Exhibit 99.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
By and Among
WellPoint Health Networks Inc.,
A Delaware For-Profit Corporation,
CareFirst, Inc.,
A Maryland Not-For-Profit Corporation
and
Congress Acquisition Corp.,
A Maryland Corporation
TABLE OF CONTENTS
ARTICLE I.....................................................................2
Definitions...................................................................2
ARTICLE II....................................................................2
The Merger....................................................................2
Section 2.1. The Merger...............................................2
Section 2.2. Effective Time...........................................2
Section 2.3. Charter..................................................3
Section 2.4. Bylaws...................................................3
Section 2.5. Directors, Officers and Name of CareFirst................3
Section 2.6. Headquarters.............................................3
ARTICLE III...................................................................3
Conversion of Shares; Purchase Price; Effects of the Merger...................3
Section 3.1. Conversion of Shares; Purchase Price.....................3
Section 3.2. Effects of the Merger....................................4
ARTICLE IV....................................................................5
Representations And Warranties Of CareFirst...................................5
Section 4.1. Organization, Qualification and Authorization............5
Section 4.2. Authority................................................6
Section 4.3. Execution and Binding Effect.............................6
Section 4.4. No Violation; Consents and Approvals.....................6
Section 4.5. Financial Statements.....................................7
Section 4.6. Reserves.................................................8
Section 4.7. Taxes....................................................8
Section 4.8. Absence of Certain Changes or Events.....................9
Section 4.9. Litigation; Judicial Proceedings.........................9
Section 4.10. Compliance with Law.....................................10
Section 4.11. Certain Contracts and Commitments.......................10
Section 4.12. Employee Plans; ERISA; Labor Matters....................11
Section 4.13. Capital Stock...........................................13
Section 4.14. Brokers and Finders.....................................13
Section 4.15. Environmental Matters...................................14
Section 4.16. Non-competition Agreements..............................15
Section 4.17. Resale Registration Statement; Purchaser's Proxy
Statement..............................................15
Section 4.18. Insurance Policies......................................15
Section 4.19. Intellectual Property...................................16
Section 4.20. Real and Personal Property..............................16
Section 4.21. Affiliate Transactions..................................17
ARTICLE V....................................................................17
Representations And Warranties Of Purchaser And CFAC.........................17
Section 5.1. Organization, Qualification and Authorization...........17
Section 5.2. Authority...............................................18
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Section 5.3. Execution and Binding Effect............................18
Section 5.4. No Violation; Consents and Approvals....................18
Section 5.5. Capitalization; Valid Issuance..........................19
Section 5.6. SEC Filings; Financial Statements.......................20
Section 5.7. Resale Registration Statement; Purchaser's Proxy
Statement..............................................20
Section 5.8. Absence of Certain Changes or Events....................21
Section 5.9. Litigation; Judicial Proceedings........................21
Section 5.10. Compliance with Law.....................................21
Section 5.11. Employee Plans..........................................22
Section 5.12. Brokers and Finders.....................................22
Section 5.13. Financing...............................................22
ARTICLE VI...................................................................22
Covenants Of The Parties.....................................................22
Section 6.1. Pre-Closing Operations..................................22
Section 6.2. New Information; Access.................................26
Section 6.3. Transfer Taxes..........................................26
Section 6.4. Preparation of Supporting Documents.....................27
Section 6.5. Purchaser's Stockholders' Meetings......................27
Section 6.6. SEC and Stockholder Filings.............................27
Section 6.7. Consents, Waivers, Authorizations, etc..................27
Section 6.8. Conversion of Primary CareFirst Companies...............28
Section 6.9. Liability; Indemnification..............................28
Section 6.10. Xxxx-Xxxxx-Xxxxxx Notification..........................29
Section 6.11. Further Assurances......................................29
Section 6.12. Public Announcements....................................30
Section 6.13. Appointment of Director of Purchaser; Management
Issues.................................................30
Section 6.14. Non-Solicitation........................................31
Section 6.15. Resale Registration Statement; NYSE Listing.............31
Section 6.16. Accountant's Letter.....................................32
Section 6.17. Employee Benefits.......................................32
Section 6.18. Insurance Against Certain Tax Events....................33
ARTICLE VII..................................................................33
Conditions...................................................................33
Section 7.1. Conditions to Each Party's Obligations..................33
Section 7.2. Conditions to Obligations of CareFirst..................34
Section 7.3. Conditions to Obligations of Purchaser and CFAC.........35
ARTICLE VIII.................................................................37
Termination Prior To Closing.................................................37
Section 8.1. Termination of Agreement................................37
Section 8.2. Termination of Obligations; Liquidated Damages..........38
ARTICLE IX...................................................................39
Miscellaneous................................................................39
Section 9.1. Entire Agreement........................................39
Section 9.2. Amendment...............................................39
Section 9.3. Parties Bound by Agreement; Successors and Assigns......39
Section 9.4. Counterparts............................................40
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Section 9.5. Modification and Waiver.................................40
Section 9.6. Expenses................................................40
Section 9.7. Survival of Representations and Warranties..............40
Section 9.8. Notices.................................................40
Section 9.9. Governing Law...........................................41
Section 9.10. Rules of Construction...................................41
Section 9.11. Waiver of Jury Trial....................................42
APPENDICES
A - Principal Terms of Plan of Conversion
B - Definitions
C - Articles of Merger
D - Form of Charter of CareFirst
E - Form of Bylaws of CareFirst
F - Form of Subordinated Note
G - Form of Rule 145 Affiliate Agreement
H - Form of Indemnity Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
November 20, 2001, by and among WellPoint Health Networks Inc., a Delaware
for-profit corporation ("Purchaser"), CareFirst, Inc., a Maryland
not-for-profit corporation ("CareFirst"), and Congress Acquisition Corp., a
Maryland corporation ("CFAC").
RECITALS
1. Purchaser directly owns all of the issued and outstanding stock of
CFAC;
2. The Board of Directors of each of Purchaser, CareFirst and CFAC
(a) have approved the merger of CFAC with and into CareFirst upon the terms
and subject to the conditions of this Agreement, including the ancillary
agreements executed and delivered pursuant hereto and (b) deem such merger to
be in the best interests of their respective companies and subscribers, and,
in the case of Purchaser and CFAC, their respective stockholders;
3. Because Purchaser is a for-profit company and CareFirst and the
Primary CareFirst Insurers are each not-for-profit companies, it will be
necessary for the Primary CareFirst Companies to convert to for-profit status
immediately prior to the consummation of such merger, and as part of the
conversion of the Primary CareFirst Companies, CareFirst will issue 100% of
its outstanding shares of capital stock ("CareFirst Common Stock") to certain
tax-exempt entities (each, a "Tax-Exempt Entity") to be designated in
accordance with applicable laws, so that, immediately prior to the merger, the
Tax-Exempt Entities will constitute all of the stockholders of CareFirst. The
principal elements of such conversion are as set forth in Appendix A hereto;
4. The parties expect and intend that the merger of CFAC with and
into CareFirst will: (i) create an enterprise that takes advantage of the
strengths, contributions, resources and prospects of each of the parties; (ii)
enhance the offering of competitive Blue Cross Blue Shield and other related
health care products for Delaware, the District of Columbia, Maryland and
other jurisdictions in which CareFirst operates; (iii) provide the workforce
of the CareFirst Companies opportunities for employment within each such
Company's current service area consistent with the collective enterprise's
evolving business requirements; (iv) create a collective enterprise which
provides additional financial strength for the customers of each of the
parties, allows each of the parties access to capital to support strategic
initiatives and positions the collective enterprise as a more significant
regional competitor; and (v) cause, allow and assist the Primary CareFirst
Insurers to continue to maintain a significant presence within their
respective jurisdictions, including operations in each jurisdiction consistent
with the collective enterprise's evolving business requirements, the
maintenance of the corporate headquarters of each within their respective
jurisdictions and the provision of products and services to residents in their
respective jurisdictions; and
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5. Purchaser and CareFirst desire to enter into this Agreement and to
make certain representations, warranties, covenants and agreements in
connection with the Merger.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
Definitions
Terms used in this Agreement not otherwise defined herein shall have
the meanings set forth in Appendix B.
ARTICLE II
The Merger
Section 2.1. The Merger.
Subject to the terms and conditions of this Agreement, at the
Effective Time, CFAC shall be merged with and into CareFirst, and the separate
corporate existence of CFAC shall thereupon cease (the "Merger"). CareFirst
shall be the surviving corporation in the Merger (sometimes referred to herein
as the "Surviving Corporation").
Section 2.2. Effective Time.
If all the conditions to the Merger set forth in Article VII shall
have been fulfilled or waived in accordance herewith and this Agreement shall
not have been terminated as provided in Article VIII, the consummation of the
Merger (the "Closing") shall take place at the offices of Xxxxx Xxxxxxx
Xxxxxxx & Xxxxx LLP, 0000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 as promptly
as possible, but in no event later than five (5) business days, after the
satisfaction or waiver of the conditions to the Closing set forth in Article
VII that are to occur prior to, but not on, the date of the Closing. The day
the Closing occurs is referred to herein as the "Closing Date." The parties
shall cause the Articles of Merger substantially in the form of Appendix C
(the "Articles of Merger") to be properly executed and filed with the Maryland
State Department of Assessments and Taxation and any other required
jurisdictions on the Closing Date. The Merger shall become effective at the
time of filing the Articles of Merger or at such later time which the parties
hereto shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").
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Section 2.3. Charter.
The Charter of CareFirst (substantially in the form of Appendix D) in
effect upon its conversion to a stock corporation immediately prior to the
Effective Time shall be the Charter of the Surviving Corporation, until duly
amended in accordance with applicable law.
Section 2.4. Bylaws.
The Bylaws of CareFirst (substantially in the form of Appendix E) in
effect upon its conversion to a stock corporation immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
Section 2.5. Directors, Officers and Name of CareFirst.
From and after the Effective Time, until successors are duly elected
or appointed and qualified in accordance with applicable law, (i) the
directors of CFAC immediately prior to the Merger shall be the directors of
the Surviving Corporation, and (ii) the officers of CareFirst immediately
prior to the Merger shall be the officers of the Surviving Corporation. The
name of the Surviving Corporation from and after the Effective Time shall
continue to be "CareFirst, Inc."
Section 2.6. Headquarters.
From and after the Effective Time, the headquarters of BCBSD,
BCBS-NCA and BCBS-MD shall be located in the State of Delaware, the District
of Columbia and the State of Maryland, respectively.
ARTICLE III
Conversion of Shares; Purchase Price; Effects of the Merger
Section 3.1. Conversion of Shares; Purchase Price.
(a) At the Effective Time, each issued and outstanding share of
CareFirst Common Stock shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the Per Share Amount. The
"Per Share Amount" shall consist of the Per Share Cash Consideration plus the
Per Share Stock Consideration plus the Per Share Note Consideration, if any.
The "Per Share Cash Consideration" shall be an amount of cash determined by
dividing (i) the Aggregate Cash Consideration by (ii) the number of shares of
CareFirst Common Stock outstanding immediately prior to the Effective Time.
The "Per Share Stock Consideration" shall be that number of shares of
Purchaser Common Stock determined by dividing (i) the Aggregate Stock
Consideration by (ii) the number of shares of CareFirst Common Stock
outstanding immediately prior to the Effective Time. The "Per Share Note
Consideration" shall be an amount payable in the form of Subordinated Notes
with a principal
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amount determined by dividing (i) the Aggregate Note Consideration by (ii) the
number of shares of CareFirst Common Stock outstanding immediately prior to
the Effective Time. The Per Share Note Consideration shall only be payable
upon the occurrence of the condition set forth in Section 3.1(b).
(b) If the Average Market Price is below $70.00, then, in addition to
the other consideration to be paid hereunder, Purchaser may, at its option,
issue a Subordinated Note (substantially in the form of Appendix F) to each
holder of CareFirst Common Stock in a principal amount equal to the Per Share
Note Consideration multiplied by the number of shares of CareFirst Common
Stock held by such holder. The parties intend that the Subordinated Notes will
bear an interest rate that would be applicable if the Subordinated Notes were
sold to an institutional holder in a transaction where the Notes were intended
to have a value as of the Closing Date equal to the principal amount of the
notes (provided, however, in determining the interest rate and value, the
Subordinated Notes, which by their terms may be prepaid at any time without
penalty or discount, will be assumed to have a "market" prepayment clause for
a note of this type). If Purchaser anticipates that it may elect to deliver
Subordinated Notes in payment of part of the consideration to be delivered to
the holders of CareFirst Common Stock, it will notify CareFirst that it may
wish to do so at least thirty (30) days prior to the anticipated Closing Date
(or if it determines anytime thereafter that Subordinated Notes may be used,
promptly upon such determination), and CareFirst and Purchaser shall jointly
select a nationally recognized investment banking firm (the "Investment
Banking Firm") who then shall be available, if necessary, to arbitrate any
final determination of the interest rate to be assigned to the Subordinated
Notes. If Purchaser then elects to deliver Subordinated Notes, at the time
that it provides the five (5) Business days' notice prior to the Closing Date
of its election to deliver the Subordinated Notes it also will set forth the
interest rate that it proposes to assign to the Subordinated Notes, and
CareFirst shall advise Purchaser within two (2) Business days thereafter
whether or not the proposed interest rate is acceptable. If CareFirst advises
Purchaser that the interest rate is not acceptable, and the parties are not
able to reach agreement on an interest rate satisfying the requirements of
this Section 3.1(b), determination of the interest rate will be based upon the
written advice of the Investment Banking Firm. The costs and expenses of the
Investment Banking Firm shall be split evenly between Purchaser and CareFirst.
(c) At the Closing, each holder of outstanding CareFirst Common Stock
as shown on the books and records of CareFirst shall receive, in respect of
each share of CareFirst Common Stock, a certificate or certificates
representing the number of shares of Purchaser Common Stock along with cash
(or immediately available funds) and Subordinated Notes that together
constitute the Per Share Amount.
Section 3.2. Effects of the Merger.
The Merger shall have the effects specified in Section 3-114 of the
Maryland General Corporation Law.
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ARTICLE IV
Representations And Warranties Of CareFirst
CareFirst hereby represents and warrants to Purchaser as follows:
Section 4.1. Organization, Qualification and Authorization.
(a) CareFirst is a nonprofit, non-stock corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland;
each CareFirst Subsidiary is listed on the CareFirst Disclosure Schedule. Each
Primary CareFirst Insurer is a non-stock corporation of which CareFirst is the
sole member and is duly organized, validly existing and in good standing under
the laws of its state of formation. Each CareFirst Company (other than
CareFirst and the Primary CareFirst Insurers) has been duly formed and is
validly existing and in good standing under the laws of its jurisdiction of
formation, which jurisdictions are listed on the CareFirst Disclosure
Schedule.
(b) Each CareFirst Company has all requisite power and authority,
corporate and other, to carry on and conduct its business as it is now being
conducted and to own or lease its properties and assets, except where the
failure to satisfy the representations of this Section 4.1(b) would not result
in a CareFirst Material Adverse Effect. CareFirst has delivered or made
available to Purchaser accurate and complete copies of the articles of
incorporation and bylaws, or equivalent governing instruments, as currently in
effect, of each of the CareFirst Companies as of the date hereof.
(c) Each CareFirst Company is duly qualified to do business and is in
good standing in each jurisdiction in which the ownership or operation of its
assets or the conduct of its business requires such qualification, except
where the failure to be so qualified or in good standing would not result in a
CareFirst Material Adverse Effect. All such jurisdictions are listed on the
CareFirst Disclosure Schedule.
(d) Except as contemplated herein, no equity security of any
CareFirst Company is or may be required to be issued by reason of any option,
warrant, right to subscribe to, call or commitment of any character whatsoever
relating to, or security or right exchangeable or convertible into, shares of
any capital stock of such CareFirst Company, and there are no contracts,
commitments, understandings or arrangements by which any CareFirst Company is
bound to issue or repurchase shares of its capital stock, or options, warrants
or rights to purchase or acquire any additional shares of its capital stock.
All shares of the CareFirst Subsidiaries are duly authorized, validly issued,
fully paid and non-assessable, have not been issued in violation of, and are
not subject to, any preemptive right. There are no contracts, commitments,
understandings or arrangements by which any person has any right or claim to
become a member of CareFirst or any of the Primary CareFirst Insurers.
(e) The CareFirst Disclosure Schedule sets forth the equity or member
interests of each CareFirst Subsidiary that are owned by CareFirst or another
CareFirst Company. The CareFirst Subsidiary Shares are owned, possessed or
controlled by CareFirst, directly or
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indirectly, free and clear of all liens, restrictions, claims, equities,
charges, options, rights of first refusal, encumbrances or other restrictions
of any kind, with no defects of title whatsoever. CareFirst or another
CareFirst Company has full power, right and authority to vote all of the
CareFirst Subsidiary Shares. CareFirst is not a party to or bound by any
voting trust, proxy or other agreement affecting or relating to the right to
transfer or vote the CareFirst Subsidiary Shares.
Section 4.2. Authority.
CareFirst has all requisite power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby, subject to the receipt of the regulatory approvals set forth in
Section 4.4(b). The execution and delivery of this Agreement by CareFirst, the
performance of its obligations hereunder and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by the
Boards of Directors of CareFirst and BCBSD, and except for the approval of the
Merger by the Tax-Exempt Entities in their capacity as stockholders of
CareFirst following the Conversion, no other corporate act or corporate
proceeding on the part of the CareFirst Companies is necessary to approve the
execution and delivery of this Agreement, the performance by CareFirst of its
obligations hereunder or the consummation of the transactions contemplated
hereby.
Section 4.3. Execution and Binding Effect.
This Agreement has been duly and validly executed and delivered by
CareFirst and constitutes, and the other documents and instruments to be
executed and delivered by CareFirst pursuant hereto upon their execution and
delivery by CareFirst on or prior to the Closing Date will constitute
(assuming, in each case, the due and valid authorization, execution and
delivery thereof by the other party or parties thereto), legal, valid and
binding obligations of CareFirst, enforceable against it in accordance with
their respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, rehabilitation, reorganization, moratorium, or similar
laws affecting enforcement of creditors' rights generally and (b) general
equitable principles.
Section 4.4. No Violation; Consents and Approvals.
(a) Except as set forth on the CareFirst Disclosure Schedule and
subject to the governmental filings (and other matters) referred to in Section
4.4(b), the execution, delivery and performance of this Agreement by
CareFirst, compliance with the provisions of this Agreement, and the
consummation by CareFirst or any CareFirst Company of the transactions
contemplated hereby will not (i) conflict with or violate any provisions of
the Charters or Bylaws in effect as of the date hereof of any CareFirst
Company (and with respect to CareFirst and the Primary CareFirst Insurers, as
such Charters and Bylaws are to be amended to accomplish the Conversion); (ii)
conflict with, violate or result in any breach of, or constitute a default
whether with or without notice or lapse of time or both, or give rise to any
right of termination, cancellation or acceleration under any of the terms,
conditions or provisions of, or render
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unenforceable, any note, bond, mortgage, indenture, license (including any
license granted by BCBSA), franchise, permit, agreement, lease or other
instrument or obligation to which any CareFirst Company is a party or by which
any CareFirst Company, its business or any of its assets is bound; (iii)
violate any statute, ordinance or law or any rule, regulation, order, writ,
injunction or decree of any Governmental Entity applicable to any CareFirst
Company, or by which its business or any of its assets is bound; (iv) require
any filing, declaration or registration with, or permit, consent or approval
of, or the giving of any notice to, any Governmental Entity; or (v) result in
the creation or imposition of any lien, charge or encumbrance upon any
CareFirst Company's assets; excluding from the foregoing clauses (other than
clause (i)) such conflicts, violations, breaches and defaults and filings,
declarations, registrations, permits, consents, approvals and notices, other
than approvals of the BCBSA, the absence of which, in the aggregate, would not
result in a CareFirst Material Adverse Effect.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by any
CareFirst Company for the execution and delivery of this Agreement by
CareFirst or the consummation by CareFirst of the transactions contemplated by
this Agreement, except for (i) the filing with the FTC and the DOJ of a
notification and report form by CareFirst under the HSR Act and (ii) the
preparation and filing of appropriate documents with, and approval of, the
appropriate regulatory bodies in the States of Maryland and Delaware, the
District of Columbia, the U.S. Congress and other jurisdictions regarding
insurance-related approvals (collectively referred to as the "CareFirst
Primary Filings").
Section 4.5. Financial Statements.
(a) CareFirst has delivered or made available to Purchaser copies of
the financial statements listed on the CareFirst Disclosure Schedule (the
"CareFirst Financial Statements"). The CareFirst Financial Statements are true
and complete in all material respects, have been prepared in accordance with
SAP or GAAP, as the case may be, consistently applied throughout the periods
covered by such statements (except as may be stated in the explanatory notes
to such statements) and present fairly, in all material respects, the
financial position and results of operations (consolidated in the case of
CareFirst) of the CareFirst Companies at the dates of and for the periods
covered thereby. The CareFirst Financial Statements for interim periods are
subject to normal recurring year-end adjustments and lack explanatory notes.
(b) Except as disclosed, recorded or otherwise referred to in the
CareFirst Financial Statements at and for the year ended December 31, 2000, no
CareFirst Company has any liabilities of any nature, whether known, unknown,
accrued, absolute, contingent or otherwise, and whether due or to become due,
probable of assertion or not, except liabilities that (i) were incurred after
December 31, 2000 in the ordinary course of its business consistent with past
practices, and (ii) in the aggregate would not have a CareFirst Material
Adverse Effect.
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Section 4.6. Reserves.
(a) Except as set forth in the CareFirst Disclosure Schedule, the
aggregate actuarial reserves and other actuarial amounts held in respect of
liabilities with respect to any or all of the CareFirst Insurers as
established or reflected in their respective 2000 financial statements
previously delivered to Purchaser:
(i) (A) were determined in accordance with presently
accepted actuarial standards consistently applied, and (B) were fairly stated
in all material respects in accordance with sound actuarial principles;
(ii) met the requirements of the applicable insurance
laws or regulations of the State of Maryland, the District of Columbia, the
State of Delaware or any other state having jurisdiction, in all material
respects;
(iii) met the requirements of the BCBSA;
(iv) have been computed in all material respects on the
basis of methodologies consistent with those used in computing the
corresponding reserves in the prior fiscal year (except as may be stated in
the explanatory notes to such statements);
(v) include provisions for all actuarial reserves and
related items that are required to be established in accordance with
applicable laws and regulations; and
(vi) CareFirst is unaware of any facts or circumstances
that would necessitate, in the application of prudent reserving practices and
policies, any material adverse change in the statutorily required reserve or
reserves above those reflected in the most recent CareFirst Financial
Statements (other than those increases consistent with past experience
resulting from increases in enrollment).
(b) Each Primary CareFirst Insurer's surplus is now, and immediately
prior to the Closing will be, not less than 100% of the statutorily adequate
reserve minimums required by applicable law.
Section 4.7. Taxes.
(a) As of the date hereof, each of the Primary CareFirst Companies
has been and, to CareFirst's knowledge, is an "existing Blue Cross and Blue
Shield organization" as defined in Section 833(c)(2) of the Code, and has
filed its federal income tax returns for all periods after the effective date
of Section 833 of the Code consistent with its reasonable interpretation of
the treatment described in Section 833 of the Code.
(b) All federal income tax returns required to be filed by any
CareFirst Company have been properly and timely filed with the IRS, and all
state and local income and premium tax returns required to be filed by any
CareFirst Company have been properly and timely filed with the appropriate
state or local taxing authorities, or an appropriate application for extension
of
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time to file such returns has been filed. Except as set forth in the CareFirst
Disclosure Schedule, such tax returns were true, correct and complete in all
material respects at the time filed, and each CareFirst Company has paid and
discharged all Taxes shown to be due on such returns, other than such Taxes as
are being contested in good faith by appropriate proceedings and are
adequately reserved for on the most recent financial statements. Each
CareFirst Company has adequately reserved, in accordance with SAP or GAAP, as
applicable, on the financial statements referred to in Section 4.5, for the
payment of all unpaid Taxes, including interest and penalties, payable in
respect of any taxable event or period (including interim periods) ending on
the dates of such financial statements and for all periods prior thereto.
