AGREEMENT AND PLAN OF MERGER by and among UNITEDHEALTH GROUP INCORPORATED, SAPPHIRE ACQUISITION, INC. and SIERRA HEALTH SERVICES, INC. Dated as of March 11, 2007
Exhibit
2-1
AGREEMENT
AND PLAN OF MERGER
by
and
among
UNITEDHEALTH
GROUP INCORPORATED,
SAPPHIRE
ACQUISITION, INC.
and
SIERRA
HEALTH SERVICES, INC.
Dated
as
of March 11, 2007
TABLE
OF CONTENTS
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|
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Page
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The
Merger
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1
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1.1.
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The
Merger
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1
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1.2.
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Closing
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1
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1.3.
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Effective
Time
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2
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1.4.
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Effects
of the Merger
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2
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1.5.
|
Articles
of Incorporation; By-laws
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2
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|
1.6.
|
Directors
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2
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1.7.
|
Officers
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2
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|
1.8.
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Information
with respect to the Company and Merger Sub
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2
|
|
Article
II
|
Effect
of the Merger on the Capital Stock of the Constituent Entities;
Exchange
of Certificates; Company Stock Options
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3
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2.1.
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Effect
on Capital Stock
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3
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|
2.2.
|
Exchange
of Certificates
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3
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|
2.3.
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Company
Equity Awards
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6
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2.4.
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Adjustments
to Prevent Dilution
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7
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|
Article
III
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Representations
and Warranties of the Company
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7
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3.1.
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Organization,
Standing and Corporate Power
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8
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|
3.2.
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Subsidiaries
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8
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|
3.3.
|
Capital
Structure
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8
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|
3.4.
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Authority;
Noncontravention
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10
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|
3.5.
|
Governmental
Approvals
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12
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|
3.6.
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Company
SEC Documents; No Undisclosed Liabilities
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12
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3.7.
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Information
Supplied
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13
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3.8.
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Absence
of Certain Changes or Events
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13
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3.9.
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Litigation
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14
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|
3.10.
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Contracts
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14
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3.11.
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Compliance
with Laws
|
17
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|
3.12.
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Employee
Benefit Plans
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19
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3.13.
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Taxes
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22
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3.14.
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Intellectual
Property; Software
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24
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3.15.
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Properties
and Assets.
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27
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3.16.
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Environmental
Matters
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27
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3.17.
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Transactions
with Related Parties
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28
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3.18.
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Brokers
and Other Advisors
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28
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3.19.
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Opinion
of Financial Advisor
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29
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3.20.
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Statutory
Financial Statements.
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29
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3.21.
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Medicare
and Medicaid Participation
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29
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3.22.
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Penalties
Under Medicare/Medicaid Programs
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30
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3.23.
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Physician
Qualifications
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30
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3.24.
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Insurance
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31
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3.25.
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Reserves
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31
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3.26.
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Capital
or Surplus Management
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32
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Article
IV
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Representations
and Warranties of Parent and Merger Sub
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32
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4.1.
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Organization,
Standing and Corporate Power
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32
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4.2.
|
Capital
Structure of Merger Sub
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33
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4.3.
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Authority;
Noncontravention
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33
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4.4.
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Governmental
Approvals
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34
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4.5.
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Information
Supplied
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34
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4.6.
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No
Parent Vote Required
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35
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4.7.
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Available
Funds
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35
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4.8.
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Brokers
and Other Advisors
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35
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|
Article
V
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Covenants
Relating to Conduct of Business
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35
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5.1.
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Conduct
of Business
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35
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5.2.
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No
Solicitation by the Company
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40
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Article
VI
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Additional
Agreements
|
44
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6.1.
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Preparation
of the Proxy Statement; Stockholder Meetings
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44
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6.2.
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Access
to Information; Confidentiality
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45
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6.3.
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Reasonable
Best Efforts
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46
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6.4.
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Indemnification,
Exculpation and Insurance
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48
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6.5.
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Fees
and Expenses
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49
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6.6.
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Stock
Exchange De-listing
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49
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6.7.
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Public
Announcements
|
50
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6.8.
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Stockholder
Litigation
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50
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6.9.
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Employee
Matters
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50
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6.10.
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Section
16 Matters
|
51
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6.11.
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Standstill
Agreements, Confidentiality Agreements, Anti-takeover
Provisions
|
52
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6.12.
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Cooperation
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52
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6.13.
|
Credit
Agreement
|
52
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Article
VII
|
Conditions
Precedent
|
53
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|
7.1.
|
Conditions
to Each Party’s Obligation to Effect the Merger
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53
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7.2.
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Conditions
to Obligations of Parent and Merger Sub
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53
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7.3.
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Conditions
to Obligation of the Company
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54
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7.4.
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Frustration
of Closing Conditions
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55
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Article
VIII
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Termination,
Amendment and Waiver
|
55
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8.1.
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Termination
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55
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8.2.
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Termination
Fee
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56
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8.3.
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Effect
of Termination
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58
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8.4.
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Amendment
|
58
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8.5.
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Extension;
Waiver
|
58
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Article
IX
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General
Provisions
|
59
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9.1.
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Nonsurvival
of Representations and Warranties
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59
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9.2.
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Notices
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59
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9.3.
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Definitions
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60
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9.4.
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Interpretation
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61
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9.5.
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Counterparts
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62
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9.6.
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Entire
Agreement; No Third-Party Beneficiaries
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62
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9.7.
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Governing
Law
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62
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9.8.
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Assignment
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62
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9.9.
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Specific
Enforcement; Consent to Jurisdiction
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62
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9.10.
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Severability
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63
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--
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”),
dated
as of March 11, 2007, is by and among UnitedHealth Group Incorporated, a
Minnesota corporation (“Parent”),
Sapphire Acquisition, Inc., a corporation organized under the laws of the State
of Nevada and an indirect wholly owned subsidiary of Parent (“Merger
Sub”),
and
Sierra Health Services, Inc., a Nevada corporation (the “Company”).
W
I T N E
S S E T H:
WHEREAS,
the Boards of Directors of Parent, Merger Sub and the Company have each
approved, adopted and declared advisable this Agreement and the merger of Merger
Sub with and into the Company, upon the terms and subject to the conditions
set
forth in this Agreement;
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; and
WHEREAS,
concurrently with the execution of this Agreement, as a condition and inducement
to Parent’s willingness to enter into this Agreement, Parent and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ have entered into a Voting Agreement (the “Voting
Agreement”);
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
1.1. The
Merger.
On
the
terms and subject to the conditions set forth in this Agreement, and in
accordance with the Nevada Revised Statutes (the “NRS”),
at
the Effective Time, (a) Merger Sub shall merge with and into the Company
(the “Merger”),
(b) the separate corporate existence of Merger Sub shall cease and the
Company shall continue its corporate existence under Nevada law as the surviving
entity in the Merger (the “Surviving
Entity”),
and
(c) the corporate existence of the Company, with all of its rights, privileges,
immunities, powers and franchises, shall continue unaffected by the
Merger.
1.2. Closing.
The
closing of the Merger (the “Closing”)
will
take place at 10:00 a.m. (Pacific Time) on a date to be specified by
theparties
(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 ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, unless another date, place or time is agreed to in writing by the parties
hereto.
1.3. Effective
Time.
Subject
to the provisions of this Agreement, as promptly as practicable on the Closing
Date, the Company and Merger Sub shall cause articles of merger (the
“Articles
of Merger”)
to be
executed and
filed
with the Secretary of State of the State of Nevada in accordance with
Section 92A.200 of the NRS. The Merger shall become effective at such time
as the Articles of Merger have been duly filed with the Secretary of State
of
the State of Nevada or at such later date or time as may be agreed by Merger
Sub
and the Company in writing and specified in the Articles of Merger in accordance
with the NRS (the effective date and time of the Merger being hereinafter
referred to as the “Effective
Time”).
1.4. Effects
of the Merger.
The
Merger shall have the effects set forth in this Agreement and the applicable
provisions of the NRS.
1.5. Articles
of Incorporation; By-laws.
(a) The
Articles of Incorporation of Merger Sub, as in effect immediately prior to
the
Effective Time, shall become the Articles of Incorporation of the Surviving
Entity at the Effective Time until thereafter changed or amended as provided
therein and by the NRS or other applicable Law; provided,
however,
that
the Articles of Incorporation of the Surviving Entity shall be amended as
necessary to comply with the obligations of the Surviving Entity set forth
in
Section 6.4 hereof.
(b) The
By-laws of Merger Sub, as in effect immediately prior to the Effective Time,
shall become the By-laws of the Surviving Entity at the Effective Time until
thereafter changed or amended as provided therein, by the Articles of
Incorporation of the Surviving Entity, and by applicable Law; provided,
however,
that
the By-laws of the Surviving Entity shall be amended as necessary to comply
with
the obligations of the Surviving Entity set forth in Section 6.4 hereof.
1.6. Directors.
The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Entity at the Effective Time until the earlier of
their resignation or removal or until their respective successors are duly
designated, as the case may be.
1.7. Officers.
The
officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Entity at the Effective Time until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
1.8. Information
with respect to the Company and Merger Sub.
The
address of the Company is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, its
jurisdiction of incorporation is Nevada and its governing law is the NRS. The
address of Merger Sub is c/o UnitedHealth Group Incorporated, UnitedHealth
Group
Center, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, its jurisdiction of
incorporation is Nevada and its governing law is the NRS.
ARTICLE
II
Effect
of the Merger on the Capital Stock of the Constituent Entities;
Exchange
of Certificates; Company Stock Options
2.1. Effect
on Capital Stock.
At the
Effective Time, as a result of the Merger and without any action on the part
of
Merger Sub or the Company or the holder of any capital stock of Merger Sub
or
the Company or any other person:
(a) Merger
Consideration.
Each
share of the common stock, par value $0.005 per share, of the Company (a
“Share”
or,
collectively, the “Shares”)
issued
and outstanding immediately prior to the Effective Time (other than Excluded
Shares) shall automatically, by virtue of the Merger and without any action
on
the part of the holder thereof, be converted into the right to receive $43.50
in
cash (the “Per
Share Merger Consideration”).
At
the Effective Time, all of the Shares shall cease to be outstanding, shall
be
cancelled and shall cease to exist, and each holder of a certificate (a
“Certificate”)
formerly representing any of the Shares (other than Excluded Shares) shall
cease
to have any rights with respect thereto, except the right to receive the Per
Share Merger Consideration, without interest.
(b) Cancellation
of Excluded Shares.
Each
issued and outstanding Share that immediately prior to the Effective Time is
owned by Parent or Merger Sub and not held on behalf of third parties (each
an
“Excluded
Share”
and
collectively, “Excluded
Shares”)
shall
automatically, by virtue of the Merger and without any action on the part of
the
holder of the Excluded Share, cease to be outstanding, shall be cancelled and
shall cease to exist without payment of any consideration therefor.
(c) Merger
Sub.
At the
Effective Time, each share of common stock, par value $0.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall
automatically be converted into one share of common stock, par value $0.005
per
share, of the Surviving Entity.
2.2. Exchange
of Certificates.
(a) Paying
Agent.
Prior
to the Effective Time, Parent shall deposit with a paying agent selected by
Parent with the Company’s prior approval, which shall not
be
unreasonably withheld (the “Paying
Agent”),
an
amount of cash equal to the product of (i) the number of Shares outstanding
immediately prior to the Effective Time (other than Excluded Shares)
multiplied by
(ii) the
Per Share Merger Consideration (such cash being hereinafter referred to as
the
“Exchange
Fund”).
The
Exchange Fund will be invested by the Paying Agent as directed by Parent;
provided,
that
such investments will be (A) in obligations of or guaranteed by the United
States of America or of any agency thereof and backed by the full faith and
credit of the United States of America, (B) in commercial paper obligations
rated A-1 or P-1 or better by either ▇▇▇▇▇’▇ Investors Service, Inc. or Standard
& Poor’s Corporation or (C) in deposit accounts, certificates of deposit or
banker’s acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks, each of which has
capital, surplus and undivided profits aggregating more than $1.0 billion (based
on the most recent financial statements of such bank which are then publicly
available at the Securities and Exchange Commission (the “SEC”)
or
otherwise). Any interest and other income resulting from such investment shall
become a part of the Exchange Fund, and any amounts in excess of the aggregate
Per Share Merger Consideration payable under this Agreement shall be promptly
returned to Parent. Any losses resulting from such investments shall not in
any
way diminish Parent’s and Merger Sub’s obligation to pay the Per Share Merger
Consideration payable under this Agreement, and Parent shall promptly provide
additional funds to the Paying Agent in the amount of any such
losses.
(b) Exchange
Procedures.
As soon
as reasonably practicable after the Effective Time (and in any event within
three business days), the Surviving Entity shall cause the Paying Agent to
mail
to each holder of record of Shares (other than Excluded Shares) entitled to
receive the Per Share Merger Consideration pursuant to Section 2.1(a) (i) a
letter of transmittal in customary form specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates (or affidavits of loss in lieu of the Certificates
as provided in Section 2.2(e)) to the Paying Agent, such letter of
transmittal to be in such form and have such other provisions as Parent and
the
Company may reasonably agree prior to the Closing, and (ii) instructions
for use in effecting the surrender of the Certificates (or affidavits of loss
in
lieu of the Certificates as provided in Section 2.2(e)) in exchange for the
Per Share Merger Consideration. Upon surrender of a Certificate (or affidavit
of
loss in lieu of the Certificate as provided in Section 2.2(e)) to the
Paying Agent in accordance with the terms of such letter of transmittal, duly
executed, Paying Agent shall (and Parent shall cause the Paying Agent to) as
soon as reasonably practicable pay from the Exchange Fund to the holder of
such
Certificate a cash amount in immediately available funds (after giving effect
to
any required tax withholdings as provided in Section 2.2(g)) equal to
(x) the number of Shares represented by such Certificate (or affidavit of
loss in lieu of the Certificate as provided in Section 2.2(e)) multiplied
by (y) the Per Share Merger Consideration, and the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued
on
any amount payable upon due surrender of the Certificates. In the event of
a
transfer of ownership of Shares that is not registered in the transfer
records of the Company, a check for any cash to be exchanged upon due surrender
of the Certificate may be issued to such transferee if the Certificate formerly
representing such Shares that is presented to the Paying Agent shall be properly
endorsed or otherwise be in proper form for transfer and is accompanied by
all
documents required to reasonably evidence that any applicable stock transfer
taxes have been paid, are not applicable or will be paid by such
transferee.
(c) Transfers.
From
and after the Effective Time, there shall be no transfers on the stock transfer
books of the Company of the Shares that were outstanding immediately prior
to
the Effective Time. If, after the Effective Time, any Certificate is presented
to the Paying Agent, it shall be cancelled and exchanged for the cash amount
in
immediately available funds to which the holder of the Certificate is entitled
pursuant to this Article II.
(d) Termination
of Exchange Fund.
