Exhibit 10.1
MERGER TERMINATION AND RELEASE
AGREEMENT
THIS MERGER TERMINATION AND RELEASE
AGREEMENT (the “Agreement”) is made and entered into
this 30th day of September, 2006, by and among Healthways, Inc., a
Delaware corporation (“Healthways”), Lime Acquisition
Corp., a California corporation and a wholly-owned subsidiary of
Healthways (the “Merger Sub”), and LifeMasters
Supported SelfCare, Inc., a California corporation
(“LifeMasters”).
WITNESSETH:
WHEREAS, Healthways, Merger Sub,
LifeMasters and the Shareholder Representative (as defined in the
Merger Agreement) entered into that certain Agreement and Plan of
Merger, dated as of May 30, 2006 (the “Merger
Agreement”); and
WHEREAS, on August 25, 2006,
Healthways and LifeMasters jointly announced that a data and
reporting error made by a third party actuarial firm with regard to
a LifeMasters contract had recently been reported to Lifemasters
; and
WHEREAS, the correction of the data
and reporting error made by the third party materially impacted
LifeMasters prior period revenues and the financial projections
which were relied upon by Healthways in entering into the Merger
Agreement;
WHEREAS, the data and reporting
error made by the third party was unknown to LifeMasters at the
time the parties entered into the Merger Agreement;
WHEREAS, as a result of the
foregoing a Material Adverse Effect occurred and prevented
LifeMasters from satisfying its conditions to closing under the
Merger Agreement; and
WHEREAS, under the circumstances the
parties hereto have determined to terminate the Merger Agreement
and certain related agreements and release their respective rights,
claims, obligations, and liabilities thereunder as provided
herein.
NOW, THEREFORE, in consideration of
the covenants and agreements herein set forth, the parties agree as
follows:
1.
Mutual Termination of
Agreement . Effective
immediately upon execution of this Agreement (i) Healthways and
LifeMasters agree to mutually terminate the Merger Agreement
pursuant to Section 7.1(a) thereof and (ii) Healthways and
LifeMasters agree that all covenants, undertakings, restrictions
and limitations contained in the Merger Agreement (except with
respect to Sections 5.2(b) and 9.7 thereof) and any other ancillary
agreement entered into in connection with or contemplation of the
Merger Agreement are terminated and shall be of no further force
and effect; provided , however , that the Mutual
Non-Disclosure Agreement, dated December 19, 2005(the
“NDA”), by and between Healthways and LifeMasters,
shall remain in full force and effect and shall not be in any way
affected hereby.
2.
Expenses . LifeMasters and Healthways agree that it would be
equitable for the parties to share expenses incurred to date in
anticipation of the merger of the two companies. Since Healthways
incurred and paid many of these expenses directly, LifeMasters
agrees to reimburse Healthways on or before October 31, 2006 the
sum of one million five hundred thousand dollars ($1,500,000)
(“Integration Expense-Sharing Contribution”). Except
for this Integration Expense-Sharing Contribution, all costs and
expenses incurred in connection with or relating to this Agreement,
the Merger Agreement and the agreements and transactions
contemplated hereby and thereby, including, without limitation, the
fees and disbursements of counsel, financial advisers, and
accountants, shall be paid by the party incurring such costs and
expenses.
(a) In
consideration of the mutual covenants herein, and upon execution of
this Agreement, Healthways, on behalf of itself, its successors and
assigns and, to the extent permitted by law, its Related Parties
(as hereinafter defined), hereby fully, finally and forever
releases, relinquishes and discharges all Released Claims (as
hereinafter defined) against LifeMasters and its Related
Parties.
(b) In
consideration of the mutual covenants herein, and upon execution of
this Agreement, Merger Sub, on behalf of itself, its successors and
assigns and, to the extent permitted by law, its Related Parties,
hereby fully, finally and forever releases, relinquishes and
discharges all Released Claims against LifeMasters and its Related
Parties.
(c) In
consideration of the mutual covenants herein, and upon execution of
this Agreement, LifeMasters, on behalf of itself, its successors
and assigns and, to the extent permitted by law, its Related
Parties, hereby fully, finally and forever releases, relinquishes
and discharges all Released Claims against Healthways and its
Related Parties.
(d) As
used in this Agreement, “Released Claims” shall mean
all known and unknown claims, counterclaims, demands, rights,
liabilities, losses, costs, expenses, obligations and causes of
action, of every nature and description whatsoever (in equity and
at law), including without limitation any of the foregoing that
arise out of or relate to the Merger Agreement and the transactions
and agreements contemplated thereby; provided ,
however , that notwithstanding the foregoing,
“Released Claims” shall not include or mean any known
or unknown claims, counterclaims, demands, rights, liabilities,
losses, costs, expenses, obligations or causes of action, of every
nature and description whatsoever (in equity and at law), arising
out of or related to the NDA or to Sections 5.2(b) or 9.7 of the
Merger Agreement, arising out of or related to Paragraph 2 of this
Agreement, or arising under this Agreement. Healthways and
LifeMasters represent that as of the effective date of this
Agreement, neither party knows of any such claim as may be reserved
by the prior sentence.
(e) As
used in this Agreement, “Related Parties” shall mean
with respect to each party, all of its subsidiaries, Affiliates (as
defined in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act of 1934, as amended), directors, officers,
stockholders, employees, agents, accountants, financial and legal
advisors and the successors and assigns of each of the
aforementioned.
(f) The
parties hereto hereby certify that the