(c) No claim or deficiency for any Taxes has been proposed, asserted,
assessed or, to the knowledge of CareFirst, threatened by the IRS or any other
taxing authority or agency against any CareFirst Company. No requests for
waivers of the time to assess any Taxes are pending. Except as set forth in
the CareFirst Disclosure Schedule, none of the federal income tax returns for
any CareFirst Company has been examined by or settled with the IRS for any
year, and none of the tax returns for any CareFirst Company remains open or
pending.
(d) None of the CareFirst Companies is a party to, is bound by or has
any obligation under any tax sharing agreement or similar contract arrangement
or any agreement that obligates it to make any payment computed by reference
to the Taxes, Taxable income or Taxable losses of any other person.
Section 4.8. Absence of Certain Changes or Events.
Except as set forth on CareFirst's Disclosure Schedule, since
December 31, 2000 and through the date of this Agreement, (a) each of the
CareFirst Companies has, in all material respects, conducted its business in
the ordinary course consistent with past practices, (b) since, September 30,
2001, neither CareFirst nor any CareFirst Subsidiary has taken any action set
forth in Section 6.1(a) which if taken after the date hereof would violate
such Section and (c) the CareFirst Companies have not experienced an event
that has had, or would reasonably be expected to have, a CareFirst Material
Adverse Effect.
Section 4.9. Litigation; Judicial Proceedings.
(a) As of the date of this Agreement, there are no judicial or
administrative actions, proceedings or investigations pending or, to the
knowledge of CareFirst, threatened, that (i) question the validity of this
Agreement or any action taken or to be taken by CareFirst in connection with
this Agreement, or (ii) seek to prevent the consummation by CareFirst of any
of the transactions contemplated by this Agreement.
(b) Except as set forth in the CareFirst Disclosure Schedule or as
otherwise disclosed in writing by CareFirst to Purchaser on or before the date
of this Agreement, there is no litigation, proceeding, suit, action, charge or
investigation pending or, to the knowledge of CareFirst, threatened, or any
order, judgment, injunction, decree, plea agreement, stipulation or award of
any kind outstanding, against or relating to any CareFirst Company, or
involving any of
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its property or business, the outcome of which in the aggregate may reasonably
be expected to result in a CareFirst Material Adverse Effect.
Section 4.10. Compliance with Law.
(a) Each CareFirst Company is conducting its business in compliance
with all statutes, laws, rules, regulations, ordinances, decrees, judgments,
injunctions and orders applicable to it (including those relating to ERISA,
labor laws, Health Benefit Laws, environmental laws and health and safety
matters), except where such failure to comply would not have a CareFirst
Material Adverse Effect, and has not received any notice that it is in
material noncompliance with any such statutes, laws, rules, regulations,
ordinances, decrees or orders.
(b) Each CareFirst Company currently holds all permits, licenses and
approvals of every Governmental Entity necessary for the ownership of its
respective assets and the operation of its respective businesses (including
those relating to ERISA, labor laws, Health Benefit Laws, environmental laws
and health and safety matters) except where the failure to hold such permits,
licenses or approvals would not result in a CareFirst Material Adverse Effect.
The CareFirst Disclosure Schedule sets forth a complete list of all material
permits, licenses and approvals of the CareFirst Companies.
(c) Each CareFirst Company is in compliance with all such permits,
licenses and approvals, except where such failure to comply would not result
in a CareFirst Material Adverse Effect.
(d) No CareFirst Company nor any officer, employee, agent,
representative or other person acting on the express, implied or apparent
authority thereof, has paid or received any bribe or other unlawful,
questionable or unusual payment of money or other thing of value, granted or
accepted any extraordinary discount, or furnished or been given any unlawful
or unusual inducement to or from any person or Governmental Entity in
connection with or in furtherance of the business of any CareFirst Company.
(e) All information provided by each CareFirst Company in connection
with the preparation and filing of any regulatory notice or other regulatory
filing was true, complete and accurate in all material respects when made.
(f) Each CareFirst Company is, to the extent applicable, in
compliance in all material respects with all rules and regulations of the
BCBSA.
Section 4.11. Certain Contracts and Commitments.
(a) All CareFirst Material Contracts are listed on the CareFirst
Disclosure Schedule. CareFirst has delivered to Purchaser, or provided
Purchaser with the opportunity to review, complete and accurate copies of all
of the CareFirst Material Contracts to which it is a party and
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all amendments thereto. The CareFirst Disclosure Schedule contains an accurate
and complete summary description of any CareFirst Material Contract that is
not in writing.
(b) Except as set forth in the CareFirst Disclosure Schedule, no
CareFirst Company is in default, nor does there exist any event that, with or
without notice or lapse of time or both, would constitute a violation, breach
or default by any CareFirst Company under any CareFirst Material Contract, and
each CareFirst Material Contract is valid, binding and in full force and
effect, and to the knowledge of CareFirst, there is no material violation,
breach or default by any other party to any CareFirst Material Contract and no
other party has notified a CareFirst Company of its intention to cease to
perform any services required to be performed by such other party or withhold
any payment required to be made by such other party to it thereunder, except
to the extent that all such violations, breaches or defaults would not result
in a CareFirst Material Adverse Effect.
Section 4.12. Employee Plans; ERISA; Labor Matters.
(a) The CareFirst Disclosure Schedule contains a list, which is
accurate and complete, of all the Benefit Plans maintained by the CareFirst
Companies (the "CareFirst Plans").
(b) Each CareFirst Company is not, and has never been obligated to
make any contributions to any multi-employer plan, as defined in Section 3(37)
of ERISA. The CareFirst Plans have been administered, in all material
respects, in compliance with the applicable requirements of the Code, ERISA
and any other applicable laws, rules and regulations. No CareFirst Company,
nor, to the knowledge of CareFirst, any plan fiduciary of any CareFirst Plan
has engaged in any transaction in violation of Section 406(a) or (b) of ERISA
for which no exemption exists under Section 408 of ERISA or any "prohibited
transaction" (as defined in Section 4975(c)(1) of the Code) for which no
exemption exists pursuant to Section 4975(c)(2) or (d) of the Code. Except as
disclosed in the CareFirst Disclosure Schedule, with respect to each of the
CareFirst Plans that is subject to Title IV of ERISA, as of the Closing, the
fair market value of the assets of such CareFirst Plan will equal or exceed
the present value of all benefit liabilities of such CareFirst Plan, if such
CareFirst Plan were terminated as of the Closing. No CareFirst Company has in
effect any stock option or stock purchase plan.
(c) Except for CareFirst's obligation to make contributions under the
CareFirst Plans and except for its self-insured arrangements (each as
disclosed in the CareFirst Disclosure Schedule), CareFirst is not subject to
any direct obligation or liability under any of the CareFirst Plans. Each
CareFirst Company has paid in full to its employees, agents and contractors
all wages, salaries, commissions, bonuses and other direct compensation for
all services performed by them, except where the failure to make such payment
would not have a CareFirst Material Adverse Effect. No CareFirst Company is
liable for any severance pay or other payments on account of termination of
former employees except as disclosed in the CareFirst Disclosure Schedule or
as would not have a CareFirst Material Adverse Effect.
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(d) Each CareFirst Company has complied in all material respects with
the applicable provisions of ERISA, the published authorities thereunder and
all applicable federal and state laws relating to the CareFirst Plans,
including laws relating to the employment of labor (including the provisions
thereof relating to wages, hours, collective bargaining and the payment of
social security and taxes), and is not liable for any arrearages of wages, any
Tax or any penalty for failure to comply with any of the foregoing, except
where such failure to comply or liability would not have a CareFirst Material
Adverse Effect.
(e) There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of CareFirst, threatened against or affecting a
CareFirst Company or its business, except as would not have a CareFirst
Material Adverse Effect. Except as would not have a CareFirst Material Adverse
Effect: (a) no representation question exists with respect to the employees of
a CareFirst Company; and (b) no collective bargaining agreement with employees
of any CareFirst Company is in effect or currently being negotiated.
(f) Except as disclosed in the CareFirst Disclosure Schedule,
CareFirst has delivered or made available to Purchaser copies of all documents
and summary plan descriptions, which are true and correct, with respect to the
CareFirst Plans, or summary descriptions of any CareFirst Plans not otherwise
in writing.
(g) To the knowledge of CareFirst, there are no negotiations, demands
or proposals that are pending which concern matters now covered, or that would
be covered, by plans, agreements or arrangements of the type described in this
Section 4.12.
(h) Except as disclosed in the CareFirst Disclosure Schedule:
(i) Each CareFirst Company has performed in all material
respects all of its obligations under all of the CareFirst Plans.
(ii) There are no actions (other than routine claims for
benefits or other actions that would not have a CareFirst Material
Adverse Effect) pending or, to the knowledge of CareFirst,
threatened against the CareFirst Plans or their assets, or arising
out of the CareFirst Plans, and, to the knowledge of CareFirst, no
facts exist which may reasonably be expected to give rise to any
such actions.
(iii) Each of the CareFirst Plans can be terminated by a
CareFirst Company within a period of thirty (30) days following the
Closing, without payment of any additional compensation or amount
or, with the exception of the termination of any CareFirst Plans to
which Section 401(a) of the Code applies, the additional vesting or
acceleration of any such benefits.
(i) Except as required by applicable law or as would not have a
CareFirst Material Adverse Effect, since December 31, 2000, there has not been
any adoption or amendment in any material respect by any CareFirst Company of
any of the CareFirst Plans providing benefits to any current or former
employee, officer or director of any CareFirst Company. Except as disclosed in
the CareFirst Disclosure Schedule, since December 31, 2000, no CareFirst
Company
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has taken any action to accelerate any rights or benefits under any
CareFirst Plan, either generally or specifically, for the benefit of any
trustee, director, officer or employee or class thereof, excluding
non-material acceleration of rights or benefits or payment of non-material
amounts by any CareFirst Company upon the dismissal of any of its non-officer
employees in the ordinary course of business.
(j) Except as disclosed in the CareFirst Disclosure Schedule:
(i) A CareFirst Company has received a favorable
determination letter (current through the Tax Reform Act of 1986)
with respect to all CareFirst Plans to which Section 401(a) of the
Code applies and, to the knowledge of CareFirst, there are no facts
that exist nor amendments that have been made that are reasonably
likely to change the qualified status of such CareFirst Plans.
(ii) None of the CareFirst Plans obligates any CareFirst
Company to pay separation, severance, termination or other benefits
solely as a result of the consummation of the transactions
contemplated by this Agreement.
Section 4.13. Capital Stock.
(a) The CareFirst Common Stock to be issued to the Tax-Exempt
Entities in connection with the Conversion, when issued in accordance with
this Agreement and Appendix A hereto, will be duly and validly issued,
fully-paid and nonassessable and will be issued in accordance with applicable
federal and state laws. Upon issuance, the shares of CareFirst Common Stock to
be issued to the Tax-Exempt Entities in connection with the Conversion will be
the only equity securities of CareFirst issued and outstanding.
(b) Other than as contemplated by this Agreement, there are not
outstanding nor is CareFirst bound by, any subscriptions, options, preemptive
rights, warrants, calls, commitments, or agreements or rights of any character
requiring it to issue or entitling any other person or entity to acquire any
shares of CareFirst Common Stock or any other equity security of CareFirst,
including any right of conversion or other instrument, and CareFirst is not
and, following the Conversion, will not be, obligated to issue or transfer any
shares of its capital stock for any purpose. There are, and following the
Conversion there will be, no outstanding obligations of CareFirst to purchase,
redeem or otherwise acquire any outstanding shares of its capital stock.
Section 4.14. Brokers and Finders.
Except for Credit Suisse First Boston, whose fee shall be the sole
responsibility of CareFirst, neither CareFirst nor any of its officers,
directors or employees has employed any broker, finder or investment banker or
incurred any liability for any brokerage fees, commissions or finders' fees or
other fees in connection with the transactions contemplated by this Agreement.
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Section 4.15. Environmental Matters.
(a) The CareFirst Disclosure Schedule contains a list of all
environmental assessment reports prepared by or on behalf of CareFirst or its
predecessors (the "CareFirst Environmental Reports") with respect to CareFirst
Owned Property and real property leased by any CareFirst Company
(collectively, the "CareFirst Properties"). CareFirst has delivered to
Purchaser, or provided Purchaser with the opportunity to review, copies of all
the CareFirst Environmental Reports, which are accurate and complete in all
material respects.
(b) No CareFirst Company has stored or used any Materials of
Environmental Concern at any CareFirst Property, except in such quantities and
under such conditions as would normally be associated with the operation and
maintenance of an office facility and, at all times, in material compliance
with the Environmental Laws except for such noncompliance as would not
reasonably be expected to have a CareFirst Material Adverse Effect.
(c) No CareFirst Company has received (i) any request for information
under Section 104(e) of the Comprehensive Environmental Response, Compensation
and Liability Act or similar authority, (ii) any written notice, complaint,
warning letter or notice of violation of any Environmental Law or
environmental permit or (iii) any notice that it is responsible (or
potentially responsible) for the assessment or remediation of any release of
any Material of Environmental Concern at, on or beneath any CareFirst Property
or with respect to any other property except as would not reasonably be
expected to have a CareFirst Material Adverse Effect.
(d) No CareFirst Company is the subject of any actual or, to
CareFirst's knowledge, threatened federal, state, local or private litigation
involving a claim of liability or a demand for damages arising out of any
alleged violation of any Environmental Law or from the alleged, actual or
threatened release of any Material of Environmental Concern at or beneath any
CareFirst Property or otherwise relating to the environmental condition of any
other property which, in the aggregate, could reasonably be expected to result
in a CareFirst Material Adverse Effect.
(e) Except for those matters set forth in the CareFirst Environmental
Reports or the CareFirst Disclosure Schedule, no CareFirst Company has
knowledge of any release or threatened release of a Material of Environmental
Concern, the presence of any current or former dry-cleaning facility, the
presence of any current or former storage tanks, the presence of any asbestos
containing material or the presence of any other condition or circumstance at
any CareFirst Property which could reasonably be expected to subject the owner
or operator of any CareFirst Property to liability or claims under the
Environmental Laws which, in the aggregate, could reasonably be expected to
result in a CareFirst Material Adverse Effect.
(f) Except as set forth in the CareFirst Environmental Reports, to
CareFirst's knowledge, there are no environmental conditions present at any
CareFirst Property which pose an imminent or substantial endangerment to human
health or the environment.
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(g) Except for those matters set forth in the CareFirst Environmental
Reports, neither any CareFirst Company nor any CareFirst Property is currently
in violation of any applicable Environmental Law which could subject the owner
or operator of any CareFirst Property to any fine or require any remedial
action of any CareFirst Property, which, in the aggregate, could reasonably be
expected to result in a CareFirst Material Adverse Effect.
(h) Each CareFirst Company has timely filed all reports required by
any Environmental Law and has generated and maintained all data, documentation
and records required under any Environmental Law, except where the failure to
file such reports or generate and maintain such data, documentation and
records could not reasonably be expected to result in a CareFirst Material
Adverse Effect.
(i) No CareFirst Company has knowledge of any existing or imminent
restriction on the ownership, occupancy, use or transferability of any
CareFirst Property arising out of any known environmental condition or
violation of any Environmental Law that, in the aggregate, could reasonably be
expected to result in a CareFirst Material Adverse Effect.
Section 4.16. Non-competition Agreements.
Except as disclosed in the CareFirst Disclosure Schedule, no
CareFirst Company is bound by any non-competition agreements or similar
restrictions on its ability to sell any products or services, engage in any
line of business, or conduct their respective businesses, including any such
agreements or restrictions that would restrict operations in any particular
geographical area.
Section 4.17. Resale Registration Statement; Purchaser's Proxy Statement.
The information supplied or to be supplied by CareFirst in writing
for inclusion in the Resale Registration Statement or Purchaser's Proxy
Statement does not and will not contain any untrue statement of material fact
and does not omit or will not 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 in which they were made, not misleading.
Section 4.18. Insurance Policies.
All of the CareFirst Companies' material insurance policies
(including reinsurance) that insure the properties, business or liability of
the CareFirst Companies or the liability of their directors, officers or
agents are listed in the CareFirst Disclosure Schedule. Except to the extent
that there would be no CareFirst Material Adverse Effect, all of the CareFirst
Companies' insurance (including reinsurance), surety bonds and umbrella
policies insuring the CareFirst Companies and their directors, officers,
agents, properties and business are valid and in full force and effect and
without any premium past due, and there are no claims, singly or in the
aggregate, under such policies which are in excess of the limitations of
coverage set forth in such policies. Except as where any of the following
would not have a CareFirst Material Adverse Effect, no CareFirst Company has
received notice of default under, or intended cancellation or non-renewal
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of, any material policies of insurance (including reinsurance) which insure
the properties, business or liability of the CareFirst Companies.
Section 4.19. Intellectual Property.
The CareFirst Disclosure Schedule contains all material applications
or registrations for patents, trademarks and copyrights owned by any CareFirst
Company and all material licenses or other agreements concerning Intellectual
Property to which any CareFirst Company is a party.
Except as set forth in the CareFirst Disclosure Schedule or as would
not reasonably be expected to have a CareFirst Material Adverse Effect, (i)
each CareFirst Company owns or has the right to use all Intellectual Property
necessary to conduct its business as currently conducted, free and clear of
all claims, liens or other encumbrances or restrictions of any kind; (ii) the
CareFirst Companies' Intellectual Property does not infringe any Intellectual
Property of any third party; (iii) there are no pending or, to the knowledge
of CareFirst, threatened actions or litigation against any CareFirst Company
challenging its ownership or use of any Intellectual Property; and (iv) the
CareFirst Companies take reasonable actions to maintain and preserve their
respective Intellectual Property.
Section 4.20. Real and Personal Property.
(a) The CareFirst Disclosure Schedule sets forth a list and
description which is true, complete and correct of all real property owned by
CareFirst or any of the CareFirst Subsidiaries (the "CareFirst Real
Property"). CareFirst or one of the CareFirst Subsidiaries is the owner of the
title to the CareFirst Real Property and to all of the buildings, structures,
and other improvements located thereon free and clear of any mortgage, deed of
trust, lien, pledge, security interest, claim, lease, charge, option, right of
first refusal, easement, restrictive covenant, encroachment or other survey
defect, encumbrance or other restriction or limitation except for matters on
the CareFirst Disclosure Schedule or any CareFirst Permitted Liens.
(b) The CareFirst Disclosure Schedule sets forth a list and
description which is true, complete and correct of all leases, subleases,
licenses or other agreements under which CareFirst or any of the CareFirst
Subsidiaries uses or occupies, or has the right to use or occupy, now or in
the future, any real property or improvements thereon (the "CareFirst Real
Property Leases"). Except for matters listed on the CareFirst Disclosure
Schedule, CareFirst or one of the CareFirst Subsidiaries holds the leasehold
estate under an interest in each CareFirst Real Property Lease free and clear
of all liens, encumbrances and other rights or occupancy, except for matters
on the CareFirst Disclosure Schedule or any CareFirst Permitted Liens. Except
as set forth on the CareFirst Disclosure Schedule, there is not under any such
CareFirst Real Property Lease any existing default, or any condition, event,
or act which with notice or lapse of time, or both, would constitute such a
default, which in either case, in the aggregate with all such other
CareFirst's Real Property Leases under which there is such a default,
condition, event or act, would have a CareFirst Material Adverse Effect.
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Section 4.21. Affiliate Transactions.
Except as disclosed on the CareFirst Disclosure Schedule, neither
CareFirst nor any CareFirst Subsidiary is a party to any oral or written
agreement, or, since December 31, 2000, has engaged in any transaction, with
any of its directors or officers or any of their respective Affiliates (other
than the CareFirst Companies) (any such agreement or transaction, an
"Affiliate Transaction"), other than payments of salary, bonus or other
compensation as an employee or director of a CareFirst Company, where such
agreement or transaction involved value in excess of $250,000.
ARTICLE V
Representations And Warranties Of Purchaser And CFAC
For the purposes of all the representations and warranties made in
this Article V, CFAC shall be considered a "Purchaser Subsidiary." Purchaser
and CFAC hereby jointly and severally represent and warrant to CareFirst as
follows:
Section 5.1. Organization, Qualification and Authorization.
(a) Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware; each Purchaser
Subsidiary is listed in the Purchaser SEC Filings or on the Purchaser
Disclosure Schedule. Each Purchaser Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, which jurisdictions are listed on the Purchaser
Disclosure Schedule.
(b) Each Purchaser Company has all requisite power and authority,
corporate and other, to carry on and conduct its business as it is now being
conducted and to own or lease its property and assets, except where the
failure to satisfy the representations of this Section 5.1(b) would not result
in a Purchaser Material Adverse Effect. Purchaser has delivered or made
available to CareFirst accurate and complete copies of the certificates of
incorporation and bylaws, or equivalent governing instruments, as currently in
effect, of each of the Purchaser Companies as of the date hereof.
(c) Each Purchaser Company is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the ownership
or operation of its assets or the conduct of its business requires such
qualification or licensing, except where the failure to be so qualified,
licensed or in good standing would not result in a Purchaser Material Adverse
Effect. All such jurisdictions are listed on the Purchaser Disclosure
Schedule.
(d) The Purchaser Disclosure Schedule sets forth every entity as of
the date hereof which is a Purchaser Subsidiary and the equity interests of
such entities that are owned by Purchaser. Purchaser owns all the issued and
outstanding shares of CFAC.
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Section 5.2. Authority.
Purchaser and CFAC, respectively, have all requisite power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby, subject to the receipt of regulatory
approvals set forth in Section 5.4. The execution and delivery of this
Agreement by Purchaser and CFAC, the performance of their obligations
hereunder and the consummation by them of the transactions contemplated
hereby, including, as to Purchaser, the issuance of the Purchaser Common Stock
to be issued in the Merger, have been duly and validly authorized by
Purchaser's and CFAC's respective Boards of Directors, and except for the
approval of Purchaser's stockholders, no other corporate act or corporate
proceeding on the part of Purchaser or CFAC is necessary to approve the
execution and delivery of this Agreement, the performance by Purchaser and
CFAC of their obligations hereunder or the consummation of the transactions
contemplated hereby.
Section 5.3. Execution and Binding Effect.
This Agreement has been duly and validly executed and delivered by
Purchaser and CFAC, and constitutes, and the other documents and instruments
to be executed and delivered by Purchaser or CFAC pursuant hereto upon their
execution and delivery by Purchaser or CFAC on or prior to the Closing Date
will constitute (assuming, in each case, the due and valid authorization,
execution and delivery thereof by the other party or parties thereto), legal,
valid and binding obligations of Purchaser or CFAC, enforceable against
Purchaser or CFAC in accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, rehabilitation,
reorganization, moratorium, or similar laws affecting enforcement of
creditors' rights generally and (b) general equitable principles.
Section 5.4. No Violation; Consents and Approvals.