Any
portion of the Exchange Fund (including the proceeds of any investments of
the
Exchange Fund) that remains unclaimed by the stockholders of the Company for
one
year after the Effective Time shall be delivered to the Surviving Entity. Any
holder of Shares (other than Excluded Shares) who has not theretofore complied
with this Article II shall thereafter look only to the Surviving Entity for
payment of the Per Share Merger Consideration (after giving effect to any
required tax withholdings as provided in Section 2.2(g)) upon due surrender
of its Certificates (or affidavits of loss in lieu of the Certificates), without
any interest thereon. Notwithstanding the foregoing, none of the Surviving
Entity, Parent, the Paying Agent or any other person shall be liable to any
former holder of Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar Laws.
(e) Lost,
Stolen or Destroyed Certificates.
In the
event 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 customary and reasonable amount and upon such terms as may reasonably
be
required by Parent as indemnity against any claim that may be made against
it or
the Surviving Entity with respect to such Certificate, the Paying Agent will
issue a check in the amount (after giving effect to any required tax
withholdings as provided in Section 2.2(g)) equal to the number of Shares
represented by such lost, stolen or destroyed Certificate multiplied by the
Per
Share Merger Consideration.
(f) No
Dissenters’ Rights.
Pursuant to Section 92A.390 of the NRS, no dissenters’ rights or rights of
appraisal will apply in connection with the Merger.
(g) Withholding
Rights.
Parent
and the Surviving Entity shall each be entitled to deduct and withhold from
the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as it is required to deduct and withhold with respect to
the
making of such payment under the Internal Revenue Code of 1986, as
amended,
or any other applicable state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Entity or Parent, as the case may
be,
such withheld amounts (i) shall be remitted by Parent or the Surviving
Entity, as applicable, to the applicable Governmental Authority, and
(ii) shall be treated for all purposes of this Agreement as having been
paid to the holder of Shares in respect of which such deduction and withholding
was made by the Surviving Entity or Parent, as the case may be.
2.3. Company
Equity Awards.
(a) All
stock
options (the “Company
Stock Options”)
and
Company Awards (as described in (ii) below, and collectively with the Company
Stock Options, “Company
Equity Awards”)
outstanding, at the Effective Time granted under the Company 1995 Long Term
Incentive Plan and the 1995 Non-Employee Director’s Stock Option
Plan (collectively,
the Company Stock Plans) shall be treated in accordance with (i) and (ii)
below.
(i) At
the
Effective Time, each outstanding Company Stock Option under the Company Stock
Plans, vested or unvested, shall be cancelled and shall only entitle the holder
thereof to receive from the Surviving Entity, as soon as reasonably practicable
after the Effective Time, an amount in cash equal to the product of (x) the
total number of Shares subject to the Company Stock Option times (y) the
excess, if any, of the value of the Per Share Merger Consideration over the
exercise price per Share under such Company Stock Option less applicable Taxes
required to be withheld with respect to such payment.
(ii) At
the
Effective Time, each right of any kind, contingent or accrued, vested or
unvested, to acquire or receive Shares or benefits measured by the value of
Shares, and each vested or unvested award of any kind consisting of Shares
that
may be held, awarded, outstanding, payable or reserved for issuance under the
Company Stock Plans and any other Company Plan, including restricted stock
units
under the Company Stock Plans (“Company
RSU”),
other
than Company Stock Options (the “Company
Awards”),
shall
be cancelled and shall only entitle the holder thereof to receive from the
Surviving Entity, as soon as reasonably practicable after the Effective Time,
an
amount in cash equal to (x) the number of Shares subject to such Company
Award immediately prior to the Effective Time times (y) the value of the
Per Share Merger Consideration (or, if the Company Award provides for payments
to the extent the value of the Shares exceed a specified reference price, the
amount, if any, by which the value of the Per Share Merger Consideration exceeds
such reference price), less applicable Taxes required to be withheld with
respect to such payment.
(b)
The
current offering in process as of the date hereof under the Company’s Amended
and Restated Employee Stock Purchase Plan (the “ESPP”)
shall
continue and the Company may, consistent with past practice and in accordance
with the terms of the ESPP, commence new offering periods under the ESPP on
or
after the date hereof and prior to the Effective Time at an exercise price
for
each such offering not less than as is provided under the ESPP; provided,
that on
each Exercise Date (as defined in the ESPP) occurring prior to the Effective
Time, and immediately prior to the Effective Time (as long as such date is
not
otherwise an Exercise Date), each participant shall promptly receive, in lieu
of
whole Shares that would otherwise be purchased under the ESPP in respect of
his
or her account, a cash payment equal to the product of (x) such number of whole
Shares and (y) the Fair Market Value (as defined in the ESPP) of a Share
(provided,
that
with respect to the deemed purchase immediately prior to the Effective Time,
the
Fair Market Value of a Share shall be deemed to be the Merger Consideration),
plus
a cash
payment equal to the balance, if any, of accumulated payroll deductions
remaining after such deemed purchase. Effective as of the date hereof, the
Company shall amend the ESPP or take any other action necessary to effectuate
the foregoing.
(c) At
or
prior to the Effective Time, the Company, the Board of Directors of the Company
(the “Company
Board”)
and
the compensation committee of the Company Board, as applicable, shall adopt
any
resolutions and take any actions which are necessary to effectuate the
provisions of Section 2.03, including
using reasonable best efforts to obtain all necessary consents and
acknowledgements of participants.
The Company shall use reasonable best efforts to ensure that from and
after the Effective Time neither Parent nor the Surviving Entity will be
required to deliver Shares or other capital stock of the Company to any person
pursuant to or in settlement of Company Stock Options or Company Awards after
the Effective Time.
(d) The
Company, including the Company Board and any committee acting on behalf of
the
Company Board, will not hereafter, except for the Company Stockholder Approval,
the Merger and the other transactions required to be taken by the Company or
any
of its Subsidiaries by this Agreement, take any action to accelerate the vesting
or exercisability, or otherwise amend, modify or change the terms, of any
Company Equity Award or other equity or equity-based awards.
2.4. Adjustments
to Prevent Dilution.
In the
event that the Company changes the number of Shares or securities convertible
or
exchangeable into or exercisable for Shares issued and outstanding prior to
the
Effective Time as a result of a reclassification, stock split (including a
reverse stock split), stock dividend or distribution, recapitalization, merger,
issuer tender or exchange offer, or other similar transaction, the Per Share
Merger Consideration shall be equitably adjusted.
ARTICLE
III
Representations
and Warranties of the Company
Except
as
set forth in the disclosure letter (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 letter 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 letter 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 letter 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 Letter”),
the
Company represents and warrants to Parent and Merger Sub as
follows:
3.1. 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, licensed or in good
standing, individually or in the aggregate has not had, and would not reasonably
be expected to have, a Material Adverse Effect. The Company has made available
to Parent complete and correct copies of its Articles of Incorporation (the
“Company
Articles”)
and
By-laws (the “Company
By-laws”)
and
the articles 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.
3.2. Subsidiaries.
Section 3.2
of the
Company Disclosure Letter lists all of 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, to the extent applicable, are fully paid and
nonassessable and are owned directly or indirectly by the Company free and
clear
of all pledges, liens, charges, title
defects, easements, encumbrances, rights of first offer or refusal 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 (i) the capital stock or
other equity or voting interests of its Subsidiaries, (ii) publicly traded
securities held for investment that do not exceed 5% of the outstanding
securities of any entity and (iii) as set
forth
on Section
3.2
of the
Company Disclosure Letter, the Company does not own, directly or indirectly,
any
capital stock or other equity or voting interests in any person.
3.3. Capital
Structure.
(a) The
authorized capital stock of the Company consists of 120,000,000 Shares and
1,000,000 shares of preferred stock, par value $0.01 per share (“Company
Preferred Stock”).
At
the close of business on March 7, 2007, (i) 55,226,395 Shares were outstanding
(which number does not include 648,500 Company RSUs), (ii) 17,583,206 Shares
were held by the Company in its treasury, (iii) 7,090,294 Shares were reserved
for issuance pursuant to the Company Stock Plans (of which 1,671,573 Shares
were
subject to outstanding Company Stock Options and 648,500 Shares were subject
to
outstanding Company RSUs), (iv) no shares of Company Preferred Stock were issued
or outstanding, and (v) 7,534,158 Shares were reserved for issuance upon
conversion of the Company’s 2.25% Senior Convertible Debentures due March 15,
2023 (the “Convertible
Debentures”)
issued
pursuant to an Indenture, dated as of March 3, 2003, between the Company and
▇▇▇▇▇ Fargo Bank Minnesota, N.A. (a complete and correct copy of which has
been
delivered or made available to Parent) of which 2,381,630 shares are subject
to
outstanding Convertible Debentures.
(b) Section 3.3(b)
of the
Company Disclosure Letter contains a correct and complete list (as of March
7,
2007) of Company Equity Awards including Company Stock Options, and Company
RSUs
under the Company Stock Plans, including the holder, date of grant, term, number
of Shares and, where applicable, exercise price and vesting schedule. Other
than
the Company Stock Options and Company RSUs there are no other outstanding equity
awards under the Stock Plan. Except as otherwise set forth in this Section
3.3
or on Section
3.3(b)
of the
Company Disclosure Letter, at the close of business on March 7, 2007, no shares
of capital stock or other voting securities of the Company were issued, reserved
for issuance or outstanding. Except as otherwise set forth in this Section
3.3
or on Section
3.3(b)
of the
Company Disclosure Letter, there are no outstanding stock appreciation rights,
rights to receive Shares on a deferred basis or other rights that are linked
to
the value of Shares granted under the Company Stock Plans or otherwise. All
outstanding shares of capital stock of the Company are, and all shares that
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. Each Company Equity Award
granted after January 1, 2000 was granted in all material respects in compliance
with (i) all applicable Laws and (ii) all of the material terms and conditions
of the Company Plans pursuant to which it was issued.
(c) Other
than the Convertible Debentures, there are no bonds, debentures, notes or other
indebtedness of the Company conferring on the holders 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 for the
Convertible
Debentures or as otherwise set forth in this Section 3.3 or on Section
3.3(b)
of the
Company Disclosure Letter, (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.
(d) Section 3.3(d)
of the
Company Disclosure Letter sets forth a complete and correct list of the
following information, as of the close of business on March 7, 2007, with
respect to the Convertible Debentures: (i) the aggregate outstanding
principal amount thereof; (ii) the aggregate amount of accrued and unpaid
interest thereon; and (iii) the conversion price thereof.
3.4. Authority;
Noncontravention.
(a) The
Company has all requisite corporate power and authority to enter into this
Agreement and, subject to the adoption of this Agreement and the Merger by
the
affirmative vote of the holders of a majority of the outstanding Shares (the
“Company
Stockholder Approval”),
to
consummate the Merger and the other transactions contemplated by this Agreement.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the Merger and the other 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). The Company
Board, 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) declaring that this Agreement, the Merger and the other
transactions contemplated by this Agreement are advisable and in the best
interests of the Company and the Company’s stockholders, (ii) approving and
adopting this Agreement, the Merger and the other transactions contemplated
by
this Agreement, (iii) directing that the adoption of this Agreement be
submitted
to a vote at a meeting of the stockholders of the Company and
(iv) recommending that the stockholders of the Company adopt this
Agreement. The Company Board has taken all action necessary to render the
provisions of Sections 78.378 to 78.3793, inclusive, and 78.411 to 78.444,
inclusive, of the NRS inapplicable to this Agreement, the Merger, and the other
transactions contemplated by this Agreement,
including the Voting Agreement. Except for Section 78.438 of the NRS (which
has been rendered inapplicable by action of the Company Board), no “moratorium,”
“control share,” “fair price,” or other antitakeover laws or regulations
(together, “Takeover
Laws”)
are
applicable to the Merger and the other transactions contemplated by this
Agreement and the Voting 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 Articles or the
Company By-laws or the comparable organizational documents of any of its
Subsidiaries, (ii) any written loan or credit agreement, bond, debenture,
note, mortgage, policy, certificate of coverage, indenture, lease or other
contract, agreement, obligation, commitment, arrangement, binding 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 3.5, 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 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.
(c) For
purposes of this Agreement, “Material
Adverse Effect”
shall
mean any change, effect, event, circumstance, 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, circumstance, occurrence or state of facts relating
to or
arising from (either alone or in combination) (i) the economy or the
financial markets in general, (ii) either of the health care or managed
care industries, (iii) changes in applicable Laws or regulations after the
date
hereof; provided
that the
exclusion set forth in this clause (iii) shall not apply to Section 3.4(b)
hereof, (iv) changes in GAAP, SAP or regulatory accounting principles after
the date hereof, (v) changes proximately
caused by the announcement or performance of this Agreement and the transactions
contemplated hereby (including compliance with the covenants set forth herein
and any action taken or omitted to be taken by the Company at the written
request or with the prior written consent of Parent or Merger Sub), (vi) the
matters set forth on Section
3.4(c)
of the
Company Disclosure Letter, (vii) any natural disasters or acts of war, sabotage
or terrorism involving the United States of America or its interests, or an
escalation or worsening thereof, (viii) any changes in the price or trading
volume of the Shares (provided
that any
change, effect, event or occurrence that may have caused or contributed to
such
change in market price or trading volume shall not be excluded), (ix) any
failure by the Company to meet revenue or earnings projections, in and of itself
(provided that any change, effect, event or occurrence that may have caused
or
contributed to such failure to meet published revenue or earnings projections
shall not be excluded) and (x) any breach by the Buyer or Merger Sub of this
Agreement; provided
that
with respect to clauses (i), (ii), (iii), (iv) and (vii), such change,
effect, event, circumstance, occurrence or state of facts does not
disproportionately affect in any material respect the Company and its
Subsidiaries, taken as a whole, as compared to the majority of persons engaged
in the same businesses as the Company that is affected by such change, effect,
event, circumstance, occurrence or state of facts.
3.5. 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 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 Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the “Exchange
Act”),
(c) the Articles of Merger to be filed with the Secretary of State of the
State of Nevada and appropriate authorization/qualification to do business
documents to be filed with the relevant authorities of other states in which
the
Company is qualified to do business, (d) any appropriate or required
filings with and approvals of the New York Stock Exchange (the “NYSE”),
(e) the various state insurance and department of health filings and/or
approvals set forth in Section 3.5(e)
of the
Company Disclosure Letter and (f) 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 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.
3.6. Company
SEC Documents; No Undisclosed Liabilities.
(a) The
Company has filed or furnished all reports, schedules, forms, statements and
other documents (including exhibits and other information incorporated therein)
with the SEC required to be filed by the Company since December 31, 2003 (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. Each of the Company SEC Documents (as amended
prior
to the date hereof) complied in all material respects with the requirements
of
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the “Securities
Act”),
or
the Exchange Act, as the case may be, applicable to such 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, revised
or
superceded by a later-filed Company SEC Document. The financial statements
of
the Company included in the Company SEC Documents, at the time of their filing,
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles (“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 presented 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
Annual Report on Form 10-K filed prior to the date hereof for the year ended
December 31, 2006, (ii) as incurred in the ordinary course of business
since December 31, 2006 or (iii) as set forth on Section
3.6(b)
of the
Company Disclosure Letter, 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 Material Adverse Effect. Section 3.6(b)
of the
Company Disclosure Letter sets forth a description of the aggregate indebtedness
for borrowed money (including guarantees of indebtedness for borrowed money
of
any other person) of the Company and its Subsidiaries outstanding as the close
of business on March 7, 2007.
