Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
Dated as of October 26, 2003
Among
UNITEDHEALTH GROUP INCORPORATED,
MU Acquisition LLC
And
MID ATLANTIC MEDICAL SERVICES, INC.
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TABLE OF CONTENTS
PAGE
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ARTICLE I The Merger......................................................................................1
Section 1.01. The Merger............................................................................1
Section 1.02. Closing...............................................................................1
Section 1.03. Effective Time........................................................................2
Section 1.04. Effects of the Merger.................................................................2
Section 1.05. Certificate of Formation; Operating Agreement.........................................2
Section 1.06. Managers..............................................................................2
Section 1.07. Officers..............................................................................2
ARTICLE II Effect of the Merger on the Capital Stock of the Constituent Entities; Exchange of
Certificates; Company Stock Options.............................................................3
Section 2.01. Effect on Capital Stock...............................................................3
Section 2.02. Exchange of Certificates..............................................................4
Section 2.03. Company Stock Options.................................................................8
ARTICLE III Representations and Warranties of the Company...................................................9
Section 3.01. Organization, Standing and Corporate Power............................................9
Section 3.02. Subsidiaries.........................................................................10
Section 3.03. Capital Structure....................................................................10
Section 3.04. Authority; Noncontravention..........................................................12
Section 3.05. Governmental Approvals...............................................................13
Section 3.06. Company SEC Documents; No Undisclosed Liabilities....................................13
Section 3.07. Information Supplied.................................................................14
Section 3.08. Absence of Certain Changes or Events.................................................14
Section 3.09. Litigation...........................................................................15
Section 3.10. Contracts............................................................................15
Section 3.11. Compliance with Laws.................................................................17
Section 3.12. Employee Benefit Plans...............................................................18
Section 3.13. Taxes................................................................................20
Section 3.14. Brokers and Other Advisors...........................................................22
Section 3.15. Opinion of Financial Advisor.........................................................22
Section 3.16. Statutory Financial Statements.......................................................22
Section 3.17. Reserves.............................................................................23
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(CONTINUED)
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Section 3.18. SCT Agreement........................................................................23
ARTICLE IV Representations and Warranties of Parent and Merger Sub........................................23
Section 4.01. Organization, Standing and Corporate Power...........................................24
Section 4.02. Capital Structure....................................................................24
Section 4.03. Authority; Noncontravention..........................................................25
Section 4.04. Governmental Approvals...............................................................26
Section 4.05. Parent SEC Documents.................................................................26
Section 4.06. Information Supplied.................................................................27
Section 4.07. Absence of Certain Changes or Events.................................................27
Section 4.08. Litigation...........................................................................27
Section 4.09. Compliance with Laws.................................................................28
Section 4.10. No Business Activities...............................................................28
Section 4.11. No Parent Vote Required..............................................................28
Section 4.12. Taxes................................................................................28
ARTICLE V Covenants Relating to Conduct of Business......................................................29
Section 5.01. Conduct of Business..................................................................29
Section 5.02. No Solicitation by the Company.......................................................33
ARTICLE VI Additional Agreements..........................................................................36
Section 6.01. Preparation of the Form S-4 and the Proxy Statement; Stockholder Meetings............36
Section 6.02. Access to Information; Confidentiality...............................................37
Section 6.03. Reasonable Efforts...................................................................38
Section 6.04. Indemnification, Exculpation and Insurance...........................................39
Section 6.05. Fees and Expenses....................................................................39
Section 6.06. Public Announcements.................................................................40
Section 6.07. Affiliates...........................................................................40
Section 6.08. Stock Exchange Listing...............................................................40
Section 6.09. Reorganization Treatment.............................................................40
Section 6.10. Stockholder Litigation...............................................................40
Section 6.11. Employee Matters.....................................................................41
Section 6.12. Employment Agreements................................................................42
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Section 6.13. Standstill Agreements, Confidentiality Agreements, Anti-takeover Provisions..........42
Section 6.14. Issuance of Shares...................................................................42
ARTICLE VII Conditions Precedent...........................................................................42
Section 7.01. Conditions to Each Party's Obligation to Effect the Merger...........................42
Section 7.02. Conditions to Obligations of Parent and Merger Sub...................................43
Section 7.03. Conditions to Obligation of the Company..............................................44
Section 7.04. Frustration of Closing Conditions....................................................45
ARTICLE VIII Termination, Amendment and Waiver..............................................................45
Section 8.01. Termination..........................................................................45
Section 8.02. Termination Fee......................................................................46
Section 8.03. Effect of Termination................................................................48
Section 8.04. Amendment............................................................................48
Section 8.05. Extension; Waiver....................................................................48
Section 8.06. Procedure for Termination or Amendment...............................................48
ARTICLE IX General Provisions.............................................................................48
Section 9.01. Nonsurvival of Representations and Warranties........................................48
Section 9.02. Notices..............................................................................48
Section 9.03. Definitions..........................................................................50
Section 9.04. Interpretation.......................................................................50
Section 9.05. Counterparts.........................................................................51
Section 9.06. Entire Agreement; No Third-Party Beneficiaries.......................................51
Section 9.07. Governing Law........................................................................51
Section 9.08. Assignment...........................................................................51
Section 9.09. Specific Enforcement; Consent to Jurisdiction........................................52
Section 9.10. Severability.........................................................................52
TABLE OF DEFINED TERMS
TERM SECTION
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Adverse Recommendation Notice................................5.02(b)
Affected Employees...........................................6.11(c)
Affiliate....................................................9.03(a)
Agreement...................................................Preamble
Certificate..................................................2.01(c)
Certificate of Merger.........................................1.03
Closing.......................................................1.02
Closing Date..................................................1.02
COBRA........................................................3.12(h)
Code........................................................Recitals
Company.....................................................Preamble
Company Adverse Recommendation Change........................5.02(b)
Company By-laws...............................................3.01
Company Certificate...........................................3.01
Company Common Stock..........................................2.01
Company Disclosure Schedule................................Article III
Company Material Adverse Effect...............................3.01
Company Plans................................................3.12(a)
Company Preferred Stock......................................3.03(a)
Company SEC Documents........................................3.06(a)
Company Stock Options........................................3.03(a)
Company Stock Plans..........................................3.03(a)
Company Stockholder Approval.................................3.04(a)
Company Stockholders Meeting.................................6.01(b)
Company Superior Proposal....................................5.02(a)
Company Takeover Proposal....................................5.02(a)
Confidentiality Agreement....................................6.02(a)
Contract.....................................................3.04(b)
Delaware Law..................................................1.01
Effective Time................................................1.03
Employees....................................................3.12(a)
Employment Agreements.........................................6.12
ERISA........................................................3.12(a)
Exchange Act..................................................3.05
Exchange Agent...............................................2.02(a)
Exchange Fund................................................2.02(a)
Exchange Ratio...............................................2.01(c)
Filed Company SEC Documents...................................3.08
Form S-4......................................................3.07
GAAP.........................................................3.06(a)
Governmental Authority........................................3.05
HSR Act.......................................................3.05
IRS..........................................................3.13(c)
TABLE OF DEFINED TERMS
(CONTINUED)
TERM SECTION
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Knowledge.........................................................9.03(b)
Laws...............................................................3.11
Liens..............................................................3.02
Merger...........................................................Recitals
Merger Consideration..............................................2.01(c)
Merger Sub.......................................................Preamble
Merger Sub Interests..............................................4.02(b)
Parent...........................................................Preamble
Parent Common Stock...............................................2.01(c)
Parent Disclosure Schedule......................................Article IV
Parent Material Adverse Effect.....................................4.01
Parent Preferred Stock............................................4.02(a)
Parent SEC Documents...............................................4.05
Permits............................................................3.11
person............................................................9.03(c)
Provider..........................................................3.10(b)
Proxy Statement....................................................3.07
Representatives...................................................5.02(a)
Restraints........................................................7.01(d)
▇▇▇▇▇▇▇▇-▇▇▇▇▇....................................................3.11(b)
SCT Agreement......................................................3.18
SEC...............................................................3.06(a)
Securities Act.....................................................3.05
State Regulatory Filings...........................................3.16
Subsidiary........................................................9.03(e)
Surviving Entity...................................................1.01
Taxes.............................................................3.13(m)
Tax Returns.......................................................3.13(m)
Termination Fee...................................................8.02(a)
Trust..............................................................3.18
Trustee............................................................3.18
Exhibits
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A...........................................Form of Rule 145 Affiliate Letter
B..............................Form of Company Tax Representation Certificate
C...............................Form of Parent Tax Representation Certificate
D................................................Form of Employment Agreement
E............................................................Closing Consents
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of October 26, 2003, is among UnitedHealth Group Incorporated, a Minnesota
corporation ("Parent"), MU Acquisition LLC, a Delaware limited liability company
and a direct wholly owned subsidiary of Parent ("Merger Sub"), and Mid Atlantic
Medical Services, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent and
the Company and the Managing Member of Merger Sub have approved and declared
advisable this Agreement and the merger of the Company with and into Merger Sub
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, for Federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
rules and regulations promulgated thereunder, and that this Agreement
constitutes, and hereby is adopted as, a plan of reorganization; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto agree as follows:
ARTICLE I
The Merger
Section 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement and in accordance with the General
Corporation Law and the Limited Liability Company Act of the State of Delaware
(collectively, "Delaware Law"), the Company shall be merged with and into Merger
Sub at the Effective Time. Following the Effective Time, the separate corporate
existence of the Company shall cease, and Merger Sub shall continue as the
surviving entity in the Merger (the "Surviving Entity") and shall succeed to and
assume all the rights and obligations of the Company in accordance with Delaware
Law.
Section 1.02. Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VII
(other than those conditions that by their terms are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions at such
time), at the offices of Weil, Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, unless another date or place is agreed to in writing by
the parties hereto.
Section 1.03. Effective Time. Subject to the provisions of
this Agreement, as soon as practicable on the Closing Date, the parties shall
file a certificate of merger (the "Certificate of Merger") executed in
accordance with the relevant provisions of Delaware Law and, as soon as
practicable on or after the Closing Date, shall make all other filings or
recordings required under Delaware Law. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Secretary of State
of the State of Delaware, or at such other time as Parent and the Company shall
agree and shall specify in the Certificate of Merger (the time the Merger
becomes effective being the "Effective Time").
Section 1.04. Effects of the Merger. The Merger shall have
the effects set forth in Delaware Law.
Section 1.05. Certificate of Formation; Operating
Agreement.
(a) The Certificate of Formation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Formation of the Surviving Entity until thereafter changed or amended as
provided therein or by Delaware Law or other applicable Law.
(b) The Operating Agreement of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Operating Agreement of the
Surviving Entity until thereafter changed or amended as provided therein or by
applicable Law; provided, however, that the Operating Agreement of the Surviving
Entity shall be amended as necessary to comply with the obligations of the
Surviving Entity set forth in Section 6.04 hereof.
Section 1.06. Managers. The managers of Merger Sub
immediately prior to the Effective Time shall be the managers of the Surviving
Entity until the earlier of their resignation or removal or until their
respective successors are duly designated, as the case may be.
Section 1.07. Officers. The officers of Merger Sub
immediately prior to the Effective Time shall be the officers of the Surviving
Entity until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
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ARTICLE II
Effect of the Merger on the Capital Stock of the
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Constituent Entities; Exchange of Certificates; Company Stock Options
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Section 2.01. Effect on Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of common stock, par value $0.01 per share, of the Company
("Company Common Stock") or any membership interests of Merger Sub:
(a) Membership Interests of Merger Sub. The issued and
outstanding membership interests of Merger Sub shall remain
outstanding and shall constitute the only issued and outstanding
equity interests of the Surviving Entity.
(b) Cancellation of Treasury Stock. Each share of Company
Common Stock that is owned by the Company (as treasury stock or
otherwise), automatically shall be canceled and retired and shall
cease to exist, and no shares of Parent Common Stock, cash or other
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section
2.01(d) and Section 2.02(e), each issued and outstanding share of
Company Common Stock (other than shares to be canceled in accordance
with Section 2.01(b), and other than as provided in Section 2.02(k)
with respect to shares as for which appraisal rights have been
perfected) shall be converted into the right to receive:
(i) 0.82 (the "Exchange Ratio") validly issued, fully paid
and nonassessable shares of common stock, par value $0.01 per share, of Parent
("Parent Common Stock") (the "Stock Consideration"); and
(ii) $18.00 in cash (the "Cash Consideration," and together
with the Stock Consideration, the "Merger Consideration").
As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate which
immediately prior to the Effective Time represented any such shares of Company
Common Stock (each, a "Certificate") shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, any dividends or
other distributions to which such holder is entitled pursuant to Section 2.02(c)
and cash in lieu of any fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e), in each case to be issued or
paid in consideration therefor upon surrender of such Certificate in accordance
with Section 2.02(b), without interest. Notwithstanding the foregoing, if
between the date of this Agreement and the Effective Time, the outstanding
shares of Parent Common Stock or Company Common Stock shall have been changed
into a different number of shares or a different class, by reason of the
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occurrence or record date of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or similar transaction,
the Merger Consideration shall be appropriately adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange of shares or similar transaction.
(d) Adjustments. In the event that the aggregate market value of the Stock
Consideration at the Effective Time will be less than 45% of the sum of the
Merger Consideration plus any cash paid pursuant to Sections 2.02(e) and
2.02(k), the Merger Consideration will be adjusted by reducing the amount of
Cash Consideration and by increasing by the same amount the amount of Stock
Consideration payable to each holder of Company Common Stock who would otherwise
have received Cash Consideration to the extent necessary so as to increase the
aggregate market value of the Stock Consideration to 45% of the sum of the
Merger Consideration plus any cash paid pursuant to Sections 2.02(e) and
2.02(k). For purposes of this paragraph (i), the "aggregate market value of the
Stock Consideration" will be determined based, as closely as reasonably
possible, on the actual Parent Common Stock price for the last trade prior to
the Effective Time or, if the Effective Time is after the close of regular
trading on the New York Stock Exchange, the mean between the highest and lowest
quoted selling price of Parent Common Stock on the New York Stock Exchange for
the date on which the Effective Time occurs and (ii) the Stock Consideration and
Cash Consideration transferred to the Trust, or to the holders of Company Common
Stock who acquire their stock from the Company or the Trust after the date
hereof, shall be disregarded.