(a) Except as set forth on the Purchaser Disclosure Schedule and
subject to the governmental filings (and other matters) referred to in Section
5.4(b), the execution, delivery and performance of this Agreement by each of
Purchaser and CFAC, compliance with the provisions of this Agreement, and the
consummation by each of Purchaser and CFAC of the transactions contemplated
hereby will not (i) conflict with or violate any provisions of the
certificates of incorporation or other comparable documents or bylaws of
Purchaser or CFAC; (ii) conflict with, violate or result in any breach of, or
constitute a default whether with or without notice or lapse of time or both,
or give rise to any right of termination, cancellation or acceleration under
any of the terms, conditions or provisions of, or render unenforceable, any
note, bond, mortgage, indenture, license (including any license granted by the
BCBSA), franchise, permit, agreement, lease or other instrument or obligation
to which any Purchaser Company is a party or by which any Purchaser Company,
its business or any of its assets is bound; (iii) violate any statute,
ordinance or law or any rule, regulation, order, writ, injunction or decree of
any Governmental Entity applicable to any Purchaser Company, or by which its
business or any of its assets is bound; (iv) require any filing, declaration
or registration with, or permit, consent or approval of, or the giving of any
notice to, any Governmental Entity; or (v) result in the creation of any lien,
charge or encumbrance upon any Purchaser Company's assets; excluding from the
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foregoing clauses (other than clause (i)) such conflicts, violations, breaches
and defaults and filings, declarations, registrations, permits, consents,
approvals and notices, other than approvals of the BCBSA, the absence of
which, in the aggregate, would not result in a Purchaser Material Adverse
Effect.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by any
Purchaser Company for the execution and delivery of this Agreement by
Purchaser and CFAC or the consummation by Purchaser and CFAC of the
transactions contemplated by this Agreement, except for (i) the filing with
the FTC and the DOJ of a notification and report form by Purchaser under the
HSR Act; (ii) the approval of the NYSE of the listing, upon notice of
issuance, of the Purchaser Common Stock to be issued in the Merger, (iii) the
preparation and filing of, and approval of, Applications on Form A, with the
appropriate state regulatory bodies; (iv) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, in the aggregate, result in a
Purchaser Material Adverse Effect.
Section 5.5. Capitalization; Valid Issuance.
(a) As of the date hereof, the authorized capital stock of Purchaser
consists of 300,000,000 shares of Common Stock and 50,000,000 shares of
Preferred Stock. As of October 31, 2001, 63,671,536 shares of Common Stock
(excluding treasury shares) and no shares of Preferred Stock were issued and
outstanding. All of such issued and outstanding shares of capital stock of
Purchaser are validly issued, fully paid and nonassessable. As of October 31,
2001, there were 7,718,929 shares of capital stock held in the treasury of
Purchaser.
(b) The authorized capital stock of CFAC consists of 1,000 shares of
$.0l par value common stock. One thousand shares of $.0l par value common
stock are issued and outstanding, and all of such shares are owned by
Purchaser. All of such issued and outstanding shares of capital stock of CFAC
are validly issued, fully paid and nonassessable. All issuances, transfers or
purchases of the capital stock of CFAC have been in compliance with all
applicable agreements and all applicable laws, including federal and state
securities laws, and all taxes thereon have been paid.
(c) Except as set forth on the Purchaser's Disclosure Schedule or in
the Purchaser's SEC Filings, as of the date hereof (i) there are not
outstanding nor is Purchaser or CFAC bound by, any subscriptions, options,
preemptive rights, warrants, calls, commitments, or agreements or rights of
any character requiring Purchaser or CFAC to issue or entitling any person or
entity to acquire any additional shares of capital stock or any other equity
security of Purchaser or CFAC, including any right of conversion or exchange
under any outstanding security or other instrument, and neither Purchaser nor
CFAC is obligated to issue or transfer any shares of its capital stock for any
purpose and (ii) there are no outstanding obligations of Purchaser or CFAC to
purchase, redeem or otherwise acquire any outstanding shares of capital stock
of Purchaser or CFAC.
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(d) The Purchaser Common Stock to be issued in the Merger, when
issued in accordance with this Agreement and the Articles of Merger, will be
duly and validly issued, fully paid and nonassessable, and will be issued in
compliance with all applicable federal and state securities laws.
Section 5.6. SEC Filings; Financial Statements.
(a) Purchaser has delivered or made available to CareFirst true and
correct copies of (i) its Annual Reports on Form 10-K, as amended, for the
years ended December 31, 2000, 1999 and 1998, as filed with the SEC, (ii) its
proxy statements relating to all of Purchaser's meetings of stockholders
(whether annual or special) since January 1, 2000, as filed with the SEC, and
(iii) all other reports, statements and registration statements (including
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as amended)
filed by Purchaser with the SEC since January 1, 2000 (the reports and
statements set forth in clauses (i), (ii) and (iii) are referred to
collectively as the "Purchaser SEC Filings"). As of their filing dates, none
of the Purchaser SEC Filings contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Purchaser SEC Filings at the time of filing
complied in all material respects with the Exchange Act or the Securities Act,
as the case may be, and the rules and regulations thereunder.
(b) Purchaser has delivered or made available to CareFirst copies of
(i) audited consolidated financial statements of Purchaser at and for the
years ended December 31, 2000, 1999 and 1998, and (ii) unaudited consolidated
financial statements of Purchaser at and for the nine-month period ended
September 30, 2001.
(c) The financial statements referred to in clause (b) above (the
"Purchaser Financial Statements") are true and complete in all material
respects, have been prepared in accordance with GAAP, consistently applied
throughout the periods covered by such statements (except as may be stated in
the explanatory notes to such statements) and present fairly, in all material
respects, the financial position and consolidated results of operations of the
Purchaser Companies at the dates of and for the periods covered thereby. The
Purchaser Financial Statements for interim periods are subject to normal
recurring year-end adjustments.
Section 5.7. Resale Registration Statement; Purchaser's Proxy Statement.
Except for information supplied or to be supplied by CareFirst in
writing for inclusion therein, as to which no representation is made, neither
the Resale Registration Statement, nor Purchaser's Proxy Statement contains or
will contain (in the case of the Resale Registration Statement, as amended or
supplemented, at the time such registration statement becomes effective, and
in the case of Purchaser's Proxy Statement or any amendments thereof or
supplements thereto, at the time of the mailing of Purchaser's Proxy Statement
and any amendments or supplements thereto, and at the time of the meeting of
stockholders of Purchaser to which Purchaser's Proxy Statement relates) any
untrue statement of material fact nor omit or will omit to state any material
fact required to be stated therein or necessary in order to make the
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statements therein, in light of the circumstances under which they were made,
not misleading. Except for information supplied or to be supplied by CareFirst
in writing for inclusion therein, as to which no representation is made, the
Resale Registration Statement and any supplements or amendments thereto will
comply in all material respects with the Securities Act.
Section 5.8. Absence of Certain Changes or Events.
Except as set forth on the Purchaser's Disclosure Schedule or in the
Purchaser's SEC Filings, since December 31, 2000 and through the date of this
Agreement, the Purchaser Companies have not experienced an event that has had,
or would reasonably be expected to have, a Purchaser Material Adverse Effect.
Section 5.9. Litigation; Judicial Proceedings.
(a) As of the date of this Agreement, there are no judicial or
administrative actions, proceedings or investigations pending or, to the
knowledge of Purchaser, threatened, that (i) question the validity of this
Agreement or any action taken or to be taken by Purchaser or CFAC in
connection with this Agreement, or (ii) seek to prevent the consummation by
Purchaser or CFAC of any of the transactions contemplated by this Agreement.
(b) Except as disclosed in Purchaser's SEC Filings or in the
Purchaser's Disclosure Schedules, as of the date of this Agreement, there is
no litigation, proceeding, suit, action, charge or investigation pending or,
to the knowledge of Purchaser, threatened, or any order, judgment, injunction,
decree, plea agreement, stipulation or award of any kind outstanding, against
or relating to any Purchaser Company, or involving any of its property or
business, the outcome of which in the aggregate may reasonably be expected to
result in a Purchaser Material Adverse Effect.
Section 5.10. Compliance with Law.
(a) Each Purchaser Company is conducting its business in compliance
with all statutes, laws, rules, regulations, ordinances, decrees, judgments,
injunctions and orders applicable to it (including those relating to ERISA,
labor laws, Health Benefit Laws, environmental laws, tax laws and health and
safety matters), except where such failure to comply would not have a
Purchaser Material Adverse Effect, and has not received any notice that it is
in noncompliance with any such statutes, laws, rules, regulations, ordinances,
decrees or orders, except where such noncompliance would not have a Purchaser
Material Adverse Effect.
(b) Each Purchaser Company currently holds all permits, licenses and
approvals of every Governmental Entity necessary for the ownership of its
respective assets and the operation of its respective businesses (including
those relating to ERISA, labor laws, Health Benefit Laws, environmental laws,
tax laws and health and safety matters) except where the failure to hold such
permits, licenses or approvals, in the aggregate, would not result in a
Purchaser Material Adverse Effect.
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(c) Each Purchaser Company is in compliance with all such permits,
licenses and approvals, except where such failure to comply would not result
in a Purchaser Material Adverse Effect.
(d) All information provided by each Purchaser Company in connection
with the preparation and filing of any regulatory notice or other regulatory
filing was true, complete and accurate in all material respects when made.
Section 5.11. Employee Plans.
The Purchaser Disclosure Schedule contains a list, which is accurate
and complete in all material respects, of all the Benefit Plans maintained by
the Purchaser Companies (the "Purchaser Plans"), in which employees of the
Purchaser Companies generally are entitled to participate as of the date of
this Agreement.
Section 5.12. Brokers and Finders.
Except for Banc of America Securities LLC or any other company, whose
fee shall be the sole responsibility of Purchaser, neither Purchaser nor any
of its officers, directors or employees has employed any broker, finder or
investment banker or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
by this Agreement.
Section 5.13. Financing.
Purchaser has, and will have at Closing, sufficient cash, available
lines of credit or other sources of immediately available funds to enable it
to make payment of the cash portion of the Purchase Price and consummate the
transactions contemplated hereby.
ARTICLE VI
Covenants Of The Parties
The parties covenant as provided in this Article VI, except as
expressly set forth in the Schedules or as contemplated herein:
Section 6.1. Pre-Closing Operations.
(a) CareFirst. CareFirst hereby covenants and agrees that, pending
the Closing, (for purposes of the following, "CareFirst" shall be deemed to
include the CareFirst Subsidiaries):
(i) except as approved by the Transition Team or otherwise
consented to by Purchaser, CareFirst will operate and
conduct its business only in the ordinary course in
accordance with prior practices, shall maintain its assets
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in their present state of repair (ordinary wear and tear
excepted), and shall use its Best Efforts to keep
available the services of its employees and preserve the
goodwill of its business and relationships with the
customers, licensors, suppliers, distributors and brokers
with whom it has business relations;
(ii) except as approved by the Transition Team or otherwise
consented to by Purchaser, CareFirst shall not:
(A) sell, transfer or otherwise dispose of any assets,
except for sales, transfers or disposals which would
not have a CareFirst Material Adverse Effect;
(B) enter into any new material contract or commitment
relating to its business, with "material contract or
commitment" being defined for the purpose of this
subsection as customer contracts with a multi-year
fee or rate guarantee involving an annual premium or
administrative services fee in excess of $2,500,000
and contracts or commitments which involve CareFirst
incurring a liability or obligation (X) in excess of
$5 million individually, or (Y) in excess of $1
million individually in the event CareFirst enters
into new contracts or commitments which involve
CareFirst incurring liabilities or obligations not
otherwise approved pursuant to this Section 6.1 in
excess of $20 million in the aggregate in any
calendar year;
(C) mortgage, pledge or subject to liens or other
encumbrances or charges any assets, except by
incurring CareFirst Permitted Liens;
(D) purchase or commit to purchase any capital asset
outside of the relevant CareFirst Company capital
plan for a price exceeding $5 million individually or
$25 million in the aggregate per calendar year;
(E) terminate or amend in any material respect any
CareFirst Material Contract or any insurance policy,
in force on the date hereof;
(F) amend its charter or bylaws (provided, however, the
foregoing will in no way limit the actions which are
required to be taken by CareFirst pursuant to Section
6.8);
(G) acquire (whether by merger, consolidation, share
exchange, acquisition of stock, or acquisition of
assets) any corporation, partnership, joint venture,
or other business (or any part thereof), except where
the consideration paid by CareFirst in connection
with such acquisition (including any debt assumed as
a result
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thereof) is less than $5 million individually or $25
million in the aggregate in any calendar year;
(H) split, combine or reclassify its outstanding capital
stock or declare, set aside or pay any dividend or
distribution payable in cash, stock, property or
otherwise, except for payments or distributions by a
wholly-owned subsidiary of CareFirst to CareFirst or
to another wholly-owned subsidiary of CareFirst;
(I) except for the issuance of CareFirst Common Stock to
the Tax-Exempt Entities in connection with the
Conversion, issue, sell, pledge or dispose of, or
agree to issue, sell, pledge or dispose of or
otherwise cause to become outstanding any shares of
or any options, warrants or rights of any kind to
acquire any shares of its capital stock of any class
or any debt or equity securities convertible into or
exchangeable for such capital stock;
(J) incur or become contingently liable with respect to
any indebtedness for borrowed money or purchase money
indebtedness, other than borrowings under CareFirst's
revolving credit facility not to exceed an aggregate
principal amount of $30 million;
(K) modify its current investment policies or practices
in any material respect except to accommodate changes
in applicable law;
(L) materially change its methods of accounting in effect
at December 31, 2000, except as required by changes
in GAAP or SAP;
(M) enter into any Affiliate Transaction in excess of
$250,000;
(N) (1) change the compensation of its employees, except
in the ordinary course of business consistent with
past practices, or change in any material respects
the methodology for calculating incentive payments to
its employees; (2) enter into or modify any severance
agreement, plan or arrangement with any employee, or
increase any severance benefit under any such
agreement, plan or arrangement, except with regard to
non-executive employees in the ordinary course of
business consistent with past practices prior to
January 1, 2001; or (3) adopt or materially change
any Benefit Plan, excluding any amendments to any
Benefit Plans required by law;
(O) materially expand or alter its geographical service
area or sell or provide products or services
materially different from those currently sold or
provided by the CareFirst Companies;
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(P) settle or compromise any pending or threatened suit,
litigation or similar proceeding that would result in
a liability to CareFirst in excess of $2 million or
that would result in material ongoing restrictions on
the conduct of business of CareFirst;
(Q) make any material change to its underwriting
practices and policies (other than changes required
by applicable law); or
(R) enter into, or agree to enter into, any agreement to
do any of the foregoing; and
(iii) CareFirst shall obtain Purchaser's prior written consent
to its annual capital plan prior to adoption by
CareFirst's Board of Directors if capital expenditures
under such plan are to exceed $60 million in the
aggregate.
(b) Purchaser or Transition Team Consent. In the event CareFirst
seeks the approval or consent of Purchaser or the Transition Team for any
action under Section 6.1(a), the proposed action shall be deemed approved or
consented to by Purchaser or the Transition Team if no objection by Purchaser
or its representatives on the Transition Team has been provided within ten
(10) business days after the date of CareFirst's request for approval or
consent (provided that such request also includes information reasonably
requested by Purchaser to evaluate such request).
(c) Purchaser. Purchaser hereby covenants and agrees that (for
purposes of the following, "Purchaser" shall be deemed to include CFAC and the
Purchaser Subsidiaries) Purchaser shall not:
(A) amend its charter or bylaws in any manner that would
adversely affect the ability of Purchaser to consummate
the transactions contemplated by this Agreement;
(B) acquire (whether by merger, consolidation, share exchange,
acquisition of stock, or acquisition of assets) any
corporation, partnership, joint venture, or other business
(or any part thereof), except where such acquisition will
not materially adversely affect or delay Purchaser's or
CareFirst's ability to consummate the transactions
contemplated by this Agreement;
(C) from the beginning of the time period for the calculation
of the Average Market Price through the Closing Date,
declare, set aside, make or pay any dividend or other
distribution (other than a share repurchase in accordance
with Purchaser's share repurchase program), payable in
cash, stock, property or otherwise, with respect to any of
its capital stock;
(D) adopt a plan of complete or partial liquidation or
dissolution of Purchaser;
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(E) take any action that may reasonably be expected to cause a
Purchaser Material Adverse Effect; or
(F) enter into, or agree to enter into, any agreement to do
any of the foregoing.
Section 6.2. New Information; Access.
(a) Each of CareFirst and Purchaser shall be obligated to promptly
disclose in writing to the other any new information which would result in a
breach of their respective representations and warranties in Articles IV and V
of this Agreement. Further, subject to confidentiality obligations, Purchaser
shall use its Best Efforts (i) to disclose promptly to CareFirst any material
development with respect to Purchaser's business, results of operations or
financial condition, and (ii) to provide promptly to CareFirst and its
advisors such information regarding its business, results of operations or
financial condition as may be reasonably requested by CareFirst.
(b) The Parties shall form a transition team (the "Transition Team")
consisting of an equal number of representatives of CareFirst and Purchaser.
The Transition Team shall be responsible for facilitating a transition and
integration planning process to facilitate the combination of the operations
of CareFirst with those of Purchaser. The Transition Team shall be responsible
for developing, and monitoring the development of, and deliverables due under,
an action plan for the combination of the businesses. The Transition Team, or
designated representatives thereof, shall meet monthly to review the financial
performance of the CareFirst Companies and at such meetings CareFirst shall
advise the Transition Team of the status of its sales, enrollment, revenues,
investment income, quarterly claim trends, medical loss ratio, administrative
expenses, net income, reserves and statutory capital (as indicated on the
quarterly balance sheet). The Transition Team shall be informed at each
quarterly meeting of the applicable trends and retention experience arising
from CareFirst's business planning and underwriting process.
(c) From and after the date hereof and subject to the terms of that
certain Confidentiality Agreement by and between the parties hereto, dated
December 8, 2000, CareFirst shall (and shall cause its subsidiaries to)
provide Purchaser reasonable access during regular business hours to its
books, records, offices, personnel, counsel, accountants and actuaries as may
be reasonably requested; provided, however, that (a) CareFirst shall not be
compelled to provide any customer-specific information pursuant to this
Section and (b) no investigation made pursuant to this Section shall
unreasonably interfere with the operation or conduct of business of CareFirst.
Section 6.3. Transfer Taxes.
All sales or transfer taxes, including stock transfer taxes, document
recording fees, real property transfer taxes, and excise taxes, arising out of
or in connection with the consummation of the Merger shall be paid by
Purchaser. All such taxes or fees arising out of or in connection with the
Conversion shall be paid by CareFirst.
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Section 6.4. Preparation of Supporting Documents.
In addition to such actions as the parties may otherwise be required
to take under this Agreement or applicable law in order to consummate this
Agreement and the transactions contemplated hereby, the parties shall take
such action, shall furnish such information, and shall prepare, or cooperate
in preparing, and execute and deliver such certificates, agreements and other
instruments as the other party may reasonably request from time to time
before, at or after the Closing, with respect to compliance with the
obligations of CareFirst, CFAC, or Purchaser in connection with the Merger and
the Conversion. Any information so furnished by the parties shall be true,
correct and complete in all material respects and shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 6.5. Purchaser's Stockholders' Meetings.
If a meeting of Purchaser's stockholders is required to comply with
Purchaser's obligations under the rules of the NYSE, after the filing of the
Plan of Conversion with the appropriate state regulatory bodies and prior to
any final hearing thereon, Purchaser will take all steps necessary to duly
call, give notice of, convene and hold a meeting of its stockholders
(including filing with the SEC and mailing to its stockholders the Purchaser
Proxy Statement) for the purpose of approving the stock issuance contemplated
by this Agreement and the Merger and for such other purposes as may be
necessary or desirable in connection with effectuating the transactions
contemplated hereby and thereby. Subject to applicable law and compliance by
Purchaser and CFAC with the material terms and conditions of this Agreement,
the Board of Directors of Purchaser shall, if such vote is so required,
recommend that its stockholders vote in favor of and shall use its Best
Efforts to obtain any necessary approval by the stockholders of Purchaser of
the foregoing.
Section 6.6. SEC and Stockholder Filings.
Purchaser shall send to CareFirst copies of all public reports and
materials as and when it sends the same to its stockholders or the SEC.
Section 6.7. Consents, Waivers, Authorizations, etc.
(a) Each of CareFirst and Purchaser will use its Best Efforts to
obtain all consents, waivers, authorizations, orders and approvals of and make
all filings and registrations with, any governmental commission, board or
other regulatory body or any third party, required for, or in connection with,
the performance by them of this Agreement and the consummation by them of the
transactions contemplated hereby, or as may be required in order not to
accelerate, violate, breach or terminate any agreement to which either party
or any of their respective Subsidiaries may be subject. Each party will
cooperate fully with each other party in assisting it to obtain such consents,
authorizations, orders and approvals. The parties will not take any action
which
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could reasonably be anticipated to have the effect of delaying, impairing or
impeding the receipt of any required approvals, regulatory or otherwise.
(b) Without limiting the generality of the foregoing, the parties
agree that Purchaser shall make such filings as are required in connection
with this Agreement and the transactions contemplated hereby on its behalf,
including the "Form A" regulatory filings to be made with the appropriate
state regulatory bodies and shall coordinate the conduct of the hearing or
hearings before the appropriate regulator in each such jurisdiction in
connection with such filings. The hearings referred to in the preceding
sentence are referred to individually as "Hearing" and collectively as the
"Hearings." CareFirst and Purchaser will reasonably cooperate with regard to
the content of the filings referred to in the first sentence of this Section
6.7(b). CareFirst and Purchaser, as the case may be, shall submit all such
filings and hearing testimony, witness lists and other similar materials
relating to the hearing to the other for its review prior to filing. Purchaser
agrees to appeal any adverse findings in connection with any orders issued as
a result of the Hearings and to use its Best Efforts in pursuing such appeal
(assuming that Purchaser, and not CareFirst, is the appropriate party to file
such appeal). CareFirst and Purchaser will reasonably cooperate with regard to
such appeal.
Section 6.8. Conversion of Primary CareFirst Companies.
As soon as practicable after the date of this Agreement, the Primary
CareFirst Companies shall take all appropriate and necessary steps so that,
immediately prior to the Merger, the Primary CareFirst Companies shall convert
from non-stock membership corporations to stock corporations and from
not-for-profit status to for-profit status (collectively, the "Conversion").
In connection with the Conversion, CareFirst shall apply for the Private
Letter Ruling. Prior to the submission of such ruling request, CareFirst will
consult with Purchaser regarding the pertinent factual representations to be
made in connection with such ruling request and subsequent supplemental
submissions and shall provide Purchaser with a draft of the ruling request for
Purchaser's review and comment, and all reasonable comments shall be
incorporated into such ruling request.
Section 6.9. Liability; Indemnification.
From and until six years after the Effective Time:
(a) CareFirst shall, and Purchaser shall cause CareFirst and the
CareFirst Subsidiaries to, keep in full force and effect and honor any
provisions in their respective charters and bylaws providing for immunity from
monetary liability for, exculpation of liability for, and indemnification of,
present or former trustees, directors, officers, fiduciaries, employees or
agents as in effect immediately prior to the Closing, which provisions will
not be amended, repealed or otherwise modified except as required by
applicable law, or except for changes permitted by law that would enlarge the
rights under such provisions, or would not adversely affect the rights
thereunder, of individuals who, on or prior to the Closing Date, were
trustees, directors, officers, fiduciaries, employees or agents of CareFirst
or the CareFirst Subsidiaries, as
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the case may be (and provided further that any permissive advance of expense
provision shall be administered as a mandatory advance of expense provision).
(b) In addition to the provisions of subparagraph (a), CareFirst
shall, and Purchaser shall cause CareFirst and the CareFirst Subsidiaries to,
maintain in effect, liability insurance against claims asserted based on acts
or omissions occurring at or prior to the Closing covering those categories of
persons who are currently covered by CareFirst's or the CareFirst
Subsidiaries' (as the case may be) liability insurance policy or policies, on
terms substantially as favorable as the terms of such insurance coverage in
effect as of the date hereof, so long as, the premium for such six year tail
coverage is not in excess of 1,200% of the last annual premium paid prior to
the date hereof. If the premium for such insurance would at any time exceed
such amount, then Purchaser shall cause to be maintained policies of insurance
that provide the maximum coverage available for a premium not in excess of
such amount.
(c) In the event Purchaser, CareFirst or any CareFirst Company or any
of their respective successors or assigns (i) consolidates with or merges into
any other person and is not the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
their respective properties and assets to any person, then, and in each such
case, proper provision will be made so that the successors and assigns of
Purchaser, CareFirst and any CareFirst Company, as the case may be, will
assume the obligations set forth in Sections 6.9(a) and (b) if they are not
otherwise assumed by operation of law.