3.7. Information
Supplied.
None of
the information supplied or to be supplied by the Company specifically for
inclusion or incorporation by reference in 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 distributed to
the
Company’s stockholders, the “Proxy
Statement”)
will,
at the date the Proxy Statement is first distributed 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 Proxy Statement based on information supplied by Parent or Merger Sub
specifically for inclusion or incorporation by reference in the Proxy Statement
or portions thereof that relate only to Parent and its
Subsidiaries.
3.8. 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) as set forth on Section
3.8
of the
Company Disclosure Letter, (b) for liabilities incurred in connection with
this
Agreement or the transactions contemplated hereby or (c) as disclosed in
the Filed Company SEC Documents, there has not been any change, effect, event,
circumstance, occurrence or state of facts that individually or in the aggregate
has had or would reasonably be expected to have a Material Adverse
Effect.
3.9 Litigation.
Except
as set forth on Section
3.9
of the
Company Disclosure Letter, (a) there is no suit, action, claim, proceeding
or
investigation 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 Material Adverse Effect or prevent
or materially delay the consummation of any of the transactions contemplated
by
this Agreement, nor (b) 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 Material Adverse Effect or prevent
or materially delay the consummation of any of the transactions contemplated
by
this Agreement.
3.10. Contracts.
(a) As
of the
date hereof, neither the Company nor any of its Subsidiaries is a party 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 (i) this
Agreement and (ii) 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 Letter sets forth a correct and complete list as of the
date
of this Agreement and, except as otherwise noted in Section
3.10(b)
of the
Company Disclosure Letter, the Company has made available to Parent correct
and
complete copies (including all material amendments, exhibits, attachments,
appendices, annexes, modifications, extensions, renewals, guarantees or other
Contracts with respect thereto, but excluding all names, terms and conditions
that have been redacted in compliance with applicable Laws governing the sharing
of information), of:
(i) all
Contracts (other than Contracts otherwise required to be disclosed in this
Section 3.10(b)) 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 or any of its Subsidiaries is bound, that contain a covenant
restricting the ability of the Company or any of its Subsidiaries (or that,
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
(including any Contracts containing exclusivity provisions or provisions
prohibiting the solicitation of employees, customers, Health Care Providers,
vendors or other business);
(iii) all
Contracts of the Company or any of its Subsidiaries with any Affiliate of the
Company (other than any of its Subsidiaries);
(iv) any
(A) Contract to which the Company or any of its Subsidiaries is a party
granting any license to Intellectual Property, and (B) other license (other
than real estate) having an aggregate value per license, or involving payments
by the Company or any of its Subsidiaries, of more than $500,000 on
an
annual basis;
(v) agreements
by the Company not to acquire assets or securities of a third
party;
(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 a breach or termination
of or
loss of benefit under any 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) any
Contract with a Governmental Authority (other than ordinary course Contracts
with Governmental Authorities as a customer or provider of health care) that
imposes any material obligation or restriction on the Company or its
Subsidiaries;
(ix) all
leases, subleases, licenses or other Contracts pursuant to which the Company
or
any of its Subsidiaries use or hold any material property involving payments
by
or to the Company or any of its Subsidiaries of more than $500,000 on
an
annual basis;
(x) all
material outsourcing Contracts (including all material claim, call center and
information technology development outsourcing Contracts);
(xi) all
Contracts with investment bankers, financial advisors, attorneys, accountants
or
other advisors retained by the Company or any of its Subsidiaries involving
payments by or to the Company or any of its Subsidiaries after the date of
this
Agreement of more than $500,000 on
an
annual basis;
(xii) all
Contracts providing for the indemnification by the Company or any of its
Subsidiaries of any person, except for any such Contract that (A) is not
material to the Company or any of its Subsidiaries or (B) was entered into
in
the ordinary course of business;
(xiii) all
Contracts pursuant to which any indebtedness for borrowed money 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 for borrowed
money 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);
(xiv) (A) all
Contracts with hospitals involving payments by or to the Company or any of
its
Subsidiaries of more than $250,000 on
an
annual basis; (B) all Contracts with SMA; (C) all exclusive or preferred (within
a market) specialty provider Contracts; (D) all Contracts (by total payments
by
the Company and its Subsidiaries) of more than $500,000 by the Company and
its
Subsidiaries to Health Care Providers during the period from January 1, 2006
through December 31, 2006 or estimated to be payable in 2007, other than claims
or capitation payments paid to Subsidiaries of the Company; and (E) any Contract
for access to or use of a third party’s network of contracted Health Care
Providers (i.e., network rental agreements);
(xv) (A)
the
Contracts with the 50 largest customers (by membership), including fully insured
revenue and administrative or network rental fee revenue, in 2006 and/or
projected for 2007 (excluding Contracts that have been terminated or have
expired as of the date of this Agreement and Contracts with any Governmental
Authority); and (B) the 10 largest Contracts for access to or use by a third
party of the Company’s or its Subsidiaries’ network of contracted Health Care
Providers (i.e., leased network agreements) (by revenue in 2006 and/or projected
for 2007), to the extent not included in clause (A) above;
(xvi) any
Contract involving payments by or to the Company or any of its Subsidiaries
of
more than $500,000 on
an
annual basis that provides a fee and/or rate guarantee to a customer extending
more than one year from the date hereof (including any rate letters that are
in
effect or will or may go into effect in the future);
(xvii) any
material Contract with respect to any risk sharing or risk transfer arrangement
or that provides for a retroactive premium or similar adjustment or withholding
arrangement (including any Contract with a customer where premiums or fees
are
placed at risk);
(xviii) any
material Contract for reinsurance or stop-loss coverage obtained or sold by
the
Company (other than in connection with the Company’s workers compensation
business);
(xix) any
Contract with a federal Governmental Authority (including (A) customer
Contracts with any Governmental Authority involving payments by or to the
Company or any of its Subsidiaries, of more than $250,000 on
an
annual basis, (B) Contracts with the Centers for Medicare and Medicaid Services
or any successor thereto, (C) Contracts with the Office of Personnel
Management, and (D) Contracts with any state Medicaid agency);
(xx) the
Contracts with the ten largest external sales agents, brokers or producers
by
compensation paid in 2006 and any Contract pursuant to which the Company pays
such ten largest external sales agents, brokers or producers any bonuses,
overrides or other similar contingent compensation; and
(xxi) any
retail pharmacy, mail pharmacy and specialty pharmacy Contracts pursuant to
which the Company or any of its Subsidiaries receive rebates of more than
$500,000 on an annual basis.
(c) Except
as
set forth on Section
3.10(c)
of the
Company Disclosure Letter, (i) none of the Company or any of its
Subsidiaries (x) 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 (y) 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 (ii) 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), or increasing the Companies’ or any of its Subsidiaries’
liabilities under, any such Contract except for violations, breaches, defaults,
waivers or failures to enforce rights or benefits covered
by clauses (i) or (ii) above that individually or in the aggregate have not
had and would not reasonably be expected to have a Material Adverse Effect.
None
of the Company or any of its Subsidiaries has received written notice from
any
party to any of the customer Contracts (including customer Contracts with any
Governmental Authority) or Health Care Provider Contracts required to be
disclosed in Section 3.10(a) that such party intends to terminate or fail
to renew any such Contract with the Company or any of its
Subsidiaries.
3.11. Compliance
with Laws.
(a) The
Company and each of its Subsidiaries has been since December 31, 2004 and 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 where any failures to be in compliance have not had and would not
reasonably be expected to have individually or in the aggregate a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has received,
since December 31, 2004, a written notice or other written 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 in all material respects as now conducted
(except where any failure to have such Permit in effect has not had and would
not reasonably be expected to have individually or in the aggregate a Material
Adverse Effect), and since December 31, 2004 there has occurred no material
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 that has not
been cured prior to the date hereof (except such violations defaults and rights
that have not had, and would not reasonably be expected to have (with or without
notice or lapse of time or both) individually or in the aggregate a Material
Adverse Effect).
Assuming
all Necessary Consents are made or obtained, the Merger, in and of itself,
would
not cause the revocation or cancellation of any such material Permit except
where the revocation or cancellation of such Permit has not had and would not
reasonably be expected to have individually or in the aggregate a Material
Adverse Effect.
(b) Since
December 31, 2004, (i) neither the Company nor any of its Subsidiaries nor,
to the Knowledge of the Company, any third-party service provider acting on
behalf of the Company or any of its Subsidiaries, has received written notice
from any Governmental Authority that (x) alleges any material noncompliance
(or that the Company or any of its Subsidiaries or any such third-party service
provider is under investigation or the subject of an inquiry by any such
Governmental Authority for such alleged material noncompliance) with any
applicable Law, (y) asserts any risk-based capital deficiency or
(z) would be reasonably likely to result in a material fine, assessment or
cease and desist order, or the suspension, revocation or material limitation
or
restriction of any Permit; and (ii) neither the Company nor any of its
Subsidiaries has entered into any agreement or settlement with any Governmental
Authority with respect to its material non-compliance with, or material
violation of, any applicable Law.
(c) Since
December 31, 2004, the Company and each of its Subsidiaries has timely filed
all
material regulatory reports, schedules, statements, documents, filings,
submissions, forms, registrations and other documents, together with any
amendments required to be made with respect thereto, that each was required
to
file with any Governmental Authority, including state health and insurance
regulatory authorities and any applicable Federal regulatory authorities, and
have timely paid all Taxes, fees and assessments due and payable in connection
therewith, except where the failure to make such filings on a timely basis
or
payments has not had, and would not reasonably be expected to have a Material
Adverse Effect.
(d) All
premium rates, rating plans and policy terms established and used by the
Company’s Subsidiaries that are required to be filed with and/or approved by
Governmental Authorities have been in all material respects so filed and/or
approved, the premiums charged conform in all material respects to the premiums
so filed and/or approved and comply in all material respects with the Laws
applicable thereto, and to the Company’s Knowledge, no such premiums are subject
to any investigation by any Governmental Authority.
(e) The
Company and its Subsidiaries have implemented policies, procedures and/or
programs designed to assure that its agents and employees are in material
compliance within all applicable Laws, including laws, regulations, directives
and opinions of Governmental Authorities relating to advertising, licensing
and
sales practices. Each of the Company and its Subsidiaries and, to the Knowledge
of the Company, each broker, producer, consultant, agent or third-party service
provider acting on behalf of the Company or any of its Subsidiaries, has
marketed, administered, sold and issued insurance and health care benefit
products in compliance in all material respects with all applicable
Laws.
(f) Except
as
set forth in the Filed Company SEC Documents, the Company and, to the Knowledge
of the Company, each of its current officers and directors (in their capacities
as officers and directors of the Company) is in compliance with, and has
complied, in all material respects with (i) the applicable provisions of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the related rules and regulations promulgated
under such act (“▇▇▇▇▇▇▇▇-▇▇▇▇▇”)
or the
Exchange Act and (ii) the applicable listing and corporate governance rules
and regulations of the NYSE. The Company has previously disclosed to Parent
all
of the information required to be disclosed by the Company and its officers
and
employees, including the Company’s chief executive officer and chief financial
officer, to the Company Board or any committee thereof pursuant to the
certification requirements relating to Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q. The Company and each of its Subsidiaries
maintains a system of internal accounting controls sufficient to comply in
all
material respects with all legal and accounting requirements applicable to
the
Company and such Subsidiary.
(g) Neither
the Company nor any of its Subsidiaries nor, to the Knowledge of the Company,
any of their respective officers or directors or any Health Care Provider,
has
since December 31, 2004, engaged in any activities that are prohibited under
the
federal Medicare statute, including 42 U.S.C. Sections 1320a-7a, 1320a-7b and
1395nn, the federal TRICARE statute, 10 U.S.C. Section 1071 et
seq.,
the
Federal Civil False Claims Act, 31 U.S.C. Section 3729 et
seq.,
or the
regulations promulgated pursuant to such statutes or any similar state Laws
or
regulations, except to the extent that such activities do not, individually
or
in the aggregate, have, and would not reasonably be expected to have, a Material
Adverse Effect.
3.12. Employee
Benefit Plans.
(a) Section 3.12(a)
of the
Company Disclosure Letter sets forth a correct and complete list of 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, Company Stock Plans, individual stock option agreements
to which the Company is a party granting stock options to acquire Shares that
have not been granted under a Company Stock Plan, incentive, stock purchase,
stock appreciation rights and other equity or equity-based compensation, or
deferred compensation arrangements, change in control, termination or severance
plans or arrangements, stock purchase, 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 employees of the Company
or
any of its Subsidiaries (the “Employees”)
or
former employees of the Company or any of its Subsidiaries and current and
former directors of the Company (collectively, the “Company
Plans”)
other
than immaterial 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 or made
available to Parent by the Company, to the extent applicable: (i) any
plans, all amendments 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; and (iv) summary
plan descriptions.
(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, in each case, except as individually or
in the aggregate, have not had and would not reasonably be expected to have
a
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
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 and the Company is not aware of
any circumstances likely to result in the loss of the qualification of any
such
Company Plan under Section 401(a) of the Code or trusts under
Section 501 of the Code, except as individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse
Effect.
(e) Neither
the Company nor its Subsidiaries nor any trade or business (whether or not
incorporated) that is treated as a single employer, with any of them under
Section 414 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), in each case, except as
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect. 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
have not had and would not reasonably be expected to have a 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), except as individually or in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect.
(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 actions, claims and lawsuits that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect.
(h) Except
as
set forth in Section 3.12(h)
of the
Company Disclosure Letter, 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 Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”),
or
applicable state law, and at the expense of the participant or the participant’s
beneficiary. Each of the Company and any ERISA Affiliate that maintains a “group
health plan” within the meaning of Section 5000(b)(1) of the Code is in
compliance 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 such failure to comply has not had and would not
reasonably be expected to have a Material Adverse Effect.
(i) Except
as
set forth in Section 3.12(i)
of the
Company Disclosure Letter, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby, including the
Company Stockholder Approval or the Merger, will (i) result in any payment
becoming due to any Employee, including severance pay or any increase in
severance pay upon termination of employment after the date hereof,
(ii) increase any benefits otherwise payable under any Company Plan,
(iii) result in the acceleration of the time of payment or vesting of any
such benefits under any Company Plan, increase the amount payable, or result
in
any material obligation pursuant to, any Company Plan, (iv) result in any
obligation to fund any trust or other arrangement with respect to compensation
or benefits under a Company Plan, in each case in excess of $500,000 or (v)
limit or restrict the right of the Company or, after the consummation of the
transactions contemplated hereby, Parent to merge, amend or terminate any
Company Plan. Except as set forth in Section 3.12(i)
of the
Company Disclosure Letter, since December 31, 2006, the Company, including
the
Company Board, any committee thereof and any officer of the Company, has not
taken any action to increase the compensation or benefits payable after the
date
hereof to any officer having the title of senior vice president or higher of
the
Company.
(j) Except
as
set forth on Section
3.12(j)
of the
Company Disclosure Letter, 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. There has been
no
amendment to or announcement by the Company or any of its Subsidiaries relating
to any change or proposed amendment to any Company Plan that would increase
materially the expense of maintaining such plan above the level of the expense
incurred therefor for the most recent fiscal year.