Section 2.02. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall
deposit with The Bank of New York or such other bank or trust company as may be
designated by Parent, with the Company's prior written consent, which shall not
be unreasonably withheld or delayed (the "Exchange Agent"), for exchange in
accordance with this Article II, through the Exchange Agent, (i) certificates
representing the shares of Parent Common Stock issuable pursuant to Section
2.01(c) in exchange for outstanding shares of Company Common Stock, (ii) cash
sufficient to pay the Cash Consideration and (iii) from time to time as needed,
additional cash sufficient to pay cash in lieu of fractional shares pursuant to
Section 2.02(e) hereof and any dividends and other distributions pursuant to
Section 2.02(c) hereof (such shares of Parent Common Stock and Cash
Consideration, together with any dividends or other distributions with respect
thereto with a record date after the Effective Time and any cash payments in
lieu of any fractional shares of Parent Common Stock, being hereinafter referred
to as the "Exchange Fund").
(b) Exchange Procedures. As promptly as practicable after
the Effective Time, Parent shall cause the Exchange Agent to mail to each holder
of record of a Certificate whose shares of Company Common Stock were converted
into the right to receive the Merger Consideration pursuant to Section 2.01(c),
(i) a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
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delivery of the Certificates to the Exchange Agent and which shall be in
customary form and shall have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in surrendering the Certificates in
exchange for certificates representing the Stock Consideration portion of the
Merger Consideration and cash representing the Cash Consideration portion of the
Merger Consideration, any dividends or other distributions to which holders of
Certificates are entitled pursuant to Section 2.02(c) and cash in lieu of any
fractional shares of Parent Common Stock to which such holders are entitled
pursuant to Section 2.02(e). Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with such letter of transmittal, duly completed and
validly executed, and such other documents as may be reasonably required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor (A) a certificate representing that number of whole shares of
Parent Common Stock that such holder has the right to receive pursuant to the
provisions of this Article II after taking into account all the shares of
Company Common Stock then held by such holder under all such Certificates so
surrendered and (B) a check for the cash that such holder is entitled to receive
pursuant to the provisions of this Article II, including for the Cash
Consideration portion of the Merger Consideration, any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(c) and
cash in lieu of any fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Company Common Stock that is not registered in the transfer records
of the Company, (w) a certificate representing the proper number of shares of
Parent Common Stock, (x) a check for the Cash Consideration portion of the
Merger Consideration, (y) any dividends or other distributions to which such
holder is entitled pursuant to Section 2.02(c) and (z) cash in lieu of any
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.02(e), may be issued to a person other than the person in
whose name the Certificate so surrendered is registered, if, upon presentation
to the Exchange Agent, such Certificate shall be properly endorsed or otherwise
be in proper form for transfer and the person requesting such issuance shall pay
any transfer or other taxes required by reason of the issuance of shares of
Parent Common Stock to a person other than the registered holder of such
Certificate or establish to the reasonable satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, any dividends or other distributions to
which the holder of such Certificate is entitled pursuant to Section 2.02(c) and
cash in lieu of any fractional share of Parent Common Stock to which such holder
is entitled pursuant to Section 2.02(e). No interest will be paid or will accrue
on the Merger Consideration or on any cash payable to holders of Certificates
pursuant to Section 2.02(c) or (e).
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the share of Parent Common Stock that
the holder thereof has the right to receive upon the surrender thereof, and no
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cash payment in lieu of any fractional shares of Parent Common Stock shall be
paid to any such holder pursuant to Section 2.02(e), in each case until the
holder of such Certificate shall surrender such Certificate in accordance with
this Article II. Following surrender of any Certificate, there shall be paid to
the holder thereof (i) at the time of such surrender, the amount of cash payable
in lieu of any fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and the amount of dividends or other
distributions payable with respect to such whole shares of Parent Common Stock
with a record date after the Effective Time and paid with respect to Parent
Common Stock prior to such surrender and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock.
All shares of Parent Common Stock issued and cash paid upon the surrender for
exchange of Certificates in accordance with the terms of this Article II
(including any dividends or other distributions paid pursuant to Section 2.02(c)
and cash paid in lieu of any fractional shares pursuant to Section 2.02(e))
shall be deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to the shares of Company Common Stock previously represented
by such Certificates, and at the close of business on the day on which the
Effective Time occurs, the stock transfer books of the Company shall be closed
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Entity of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. Subject to the last
sentence of Section 2.02(f), if, at any time after the Effective Time,
Certificates are presented to the Surviving Entity or the Exchange Agent for any
reason, they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividends or other distributions of
Parent shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of Parent.
(ii) In lieu of such fractional share interests, Parent
shall pay to each former holder of shares of Company Common Stock an
amount in cash equal to the product obtained by multiplying (A) the
fractional share interest to which such former holder (after taking
into account all shares of Company Common Stock held at the Effective
Time by such holder) would otherwise be entitled by (B) the per share
closing price of Parent Common Stock on the Closing Date (or, if such
date is not a trading day, the trading day immediately preceding the
Closing Date) on the New York Stock Exchange, Inc. Composite
Transactions Tape (or, if not reported thereby, as reported by any
other authoritative source). As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of
fractional interests, the Exchange Agent shall so notify Parent and
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Parent shall cause the Surviving Entity to deposit such amount with
the Exchange Agent and shall cause the Exchange Agent to forward
payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund that remains undistributed to the holders of the Certificates for
nine months after the Effective Time shall be delivered to Parent, upon demand,
and any holders of Certificates who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their claim for
the Merger Consideration, any dividends or other distributions with respect to
shares of Parent Common Stock and cash in lieu of any fractional shares of
Parent Common Stock in accordance with this Article II. If any Certificate shall
not have been surrendered immediately prior to the date on which any Merger
Consideration (and all dividends or other distributions payable pursuant to
Section 2.02(c) and all cash payable in lieu of fractional shares pursuant to
Section 2.02(e)) would otherwise escheat to or become the property of any
Governmental Authority, any such Merger Consideration (and all dividends or
other distributions payable pursuant to Section 2.02(c) and all cash payable in
lieu of fractional shares pursuant to Section 2.02(e)) in respect thereof shall,
to the extent permitted by applicable Law, become the property of Parent, free
and clear of all claims or interest of any person previously entitled thereto.
(g) No Liability. None of Parent, Merger Sub, the Company
or the Exchange Agent shall be liable to any person in respect of any shares of
Parent Common Stock (or dividends or other distributions with respect thereto)
or cash in lieu of any fractional shares of Parent Common Stock or cash from the
Exchange Fund, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments shall be
the property of, and shall be paid to, Parent. Any losses resulting from such
investments shall not in any way diminish Parent's and Merger Sub's obligation
to pay the full amount of the Merger Consideration.
(i) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger
Consideration, any dividends or other distributions to which the holder of such
Certificate would be entitled pursuant to Section 2.02(c) and cash in lieu of
any fractional share of Parent Common Stock to which such holder would be
entitled pursuant to Section 2.02(e), in each case in accordance with the terms
of this Agreement.
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(j) Withholding Rights. The Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable to any
holder of shares of Company Common Stock pursuant to this Agreement such amounts
as may be required to be deducted and withheld with respect to the making of
such payment under the Code and the rules and regulations promulgated
thereunder, or under any provision of state or foreign tax Law. To the extent
that amounts are so withheld and paid over to the appropriate taxing authority,
such withheld amounts shall be treated for the purposes of this Agreement as
having been paid to the former holder of the shares of Company Common Stock. Any
such withholding shall be applied first against the Cash Consideration to the
full extent thereof and then against the Stock Consideration. If withholding is
required from shares of Parent Common Stock, the Exchange Agent shall sell in
the open market such shares of Parent Common Stock on behalf of the former
holder of Company Common Stock as is necessary to satisfy such withholding
obligation and shall pay such cash proceeds to the appropriate taxing authority.
(k) Dissenting Shares. Notwithstanding Section 2.01(c), any
shares of Company Common Stock outstanding immediately prior to the Effective
Time and held by a person who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such shares in accordance
with Delaware Law (the "Dissenting Shares") shall not be converted into a right
to receive the Merger Consideration, unless such holder fails to perfect or
withdraws or otherwise loses its rights to appraisal or it is determined that
such holder does not have appraisal rights in accordance with Delaware Law. If,
after the Effective Time, such holder fails to perfect or withdraws or loses its
right to appraisal, or if it is determined that such holder does not have
appraisal rights, such shares shall be treated as if they had been converted as
of the Effective Time into the right to receive the Merger Consideration. The
Company shall give Parent and Merger Sub prompt notice of any demands received
by the Company for appraisal of shares, and Parent and Merger Sub shall have the
right to participate in all negotiations and proceedings with respect to such
demands except as required by applicable Law. The Company shall not, except with
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands, unless and to the extent required to do so
under applicable Law.
Section 2.03. Company Stock Options.
(a) During the thirty (30) day period prior to the Closing,
each holder of outstanding Company Stock Options (whether or not then vested or
exercisable by its terms) shall have the opportunity to exercise his or her
Company Stock Options upon payment of the exercise price in accordance with the
terms of the applicable Company Stock Plan, or, at the option of the Company, on
a net "cashless exercise" basis upon delivery to the Company of an exercise
agreement in a form mutually acceptable to Parent and the Company. Except for
vested options being exercised in accordance with the terms of the applicable
Company Stock Plan, such option exercises shall be deemed effective as of, and
conditioned upon, the occurrence of the Closing. All written communications
distributed generally to employees by or on behalf of the Company regarding such
exercises will be mutually acceptable to Parent and the Company. Each
8
outstanding Company Stock Option which is not exercised prior to the Closing in
accordance with this Section 2.03 shall be cancelled upon the occurrence of the
Closing and no consideration shall be paid therefor.
(b) Effective on the Closing each of the Company Stock
Plans, including, without limitation, the SCT Agreement, shall be terminated in
accordance with their respective terms.
(c) In connection with the termination of the Company Stock
Plans, following the Effective Time, no holder of Company Stock Options or any
participant in or beneficiary of the Company Stock Plans or Trust, will have any
right to acquire or receive any equity securities of the Surviving Entity or any
Subsidiary thereof or any consideration other than as contemplated pursuant to
this Section 2.03; provided, however, that all proceeds remaining in the Trust
immediately after the Effective Time shall be applied, first to be returned to
the Company in an amount equal to the principal amount, plus any accrued
interest thereon, of the Loan (as defined in the SCT Agreement) that was
forgiven upon such termination, and second as provided in the SCT Agreement, to
satisfy obligations of the Company and its Subsidiaries under employee benefit
plans of the Company listed on Schedule A of the SCT Agreement.
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
Except as set forth in the disclosure schedule (with
specific reference to the Section or Subsection of this Agreement to which the
information stated in such disclosure relates; provided that any fact or
condition disclosed in any section of such disclosure schedule in such a way as
to make its relevance to a representation or representations made elsewhere in
this Agreement or information called for by another section of such disclosure
schedule reasonably apparent shall be deemed to be an exception to such
representation or representations or to be disclosed on such other section of
such disclosure schedule notwithstanding the omission of a reference or cross
reference thereto) delivered by the Company to Parent prior to the execution of
this Agreement (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Merger Sub as follows:
Section 3.01. Organization, Standing and Corporate Power.
The Company and each of its Subsidiaries is an entity duly organized, validly
existing and in good standing under the Laws of the jurisdiction in which it is
formed and has all requisite power and authority to carry on its business as now
being conducted. The Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed individually or
in the aggregate has not had and would not reasonably be expected to have a
Company Material Adverse Effect. For purposes of this Agreement, "Company
9
Material Adverse Effect" shall mean any change, effect, event, occurrence or
state of facts that is materially adverse to the business, financial condition,
or results of operations of the Company and its Subsidiaries, taken as a whole,
other than any change, effect, event, occurrence or state of facts relating to
(a) the economy or the financial markets in general, (b) the industry in which
the Company and its Subsidiaries operate in general and not specifically
relating to the Company and its Subsidiaries, (c) the announcement of this
Agreement or the transactions contemplated hereby or the identity of Parent
(provided that the exclusion set forth in this clause (c) shall not apply to
Section 3.04(b) hereof), (d) any Company action prohibited by Section 5.01(a)
hereto that Parent does not consent to the Company taking; (e) changes in
applicable Laws or regulations after the date hereof, or (f) changes in GAAP or
regulatory accounting principles after the date hereof. The Company has made
available to Parent complete and correct copies of its Certificate of
Incorporation (the "Company Certificate") and By-laws (the "Company By-laws")
and the certificate of incorporation and by-laws (or comparable organizational
documents) of each of its Subsidiaries, in each case as amended to the date of
this Agreement. The Company has made available to Parent and its representatives
correct and complete copies of the minutes of all meetings of stockholders, the
Board of Directors and each committee of the Board of Directors of the Company
and each of its Subsidiaries held since December 31, 2000.
Section 3.02. Subsidiaries. Section 3.02 of the Company
Disclosure Schedule lists all the Subsidiaries of the Company and, for each such
Subsidiary, the state of formation and each jurisdiction in which such
Subsidiary is qualified or licensed to do business. All the outstanding shares
of capital stock of, or other equity interests in, each such Subsidiary have
been validly issued and are fully paid and nonassessable and are owned directly
or indirectly by the Company free and clear of all pledges, claims, liens,
charges, encumbrances or security interests of any kind or nature whatsoever
(collectively, "Liens"), and free of any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other equity interests. Except for
the capital stock or other equity or voting interests of its Subsidiaries and
publicly traded securities held for investment which do not exceed 5% of the
outstanding securities of any entity, the Company does not own, directly or
indirectly, any capital stock or other equity or voting interests in any person.
