A recent case decision from the Delaware Court of Chancery, Cigna Health and Life Ins. Co. v. Audax Health Solutions, Inc., called into question the use of special provisions in the letter of transmittal to bind non-signatory shareholders, and the use of a post-closing indemnification provision, contained in a merger agreement, that is not limited in duration or subject to a monetary cap. Brief Summary A Letter of Transmittal may not contain special provisions that are not in the merger agreement, unless separate consideration is provided for those provisions. New provisions contained in the Letter of Transmittal are considered a separate contract from the merger agreement. Indemnification obligations contained in a merger agreement may …show more content…
The plaintiff, Cigna Health, owned shares of Audax’s Series B Preferred Stock. In 2014, a majority of Audax’s board and 66.9% of the shareholders approved the merger. The shareholders approved the merger via written consent delivered in the form of support agreements, which included a release of any claims against Optum, an agreement to be bound by the terms of the merger agreement, and an appointment of a stockholder representative. Cigna did not vote in favor of the merger and did not sign the support agreement. The merger agreement required surrender of shared and execution of a Letter of Transmittal in order for a shareholder to receive the merger consideration. The Letter of Transmittal contained a separate release obligation that did not appear in the merger agreement but only appeared in the Letter of Transmittal, and required that stockholders surrendering their shares agree to the obligations contained in the merger agreement, which included an indemnification …show more content…
Any stockholder signing the Letter of Transmittal “irrevocably and unconditionally releases, acquits and forever discharges” the Releasees from: “any and all Losses, debts or rights, whether fixed or contingent, known or unknown, matured or unmatured, arising out of, relating to, or in any manner connected with any facts, events or circumstances, or any actions taken, at or prior to the consummation of the transactions contemplated by the Merger Agreement that any Releasor ever had or now has against the Releasees, including any right, title and interest in and to the Shares.” The Indemnification Obligation, contained in the merger agreement, made former stockholders liable to Optum, up to the pro rata amount of merger consideration they received, for breaches of Audax’s representations and warranties. Most of the representations and warranties would terminate 18 months after closing, but the fundamental representations and the Indemnification Obligation survived indefinitely. Cigna refused to sign the Letter of Transmittal and sued the parties to the merger agreement.
Membership Services (MSD) at Kaiser Permanente used to be a modest department of sixty staff. However, over the past few years the department has doubled in size, creating minor departmental reorganization. In addition the increase of departmental staffing, several challenges became apparent. The changes included primary job function, as well as the introduction of new network system software which slowed down the processes of other departments. These departments included Claims (who pay the bills for service providers outside of the Kaiser Permanente network), and Patient Business Services (who send invoices to members for services received within Kaiser Permanente). Due to the unforeseen challenges created by the system upgrade, it was decided that MSD would process the calls for both of the affected departments. Unfortunately, this created a catastrophic event of MSD receiving numerous phone calls from upset members—who had received bills a year after the service had been provided. The average Monday call volume had risen from 1,800 to 2,600 calls per day. The average handling time for each phone call had risen as well—from an acceptable standard of 5.6 minutes to an unfavorable 7.2 minutes. The department continued to be kept inundated with these types of calls for the two years that these changes have been effect.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
...ies, Recital 29 of the new EUMR highlights their importance in the merger control assessment as a defense to mergers that might otherwise present problems in competition.
A merger is a transaction involving or more corporations in which stock is exchanged, but from which only one corporation survives. Mergers usually occur between firms of somewhat similar size and are usually “friendly”. The resulting firm is likely to have a name derived from its composite firms.
..., the transferee would have been fully aware of the existence the pre-emption rights. In the case of a courts view it may be held that a fraudulent agreement had taken place as they were aware of the existence of the pre-emption rights agreement and that minority shareholders may have had the intention to invoke the these rights under section 561 of the CA 2006.