(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,
have
not had and would not reasonably be expected to have a Material Adverse Effect.
(l) Except
as
set forth in Section
3.12(l)
of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries
is a
party to any contract, agreement or other arrangement providing for the payment
of any amount that would not be deductible by reason of Section 162(m) or
Section 280G of the Code.
3.13. Taxes.
Except
as set forth in Section
3.13
of the
Company Disclosure Letter:
(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 in full.
(b) All
taxes
due and payable by the Company and its Subsidiaries have been adequately
provided for in the financial statements of the Company and its Subsidiaries
for
all periods ending through the date hereof. 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. There are no material unresolved questions or claims concerning
the Company’s or any of its Subsidiaries’ tax liabilities that are not disclosed
or provided for in the Company SEC Documents. No reductions have been made
to
the December 31, 2006 current tax reserve and valuation allowance
previously reported to Parent.
(c) Except
for the periods set forth on Section
3.13(c)
of the
Company Disclosure Letter, the material income tax returns of the Company and
each of its Subsidiaries have been examined by and settled with (or received
a
“no change” letter from) the Internal Revenue Service (the “IRS”)
or the
appropriate state, local or foreign taxing authority (or the applicable statute
of limitations has expired). All material assessments for taxes due with respect
to such completed and settled examinations or any concluded litigation have
been
fully paid.
(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
December 31, 2001, neither the Company nor any of its Subsidiaries has
(i) 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 or (ii) any material liability for the taxes of any
other person (other than the Company or any of its Subsidiaries) under any
state, local or foreign law, as a transferee or successor, by contract, or
otherwise.
(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 writing 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) Neither
the Company nor any of its Subsidiaries is currently receiving any material
tax
benefit or credit or other favorable material tax treatment that will not be
extended and available to the Company and its Subsidiaries following the
Merger.
(i) No
written claim that could give rise to material taxes has been made to the
Company or any of its Subsidiaries 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.
(j) 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.
(k) No
Liens
for taxes exist with respect to any properties or other assets of the Company
or
any of its Subsidiaries, except for Permitted Liens.
(l) 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.
(m) The
Company has not entered into any “reportable transaction” within the meaning of
Treasury Regulation Section 1.6011-4(b).
(n) 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.
3.14. Intellectual
Property; Software.
(a) As
used
herein: (i) “Intellectual
Property”
means
all U.S. and foreign (a) trademarks, service marks, trade names, Internet
domain names, designs, logos, slogans and other distinctive indicia of origin,
together with goodwill, registrations and applications relating to the foregoing
(“Trademarks”);
(b) patents and pending patent applications, invention disclosure
statements, and any and all divisions, continuations, continuations-in-part,
reissues, reexaminations, and any extensions thereof, any counterparts claiming
priority therefrom and like statutory rights (“Patents”);
(c) registered and unregistered copyrights (including those in Software
other than “off-the-shelf” Software) and all registrations and applications to
register the same (“Copyrights”);
(d) confidential technology, know-how, inventions, processes, formulae,
algorithms, models and methodologies (“Trade
Secrets”);
and
(e) Software; (ii) “IP
Licenses”
means
all Contracts (excluding “click-wrap” or “shrink-wrap” agreements or agreements
contained in “off-the-shelf” Software or the terms of use or service for any Web
site) pursuant to which the Company and its Subsidiaries have acquired rights
(including usage rights) to any material Intellectual Property used in the
operation of their respective businesses as currently conducted, or licenses
and
agreements pursuant to which the Company and its Subsidiaries have licensed
or
transferred the right to use any material Intellectual Property, including
license agreements and settlement agreements; (iii) “Software”
means
all computer programs, including any and all software implementations of
algorithms, models and methodologies whether in source code or object code
form,
databases and compilations, including any and all electronic data and electronic
collections of data, all documentation, including user manuals and training
materials, related to any of the foregoing and the content and information
contained on any Web site, other than off-the-shelf software; and
(iv) “Company
Intellectual Property”
means
the Intellectual Property and Software owned by the Company and its
Subsidiaries, and held for use or used in the business of the Company or its
Subsidiaries as presently conducted.
(b) Section 3.14(b)
of the
Company Disclosure Letter sets forth, for the Company Intellectual Property,
a
complete and accurate list of all U.S., state and foreign: (i) Patents
issued or pending; (ii) Trademark registrations and applications for
registration (including Internet domain name registrations) and material
unregistered trademarks and service marks; and (iii) material
Copyrights.
(c) Section 3.14(c)
of the
Company Disclosure Letter lists all (i) material Software that is owned by
the Company or its Subsidiaries and (ii) material IP Licenses.
(d) The
Company, or one of its Subsidiaries, owns or possesses all licenses or other
legal rights to use, sell or license all material Company Intellectual Property,
free and clear of all Liens (other than Permitted Liens).
(e) All
material Trademark registrations and applications for registration, material
Patents issued or pending and all material Copyright registrations and
applications for registration owned by the Company and its Subsidiaries are,
in
all material respects, valid and subsisting, in full force and effect and have
not lapsed, expired or been abandoned, and, to the Knowledge of the Company
are
not the subject of any opposition filed with the United States Patent and
Trademark Office or any other intellectual property registry.
(f) The
Company Intellectual Property, and the Intellectual Property related to the
Company’s and its Subsidiaries’ respective businesses that is licensed to the
Company or its Subsidiaries, constitutes all the Intellectual Property and
Software necessary for the continuing conduct and operation of the Company’s
business as currently conducted and operated by the Company, except as would
not
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect.
(g) Except
as
set forth in Section 3.14(g)
of the
Company Disclosure Letter:
(i) no
unresolved claims, or to the Knowledge of the Company, threat of claims within
the three years prior to the date of this Agreement, have been asserted in
writing by any third party against the Company or any of its Subsidiaries
related to the use in the conduct of the businesses of the Company and its
Subsidiaries that the Company Intellectual Property or the conduct of the
business of the Company materially infringes, misappropriates, dilutes or
otherwise violates any Intellectual Property rights of any third
party;
(ii) to
the
Knowledge of the Company, the conduct of the businesses of the Company and
its
Subsidiaries does not infringe, misappropriate, dilute or otherwise violate
any
Intellectual Property rights of any third party, except as would not reasonably
be expected to result, individually or in the aggregate, in a Material Adverse
Effect;
(iii) to
the
Knowledge of the Company, no third party is infringing, misappropriating,
diluting or violating any Company Intellectual Property, or material
Intellectual Property related to the Company’s and its Subsidiaries’ respective
businesses that is licensed to the Company or its Subsidiaries, except as would
not reasonably be expected to result, individually or in the aggregate, in
a
Material Adverse Effect;
(iv) there
is
no default under any of the IP Licenses by the Company or any of its
Subsidiaries or, to the Knowledge of the Company, by the other party thereto,
except as would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect;
(v) the
Company and its Subsidiaries have taken commercially reasonable measures to
protect the confidentiality of their Trade Secrets, except as would not
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect; and
(vi) the
consummation of the transactions contemplated hereby will not result in the
loss
or impairment of the Company’s and its Subsidiaries’ rights to own or use any of
the Company Intellectual Property or material Intellectual Property that is
licensed to the Company or its Subsidiaries or obligate them to pay any
royalties or other amounts to any third party in excess of the amounts payable
by them prior to the Closing, nor will such consummation require the consent
of
any third party in respect of any such Intellectual Property, except as would
not reasonably be expected to result in, individually or in the aggregate,
a
Material Adverse Effect.
(h) To
the
Knowledge of the Company, the Software that the Company or its Subsidiaries
license or otherwise use (i) functions in compliance in all material respects
with its related documentation and specifications, and functions properly in
all
respects to achieve its intended purposes and (ii) is free of any computer
instructions, devices or techniques that are designed to infect, disrupt,
damage, disable or alter such Software or its processing environment (including
other programs, equipment and data), except, in the case of clauses (i) and
(ii)
above, as would not reasonably be expected to have a Material Adverse
Effect.
3.15. Properties
and Assets.
(a) Section
3.15(a)
of the
Company Disclosure Letter sets forth the address and parcel number of each
parcel of real property owned by the Company or any of its Subsidiaries
(collectively, the “Owned
Real Property”).
The
Company or one of its Subsidiaries has good and marketable fee simple title
to
the Owned Real Property and to all of the buildings, structures and other
improvements thereon free and clear of all Liens other than Permitted Liens.
Neither the Company nor any of its Subsidiaries has leased, licensed or
otherwise granted any person the right to use or occupy the Owned Real Property
which lease, license or grant is currently
in effect or collaterally assigned or granted any other security interest (other
than Permitted Liens) in the Owned Real Property which assignment or security
interest is currently in effect. There are no outstanding agreements, options,
rights of first offer or rights of first refusal on the part of any party to
purchase any Owned Real Property.
(b) Section
3.15(b)
of the
Company Disclosure Letter sets forth a list by address, tenant, landlord and
date of lease of all leases, subleases, licenses and similar agreements and
all
amendments thereto (each such lease, sublease, license or similar agreement
and
all amendments thereto, being a “Lease”)
of all
leasehold or subleasehold estates held by or for the Company or its Subsidiaries
(the “Leased
Real Property;
and,
collectively with the Owned Real Property, the “Real
Property”).
Section
3.15(b)
of the
Company Disclosure Letter sets forth all sublicenses, licenses and other grants
by the Company or any of its Subsidiaries to any person of the right to use
or
occupy such Leased Real Property or any portion thereof involving, in any such
case, payments of more than $100,000 annually. The Company has a good and valid
leasehold interest in and to the Leased Real Property, subject to no Liens,
except Permitted Liens. Each Lease is in full force and effect except as would
not reasonably be expected to have a Material Adverse Effect. There exists
no
material default by or condition caused by the Company, or to Knowledge of
Company, any other parties, which with the giving of notice, the passage of
time
or both could become a material default under any Lease. True and complete
copies of all Leases have been made available to Parent.
(c) The
Company and each of its Subsidiaries has such good and valid title to, or such
valid rights by lease, license, other agreement or otherwise to use, all assets
and properties (in each case, tangible and intangible) necessary to enable
the
Company and its Subsidiaries to conduct their business as currently conducted,
except where the failure to have such good and valid title or valid rights
would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect
3.16. Environmental
Matters.
Except
as disclosed in Section
3.16
of the
Company Disclosure Letter or as would not reasonably be expected to have a
Material Adverse Effect: (a) no written notification, demand, request for
information, citation, summons, complaint or order has been received by, and
no
action, claim, suit or proceeding is pending or, to the Knowledge of the
Company, threatened by any person against, the Company, any of its Subsidiaries
or to the Knowledge of the Company, against any person whose liability the
Company or any of its Subsidiaries has assumed either contractually or by
operation of law with respect to any matters arising under any Environmental
Law; (b) the Company and its Subsidiaries are currently in compliance with
all
applicable Environmental Laws, including possessing all permits, authorizations,
licenses, exemptions and other governmental authorizations required for their
operations under applicable Environmental Laws; and (c) neither the Company
nor
any of its Subsidiaries is subject to any outstanding and unresolved order,
decree, injunction or written agreement with any Governmental Authority arising
under any Environmental Law.
The
representations and warranties contained in this Section 3.16 and in Section
3.6(b) are the sole and exclusive representations and warranties in this
Agreement applicable to environmental matters.
As
used
in this Agreement, the term “Environmental
Laws”
means
any applicable Federal, state, local and foreign statutes, Laws, binding
judicial decisions, regulations, ordinances, rules, judgments, orders, codes,
injunctions, permits, governmental agreements and common law standards of
conduct, in each case, relating to the protection of human health as it relates
to Hazardous Materials exposure or the protection of the environment, including
the transportation, use, storage and disposal of Hazardous
Materials.
As
used
in this Agreement, the term “Hazardous
Materials”
means
all substances or materials regulated under, or otherwise defined as hazardous,
toxic, explosive, dangerous, flammable or radioactive pursuant to, any
Environmental Law including (i) petroleum compounds, asbestos containing
material, medical waste and polychlorinated biphenyls and (ii) in the United
States, all substances defined as Hazardous Substances, Oils, Pollutants or
Contaminants in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R. Section 300.5.
3.17. Transactions
with Related Parties.
Except
as set forth in the Filed Company SEC Documents, since December 31, 2006, there
has been no transaction, or series of similar transactions, agreements,
arrangements or understandings, nor are there any currently proposed
transactions, or series of similar transactions, agreements, arrangements or
understandings to which the Company or any of its Subsidiaries was or is to
be a
party, that would be required to be disclosed under Item 404 of Regulation
S-K
promulgated under the Securities Act.
3.18. Brokers
and Other Advisors.
No
broker, investment banker, financial advisor or other person, other than ▇▇▇▇▇▇
Brothers, the fees and expenses of which will be paid by the Company in
accordance with the Company’s agreements with such firm (a complete copy of
which have heretofore 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.
3.19. Opinion
of Financial Advisor.
The
Company has received the opinion of ▇▇▇▇▇▇ Brothers dated the date hereof to
the
effect that, as of such date, from a financial point of view, the Merger
Consideration offered to the holders of Shares in the Merger is fair to such
stockholders, a complete copy of which opinion will be made available to Parent
as a matter of record as soon as practicable after the date of this
Agreement.
3.20. Statutory
Financial Statements.
(a) Section 3.20(a)
of the
Company Disclosure Letter sets forth a list of all annual statements and
quarterly statements of the Company’s Subsidiaries filed with Governmental
Authorities for the years ended December 31, 2005 and December 31, 2006 (the
“State
Regulatory Filings”).
Except as otherwise set forth in such State Regulatory Filings when made, all
such State Regulatory Filings and the statutory balance sheets and income
statements included therein (i) were prepared from the books and records of
the Company’s Subsidiaries, (ii) fairly present in all material respects
the statutory financial condition and results of operations of the Company’s
Subsidiaries, as applicable, as of the date and for the periods indicated
therein and (iii) have been prepared in all material respects in accordance
with applicable statutory accounting principles (“SAP”)
consistently applied throughout the periods indicated, except as may be
reflected in the notes thereto and subject to the absence of notes where not
required by SAP and to normal year-end adjustments.
(b) The
Company has provided Parent with true and correct copies of all actuarial
reports prepared by independent or internal actuaries since January 1, 2004
(other than actuarial reports prepared by internal actuaries that are not
material to the aggregate reserves of the Company and its Subsidiaries, taken
as
a whole) and all attachments, addenda, supplements and modifications
thereto.
3.21. Medicare
and Medicaid Participation.
The
Company facilities listed in Section 3.21
of the
Company Disclosure Letter (each a “Company
Facility”,
collectively “Company
Facilities”)
are
qualified for participation in the Medicare and Medicaid programs, have a
current and valid provider contract with the Medicare and Medicaid programs,
are
in all material respects in compliance with the material conditions of
participation in such programs and have received all material approvals or
qualifications necessary for reimbursement relating to each Company Facility.
Except as set forth in Section 3.21
of the
Company Disclosure Letter, neither the Company nor any Subsidiary of the Company
nor any Company Facility has since December 31, 2004 received any written notice
from either Medicare or Medicaid programs of any pending or threatened material
investigations or surveys.