Section 3.03. Capital Structure.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and 1,000,000 shares of preferred
stock, par value $0.01 per share ("Company Preferred Stock"). At the close of
business on September 30, 2003, (i) 67,772,502 shares of Company Common Stock
were issued and 47,760,422 shares of Company Common Stock were outstanding, (ii)
20,012,080 shares of Company Common Stock were held by the Company in its
treasury, (iii) 7,608,120 shares of Company Common Stock were reserved for
issuance pursuant to the Company's 1989 Non-Qualified Stock Option Plan, 1990
Non-Qualified Stock Option Plan, 1991 Non-Qualified Stock Option Plan, 1992
Non-Qualified Stock Option Plan, 1994 Non-Qualified Stock Option Plan, 1995
Non-Qualified Stock Option Plan, 1996 Non-Qualified Stock Option Plan, 1998
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Non-Qualified Stock Option Plan, 1999 Non-Qualified Stock Option Plan, 2000
Non-Qualified Stock Option Plan, 2001 Non-Qualified Stock Option Plan, 2002
Non-Qualified Stock Option Plan, 2003 Non-Qualified Stock Option Plan, any
non-employee director stock option plan and any other plan or arrangement under
which compensatory stock options were granted (collectively, the "Company Stock
Plans") (of which 6,412,486 shares of Company Common Stock were subject to
outstanding options to purchase shares of Company Common Stock granted under the
Company Stock Plans ("Company Stock Options")), (iv) 389,217 shares of Company
Common Stock were "Available Shares" (as defined in the SCT Agreement) and
7,915,335 shares of Company Common Stock were held in the "Suspense Account" (as
defined in the SCT Agreement) pursuant to the Trust and (v) no shares of Company
Preferred Stock were issued or outstanding.
(b) The Company has delivered to Parent a correct and
complete list, as of September 30, 2003, of all outstanding Company Stock
Options or other rights to purchase or receive shares of Company Common Stock
granted under the Company Stock Plans or otherwise, the number of shares of
Company Common Stock subject thereto, expiration dates and exercise prices
thereof. Except as set forth above in this Section 3.03, at the close of
business on September 30, 2003, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding.
Except as set forth above in this Section 3.03, there are no outstanding stock
appreciation rights, rights to receive shares of Company Common Stock on a
deferred basis or other rights that are linked to the value of Company Common
Stock granted under the Company Stock Plans or otherwise. All outstanding shares
of capital stock of the Company are, and all shares which may be issued pursuant
to the Company Stock Plans will be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(c) Except as set forth above in this Section 3.03, there
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above in this Section 3.03, (i) there are not issued,
reserved for issuance or outstanding (A) any securities of the Company or any of
its Subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company or any of its Subsidiaries or
(B) any warrants, calls, options or other rights to acquire from the Company or
any of its Subsidiaries, or any obligation of the Company or any of its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or voting
securities of the Company or any of its Subsidiaries and (ii) there are not any
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Neither the Company
nor any of its Subsidiaries is a party to any voting agreement with respect to
the voting of any such securities.
11
Section 3.04. Authority; Noncontravention.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to receipt of Company
stockholder approval (the "Company Stockholder Approval"), to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, subject, in the case of the
Merger, to receipt of the Company Stockholder Approval. This Agreement has been
duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery by each of the other parties hereto, constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms (subject to applicable bankruptcy, solvency,
fraudulent transfer, reorganization, moratorium and other Laws affecting
creditors' rights generally from time to time in effect and by general
principles of equity). As of the date hereof, the Board of Directors of the
Company, at a meeting duly called and held at which all the directors of the
Company were present in person or by telephone, duly and unanimously adopted
resolutions (i) approving and declaring advisable this Agreement, the Merger and
the other transactions contemplated by this Agreement, (ii) directing that the
adoption of this Agreement be submitted to a vote at a meeting of the
stockholders of the Company and (iii) recommending that the stockholders of the
Company adopt this Agreement.
(b) The execution and delivery of this Agreement do not,
and the consummation of the Merger and the other transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of the Company or any of its Subsidiaries under, (i)
the Company Certificate or the Company By-laws or the comparable organizational
documents of any of its Subsidiaries, (ii) any loan or credit agreement, bond,
debenture, note, mortgage, indenture, lease or other contract, agreement,
obligation, commitment, arrangement, understanding, instrument, permit or
license (each, a "Contract"), to which the Company or any of its Subsidiaries is
a party or any of their respective properties or other assets is subject or
(iii) subject to the governmental filings and other matters referred to in
Section 3.05, any Law applicable to the Company or any of its Subsidiaries or
their respective properties or other assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, breaches, defaults, rights,
losses or Liens that individually or in the aggregate (A) have not had and would
not reasonably be expected to have a Company Material Adverse Effect, (B) would
not reasonably be expected to impair in any material respect the ability of the
Company to perform its obligations hereunder and (C) would not reasonably be
expected to prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
12
Section 3.05. Governmental Approvals. No consent, approval,
order or authorization of, action by or in respect of, or registration,
declaration or filing with, any Federal, state, local or foreign government, any
court, administrative, regulatory or other governmental agency, commission or
authority or any non-governmental self-regulatory agency, commission or
authority (each, a "Governmental Authority") is required by or with respect to
the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the Merger or the other transactions contemplated by this Agreement, except for
those required under or in relation to (a) the premerger notification and report
form under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (b) the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"); (c) the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), (d) the Certificate of Merger to be filed with
the Secretary of State of the State of Delaware and appropriate documents to be
filed with the relevant authorities of other states in which the Company is
qualified to do business, (e) any appropriate filings with and approvals of the
New York Stock Exchange, (f) applicable state insurance and department of health
approvals; (g) state securities or "blue sky" laws and (h) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate would
not reasonably be expected to (x) have a Company Material Adverse Effect, (y)
impair in any material respect the ability of the Company to perform its
obligations hereunder or (z) prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement. The consents, approvals,
orders, authorizations, registrations, declarations and filings set forth in (a)
through (g) above or listed in Section 3.05 of the Company Disclosure Schedule
are referred to herein as "Necessary Consents."
Section 3.06. Company SEC Documents; No Undisclosed
Liabilities.
(a) The Company has filed all reports, schedules, forms,
statements and other documents (including exhibits and other information
incorporated therein) with the Securities and Exchange Commission (the "SEC")
required to be filed by the Company since December 31, 2000 (such documents, the
"Company SEC Documents"). No Subsidiary of the Company is required to file, or
files, any form, report or other document with the SEC. As of their respective
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be,
applicable to such Company SEC Documents, and none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, unless such information contained in any Company SEC Document has
been corrected by a later-filed Company SEC Document. The financial statements
of the Company included in the Company SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
13
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to the absence
of footnote disclosure and to normal and recurring year-end audit adjustments).
(b) Except (i) as set forth in the financial statements
included in the Company's most recent Annual Report on Form 10-K or subsequent
Quarterly Reports on Form 10-Q filed by the Company and publicly available prior
to the date of this Agreement and (ii) as incurred in the ordinary course of
business, neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that individually or in the aggregate have had or would reasonably be expected
to have a Company Material Adverse Effect.
Section 3.07. Information Supplied. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in (a) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of shares of Parent
Common Stock in the Merger (as amended or supplemented from time to time, the
"Form S-4") will, at the time the Form S-4 is filed with the SEC, at any time it
is amended or supplemented and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading or (b) the proxy statement relating to the Company Stockholders
Meeting (together with any amendments thereof or supplements thereto, in each
case in the form or forms mailed to the Company's stockholders, the "Proxy
Statement") will, at the date it is first mailed to the stockholders of the
Company and at the time of the Company Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act. Notwithstanding the foregoing, no representation or warranty is
made by the Company with respect to statements made or incorporated by reference
in the Form S-4 or the Proxy Statement based on information supplied by Parent
or Merger Sub specifically for inclusion or incorporation by reference in the
Form S-4 of the Proxy Statement.
Section 3.08. Absence of Certain Changes or Events. Since
the date of the most recent audited financial statements included in the Company
SEC Documents filed by the Company and publicly available prior to the date of
this Agreement (the "Filed Company SEC Documents"), except (a) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby to Parent, Merger Sub and the Company's financial and legal advisors or
(b) as disclosed in the Filed Company SEC Documents there has not been any
change, effect, event, occurrence or state of facts that individually or in the
14
aggregate has had or would reasonably be expected to have a Company Material
Adverse Effect.
Section 3.09. Litigation. There is no suit, action or
proceeding pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries that individually or in the aggregate has had
or would reasonably be expected to have a Company Material Adverse Effect or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Authority or arbitrator outstanding against,
or, to the Knowledge of the Company, investigation by any Governmental Authority
involving, the Company or any of its Subsidiaries that individually or in the
aggregate has had or would reasonably be expected to have a Company Material
Adverse Effect or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
Section 3.10. Contracts.
(a) Neither the Company nor any of its Subsidiaries is a
party to, and none of their respective properties or other assets is subject to,
any Contract that is of a nature required to be filed as an exhibit to a report
or filing under the Securities Act or the Exchange Act, other than any Contract
that is filed as an exhibit to the Filed Company SEC Documents.
(b) Except for Contracts filed in unredacted form as
exhibits to the Filed Company SEC Documents, Section 3.10(b) of the Company
Disclosure Schedule sets forth a correct and complete list as of the date of
this Agreement, and the Company has made available to Parent correct and
complete copies (including all amendments thereto), of:
(i) all Contracts (other than Contracts of the category
required to be disclosed in either clause (ix) or clause (x) of this
Section 3.10(b), regardless of value) of the Company or any of its
Subsidiaries having an aggregate value per Contract, or involving
payments by or to the Company or any of its Subsidiaries, of more
than $500,000 on an annual basis;
(ii) all Contracts to which the Company or any of its
Subsidiaries is a party, or by which the Company, any of its
Subsidiaries or any of its Affiliates is bound, that contain a
covenant restricting the ability of the Company or any of its
Subsidiaries (or which, following the consummation of the Merger,
would restrict the ability of Parent or any of its Subsidiaries,
including the Surviving Entity and its Subsidiaries) to compete in
any business or with any person or in any geographic area;
(iii) all Contracts (other than Contracts entered into in
the ordinary course of business with all providers of health care,
including, but not limited to, physicians, facilities and ancillary
providers (each a "Provider")) of the Company or any of its
15
Subsidiaries with any Affiliate of the Company (other than any of its
Subsidiaries);
(iv) all Contracts to which the Company or any of its
Subsidiaries is a party granting any license to intellectual property
(other than trade and service marks) and any other license (other
than real estate) having an aggregate value per license, or involving
payments to the Company or any of its Subsidiaries, of more than
$500,000 on an annual basis;
(v) all confidentiality agreements (other than in the
ordinary course of business), agreements by the Company not to
acquire assets or securities of a third party or agreements by a
third party not to acquire assets or securities of the Company;
(vi) any Contract having an aggregate value per Contract,
or involving payments by or to the Company or any of its
Subsidiaries, of more than $500,000 on an annual basis that requires
consent of or notice to a third party in the event of or with respect
to the Merger, including in order to avoid termination of or loss of
benefit under any such Contract;
(vii) all joint venture, partnership or other similar
agreements involving co-investment with a third party to which the
Company or any of its Subsidiaries is a party;
(viii) except as set forth in Section 3.03, all Contracts
pursuant to which any indebtedness of the Company or any of its
Subsidiaries is outstanding or may be incurred and all guarantees of
or by the Company or any of its Subsidiaries of any indebtedness of
any other person (other than the Company or any of its Subsidiaries)
(except for such indebtedness or guarantees the aggregate principal
amount of which does not exceed $500,000 on an annual basis and
excluding trade payables arising in the ordinary course of business);
(ix) the 25 largest Provider and the ten largest customer
Contracts measured in terms of payments to or receipts from the
Company and its Subsidiaries in the aggregate during the calendar
year ending December 31, 2002;
(x) any Contract (other than a Contract with a Provider)
that involves (1) annual premiums or payments of greater than
$500,000 or annual administrative services fees or similar payments
of greater than $500,000 and (2) by its terms, does not terminate
within one year after the date of such Contract and is not cancelable
during such period without penalty or without payment (other than
customer agreements that are not terminable within one year solely as
a result of the Health Insurance Portability and Accountability Act
and the regulations promulgated thereunder (including 45 C.F.R. parts
160, 162, and 164) or other statutory or regulatory requirements);
and
16
(xi) any Contract, agreement or policy for reinsurance.
(c) None of the Company or any of its Subsidiaries is, or
has received written notice or has Knowledge that any other party to any of its
Contracts is, in violation or breach of or default (with or without notice or
lapse of time or both) under, or has waived or failed to enforce any rights or
benefits under, any Contract to which it is a party or any of its properties or
other assets is subject, and, to the Knowledge of the Company, there has
occurred no event giving to others any right of termination, amendment or
cancellation of (with or without notice or lapse of time or both) any such
Contract except, in each case for violations, breaches, defaults, waivers or
failures to enforce rights or benefits that individually or in the aggregate
have not had and would not reasonably be expected to have a Company Material
Adverse Effect.
Section 3.11. Compliance with Laws.
(a) The Company and each of its Subsidiaries is in
compliance with all statutes, laws, ordinances, rules, regulations, judgments,
orders and decrees of any Governmental Authority (collectively, "Laws")
applicable to it, its properties or other assets or its business or operations,
except for instances of noncompliance or possible noncompliance that
individually or in the aggregate have not had and would not reasonably be
expected to have a Company Material Adverse Effect. None of the Company or any
of its Subsidiaries has received, since December 31, 2001, a notice or other
communication alleging or relating to a possible material violation of any Laws
applicable to its businesses or operations. The Company and its Subsidiaries
have in effect all material permits, licenses, variances, exemptions,
authorizations, operating certificates, franchises, orders and approvals of all
Governmental Authorities (collectively, "Permits") necessary to carry on their
businesses as now conducted, and there has occurred no violation of, default
(with or without notice or lapse of time or both) under, or event giving to
others any right of termination, amendment or cancellation of, with or without
notice or lapse of time or both, any Permit, except for violations, defaults or
events that individually or in the aggregate have not had and would not
reasonably be expected to have a Company Material Adverse Effect. There is no
event which has occurred that, to the Knowledge of the Company, would reasonably
be expected to result in the revocation, cancellation, non-renewal or adverse
modification of any such Permit that individually or in the aggregate would
reasonably be expected to cause a Company Material Adverse Effect. The Merger,
in and of itself, would not cause the revocation or cancellation of any such
Permit that individually or in the aggregate would reasonably be expected to
have a Company Material Adverse Effect.