The 1960’s and 70’s were considered the earlier era of merger law by economists. During this time frame he courts and governments were more concerned with the NON-economic aspects of mergers: reducing market concentration, protecting small business, consumers rights…etc. Since 1979 those concerns have faded and the court system is now more concerned with economic concerns. The difference between right and wrong has been blurred recently, which allows judges to consider ALL factors in a case (economic and non), and be flexible when looking at specific cases. The merger guidelines were revised in 1997 to allow efficiencies to be used as a defense. Clearly, efficiencies are a key part of the defense, and are looked at very closely by the courts, especially in cases with a high market concentration. The Merger Guidelines state: “Efficiencies almost never justify a merger to monopoly or near monopoly.” (Kwoka and White, 2004)
One of the most obvious advantages from the process of mergers and acquisitions is to obtain exclusive talent, knowledge as well as technology from acquired company. This will allow the acquiring company to increase its competency, as it will be able to provide more products and services to end consumers (Dugar, 2009). Hence, it gives a competitive edge for the acquiring company in this strong rivalry market. On the other hand, the exclusive talent, knowledge and technology obtained will allow company to reduce its cost in research and development. The...
This is still an improvement on the former practice of a letter of obligation. A letter of obligation is a guarantee by the sell...
Prepare Memorandum and Articles– Format has been prescribed in the Companies Act, 2013 (Schedule I, Table A & Table F)
A merger or acquisition is a mix of two organizations where one partnership is totally consumed by another enterprise. The less essential organization loses its personality and turns out to be a piece of the more imperative partnership, which holds its character. A merger quenches the consolidated company, and the surviving partnership accepts all the rights, benefits, and liabilities of the combined enterprise. A merger is not the same as a solidification, in which two partnerships lose their different personalities and join to frame a totally new company. Government and state laws control mergers and acquisitions. Direction depends on the worry that mergers unavoidably dispose
Paragraph 92 stated, disclosure of some or all of the information required by paragraphs 84–89 can be expected to prejudice seriously the position of the entity in a dispute with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, an entity need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been
However, owing to the complexity and non-accessibility of the law, very few derivative actions succeeded. Among the reasons as experienced in many jurisdictions would tell us that the costs of the litigations, proceedings and attorneys’ fees relative to this claim can be an alarming obstacle for shareholders suing on behalf of the company. These factors, together with the difficulty of establishing liability and seeking permission to proceed with the c...
Ltd. et al. v. Letain in 1963 Supreme Court of Canada. The optionee Conwest Exploration Co. Ltd. was promised an extended deadline for processing internal arrangement for incorporation by the optionor Letain. With the gratuitous promise from the optionor, the optionee carried on their steps towards incorporation. Later on, the optionee was told to revert back to the original date stated in the contract, thus they applied for relief on the grounds of equitability. (Marston, 2008, pp.92-93) As a result, “The court found that that it would inequitable to revert to the strict interpretation of the contract and therefore estopped the optionor from enforcing the date specified in the contract.”(Marston, 2008, pp.92-93). Likewise, the contractor in the second case will be refused to enforce the conditions in the contract and thus will not be able to terminate the contract as
A merger by definition is the legal consolidation of two companies that come together and become one joint entity whereas an acquisition is when one company acquires or takes over another entity thus establishing itself as the new owner. To understand the reasons that lead to their failure, it is important to reflect on the motives behind these deals. Some of the most common aims include rapid growth, gains in market share, R&D improvements, shareholder wealth creation but the main stated objective of most M&A deals is to achieve synergy both operational and financial. Synergy is the belief that the value and performance resulting from the merger of two companies is greater than the sum of their individual parts had they not merged i.e. what is casually referred to as the 2+2=5 effect. However, many merger and acquisition failures in the past have demonstrated that the ...
Stallworthy, E. A. and Kharbanda, O. P. (1988). TAKEOVERS, ACQUISITIONS AND MERGERS. London: Kogan Page Limited.