For
purposes of this Agreement, (i) the term “Medicaid”
means
the applicable provisions of Title XIX of the Social Security Act, the
regulations promulgated thereunder, and the state Laws implementing the Medicaid
program; and (ii) the term “Medicare”
means
the applicable provisions of Title XVIII of the Social Security Act and the
regulations promulgated thereunder.
3.22. Penalties
Under Medicare/Medicaid Programs.
Except
as set forth in Section 3.22
of the
Company Disclosure Letter, neither the Company nor any Subsidiary of the Company
nor any Company Facility has since December 31, 2004 been required to pay any
civil monetary penalty under applicable law regarding false, fraudulent, or
impermissible claims under, or payments to induce a reduction or limitation
of
health care services to beneficiaries of, any state or federal health care
program.
To the Knowledge of the Company, and except as set forth in Section 3.22
of the
Company Disclosure Letter, neither the Company, nor any Subsidiary of the
Company nor any Company Facility is currently the subject of any material
investigation or proceeding that may result in such payment. Neither the Company
nor any Subsidiary of the Company nor any Company Facility nor, to the Knowledge
of the Company, any of their respective current employees are debarred,
suspended from, or otherwise ineligible to participate in, the Medicare,
Medicaid, or Maternal and Child Health Services Program, or any program funded
under the Block Grants to States for Social Services (Title XX) program
nor, to the Knowledge of the Company, have any such current employees been
convicted, under federal or state law, of a criminal offense related to (i)
the
neglect or abuse of a patient or (ii) the delivery of an item or service,
including the performance of management or administrative services related
to
the delivery of an item or service, under the Medicare or Medicaid
programs.
3.23. Physician
Qualifications.
(a) Section
3.23(a)
of the
Company Disclosure Letter lists (i) all of the physicians, by name, type of
professional license, specialty and board certification (“Physicians”)
and
(ii) all of the non-physician providers, by name, type of professional license
and area of practice (“Non-Physician
Provider”)
(collectively, Physicians and Non-Physician Providers shall be referred to
as
“Company
Providers”)
employed by Southwest Medical Associates, Inc. (“SMA”),
a
wholly owned Subsidiary of the Company, or other Company Facilities, as of
the
date hereof. Each Company Provider holds a current license to practice his
or
her applicable profession, as identified in Section
3.23(a)
of the
Company Disclosure Letter, in the State of Nevada, without restriction or
subject to any disciplinary or corrective action. Except as noted in
Section
3.23(a)
of the
Company Disclosure Letter, each Physician and each Non-Physician Provider,
as
applicable, has a current Drug Enforcement Administration authorization.
(i) Except
as
set forth in Section
3.23(b)
of the
Company Disclosure Letter, to the Knowledge of the Company:
(ii) no
Physician who is a current employee of SMA has ever had his or her license
to
practice his or her applicable profession or to prescribe controlled substances
in any state restricted, suspended or revoked;
(iii) each
Physician that is a current employee of SMA is eligible and enrolled as a
participating provider for Medicare and/or Medicaid beneficiaries and has not
been suspended or debarred by Centers for Medicare and Medicaid Services or
any
state Medicaid agency;
(iv) no
Physician that is a current employee of SMA has ever been reprimanded,
sanctioned or disciplined by any licensing board, state or local medical or
other professional society, specialty board or other certifying
board;
(v) no
Physician that is a current employee of SMA has ever (1) been denied health
care
facility medical staff membership or clinical privileges or reappointment to
a
health care facility medical staff, (2) had his or her health care facility
medical staff membership or clinical privileges suspended, restricted or
revoked, nor (3) voluntarily resigned or relinquished any health care facility
medical staff membership or clinical privileges while a disciplinary action
or
investigation has been pending; and
(vi) (A)
during the three year period prior to the date hereof, no final judgment in
a
professional malpractice action has been entered against any Company Provider;
and (B) no such action, based on an allegation of professional malpractice,
has
ever been settled by payment to a plaintiff.
(b) A
form of
the employment agreement executed between SMA and a Physician employed by SMA
is
attached to this Agreement as Exhibit
A
(“Form
SMA Physician Employment Agreement”).
3.24. Insurance.
Except
as set forth in Section
3.24
of the
Company Disclosure Letter, all medical malpractice, fire and casualty, general
liability and business interruption insurance policies maintained by the Company
or any of its Subsidiaries (“Insurance
Policies”)
are
with reputable insurance carriers and provide coverage in amounts that the
Company reasonably believes, based upon historical experience, are adequate
for
the Company’s and its Subsidiaries’ operations. Each Insurance Policy is in full
force and effect and all premiums due with respect to all Insurance Policies
have been paid, with such exceptions that, individually or in the aggregate,
are
not reasonably likely to have a Material Adverse Effect. To the Knowledge of
the
Company, the Company has submitted all requisite claim documentation and
notifications under the Insurance Policies with respect to any and all material
claims of the Company or any of its Subsidiaries.
3.25. Reserves.
Except
as set forth in Section
3.25
of the
Company Disclosure Letter, the loss reserves (including reserves for medical
costs and for payment disputes with Health Care Providers) 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) are determined in all material respects in
accordance with generally accepted actuarial standards consistently applied
(except as otherwise noted in such financial statements), (ii) are fairly
stated in all material respects in accordance with generally accepted actuarial
principles and (iii) include provisions for all actuarial reserves that are
required to be established in accordance with applicable Laws. Except as set
forth in Section
3.25
of the
Company Disclosure Letter, to the Knowledge of the Company, there are no facts
or circumstances that would necessitate, in the good faith application of the
Company’s 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). As of December 31, 2006, each of the
Company’s Subsidiaries for which there are statutory net worth and other deposit
or capital requirements (the “Regulated
Subsidiaries”)
met or
exceeded said statutory net worth, deposit or other capital requirements. As
of
December 31, 2006, each of the Regulated Subsidiaries had statutory net worth
in
excess of 300% of the authorized control level, as such term is defined in
the
NAIC Risk-Based Capital guidelines.
3.26. Capital
or Surplus Management.
Except
as set forth in Section
3.26
of the
Company Disclosure Letter, to the Knowledge of the Company, none of the
Company’s Subsidiaries is subject to any requirement to maintain capital or
surplus amounts or levels, or is subject to any restriction on the payment
of
dividends or other distributions on its membership interests or shares of
capital stock, except for such requirements or restrictions under insurance
or
other Laws of general application.
ARTICLE
IV
Representations
and Warranties of Parent and Merger Sub
Except
as
set forth in the disclosure letter (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 letter 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 letter 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 letter 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 Letter”),
Parent and Merger Sub jointly and severally represent and warrant to the Company
as follows:
4.1. Organization,
Standing and Corporate Power.
Each of
Parent 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.
Each of Parent 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, licensed or in good standing individually or in the aggregate
has
not resulted in, and would not reasonably be expected to result in, material
direct or indirect costs or liabilities to Parent. Parent has made available
to
the Company complete and correct copies of its Articles of Incorporation (the
“Parent
Articles”)
and
By-laws (the “Parent
By-laws”)
and
the articles of incorporation and by-laws of Merger Sub, in each case as amended
to the date of this Agreement.
None of
Parent nor any of its Subsidiaries (including Merger Sub)
or
Affiliates is the is the beneficial owner (as defined under Rule 13d-3 of the
Exchange Act) of any Shares.
4.2. Capital
Structure of Merger Sub.
The
authorized capital stock of Merger Sub consists solely of 1,000 shares of common
stock, par value $0.01 per share, all of which are validly issued and
outstanding. All of the issued and outstanding capital stock of Merger Sub
is
owned by UnitedHealthcare, Inc., a wholly-owned Subsidiary of Parent. Merger
Sub
has not conducted any business prior to the date of this Agreement and has
no
assets, liabilities or obligations of any nature other than those incident
to
its formation and pursuant to this Agreement and the Merger and the other
transactions contemplated by this Agreement.
4.3. Authority;
Noncontravention.
(a) Each
of
Parent and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and to consummate the Merger and the other transactions
contemplated by this Agreement. The execution and delivery of this Agreement
and
the consummation of the Merger and the other transactions contemplated by this
Agreement have been duly authorized by all necessary corporate 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 Company, 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). The board of directors of Parent (the “Parent
Board”),
at a
meeting duly called and held, duly adopted resolutions, approving and adopting
this Agreement, the Merger and the other transactions contemplated by this
Agreement.
Parent,
in its capacity as the sole stockholder of Merger Sub, has consented in writing
to the approval and adoption of this Agreement, the Merger and the other
transactions contemplated hereby in accordance with all applicable
laws.
(b) The
Board
of Directors of Merger Sub, by a validly adopted unanimous consent, has (i)
determined that this Agreement, the Merger and the other transactions
contemplated hereby, are advisable and in the best interests of Merger Sub
and
Merger Sub’s stockholder, (ii) approved and adopted this Agreement, the Merger
and the other transactions contemplated hereby, (iii) directed that the adoption
of this Agreement be submitted to Merger Sub’s stockholders and (iv) resolved to
recommend approval and adoption of this Agreement and the Merger to the sole
stockholder of Merger Sub.
(c) 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 or Merger Sub under (i) the Parent Articles or the
Parent By-laws or articles of incorporation or by-laws of Merger Sub,
(ii) any Contract to which Parent or Merger Sub is a party or to which any
of their respective properties or other assets is subject or (iii) subject
to the governmental filings and other matters referred to in Section 4.4
hereof, any Law applicable to Parent 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) would not reasonably be expected
to impair in any material respect the ability of Parent or Merger Sub to perform
their respective obligations under this Agreement and (B) would not reasonably
be expected to prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
4.4. 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 Parent 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 (i) the consents, approvals, orders, authorizations, registrations,
declarations and filings set forth in clauses (a) through (d) of Section 3.5
or
listed in Section 3.5 of the Company Disclosure Letter, (ii) the various
state insurance and department of health filing and/or approvals set forth
on
Section
4.4(ii)
of the
Parent Disclosure Letter and (iii) 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 (A)
impair in any material respect the ability of Parent or Merger Sub to perform
their respective obligations under this Agreement or (B) 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 (i) and (ii) above or listed in
Section 3.5
of the
Company Disclosure Letter or Section
4.4(ii)
of the
Parent Disclosure Letter are referred to herein as the “Necessary
Consents”.
4.5. Information
Supplied.
None of
the information supplied or to be supplied by Parent or Merger Sub specifically
for inclusion or incorporation by reference in the Proxy Statement will, at
the
date the Proxy Statement is first distributed 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. 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 Proxy Statement based on information
supplied by the Company specifically for inclusion or incorporation by reference
in the Proxy Statement or portions thereof that relate only to the Company
Subsidiaries.
4.6 No
Parent Vote Required.
No vote
or other action of the stockholders of Parent is required by Law, the Parent
Articles or the Parent By-laws or otherwise in order for Parent and Merger
Sub
to consummate the Merger and the transactions contemplated hereby.
4.7. Available
Funds.
As of
the Effective Time, Parent and Merger Sub will have available to them all funds
necessary for the payment of the aggregate Per Share Merger Consideration and
to
satisfy all of their obligations under this Agreement.
4.8. Brokers
and Other Advisors.
No
broker, investment banker, financial advisor or other person 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 Parent, Merger
Sub or any of their respective Affiliates.
ARTICLE
V
Covenants
Relating to Conduct of Business
5.1. Conduct
of Business.
(a) Conduct
of Business by the Company.
During
the period from the date of this Agreement to the earlier of the Effective
Time
and the termination of this Agreement pursuant to Section 8.1, except as
required by applicable Law or provided in Section
5.1(a)
of the
Company Disclosure Letter or contemplated by this Agreement, the Company shall,
and shall cause each of its Subsidiaries to, carry on its business in all
material respects 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 commercially reasonable efforts to preserve intact
its current business organizations, keep available the services of its current
officers, employees and consultants and preserve its existing relationships
with
Health Care Providers, customers, suppliers, licensors, licensees, distributors
and others having business dealings with it. Without limiting the generality
of
the foregoing, during the period from the date of this Agreement to the earlier
of the Effective Time and the termination of this Agreement pursuant to Section
8.1, except as required by applicable Law or provided in Section
5.1(a)
of the
Company Disclosure Letter or contemplated by this Agreement, the Company shall
not, and shall not permit any of its Subsidiaries to, without Parent’s prior
written consent, which consent shall not be unreasonably withheld or
delayed:
(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) except as otherwise required by the terms of such securities, 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;
(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, Company RSUs, stock appreciation rights or stock based
performance units (other than (A) the issuance of Shares upon the exercise
of Company Stock Options outstanding on the date hereof or granted after the
date hereof in accordance with clause (B) or (C) 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 Company RSUs or options to acquire Shares to
employees hired any time after the date hereof in accordance with the Company’s
ordinary course of business consistent with past practice, provided that, in
any
event, Company RSUs and options of not more than 5,000 Shares per individual
and
25,000 Shares in the aggregate shall be issued pursuant to this clause
(B), (C) the
grant of options to employees in order to assist the Company and its
Subsidiaries in retaining the employment of such persons during the period
prior
to the Closing, provided that, in any event, options and RSUs for not more
than
10,000 Shares per individual and 50,000 Shares in the aggregate shall be issued
pursuant to this clause (C) or (D) upon the conversion of the Convertible
Debentures);
(iii) amend
the
Company Articles or the Company By-laws or the comparable charter or
organizational documents of any of its Subsidiaries or adopt a stockholders’
rights plan (i.e.,
“poison pill”);
(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 $1,000,000 individually or $2,000,000 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) with
respect to the Company’s 2007 fiscal year, make any capital expenditure or
expenditures not budgeted for on the 2007 fiscal year capital expenditure plan
set forth in on Section
5.1(a)(vi)
of the
Company Disclosure Letter, that (1) is in excess of $1,500,000 individually,
or
$3,000,000 in the aggregate or (2) involves the acquisition of real property
for
development or investment for an amount (taking into account the fair market
value of any non-cash consideration) in excess of $500,000 for any individual
or
series of related transactions or $1,250,000 in the aggregate for all such
real
property acquisitions;
(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 another person or enter into
any
arrangement having the economic effect of any of the foregoing except (x)
pursuant to the Credit Agreement or (y) not in excess of $1,000,000 in the
aggregate in the ordinary course of business or (C) make any loans,
advances or capital contributions to, or investments in, any other person except
for loans, advances, capital contributions and investments (1) not in
excess of $1,000,000 in the aggregate, (2) in or to any direct or indirect
wholly owned Subsidiary of the Company or (3) made in the ordinary course of
business consistent with past practice;
(viii) except
as
permitted by Section 6.8, (A) pay, discharge, settle or satisfy any claims
(including claims of stockholders), liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) relating
to
any litigations, mediations, arbitrations or investigations (1) for an amount
greater than $500,000, individually, and $2,500,000, in the
aggregate, in
each
case, in excess of the amount accrued for such matter on the Company’s financial
statements for the year ended December 31, 2006 and the amount of the Company’s
coverage under applicable third party insurance policies with respect to such
matter 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
$500,000;
(ix) enter
into, modify, amend or terminate (A) any Contract that if so entered into,
modified, amended or terminated would reasonably be expected to (1) have a
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 $1,000,000 individually or
$2,000,000 in the aggregate and that is not terminable by the Company without
material penalty with one year or less notice (excluding contracts or amendments
entered into or made in the ordinary course of business with customers or Health
Care Providers of the Company or its Subsidiaries), (C) any Contract by
which the Company or any of its Subsidiaries grants any exclusive license to
Company Intellectual Property or (D) any Contract that contains a covenant
restricting the ability of the Company or any of its Subsidiaries (or that,
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 (other
than, in the case of clauses (B), (C) and (D), in the ordinary course of
business consistent with past practice);
(x) enter
into any Contract that if in effect as of the date hereof would be required
to
be disclosed pursuant to Section 3.10(b) hereof 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
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, any Company Plan, any Contract disclosed
in Section 3.12
of the
Company Disclosure Letter or as otherwise permitted pursuant to Section
5.1(a)(ii), (A) materially increase the compensation, bonus or pension,
welfare, severance 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, except (1) in the ordinary course of business (including in
connection with promotions and customary annual increases), (2) to pay bonuses
consistent with the guidelines under any Company Plan providing for cash bonuses
or incentive compensation and (3) to pay bonuses that were accrued in the
Company’s financial statements for the year ended December 31, 2006 or were (or
will be) accrued after December 31, 2006 in the ordinary course of business
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 equity awards under any Company Plan (including
the
grant of stock options, stock appreciation rights, stock based or stock related
awards, performance units, Company RSUs, or restricted stock or the
removal of existing restrictions in any Contract or Company Plan or awards
made
thereunder), (D) except in the ordinary course of business, take any action
to fund or in any other way secure the payment of compensation or benefits
under
any Contract or Company Plan, (E) exercise any discretion to accelerate the
vesting or payment of any compensation or benefit under any Contract or Company
Plan, (F) except in response to external economic considerations and upon
the advice of advisors, 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, (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 or (H) except in the
ordinary course of business consistent with past practice, forgive any loans
to
directors, officers or employees of the Company or any of its Subsidiaries;
(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 commercially reasonable efforts to renew or maintain existing material
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 material
changes in financial, actuarial, reserving, statutory or tax accounting methods,
principles or practices, except in each case as required by GAAP, SAP or
applicable Law;
(xv) make
any
material tax election or settle or compromise any material tax
liability;
(xvi) make
any
material change in the investment, reserving, hedging, underwriting or claims
administration policies, practices or principles, except as may be appropriate
to conform to changes in applicable Law, SAP or GAAP;
(xvii) fund
any
trust or other arrangement with respect to compensation or benefits under a
Company Plan without providing Parent with prior written notice
thereof;
(xviii) authorize
any of, or commit, propose or agree to take any of, the foregoing actions;
or
(xix) fail
to
make any required filing with a Governmental Authority.