(b) The Company and each of its officers and directors are
in compliance with, and have complied, in all material respects with (A) the
applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the related rules
and regulations promulgated under such act or the Exchange Act
("▇▇▇▇▇▇▇▇-▇▇▇▇▇") and (B) the applicable listing and corporate governance rules
and regulations of the New York Stock Exchange. The Company has previously
disclosed to Parent any of the information required to be disclosed by the
Company and certain of its officers to the Company's Board of Directors or any
17
committee thereof pursuant to the certification requirements contained in Form
10-K and Form l0-Q under the Exchange Act.
Section 3.12. Employee Benefit Plans.
(a) Section 3.12(a) of the Company Disclosure Schedule sets
forth a correct and complete list of: (i) all "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and all other employee benefit plans, programs,
agreements, policies, arrangements or payroll practices, including bonus plans,
employment, consulting or other compensation agreements, collective bargaining
agreements, incentive, equity or equity-based compensation, or deferred
compensation arrangements, change in control, termination or severance plans or
arrangements, stock purchase, severance pay, sick leave, vacation pay, salary
continuation for disability, hospitalization, medical insurance, life insurance
and scholarship plans and programs maintained by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries contributed or
is obligated to contribute thereunder for current or former employees of the
Company or any of its Subsidiaries (the "Employees") (collectively, the "Company
Plans").
(b) Correct and complete copies of the following documents,
with respect to each of the Company Plans (other than a Multiemployer Plan),
have been delivered to Parent by the Company, to the extent applicable: (i) any
plans, all amendments and attachments thereto and related trust documents,
insurance contracts or other funding arrangements, and amendments thereto; (ii)
the most recent Forms 5500 and all schedules thereto and the most recent
actuarial report, if any; (iii) the most recent IRS determination letter; (iv)
summary plan descriptions; and (v) written communications to employees generally
and relating to the SCT Agreement, except, in the case of communications
relating to the SCT Agreement, as individually or in the aggregate would not
reasonably be expected to have a Company Material Adverse Effect.
(c) The Company Plans have been maintained in accordance
with their terms and with all provisions of ERISA, the Code and other applicable
Laws, and neither the Company (or any of its Subsidiaries) nor any "party in
interest" or "disqualified person" with respect to the Company Plans has engaged
in a non-exempt "prohibited transaction" within the meaning of Section 4975 of
the Code or Section 406 of ERISA, except as individually or in the aggregate
have not had and would not reasonably be expected to have a Company Material
Adverse Effect. No fiduciary has any liability for breach of fiduciary duty or
any other failure to act or comply in connection with the administration or
investment of the assets of any Company Plan, except as individually or in the
aggregate have not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(d) The Company Plans intended to qualify under Section 401
of the Code are so qualified and any trusts intended to be exempt from Federal
income taxation under Section 501 of the Code are so exempt, except as
18
individually or in the aggregate have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(e) None of the Company, its Subsidiaries or any trade or
business (whether or not incorporated) that is treated as a single employer,
with any of them under Section 414(b), (c), (m) or (o) of the Code has any
current or contingent liability with respect to (i) a plan subject to Title IV
or Section 302 of ERISA or Section 412 or 4971 of the Code or (ii) any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA). Each Company
Plan that is intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of Subtitle A of the Code meets such requirements,
with such exceptions that individually or in the aggregate have not had and
would not reasonably be expected to have a Company Material Adverse Effect.
(f) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made under
any of the Company Plans (including workers compensation) or by Law (without
regard to any waivers granted under Section 412 of the Code), to any funds or
trusts established thereunder or in connection therewith have been made by the
due date thereof (including any valid extension).
(g) There are no pending actions, claims or lawsuits that
have been asserted or instituted against the Company Plans, the assets of any of
the trusts under the Company Plans or the sponsor or administrator of any of the
Company Plans, or against any fiduciary of the Company Plans with respect to the
operation of any of the Company Plans (other than routine benefit claims), nor
does the Company have any Knowledge of facts that could form the basis for any
such action, claim or lawsuit, other than such actions, claims or lawsuits that
individually or in the aggregate have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(h) None of the Company Plans provides for post-employment
life or health insurance, benefits or coverage for any participant or any
beneficiary of a participant, except as may be required under the Consolidate
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and at the
expense of the participant or the participant's beneficiary. Each of the Company
and any ERISA Affiliate which maintains a "group health plan" within the meaning
Section 5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder, except where the failure to comply
individually or in the aggregate has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(i) Except as specifically provided in this Agreement,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any Employee, (ii) increase any benefits otherwise payable under any Company
19
Plan, (iii) result in the acceleration of the time of payment or vesting of any
such benefits under any Company Plan or (iv) result in any obligation to fund
any trust or other arrangement with respect to compensation or benefits under a
Company Plan.
(j) Neither the Company nor any of its Subsidiaries has a contract, plan or
commitment, whether legally binding or not, to create any additional Company
Plan or to modify any existing Company Plan, except as required by applicable
Law or tax qualification requirement.
(k) Any individual who performs services for the Company or any of its
Subsidiaries (other than through a contract with an organization other than such
individual) and who is not treated as an employee of the Company or any of its
Subsidiaries for Federal income tax purposes by the Company or any of its
Subsidiaries is not an employee for such purposes, except as individually or in
the aggregate, together with any breach or breaches of Section 3.12(c) hereof
(without regard to any materiality or Company Material Adverse Effect qualifiers
therein), has not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(l) Neither the Company nor any of its Subsidiaries is a
party to any contract, agreement or other arrangement which provides for the
payment of any amount which would not be deductible by reason of Section 162(m)
(to the extent not properly reflected on the Company's applicable tax returns)
or Section 280G of the Code.
Section 3.13. Taxes.
(a) The Company and each of its Subsidiaries has timely
filed, or has caused to be timely filed on its behalf (taking into account any
extension of time within which to file), all material tax returns required to be
filed by it, and all such filed tax returns are correct and complete in all
material respects. All taxes shown to be due on such tax returns, and all
material taxes otherwise required to be paid by the Company or any of its
Subsidiaries, have been timely paid.
(b) The most recent financial statements contained in the
Filed Company SEC Documents reflect an adequate reserve for all material taxes
payable by the Company and its Subsidiaries for all taxable periods and portion
thereof through the date covered by such financial statements. No material
deficiency with respect to taxes has been proposed, asserted or assessed against
the Company or any of its Subsidiaries that has not been paid in full or fully
resolved in favor of the taxpayer.
(c) The Federal income tax returns of the Company and each
of its Subsidiaries have been examined by and settled with the Internal Revenue
Service (the "IRS") (or, to the Knowledge of the Company, the applicable statute
of limitations has expired) for all years through 1999. All material assessments
for taxes due with respect to such completed and settled examinations or any
concluded litigation have been fully paid.
20
(d) Neither the Company nor any of its Subsidiaries has any
obligation under any agreement (either with any person or any taxing authority)
with respect to material taxes.
(e) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code since the
effective date of Section 355(e) of the Code.
(f) Since 1996, neither the Company nor any of its
Subsidiaries has been a member of an affiliated group of corporations within the
meaning of Section 1504 of the Code, other than the affiliated group of which
the Company is the common parent.
(g) No audit or other administrative or court proceedings
are pending with any taxing authority with respect to any federal, state or
local income or other material taxes of the Company or any of its Subsidiaries,
and no written notice thereof has been received by the Company or any of its
Subsidiaries. No issue has been raised by any taxing authority in any presently
pending tax audit that could be material and adverse to the Company or any of
its Subsidiaries for any period after the Effective Time. Neither the Company
nor any of its Subsidiaries has any outstanding agreements, waivers or
arrangements extending the statutory period of limitations applicable to any
claim for, or the period for the collection or assessment of, any federal, state
or local income or other material taxes.
(h) No written claim that could give rise to material taxes
has been made within the previous five years by a taxing authority in a
jurisdiction where the Company or any of its Subsidiaries does not file tax
returns that the Company or any of its Subsidiaries is or may be subject to
taxation in that jurisdiction.
(i) The Company has made available to Parent correct and
complete copies of (i) all income and franchise tax returns of the Company and
its Subsidiaries for the preceding three taxable years and (ii) any audit report
issued within the last three years (or otherwise with respect to any audit or
proceeding in progress) relating to income or franchise taxes of the Company or
any of its Subsidiaries.
(j) No Liens for taxes exist with respect to any properties
or other assets of the Company or any of its Subsidiaries, except for Liens for
taxes not yet due.
(k) All material taxes required to be withheld by the
Company or any of its Subsidiaries have been withheld and have been or will be
duly and timely paid to the proper taxing authority.
(l) Neither the Company nor any of its Subsidiaries has
taken any action, has failed to take any action or has any Knowledge of any fact
or circumstance that would reasonably be likely to prevent the Merger from
21
qualifying as a reorganization under Section 368 of the Code.
(m) For purposes of this Agreement, (i) "taxes" shall mean
taxes of any kind (including those measured by or referred to as income,
franchise, gross receipts, sales, use, ad valorem, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added, property, windfall profits, customs, duties or similar fees,
assessments or charges of any kind whatsoever) together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto, domestic or foreign and shall include any
transferee or successor liability in respect of taxes (whether by contract or
otherwise) and any several liability in respect of any tax as a result of being
a member of any affiliated, consolidated, combined, unitary or similar group and
(ii) "tax returns" shall mean any return, report, claim for refund, estimate,
information return or statement or other similar document relating to or
required to be filed with any taxing authority with respect to taxes, including
any schedule or attachment thereto, and including any amendment thereof.
Section 3.14. Brokers and Other Advisors. No broker,
investment banker, financial advisor or other person, other than ▇▇▇▇▇▇ Brothers
and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, the fees and expenses of which will be paid
by the Company in accordance with the Company's agreements with such firm
(copies of which have been made available to Parent), is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission, or
the reimbursement of expenses, in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of the Company or
its Subsidiaries.
Section 3.15. Opinion of Financial Advisor. The Company has
received the opinion of each of ▇▇▇▇▇▇ Brothers and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇ each dated the date hereof and in customary form to the effect that, as of
such date, the Merger Consideration is fair from a financial point of view to
the holders of shares of Company Common Stock, copies of which opinions will be
delivered to Parent as soon as practicable after the date of this Agreement.
Section 3.16. Statutory Financial Statements. Except as
otherwise set forth therein, the annual statements and the quarterly statements
filed by the Company or any of its Subsidiaries with the Governmental
Authorities listed in Section 3.16 of the Company Disclosure Schedule for the
years ended December 31, 2001 and 2002, and for each quarterly period ending
after December 31, 2002 (the "State Regulatory Filings") and the statutory
balance sheets and income statements included in such State Regulatory Filings
fairly present in all material respects the statutory financial condition and
results of operations of the Company or such Subsidiaries, as applicable, as of
the date and for the periods indicated therein and have been prepared in
accordance with applicable statutory accounting principles consistently applied
throughout the periods indicated, except as may be reflected in the notes
thereto and subject to the absence of notes required by statutory accounting
principles and to normal year-end adjustments.
22
Section 3.17. Reserves. The loss reserves and other
actuarial amounts of the Company and each of its Subsidiaries recorded in their
respective financial statements contained in the Company's SEC Documents and the
State Regulatory Filings (i) were determined in all material respects in
accordance with generally accepted actuarial standards consistently applied
(except as otherwise noted in such financial statements), (ii) were fairly
stated in all material respects in accordance with sound actuarial principles,
(iii) satisfied all applicable Laws in all material respects and have been
computed on the basis of methodologies consistent in all material respects with
those used in computing the corresponding reserves in the prior fiscal years and
(iv) include provisions for all actuarial reserves and related items which ought
to be established in accordance with applicable Laws. To the Knowledge of the
Company there are no facts or circumstances which would necessitate, in the good
faith application of prudent reserving practices and policies, any material
adverse change in the statutorily required reserves or reserves above those
reflected in the most recent balance sheet (other than increases consistent with
past experience resulting from increases in enrollment with respect to services
provided by the Company or its Subsidiaries). The Risk Based Capital - Company
Action Level of the Company and each of its Subsidiaries (excluding Optimum
Choice of the Carolinas, Inc.) as defined in NAIC Risk Based Capital Guidelines
and as required by applicable Law is now and immediately prior to Closing will
be not less than the risk based capital of the Company or such Subsidiary
(excluding Optimum Choice of the Carolinas, Inc.) as of June 30, 2003 as set
forth in the applicable State Regulatory Filing, reduced, in the case of any
Subsidiary, by any duly authorized dividends paid by such Subsidiary to the
Company.
Section 3.18. SCT Agreement. Correct and complete copies of
the Amended and Restated Mid Atlantic Medical Services, Inc. Stock Compensation
Trust Agreement, by and between the Company and The Bank of New York (the
"Trustee"), dated August 4, 2000 (the "SCT Agreement"), all amendments and
allonges thereto and all promissory notes issued pursuant thereto have been made
available to Parent by the Company. The SCT Agreement constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms and, to the Knowledge of the Company, the SCT
Agreement constitutes a legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms, in each case,
subject to the terms of the trust created pursuant to the terms of the SCT
Agreement (the "Trust") with respect to applicable bankruptcy, solvency,
fraudulent transfer, reorganization, moratorium and other Laws affecting
creditors' rights generally from time to time in effect and by general
principles equity. The Trust distributes assets in respect of the Company's
employee benefit plans set forth in Section 3.18 of the Company Disclosure
Schedule.