(d) This Section 6.9: (i) will survive the Closing; (ii) is intended
to benefit each CareFirst Company, and the individuals who at or before the
Closing were trustees, directors, officers, fiduciaries, employees and agents
of any CareFirst Company, and their respective heirs, executors,
administrators, representatives and successors; and (iii) is in addition to,
and not in substitution for, any other rights to immunity, exculpation,
indemnification, contribution or insurance that any such individual may have
by contract or otherwise.
Section 6.10. Xxxx-Xxxxx-Xxxxxx Notification.
Each of CareFirst and Purchaser shall prepare and file on a date
agreed to by the parties a notification with the DOJ and the FTC as required
by the HSR Act. Each party shall cooperate with each other party in connection
with the preparation of such notification, including sharing information
concerning sales and ownership and such other information as may be needed to
complete such notification. The parties further agree to cooperate with one
another to the extent necessary to comply with any requests by the DOJ or the
FTC under the HSR Act for additional information arising from the
notification. Each party shall keep confidential all information about the
other party obtained in connection with the preparation of such notification
or response to requests for additional information.
Section 6.11. Further Assurances.
Subject to the terms and conditions herein provided, each of
CareFirst and Purchaser agrees to use its Best Efforts to take, or cause to be
taken, all actions, and to do, or cause to be
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done, all things reasonably necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by
this Agreement, including (a) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, (b) obtaining all
governmental consents acquired for the consummation of the Merger, the
Conversion and the transactions contemplated hereby, and (c) making all
necessary filings under the HSR Act. Upon the terms and subject to the
conditions hereof, each of the parties agrees to use its Best Efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
reasonably necessary to satisfy the other conditions of the Closing set forth
herein. Each party will consult with counsel for the other party as to, and
will permit such counsel to participate in, at such other party's expense, any
lawsuits or proceedings referred to in clause (a) above brought against any
party. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the
officers and directors of the Surviving Corporation shall take all such
necessary action to the extent not inconsistent with their other duties and
obligations or applicable law.
Section 6.12. Public Announcements.
So long as this Agreement is in effect, each of CareFirst and
Purchaser shall not and shall cause their affiliates not to issue or cause the
publication of any press release or any other announcement with respect to the
Merger, the Conversion, or the transactions contemplated by this Agreement
without the prior consent of the other party, except where such release or
announcement is required by applicable law or pursuant to any listing
agreement with, or the rules or regulations of, the SEC or the NYSE, in which
case each of CareFirst and Purchaser will permit review by the other of any
such press release or announcement prior to its release or filing and shall
deliver simultaneously a final copy of such release or announcement to the
other upon its release or filing. CareFirst and Purchaser agree to coordinate
their initial press releases announcing the execution of this Agreement.
Section 6.13. Appointment of Director of Purchaser; Management Issues.
(a) Effective as of Closing, Purchaser (after consultation with
CareFirst) will nominate for election one non-employee member of the existing
Board of Directors of CareFirst to serve on Purchaser's Board of Directors and
will use Best Efforts to have the CareFirst designee appointed or elected to
Purchaser's Board of Directors. In the event that at that time, Purchaser's
Board of Directors shall have one or more classes of directors which have
fewer members than one or more other classes of directors, the CareFirst
designee shall be nominated to whichever class with fewer directors provides
for the longest initial term for the CareFirst director.
(b) At the Effective Time, the Chief Executive Officer of CareFirst
shall be named the President of Purchaser's Southeast Business Region with
overall responsibility for all of the business operations of the Surviving
Corporation and the CareFirst Subsidiaries in the Southeast Business Region.
Other senior executives of CareFirst will be assigned significant
responsibilities with respect to the business of the Surviving Corporation.
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(c) An advisory board will be formed for each of BCBS-NCA, BCBS-MD
and BCBSD. Each person who serves as a director of one those companies at
Closing, subject to such person's acceptance of such appointment, will serve
on the advisory board for that company, and the current directors of CareFirst
who do not currently serve on the Board of BCBS-NCA, BCBS-MD or BCBSD, subject
to such person's acceptance of such appointment, will be appointed to serve on
one of the advisory boards. Each advisory board will provide guidance to its
respective company regarding the company's relationship with subscribers (both
group and non-group), providers and the general public. Each director
appointed to an advisory board shall serve for a term of two years from the
Closing on the same terms and conditions currently applicable to such person's
service on the Board of Directors of CareFirst, BCBS-NCA, BCBS-MD or BCBSD as
of the date hereof.
Section 6.14. Non-Solicitation.
So long as this Agreement is in effect, no CareFirst Company shall,
and each shall use its Best Efforts to cause its representatives not to,
directly or indirectly, solicit any proposal from a third party regarding a
purchase, affiliation, or lease of all or a material part of the assets of
CareFirst, whether by sale of capital stock, merger, consolidation, sale or
lease of material assets, affiliation, joint venture, or other material
transaction (a "Merger Proposal"). Neither the foregoing prohibition nor any
other provision of this Agreement shall be interpreted to prohibit CareFirst
from (a) making any disclosure of information required by law, or (b)
providing information regarding CareFirst to, or negotiating with, any third
party (provided such party is subject to an executed confidentiality
agreement) that makes an unsolicited written Merger Proposal if the Board of
Directors of CareFirst concludes in good faith, after consultation with its
outside legal counsel, that the failure to provide such information or engage
in such negotiations is or is reasonably likely to be inconsistent with the
directors' fiduciary duties under applicable law. Prior to providing any
information to any third party or entering into negotiations with any third
party, CareFirst shall notify Purchaser of the Merger Proposal and shall
provide to Purchaser a copy of the Merger Proposal.
Section 6.15. Resale Registration Statement; NYSE Listing.
As soon as practicable after the date of this Agreement, Purchaser
shall file with the SEC the Resale Registration Statement to register under
the Securities Act the shares of Purchaser Common Stock to be issued in the
Merger for resale by the Tax-Exempt Entities after the Closing. CareFirst will
provide all information, financial and otherwise, concerning CareFirst as may
be needed in the Resale Registration Statement. Purchaser and CareFirst shall
use their Best Efforts to comply, prior to the Effective Time, with all
applicable requirements of federal and state securities laws in connection
with the Merger and the issuance of Purchaser Common Stock in connection
therewith. Purchaser shall have the Resale Registration Statement declared
effective by the SEC on or before the Closing Date and shall maintain the
effectiveness and availability of the Resale Registration Statement from the
Closing Date through the date that is 180 days after the Closing Date (subject
to blackout periods provided for in the registration rights agreement referred
to in the next sentence). On or before the Closing, Purchaser shall enter into
a registration rights agreement with the Tax-Exempt Entities that shall
contain
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customary terms and provisions (including reasonable blackout periods) and
shall provide them with the following: (1) one demand registration right which
right will expire on the first anniversary of the Closing Date and (2)
unlimited piggy back registration rights which rights will expire on the
second anniversary of the Closing Date. In addition, Purchaser shall promptly
file all appropriate applications with the NYSE to have the Purchaser Common
Stock approved for listing on the NYSE upon notice of issuance.
Section 6.16. Accountant's Letter.
Upon reasonable notice, CareFirst shall use its Best Efforts to cause
its independent public accountants to deliver to Purchaser a letter dated
within two (2) business days prior to the effective time of the Resale
Registration Statement, covering such matters reasonably requested by
Purchaser as are customarily addressed in accountants' "comfort" letters.
Section 6.17. Employee Benefits.
(a) From the date hereof through the fourth anniversary of the date
of this Agreement, Purchaser and the Surviving Corporation shall not cause or
permit any CareFirst Plan (except the CareFirst 1995 Long-Term Incentive Plan)
to be amended, suspended or terminated in any manner that could have any
adverse effect on the benefits or any right of any participant or beneficiary
therein (other than with respect to an employee whose employment is covered by
a collective bargaining agreement), except as required by law or as determined
by the President of CareFirst to be in the best interests of CareFirst. From
the Effective Time through the fifth anniversary of the Closing Date,
Purchaser and the Surviving Corporation shall not cause or permit the
CareFirst of Maryland, Inc. Retirement Plan, the Non-Contributory Retirement
Program for Certain Employees of Blue Cross and Blue Shield of Delaware or the
Group Hospitalization and Medical Services, Inc. Pension Trust Plan
(collectively, the "CareFirst Pension Plans") to be amended, suspended or
terminated in any manner that could have any adverse effect on benefit
accruals during such five-year period (including any reduction in the rate of
accrual) of any employee who, as of the Closing Date, is a vested participant,
has attained age 45 and has a sum of age and years of service of at least 65.
Nothing in this Section 6.17(a) shall prohibit (i) the merger of any CareFirst
Plan with another plan provided that such merger does not have any adverse
effect on the benefits or rights protected by this Section 6.17(a), or (ii)
the transfer of any person's employment from a CareFirst Company to Purchaser
or an Affiliate thereof provided such transfer does not adversely affect the
pension and retirement benefits such employee would otherwise receive in
accordance with and subject to terms and conditions of this Section 6.17(a).
(b) After the requirements of Section 6.17(a) cease to apply to any
CareFirst Plans, Purchaser and the Surviving Corporation shall cause the
Purchaser Companies or the CareFirst Companies to provide the employees of the
CareFirst Companies (the "CareFirst Employees"), other than those employees
whose employment is covered by a collective bargaining agreement, benefits
that in the aggregate are no less favorable than those provided to other
similarly situated employees of Purchaser and its Affiliates.
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(c) Purchaser and the Surviving Corporation shall cause any employee
benefit plans (as defined in Section 3(3) of ERISA) in which any CareFirst
Employees first become eligible to participate on or after the Effective Time
(the "New CareFirst Plans") to (i) waive all limitations as to pre-existing
conditions, exclusions and waiting periods thereunder with respect to the
participation and coverage requirements applicable to such CareFirst Employees
and their beneficiaries other than limitations or waiting periods that are
already in effect with respect to such CareFirst Employees and that have not
been satisfied as of the date on which such CareFirst Employees first became
eligible to participate in such New CareFirst Plan, (ii) credit such CareFirst
Employees and their beneficiaries with the deductibles, coinsurance amounts or
maximum out-of-pocket payments satisfied under the comparable CareFirst Plans
during the same calendar year, and (iii) recognize all service of the
CareFirst Employees with the CareFirst Companies for purposes of eligibility
to participate and vesting. Service of the CareFirst Employees with the
CareFirst Companies will also be recognized for purposes of benefits accrual
under any New CareFirst Plan that is a defined benefit pension plan with a
benefit formula based on final average compensation, provided that such plan
shall provide for an offset for any benefit payable under the New CareFirst
Plan for the same period of service with the CareFirst Companies under any
CareFirst Pension Plan.
(d) After the Effective Time, Purchaser and the Surviving Corporation
shall cause the CareFirst Companies to continue to comply with their
agreements and covenants and to perform their obligations respecting the
CareFirst Plans under Section 7.5 of the Business Affiliation Agreement dated
December 23, 1998, by and between CareFirst and BCBSD.
Section 6.18. Insurance Against Certain Tax Events.
CareFirst will seek to purchase for the benefit of the Tax-Exempt
Entities an insurance policy effective as of the Closing Date insuring the
Tax-Exempt Entities against the risks assumed by the Tax-Exempt Entities
pursuant to the Indemnity Agreement described in Section 7.3(f)(iii).
Purchaser shall cooperate with CareFirst's reasonable requests in securing
such policy and agrees to pay up to $5 million for the premium for such
insurance policy.
ARTICLE VII
Conditions
Section 7.1. Conditions to Each Party's Obligations.
The respective obligation of each party to effect the Merger and the
other transactions to be effected contemporaneous with or as a result of the
Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following conditions:
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(a) Conversion. The Conversion shall have occurred substantially on
the terms set forth on Appendix A or on other terms which do not alter the
economic terms, or in any material respect the other terms, of the Merger and
other transactions contemplated by this Agreement.
(b) Stockholder Approval. If required, this Agreement and the Merger
shall have been approved at or prior to the Effective Time by the requisite
vote of the stockholders of Purchaser in accordance with generally applicable
law and the Certificate of Incorporation and Bylaws of Purchaser.
(c) No Injunction. No order, statute, rule, regulation, executive
order, stay, decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which prohibits
or prevents the consummation of the transactions contemplated hereby and which
has not been stayed or vacated by the Effective Time. Each of CareFirst, CFAC,
and Purchaser shall use its Best Efforts and shall cooperate with each other
to have any such order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction vacated, lifted or stayed.
(d) HSR Act. Any waiting period applicable to the Merger under the
HSR Act shall have expired or earlier termination thereof shall have been
granted.
(e) NYSE Listing. The Purchaser Common Stock issuable in the Merger
shall have been approved for listing on the NYSE upon notice of issuance.
(f) Consent of State Regulators. All consents of the Maryland
Administration, the D.C. Superintendent, the Delaware Commissioner and any
other appropriate state regulatory bodies that are required to consummate the
transactions contemplated hereby shall have been obtained pursuant to orders
which by their respective terms do not impose any Materially Burdensome
Condition, and such orders shall be in full force and effect.
(g) Approval of the Blue Cross Blue Shield Association. Any required
approval of the BCBSA shall have been obtained.
(h) Approval by Tax-Exempt Entities. The Merger shall have been
approved by the Tax-Exempt Entities in their capacity as stockholders of
CareFirst.
(i) Receipt of Private Letter Ruling. CareFirst shall have received
the Private Letter Ruling, which shall be favorable in all material
respects.
Section 7.2. Conditions to Obligations of CareFirst.
The obligation of CareFirst to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions, any one or more of which may be waived in writing by CareFirst:
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(a) Obligations Performed. Purchaser and CFAC shall have performed
and complied with in all material respects their obligations, agreements and
covenants under this Agreement which are required to be performed or complied
with by them at or prior to the Effective Time.
(b) Representations and Warranties True at Closing Date. As of the
Effective Time, the representations and warranties contained in Article V
shall be true and correct in all respects as if made on and as of the Closing
Date (except in each case for (i) such changes that are caused by Purchaser's
compliance with the terms of this Agreement, and (ii) representations and
warranties that address matters only as of a date or with respect to the
period of time specified therein) without regard to any materiality
qualifications or qualifications for Purchaser Material Adverse Effect;
provided, however, that such representations and warranties shall be deemed
true and correct unless the failure of such representations and warranties to
be true and correct, in the aggregate, would result in a Purchaser Material
Adverse Effect.
(c) Certificate Delivered. Purchaser and CFAC shall have delivered to
CareFirst a certificate executed on their behalf by their respective
Presidents or other authorized executive officer in its corporate capacity to
the effect that the conditions set forth in Sections 7.2(a) and 7.2(b) have
been satisfied.
(d) Articles of Merger. CFAC shall have executed and delivered the
Articles of Merger in accordance with Section 2.2.
(e) Appointment of CareFirst Director. Purchaser shall have taken all
action necessary to appoint to the Board of Directors of Purchaser the person
selected pursuant to Section 6.13.
(f) Effective Resale Registration Statement. The Resale Registration
Statement shall have been declared effective by the SEC and no stop order
suspending the effectiveness of the Resale Registration Statement shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the SEC.
(g) No Material Adverse Effect. There shall have not occurred a
Purchaser Material Adverse Effect. Further, the Purchaser Common Stock shall
not have an average closing price of less than $50 per share for any 20
consecutive trading day period at any time prior to the Closing.
(h) Insurance Policy. The insurance policy contemplated by Section
6.18 shall have been obtained.
Section 7.3. Conditions to Obligations of Purchaser and CFAC.
The obligation of Purchaser and CFAC to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions, any one or more of which may be waived in writing by
Purchaser:
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(a) Obligations Performed. CareFirst shall have performed and
complied with in all material respects its obligations, agreements and
covenants under this Agreement which are required to be performed or complied
with by it at or prior to the Effective Time.
(b) Representations and Warranties True at Closing Date. As of the
Effective Time, the representations and warranties contained in Article IV
shall be true and correct in all respects as if made on and as of the Closing
Date (except in each case for (i) such changes that are caused by CareFirst's
compliance with the terms of this Agreement, and (ii) representations and
warranties that address matters only as of a date or with respect to the
period of time specified therein) without regard to any materiality
qualifications or qualifications for CareFirst Material Adverse Effect;
provided, however, that such representations and warranties shall be deemed to
be true and correct unless the failure of such representations and warranties
to be true and correct, in the aggregate, would result in a CareFirst Material
Adverse Effect; and provided further, that no representation or warranty
contained in Section 4.11 shall be violated by reason of the expiration of any
CareFirst Material Contract in accordance with its terms.
(c) Certificate Delivered. CareFirst shall have delivered to
Purchaser a certificate executed on its behalf by its President or another
authorized executive officer in its corporate capacity to the effect that the
conditions set forth in Sections 7.3(a) and 7.3(b) have been satisfied.
(d) Articles of Merger. CareFirst shall have executed and delivered
the Articles of Merger in accordance with Section 2.2.
(e) No Material Adverse Effect. There shall not have occurred an
event that has a CareFirst Material Adverse Effect.
(f) Agreement by Tax-Exempt Entities. Each of the Tax-Exempt Entities
shall have: (i) filed any notification with the DOJ and the FTC as required by
the HSR Act, (ii) executed and delivered a written agreement substantially in
the form of Appendix G, and (iii) given to Purchaser a tax indemnity
agreement, substantially in the form of Appendix H.
(g) No Litigation. There shall not be pending any suit, litigation or
other similar proceeding relating to the Conversion or to the other
transactions contemplated by this Agreement and as to which it is likely that
there will be a material liability to the Purchaser Companies or the CareFirst
Companies, each taken as a whole, (a "Material Case"); provided, however, that
in the event CareFirst or Purchaser notifies the other that it considers a
matter to be a Material Case, CareFirst and Purchaser agree that either may
refer the matter to an independent arbitrator mutually acceptable to the
parties (the "Independent Arbitrator") for a determination of whether the
matter is a Material Case. The Independent Arbitrator shall hold a hearing
(which shall be held pursuant to such rules and procedures as the parties may
agree upon or shall be established by the Independent Arbitrator) and render a
decision, which shall be final and binding upon the parties, within ten days
following either party's request. Each party shall be entitled to submit a
written brief or statement of position to the Independent Arbitrator (with a
copy being simultaneously provided to the other party) prior to the hearing.
The costs and expenses of the Independent Arbitrator shall be borne equally by
Purchaser and CareFirst.
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(h) Insurance Policy. Purchaser shall not have been obligated to
contribute more than $5 million for the premium for the insurance policy
contemplated by Section 6.18 (after taking into account premium amounts, if
any, agreed to be paid by or for the account of the Tax-Exempt Entities either
directly or through a reduction of the Purchase Price).
ARTICLE VIII
Termination Prior To Closing
Section 8.1. Termination of Agreement.
This Agreement may be terminated and the Merger contemplated hereby
may be abandoned at any time prior to the Effective Time, whether before or
after approval by the stockholders of Purchaser:
(a) By the written agreement of CareFirst and Purchaser;
(b) By either of CareFirst or Purchaser in writing, if the Merger or
Conversion shall not have been consummated on or before the three year
anniversary of this Agreement (or such later date as may be agreed to by
CareFirst and Purchaser); provided, however, that neither CareFirst nor
Purchaser may terminate this Agreement under this Section if the failure has
been caused by such party's material breach or default of its obligations
under this Agreement;
(c) By CareFirst in writing, if Purchaser or CFAC shall have (i)
materially breached any of their respective covenants contained herein or (ii)
breached any of their respective representations or warranties contained
herein which (in the case of clauses (i) and (ii)), (A) in the aggregate, has
resulted in a Purchaser Material Adverse Effect, and (B) is not capable of
being cured within 60 days after notice of breach;
(d) By Purchaser in writing, if CareFirst shall have (i) materially
breached any of its covenants contained herein or (ii) breached any of its
representations or warranties contained herein which (in the case of clauses
(i) and (ii)), (A) in the aggregate, has resulted in a CareFirst Material
Adverse Effect, and (B) is not capable of being cured within 60 days after
notice of breach;
(e) By either of CareFirst or Purchaser in writing, if any order,
statute, rule, regulation, executive order, stay, decree, judgment or
injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental authority which prohibits or prevents the consummation
of the transactions contemplated hereby, provided that Purchaser, CFAC and
CareFirst shall have used their respective Best Efforts to have any such
order, statute, rule, regulation, executive order, stay, decree, judgment or
injunction vacated, lifted or stayed and the same shall not have been vacated,
lifted or stayed within 30 days after entry, by any such court or governmental
or regulatory agency;
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(f) By CareFirst in writing, if the condition set forth in Section
7.1(b) is required but not satisfied within 180 days after the Plan of
Conversion is filed with the Maryland Administration, the D.C. Superintendent
and the Delaware Commissioner;
(g) By CareFirst or Purchaser in writing, if any required approval of
the stockholders of Purchaser for this Agreement or the Merger shall not have
been obtained because Purchaser's stockholders fail to approve this Agreement
and the Merger at a duly held meeting of stockholders or at any adjournment
thereof;
(h) By CareFirst or Purchaser in writing, if the Board of Directors
of CareFirst authorizes CareFirst to execute a binding written agreement with
respect to a transaction that constitutes a Superior Proposal; provided,
however, that prior to any such authorization, (i) the Board of Directors of
CareFirst, after consultation with legal counsel, shall determine in good
faith that contemplation of such Superior Proposal and termination of this
Agreement is required for such Board of Directors to comply with its fiduciary
duties under applicable law, (ii) CareFirst notifies Purchaser in writing that
it intends to enter into such an agreement and provides Purchaser with the
proposed definitive documentation for such Superior Proposal and (iii)
Purchaser does not, within seven days after the receipt of such written notice
and documentation, provide a written offer that the Board of Directors of
CareFirst determines in good faith to be at least as favorable as the Superior
Proposal;
(i) By either of CareFirst or Purchaser in writing, if the Maryland
Administration, the D.C. Superintendent or the Delaware Commissioner
disapproves the Merger after a Hearing; or
(j) By either of CareFirst or Purchaser in writing, if the FTC or the
DOJ makes a final decision, which is not appealable within the FTC or DOJ, to
file a suit, action or proceeding to prohibit or restrain the consummation of
the transactions contemplated by this Agreement.
Section 8.2. Termination of Obligations; Liquidated Damages.
(a) A termination of this Agreement pursuant to this Article VIII
shall terminate all obligations of the parties hereunder without further
liability, except as otherwise provided in this Section. In the event this
Agreement is terminated (1) by CareFirst pursuant to Section 8.1(c), then
Purchaser shall, upon CareFirst's written request, reimburse CareFirst within
15 days after demand for all its reasonable expenses (documented in reasonable
detail) incurred in connection with this Agreement and the transactions
contemplated hereby up to an aggregate amount equal to $3 million, (2) by
Purchaser pursuant to Section 8.1(d), then CareFirst shall, upon Purchaser's
written request, reimburse Purchaser within 15 days after demand for all its
reasonable expenses (documented in reasonable detail) incurred in connection
with this Agreement and the transactions contemplated hereby up to an
aggregate amount equal to $3 million, (3) by CareFirst or Purchaser pursuant
to Section 8.1(h), then CareFirst shall be obligated to pay Purchaser, within
15 days after such termination, a termination fee of $37.5 million, or (4) by
Purchaser pursuant to Section 8.1(d) and at the time of CareFirst's breach,
the CareFirst Board of Directors was aware of the existence of a then pending
Merger Proposal or the intention to propose a Merger Proposal and such Merger
Proposal had not been withdrawn prior to CareFirst's breach
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of a representation or warranty and within 12 months after such termination
CareFirst enters into a definitive agreement with respect to, or consummates,
a Merger Proposal, then CareFirst shall be obligated to pay Purchaser, within
15 days after entering such definitive agreement, a termination fee of $37.5
million.