(b) Employee
Communications.
Subject
to applicable law, prior to making any written communications or public
announcements to the directors, officers or employees of the Company or any
of
its Subsidiaries pertaining to compensation or benefit matters that are affected
by the transactions contemplated by this Agreement, the Company shall provide
Parent with a copy of the intended communication, Parent shall have a reasonable
period of time to review and comment on the communication, and Parent and the
Company shall cooperate in providing any such mutually agreeable
communication.
(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 any of the conditions
to the Merger set forth in Article
VII
not
being satisfied.
(d) Advice
of Changes; Filings.
Each of
the Company and Parent shall as promptly as practicable advise the other party
in writing upon obtaining Knowledge 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 or Material Adverse Effect, as
the
case may be, becoming untrue or inaccurate in any respect or any 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. Subject to applicable
law, 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. Failure by the Company
to comply with this Section 5.1(d) shall not, in and of itself, result in a
failure by the Company to satisfy the conditions set forth in Section 7.2(b).
Failure by Parent to comply with this Section 5.1(d) shall not, in and of
itself, result in a failure by Parent or Merger Sub to satisfy the conditions
set forth in Section 7.3(b).
5.2. No
Solicitation by the Company.
(a) From
the
date hereof until the earlier of the Effective Time and the termination of
this
Agreement pursuant to Section 8.1, the Company agrees that, neither it nor
any
of its Subsidiaries shall, nor shall it authorize or permit any of its or their
respective directors, officers, employees or any investment banker, financial
advisor, attorney, accountant or other advisor, agent or representative of
the
Company or any Subsidiary (collectively, “Representatives”)
to,
directly or indirectly, (i) solicit, initiate, cause, knowingly encourage
or knowingly facilitate, any inquiries or the making of any proposal or offer
that constitutes or is 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 (it being understood that providing non-public information
in
the ordinary course of business will not, in and of itself, constitute a
violation of this Section 5.2(a)). 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 5.2(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 then-existing discussions or negotiations with any person
conducted 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 Company Board
determines in good faith (after receiving the advice of a financial advisor
of
nationally recognized reputation and its outside counsel) constitutes or is
reasonably likely to constitute or result in a Company Superior Proposal, the
Company may, if the Company Board determines in good faith (after receiving
the
advice of its outside counsel) that there is a reasonable probability that
the
failure to take such action would be inconsistent with its fiduciary duties
to
the Company under applicable Law, and subject to compliance with
Section 5.2(c) (provided
that the Company shall be required to give Parent
at
least 12 hours prior 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
an
Acceptable Confidentiality Agreement; provided
that,
subject
to the right of the Company to withhold information where such disclosure would
contravene any applicable Law, all
such
information (to the extent that such information has not been previously
provided or made available to Parent) is provided or made available to Parent,
as the case may be, prior to or substantially concurrently with or promptly
after the time it is provided or made available to such person, as the case
may
be, and (B) participate in discussions or negotiations with the person
making such Company Takeover Proposal (and its Representatives) regarding such
Company Takeover Proposal.
For
the
purposes of this agreement, “Acceptable
Confidentiality Agreement”
means
a
confidentiality agreement that contains provisions that are no less favorable
in
the aggregate to the Company than those contained in the Confidentiality
Agreement, provided, however, that an Acceptable Confidentiality Agreement
may
include provisions that are less favorable in the aggregate to the Company
than
those contained in the Confidentiality Agreement, so long as the Company offers
to amend the Confidentiality Agreements concurrently with execution of such
Acceptable Confidentiality Agreement to include substantially similar provisions
for the benefit of the parties thereto.
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, in a single transaction or series of related
transactions, 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, in a single transaction or series
of related transactions, 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 stockholders) owning, directly or indirectly, greater than 50% of the Shares
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 that the
Company Board determines in good faith (after receiving the advice of a
financial advisor of nationally recognized reputation and its outside counsel
and in light of all relevant circumstances, including all the terms and
conditions of such proposal and this Agreement) to be more favorable to the
Company or its stockholders than the transactions contemplated by this Agreement
and (ii) that is reasonably likely to be completed, taking into account any
financing and approval requirements and all other legal, regulatory and other
aspects of such proposal.
(b) Neither
the Company Board nor any committee thereof shall (i) (A) withdraw (or
modify in a manner materially adverse to Parent), or propose publicly to
withdraw (or modify in a manner materially adverse to Parent), the approval,
recommendation or declaration of advisability by such Company Board or any
such
committee thereof of this Agreement or the Merger, (B) fail to publicly confirm
its approval, recommendation and declaration of advisability of this Agreement
and the Merger after receiving a request from Parent to do so or
(C) 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 publicly 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 a Company Takeover
Proposal (other than (x) an Acceptable Confidentiality Agreement pursuant to
Section 5.2(a) or (y) concurrently with taking such action the Company
terminates this Agreement pursuant to Section 8.1(e) and, at the time of such
termination, pays the Termination Fee). Notwithstanding the foregoing,
the Company Board may make a Company Adverse Recommendation Change and cancel
the Company Stockholders Meeting:
(x)
if,
not
in connection with a Company Takeover Proposal, the Company Board determines
in
good faith (after receiving the advice of its outside counsel) that there is
a
reasonable probability that the failure to take such action would be
inconsistent with its fiduciary duties to the Company under applicable Law;
or
(y)
if
in
connection with a Company Takeover Proposal that the Company Board determines
in
good faith (after receiving the advice of a financial advisor of nationally
recognized reputation and of its and outside counsel) constitutes a Company
Superior Proposal and the Company Board determines in good faith (after
receiving the advice of its outside counsel) that there is a reasonable
probability that the failure to take such action would be inconsistent with
its
fiduciary duties to the Company under applicable Law;
provided,
however,
that no
Company Adverse Recommendation Change may be made until three (3) business
days
after Parent’s receipt of written notice from the Company (an “Adverse
Recommendation Notice”)
advising Parent that the Company Board has determined:
(A) in
the
case of clause (x) of this Section 5.2(b), that the Company Board intends to
make such Company Adverse Recommendation Change and containing details of the
facts and conclusions that led the Company Board to conclude that there is
a
reasonable probability that the failure to take such action would be
inconsistent with its fiduciary duties to the Company under applicable Law
together with copies of any relevant written analyses or materials (it being
understood and agreed that any change to such facts and conclusions shall
require a new Adverse Recommendation Notice and a new three (3) business day
notice period). During such three (3) business day period, the Company shall,
if
so requested by Parent, negotiate in good faith with Parent with respect to
any
revised proposal from Parent; provided that a determination by the Company
Board
that, after taking into account any such changes, there continues to be a
reasonable probability that the failure to make such Company Adverse
Recommendation Change would be inconsistent with its fiduciary duties to the
Company under applicable Law shall not require a new Adverse Recommendation
Notice or a new three (3) business day notice period; and
(B) in
the
case of clause (y) of this Section 5.2(b), that such Company Takeover Proposal
constitutes a Company Superior Proposal, that the Company Board intends to
make
such Company Adverse Recommendation Change and containing all information
required by Section 5.2(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 three (3) business day notice period). During
such three (3) business day period, the Company
shall, if so requested by Parent, negotiate in good faith with Parent with
respect to any revised proposal from Parent in respect of the terms of the
transactions contemplated by this Agreement. In making a determination that
a
Company Takeover Proposal constitutes a Company Superior Proposal, the Company
Board shall take into account any changes to the terms of this Agreement
proposed by Parent (in response to an Adverse Recommendation Notice or
otherwise); provided
that a
determination by the Company Board that, after taking into account any such
changes, a Company Takeover Proposal continues to constitute a Company Superior
Proposal shall not require a new Adverse Recommendation Notice or a new three
(3) business day notice period.
(c) In
addition to the obligations of the Company set forth in paragraphs (a) and
(b) of this Section 5.2, the Company shall promptly, and in no event later
than 48 hours after receipt, advise Parent in writing of any request for
information or other inquiry that the Company reasonably believes could lead
to
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 (i) promptly keep Parent reasonably informed of
the status and details (including any change to the terms thereof) of any such
request, Company Takeover Proposal or inquiry and (ii) provide Parent as
soon as practicable after receipt of delivery thereof copies of any written
offer and any other material written material received from the person making
such request (or its representatives) that describes any of the terms or
conditions of any such request, in either case sent or provided to the Company
or any of its Subsidiaries with respect to a Company Takeover
Proposal.
(d) Nothing
contained in this Section 5.2
shall
prohibit the Company from (i) taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 or 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 Company Board (after receiving the advice of its outside
counsel), failure to so disclose would reasonably be expected to be inconsistent
with its obligations under applicable Law.
(e) Without
limiting any other rights of Parent under this Agreement, neither any Company
Adverse Recommendation Change nor any termination of this Agreement shall have
any effect on any of the approvals or other actions referred to herein for
the
purpose of causing the Takeover Laws to be inapplicable to this Agreement and
the transactions contemplated hereby.
ARTICLE
VI
Additional
Agreements
6.1. Preparation
of the Proxy Statement; Stockholder Meetings.
(a) As
soon
as reasonably practicable following the date of this Agreement, the Company
shall prepare and file with the SEC the Proxy Statement. The Company shall
respond promptly to any comments from the SEC or the staff of the SEC on the
Proxy Statement. The Company shall use its commercially reasonable efforts
to
cause the Proxy Statement to be distributed to the stockholders of the Company
as promptly as reasonably practicable. No filing of, or amendment or supplement
to, the Proxy Statement will be made by the Company, without providing Parent
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 that should be set forth in an amendment
or
supplement to the Proxy Statement, so that it 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 that 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 the Company. The Company
shall notify Parent 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 for additional information
and
shall supply Parent with copies of all correspondence between the Company 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 or the Merger. Parent and
Merger Sub shall cooperate with the Company in connection with the preparation
of the Proxy Statement, including promptly furnishing the Company upon request
with any and all information as may be required to be set forth in the Proxy
Statement under applicable Law.
(b) The
Company shall, as soon as practicable following the date of this Agreement,
establish a record date for and promptly take any and all actions in connection
therewith, and duly call, give notice of, (subject to Section 5.2(d)) convene
and hold, a meeting of its stockholders (the “Company
Stockholders Meeting”)
solely
for the purpose of obtaining the Company Stockholder Approval. Except to the
extent that the Company has effected a Company Adverse Recommendation Change
in
accordance with Section 5.2, the Company shall, through the Company Board,
recommend to its stockholders adoption of this Agreement, the Merger and the
other transactions contemplated by this Agreement.
6.2. Access
to Information; Confidentiality.
(a) The
Company shall afford to Parent, and its 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, tax returns, contracts, commitments, personnel, records and statutory
filings and, during such period, the Company shall furnish promptly to Parent
(a) a copy of each report, schedule, registration statement and other
document filed by the Company during such period pursuant to the requirements
of
Federal or state securities and insurance Laws and (b) consistent with its
legal obligations all other information concerning the Company and its
Subsidiaries’ business, properties and personnel as Parent may reasonably
request; provided,
however,
that
(i) the Company may restrict the foregoing access to the extent that any law,
treaty, rule or regulation of any Governmental Authority applicable to the
Company requires the Company or its Subsidiaries to restrict access to any
properties or information and (ii) the Buyer will not have access to individual
performance or evaluation records, medical histories or other information that
in the reasonable opinion of the Company is sensitive or the disclosure of
which
could reasonably be expected to subject the Company or any of its Subsidiaries
to risk of liability or information that is subject to attorney-client privilege
or other privilege; provided,
further,
that
such access will be conducted at the Buyer’s expense. Except for disclosures
expressly permitted by the terms of the confidentiality agreement, dated as
of
December 20, 2006, 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 Representatives to hold, all information
received from the other party, directly or indirectly, in confidence in
accordance with the Confidentiality Agreement.
The
parties hereby agree that, notwithstanding anything the contrary in the
Confidentiality Agreement, the Confidentiality Agreement shall survive the
execution of this Agreement.
(b) In
addition to and without limiting the foregoing, from the date hereof until
the
Effective Time the Company shall furnish to Parent, within 20 business days
after the end of each month, the standard monthly reporting package set forth
in
Section 6.2(b)
of the
Company Disclosure Letter. The Company shall promptly notify Parent of any
written communication received by the Company or any of its Subsidiaries from
a
party to one of the customer Contracts required to be disclosed pursuant to
Section 3.10(b) relating to any of the matters set forth in the last sentence
of
Section 3.10(c).