ARTICLE IV
Representations and Warranties of Parent and Merger Sub
-------------------------------------------------------
Except as set forth in the disclosure schedule (with
specific reference to the Section or Subsection of this Agreement to which the
information stated in such disclosure relates; provided that, any fact or
condition disclosed in any section of such disclosure schedule in such a way as
23
to make its relevance to a representation or representations made elsewhere in
this Agreement or information called for by another section of such disclosure
schedule reasonably apparent shall be deemed to be an exception to such
representation or representations or to be disclosed on such other section of
such disclosure schedule notwithstanding the omission of a reference or cross
reference thereto) delivered by Parent to the Company prior to the execution of
this Agreement (the "Parent Disclosure Schedule"), Parent and Merger Sub
represent and warrant to the Company as follows:
Section 4.01. Organization, Standing and Corporate Power.
Each of Parent, its Subsidiaries and Merger Sub is an entity duly organized,
validly existing and in good standing under the Laws of the jurisdiction in
which it is formed and has all requisite power and authority to carry on its
business as now being conducted. Parent, its Subsidiaries and Merger Sub is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed individually or in the aggregate has not had and would not reasonably
be expected to have a Parent Material Adverse Effect. For purposes of this
Agreement, "Parent Material Adverse Effect" shall mean any change, effect,
event, occurrence or state of facts that is materially adverse to the business,
financial condition or results of operations of Parent and its Subsidiaries,
taken as a whole, other than any change, effect, event, occurrence or state of
facts relating to (a) the economy or the financial markets in general, (b) the
industry in which Parent and its Subsidiaries operate in general and not
specifically relating to Parent and its Subsidiaries, (c) the announcement of
this Agreement or the transactions contemplated hereby or the identity of the
Company (provided, that the exclusion set forth in this clause (c) shall not
apply to Section 4.03(b)), (d) changes in applicable Law or regulations after
the date hereof (provided, that the exclusion set forth in this clause (d) shall
not apply to consents, orders or decrees in the case of the last sentence of
Section 6.03 or the consents referred to in Section 7.02(f)) or (e) changes in
GAAP or regulatory accounting principles after the date hereof. Parent has made
available to the Company complete and correct copies of its Certificate of
Incorporation (the "Parent Articles") and By-laws (the "Parent By-laws") and the
Articles of incorporation and by-laws or comparable organizational documents) of
each of its Subsidiaries and Merger Sub, in each case as amended to the date of
this Agreement.
Section 4.02. Capital Structure.
(a) The authorized capital stock of Parent consists of
1,500,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, par value $0.001 per share ("Parent Preferred Stock"). At the close of
business on September 30, 2003, (i) 589,645,080 shares of Parent Common Stock
were issued and outstanding, (ii) no shares of Parent Common Stock were held by
Parent in its treasury, (iii) 137,986,873 shares of Parent Common Stock were
reserved for issuance pursuant to the 2002 Stock Incentive Plan, as amended, the
1987 Supplemental Stock Option Plan and the 1993 Qualified Employee Stock
24
Purchase Plan, as amended (collectively, the "Parent Stock Plans") (of which
85,925,216 shares of Parent Common Stock were subject to outstanding options to
purchase shares of Parent Common Stock granted under the Parent Stock Plans )
and (iv) no shares of Parent Preferred Stock were issued or outstanding. Except
as set forth above in this Section 4.02(a), at the close of business on
September 30, 2003, no shares of capital stock or other voting securities of the
Parent were issued, reserved for issuance or outstanding. All outstanding shares
of capital stock of Parent are, and all shares which may be issued (including
shares of Parent Common Stock to be issued in accordance with this Agreement)
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth above in
this Section 4.02(a), there are no bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of Parent may vote.
(b) The authorized equity interests of Merger Sub consists
of 100 membership interests ("Merger Sub Interests"). All of the issued and
outstanding Merger Sub Interests are owned by Parent. Merger Sub does not have
issued or outstanding any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating Merger Sub
to issue, transfer or sell any Merger Sub Interests to any person, other than
Parent.
Section 4.03. Authority; Noncontravention.
(a) Each of Parent and Merger Sub has all requisite
organizational power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate or other
organizational action on the part of Parent and Merger Sub and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub
and, assuming the due authorization, execution and delivery by the other party
hereto, constitutes a legal, valid and binding obligation of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its terms
(subject to applicable bankruptcy, solvency, fraudulent transfer,
reorganization, moratorium and other Laws affecting creditors' rights generally
from time to time in effect and by general principles of equity).
(b) The execution and delivery of this Agreement do not,
and the consummation of the Merger and the other transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of Parent, any of its Subsidiaries or Merger Sub
under (i) the Parent Certificate or Parent By-laws or the comparable
25
organizational documents of any of its Subsidiaries or Merger Sub, (ii) any
Contract to which Parent, any of its Subsidiaries or Merger Sub is a party or
any of their respective properties or other assets is subject or (iii) subject
to the governmental filings and other matters referred to in Section 4.04
hereof, any Law applicable to Parent, any of its Subsidiaries or Merger Sub or
their respective properties or other assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, breaches, defaults, rights,
losses or Liens that individually or in the aggregate (A) have not had and would
not reasonably be expected to have a Parent Material Adverse Effect, (B) would
not reasonably be expected to impair in any material respect the ability of
Parent or Merger Sub to perform its obligations under this Agreement and (C)
would not reasonably be expected to prevent or materially delay the consummation
of any of the transactions contemplated by this Agreement.
Section 4.04. Governmental Approvals. No consent, approval,
order or authorization of, action by or in respect of, or registration,
declaration or filing with, any Governmental Authority is required by or with
respect to Parent, any of its Subsidiaries or Merger Sub in connection with the
execution and delivery of this Agreement by Parent and Merger Sub or the
consummation by Parent and Merger Sub of the Merger or the other transactions
contemplated by this Agreement, except for (a) Necessary Consents and (b) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made individually or in the
aggregate would not reasonably be expected to (x) have a Parent Material Adverse
Effect, (y) impair in any material respect the ability of Parent or Merger Sub
to perform its obligations under this Agreement or (z) prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement.
Section 4.05. Parent SEC Documents. (a) Parent has filed
all reports, schedules, forms, statements and other documents (including
exhibits and other information incorporated therein) with the SEC required to be
filed by Parent since December 31, 2000 (such documents, the "Parent SEC
Documents"). No Subsidiary of Parent is required to file, or files, any form,
report or other document with the SEC. As of their respective dates, the Parent
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, applicable to such
Parent SEC Documents, and none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, unless such
information contained in any Parent SEC Document has been corrected by a
later-filed Parent SEC Document. The financial statements of Parent included in
the Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
financial position of Parent and its consolidated Subsidiaries as of the dates
26
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to the absence
of footnote disclosure and to normal and recurring year-end audit adjustments).
(b) Except (i) as set forth in the financial statements
included in Parent's most recent Annual Report on Form 10-K or subsequent
Quarterly Reports on Form 10-Q filed by Parent and publicly available prior to
the date of this Agreement and (ii) as incurred in the ordinary course of
business, neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that individually or in the aggregate have had or would reasonably be expected
to have a Parent Material Adverse Effect.
Section 4.06. Information Supplied. None of the information
supplied or to be supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in (a) the Form S-4 will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading or (b) the Proxy Statement will, at the date
it is first mailed to the stockholders of the Company and at the time of the
Company Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable. Notwithstanding the foregoing, no representation or warranty
is made by Parent or Merger Sub with respect to statements made or incorporated
by reference in the Form S-4 or the Proxy Statement based on information
supplied by the Company specifically for inclusion or incorporation by reference
in the Form S-4 or the Proxy Statement.
Section 4.07. Absence of Certain Changes or Events. Since
the date of the most recent audited financial statements included in the Parent
SEC Documents filed by Parent and publicly available prior to the date of this
Agreement, except (a) for liabilities incurred in connection with this Agreement
or the transactions contemplated hereby to the Company or (b) as disclosed in
the Parent SEC Documents filed by Parent and publicly available prior to the
date of this Agreement, there has not been any change, effect, event, occurrence
or state of facts that individually or in the aggregate has had or would
reasonably be expected to have a Parent Material Adverse Effect.
Section 4.08. Litigation. There is no suit, action or
proceeding pending or, to the Knowledge of Parent, threatened against Parent or
any of its Subsidiaries that individually or in the aggregate has had or would
reasonably be expected to have a Parent Material Adverse Effect or prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Authority or arbitrator outstanding against, or, to the
Knowledge of Parent, investigation by any Governmental Authority involving,
27
Parent or any of its Subsidiaries that individually or in the aggregate has had
or would reasonably be expected to have a Parent Material Adverse Effect or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
Section 4.09. Compliance with Laws.
(a) Parent and each of its Subsidiaries is in compliance
with all Laws applicable to it, its properties or other assets or its business
or operations, except for instances of noncompliance or possible noncompliance
that individually or in the aggregate has not had or would not reasonably be
expected to have a Parent Material Adverse Effect. None of Parent or any of its
Subsidiaries has received, since December 31, 2001, a notice or other
communication alleging or relating to a possible material violation of any Laws
applicable to its businesses or operations. Parent and its Subsidiaries have in
effect all material Permits necessary to carry on their businesses as now
conducted, and there has occurred no violation of, default (with or without
notice or lapse of time or both) under, or event giving to others any right of
termination, amendment or cancellation of, with or without notice or lapse of
time or both, any Permit, except for violations, defaults or events that
individually or in the aggregate have not had and would not reasonably be
expected to have a Parent Material Adverse Effect. There is no event which has
occurred that, to the Knowledge of Parent, would reasonably be expected to
result in the revocation, cancellation, non-renewal or adverse modification of
any such Permit that individually or in the aggregate would reasonably be
expected to cause a Parent Material Adverse Effect. The Merger, in and of
itself, would not cause the revocation or cancellation of any such Permit that
individually or in the aggregate would reasonably be expected to have a Parent
Material Adverse Effect.
(b) Parent and each of its officers and directors are in
compliance with, and have complied, in all material respects with (A) the
applicable provisions of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and (B) the applicable listing and
corporate governance rules and regulations of the New York Stock Exchange.
Parent has previously disclosed to the Company any of the information required
to be disclosed by Parent and certain of its officers to Parent's Board of
Directors or any committee thereof pursuant to the certification requirements
contained in Form 10-K and Form l0-Q under the Exchange Act.
Section 4.10. No Business Activities. Merger Sub has not
conducted any activities other than in connection with the organization of
Merger Sub, the negotiation and execution of this Agreement and the consummation
of the transactions contemplated hereby.
Section 4.11. No Parent Vote Required. No vote or other
action of the stockholders of Parent is required by Law, the Parent Certificate
or the Parent By-laws or otherwise in order for Parent and Merger Sub to
consummate the Merger and the transactions contemplated hereby.
28
Section 4.12. Taxes.
(a) Neither Parent nor any of its Subsidiaries has taken
any action, has failed to take any action or has Knowledge of any fact or
circumstance that would reasonably be likely to prevent the Merger from
qualifying as a reorganization under Section 368 of the Code.
(b) Merger Sub is a Delaware limited liability company all
of the membership interests of which are owned by Parent and as to which Parent
has not elected to treat as a corporation for federal income tax purposes.
ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
Section 5.01. Conduct of Business.