(b) The parties agree that the liquidated damages and reimbursement
of expenses set forth in Section 8.2(a) shall be the total damages and sole
remedy of the parties upon the termination of this Agreement; provided,
however, that termination pursuant to subparagraphs (c) or (d) of Section 8.1
shall not relieve a party that willfully or intentionally defaults or breaches
from any liability to the other party hereto.
ARTICLE IX
Miscellaneous
Section 9.1. Entire Agreement.
This Agreement (including the Appendices and the Disclosure
Schedules) constitutes the sole understanding of the parties with respect to
the subject matter hereof; provided, however, that this provision is not
intended to abrogate any other written agreement between the parties executed
with or after this Agreement, or abrogate the effect of the Confidentiality
Agreement.
Section 9.2. Amendment.
No amendment, modification or alteration of the terms or provisions
of this Agreement shall be binding unless the same shall be in writing and
duly executed by the parties hereto.
Section 9.3. Parties Bound by Agreement; Successors and Assigns.
The terms, conditions and obligations of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto prior to the Effective Time without the prior written consent of the
other parties hereto; provided that Purchaser and CFAC each shall be permitted
to assign this Agreement to a direct or indirect wholly-owned subsidiary of
Purchaser so long as Purchaser remains fully liable for any failure of such
assignee to perform its obligations hereunder. Except for the parties hereto
and any person or entity covered by an indemnification provision hereunder,
this Agreement is not intended to confer upon any other person any rights or
remedies hereunder.
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Section 9.4. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall for all purposes be deemed to be an original and all of which
shall constitute the same instrument.
Section 9.5. Modification and Waiver.
Any of the terms or conditions of this Agreement may be waived in
writing at any time by the party which is entitled to the benefits thereof. No
waiver of any of the provisions of this Agreement shall be deemed to be or
shall constitute a waiver of any other provision hereof (whether or not
similar).
Section 9.6. Expenses.
Except as otherwise expressly provided herein, if the Merger is not
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses.
Section 9.7. Survival of Representations and Warranties.
The respective representations and warranties of CareFirst, Purchaser
and CFAC contained herein or in any certificates or other documents delivered
prior to or at the Closing by such parties pursuant to the terms of this
Agreement shall terminate upon the consummation of the Merger and be of no
further force and effect.
Section 9.8. Notices.
Any notice, request, instruction or other document to be given
hereunder by any party hereto to any other party hereto shall be in writing
and delivered personally or sent by registered or certified mail (including by
overnight courier or express mail service), postage or fees prepaid, or sent
by facsimile with original sent by overnight courier,
If to Purchaser: WELLPOINT HEALTH NETWORKS INC.
0 XxxxXxxxx Xxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: General Counsel
with a copy (which shall XXXXXXX XXXXXXX & XXXXXXXX
not constitute notice) to: 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx
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If to CareFirst: CAREFIRST, INC.
00000 Xxxx Xxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Jews
President and Chief
Executive Officer
with a copy (which shall CAREFIRST, INC.
not constitute notice) to: 00000 Xxxx Xxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxxxxx, Esq.
Executive Vice President
and General Counsel
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day
after the day it is so placed in the mail or, if earlier, the time of actual
receipt.
Section 9.9. Governing Law.
This Agreement is executed by the parties hereto in and shall be
construed in accordance with and governed by the laws of Maryland without
giving effect to the principles of conflict of laws thereof.
Section 9.10. Rules of Construction.
Unless the context clearly indicates to the contrary, the following
rules shall apply to the construction of this Agreement:
(a) Words importing the singular number include the plural number and
words importing the plural number include the singular number.
(b) Words of the masculine gender include correlative words of the
feminine and neuter genders.
(c) The headings and the Table of Contents set forth in this
Agreement are solely for convenience of reference and shall not constitute a
part of this Agreement or affect its meaning, construction or effect.
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(d) Any reference to a particular Article, Section, Appendix or
Attachment shall be to such Article, Section, Appendix or Attachment of this
Agreement unless the context shall otherwise require.
(e) The terms "agree" and "agreement" shall include and mean
"covenant," and all agreements contained in this Agreement are intended to
constitute covenants and shall be enforceable as such.
(f) For purposes of this Agreement, a party shall be deemed to have
"knowledge" of a matter if any Executive Employee, director or trustee of the
party or any of its Subsidiaries has received written notice or otherwise has
actual knowledge of such matter or, in the reasonable exercise of such
Executive Employee's, director's or trustees duties in the ordinary course of
business, should have known of such matter. Attached hereto as Attachment 9.10
is a list of each party's Executive Employees.
(g) Whenever the words "include," "includes" and "including" are used
in this Agreement, they are deemed to be followed by the words "without
limitation."
(h) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, Subsection or other subdivision.
(i) All share and price calculations will be appropriately adjusted
for any stock dividends, stock splits or similar events.
Section 9.11. Waiver of Jury Trial.
Each party hereto waives its rights to a trial by jury in connection
with any matter related to the Conversion, the Merger or this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Purchaser, CareFirst and CFAC as
of the date first above written.
WELLPOINT HEALTH NETWORKS INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice President
CAREFIRST, INC.
By: /s/ Xxxxxxx X. Jews
--------------------------------------
Xxxxxxx X. Jews
President and Chief Executive Officer
CONGRESS ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Assistant Treasurer, Assistant
Secretary and Vice President
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Appendix A
Principal Terms of Plan of Conversion
The board of directors of CareFirst, Inc. and each of its non-profit
subsidiaries (CareFirst of Maryland, Inc., Group Hospitalization and Medical
Services, Inc. ("GHMSI") and Blue Cross Blue Shield of Delaware, Inc.
("BCBSD")) will adopt a Plan of Conversion providing for the conversion of the
companies from non-profit to for-profit status. For all companies except
GHMSI, the conversion will be accomplished by means of the adoption of amended
and restated articles or certificates of incorporation providing that the
corporation will operate as a for-profit business corporation. The conversions
will be subject to regulatory approval in each of the jurisdictions listed.
GHMSI, a federally chartered corporation, will be re-chartered in the District
of Columbia, which will require approval of the U.S. Congress. In determining
whether to approve the conversion, the regulators must find that the fair
value of the assets has been received and that the conversion is in the public
interest.
Following the amendment of its charter (or, in the case of GHMSI, its
re-chartering), each subsidiary insurer will issue shares of its Common Stock
(which will constitute all of its issued and outstanding shares) to CareFirst,
thus becoming a wholly-owned subsidiary of CareFirst. CareFirst will then
issue to tax-exempt entities in Maryland, the District of Columbia and
Delaware a number of shares of Common Stock of CareFirst representing the
percentage of the aggregate value of CareFirst represented by the subsidiary
insurer of the particular jurisdiction, as agreed among the regulators in the
jurisdictions involved. Following those issuances, all of the issued and
outstanding capital stock of CareFirst will be owned by the tax-exempt
entities designated by the regulators in those jurisdictions.
In the Merger, each share of CareFirst Common Stock will be converted
into the Aggregate Per Share Consideration (as defined in the Merger
Agreement).
After the Merger, the Primary CareFirst Insurers will each continue
to provide healthcare services as licensed insurers to the communities in each
of their respective jurisdictions that they currently serve.
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Xxxxxxxx X
DEFINITIONS
"Affiliate" as to a specified person, means any person which directly
or indirectly through one or more intermediaries, controls (i.e., possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of a person whether through ownership of voting
securities, by contract, through membership or otherwise), is controlled by,
or is under common control with, the specified person.
"Aggregate Cash Consideration" means the amount of the Purchase Price
to be delivered in cash (or immediately available funds) by Purchaser at the
Closing, which amount shall be specified by Purchaser at least five (5)
business days prior to Closing and shall not be less than $450 million.
"Aggregate Note Consideration" means a principal amount of
Subordinated Notes specified by Purchaser at least five (5) business days
prior to the Closing in circumstances where the provisions of Section 3.1(b)
apply, which principal amount shall not exceed the Maximum Note Consideration.
"Aggregate Stock Consideration" means a number of shares of Purchaser
Common Stock equal to (i) the Purchase Price less the Aggregate Cash
Consideration and less the Aggregate Note Consideration, divided by (ii) the
Average Market Price.
"Agreement" means this Agreement and Plan of Merger dated as of
November __, 2001, together with the Appendices and attachments hereto and
thereto.
"Articles of Merger" shall have the meaning set forth in Section 2.2.
"Assumed Stock Consideration" means an amount equal to the result of
(i) (A) the Purchase Price less the Aggregate Cash Consideration divided by
(B) $70.00, multiplied by (ii) the Average Market Price.
"Average Market Price" means the average of the daily closing price
of the Purchaser Common Stock on the NYSE for the 20-trading day period ending
on the fifth trading day prior to the Closing Date.
"BCBSA" shall mean the Blue Cross and Blue Shield Association.
"BCBSD" means BCBSD, Inc., a non-stock Delaware corporation, d/b/a
Blue Cross Blue Shield of Delaware.
"BCBS-MD" means CareFirst of Maryland, Inc., a Maryland corporation
licensed as a non-profit health service plan.
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"BCBS-NCA" means Group Hospitalization and Medical Services, Inc.
d/b/a Blue Cross and Blue Shield of the National Capital Area, a non-profit
corporation incorporated under federal charter.
"Benefit Plans" means all employee benefit plans as defined in
Section 3(3) of ERISA and all other employee benefit arrangements,
obligations, customs, or practices (including but not limited to a payroll
practice), whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to current or former directors,
employees or agents of CareFirst or Purchaser, as the case may be or an ERISA
Affiliate of such party, including, without limitation, employment agreements
(whether written or oral), severance agreements, executive compensation
arrangements, incentive programs or arrangements, sick leave, vacation pay,
severance pay policies, plant closing benefits, salary continuation for
disability, consulting or other compensation arrangements, workers'
compensation, deferred compensation, bonus, stock option or purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement or
scholarship programs, any plans providing benefits or payments in the event of
a change of control, change in ownership, or sale of a substantial portion
(including all or substantially all) of the assets of any business of
CareFirst or Purchaser, other than Multiemployer Plans, maintained by
CareFirst or Purchaser or an ERISA Affiliate or to which CareFirst or
Purchaser or an ERISA Affiliate has contributed or is or was obligated to make
payments, in each case with respect to any current or former employees,
directors or agents of CareFirst, Purchaser or an ERISA Affiliate of such
party, in the six-year period before the date of this Agreement.
"Best Efforts" shall mean, as to a party hereto, an undertaking by
such party to perform or satisfy an obligation or duty or otherwise act in the
manner that a person desirous of achieving a result would act in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided however, that such party shall not be required to agree to
any Materially Burdensome Condition or take any action that would result in a
materially adverse change in the benefits to such person of this Agreement and
the transactions contemplated by this Agreement.
"Board of Directors" means the Purchaser Board of Directors, the CFAC
Board of Directors, or the CareFirst Board of Directors, as is indicated by
the context in which the term appears.
"CareFirst" means CareFirst, Inc., a Maryland corporation.
"CareFirst Common Stock" shall have the meaning set forth in the
Recitals hereto.
"CareFirst Company" means CareFirst and each CareFirst Subsidiary
(collectively, the "CareFirst Companies").
"CareFirst Disclosure Schedule" means the confidential disclosure
provided by CareFirst to Purchaser pursuant to this Agreement.
"CareFirst Employees" shall have the meaning set forth in Section
6.17(b).
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"CareFirst Environmental Reports" shall have the meaning set forth in
Section 4.15(a).
"CareFirst Financial Statements" shall have the meaning set forth in
Section 4.5(a).
"CareFirst Insurer" means the Primary CareFirst Insurers and any
other Insurer that is directly or indirectly owned, controlled or operated by
CareFirst or any of its Affiliates.
"CareFirst Material Adverse Effect" shall mean a material adverse
effect on the business, assets, liabilities, financial condition or results of
operations of the CareFirst Companies, taken as a whole. The failure of any of
the CareFirst Companies to qualify as an "existing Blue Cross and Blue Shield
organization," as defined in Section 833(c)(2) of the Code, shall not
constitute a CareFirst Material Adverse Effect.
"CareFirst Material Contracts" means, with respect to the CareFirst
Companies: (i) the 25 largest provider and 25 largest customer contracts
measured in terms of payments to or receipts from any CareFirst Company (and
all contracts that contain a fee, rate or performance guarantee applicable to
any period longer than 12 months involving an amount in excess of $10
million); (ii) any contract, other than a provider contract, customer contract
or employee benefit plan, arrangement or agreement, that, by its terms, does
not terminate within one year after the date of such contract and is not
cancelable during such period without penalty or without payment, and which
involves an aggregate payment or commitment on the part of any party thereto
of more than $1 million during any twelve (12) month period; (iii) any
contract, other than a contract, plan, arrangement or agreement referenced in
subsection (ii) above, that is material to the financial condition, results of
operations, assets, business or prospects of the CareFirst Companies, taken as
a whole; (iv) any loan agreement or other evidence of indebtedness for
borrowed money; (v) any contract or other agreement limiting in any material
respect the ability of any CareFirst Company to sell any products or services,
engage in any line of business or compete with any person or entity or operate
at any location; (vi) any contract or other agreement restricting the payment
of dividends or the repurchase of stock or other equity; (vii) employment
agreements; (viii) change in control or similar arrangements with any
officers, employees or agents of any CareFirst Company that will result in any
obligation (absolute or contingent) of such CareFirst Company to make any
payment to any officers, employees or agents of any CareFirst Company as a
result of the consummation of the transactions contemplated hereby,
termination of employment, or both; (ix) labor contract; (x) reinsurance
agreements; (xi) material joint venture, partnership agreements or other
similar agreements; and (xii) any contract for the acquisition, directly or
indirectly (by merger or otherwise), of any entity or business involving an
acquisition price of more than $1 million.
"CareFirst Owned Properties" means any real property that is owned by
any CareFirst Company.
"CareFirst Pension Plans" shall have the meaning set forth in Section
6.17(a).
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"CareFirst Permitted Liens" means any (i) liens for taxes not yet due
or which are being contested in good faith by appropriate proceedings, (ii)
mechanics' or similar liens, (iii) pledges or deposits in connection with
workers' compensation, unemployment insurance and other social security
legislation, (iv) easements and similar encumbrances incurred in the ordinary
course of business which do not materially diminish the value of the property
subject thereto and (v) purchase money liens and liens securing rental
payments under capital lease arrangements.
"CareFirst Plans" shall have the meaning set forth in Section
4.12(a).
"CareFirst Primary Filings" shall have the meaning set forth in
Section 4.4(b).
"CareFirst Properties" shall have the meaning set forth in Section
4.15(a).
"CareFirst Subsidiary" shall mean every entity in which CareFirst
owns 50% or more of the outstanding equity, directly or indirectly, and each
CareFirst Insurer.
"CareFirst Subsidiary Shares" shall mean any equity or member
interests in a CareFirst Subsidiary held, directly or indirectly, by
CareFirst.
"Certificate of Authority" means a certificate issued to Insurers by
any insurance administration that such Insurer is required to hold.
"CFAC" means Congress Acquisition Corporation, a Maryland
corporation.
"Change of Control" as to a specified person, means a transaction or
event or circumstance that results in a party that is not an Affiliate of such
specified person immediately prior to such transaction, event or circumstance
becoming an Affiliate of such specified person immediately after such
transaction, event or circumstance.
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" means the date of the Closing, as determined under
Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended and the
regulations thereunder.
"Confidentiality Agreement" shall have the meaning set forth in
Section 6.2(c).
"Conversion" shall have the meaning set forth in Section 6.8.
"D.C. Superintendent" means the Superintendent of Insurance of the
District of Columbia.
"Delaware Commissioner" means the Delaware Insurance Commissioner.
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"DOJ" shall mean the Antitrust Division of the Department of Justice.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Environmental Laws" means federal, state, local, and municipal laws,
ordinances, common law, rules, orders, decrees, statutes and regulations,
relating to pollution or the protection of the environment or human health and
safety, or to the cleanup or restoration of the environment, including,
without limitation, any laws or regulations relating to (a) generation,
treatment, storage, disposal or transportation of Materials of Environmental
Concern, (b) emissions, discharges or other releases or threatened releases of
Materials of Environmental Concern or protection of the environment from the
same, and (c) exposure of persons to Materials of Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and includes the regulations thereunder.
"ERISA Affiliate" means any trade or business the employees of which,
together with the employees of CareFirst or Purchaser, as the case may be, are
treated as employed by a single employer under Section 414(b), (c), (m) or (o)
of the Code.
"Executive Employee" means as to Purchaser and CareFirst, as the case
may be, those employees listed as such on Attachment 9.10 of this Agreement.
"FTC" shall mean the Federal Trade Commission.
"GAAP" means generally accepted accounting principles consistently
applied in the United States.
"Governmental Entity" means any federal, state or local government or
any court, administrative or regulatory agency, body or commission or other
governmental authority or agency, domestic or foreign.
"Health Benefit Law" means any local, state or federal law,
ordinance, regulation or order relating to the license, certification,
qualification or authority to transact business relating to the provision of
or payment for health benefits and insurance and any such laws relating to the
regulation of health maintenance organizations, workers' compensation, managed
care organizations, insurance, preferred provider organizations,
point-of-service plans, third party administrators, utilization review,
hospital reimbursement, Medicare and Medicaid participation, fraud and abuse
and patient referrals.
"Hearings" shall have the meaning set forth in Section 6.7(b).
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
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"Insurer" means any person transacting the business of insurance or
operating a health maintenance organization, whether or not such person holds
a Certificate of Authority for transacting such insurance business or for
operating such health maintenance organization.
"Intellectual Property" means all patents, inventions, discoveries,
technologies, copyrights, software, trademarks, service marks, trade names,
corporate names, trade dress, trade secrets and all other intellectual
property rights.
"Investment Banking Firm" shall have the meaning set forth in Section
3.1(b).
"IRS" means the Internal Revenue Service.
"Maryland Administration" means the Maryland Insurance Administration.
"Materially Burdensome Condition" means any condition (X) imposed on
any Purchaser Company or CareFirst Company which would (i) materially limit
the ability of Purchaser after the Merger, as the sole stockholder of
CareFirst, to exercise full rights of ownership of the shares of CareFirst,
including, without limitation, the right to vote such shares as provided by
Maryland law, (ii) materially limit the ability of CareFirst, as the Surviving
Corporation in the Merger, to exercise full rights of ownership of the shares
of the Primary CareFirst Insurers, including the right to vote such shares as
provided by applicable law, (iii) materially limit the ability of Purchaser to
operate its business or the business of the CareFirst Companies after the
Merger in substantially the same manner as the CareFirst Companies were
operated on the date hereof, or (iv) materially change the terms of the
consideration to be paid in connection with the transactions contemplated by
this Agreement or (Y) that now exists and is not rescinded or is imposed on
any Purchaser Company or CareFirst Company and that materially limits the
declaration or payment of dividends (except for any limitation that conforms
to the guidelines of the National Association of Insurance Commissioners
applicable to managed care companies).
"Materials of Environmental Concern" means all hazardous chemicals,
solid wastes, hazardous wastes, hazardous materials, toxic substances,
petroleum or petroleum products or hazardous substances as now defined or
regulated under any Environmental Laws including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, the Resource Conservation and Recovery Act, the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act and the Hazardous
Materials Transportation Act.
"Maximum Note Consideration" shall mean an amount equal to the
excess, if any, of (i) the Purchase Price over (ii) the sum of (A) the
Aggregate Cash Consideration and (B) the Assumed Stock Consideration.
"Merger" shall have the meaning set forth in Section 2.1.
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"Merger Proposal" shall have the meaning set forth in Section 6.14.
"Multiemployer Plan" means any multiemployer plan as defined in
Section 3(37) of ERISA to which CareFirst or Purchaser, as the case may be, or
an ERISA Affiliate of such party has contributed or is or was obligated to
make payments, in each case with respect to any current or former employees of
CareFirst or Purchaser, as the case may be, or an ERISA Affiliate of such
party before the Closing Date.
"Multiple Employer Plan" means a Benefit Plan that is a multiple
employer plan subject to Sections 4063 and 4064 of ERISA or Section 413(c) of
the Code.
"New CareFirst Plans" shall have the meaning set forth in Section
6.17(c).
"Pension Plan" means a Benefit Plan that is an employee pension
benefit plan as defined in Section 3(2) of ERISA.
"Per Share Amount" shall have the meaning set forth in Section
3.1(a).
"Primary CareFirst Companies" shall mean CareFirst, BCBS-MD, BCBS-NCA
and BCBSD.
"Primary CareFirst Insurers" means BCBS-MD, BCBS-NCA and BCBSD.
"Private Letter Ruling" shall mean a letter ruling from the IRS to
CareFirst ruling that:
(a) (i) The Conversion of each of the Primary CareFirst Companies
from non-stock nonprofit corporation to a for-profit stock corporation will
constitute a reorganization within the meaning of Section 368(a)(1)(E) of the
Code; (ii) the Primary CareFirst Companies will be parties to a reorganization
within the meaning of Section 368(b) of the Code; (iii) no gain or loss will
be recognized by the Primary CareFirst Companies as a result of the
reorganization; and (iv) each of the Primary CareFirst Companies' basis,
holding periods, earnings and profits, and accounting periods and methods will
not be affected by the Conversion.
(b) The Merger will not cause the Conversion to fail to qualify as a
reorganization within the meaning of Section 368(a)(1)(E) of the Code.
(c) Gain or loss recognized by the Tax-Exempt Entities from the
exchange of the CareFirst Common Stock in the Merger will not be subject to
unrelated business income tax.
"Purchase Price" means $1.3 billion, in U.S. dollars.
"Purchaser" means WellPoint Health Networks Inc., a Delaware
for-profit corporation.
"Purchaser Common Stock" means the Common Stock of Purchaser.
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"Purchaser Company" means Purchaser and any Purchaser Subsidiary.
"Purchaser Disclosure Schedule" means the confidential disclosure
provided by Purchaser to CareFirst pursuant to this Agreement.
"Purchaser Financial Statements" shall have the meaning set forth in
Section 5.6(c).
"Purchaser Insurer" means any Purchaser Company that is an Insurer.
"Purchaser Material Adverse Effect" means an event that has a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated hereby (including scheduled payments of interest and
principal on the Subordinated Notes); provided, however, that solely with
respect to the application of such term on the date hereof in connection with
the representations and warranties of Purchaser and CFAC contained in Article
V (but not with respect to the "bring down" of such representations and
warranties provided in Section 7.2(b)), "Purchaser Material Adverse Effect"
means a material adverse effect on the business, assets, liabilities,
financial condition or results of operation of Purchaser and the Purchaser
Subsidiaries, taken as a whole.
"Purchaser Proxy Statement" means the proxy statement filed by
Purchaser with the SEC and delivered to Purchaser's stockholders who are
entitled to vote on the merger or any of the other transactions contemplated
hereby.
"Purchaser SEC Filings" shall have the meaning set forth in Section
5.6(a).
"Purchaser Subsidiary" shall mean every entity in which Purchaser
owns 50% or more of the outstanding equity, directly or indirectly, and which
is material to the operations or financial condition of Purchaser.
"Qualified Plan" means a plan qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended.
"Resale Registration Statement" means the registration statement to
be filed by Purchaser with the SEC to register the Purchaser Common Stock to
be issued in the Merger for resale by the Tax-Exempt Entities.
"SAP" shall mean the statutory accounting practices prescribed or
permitted by the Departments of Insurance of the State of Maryland, the State
of Delaware, the Commonwealth of Virginia or the District of Columbia, as the
case may be.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
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"Subordinated Note" means a subordinated note substantially in the
form of Appendix F.
"Superior Proposal" means a Merger Proposal which the Board of
Directors of CareFirst determines in good faith, after consultation with its
outside legal counsel and financial advisors, would be, if accepted by
CareFirst on substantially the terms presented, is likely to be consummated
and would, if consummated, result in a transaction superior to the one
contemplated by this Agreement after taking into account all relevant factors,
including, without limitation, the consideration to be received pursuant to
such Merger Proposal.
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Tax-Exempt Entity" shall have the meaning set forth in the Recitals
hereto.