6.3. Reasonable
Best Efforts.
(a) Upon
the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use its reasonable best 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 best efforts to accomplish
the following: (i) the taking of all acts necessary to cause the conditions
to Closing to be satisfied as promptly as practicable, (ii) 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 and the Necessary
Consents) 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, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties and (iv) 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 6.3(a), each of the
Company and the Company Board and Parent and the Parent Board shall
(A) 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 (B) 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.
(b) Notwithstanding
the foregoing or anything else to the contrary in this Agreement:
(i) nothing
shall be deemed to require Parent to (1) 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, (2) not compete in any geographic area or line of business,
(3) restrict the manner in which, or whether, Parent or any of its Subsidiaries
or, assuming the consummation of the Merger, the Company, the Surviving Entity
or any of their respective Affiliates may carry on business in any part of
the
world or restrict the exercise of the full rights of ownership, (4) agree to
any
terms or conditions that would impose any obligations on Parent or any of its
Subsidiaries or, assuming the consummation of the Merger, the Company or any
of
its Subsidiaries, to maintain facilities, operations, places of business,
employment levels, products or businesses or any other restriction, limitation
or qualification or (5) make any payments that, in the case of any of clauses
(1) through (5), that, if implemented, would, or would reasonably be expected
to, individually or when taken together with any other actions of the type
described in clauses (1) through (5) above imposed on the Company, Parent or
any
of their respective Subsidiaries, have a Material Adverse Effect regardless
of
whether any such action would individually have a Material Adverse Effect (each,
subject to Schedule 6.3(b), a “Negative
Regulatory Action”);
provided that any actions of the type described in clauses (1) through (5)
above
imposed on Parent or its Subsidiaries
shall constitute a Negative Regulatory Action if such action would, or would
reasonably be expected to, individually or when taken together with any other
actions of the type described in clauses (1) through (5) above imposed on the
Company, Parent or any of their respective Subsidiaries, have constituted a
Material Adverse Effect by reference to the business, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole;
and
(ii) Parent
and Merger Sub shall be required to consent to any divestiture or other
structural or conduct relief in order to obtain clearance from any Governmental
Authority or to address any legal action brought by any third party in
connection with the transaction relating to this Agreement to the extent that
such divestiture or other structural or conduct relief or other legal action,
if
implemented, would not, or would not reasonably be expected to, individually
or
in the aggregate, result in a Negative Regulatory Action.
(c) Each
of
the parties hereto shall use its reasonable best efforts to (i) cooperate
in all respects with each other in connection with any filing or submission
with
a Governmental Authority in connection with the Merger and in connection with
any investigation, approval process or other inquiry by or before a Governmental
Authority relating to the Merger, including any proceeding initiated by a
private party, and (ii) keep the other party informed in all material
respects and on a reasonably timely basis of any material communication received
by such party from, or given by such party to, the Federal Trade Commission,
the
Antitrust Division of the Department of Justice or any other Governmental
Authority and of any material communication received or given in connection
with
any proceeding by a private party, in each case regarding the Merger.
6.4. Indemnification,
Exculpation and Insurance.
(a) Without
limiting any additional rights that any Person may have under any agreement
or
Company Plan, from and after the Effective Time, Parent and the Surviving Entity
shall jointly and severally indemnify and hold harmless each present (as of
the
Effective Time) and former officer, director or employee of the Company and
its
Subsidiaries (the “Indemnified
Parties”),
against all claims, losses, liabilities, damages, judgments, inquiries, fines
and reasonable fees, costs and expenses, including attorneys’ fees and
disbursements (collectively, “Costs”),
incurred in connection with any suits, claims, actions, proceedings,
arbitrations, mediations or investigations, whether civil, criminal,
administrative or investigative (each a “Proceeding”),
arising out of or pertaining to the fact that the Indemnified Party is or was
an
officer, director, employee, fiduciary or agent of the Company or its
Subsidiaries, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under applicable Law and the Company’s
Articles of Incorporation or Bylaws as at the date hereof. In the event of
any
such Proceeding, each Indemnified Party will be entitled to advancement of
expenses incurred in the defense of any Proceeding from Parent or the Surviving
Entity within ten business
days of receipt by Parent or the Surviving Entity from the Indemnified Party
of
a request therefor to the extent permitted by applicable Law.
(b) All
rights to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time (and rights for advancement of
expenses) now existing in favor of the Indemnified Parties as provided in the
articles of incorporation or bylaws (or comparable organizational documents)
of
the Company or any of its Subsidiaries (in each case, as in effect on the date
hereof) and any indemnification or other agreements of the Company and its
Subsidiaries 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. Further, the articles of incorporation and bylaws of the
Surviving Entity shall contain provisions no less favorable with respect to
indemnification, advancement of expenses and exculpation of former or present
directors and officers than are presently set forth in the Company’s Articles of
Incorporation and Bylaws, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of any such individuals
except as amendments may be required by applicable Law during such
period.
(c) Promptly
after the Closing (and in any event within 30 days thereof), Parent shall obtain
a six year “tail” insurance policy (the “D&O
Tail Policy”)
that
provides coverage on terms no less favorable than the coverage provided under
the Company’s directors’ and officers’ insurance policy in effect on the date of
this Agreement for the Persons who are covered by such policy on the date of
this Agreement for events occurring prior to the Effective Time; provided
that
during the period from the Closing to the time that the D&O Tail Policy is
in effect, Parent shall be required to (or cause the Surviving Entity to)
maintain (without amendment or modification) the Company’s directors’ and
officers’ insurance policy in effect as of the Closing Date (including, if
necessary, renewing such policy and paying any premiums due under such
policy).
(d) The
covenants contained in this Section 6.4 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.
(e) In
the
event that Parent, the Surviving Entity or its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or
(ii) transfers or conveys all or a majority of its properties and assets to
any
Person, then, and in each such case, proper provision shall be made so that
the
successors and assigns of Parent and/or the Surviving Entity shall succeed
to
the obligations set forth in this Section 6.4.
(f) Parent
shall pay all reasonable expenses, including reasonable attorneys’ fees, that
may be incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided in this Section 6.4.
6.5. 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 the
filing fees for the premerger notification and report forms under the HSR Act
and of all filing and counsel fees relating to obtaining clearances from any
other Governmental Authority.
6.6. Stock
Exchange De-listing.
Prior
to the Closing Date, the Company shall cooperate with Parent and use reasonable
best efforts to take, or cause to be taken, all actions, and do or cause to
be
done all things, reasonably necessary, proper or advisable on its part under
applicable Laws and rules and policies of the NYSE to enable the de-listing
by
the Surviving Entity of the Shares from the NYSE and the deregistration of
the
Shares under the Exchange Act as promptly as practicable after the Effective
Time.
6.7. Public
Announcements.
Parent
and the Company shall consult with each other before issuing, and give each
other the reasonable 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.
6.8. Stockholder
Litigation.
The
Company shall promptly advise Parent in writing of any stockholder litigation
against the Company and/or its directors relating to this Agreement, the Merger
and/or the transactions contemplated by this Agreement and shall keep Parent
reasonably 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 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; provided,
however,
that
the Company further will not, without Parent’s prior written consent (which
consent shall not be unreasonably withheld or delayed), settle any stockholder
litigation.
6.9. Employee
Matters.
(a) Until
the
first anniversary of the Effective Time, Parent shall cause to be provided
to
individuals who are employed by the Company and its Subsidiaries immediately
prior to the Effective Time and who remain employed with the Surviving Entity
or
any of Parent’s Subsidiaries (the “Affected
Employees”),
compensation and employee benefits (other than accruals of supplemental
executive retirement plan benefits for service after the Effective Time), that
are, in the aggregate, no less favorable to than the compensation and employee
benefits provided to such persons immediately prior to the Effective Time.
Thereafter, Parent shall cause to be provided to the Affected Employees (and
their dependents) compensation and employee benefits that are no less favorable,
in the aggregate, than the compensation and employee benefits provided
to similarly situated employees of Parent and its
Subsidiaries.
(b) For
all
purposes, 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), other than under Parent’s 2002 Stock Incentive Plan (or any
successor plan thereto), Parent shall, and shall cause the Surviving Entity
to,
recognize the service with the Company and its Subsidiaries prior to the
Effective Time of the Affected Employees for purposes of such plan, program
or
arrangement; provided,
however,
that
such recognition shall not result in a duplication of benefits.
(c) 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 (i) to 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.
(d) Effective
on the business day immediately prior to the Closing Date (but contingent on
the
occurrence of the Closing), the Company shall, if requested to do so by Parent,
terminate its defined contribution 401(k) plans. Parent shall provide, or cause
the Surviving Entity to provide, that the Affected Employees are eligible to
participate in a tax-qualified, defined contribution 401(k) plan immediately
following the Effective Time and that such defined contribution plan shall
accept “eligible rollover distributions” for Affected Employees from a
terminated Company defined contribution 401(k) plan.
(e) Notwithstanding
anything in this Section 6.9 to the contrary, Parent agrees that it shall,
or
shall cause the Surviving Corporation to, (i) continue the Company’s current
severance plans and policies without adverse amendment or termination during
the
12 month period following the Effective Time and (ii) pay the bonuses required
to be paid pursuant to the bonus plan set forth on Section
6.9(e)
of the
Company Disclosure Letter, in accordance with the terms of such
plan.
(f) Notwithstanding
the foregoing, nothing contained herein shall (1) be treated as an
amendment of any particular Company Plan, (2) give any third party any
right to enforce the provisions of this Section 6.9 or (3) obligate
Parent, the Surviving Entity or any of their Affiliates to (i) maintain any
particular Company Plan (other than as provided in Section 6.9(e)) or
(ii) retain the employment of any particular employee.
6.10. Section
16 Matters.
Prior
to the Effective Time, the Company will take all such steps as may be required
to cause to be exempt under Rule 16b-3 promulgated under the Exchange Act any
dispositions of Shares (including derivative securities with respect to Shares)
that are treated as dispositions under such rule and result from the
transactions contemplated by this Agreement by each director or officer of
the
Company who is subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company.
6.11. Standstill
Agreements, Confidentiality Agreements, Anti-takeover Provisions.
During
the period from the date of this Agreement through the Effective Time, unless
the Company Board determines in good faith (after receiving the advice of its
outside counsel) that there is a reasonable probability that the failure to
take
such action would be inconsistent with its fiduciary duties to the Company
under
applicable Law, the Company (i) shall not terminate, amend, modify or waive
any
provision of any standstill or similar agreement requiring a person not to
acquire the Company’s assets or securities 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 and (ii) 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; provided
that
this Section 6.11 shall only apply with respect to agreements that were entered
into in respect of a potential acquisition of the Company or any Subsidiary
thereof or a potential business combination transaction between the Company
or
any Subsidiary thereof and another Person.
6.12. Cooperation.
Each of
the Company and its Subsidiaries will, and will cause each of its
Representatives to, use its commercially reasonable efforts, subject to
applicable Laws, to cooperate with and assist Parent and Merger Sub in
connection with planning the integration of the Company and its Subsidiaries
and
their respective employees with the business operations of Parent and its
Subsidiaries.
6.13. Credit
Agreement.
(a) The
Company shall terminate (which termination will be effective as of the
Effective Time) the Credit Agreement, dated as of March 3, 2003 (as it may
have
been amended or modified from time to time), among the Company, Bank of America
N.A., the other lenders party thereto, Credit Lyonnais New York Branch (as
syndication agent), U.S. Bank National Association (as documentation agent)
and
Banc of
America Securities LLC (as sole lead arranger and sole book manager) (the
“Credit
Agreement”)
(or to
such other person as such lender shall designate to Parent and the Company
in
writing), without penalty or expense to the Company or any of its Subsidiaries
other than those penalties or expenses expressly provided for in the Credit
Agreement, if any, and shall pay to the lender under the Credit Agreement any
and all amounts then due and payable by the Company or any
of its Subsidiaries under the Credit Agreement (such amounts in
the aggregate, the “Payoff
Amount”).
Notwithstanding the foregoing, in the event that the amount of cash and cash
equivalents held by the Company and its Subsidiaries, in the aggregate,
immediately prior to the Closing that are reasonably available (as reasonably
determined by the Company’s management) to pay the Payoff Amount are less than
the Payoff Amount, then (i) immediately prior to the Closing, the Company will
pay any portion of the Payoff Amount for which it has available cash and (ii)
simultaneously with the Closing, Parent will pay (on behalf of the Company
and
its Subsidiaries) any portion of the Payoff Amount that was not paid by the
Company. No later than two business days prior to the Closing, the Company
shall
provide Parent with written notice of any amounts it expects that Parent will
need to pay pursuant to the preceding sentence.
(b) In
connection with the termination of the Credit Agreement and the payment by
the Company or its designee contemplated by Section 6.13(a), the Company shall
obtain from the lender under the Credit Agreement evidence in writing that
the
Credit Agreement has been terminated and that there are then and thereafter
will
be no amounts due and payable under the Credit Agreement.
ARTICLE
VII
Conditions
Precedent
7.1. 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) Antitrust.
The
waiting period (and any extension thereof) applicable to the Merger under the
HSR Act and any other clearances or approvals required under applicable
competition, merger control, antitrust or similar Law shall have been granted,
terminated or shall have expired, without any conditions, restrictions,
requirements or change of regulation or any other action taken, that (if
implemented) would be reasonably likely, individually or in the aggregate,
to
result in a Negative Regulatory Action.
(c) Necessary
Consents.
The
Necessary Consents shall have been obtained and shall be in full force and
effect, without any conditions, restrictions, requirements
or change of regulation or any other action taken, that (if implemented) would
be reasonably likely, individually or in the aggregate, to result in a Negative
Regulatory Action.
(d) No
Injunctions or Restraints.
No
temporary restraining order, preliminary or permanent injunction or other
judgment, order or decree 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.
7.2. 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 (i) set forth in this Agreement
(other than the representations and warranties of the Company set forth in
Section 3.3(a), the first four sentences of Section 3.3(b), the first two
sentences of Section 3.3(c) and Section 3.3(d)) shall be true and correct as
of
the Effective Time (except to the extent that any such representation and
warranty expressly relate to an earlier date, in which case such representation
and warranty shall be true and correct as of such other time), except where
the
failure of such representations and warranties to be so true and correct
(without giving effect to any “materiality” or “Material Adverse Effect” or
similar qualifiers set forth therein) does not have, and would not reasonably
be
expected to have, individually or in the aggregate, a Material Adverse Effect
and (ii) set forth in Section 3.3(a), the first four sentences of Section
3.3(b), the first two sentences of Section 3.3(c) and Section 3.3(d) shall
be
true and correct in all respects (subject to de minimis exceptions for breaches
involving discrepancies of no more than 100,000 Shares, Shares subject to stock
options and Company RSUs, in the aggregate). Parent shall have received a
certificate signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) Performance
of Obligations of the Company.
The
Company shall have performed in all material respects all of the 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 an executive officer of the Company to such effect.