(a) Conduct of Business by the Company. During the period
from the date of this Agreement to the Effective Time, the Company shall, and
shall cause each of its Subsidiaries to, carry on its business in the ordinary
course consistent with past practice and comply with all applicable Laws in all
material respects, and, to the extent consistent therewith, use its reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current officers, employees and consultants and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it with the intention that its goodwill and
ongoing business shall not be materially impaired at the Effective Time. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as provided in Section 5.01(a) of
the Company Disclosure Schedule and except as expressly contemplated by this
Agreement, the Company shall not, and shall not permit any of its Subsidiaries
to, without Parent's prior written consent, which shall not be unreasonably
withheld or delayed (provided that in the case of any issuance, delivery or sale
of shares of capital stock proposed by the Company in accordance with Section
5.01(a)(ii), Parent's consent may be withheld or delayed in its sole discretion
if such issuance, delivery or sale would reasonably be likely to require an
additional issuance of shares by Parent in accordance with Section 2.01(d)
hereof):
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property) in
respect of, any of its capital stock, other than dividends or
distributions by a direct or indirect wholly owned Subsidiary of the
Company to its parent, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (C) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities;
29
(ii) issue, deliver, sell, grant, pledge or otherwise
encumber or subject to any Lien any shares of its capital stock, any
other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, or any "phantom" stock,
"phantom" stock rights, stock appreciation rights or stock based
performance units (other than (A) the issuance of shares of Company
Common Stock upon the exercise of Company Stock Options outstanding
on the date hereof or granted after the date hereof in accordance
with clause (B) below, in either case in accordance with their terms
on the date hereof (or on the date of grant, if later), (B) the grant
of options to employees hired within one year prior to, or anytime
after, the date hereof to acquire shares of Company Common Stock in
accordance with the Company's ordinary course of business consistent
with past practice);
(iii) amend the Company Certificate or the Company By-laws
or the comparable charter or organizational documents of any of its
Subsidiaries;
(iv) directly or indirectly acquire (A) by merging or
consolidating with, or by purchasing all of or a substantial equity
interest in, or by any other manner, any division, business or equity
interest of any person or (B) any assets forming part of such a
division or business that have a purchase price in excess of
$1,000,000 individually or $2,000,000 in the aggregate;
(v) sell, lease, license, mortgage, sell and leaseback or
otherwise encumber or subject to any Lien or otherwise dispose of any
of its properties or other assets with a fair market value in excess
of $2,000,000 individually or $5,000,000 in the aggregate to a third
party (except (A) by incurring Permitted Liens, (B) with respect to
properties or other assets no longer used in the operation of the
Company's business and/or (C) in the ordinary course of business);
(vi) make any unbudgeted capital expenditure or
expenditures which (A) involves the purchase of any real property or
(B) is in excess of $2,000,000 individually or $5,000,000 in the
aggregate, except for any such capital expenditures provided for in
the 2003 Capital Expenditure Plan (authorizing approximately
$22,100,000 of capital expenditures) and the 2004 Capital Expenditure
Plan (providing for approximately $22,000,000 in capital expenditures
ratably over the 2004 calendar year) provided to Parent prior to the
date hereof;
(vii) (A) repurchase or prepay any indebtedness for
borrowed money except as required by the terms of such indebtedness,
(B) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person or issue or sell any debt securities
or options, warrants, calls or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any
debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of
30
another person or enter into any arrangement having the economic
effect of any of the foregoing or (C) make any loans, advances or
capital contributions to, or investments in, any other person in
excess of $250,000 in the aggregate, other than (1) any loan or
advance to any physician or physicians group up to $150,000 in the
aggregate, (2) any working capital advance to any Provider pursuant
to COMAR Section 10.37.10.26B and (3) in the Company or in or to any
direct or indirect Subsidiary of the Company;
(viii) (A) pay, discharge, settle or satisfy any claims
(including claims of stockholders), liabilities or obligations
(whether absolute, accrued, asserted or unasserted, contingent or
otherwise) (1) in excess of $2,000,000 individually and $5,000,000 in
the aggregate, other than in the ordinary course of business
consistent with past practice or (2) involving any material
limitation on the conduct of the business of the Company or its
Subsidiaries or (B) waive or release any right of the Company or any
of its Subsidiaries with a value in excess of $250,000;
(ix) enter into, modify, amend or terminate (A) any
Contract which if so entered into, modified, amended or terminated
would reasonably be expected to (1) have a Company Material Adverse
Effect, (2) impair in any material respect the ability of the Company
to perform its obligations under this Agreement or (3) prevent or
materially delay the consummation of any of the transactions
contemplated by this Agreement, (B) any other Contract that involves
the Company or any of its Subsidiaries incurring a liability in
excess of $2,000,000 individually or $5,000,000 in the aggregate and
that is not terminable by the Company without penalty with one year
or less notice (excluding contracts or amendments entered into or
made in the ordinary course of business with customers or Providers
of the Company or its Subsidiaries), (C) any Contract by which the
Company or any of its Subsidiaries grants any license to intellectual
property (other than trade or service marks) or (D) any Contract that
contains a covenant restricting the ability of the Company or any of
its Subsidiaries (or which, following the consummation of the Merger,
would restrict the ability of Parent or any of its Subsidiaries,
including the Surviving Entity and its Subsidiaries) to compete in
any business or with any person or in any geographic area;
(x) enter into any Contract which if in effect as of the
date hereof would be required to be disclosed pursuant to Section
3.10(b) hereof (other than Contracts required to be disclosed
pursuant to Section 3.10(b)(v)) to the extent consummation of the
transactions contemplated by this Agreement or compliance by the
Company with the provisions of this Agreement would reasonably be
expected to conflict with, or result in a violation or breach of, or
default (with or without notice or lapse of time or both) under, or
give rise to a right of, or result in, termination, cancellation or
acceleration of any obligation or to a loss of a benefit under, or
result in the creation of any Lien in or upon any of the properties
or other assets of the Company or any of its Subsidiaries under, or
31
give rise to any increased, additional, accelerated or guaranteed
right or entitlement of any third party under, or result in any
material alteration of, any provision of such Contract;
(xi) except as required to comply with applicable Law or
any Contract, or pursuant to the terms of any Company Plan existing
on the date of this Agreement (including any bonus payments for the
Company's 2003 fiscal year under the bonus plans set forth in Section
6.11 of the Company Disclosure Schedule), (A) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any
current or former director, officer, employee or consultant of the
Company or any of its Subsidiaries other than increases and bonuses
consistent with past practice, (B) pay to any current or former
director, officer, employee or consultant of the Company or any of
its Subsidiaries any benefit not provided for under any Contract or
Company Plan other than the payment of cash compensation in the
ordinary course of business consistent with past practice, (C) grant
any awards under any Company Plan (including the grant of stock
options, stock appreciation rights, stock based or stock related
awards, performance units or restricted stock or the removal of
existing restrictions in any Contract or Company Plan or awards made
thereunder), other than in the ordinary course of business to
employees hired within one year prior to, or anytime after, the date
hereof, (D) take any action to fund or in any other way secure the
payment of compensation or benefits under any Contract or Company
Plan, (E) take any action to accelerate the vesting or payment of any
compensation or benefit under any Contract or Company Plan, (F)
materially change any actuarial or other assumption used to calculate
funding obligations with respect to any Company Plan or change the
manner in which contributions to any Company Plan are made or the
basis on which such contributions are determined or (G) adopt any new
employee benefit plan or arrangement or amend, modify or terminate
any existing Company Plan, in each case for the benefit of any
current or former director, officer, employee or consultant of the
Company or any of its Subsidiaries, other than required by applicable
Law or tax qualification requirement;
(xii) adopt or enter into any collective bargaining
agreement or other labor union contract applicable to the employees
of the Company or any of its Subsidiaries;
(xiii) fail to use reasonable efforts to maintain existing
insurance policies or comparable replacement policies to the extent
available for a reasonable cost;
(xiv) change its fiscal year, revalue any of its material
assets, or make any changes in financial, actuarial, statutory or tax
accounting methods, principles or practices, except in each case as
required by GAAP or applicable Law;
(xv) make any material tax election or settle or
compromise any material tax liability, or agree to an extension of a
statute of limitations with respect to material taxes; or
32
(xvi) authorize any of, or commit, propose or agree to take any of, the
foregoing actions.
(b) Conduct of Business by Parent. During the period from
the date of this Agreement to the Effective Time, Parent shall not (i) amend the
Parent Certificate or the Parent By-laws in a manner materially adverse to the
Company's stockholders or (ii) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property) in respect of,
any of its capital stock, other than (A) dividends or distributions by a direct
or indirect wholly owned Subsidiary of Parent to its parent or (B) regular cash
dividends paid in the ordinary course of business consistent with past practice.
(c) Other Actions. Except as otherwise contemplated or
permitted by this Agreement, the Company and Parent shall not, and shall not
permit any of their respective Subsidiaries to, take any action that would
reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified by
materiality, Company Material Adverse Effect or Parent Material Adverse Effect,
as the case may be, becoming untrue, (ii) any of such representations and
warranties that are not so qualified becoming untrue in any material respect or
(iii) any of the conditions to the Merger set forth in Article VII not being
satisfied.
(d) Advice of Changes; Filings. The Company and Parent
shall as promptly as practicable advise the other party orally and in writing of
(i) any representation or warranty made by it (and, in the case of Parent, made
by Merger Sub) contained in this Agreement that is qualified as to materiality,
Company Material Adverse Effect or Parent Material Adverse Effect, as the case
may be, becoming untrue or inaccurate in any respect or any such representation
or warranty that is not so qualified becoming untrue or inaccurate in any
material respect or (ii) the failure of it (and, in the case of Parent, of
Merger Sub) to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement. The Company and Parent shall promptly provide the other copies
of all filings made by such party with any Governmental Authority in connection
with this Agreement and the transactions contemplated hereby.
Section 5.02. No Solicitation by the Company.
(a) The Company shall not, nor shall it authorize or permit
any of its Subsidiaries, any of its or their respective directors, officers or
employees or any investment banker, financial advisor, attorney, accountant or
other advisor, agent or representative retained by the Company or any Subsidiary
in connection with the transactions contemplated by this Agreement
(collectively, "Representatives") to, directly or indirectly through another
person, (i) solicit, initiate, cause, knowingly encourage, or knowingly
facilitate, any inquiries or the making of any proposal that constitutes or is
33
reasonably likely to lead to a Company Takeover Proposal or (ii) participate in
any discussions or negotiations regarding any Company Takeover Proposal, or
furnish to any person any information in connection with or in furtherance of
any Company Takeover Proposal. Without limiting the foregoing, it is agreed that
any violation of the restrictions set forth in the preceding sentence by any
Representative of the Company or any of its Subsidiaries shall be a breach of
this Section 5.02(a) by the Company. The Company shall, and shall cause its
Subsidiaries and instruct its Representatives to, immediately cease and cause to
be terminated all existing discussions or negotiations with any person conducted
heretofore with respect to any Company Takeover Proposal and request the prompt
return or destruction of all confidential information previously furnished.
Notwithstanding the foregoing, at any time prior to obtaining the Company
Stockholder Approval (and in no event after obtaining such Company Stockholder
Approval), in response to an unsolicited bona fide written Company Takeover
Proposal made after the date hereof that the Board of Directors of the Company
determines in good faith constitutes or is reasonably likely to constitute a
Company Superior Proposal, the Company may, if its Board of Directors determines
in good faith (after consultation with outside counsel) that it is necessary to
do so in order to comply with its fiduciary duties to the stockholders of the
Company under applicable Law, and subject to compliance with Section 5.02(c) and
after giving Parent two Business Days written notice of such determination, (A)
furnish information with respect to the Company and its Subsidiaries to the
person making such Company Takeover Proposal (and its Representatives) pursuant
to a customary confidentiality agreement not less restrictive of such person
than the Confidentiality Agreement, provided that all such information (to the
extent that such information has not been previously provided to Parent) is
provided to Parent prior to or substantially concurrent with the time it is
provided to such person, and (B) participate in discussions or negotiations with
the person making such Company Takeover Proposal (and its Representatives)
regarding such Company Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal"
shall mean any inquiry, proposal or offer, whether or not conditional and
whether or not withdrawn, (a) for a merger, consolidation, dissolution,
recapitalization or other business combination involving the Company, (b) for
the issuance of 20% or more of the equity securities of the Company as
consideration for the assets or securities of another person or (c) to acquire
in any manner, directly or indirectly, 20% or more of the equity securities of
the Company or assets (including equity securities of any Subsidiary of the
Company) that represent 20% or more of the total consolidated assets of the
Company, other than the transactions contemplated by this Agreement.
For purposes of this Agreement, "Company Superior Proposal"
shall mean any bona fide written offer made by a third party, that if
consummated would result in such person (or its shareholders) owning, directly
or indirectly, greater than 50% of the shares of Company Common Stock then
outstanding (or of the surviving entity in a merger or the direct or indirect
parent of the surviving entity in a merger) or all or substantially all of the
total consolidated assets of the Company (i) on terms which the Board of
Directors of the Company determines in good faith (after consultation with
34
outside counsel and a financial advisor of nationally recognized reputation and
in light of all relevant circumstances, including, without limitation, all the
terms and conditions of such proposal and this Agreement) to be more favorable
to the stockholders of the Company from a financial point of view than the
transactions contemplated by this Agreement and (ii) which is reasonably likely
to be completed, taking into account any financing and approval requirements and
all other financial, legal, regulatory and other aspects of such proposal.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) (A) withdraw (or modify in a manner adverse to
Parent), or propose to withdraw (or modify in a manner adverse to Parent), the
approval, recommendation or declaration of advisability by such Board of
Directors or any such committee thereof of this Agreement or the Merger or (B)
recommend, adopt or approve, or propose publicly to recommend, adopt or approve,
any Company Takeover Proposal (any action described in this clause (i) being
referred to as a "Company Adverse Recommendation Change") or (ii) approve or
recommend, or propose to approve or recommend, or allow the Company or any of
its Subsidiaries to execute or enter into, any letter of intent, memorandum of
understanding, agreement in principle, merger agreement, acquisition agreement,
option agreement, joint venture agreement, partnership agreement or other
similar agreement constituting or related to, any Company Takeover Proposal
(other than a confidentiality agreement pursuant to Section 5.02(a)).
Notwithstanding the foregoing, the Board of Directors of the Company may make a
Company Adverse Recommendation Change if such Board of Directors determines in
good faith (after consultation with outside counsel) that it is necessary to do
so in order to comply with its fiduciary duties to the stockholders of the
Company under applicable Law; provided, however, that no Company Adverse
Recommendation Change may be made in response to a Company Superior Proposal
until after the fifth business day following Parent's receipt of written notice
from the Company (an "Adverse Recommendation Notice") advising Parent that the
Board of Directors of the Company intends to make such Company Adverse
Recommendation Change and containing all information required by Section
5.02(c), together with copies of any written offer or proposal in respect of
such Company Superior Proposal (it being understood and agreed that any
amendment to the financial terms or other material terms of such Company
Superior Proposal shall require a new Adverse Recommendation Notice and a new
five (5) business day period). In determining whether to make a Company Adverse
Recommendation Change in response to a Company Superior Proposal, the Board of
Directors of the Company shall take into account any changes to the terms of
this Agreement proposed by Parent (in response to an Adverse Recommendation
Notice or otherwise) in determining whether such third party Company Takeover
Proposal still constitutes a Company Superior Proposal.
(c) In addition to the obligations of the Company set forth
in paragraphs (a) and (b) of this Section 5.02, the Company shall promptly
advise Parent orally and in writing of any request for information or other
inquiry that the Company reasonably believes could lead to any Company Takeover
Proposal or of any Company Takeover Proposal, the terms and conditions of any
such request, Company Takeover Proposal or inquiry (including any changes
thereto) and the identity of the person making any such request, Company
Takeover Proposal or inquiry. The Company shall promptly keep Parent fully
35
informed of the status and details (including any change to the terms thereof)
of any such request, Company Takeover Proposal or inquiry.
(d) Nothing contained in this Section 5.02 shall prohibit
the Company from (i) taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated
under the Exchange Act or (ii) making any required disclosure to the
stockholders of the Company if, in the good faith judgment of the Board of
Directors of the Company (after consultation with outside counsel), failure to
so disclose would be inconsistent with its obligations under applicable Law.
ARTICLE VI
Additional Agreements
---------------------
Section 6.01. Preparation of the Form S-4 and the Proxy
Statement; Stockholder Meetings.