"Taxes" means all federal, state, local and foreign income, property,
sales, excise and other taxes, of any nature whatsoever (whether payable
directly or by withholding), together with any interest and penalties,
additions to tax or additional amounts imposed with respect thereto.
"Transition Team" shall have the meaning set forth in Section 6.2(b).
"Welfare Plan" means a Benefit Plan that is an employee welfare
benefit plan as defined in Section 3(1) of ERISA.
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Appendix C
ARTICLES OF MERGER
between
CAREFIRST, INC.
(a Maryland Corporation)
and
CONGRESS ACQUISITION CORP.
(a Maryland Corporation)
CAREFIRST, INC., a corporation duly organized and existing under the
laws of the State of Maryland ("CareFirst"), and CONGRESS ACQUISITION CORP., a
corporation duly organized and existing under the laws of the State of
Maryland ("CFAC"), do hereby certify that:
FIRST: CareFirst and CFAC agree to merge.
SECOND: The name and place of incorporation of each party to these
Articles are CAREFIRST, INC. a Maryland corporation, and CONGRESS ACQUISITION
CORP., a Maryland corporation. CareFirst shall survive the merger as the
successor corporation and shall continue under the name "CAREFIRST, INC." as a
corporation of the State of Maryland.
THIRD: CareFirst has its principal office in the State of Maryland in
Baltimore County. CFAC has its principal office in the State of Maryland in
Baltimore County and does not own an interest in land in the State of
Maryland.
FOURTH: The terms and conditions of the transaction set forth in
these Articles were advised, authorized, and approved by each corporation
party to the Articles in the manner and by the vote required by its Charter
and the laws of the state of its incorporation. The manner of approval was as
follows:
(a) The Board of Directors of CareFirst at a meeting duly
called and held on ______, 2001 adopted resolutions which declared
that the proposed merger was advisable on substantially the terms
and conditions set forth or referred to in the resolutions and
directed that the proposed merger be submitted for consideration by
unanimous written consent of the stockholders of CareFirst. Notice
was waived by each stockholder of CareFirst. By written consent
dated ______, 2001, signed by all of the stockholders of CareFirst
and filed with the minutes of proceedings of stockholders, the
proposed merger was approved by the stockholders of CareFirst by the
affirmative vote of all the votes entitled to be cast on the matter.
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(b) The Board of Directors of CFAC by unanimous written consent
dated ______, 200_ signed by all the directors and filed with the
minutes of proceedings of the Board of Directors of CFAC adopted
resolutions which declared that the proposed merger was advisable on
substantially the terms and conditions set forth or referred to in
the resolutions and directed that the proposed merger be submitted
for consideration by written consent of the sole stockholder of
CFAC. Notice was waived by such stockholder. By written consent
dated ______, 200_, signed by the sole stockholder of CFAC and filed
with the minutes of proceedings of stockholders, the proposed merger
was approved by the sole stockholder of CFAC.
FIFTH: No amendment to the Charter of CareFirst is to be effected as
a part of the merger.
SIXTH: The total number of shares of capital stock of all classes
which CareFirst or CFAC, respectively, has authority to issue, the number of
shares of each class which CareFirst or CFAC, respectively, has authority to
issue, and the par value of the shares of each class which CareFirst or CFAC,
respectively, has authority to issue are as follows:
(a) The total number of shares of stock of all classes which
CareFirst has authority to issue is ______ shares, of which ______
shares are classified as Preferred Stock (par value $______ per
share) and ______ shares are classified as Common Stock (par value
$______ per share). The aggregate par value of all the shares of
stock of all classes of CareFirst is $______.
(b) The total number of shares of stock of all classes which
CFAC has authority to issue is ______ shares, of which ______ shares
are classified as Preferred Stock (par value $______ per share) and
______ shares are classified as Common Stock (par value $______ per
share). The aggregate par value of all the shares of stock of all
classes of CFAC is $______.
SEVENTH: The merger does not change the authorized stock of
CareFirst.
EIGHTH: The manner and basis of converting or exchanging issued stock
of the merging corporations into different stock of a corporation, for other
consideration and the treatment of any issued stock of the merging
corporations not to be converted or exchanged are as follows. At the effective
time of the merger, each issued and outstanding share of CareFirst common
stock shall, by virtue of the merger and without any action on the part of the
holder thereof, be converted into the per share amount as set forth herein.
The per share amount shall be an amount equal to the [insert description of
consideration]. At the closing, each holder of outstanding CareFirst common
stock as shown on the books and records of CareFirst shall receive, in respect
of each share of CareFirst common stock, a certificate or certificates
representing the number of shares of the purchaser common stock along with
cash (or immediately available funds) that together constitute the per share
amount.
NINTH: The merger shall become effective at 11:59 p.m. on
___________, 200_.
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IN WITNESS WHEREOF, CAREFIRST, INC. and CFAC have caused these
presents to be signed in their respective names and on their respective
behalves by their respective presidents and witnessed by their respective
secretaries on ______, 200_.
WITNESS: CAREFIRST, INC.
(a Maryland corporation)
_________________________________ By____________________________________
Secretary President
WITNESS: CONGRESS ACQUISITION CORP.
(a Maryland corporation)
_________________________________ By____________________________________
Secretary President
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THE UNDERSIGNED, President of CAREFIRST, INC., who executed on
behalf of the Corporation the foregoing Articles of Merger of which this
certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles of Merger to be the corporate act of
said Corporation and hereby certifies that to the best of his knowledge,
information and belief the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
---------------------------------------
President
THE UNDERSIGNED, President of CONGRESS ACQUISITION CORP., who
executed on behalf of the Corporation the foregoing Articles of Merger of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Merger to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
---------------------------------------
President
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Appendix D
CAREFIRST, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
CareFirst, Inc., a Maryland corporation, having its principal
office in Baltimore County, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended and
restated in its entirety to read as follows:
FIRST: The name of the corporation (which is hereinafter called
the "Corporation") is:
CareFirst, Inc.
SECOND: (a) The purposes for which and any of which the
Corporation is formed and the business and objects to be carried on
and promoted by it are to engage in any lawful business or other
activity, whether or not related to the business described elsewhere
in this Article or to any other business at the time or theretofore
engaged in by the Corporation.
(b) The foregoing enumerated purposes and objects shall be in
no way limited or restricted by reference to, or inference from, the
terms of any other clause of this or any other Article of the
Charter of the Corporation, and each shall be regarded as
independent; and they are intended to be and shall be construed as
powers as well as purposes and objects of the Corporation and shall
be in addition to and not in limitation of the general powers of
corporations under the General Laws of the State of Maryland.
THIRD: The present address of the principal office of the
Corporation in this State is 00000 Xxxx Xxx Xxxxxx, Xxxxxx Xxxxx,
Xxxxxxxx 00000.
FOURTH: The name and address of the resident agent of the
Corporation in this State are Xxxx X. Xxxxxxxxx, Esquire, 00000 Xxxx
Xxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxx 00000.
FIFTH: (a) The total number of shares of stock of all classes
that the Corporation has authority to issue is 10,000,000 shares of
capital stock, par value $.01 per share, amounting in aggregate par
value to $100,000. All of such shares are initially classified as
"Common Stock." The Board of Directors may classify and reclassify
any unissued shares of capital stock by setting or changing in any
one or more respects the preferences, conversion or other rights,
voting powers, restrictions,
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limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of capital stock.
(b) The following is a description of the preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions
of redemption of the Common Stock of the Corporation:
(1) Each share of Common Stock shall have one vote, and,
except as otherwise provided in respect of any class of stock
hereafter classified or reclassified, the exclusive voting
power for all purposes shall be vested in the holders of the
Common Stock. Shares of Common Stock shall not have cumulative
voting rights.
(2) Subject to the provisions of law and any preferences
of any class of stock hereafter classified or reclassified,
dividends, including dividends payable in shares of another
class of the Corporation's stock, may be paid ratably on the
Common Stock at such time and in such amounts as the Board of
Directors may deem advisable.
(3) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or
involuntary, the holders of the Common Stock shall be entitled,
together with the holders of any other class of stock hereafter
classified or reclassified not having a preference on
distributions in the liquidation, dissolution or winding up of
the Corporation, to share ratably in the net assets of the
Corporation remaining, after payment or provision for payment
of the debts and other liabilities of the Corporation and the
amount to which the holders of any class of stock hereafter
classified or reclassified having a preference on distributions
in the liquidation, dissolution or winding up of the
Corporation shall be entitled.
(c) Subject to the foregoing, the power of the Board of
Directors to classify and reclassify any of the shares of capital
stock shall include, without limitation, subject to the
provisions of the Charter, authority to classify or reclassify
any unissued shares of such stock into a class or classes of
preferred stock, preference stock, special stock or other stock,
and to divide and classify shares of any class into one or more
series of such class, by determining, fixing, or altering one or
more of the following:
(1) The distinctive designation of such class or
series and the number of shares to constitute such class
or series; provided that, unless otherwise prohibited by
the terms of such or any other class or series, the number
of shares of any class or series may be decreased by the
Board of Directors in connection with any classification
or reclassification of unissued shares and the number of
shares of such class or series may be increased by the
Board of Directors in connection with any such
classification or reclassification, and any
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shares of any class or series which have been redeemed,
purchased, otherwise acquired or converted into shares of
Common Stock or any other class or series shall become
part of the authorized capital stock and be subject to
classification and reclassification as provided in this
sub-paragraph.
(2) Whether or not and, if so, the rates, amounts and
times at which, and the conditions under which, dividends
shall be payable on shares of such class or series,
whether any such dividends shall rank senior or junior to
or on a parity with the dividends payable on any other
class or series of stock, and the status of any such
dividends as cumulative, cumulative to a limited extent or
non-cumulative and as participating or non-participating.
(3) Whether or not shares of such class or series
shall have voting rights, in addition to any voting rights
provided by law and, if so, the terms of such voting
rights.
(4) Whether or not shares of such class or series
shall have conversion or exchange privileges and, if so,
the terms and conditions thereof, including provision for
adjustment of the conversion or exchange rate in such
events or at such times as the Board of Directors shall
determine.
(5) Whether or not shares of such class or series
shall be subject to redemption and, if so, the terms and
conditions of such redemption, including the date or dates
upon or after which they shall be redeemable and the
amount per share payable in case of redemption, which
amount may vary under different conditions and at
different redemption dates; and whether or not there shall
be any sinking fund or purchase account in respect
thereof, and if so, the terms thereof.
(6) The rights of the holders of shares of such class
or series upon the liquidation, dissolution or winding up
of the affairs of, or upon any distribution of the assets
of, the Corporation, which rights may vary depending upon
whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at
different dates, and whether such rights shall rank senior
or junior to or on a parity with such rights of any other
class or series of stock.
(7) Whether or not there shall be any limitations
applicable, while shares of such class or series are
outstanding, upon the payment of dividends or making of
distributions on, or the acquisition of, or the use of
moneys for purchase or redemption of, any stock of the
Corporation, or upon any other action of the Corporation,
including
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action under this sub-paragraph, and, if so, the terms and
conditions thereof.
(8) Any other preferences, rights, restrictions,
including restrictions on transferability, and
qualifications of shares of such class or series, not
inconsistent with law and the Charter of the Corporation.
(d) For the purposes hereof and of any articles
supplementary to the Charter providing for the classification or
reclassification of any shares of capital stock or of any other
Charter document of the Corporation (unless otherwise provided in
any such articles or document), any class or series of stock of
the Corporation shall be deemed to rank:
(1) prior to another class or series either as
to dividends or upon liquidation, if the holders of such
class or series shall be entitled to the receipt of
dividends or of amounts distributable on liquidation,
dissolution or winding up, as the case may be, in
preference or priority to holders of such other class or
series;
(2) on a parity with another class or series
either as to dividends or upon liquidation, whether or
not the dividend rates, dividend payment dates or
redemption or liquidation price per share thereof be
different from those of such others, if the holders of
such class or series of stock shall be entitled to
receipt of dividends or amounts distributable upon
liquidation, dissolution or winding up, as the case may
be, in proportion to their respective dividend rates or
redemption or liquidation prices, without preference or
priority over the holders of such other class or series;
and
(3) junior to another class or series either as
to dividends or upon liquidation, if the rights of the
holders of such class or series shall be subject or
subordinate to the rights of the holders of such other
class or series in respect of the receipt of dividends or
the amounts distributable upon liquidation, dissolution
or winding up, as the case may be.
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SIXTH: The number of directors of the Corporation shall
be ____, which number may be increased or decreased pursuant to
the By-Laws of the Corporation, but shall never be less than the
minimum number permitted by the General Laws of the State of
Maryland now or hereafter in force. The names of the directors
who will serve until the next annual meeting of stockholders and
until their successors are elected and qualify are as follows:
[Insert Names of Directors]
SEVENTH: (a) The following provisions are hereby adopted
for the purpose of defining, limiting and regulating the powers
of the Corporation and of the directors and stockholders:
(1) The Board of Directors is hereby empowered
to authorize the issuance from time to time of shares of
its stock of any class, whether now or hereafter
authorized, or securities convertible into shares of its
stock of any class or classes, whether now or hereafter
authorized, for such consideration as may be deemed
advisable by the Board of Directors and without any
action by the stockholders.
(2) No holder of any stock or any other
securities of the Corporation, whether now or hereafter
authorized, shall have any preemptive right to subscribe
for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of
Directors, in its sole discretion, may determine and at
such price or prices and upon such other terms as the
Board of Directors, in its sole discretion, may fix; and
any stock or other securities which the Board of
Directors may determine to offer for subscription may, as
the Board of Directors in its sole discretion shall
determine, be offered to the holders of any class, series
or type of stock or other securities at the time
outstanding to the exclusion of the holders of any or all
other classes, series or types of stock or other
securities at the time outstanding.
(3) The Corporation shall indemnify (A) its
directors and officers, whether serving the Corporation
or at its request any other entity, to the full extent
required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance
of expenses under the procedures and to the full extent
permitted by law and (B) other employees and agents to
such extent as shall be authorized by the Board of
Directors or the Corporation's By-Laws and be permitted
by law. The foregoing rights of indemnification shall not
be exclusive of any other rights to which those seeking
indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to
adopt, approve and amend from time to time such by-
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laws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as
may be permitted by law. No amendment of the Charter of
the Corporation or repeal of any of its provisions shall
limit or eliminate the right to indemnification provided
hereunder with respect to acts or omissions occurring
prior to such amendment or repeal.
(4) To the fullest extent permitted by Maryland
statutory or decisional law, as amended or interpreted,
no director or officer of the Corporation shall be
personally liable to the Corporation or its stockholders
for money damages. No amendment of the Charter of the
Corporation or repeal of any of its provisions shall
limit or eliminate the limitation on liability provided
to directors and officers hereunder with respect to any
act or omission occurring prior to such amendment or
repeal.
(5) The Corporation reserves the right from time
to time to make any amendments of the Charter which may
now or hereafter be authorized by law, including any
amendments changing the terms or contract rights, as
expressly set forth in the Charter, of any of its
outstanding stock by classification, reclassification or
otherwise.
(b) The enumeration and definition of particular powers
of the Board of Directors included in the foregoing shall in no
way be limited or restricted by reference to or inference from
the terms of any other clause of this or any other Article of the
Charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any
powers conferred upon the Board of Directors under the General
Laws of the State of Maryland now or hereafter in force.
EIGHTH: The duration of the Corporation shall be
perpetual.
SECOND: (a) As of immediately before the amendment and
restatement the corporation was a non-stock corporation.
(b) As amended, the total number of shares of capital stock of all
classes that the Corporation has authority to issue is 10,000,000 shares, all
of which are classified as shares of Common Stock, par value $.01 per share.
(c) Before the amendment, the Corporation was a non-stock
corporation. As a result of the amendment, the aggregate par value of all
shares having a par value is $100,000.
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(d) The shares of capital stock of the Corporation are not divided
into classes.
THIRD: The foregoing amendment and restatement to the Charter of the
Corporation has been approved by a majority of the entire Board of Directors
and no stock entitled to be voted on the matter was outstanding or subscribed
for at the time of approval.
IN WITNESS WHEREOF, CareFirst, Inc. has caused these presents to be
signed in its name and on its behalf by its President and Chief Executive
Officer and witnessed by its Secretary on __________, 2001.
WITNESS: CAREFIRST, INC.
__________________________________ By: _____________________________________
Xxxx X. Xxxxxxxxx Xxxxxxx X. Jews
Secretary President and Chief Executive Officer
THE UNDERSIGNED, President and Chief Executive Officer of CareFirst,
Inc., who executed on behalf of the Corporation the foregoing Articles of
Amendment and Restatement of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles of Amendment and Restatement to be the corporate act of said
Corporation and hereby certifies that to the best of his knowledge,
information, and belief the matters and facts set forth therein with respect
to the authorization and approval thereof are true in all material respects
under the penalties of perjury.
-------------------------------------
Xxxxxxx X. Jews
President and Chief Executive Officer
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Appendix E
CAREFIRST, INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I.
STOCKHOLDERS
SECTION 1.01. Annual Meeting. The Corporation shall hold an annual
meeting of its stockholders to elect directors and transact any other business
within its powers, either at 9:00 a.m. on the second Tuesday of May in each
year if not a legal holiday, or at such other time on such other day falling
on or before the 30th day thereafter as shall be set by the Board of
Directors. Except as the Charter or statute provides otherwise, any business
may be considered at an annual meeting without the purpose of the meeting
having been specified in the notice. Failure to hold an annual meeting does
not invalidate the Corporation's existence or affect any otherwise valid
corporate acts.
SECTION 1.02. Special Meeting. At any time in the interval between
annual meetings, a special meeting of the stockholders may be called by the
Chairman of the Board or the President or by a majority of the Board of
Directors by vote at a meeting or in writing (addressed to the Secretary of
the Corporation) with or without a meeting. Special meetings of the
stockholders shall be called by the Secretary at the request of the
stockholders only on the written request of stockholders entitled to cast at
least a majority of all the votes entitled to be cast at the meeting and then
only as may be required by law. The Board of Directors shall have sole power
to fix the date and time of the special meeting.
SECTION 1.03. Place of Meetings. Unless the Charter provides
otherwise, meetings of stockholders shall be held at such place as is set from
time to time by the Board of Directors.
SECTION 1.04. Notice of Meetings; Waiver of Notice. Not less than ten
nor more than 90 days before each stockholders' meeting, the Secretary shall
give written notice of the meeting to each stockholder entitled to vote at the
meeting and each other stockholder entitled to notice of the meeting. The
notice shall state the time and place of the meeting and, if the meeting is a
special meeting or notice of the purpose is required by statute, the purpose
of the meeting. Notice is given to a stockholder when it is personally
delivered to the stockholder, left at the stockholder's residence or usual
place of business, or mailed to the stockholder at the stockholder's address
as it appears on the records of the Corporation or transmitted to the
stockholder by electronic mail to any electronic mail address of the
stockholder or by any other electronic means. Notwithstanding the foregoing
provisions, each person who is entitled to notice waives notice if such person
before or after the meeting signs a waiver of the notice which is filed with
the records of stockholders' meetings, or is present at the meeting in person
or by proxy.
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SECTION 1.05. Quorum; Voting. Unless any statute or the Charter
provides otherwise, at a meeting of stockholders the presence in person or by
proxy of stockholders entitled to cast a majority of all the votes entitled to
be cast at the meeting constitutes a quorum, and a majority of all the votes
cast at a meeting at which a quorum is present is sufficient to approve any
matter which properly comes before the meeting, except that a plurality of all
the votes cast at a meeting at which a quorum is present is sufficient to
elect a director.
SECTION 1.06. Adjournments. Whether or not a quorum is present, a
meeting of stockholders convened on the date for which it was called may be
adjourned from time to time without further notice by a majority vote of the
stockholders present in person or by proxy to a date not more than 120 days
after the original record date. Any business which might have been transacted
at the meeting as originally notified may be deferred and transacted at any
such adjourned meeting at which a quorum shall be present.
SECTION 1.07. General Right to Vote; Proxies. Unless the Charter
provides for a greater or lesser number of votes per share or limits or denies
voting rights, each outstanding share of stock, regardless of class, is
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders; however, a share is not entitled to be voted if any installment
payable on it is overdue and unpaid. In all elections for directors, each
share of stock may be voted for as many individuals as there are directors to
be elected and for whose election the share is entitled to be voted. A
stockholder may vote the stock the stockholder owns of record either in person
or by proxy. A stockholder may sign a writing authorizing another person to
act as proxy. Signing may be accomplished by the stockholder or the
stockholder's authorized agent signing the writing or causing the
stockholder's signature to be affixed to the writing by any reasonable means,
including facsimile signature. A stockholder may authorize another person to
act as proxy by transmitting, or authorizing the transmission of, an
authorization by a telegram, cablegram, datagram, electronic mail or any other
electronic or telephonic means to the person authorized to act as proxy or to
any other person authorized to receive the proxy authorization on behalf of
the person authorized to act as the proxy, including a proxy solicitation firm
or proxy support service organization. Unless a proxy provides otherwise, it
is not valid more than 11 months after its date. A proxy is revocable by a
stockholder at any time without condition or qualification unless the proxy
states that it is irrevocable and the proxy is coupled with an interest. A
proxy may be made irrevocable for so long as it is coupled with an interest.
The interest with which a proxy may be coupled includes an interest in the
stock to be voted under the proxy or another general interest in the
Corporation or its assets or liabilities.
SECTION 1.08. List of Stockholders. At each meeting of stockholders,
a full, true and complete list of all stockholders entitled to vote at such
meeting, showing the number and class of shares held by each and certified by
the transfer agent for such class or by the Secretary, shall be furnished by
the Secretary.
SECTION 1.09. Conduct of Business and Voting. At all meetings of
stockholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions touching the qualification of
voters and the validity of proxies, the acceptance or rejection of votes and
procedures for the conduct of business not otherwise specified by these
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By-Laws, the Charter or law, shall be decided or determined by the chairman of
the meeting. If demanded by stockholders, present in person or by proxy,
entitled to cast 10% in number of votes entitled to be cast, or if ordered by
the chairman of the meeting, the vote upon any election or question shall be
taken by ballot and, upon like demand or order, the voting shall be conducted
by two inspectors, in which event the proxies and ballots shall be received,
and all questions touching the qualification of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided, by such
inspectors. Unless so demanded or ordered, no vote need be by ballot and
voting need not be conducted by inspectors. The stockholders at any meeting
may choose an inspector or inspectors to act at such meeting, and in default
of such election the chairman of the meeting may appoint an inspector or
inspectors. No candidate for election as a director at a meeting shall serve
as an inspector thereat.
SECTION 1.10. Informal Action by Stockholders. Except as provided
below, any action required or permitted to be taken at a meeting of
stockholders may be taken without a meeting if a unanimous written consent
which sets forth the action and is signed by each stockholder entitled to vote
on the matter and is filed with the records of stockholders meetings. Unless
the Charter requires otherwise, the holders of any class of stock other than
Common Stock, entitled to vote generally in the election of directors, may
take action or consent to any action by the written consent of stockholders
entitled to cast not less than the minimum number of votes that would be
necessary to authorize or take the action at a stockholders meeting if the
Corporation gives notice of the action to each stockholder not later than 10
days after the effective time of the action.
SECTION 1.11. Meeting by Conference Telephone. Stockholders may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.01. Function of Directors. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.
All powers of the Corporation may be exercised by or under authority of the
Board of Directors, except as conferred on or reserved to the stockholders by
statute or by the Charter or By-Laws.
SECTION 2.02. Number of Directors. The Corporation shall have at
least one director. The Corporation shall have the number of directors
provided in the Charter until changed as herein provided. A majority of the
entire Board of Directors may alter the number of directors set by the Charter
to not exceeding 25 nor less than the minimum number then permitted herein,
but the action may not affect the tenure of office of any director.
SECTION 2.03. Election and Tenure of Directors. Subject to the rights
of the holders of any class of stock separately entitled to elect one or more
directors, at each annual meeting,
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the stockholders shall elect directors to hold office until the next annual
meeting and until their successors are elected and qualify.