7.3. 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 set forth in this
Agreement shall be true and correct (without giving effect to any “materiality”
or similar qualifiers set forth therein) as of the Effective Time (except to
the
extent that any such representation and warranty expressly relate to an earlier
date, in which case such representation and warranty shall be true and
correct
as of such other time), except where the failure of such representations and
warranties to be so true and correct individually or in the aggregate would
not
reasonably be expected to prevent or materially delay the consummation of any
of
the transactions contemplated by this Agreement. 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.
7.4. Frustration
of Closing Conditions.
None of
the Company, Parent or Merger Sub may rely on the failure of any condition
set
forth in Section 7.1, 7.2 or 7.3, as the case may be, to be satisfied if
such failure was caused by such party’s failure to use its reasonable best
efforts to consummate the Merger and the other transactions contemplated by
this
Agreement, as required by and subject to Section 6.3.
ARTICLE
VIII
Termination,
Amendment and Waiver
8.1. 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 December 11, 2007 (the
“Termination
Date”);
provided,
however,
that if
on December 11, 2007 the condition to Closing set forth in Section 7.1(b),
(c) or (d) shall not have been satisfied because of action by a Governmental
Authority seeking to restrain, enjoin or prohibit the Merger but all other
conditions to Closing shall have been satisfied (or in the case of conditions
that by their terms are to be satisfied at the Closing, shall be capable of
being satisfied on such date), then the Termination Date shall automatically
be
extended to March 11, 2008; provided,
further,
that
the right to terminate this Agreement under this Section 8.1(b)(i) shall
not be available to any party whose action not in accordance with the terms
of
this Agreement or failure to act in accordance with the terms of this Agreement
has been a principal cause of or resulted in the failure of the Merger to be
consummated on or before such date;
(ii) if
any
Restraint having the effect of permanently restraining, enjoining, or otherwise
prohibiting the Merger and the transactions contemplated by this Agreement
shall
be in effect and shall have become final and nonappealable; or
(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 7.2(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 or Merger Sub shall have breached or failed to perform any
of
their respective 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 7.3(a) or (b) and
(ii) is incapable of being cured, or is not cured, by Parent or Merger Sub
within 30 calendar days following receipt of written notice from the Company
of
such breach or failure to perform; or
(e) by
Parent
or the Company, if a Company Adverse Recommendation Change shall have
occurred.
Notwithstanding
the foregoing, (x) Parent may not terminate this Agreement pursuant to Section
8.1, if, at the time of such termination, Parent and Merger Sub shall be in
breach or shall have failed to perform any of their respective representations,
warranties, covenants or agreements set forth in this Agreement, which breach
or
failure to perform would give rise to the failure of a condition set forth
in
Section 7.3(a) or (b) and (y) the Company may not terminate this Agreement
pursuant to Section 8.1, if, at the time of such termination, the Company shall
be in breach or shall have failed to perform any of its representations,
warranties, covenants or agreements set forth in this Agreement, which breach
or
failure to perform would give rise to the failure of a condition set forth
in
Section 7.2(a) or (b).
8.2. Termination
Fee.
(a) In
the
event that:
(i) this
Agreement is terminated by either Parent or the Company pursuant to
Section 8.1(b)(i) and (A) a vote to obtain the Company Stockholder
Approval has not been held, (B) after the date of this Agreement a bona fide
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 twelve months after such termination the Company shall have
entered into a definitive agreement to consummate, or shall have consummated,
a
Company Takeover Proposal;
(ii) this
Agreement is terminated by either Parent or the Company pursuant to
Section 8.1(b)(iii) and (A) after the date of this Agreement a bona fide
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
(B) within twelve months after such termination the Company shall have
entered into a definitive agreement to consummate, or shall have consummated,
a
Company Takeover Proposal;
(iii) this
Agreement is terminated by Parent pursuant to Section 8.1(c),
and (A)
the Company’s breach or failure triggering such termination shall have been
willful, (B) after the date of this Agreement a bona fide 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
twelve months after such termination the Company shall have entered into a
definitive agreement to consummate, or shall have consummated, a Company
Takeover Proposal;
(iv) this
Agreement is terminated by Parent pursuant to Section 8.1(e),
or
(v) this
Agreement is terminated by the Company pursuant to
Section 8.1(e),
then
the
Company shall (1) in the case of a Termination Fee payable pursuant to
clauses (i), (ii) or (iii) of this Section 8.2(a),
upon
the earlier of the date of such definitive agreement and such consummation
of a
Company Takeover Proposal, (2) in the case of a Termination Fee payable pursuant
to clause (iv) of this Section 8.2(a),
within
ten business days after the date of such termination, and (3) in the case
of a Termination Fee payable pursuant to clause (v) of this
Section 8.2(a),
prior
to or at the time of such termination, pay Parent a fee equal to $85,000,000
(the “Termination
Fee”)
by
wire transfer of same-day funds. The payment by the Company of a Termination
Fee, if applicable, will be considered liquidated damages for any breach by
the
Company of this Agreement and in the event of such payment none of the Company,
any of its Subsidiaries or Affiliates or any of their respective Representatives
will have any other liability for any breach of any of the representations,
warranties, covenants or agreements set forth in this Agreement; provided,
however,
that
notwithstanding the foregoing the parties hereby agree that the Termination
Fee
(including the right to receive such fee or the payment of such fee) shall
not
limit in any respect any rights or remedies available to Parent and Merger
Sub
relating to any willful breach by the Company of Section 5.2.
(b) In
the
event that:
(i) this
Agreement is terminated pursuant to Section 8.1(b)(ii) in connection with a
Restraint relating to applicable insurance, competition, merger control or
antitrust Laws; or
(ii) this
Agreement is terminated by Parent or the Company pursuant to Sections 8.1(b)(i)
and, at the time of such termination, the conditions to Closing set forth in
either Section 7.1(b) or Section 7.1(c) have not been satisfied;
then
Parent shall pay the Company, within ten business days after the date of such
termination, a fee equal to $25,000,000 (the “Parent
Termination Fee”)
by
wire transfer of same-day funds. The payment by Parent of a Parent Termination
Fee, if applicable, will be considered liquidated damages for any breach by
Parent or Merger Sub of this Agreement and in the event of such payment none
of
Parent any of its Subsidiaries or Affiliates (including Merger Sub) or any
of
their respective Representatives will have any other liability for any breach
of
any of the representations, warranties, covenants or agreements set forth in
this Agreement.
(c) The
Company acknowledges and agrees that the agreements contained in
Section 8.2(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 8.2(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 and expenses 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.
(d) Solely
for purposes of this Section 8.2 references to 20% in the definition of Company
Takeover Proposal shall be deemed replaced by references to 50%.
8.3. Effect
of Termination.
In the
event of termination of this Agreement by either the Company or Parent as
provided in Section 8.1, 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 last two sentences
of Section 6.2(a), Sections 6.5 and 8.2, this Section 8.3 and
Article
IX,
which
provisions shall survive such termination; provided
that,
except as provided in the last sentence of Section 8.2(a), nothing herein shall
relieve any party from any liability for any willful breach of this
Agreement.
8.4. 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.
8.5. 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 8.4, 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.
ARTICLE
IX
General
Provisions
9.1. 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 9.1 shall not limit any covenant or agreement of the parties that
by its terms contemplates performance after the Effective Time.
9.2. 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 (that 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
UnitedHealth
Group Center
▇▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
General Counsel
with
copies to:
| UnitedHealthcare, Inc. |
UnitedHealth
Group Center
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▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
General Counsel
| and |
|
▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇
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▇▇▇
▇▇▇▇,
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if
to the
Company, to:
Sierra
Health Services, Inc.
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▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
General Counsel
with
a
copy to:
▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and R. ▇▇▇▇ ▇▇▇▇▇▇
Any
party
may change the address to which notices, requests, claims, demands and other
communications hereunder are to be delivered by giving the other parties notice
in the manner set forth herein.
9.3. 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) “Health
Care Providers”
means
all physicians, physician assistants, nurses and other health care
professionals, medical groups, independent practice associations, hospitals
or
other health care facilities, specialty health care providers (such as
ophthalmologists, psychiatrists, behavioral health professionals and the like),
or ancillary service providers (such as laboratories, radiology imaging
providers and the like);
(c) “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 9.3(c)
of the
Company Disclosure Letter 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 9.3(c)
of the
Parent Disclosure Letter;
(d) “person”
means
an individual, corporation (including not-for-profit), partnership, limited
liability company, joint venture, estate, association, trust, unincorporated
organization, Governmental Authority or other entity of any kind or
nature;
(e) “Permitted
Liens”
means
(i) any Liens for taxes not yet due and payable or that 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,
(iv) easements,
rights-of-way, restrictions, conditions, imperfections, zoning laws or
ordinances or any other matters affecting the Real Property (whether shown
or
not shown by public records) including boundary line disputes, overlaps,
encroachments and any matters not of record which would be disclosed by an
accurate survey or other Liens incurred in the ordinary course of business
that
do not, individually or in the aggregate, materially impair the continued use,
operation, value or marketability of the properties or assets they affect or
the
conduct of the business of the Company and its Subsidiaries as presently
conducted, (v) any supplemental taxes or assessments not shown by the public
records, (vi) title to any portion of the Real Property lying within the right
of way or boundary of any public road which an accurate survey would disclose,
(vii) Liens that will be released prior to or as of the Closing, (viii) Liens
arising under this Agreement or the Credit Agreement or (ix) Liens created
by or
through the Parent or Merger Sub; and
(f) 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 (except as set forth on Section
9.3(f)
of the
Company Disclosure Letter).
9.4. 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
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 terms. Any agreement, instrument or statute defined or referred to herein
or in any agreement or instrument that is referred to therein 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.
9.5. 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. Facsimile or other electronic transmission of any signed original
document and/or retransmission of any signed facsimile or other electronic
transmission will be deemed the same as delivery of an original.
9.6. Entire
Agreement; No Third-Party Beneficiaries.
This
Agreement, including the Company Disclosure Letter and the Parent Disclosure
Letter, the Exhibits hereto 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 6.4 (which will be for the
benefit of the persons set forth therein), are not intended to confer upon
any
person other than the parties any rights, benefits or remedies.
9.7. Governing
Law.
Except
to the extent that the laws of the State of Nevada are mandatorily applicable
to
the Merger, this Agreement shall be governed by, and construed in accordance
with, the Laws of the State of New York, regardless of the Laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
9.8. 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 any or all of its rights,
interests
and obligations under this Agreement to any direct, wholly owned Subsidiary
of
Parent, but no such assignment shall relieve Merger Sub or Parent of any of
their respective obligations hereunder. 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.
9.9. 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 the United
States District Court for the Southern District of New York or any state court
in the New York County, New York, 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 the
United States District Court for the Southern District of New York or any state
court in New York County, New York 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 the United States District Court
for
the Southern District of New York or any state court in New York County, New
York.
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.
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/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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||
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Title:
President and Chief Executive Officer
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SAPPHIRE
ACQUISITION, INC.
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By:
/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title:
President, Secretary and Treasurer
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SIERRA
HEALTH SERVICES, INC
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By:
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
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Title:
Chief Executive Officer and Chairman of the
Board
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ANNEX
A
DEFINED
TERMS
|
Adverse
Recommendation Notice
|
5.2(b)
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|
Affected
Employees
|
6.9(a)
|
|
Affiliate
|
9.3(a)
|
|
Agreement
|
Preamble
|
|
Articles
of Merger
|
1.3
|
|
Certificate
|
2.1(a)
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|
Closing
|
1.2
|
|
Closing
Date
|
1.2
|
|
COBRA
|
3.12(h)
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|
Company
|
Preamble
|
|
Company
Adverse Recommendation Change
|
5.2(b)
|
|
Company
Awards
|
2.3(a)(ii)
|
|
Company
By-laws
|
3.1
|
|
Company
Certificate
|
3.1
|
|
Company
Equity Awards
|
2.3(a)
|
|
Company
Facilities
|
3.21
|
|
Company
Facility
|
3.21
|
|
Company
Intellectual Property
|
3.14(a)
|
|
Company
Plans
|
3.12(a)
|
|
Company
RSU
|
2.3(a)(ii)
|
|
Company
SEC Documents
|
3.6(a)
|
|
Company
Stock Options
|
2.3(a)
|
|
Company
Stockholder Approval
|
3.4(a)
|
|
Company
Stockholders Meeting
|
6.1(b)
|
|
Company
Superior Proposal
|
5.2(a)
|
|
Company
Takeover Proposal
|
5.2(a)
|
|
Confidentiality
Agreement
|
6.2(a)
|
|
Contract
|
3.4(b)
|
|
Copyrights
|
3.14(a)
|
|
Effective
Time
|
1.3
|
|
Employees
|
3.12(a)
|
|
ERISA
|
3.12(a)
|
|
Exchange
Fund
|
2.2(a)
|
|
Excluded
Share
|
2.1(a)
|
|
Excluded
Shares
|
2.1(a)
|
|
Filed
Company SEC Documents
|
3.8
|
|
GAAP
|
3.6(a)
|
|
Governmental
Authority
|
3.5
|
|
Health
Care Providers
|
9.3(b)
|
|
HSR
Act
|
3.5
|
|
Intellectual
Property
|
3.14(a)
|
|
IP
Licenses
|
3.14(a)
|
|
IRS
|
3.13(c)
|
|
Knowledge
|
9.3(b)
|
|
Laws
|
3.11(a)
|
|
Lease
|
3.15(b)
|
|
Leased
Real Property
|
3.15(b)
|
|
Liens
|
3.2
|
|
Material
Adverse Effect
|
3.4(c)
|
|
Merger
|
1.1
|
|
Merger
Sub
|
Preamble
|
|
Necessary
Consents
|
3.5
|
|
NRS
|
1.1
|
|
Owned
Real Property
|
3.15(a)(a)
|
|
Parent
|
Preamble
|
|
Parent
Articles
|
4.1
|
|
Parent
Board
|
4.3(a)
|
|
Parent
By-laws
|
4.1
|
|
Parent
Disclosure Letter
|
Article
IV
|
|
Patents
|
3.14(a)
|
|
Paying
Agent
|
2.2(a)
|
|
Per
Share Merger Consideration
|
2.1(a)
|
|
Permits
|
3.11(a)
|
|
Permitted
Liens
|
9.3(e)
|
|
person
|
9.3(d)
|
|
Proxy
Statement
|
3.7
|
|
Real
Property
|
3.15(b)
|
|
Regulated
Subsidiaries
|
3.25
|
|
Representatives
|
5.2(a)
|
|
Restraints
|
7.1(d)
|
|
▇▇▇▇▇▇▇▇-▇▇▇▇▇
|
3.11(f)
|
|
Share
|
2.1(a)
|
|
Shares
|
2.1(a)
|
|
Software
|
3.14(a)
|
|
State
Regulatory Filings
|
3.20(a)
|
|
Subsidiary
|
9.3(f)
|
|
Surviving
Entity
|
1.1
|
|
Takeover
Laws
|
3.4(a)
|
|
tax
returns
|
3.13(n)
|
|
taxes
|
3.13(n)
|
|
Termination
Date
|
8.1(b)(i)
|
|
Termination
Fee
|
8.2(a),
8.2(a)
|
|
Trade
Secrets
|
3.14(a)
|
|
Trademarks
|
3.14(a)
|
|
Voting
Agreement
|
Recitals
|