(a) As soon as practicable following the date of this
Agreement, the Company shall prepare and file with the SEC the Proxy Statement
and the Company and Parent shall prepare and Parent shall file with the SEC the
Form S-4, in which the Proxy Statement will be included as a prospectus. Each of
the Company and Parent shall use its reasonable efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing and keep the Form S-4 effective for so long as necessary to
consummate the Merger. The Company shall use its reasonable efforts to cause the
Proxy Statement to be mailed to the stockholders of the Company as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Parent shall also take any action required to be taken under any applicable
state securities Laws in connection with the issuance of shares of Parent Common
Stock in the Merger, and the Company shall furnish all information concerning
the Company and the holders of shares of Company Common Stock as may be
reasonably requested by Parent in connection with any such action. No filing of,
or amendment or supplement to, the Form S-4 will be made by Parent, and no
filing of, or amendment or supplement to the Proxy Statement will made by the
Company, without providing the other party and its counsel a reasonable
opportunity to review and comment thereon. If at any time prior to the Effective
Time any information relating to the Company or Parent, or any of their
respective Affiliates, directors or officers, should be discovered by the
Company or Parent which should be set forth in an amendment or supplement to
either the Form S-4 or the Proxy Statement, so that either such document would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be promptly filed with
the SEC and, to the extent required by Law, disseminated to the stockholders of
36
the Company. The parties shall notify each other promptly of the receipt of any
comments from the SEC or the staff of the SEC and of any request by the SEC or
the staff of the SEC for amendments or supplements to the Proxy Statement or the
Form S-4 or for additional information and shall supply each other with copies
of (i) all correspondence between it or any of its Representatives, on the one
hand, and the SEC or the staff of the SEC, on the other hand, with respect to
the Proxy Statement, the Form S-4 or the Merger and (ii) all orders of the SEC
relating to the Form S-4.
(b) The Company shall, as soon as practicable following the
date of this Agreement, establish a record date for, and promptly after the Form
S-4 is declared effective, duly call, give notice of, convene and hold a meeting
of its stockholders (the "Company Stockholders Meeting") solely for the purpose
of obtaining the Company Stockholder Approval. Subject to Section 5.02(b), the
Company shall, through its Board of Directors, recommend to its stockholders
adoption of this Agreement. Without limiting the generality of the foregoing,
the Company's obligations pursuant to the first sentence of this Section 6.01(b)
shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of any Company Takeover Proposal or
(ii) any Company Adverse Recommendation Change.
Section 6.02. Access to Information; Confidentiality. (a)
Subject to applicable Laws each party shall afford to the others, and the
others' officers, employees, accountants, counsel, financial advisors and other
Representatives, reasonable access during normal business hours during the
period prior to the Effective Time or the termination of this Agreement to all
its and its Subsidiaries' properties, books, contracts, commitments, personnel
and records and, during such period, each party shall furnish promptly to the
others (a) a copy of each report, schedule, registration statement and other
document filed by such party during such period pursuant to the requirements of
Federal or state securities Laws and (b) consistent with its legal obligations
all other information concerning such party and its Subsidiaries' business,
properties and personnel as the other party may reasonably request. Except for
disclosures expressly permitted by the terms of the confidentiality agreement,
dated as of March 10, 2003, between Parent and the Company (as it may be amended
from time to time, the "Confidentiality Agreement"), each party shall hold, and
shall cause its officers, employees, accountants, counsel, financial advisors
and other Representatives to hold, all information received from the other
party, directly or indirectly, in confidence in accordance with the
Confidentiality Agreement. No investigation pursuant to this Section 6.02 or
information provided or received by any party hereto pursuant to this Agreement
will affect any of the representations or warranties of the parties hereto
contained in this Agreement or the conditions hereunder to the obligations of
the parties hereto.
(b) Notwithstanding anything to the contrary set forth
herein or in any other agreement to which the parties hereto are parties or by
which they are bound (including, without limitation, the Confidentiality
Agreement), commencing on the Release Date (as defined below), the obligations
of confidentiality contained herein and therein, as they relate to the
transactions contemplated herein, shall not apply to the tax structure or tax
37
treatment of the transactions contemplated herein, and each party hereto (and
any employee, representative, or agent of any party hereto) may disclose after
the Release Date to any and all persons, without limitation of any kind, the tax
structure and tax treatment of the transactions contemplated herein; provided,
however, that such disclosure shall not include the name (or other identifying
information not relevant to the tax structure or tax treatment) of any person
and shall not include information for which nondisclosure is reasonably
necessary in order to comply with applicable securities laws. For purposes of
this agreement, "Release Date" means the date that is the earlier of (a) the
date of the public announcement of discussions relating to the transactions
contemplated herein, (b) the date of the public announcement of the transactions
contemplated herein or (c) the date of the execution of an agreement (with or
without conditions) to enter into the transactions contemplated herein.
Section 6.03. Reasonable Efforts. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use its reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement, including using reasonable
efforts to accomplish the following: (a) the taking of all acts necessary to
cause the conditions to Closing to be satisfied as promptly as practicable, (b)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Authorities and the making of all necessary
registrations and filings (including filings with Governmental Authorities, if
any) and the taking of all steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by any Governmental Authority,
(c) the obtaining of all necessary consents, approvals or waivers from third
parties and (d) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. In connection with and without limiting the
first sentence of this Section 6.03, each of the Company and its Board of
Directors and Parent and its Board of Directors shall (i) take all action
reasonably necessary to ensure that no state takeover statute or similar statute
or regulation is or becomes applicable to this Agreement, the Merger or any of
the other transactions contemplated by this Agreement and (ii) if any state
takeover statute or similar statute becomes applicable to this Agreement, the
Merger or any of the other transactions contemplated by this Agreement, take all
action reasonably necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on this Agreement, the Merger and the other
transactions contemplated by this Agreement. Nothing in this Agreement shall be
deemed to require Parent to (A) agree to, or proffer to, divest or hold separate
any assets or any portion of any business of Parent or any of its Subsidiaries
or, assuming the consummation of the Merger, the Company or any of its
Subsidiaries, (B) not compete in any geographic area or line of business or (C)
restrict the manner in which, or whether, Parent, the Company, the Surviving
38
Entity or any of their respective Affiliates may carry on business in any part
of the world, which, in the case of any of clauses (A) through (C) above, would
reasonably be likely to have a Parent Material Adverse Effect, a Company
Material Adverse Effect or materially impair the long-term benefits sought to be
derived from the Merger.
Section 6.04. Indemnification, Exculpation and Insurance.
(a) All rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors, officers and employees
of the Company and its Subsidiaries (the "Indemnified Parties") as provided in
the Company Certificate or the Company By-laws (in each case, as in effect on
the date hereof) shall be assumed by the Surviving Entity in the Merger, without
further action, as of the Effective Time and shall survive the Merger and shall
continue in full force and effect in accordance with their terms. The Parent
shall indemnify and hold harmless, and provide advancement of expenses to the
Indemnified Parties to the same extent such persons are indemnified or have the
right to advancement of expenses as of the date hereof by the Company pursuant
to the Company Certificate and the Company By-laws.
(b) For six years after the Effective Time, Parent shall
maintain in effect the Company's current directors' and officers' liability
insurance in respect of acts or omissions occurring at or prior to the Effective
Time, (including for acts or omissions occurring in connection with the approval
of this Agreement and the consummation of the transactions contemplated hereby)
covering the Indemnified Parties currently covered by the Company's directors'
and officers' liability insurance policy (a correct and complete copy of which
has been heretofore made available to Parent), on terms with respect to such
coverage and amount no less favorable than those of such policy in effect on the
date hereof; provided, however, that Parent may substitute therefor policies of
Parent containing terms with respect to coverage and amount no less favorable to
such Indemnified Parties; provided further, however, that in satisfying its
obligation under this Section 6.04(b) Parent shall not be obligated to pay
aggregate premiums in excess of 300% of the amount paid by the Company in its
last full fiscal year (which premiums are hereby represented and warranted by
the Company to be approximately $2,500,000), it being understood and agreed that
Parent shall nevertheless be obligated to provide such coverage as may be
obtained for such 300% amount.
(c) The covenants contained in this Section 6.04 are
intended to be for the benefit of, and shall be enforceable by, each of the
Indemnified Parties and their respective heirs and legal representatives, and
shall not be deemed exclusive of any other rights to which an Indemnified Party
is entitled, whether pursuant to Law, contract or otherwise.
Section 6.05. Fees and Expenses. All fees and expenses
incurred in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated, except that
each of the Company and Parent shall bear and pay one-half of (a) the costs and
39
expenses incurred in connection with filing, printing and mailing the Form S-4
and (b) the filing fees for the premerger notification and report forms under
the HSR Act.
Section 6.06. Public Announcements. Parent and the Company
shall consult with each other before issuing, and give each other the
opportunity to review and comment upon, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable Law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities quotation
system. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties.
Section 6.07. Affiliates. Prior to the Effective Time the
Company shall deliver to Parent a letter identifying all persons who will be at
the time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act and applicable SEC rules and regulations. The Company shall use
its reasonable efforts to cause each such person to deliver to Parent at least
10 days prior to the Closing Date a written agreement substantially in the form
attached as Exhibit A.
Section 6.08. Stock Exchange Listing. Parent shall use its
reasonable efforts to cause the shares of Parent Common Stock to be issued in
the Merger to be approved for listing on the New York Stock Exchange, subject to
official notice of issuance, prior to the Closing Date.
Section 6.09. Reorganization Treatment. The Company, Parent
and Merger Sub shall execute and deliver to each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP,
special counsel to the Company, and Weil, Gotshal & ▇▇▇▇▇▇ LLP, counsel to
Parent and Merger Sub, certificates substantially in the forms attached hereto
at Exhibits B and C at such time or times as reasonably requested by each such
law firm in connection with its delivery of the opinion referred to in Section
7.02(e) or 7.03(c), as the case may be. Prior to the Effective Time, none of the
Company, Parent or Merger Sub shall take or cause to be taken any action which
would cause to be untrue any of the representations in such certificates. The
parties intend the Merger to qualify as a reorganization under Section 368(a) of
the Code and the parties will take the position for all tax purposes that the
Merger so qualifies unless a contrary position is required by a final
determination within the meaning of Section 1313 of the Code.
Section 6.10. Stockholder Litigation. The Company shall
promptly advise Parent orally and in writing of any stockholder litigation
against the Company and/or its directors relating to the transactions
contemplated by this Agreement and shall keep Parent fully informed regarding
any such stockholder litigation. The Company shall give Parent the opportunity
to consult with the Company regarding the defense or settlement of any such
40
stockholder litigation, shall give due consideration to Parent's advice with
respect to such stockholder litigation and shall not settle any such litigation
prior to such consultation and consideration.
Section 6.11. Employee Matters.
(a) Parent agrees to honor, or cause the Surviving Entity
to honor, from and after the Effective Time any bonus payments for the Company's
2003 fiscal year under the bonus plans set forth in Section 6.11 of the Company
Disclosure Schedule in accordance with their terms as in effect immediately
before the Effective Time.
(b) As soon as practicable after the Effective Time, Parent
shall cause the Surviving Entity to provide each individual who, as of the
Effective Time, is an employee of the Company or any of its Subsidiaries, with
compensation and benefits that are comparable in the aggregate to the
compensation and benefits that are provided to similarly situated employees of
Parent.
(c) With respect to any benefit plan, program, arrangement
(including any "employee benefit plan" (as defined in Section 3(3) of ERISA) and
any vacation program), Parent shall, and shall cause the Surviving Entity to,
recognize the service with the Company and its Subsidiaries prior to the
Effective Time of employees of the Company and its Subsidiaries who continue
their employment after the Effective Time (the "Affected Employees") for
purposes of such plan or program.
(d) Prior to the Effective Time, the Company shall take all
such steps as may be required to cause the transactions contemplated by Section
2.03 and any other dispositions of Company equity securities (including
derivative securities) in connection with this Agreement or the transactions
contemplated hereby by each individual who is a director or officer of the
Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act, such
steps to be taken in accordance with the interpretive letter, dated January 12,
1999, issued by the SEC with respect to such matters.
(e) With respect to any welfare plan in which employees of
the Company and its Subsidiaries are eligible to participate after the Effective
Time, Parent shall, and shall cause the Surviving Entity to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to such employees
to the extent such conditions were satisfied under the welfare plans of the
Company and its Subsidiaries prior to the Effective Time, and (ii) provide each
such employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any analogous deductible or out-of-pocket
requirements to the extent applicable under any such plan.
(f) Prior to the Effective Time, the Company shall
terminate its defined contribution 401(k) plan. Parent agrees to provide, or
cause the Surviving Entity to provide, that the Affected Employees are eligible
to participate in a defined contribution 401(k) plan immediately following the
Effective Time and that such defined contribution plan shall accept "eligible
41
rollover distributions" for Affected Employees from the Company's defined
contribution 401(k) plan.
Section 6.12. Employment Agreements. The Company will use
its best efforts to procure the agreement of each of the employees named on
Section 6.12 of the Company Disclosure Schedule to enter into employment
agreements with the Company (the "Employment Agreements") to be effective as of
the Effective Time and substantially in the form set forth on Exhibit D hereto.
For purposes of this Section 6.12, it is understood that "best efforts" shall
not constitute a guaranty that any particular individual or any number of
individuals will agree to enter into an Employment Agreement. No provisions of
the Employment Agreements or any other employment agreements between the Company
or any of its Subsidiaries and their respective employees will be amended
without the prior written consent of Parent, which consent may be withheld in
the sole discretion of Parent.
Section 6.13. Standstill Agreements, Confidentiality
Agreements, Anti-takeover Provisions. During the period from the date of this
Agreement through the Effective Time, the Company will not terminate, amend,
modify or waive any provision of any agreement required to be disclosed pursuant
to Section 3.10(b)(v) hereof to which it or any of its Subsidiaries is a party,
other than the Confidentiality Agreement pursuant to its terms or by written
agreement of the parties thereto. During such period, the Company shall enforce,
to the fullest extent permitted under applicable Law, the provisions of any such
agreement, including by obtaining injunctions to prevent any material breaches
of such agreements and to enforce specifically the material terms and provisions
thereof in any court of the United States of America or of any state having
jurisdiction. In addition, the Company will not approve a Company Takeover
Proposal or Company Superior Proposal for purposes of Section 203 of Delaware
Law.
Section 6.14. Issuance of Shares. All shares of Company
Common Stock to be issued pursuant to exercises of Company Stock Options after
the date hereof shall be issued by the Trust and the Company will not issue any
shares of Company Common Stock under the Company Stock Plans or the Company
Stock Options.