SECTION 2.04. Removal of Director. Unless statute or the Charter
provides otherwise, the stockholders may remove any director, with or without
cause, by the affirmative vote of a majority of all the votes entitled to be
cast generally for the election of directors.
SECTION 2.05. Vacancy on Board of Directors. Subject to the rights of
the holders of any class or series of stock separately entitled to elect one
or more directors, the stockholders may elect a successor to fill a vacancy on
the Board of Directors which results from the removal of a director. A
director elected by the stockholders to fill a vacancy which results from the
removal of a director serves for the balance of the term of the removed
director. Subject to the rights of the holders of any class of stock
separately entitled to elect one or more directors, a majority of the
remaining directors, whether or not sufficient to constitute a quorum, may
fill a vacancy on the Board of Directors which results from any cause except
an increase in the number of directors, and a majority of the entire Board of
Directors may fill a vacancy which results from an increase in the number of
directors. A director elected by the Board of Directors to fill a vacancy
serves until the next annual meeting of stockholders and until his or her
successor is elected and qualifies.
SECTION 2.06. Regular Meetings. After each meeting of stockholders at
which directors shall have been elected, the Board of Directors shall meet as
soon thereafter as practicable for the purpose of organization and the
transaction of other business. In the event that no other time and place are
specified by resolution of the Board of Directors or announced by the
President or the Chairman of the Board at such stockholders meeting, the Board
of Directors shall meet immediately following the close of, and at the place
of, such stockholders meeting. Any other regular meeting of the Board of
Directors shall be held on such date and time and at such place as may be
designated from time to time by the Board of Directors. No notice of such
meeting following a stockholders meeting or any other regular meeting shall be
necessary if held as hereinabove provided.
SECTION 2.07. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board or the
President or by a majority of the Board of Directors by vote at a meeting, or
in writing with or without a meeting. A special meeting of the Board of
Directors shall be held on such date and at any place as may be designated
from time to time by the Board of Directors. In the absence of designation
such meeting shall be held at such place as may be designated in the call.
SECTION 2.08. Notice of Meeting. Except as provided in Section 2.06,
the Secretary shall give notice to each director of each regular and special
meeting of the Board of Directors. The notice shall state the time and place
of the meeting. Notice is given to a director when it is delivered personally
to him or her, left at his or her residence or usual place of business, or
sent by telegraph, facsimile transmission or telephone, at least 24 hours
before the time of the meeting or, in the alternative by mail to his or her
address as it shall appear on the records of the Corporation, at least 72
hours before the time of the meeting. Unless these By-Laws or a resolution of
the Board of Directors provides otherwise, the notice need not state the
business to
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be transacted at or the purposes of any regular or special meeting of the
Board of Directors. No notice of any meeting of the Board of Directors need be
given to any director who attends except where a director attends a meeting
for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened, or to any director
who, in writing executed and filed with the records of the meeting either
before or after the holding thereof, waives such notice. Any meeting of the
Board of Directors, regular or special, may adjourn from time to time to
reconvene at the same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement.
SECTION 2.09. Quorum; Action by Directors. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of business.
In the absence of a quorum, the directors present by majority vote and without
notice other than by announcement may adjourn the meeting from time to time
until a quorum shall attend. At any such adjourned meeting at which a quorum
shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified. Unless statute or the
Charter or By-Laws requires a greater proportion, the action of a majority of
the directors present at a meeting at which a quorum is present is action of
the Board of Directors. Any action required or permitted to be taken at a
meeting of the Board of Directors may be taken without a meeting, if an
unanimous written consent which sets forth the action is signed by each member
of the Board of Directors and filed with the minutes of proceedings of the
Board of Directors.
SECTION 2.10. Meeting by Conference Telephone. Members of the Board
of Directors may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the
meeting can hear each other at the same time. Participation in a meeting by
these means constitutes presence in person at a meeting.
SECTION 2.11. Compensation. By resolution of the Board of Directors a
fixed sum and expenses, if any, for attendance at each regular or special
meeting of the Board of Directors or of committees thereof, and other
compensation for their services as such or on committees of the Board of
Directors, may be paid to directors. Directors who are full-time employees of
the Corporation need not be paid for attendance at meetings of the Board of
Directors or committees thereof for which fees are paid to other directors. A
director who serves the Corporation in any other capacity also may receive
compensation for such other services, pursuant to a resolution of the
directors.
ARTICLE III.
COMMITTEES
SECTION 3.01. Committees. The Board of Directors may appoint from
among its members an Executive Committee and other committees composed of one
or more directors and delegate to these committees any of the powers of the
Board of Directors, except the power to authorize dividends on stock, elect
directors, issue stock other than as provided in the next sentence, recommend
to the stockholders any action which requires stockholder approval, amend
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these By-Laws, or approve any merger or share exchange which does not require
stockholder approval. If the Board of Directors has given general
authorization for the issuance of stock providing for or establishing a method
or procedure for determining the maximum number of shares to be issued, a
committee of the Board of Directors, in accordance with that general
authorization or any stock option or other plan or program adopted by the
Board of Directors, may authorize or fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
SECTION 3.02. Committee Procedure. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority
of those present at a meeting at which a quorum is present shall be the act of
the committee. The members of a committee present at any meeting, whether or
not they constitute a quorum, may appoint a director to act in the place of an
absent member. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if an unanimous written consent
which sets forth the action is signed by each member of the committee and
filed with the minutes of the committee. The members of a committee may
conduct any meeting thereof by conference telephone in accordance with the
provisions of Section 2.10.
SECTION 3.03. Emergency. In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by its directors and officers as contemplated by
the Charter and these By-Laws, any two or more available members of the then
incumbent Executive Committee shall constitute a quorum of that Committee for
the full conduct and management of the affairs and business of the Corporation
in accordance with the provisions of Section 3.01. In the event of the
unavailability, at such time, of a minimum of two members of the then
incumbent Executive Committee, the available directors shall elect an
Executive Committee consisting of any two members of the Board of Directors,
whether or not they be officers of the Corporation, which two members shall
constitute the Executive Committee for the full conduct and management of the
affairs of the Corporation in accordance with the foregoing provisions of this
Section. This Section shall be subject to implementation by resolution of the
Board of Directors passed from time to time for that purpose, and any
provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of
any such implementary resolutions shall be suspended until it shall be
determined by any interim Executive Committee acting under this Section that
it shall be to the advantage of the Corporation to resume the conduct and
management of its affairs and business under all the other provisions of these
By-Laws.
ARTICLE IV.
OFFICERS
SECTION 4.01. Executive and Other Officers. The Corporation shall
have a President, a Secretary, and a Treasurer. It may also have a Chairman of
the Board. The Board of Directors
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shall designate who shall serve as chief executive officer, who shall have
general supervision of the business and affairs of the Corporation, and may
designate a chief operating officer, who shall have supervision of the
operations of the Corporation. In the absence of any designation the President
shall serve as chief executive officer. The Corporation may also have one or
more Vice-Presidents, assistant officers, and subordinate officers as may be
established by the Board of Directors. A person may hold more than one office
in the Corporation except that no person may serve concurrently as both
President and Vice-President of the Corporation. The Chairman of the Board
shall be a director, and the other officers may be directors.
SECTION 4.02. Chairman of the Board. The Chairman of the Board, if
one be elected, shall preside at all meetings of the Board of Directors and of
the stockholders at which he or she shall be present. In general, he or she
shall perform such duties and have such powers as are from time to time
assigned to him or her by the Board of Directors. The Chairman shall be an ex
officio member of all committees of the Board of Directors.
SECTION 4.03. President. Unless otherwise specified by the Board of
Directors, the President shall be the chief executive officer of the
Corporation and perform the duties customarily performed by chief executive
officers. He or she may execute, in the name of the Corporation, all
authorized deeds, mortgages, bonds, contracts or other instruments, except in
cases in which the signing and execution thereof shall have been expressly
delegated to some other officer or agent of the Corporation. In general, he or
she shall perform such other duties customarily performed by a president of a
corporation and shall perform such other duties and have such other powers as
are from time to time assigned to him or her by the Board of Directors of the
Corporation.
SECTION 4.04. Vice-Presidents. The Vice-President or Vice-Presidents,
at the request of the President, or in the President's absence or during his
or her inability to act, shall perform the duties and exercise the functions
of the President, and when so acting shall have the powers of the President.
If there be more than one Vice-President, the Board of Directors may determine
which one or more of the Vice-Presidents shall perform any of such duties or
exercise any of such functions, or if such determination is not made by the
Board of Directors, the chief executive officer, or the President may make
such determination; otherwise any of the Vice-Presidents may perform any of
such duties or exercise any of such functions. Each Vice-President shall
perform such other duties and have such other powers, and have such additional
descriptive designations in their titles (if any), as are from time to time
assigned to them by the Board of Directors or the President.
SECTION 4.05. Secretary. The Secretary shall keep the minutes of the
meetings of the stockholders, of the Board of Directors and of any committees,
in books provided for the purpose; he or she shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as required
by law; he or she shall be custodian of the records of the Corporation; he or
she may witness any document on behalf of the Corporation, the execution of
which is duly authorized, see that the corporate seal is affixed where such
document is required or desired to be under its seal, and, when so affixed,
may attest the same. In general, he or she shall perform such other duties
customarily performed by a secretary of a corporation, and shall
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perform such other duties and have such other powers as are from time to time
assigned to him or her by the Board of Directors or the President.
SECTION 4.06. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected by
the Board of Directors; he or she shall render to the President and to the
Board of Directors, whenever requested, an account of the financial condition
of the Corporation. In general, he or she shall perform such other duties
customarily performed by a treasurer of a corporation, and shall perform such
other duties and have such other powers as are from time to time assigned to
him or her by the Board of Directors or the President.
SECTION 4.07. Assistant and Subordinate Officers. The assistant and
subordinate officers of the Corporation are all officers below the office of
Vice-President, Secretary, or Treasurer. The assistant or subordinate officers
shall have such duties as are from time to time assigned to them by the Board
of Directors or the President.
SECTION 4.08. Election, Tenure and Removal of Officers. The Board of
Directors shall elect the officers of the Corporation. The Board of Directors
may from time to time authorize any committee or officer to appoint assistant
and subordinate officers. Election or appointment of an officer, employee or
agent shall not of itself create contract rights. All officers shall be
appointed to hold their offices, respectively, at the pleasure of the Board of
Directors. The Board of Directors (or, as to any assistant or subordinate
officer, any committee or officer authorized by the Board of Directors) may
remove an officer at any time. The removal of an officer does not prejudice
any of his or her contract rights. The Board of Directors (or, as to any
assistant or subordinate officer, any committee or officer authorized by the
Board of Directors) may fill a vacancy which occurs in any office for the
unexpired portion of the term.
SECTION 4.09. Compensation. The Board of Directors shall have power
to fix the salaries and other compensation and remuneration, of whatever kind,
of all officers of the Corporation. No officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a director
of the Corporation. The Board of Directors may authorize any committee or
officer, upon whom the power of appointing assistant and subordinate officers
may have been conferred, to fix the salaries, compensation and remuneration of
such assistant and subordinate officers.
ARTICLE V.
DIVISIONAL TITLES
SECTION 5.01. Conferring Divisional Titles. The Board of Directors
may from time to time confer upon any employee of a division of the
Corporation the title of President, Vice President, Treasurer or Controller of
such division or any other title or titles deemed appropriate, or may
authorize the Chairman of the Board or the President to do so. Any such titles
so
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conferred may be discontinued and withdrawn at any time by the Board of
Directors, or by the Chairman of the Board or the President if so authorized
by the Board of Directors. Any employee of a division designated by such a
divisional title shall have the powers and duties with respect to such
division as shall be prescribed by the Board of Directors, the Chairman of the
Board or the President.
SECTION 5.02. Effect of Divisional Titles. The conferring of
divisional titles shall not create an office of the Corporation under Article
IV unless specifically designated as such by the Board of Directors; but any
person who is an officer of the Corporation may also have a divisional title.
ARTICLE VI.
STOCK
SECTION 6.01. Certificates for Stock. Each stockholder is entitled to
certificates which represent and certify the shares of stock he or she holds
in the Corporation. Each stock certificate shall include on its face the name
of the Corporation, the name of the stockholder or other person to whom it is
issued, and the class of stock and number of shares it represents. It shall be
in such form, not inconsistent with law or with the Charter, as shall be
approved by the Board of Directors or any officer or officers designated for
such purpose by resolution of the Board of Directors. Each stock certificate
shall be signed by the Chairman of the Board, the President, or a
Vice-President, and countersigned by the Secretary, an Assistant Secretary,
the Treasurer, or an Assistant Treasurer. Each certificate may be sealed with
the actual corporate seal or a facsimile of it or in any other form and the
signatures may be either manual or facsimile signatures. A certificate is
valid and may be issued whether or not an officer who signed it is still an
officer when it is issued. A certificate may not be issued until the stock
represented by it is fully paid.
SECTION 6.02. Transfers. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates of stock; and
may appoint transfer agents and registrars thereof. The duties of transfer
agent and registrar may be combined.
SECTION 6.03. Record Dates or Closing of Transfer Books. The Board of
Directors may, and shall have the sole power to, set a record date or direct
that the stock transfer books be closed for a stated period for the purpose of
making any proper determination with respect to stockholders, including which
stockholders are entitled to request a special meeting of stockholders, notice
of a meeting of stockholders, vote at a meeting of stockholders, receive a
dividend, or be allotted other rights. The record date may not be prior to the
close of business on the day the record date is fixed nor, subject to Section
1.06, more than 90 days before the date on which the action requiring the
determination will be taken; the transfer books may not be closed for a period
longer than 20 days; and, in the case of a meeting of stockholders, the record
date or the closing of the transfer books shall be at least ten days before
the date of the meeting. Any shares of the Corporation's own stock acquired by
the Corporation between the record date for
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determining stockholders entitled to notice of or to vote at a meeting of
stockholders and the time of the meeting may be voted at the meeting by the
holder of record as of the record date and shall be counted in determining the
total number of outstanding shares entitled to be voted at the meeting.
SECTION 6.04. Stock Ledger. The Corporation shall maintain a stock
ledger which contains the name and address of each stockholder and the number
of shares of stock of each class which the stockholder holds. The stock ledger
may be in written form or in any other form which can be converted within a
reasonable time into written form for visual inspection. The original or a
duplicate of the stock ledger shall be kept at the offices of a transfer agent
for the particular class of stock, or, if none, at the principal office in the
State of Maryland or the principal executive offices of the Corporation.
SECTION 6.05. Certification of Beneficial Owners. The Board of
Directors may adopt by resolution a procedure by which a stockholder of the
Corporation may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth
the class of stockholders who may certify; the purpose for which the
certification may be made; the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of a
certification which complies with the procedure adopted by the Board of
Directors in accordance with this Section, the person specified in the
certification is, for the purpose set forth in the certification, the holder
of record of the specified stock in place of the stockholder who makes the
certification.
SECTION 6.06. Lost Stock Certificates. The Board of Directors may
determine the conditions for issuing a new stock certificate in place of one
which is alleged to have been lost, stolen, or destroyed, or the Board of
Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may require the owner of the certificate to give bond, with
sufficient surety, to indemnify the Corporation against any loss or claim
arising as a result of the issuance of a new certificate. In their discretion,
the Board of Directors or such officer or officers may refuse to issue such
new certificate save upon the order of some court having jurisdiction in the
premises.
ARTICLE VII.
FINANCE
SECTION 7.01. Checks, Drafts, Etc. All checks, drafts and orders for
the payment of money, notes and other evidences of indebtedness, issued in the
name of the Corporation, shall, unless otherwise provided by resolution of the
Board of Directors, be signed by the Chairman of the Board, the President, a
Vice-President, an Assistant Vice-President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary.
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SECTION 7.02. Annual Statement of Affairs. The President or chief
accounting officer shall prepare annually a full and correct statement of the
affairs of the Corporation, to include a balance sheet and a financial
statement of operations for the preceding fiscal year. The statement of
affairs shall be submitted at the annual meeting of the stockholders and,
within 20 days after the meeting, placed on file at the Corporation's
principal office.
SECTION 7.03. Fiscal Year. The fiscal year of the Corporation shall
be the 12 calendar months period ending December 31 in each year, unless
otherwise provided by the Board of Directors.
SECTION 7.04. Dividends. If declared by the Board of Directors at any
meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Charter.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.01. Procedure. Any indemnification, or payment of expenses
in advance of the final disposition of any proceeding, shall be made promptly,
and in any event within 60 days, upon the written request of the director or
officer entitled to seek indemnification (the "Indemnified Party"). The right
to indemnification and advances hereunder shall be enforceable by the
Indemnified Party in any court of competent jurisdiction, if (i) the
Corporation denies such request, in whole or in part, or (ii) no disposition
thereof is made within 60 days. The Indemnified Party's costs and expenses
incurred in connection with successfully establishing his or her right to
indemnification, in whole or in part, in any such action shall also be
reimbursed by the Corporation. It shall be a defense to any action for advance
for expenses that (a) a determination has been made that the facts then known
to those making the determination would preclude indemnification or (b) the
Corporation has not received both (i) an undertaking as required by law to
repay such advances in the event it shall ultimately be determined that the
standard of conduct has not been met and (ii) a written affirmation by the
Indemnified Party of such Indemnified Party's good faith belief that the
standard of conduct necessary for indemnification by the Corporation has been
met.
SECTION 8.02. Exclusivity, Etc. The indemnification and advance of
expenses provided by the Charter and these By-Laws shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advance of expenses may be entitled under any law (common or statutory), or
any agreement, vote of stockholders or disinterested directors or other
provision that is consistent with law, both as to action in his or her
official capacity and as to action in another capacity while holding office or
while employed by or acting as agent for the Corporation, shall continue in
respect of all events occurring while a person was a director or officer after
such person has ceased to be a director or officer, and shall inure to the
benefit of the estate, heirs, executors and administrators of such person. The
Corporation shall not be liable for any payment under this By-Law in
connection with a claim made by a director or officer to the
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extent such director or officer has otherwise actually received payment under
insurance policy, agreement, vote or otherwise, of the amounts otherwise
indemnifiable hereunder. All rights to indemnification and advance of expenses
under the Charter of the Corporation and hereunder shall be deemed to be a
contract between the Corporation and each director or officer of the
Corporation who serves or served in such capacity at any time while this
By-Law is in effect. Nothing herein shall prevent the amendment of this
By-Law, provided that no such amendment shall diminish the rights of any
person hereunder with respect to events occurring or claims made before its
adoption or as to claims made after its adoption in respect of events
occurring before its adoption. Any repeal or modification of this By-Law shall
not in any way diminish any rights to indemnification or advance of expenses
of such director or officer or the obligations of the Corporation arising
hereunder with respect to events occurring, or claims made, while this By-Law
or any provision hereof is in force.
SECTION 8.03. Severability; Definitions. The invalidity or
unenforceability of any provision of this Article VIII shall not affect the
validity or enforceability of any other provision hereof. The phrase "this
By-Law" in this Article VIII means this Article VIII in its entirety.
ARTICLE IX.
SUNDRY PROVISIONS
SECTION 9.01. Books and Records. The Corporation shall keep correct
and complete books and records of its accounts and transactions and minutes of
the proceedings of its stockholders and Board of Directors and of any
executive or other committee when exercising any of the powers of the Board of
Directors. The books and records of the Corporation may be in written form or
in any other form which can be converted within a reasonable time into written
form for visual inspection. Minutes shall be recorded in written form but may
be maintained in the form of a reproduction. The original or a certified copy
of these By-Laws shall be kept at the principal office of the Corporation.
SECTION 9.02. Corporate Seal. The Board of Directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be in the
charge of the Secretary. The Board of Directors may authorize one or more
duplicate seals and provide for the custody thereof. If the Corporation is
required to place its corporate seal to a document, it is sufficient to meet
the requirement of any law, rule, or regulation relating to a corporate seal
to place the word "(seal)" adjacent to the signature of the person authorized
to sign the document on behalf of the Corporation.
SECTION 9.03. Bonds. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his or her duties, with one or more
sureties and in such amount as may be satisfactory to the Board of Directors.
SECTION 9.04. Voting Stock in Other Corporations. Stock of other
corporations or associations, registered in the name of the Corporation, may
be voted by the President, a Vice-
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President, or a proxy appointed by either of them. The Board of Directors,
however, may by resolution appoint some other person to vote such shares, in
which case such person shall be entitled to vote such shares upon the
production of a certified copy of such resolution.
SECTION 9.05. Mail. Any notice or other document which is required by
these By-Laws to be mailed shall be deposited in the United States mails,
postage prepaid.
SECTION 9.06. Contracts and Agreements. To the extent permitted by
applicable law, and except as otherwise prescribed by the Charter or these
By-Laws, the Board of Directors may authorize any officer, employee or agent
of the Corporation to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation. Such authority may
be general or confined to specific instances. A person who holds more than one
office in the Corporation may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer.
SECTION 9.07. Amendments. Subject to the special provisions of
Section 2.02, any and all provisions of these By-Laws may be repealed,
altered, amended or rescinded and new by-laws may be adopted (a) by the
stockholders at any annual meeting of the stockholders, or at any special
meeting called for that purpose and (b) by the Board of Directors at any
regular or special meeting of the Board of Directors.
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Xxxxxxxx X
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND THIS NOTE MAY
NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
THE TERMS OF SECTION 3.3(B) HEREIN. IN ADDITION, ANY SALE, TRANSFER OR OTHER
DISPOSITION OF THIS NOTE SHALL ONLY BE MADE PURSUANT TO (I) AN EFFECTIVE
REGISTRATION STATEMENT OR (II) AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAW AND THE HOLDER DELIVERS TO THE COMPANY AN OPINION OF
LEGAL COUNSEL THAT SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION REQUIREMENTS.
WELLPOINT HEALTH NETWORKS INC.
SUBORDINATED NOTE DUE ___________ __, 20__
$____________ ________ __, 20__
WellPoint Health Networks Inc., a Delaware corporation (the
"Company"), for value received hereby promises to pay to the holder hereof on
_________ __, 20__ (the "Stated Maturity"), the principal sum of
______________________ dollars ($________). The Company promises to pay
interest on the outstanding principal amount of this Note at a rate equal to
___% (the "Interest Rate"). Interest on the Notes will accrue at the Interest
Rate from the most recent date on which interest has been paid or, if no
interest has been paid, from _________ __, 20__. The Company will pay interest
semi-annually in arrears on each _________ __, and _________ __, commencing
_________ __, 20__. Interest will be computed on the basis of a 360-day year
of twelve 30-day months and, in the case of a partial month, the actual number
of days elapsed. The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at a rate equal
to ___% (the "Default Interest Rate") so long as such Default (as defined in
Section 1.1 below) is continuing. This Note is one of the $______ aggregate
principal amount issued of ___% Subordinated Notes due __________, 20__,
referred to herein as the Securities.
This Note shall also be subject to the following terms:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions
"Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code, or any similar
Federal or state law for the relief of debtors.
