anticipated business, research and
development or existing or future products or services and which are conceived,
developed or made by Employee while employed by the Company and/or its
Subsidiaries ("Work Product") belong to the Company or such Subsidiary. Employee
will promptly disclose such Work Product to the Board and perform all actions
reasonably requested by the Board (whether during or after the Employment
Period) to establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).
7. Non-Compete, Non-Solicitation.
(a) Employee acknowledges that in the course of his/her employment with the
Company he/she will become familiar with the information concerning the
Company, its affiliates, Subsidiaries and its predecessors and that his/her
services have been and will be of special, unique and extraordinary value
to the Company. Therefore, Employee agrees that, during the Employment
Period and for the period of two years thereafter, the Employee shall not
directly or indirectly own, manage, control, participate in, consult with,
render services for, or in any manner engage in any business competing with
the business of the Company or its Subsidiaries as such businesses exist or
are in process on the date of the termination of Employee's
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employment, within any geographic area in which the Company,
its affiliates or its Subsidiaries engage or plan to engage in
such businesses. Nothing herein shall prohibit Employee from
being a passive owner of not more than 3% of the outstanding
stock of any class of a corporation which is publicly traded,
so long as Employee has no active participation in the
business of such corporation.
(b) During the non-compete Period, Employee shall not directly or indirectly
through another entity (i) induce or attempt to induce any employee of the
Company, any of its affiliates or any Subsidiary to leave the employ of the
Company or such affiliate or Subsidiary, or in any way interfere with the
relationship between the Company, any of its affiliates or any Subsidiary
and any employee thereof, (ii) hire any person who was an employee of the
Company, any of its affiliates or any Subsidiary at any time during the
Employment Period, or (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of the Company, any of its
affiliates or any subsidiary to cease doing business with the Company or
such affiliate or Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Company, any of its affiliates or any Subsidiary.
(c) If Employee is terminated by the Company Without Cause or the Company is
liquidated, the Non-compete provisions of this Agreement will also
terminate upon the Termination Date or date of liquidation.
8. Enforcement. If, at the time of enforcement of paragraph 5, 6 or 7
of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area. Because
Employee's services are unique and because Employee has access to Confidential
Information and Work Product, the parties hereto agree that money damages would
be an inadequate remedy for any breach of this Agreement. Therefore, in the
event of a breach or threatened breach of this Agreement, the Company or its
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security).
9. Employee Representation. Employee hereby represents and warrants to
the Company that (i) the execution, delivery and performance of this Agreement
by Employee does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Employee is a party or by which he/she is bound, (ii) Employee is not a
party to or bound by an employment agreement, non-compete agreement or
confidentiality agreement with any other person or entity, and (iii) upon the
execution and delivery
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of this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Employee, enforceable in accordance with its terms.
10. Survival. Paragraphs 5, 6 and 7 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period, unless such termination was Without Cause.
11. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the Address indicated below:
Notice to Employee: _______________________________
-------------------------------
Notices to Company: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
12. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
13. Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may be related to the subject matter hereof in any way.
14. Counterparts. This Agreement may be executed in separate counter-
parts, each of which is deemed to be in an original and all of which taken
together constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Employee, the Company and their
respective heirs, successors and assigns,
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except that Employee may not assign his/her rights or delegate his/her
obligations hereunder without the prior written consent of the Company.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Texas or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Texas. In furtherance of the
foregoing, the internal law of the State of Texas shall control the
interpretation and construction of this Agreement, even though under that
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
17. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Employee, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
18. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
19. No Strict Construction; Interpretation. The language used in this
agreement will be deemed to be the language chosen by the parties hereto to
express their mutual intent and no rule of strict construction will be applied
against any person. The term "including" as used in this Agreement is used to
list items by way of example and shall not be deemed to constitute a limitation
of any term or provision contained herein. As used in this Agreement, the
singular or plural number shall be deemed to include the other whenever the
context so requires.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ProMedCo Management Company "Employee"
BY:_______________________________ __________________________
H. ▇▇▇▇▇ ▇▇▇▇▇
President and CEO
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SECOND AMENDMENT
SECOND AMENDMENT dated as of October 14, 1997 among ProMedCo
Management Company, a Delaware corporation ("ProMedCo"), HP Acquisition Corp., a
Maine corporation and a wholly-owned subsidiary of ProMedCo ("MergerSub"), PBMA
Health Systems, Inc., a Maine corporation ("HSI") and Health Plans, Inc., a
Maine corporation ("HP"; HSI and HP are collectively referred to herein as the
"Constituent Corporations").
RECITAL:
ProMedCo, MergerSub and the Constituent Corporations are
parties to an Agreement for Statutory Mergers dated as of July 25, 1997 (the
"Merger Agreement"). At the time they executed the Merger Agreement, the parties
contemplated that the Closing of the mergers and other transactions contemplated
by the Merger Agreement would be consummated on or prior to September 17, 1997.
On September 16, 1997, ProMedCo, MergerSub and the Constituent Corporations
entered into a First Amendment to the Merger Agreement to reflect the fact that
the Closing would not occur on or prior to the originally anticipated closing
date. It now appears that the Closing will be further delayed, and the parties
desire to amend the Merger Agreement to reflect such later date.
The parties agree as follows:
1. Amendment of Section 2.4. In the third line of Section 2.4,
"October 15, 1997" is hereby amended to read "November 15, 1997".
2. Amendment of Section 9.1. In clauses (b) and (c) of Section
9.1, "October 15, 1997" is hereby amended to read "November 15, 1997".
3. Amendment of Section 9.3. In Section 9.3, "October 15,
1997" is hereby amended to read "November 15, 1997".
4. All other terms and provisions of the Merger Agreement and
the appendices thereto remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PROMEDCO MANAGEMENT COMPANY
By
Its
Name
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HP ACQUISITION CORP
By
Its
Name
HEALTH PLANS, INC.
By
Its
Name
PBMA HEALTH SYSTEMS, INC.
By
Its
Name