ARTICLE VII
Conditions Precedent
--------------------
Section 7.01. Conditions to Each Party's Obligation to
Effect the Merger. The respective obligation of each party to effect the Merger
is subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) Stock Exchange Listing. The shares of Parent Common
Stock issuable to the stockholders of the Company as contemplated by
42
this Agreement shall have been approved for listing on the New York
Stock Exchange, subject to official notice of issuance.
(c) Antitrust. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act or any other
applicable competition, merger control, antitrust or similar Law
shall have been terminated or shall have expired.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other judgment or order
issued by any court of competent jurisdiction or other statute, law,
rule, legal restraint or prohibition (collectively, "Restraints")
shall be in effect preventing the consummation of the Merger.
(e) Form S-4. The Form S-4 shall have become effective
under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(f) Closing Consents. The consents listed on Exhibit E
hereto shall have been obtained and shall be in full force and
effect.
Section 7.02. Conditions to Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are
further subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company contained in this Agreement shall be
true and correct as of the date of this Agreement and as of the
Closing Date as though made on the Closing Date (without regard to
materiality or Company Material Adverse Effect qualifiers contained
therein), except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such earlier
date, except where the failure of the representations and warranties
to be true and correct individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material
Adverse Effect. Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer and the chief
financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to
the Closing Date, and Parent shall have received a certificate signed
on behalf of the Company by the chief executive officer and the chief
financial officer of the Company to such effect.
(c) No Litigation. There shall not be pending or
threatened any suit, action or proceeding by any Governmental
Authority (i) challenging the acquisition by Parent or Merger Sub of
any shares of Company Common Stock, seeking to restrain or prohibit
43
the consummation of the Merger, seeking to place limitations on the
ownership of shares of Company Common Stock (or shares of capital
stock of the Surviving Entity) by Parent or Merger Sub, (ii) seeking
to prohibit or limit the ownership or operation by the Company or any
of its Subsidiaries or by Parent or any of its Subsidiaries of any
portion of any business or of any assets of the Company and its
Subsidiaries or Parent and its Subsidiaries or to compel the Company
or any of its Subsidiaries or Parent or any of its Subsidiaries to
divest or hold separate any portion of any business or of any assets
of the Company and its Subsidiaries or Parent and its Subsidiaries,
as a result of the Merger or (iii) seeking to obtain from the
Company, Parent or Merger Sub any damages, which, in the case of
clauses (ii) and (iii) above, would reasonably be likely to have a
Parent Material Adverse Effect, have a Company Material Adverse
Effect, or materially impair the long-term benefits sought to be
derived from the Merger.
(d) Restraint. No Restraint that would reasonably be
expected to result, directly or indirectly, in any of the effects
referred to in Section 7.02(c) shall be in effect.
(e) Tax Opinion. Parent shall have received from Weil,
Gotshal & ▇▇▇▇▇▇ LLP, counsel to the Parent, on the Closing Date, an
opinion in form and substance reasonably satisfactory to Parent and
dated as of the Closing Date, to the effect that the Merger will
qualify for United States Federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Code. In
rendering such opinion, Weil, Gotshal & ▇▇▇▇▇▇ LLP may rely upon
customary assumptions and the representations and covenants contained
in the certificates of the Company, Parent and Merger Sub referred to
in Section 6.09.
(f) Closing Consents. The consents listed on Exhibit E
hereto shall have been obtained and shall be in full force and
effect, without any conditions which would reasonably be likely to
have a Parent Material Adverse Effect, have a Company Material
Adverse Effect, or materially impair the long-term benefits sought to
be derived from the Merger.
Section 7.03. Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations
and warranties of Parent and Merger Sub contained in this Agreement
shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on the Closing Date (without regard
to materiality or Parent Material Adverse Effect qualifiers contained
therein), except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such earlier
date, except where the failure of the representations and warranties
to be true and correct individually or in the aggregate, has not had
44
and would not reasonably be expected to have a Parent Material
Adverse Effect. The Company shall have received a certificate signed
on behalf of Parent by an executive officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects
all obligations required to be performed by them under this Agreement
at or prior to the Closing Date, and the Company shall have received
a certificate signed on behalf of Parent by an executive officer of
Parent to such effect.
(c) Tax Opinion. The Company shall have received from
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, special counsel to the Company, on the Closing
Date, an opinion in form and substance reasonably satisfactory to the
Company and dated as of the Closing Date, to the effect that the
Merger will qualify for United States Federal income tax purposes as
a "reorganization" within the meaning of Section 368(a) of the Code.
In rendering such opinion, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP may rely upon
customary assumptions and representations and covenants contained in
the certificates of the Company, Parent and Merger Sub referred to in
Section 6.09.
Section 7.04. Frustration of Closing Conditions. None of
the Company, Parent or Merger Sub may rely on the failure of any condition set
forth in Section 7.01, 7.02 or 7.03, as the case may be, to be satisfied if such
failure was caused by such party's failure to use its reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 6.03.
ARTICLE VIII
Termination, Amendment and Waiver
---------------------------------
Section 8.01. Termination. This Agreement may be terminated
at any time prior to the Effective Time, whether before or after receipt of the
Company Stockholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated
on or before July 31, 2004; provided, however,
that the right to terminate this Agreement
under this Section 8.01(b)(i) shall not be
available to any party whose action or failure
to act has been a principal cause of or
resulted in the failure of the Merger to be
consummated on or before such date;
45
(ii) if any Restraint having the effect of granting
or implementing any relief referred to in
Section 7.02(c) shall be in effect and shall
have become final and nonappealable;
(iii) if the Company Stockholder Approval shall not
have been obtained at the Company Stockholders
Meeting duly convened therefor or at any
adjournment or postponement thereof;
(c) by Parent, if the Company shall have breached or
failed to perform any of its representations, warranties, covenants
or agreements set forth in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth
in Section 7.02(a) or (b) and (B) is incapable of being cured, or is
not cured, by the Company within 30 calendar days following receipt
of written notice from Parent of such breach or failure to perform;
(d) by the Company, if Parent shall have breached or
failed to perform any of its representations, warranties, covenants
or agreements set forth in this Agreement, which breach or failure to
perform (i) would give rise to the failure of a condition set forth
in Section 7.03(a) or (b) and (ii) is incapable of being cured, or is
not cured, by Parent within 30 calendar days following receipt of
written notice from the Company of such breach or failure to perform;
or
(e) by Parent, within 45 days of the date on which (i) a
Company Adverse Recommendation Change shall have occurred or (ii) the
Board of Directors of the Company or any committee thereof shall have
failed to publicly confirm its recommendation and declaration of
advisability of this Agreement and the Merger within three (3)
business days after a written request by Parent that it do so.
Section 8.02. Termination Fee.
(a) In the event that
(i) this Agreement is terminated by either
Parent or the Company pursuant to Section 8.01(b)(i), and
(A) a vote to obtain the Company Stockholder Approval has
not been held, (B) the failure to hold such vote was not
due to circumstances beyond the control of the Company,
including Parent's breach of its obligations contained in
this Agreement or any Restraint which had the effect of
delaying the Company Stockholders Meeting past July 31,
2004, despite the Company's reasonable efforts to remove
the Restraint and hold the meeting in a timely manner and
(C) within 12 months after such termination the Company
shall have reached a definitive agreement to consummate,
or shall have consummated, a Company Takeover Proposal;
46
(ii) this Agreement is terminated by either
Parent or the Company pursuant to Section 8.01(b)(iii) and
(A) Parent shall not have been entitled to terminate this
Agreement pursuant to Section 8.01(e), (B) after the date
of this Agreement a Company Takeover Proposal shall have
been made or communicated to the Company or shall have
been made directly to the stockholders of the Company
generally and (C) within 12 months after such termination
the Company shall have reached a definitive agreement to
consummate, or shall have consummated, a Company Takeover
Proposal;
(iii) this Agreement is terminated by Parent
pursuant to Section 8.01(c) and (A) the Company's breach
or failure triggering such termination shall have been
willful, (B) after the date of this Agreement a Company
Takeover Proposal shall have been made or communicated to
the Company or shall have been made directly to the
stockholders of the Company generally and (C) within 12
months after such termination the Company shall have
reached a definitive agreement to consummate, or shall
have consummated, a Company Takeover Proposal; or
(iv) this Agreement is terminated by Parent
pursuant to Section 8.01(e),
then the Company shall (x) in the case of a Termination Fee payable pursuant to
clause (i), (ii) or (iii) of this Section 8.02(a), upon the earlier of the date
of such definitive agreement and such consummation of a Company Takeover
Proposal or (y) in the case of a Termination Fee payable pursuant to clause (iv)
of this Section 8.02(a), on the date of such termination, pay Parent a fee equal
to $116,388,089 (the "Termination Fee") by wire transfer of same-day funds. In
the case of a Termination Fee payable pursuant to clause (iii) of this Section
8.02(a), the parties agree that the Termination Fee shall be the appropriate
measure of liquidated damages, and shall be the total damages and sole and
exclusive remedy of Parent and Merger Sub relating to the willful breach or
failure which triggered the payment of the Termination Fee.
(b) The Company acknowledges and agrees that the agreements
contained in Section 8.02(a) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent would
not enter into this Agreement. If the Company fails promptly to pay the amount
due pursuant to Section 8.02(a), and, in order to obtain such payment, Parent
commences a suit that results in a judgment against the Company for the
Termination Fee, the Company shall pay to Parent its reasonable costs and
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with such suit, together with interest on the amount of the
Termination Fee from the date such payment was required to be made until the
date of payment at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made.
47
Section 8.03. Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent as provided in
Section 8.01, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Merger Sub or the
Company, other than the provisions of the penultimate sentence of Section
6.02(a), Sections 6.05 and 8.02, this Section 8.03 and Article IX, which
provisions shall survive such termination; provided that nothing herein shall
relieve any party from any liability for any willful breach hereof, subject to
the final sentence of Section 8.02(a).
Section 8.04. Amendment. This Agreement may be amended by
the parties hereto at any time before or after receipt of the Company
Stockholder Approval; provided, however, that after such approval has been
obtained, there shall be made no amendment that by Law requires further approval
by the stockholders of the Company without such approval having been obtained.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 8.05. Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (c) subject to the proviso to the first
sentence of Section 8.04, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
Section 8.06. Procedure for Termination or Amendment. A
termination of this Agreement pursuant to Section 8.01 or an amendment of this
Agreement pursuant to Section 8.04 shall, in order to be effective, require, in
the case of Parent or the Company, action by its Board of Directors or, with
respect to any amendment of this Agreement pursuant to Section 8.04, the duly
authorized committee or other designee of its Board of Directors to the extent
permitted by Law.
ARTICLE IX
General Provisions
------------------
Section 9.01. Nonsurvival of Representations and
Warranties. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
Section 9.02. Notices. Except for notices that are
specifically required by the terms of this Agreement to be delivered orally, all
notices, requests, claims, demands and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, facsimiled (which
48
is confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
if to Parent or Merger Sub, to:
UnitedHealth Group Incorporated
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to the Company, to:
Mid Atlantic Medical Services, Inc.
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
M. ▇▇▇▇ ▇▇▇▇▇▇-Far
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: 202-778-9100
Attention: ▇▇▇▇ ▇. Berkeley
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
49
Section 9.03. Definitions. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person;
(b) "Knowledge" of any person that is not an individual
means, (i) with respect to the Company regarding any matter in
question , the actual knowledge of the employees of the Company and
its Subsidiaries listed in Section 9.03(b) of the Company Disclosure
Schedule and (ii) with respect to Parent regarding any matter in
question, the actual knowledge of the employees of Parent and its
Subsidiaries listed in Section 9.03(b) of the Parent Disclosure
Schedule.;
(c) "person" means an individual, corporation,
partnership, limited liability company, joint venture, association,
trust, unincorporated organization or other entity; and
(d) "Permitted Liens" means (i) any liens for taxes not
yet due or which are being contested in good faith by appropriate
proceedings, (ii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other similar liens, (iii) pledges or
deposits in connection with workers' compensation, unemployment
insurance and other social security legislation and (iv) easements,
rights-of-way, restrictions and other similar encumbrances incurred
in the ordinary course of business that, in the aggregate, are not
material in amount and that do not, in any case, materially detract
from the value of the property subject thereto;
(e) a "Subsidiary" of any person means another person, an
amount of the voting securities, other voting rights or voting
partnership interests of which is sufficient to elect at least a
majority of its board of directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity
interests of which) is owned directly or indirectly by such first
person.
Section 9.04. Interpretation. When a reference is made in
this Agreement to an Article, a Section, Exhibit or Schedule, such reference
shall be to an Article of, a Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
50
this Agreement. All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns. The
parties have participated jointly in the negotiating and drafting of this
Agreement. In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
Section 9.05. Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 9.06. Entire Agreement; No Third-Party
Beneficiaries. This Agreement, including the Company Disclosure Schedule and the
Parent Disclosure Schedule, and the Confidentiality Agreement (a) constitute the
entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement and the Confidentiality Agreement and (b) except for the provisions of
Section 6.04, are not intended to confer upon any person other than the parties
any rights, benefits or remedies.
Section 9.07. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the Laws of the State of
Delaware, regardless of the Laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
Section 9.08. Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of Law or otherwise by any of the parties without the prior
written consent of the other parties and any attempt to make any such assignment
without such consent shall be null and void, except that Merger Sub may assign,
in its sole discretion (and, if so requested by the Company, will assign to a
wholly owned corporate subsidiary of Parent) any of or all its rights, interests
and obligations under this Agreement to any direct, wholly owned Subsidiary of
Parent, but no such assignment shall relieve Merger Sub of any of its
obligations hereunder (except in the case of any such request). Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
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Section 9.09. Specific Enforcement; Consent to
Jurisdiction. The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in any state
court in the State of Delaware, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any Federal
court located in the State of Delaware or of any state court located in the
State of Delaware in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a Federal court located in the State of Delaware or a state
court located in the State of Delaware.
Section 9.10. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable Law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
UNITEDHEALTH GROUP INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
Title: Chairman and Chief Executive
Officer
MU ACQUISITION LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
Title: Chairman
MID ATLANTIC MEDICAL SERVICES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
Title: Chairman of the Board
53