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"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which
the Company is a party) expressly provides that such Senior Indebtedness shall
be "Designated Senior Indebtedness" for purposes of this Note and the other
Securities and (ii) any other Indebtedness of the Company designated by the
Company as of the date hereof; provided that such instrument, agreement or
other document may place limitations and conditions on the right of such
Senior Indebtedness to exercise the rights of Designated Senior Indebtedness.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, and without
duplication, (a) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money (including
obligations of the Company in respect of overdrafts, foreign exchange
contracts, currency exchange agreements, interest rate protection agreements,
and any loans or advances from banks, whether or not evidenced by notes or
similar instruments) or evidenced by bonds, debentures, notes or similar
instruments (whether or not the recourse of the lender is to the whole of the
assets of such Person or to only a portion thereof), (b) all reimbursement
obligations and other liabilities (contingent or otherwise) of such Person
with respect to letters of credit, bank guarantees or bankers' acceptances,
(c) all obligations and liabilities (contingent or otherwise) in respect of
leases of such Person (i) required, in conformity with generally accepted
accounting principles, to be accounted for as capitalized lease obligations on
the balance sheet of such Person, or (ii) required, in conformity with
generally accepted accounting principles, to be accounted for as an operating
lease, provided either (A) such operating lease requires, at the end of the
term thereof, that such Person make any payment other than accrued periodic
rent in the event that such Person does not acquire the leased real property
and related fixtures subject to such lease, or (B) such Person has an option
to acquire the leased real property and related fixtures, whether such option
is exercisable at any time or under specific circumstances, (d) all
obligations of such Person (contingent or otherwise) with respect to an
interest rate swap, cap or collar agreement or other similar instrument or
agreement, (e) all direct or indirect guaranties or similar agreements by such
Person in respect of, and obligations or liabilities (contingent or otherwise)
of such Person to purchase or otherwise acquire or otherwise assure a creditor
against loss in respect of, indebtedness, obligations or liabilities of
another Person of the kind described in clauses (a) through (d), (f) any
indebtedness or other obligations described in clauses (a) through (d) secured
by any mortgage, pledge, lien or other encumbrance existing on property which
is owned or held by such Person, regardless of whether the indebtedness or
other obligation secured thereby shall have been assumed by such Person and
(g) any and all deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness, obligation or
liability of the kind described in clauses (a) through (f).
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"Note" means this Note, as amended or supplemented from time to time
in accordance with the terms hereof.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities" means this Note and all other notes with similar terms
issued contemporaneously herewith as part of the $___ aggregate principal
amount issued of ___% Subordinated Notes due ________, 20__, together with all
other notes accepted from time to time in substitution, renewal or replacement
for all or any part thereof including pursuant to Section 3.3, which shall be
treated as a single class of securities.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of
any bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding), rent and end of term
payments payable on or in connection with, and, to the extent not included in
the foregoing, all amounts payable as fees, costs, expenses, liquidated
damages, indemnities, repurchase and other put obligations and other amounts
to the extent accrued or due on or in connection with, Indebtedness of the
Company, whether outstanding on the date of this Note or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company
(including all deferrals, renewals, extensions or refundings of, or
amendments, modifications or supplements to, the foregoing. Notwithstanding
the foregoing, the term Senior Indebtedness shall not include (i) the
$260,000,000 principal amount of Zero Coupon Convertible Subordinated
Debentures Due 2019 of the Company issued under an Indenture dated as of July
2, 1999 as such Indenture may be amended from time to time (with respect to
which this Note and the other Securities shall be pari passu) (ii)
Indebtedness evidenced by this Note or the other Securities (with respect to
which this Note and the other Securities shall be pari passu), (iii)
Indebtedness of the Company to any subsidiary of the Company, a majority of
the voting stock of which is owned, directly or indirectly, by the Company,
(iv) accounts payable or other indebtedness to trade creditors created or
assumed by the Company in the ordinary course of business and (v) any
particular Indebtedness in which the instrument creating or evidencing the
same or the assumption or guarantee thereof expressly provides that such
Indebtedness shall not be senior in right of payment to, or is pari passu
with, or is subordinated or junior to, this Note and the other Securities.
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ARTICLE 2
REDEMPTION
Section 2.1 Right to Redeem.
This Note and the other Securities are redeemable in whole or in
part, from time to time, at the option of the Company; provided, that a Note
may be redeemed only in integral multiples of $1,000. Upon such redemption,
the Company shall pay the holder the principal amount of this Note so redeemed
plus accrued but unpaid interest on such principal amount.
Section 2.2 Notice of Redemption.
At least 20 days but not more than 60 days before any redemption of
all or any portion of this Note, the Company shall mail a notice of redemption
by first-class mail, postage prepaid, to the holder of this Note, setting
forth the principal amount to be redeemed, the interest on such principal
amount that will accrue and be unpaid prior to such redemption and the date
for such redemption.
The notice, if mailed in the manner herein provided, shall be
conclusively presumed to have been duly given, whether or not the holder
receives such notice.
Section 2.3 Effect of Notice of Redemption.
Once notice of redemption is given, pursuant to Section 2.2, the
principal amount of this Note so redeemed, plus accrued but unpaid interest
thereon, shall become due and payable on the date for such redemption.
Section 2.4 Securities Redeemed in Part.
If less than all the Securities are to be redeemed, the Company shall
select the Securities to be redeemed pro rata or by lot or by another fair and
appropriate method; provided, that no Securities of a principal amount of
$1,000 or less shall be redeemed in part. The Company shall make the selection
at least 25 days, but not more than 65 days, before the date selected for the
redemption of outstanding Securities not previously called for redemption. If
this Note is to be redeemed in part only, a Note in a principal amount equal
to the unredeemed portion thereof will be issued in the name of the holder
thereof in accordance with Section 3.3 hereof.
ARTICLE 3
ADDITIONAL COVENANTS
Section 3.1 Financial Information; SEC Reports.
The Company will deliver to the holder of this Note (a) as soon as
available and in any event within 90 days after the end of each fiscal year of
the Company (i) a consolidated
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balance sheet of the Company and its subsidiaries as of the end of such fiscal
year and the related consolidated statements of operations, stockholders'
equity and cash flows for such fiscal year, all reported on by an independent
public accountant of nationally recognized standing and (ii) a report
containing a management's discussion and analysis of the financial condition
and results of operations and a description of the business and properties of
the Company and (b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Company
(i) an unaudited consolidated financial report for such quarter and (ii) a
report containing a management's discussion and analysis of the financial
condition and results of operations of the Company; provided that the
foregoing shall not be required for any fiscal year or quarter, as the case
may be, with respect to which the Company delivers or expects to deliver to
the holder an annual report or quarterly report, as the case may be, pursuant
to the immediately following paragraph.
The Company shall deliver to the holder, within 15 days after it
files such annual and quarterly reports, information, documents and other
reports with the SEC, copies of its annual report and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe) which the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act.
Section 3.2 Officers' Certificates.
The Company shall deliver to the holder, within 120 days after the
end of each fiscal year of the Company, an officers' certificate in which one
of the two officers signing such certificate is either the principal executive
officer, principal financial officer or principal accounting officer of the
Company (an "Officers' Certificate"), stating whether or not to the knowledge
of the signers thereof the Company is in Default in the performance and
observance of any of the terms, provisions and conditions of this Note or any
of the other Securities (without regard to any period of grace or requirement
of notice provided hereunder) and, if the Company shall be in Default,
specifying all such Defaults and the nature and status thereof of which the
signers may have knowledge.
The Company will deliver to the holder, as soon as possible and in
any event within five days, upon becoming aware of any Default in the
performance or observance of any covenant, agreement or condition contained in
this Note or any other Securities, or any Event of Default, an Officers'
Certificate specifying with particularity such Default or Event of Default and
further stating what action the Company has taken, is taking or proposes to
take with respect thereto.
Section 3.3 Registration and Transfer.
(a) The Company will keep at its principal office a register in which
the Company will provide for the registration of the Securities and their
transfer. The Company may treat any Person in whose name this Note is
registered on such register as the owner thereof for the purpose of receiving
payment of the principal and redemption price of and interest on the Note and
for all other purposes, whether or not the Note shall be overdue, and the
Company shall
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not be affected by any notice to the contrary from any Person other than such
Person. All references herein to a "holder" of this Note shall mean the Person
in whose name the Note is at the time registered on such register.
(b) This Note shall not be sold, transferred or otherwise disposed of
except in accordance with all of the following terms:
(i) the Company shall have consented to such sale, transfer or other
disposition, which consent shall not be unreasonably withheld;
(ii) no such transfer, sale or other disposition shall be made to a
Person that as of the date of such transfer, directly or indirectly
through an affiliate, is engaged in any material respect in the same or
similar business (regardless of the location) as that in which the
Company or any of its subsidiaries is then engaged; and
(iii) this Note may not be transferred, sold or otherwise disposed
of in principal amounts of less than the lesser of $25 million or the
actual principal amount of this Note.
(c) This Note may not be transferred, sold, otherwise disposed of or
subdivided in principal amounts of less than the lesser of $25 million or the
then-outstanding principal amount of this Note. Subject to the foregoing
sentence, upon surrender of this Note for registration of transfer as
otherwise permitted herein or for exchange to the Company at its principal
office or upon a partial redemption of the Note, the Company, at its expense,
will execute and deliver in exchange therefor a new Note or Notes, as the case
may be, which aggregate the unpaid principal amount of the Note, registered as
such holder or transferee may request, dated so that there will be no loss of
interest on the surrendered Note and otherwise of the same class of Securities
and of like tenor.
(d) Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of the Note and, in the case of
any such loss, theft or destruction of the Note, upon delivery of an indemnity
bond in such reasonable amount as the Company may determine (or, at the
discretion of the Company, an unsecured indemnity agreement from the holder),
or, in the case of any such mutilation, upon the surrender of such Note for
cancellation to the Company at its principal office, the Company at its
expense will execute and deliver, in lieu thereof, a new Note of the same
class of Securities and of like tenor, dated so that there will be no loss of
interest on (and registered in the name of the holder of) such lost, stolen,
destroyed or mutilated Note. Any Note in lieu of which any such new Note has
been so executed and delivered by the Company shall be deemed to be not
outstanding.
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(e) The Company agrees that, within 15 days of receiving such request
from the holder of this Note, it shall provide the holder with a list of names
and addresses of the holders of the other Securities.
Section 3.4 Payment.
The Company shall make each payment (including principal or
redemption price of or interest on the Note or other amounts) hereunder not
later than 11 a.m., New York City time, on the date when due in immediately
available U.S. dollars. Each such payment shall be made to the holder pursuant
to written instructions from such Holder to the Company, including pursuant to
wire transfer instructions. Notwithstanding anything to the contrary contained
in this Note, the Company may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States
of America from payments on the Note required hereunder.
ARTICLE 4
SUCCESSOR CORPORATION
Section 4.1 When the Company May Merge or Transfer Assets.
The Company shall not consolidate with or merge with or into any
other Person (other than in a merger or consolidation in which the Company is
the surviving or continuing Person) or sell, convey, transfer, assign or lease
its properties and assets substantially as an entirety to any Person, unless:
(i) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, conveyance, transfer, assignment or lease the properties and assets
of the Company substantially as an entirety shall be a corporation, limited
liability company, partnership or trust organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia, and shall expressly assume by a note, executed and delivered to the
holder in form reasonably satisfactory to the holder, the due and punctual
payment of the then outstanding principal amount of this Note, and accrued but
unpaid interest thereon, and the due and punctual performance of all of the
covenants and obligations of the Company under this Note; and
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing.
The successor Person formed by such consolidation or into which the Company is
merged or the successor Person to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Note with the same effect as if such
successor had been named as the Company herein; and thereafter the Company
shall be discharged from all obligations and covenants hereunder.
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ARTICLE 5
DEFAULTS AND REMEDIES
Section 5.1 Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on the Note when
the same becomes due and payable, whether or not such payment shall be
prohibited by Article 6 hereof, and such failure continues for 60 days after
receipt by the Company of a Notice of Default;
(2) the Company defaults in the payment of the principal amount when
the same becomes due and payable at the Stated Maturity or upon redemption,
whether or not such payment shall be prohibited by Article 6 hereof;
(3) the Company fails to comply with any of its agreements or
covenants herein (other than those referred to in clauses (1) and (2) above)
and such failure continues for 60 days after receipt by the Company of a
Notice of Default;
(4) a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the Company
under any Bankruptcy Law, and such decree or order shall have continued
undischarged and unstayed for a period of 60 consecutive days; or a decree or
order of a court having jurisdiction in the premises of the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of
the Company or of its property, or for the winding-up or liquidation of its
affairs, shall have been entered, and such decree or order shall have remained
in force undischarged and unstayed for a period of 60 consecutive days; or
(5) the Company shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking
reorganization under any Bankruptcy Law, or shall consent to the filing of any
such petition, or shall consent to the appointment of a receiver or liquidator
or trustee or assignee in bankruptcy or insolvency of it or of its property or
shall make an assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due.
A Default under clause (3) above is not an Event of Default until the
holders of at least 25% of the then-outstanding principal amount of the
Securities notify the Company of the Default and the Company does not cure
such Default (and such Default is not waived) within the 60 days after actual
receipt of such notice (a "Notice of Default"). Any such notice must specify
the Default, demand that it be remedied and state that such notice is a Notice
of Default.
-8-
Section 5.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
clause (4) or (5) of Section 5.1 hereof) occurs and is continuing, the holders
of at least 25% of the then-outstanding principal amount of the Securities, by
notice to the Company may declare the outstanding principal amount and any
accrued but unpaid interest thereon to the date of declaration to be
immediately due and payable. Upon such a declaration, such principal amount
and accrued but unpaid interest shall become and be due and payable
immediately. If an Event of Default specified in clause (4) or (5) of Section
5.1 hereof occurs and is continuing, the principal amount and any accrued but
unpaid interest shall become and be immediately due and payable without any
declaration or other act on the part of the holder. The holders of a majority
of the then-outstanding principal amount of the Securities, by notice to the
Company, may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of the principal amount
and interest thereon that has become due solely as a result of acceleration.
No such rescission shall affect any subsequent or other Default or Event of
Default or impair any consequent right.
Section 5.3 Other Remedies.
If an Event of Default occurs and is continuing, the holder may
pursue any available remedy to collect the payment of the outstanding
principal amount and any accrued but unpaid interest on this Note or to
enforce the performance of any provision hereof.
A delay or omission by the holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of, or acquiescence in, the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 5.4 Waiver of Past Defaults.
The holders of a majority of the then-outstanding principal amount of
the Securities, by notice to the Company, may waive an existing Default or
Event of Default and its consequences except (1) an Event of Default described
in clause (1), (2) or (3) of Section 5.1 or, (2) a Default in respect of a
provision that under Section 7.2 hereof cannot be amended without the consent
of each holder affected. When a Default or Event of Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any consequent right.
Section 5.5 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Note, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in
its discretion may assess reasonable costs, including reasonable
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attorneys' fees and expenses, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 5.5 does not apply to a suit by the holder for
the enforcement of the payment of the principal amount or accrued but unpaid
interest on or after the due date.
Section 5.6 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury or other law wherever enacted, now or at any time hereafter in force,
which would prohibit or forgive the Company from paying all or any portion of
the principal amount or any interest thereon, as contemplated herein, or which
may affect the covenants or the performance of this Note.
ARTICLE 6
SUBORDINATION
Section 6.1 Agreement of Subordination.
The obligations arising from this Note and the other Securities shall
rank pari passu with those of the Company's $260,000,000 principal amount of
Zero Coupon Convertible Subordinated Debentures Due 2019 issued under an
Indenture dated as of July 2, 1999, as such Indenture may be amended from time
to time.
The payment of the principal amount or interest thereon in respect of
this Note shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment in full in
cash or other payment satisfactory to the holders of Senior Indebtedness of
all Senior Indebtedness of the Company, whether outstanding at the date of
this Note or thereafter incurred, or thereafter created, assumed or
guaranteed.
No provision of this Article 6 shall prevent the occurrence of any
Default or Event of Default hereunder.
Section 6.2 Notice to the Holders
The Company shall give prompt written notice to the holder of any
fact known to the Company which would prohibit the making of any payment of
monies in respect of this Note pursuant to the provisions of this Article 6,
but failure to give such notice shall not affect the subordination of the
Securities to the Senior Indebtedness as provided in this Article 6.
Section 6.3 Payments to the Holder.
No payment shall be made with respect to the payment of any principal
or interest on this Note, if:
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(i) a default in any payment obligations in respect of Designated
Senior Indebtedness occurs and is continuing, without regard to any applicable
period of grace (whether at maturity or at a date fixed for payment or by
declaration or otherwise); or
(ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits the holders of such Designated
Senior Indebtedness as to which such default relates to accelerate its
maturity and the Company receives a notice of the default (a "Payment Blockage
Notice") from a holder, or a representative of holders, of Designated Senior
Indebtedness.
If the Company receives any Payment Blockage Notice pursuant to
clause (ii) above, no subsequent Payment Blockage Notice shall be effective
for purposes of this Section unless and until at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Company shall be the
basis for a subsequent Payment Blockage Notice (it being acknowledged that (x)
any action of the Company or any of its subsidiaries occurring subsequent to
delivery of a Payment Blockage Notice that would give rise to any event of
default pursuant to any provision of Senior Indebtedness under which an event
of default previously existed (or was continuing at the time of delivery of
such Payment Blockage Notice) shall constitute a new event of default for this
purpose and (y) any breach of a financial covenant giving rise to a nonpayment
default for a period ending subsequent to the date of delivery of the
respective Payment Blockage Notice shall constitute a new event of default for
this purpose).
The Company may and shall resume payments on and distributions in
respect of this Note:
(1) in case of a default referred to in clause (i) above, the earlier
of the date upon which the default is cured or waived in accordance with the
terms of the governing instrument or ceases to exist, or
(2) in the case of a default referred to in clause (ii) above, the
earlier of the date upon which the default is cured, waived in accordance with
the terms of the governing instrument or ceases to exist or 179 days pass
after the applicable Payment Blockage Notice is received if the maturity of
such Designated Senior Indebtedness has not been accelerated, unless this
Article 6 otherwise prohibits the payment or distribution at the time of such
payment or distribution.
Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization
or bankruptcy of the Company, whether voluntary or involuntary, or insolvency,
receivership or similar proceedings relating to the Company or its property,
or an assignment for the benefit of creditors or any marshaling of the
Company's assets or liabilities, all amounts due or to become due upon all
Senior Indebtedness of the Company shall first be paid in full in cash or
other payment satisfactory to the holders of such Senior
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Indebtedness before any payment is made on account of the principal or
interest in respect of this Note, and upon any such dissolution or winding-up
or liquidation or reorganization or bankruptcy of the Company, whether
voluntary or involuntary or insolvency, receivership or similar proceedings
relating to the Company or its property, or an assignment for the benefit of
creditors or any marshaling of the Company's assets or liabilities, any
payment by the Company, or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the holder of
this Note would be entitled, except for the provisions of this Article 6,
shall (except as aforesaid) be paid by the Company or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other Person making such payment
or distribution, or by the holder of this Note if received by them or it,
directly to the holders of Senior Indebtedness of the Company, as their
respective interests may appear, or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any such Senior Indebtedness may have been issued, as
their respective interests may appear, to the extent necessary to pay all such
Senior Indebtedness in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness,
before any payment or distribution is made to the holders of this Note or the
other Securities..
In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (including, without limitation, by way
of setoff or otherwise), prohibited by the foregoing provisions in this
Section 6.3, shall be received by the holder of this Note before all Senior
Indebtedness of the Company is paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness, such payment or
distribution shall be held in trust for the benefit of and shall be paid over
or delivered to the holders of Senior Indebtedness of the Company or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any such Senior
Indebtedness may have been issued, as their respective interests may appear,
as calculated by the Company, for application to the payment of all such
Senior Indebtedness remaining unpaid to the extent necessary to pay all such
Senior Indebtedness in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
For purposes of this Article 6, the words cash, property or
securities shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated, at least to the extent provided in this
Article 6 with respect to this Note, to the payment of all Senior Indebtedness
of the Company which may at the time be outstanding; provided that (i) such
Senior Indebtedness is assumed by the new corporation, if any, resulting from
any such reorganization or readjustment, and (ii) the rights of the holders of
such Senior Indebtedness (other than leases that are not assumed by the
Company or the new corporation, as the case may be) are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
corporation shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 6.3.
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Section 6.4 Subrogation
Subject to the payment in full in cash or other payment satisfactory
to the holders of Senior Indebtedness of all Senior Indebtedness of the
Company, the rights of the holder of this Note shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company applicable to
such Senior Indebtedness until the principal and interest on this Note shall
be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash, property
or securities to which the holder of this Note would be entitled except for
the provisions of this Article 6, and no payment over pursuant to the
provisions of this Article 6, to or for the benefit of the holders of such
Senior Indebtedness by the holder of this Note, shall, as between the Company,
its creditors other than holders of its Senior Indebtedness, and the holder of
this Note be deemed to be a payment by the Company to or on account of the
Senior Indebtedness; and no payments or distributions of cash, property or
securities to or for the benefit of the holder of this Note pursuant to the
subrogation provisions of this Article 6, which would otherwise have been paid
to the holders of Senior Indebtedness shall be deemed to be a payment by the
Company to or for the account of this Note. It is understood that the
provisions of this Article 6 are and are intended solely for the purpose of
defining the relative rights of the holder of this Note, on the one hand, and
the holders of Senior Indebtedness, on the other hand.
Nothing contained in this Article 6 or elsewhere herein is intended
to or shall impair, as between the Company, its creditors other than the
holders of its Senior Indebtedness and the holder of this Note, the obligation
of the Company, which is absolute and unconditional, to pay to the holder of
this Note the principal and interest in respect of this Note as and when the
same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the holder of this Note and
creditors of the Company other than the holders of its Senior Indebtedness,
nor shall anything herein or therein prevent the holder of this Note from
exercising all remedies otherwise permitted by applicable law upon default
under this Note, subject to the rights, if any, under this Article 6 of the
holders of Senior Indebtedness in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
Section 6.5 No Impairment of Subordination.
No right of any present or future holder of any Senior Indebtedness
of the Company to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by (i) any amendment of or addition or
supplement to any such Senior Indebtedness or any instrument or agreement
relating thereto (unless otherwise expressly provided therein), or (ii) any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of the instrument, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with
or (iii) a failure to act by the holder of this Note or the failure of such
holder to comply with this Note.
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Section 6.6 Reliance By Holders Of Senior Indebtedness On
Subordination Provisions.
The holder of this Note by such holder's acceptance hereof,
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness of the Company, whether such Senior Indebtedness was
created, assumed or acquired before or after the date hereof, to acquire and
continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness, and no amendment or modification
of the provisions contained herein shall diminish the rights of such holder or
holders unless such holder or holders shall have agreed in writing thereto.
Section 6.7 Reinstatement of Subordination.
If, at any time, all or part of any payment of any Senior
Indebtedness theretofore made by the Company or any other Person is rescinded
or must otherwise be returned by the holders of such Senior Indebtedness for
any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of the Company or such other Person), these
subordination provisions shall continue to be effective or be reinstated, as
the case may be, all as though such payment had not been made.
Section 6.8 Permitted Payments.
Nothing contained in this Article 6 or elsewhere herein shall prevent
the Company at any time, except under the conditions described in Section 6.3
hereof, from making payments at any time of principal or interest in respect
of this Note, if such payment would not have been prohibited by the provisions
of Section 6.3 hereof.
Section 6.9 Reliance On Judicial Order Or Certificate Of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article 6, the holder of this Note shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the holder of this Note, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
6.
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ARTICLE 7
Amendments
Section 7.1 Without Consent of Holder.
The Company may amend the Securities, including this Note, without
the consent of the holder thereof:
(1) to cure any ambiguity or to correct or supplement any provision
contained in the Securities which may be defective or inconsistent with any
other provision contained in the Securities, or to make such other provisions
with regard to matters or questions arising under the Securities which shall
not materially adversely affect the interests of the holders of the
Securities;
(2) to comply with Section 4.1 of this Note;
(3) to comply with any requirements of the SEC or to comply with the
provisions of the Trust Indenture Act of 1939;
(4) to make any change that would provide any additional benefit or
rights to the holder; or
(5) to make any change that does not adversely affect the right of
the holders.
Section 7.2 With Consent of Holder.
The Company, with the written consent of the holders of at least a
majority of the then-outstanding principal amount of the Securities, may amend
the Securities, including this Note. However, without the consent of each
holder affected, an amendment or supplement to the Securities may not:
(1) make any change to the principal amount owed to a holder who must
consent to an amendment;
(2) make any change to the manner or rate of accrual of interest or
reduce the rate of interest, including defaulted interest, referred to on the
face of a Security or extend the time for payment of the interest on a
Security;
(3) reduce the principal amount of a Security or extend the Stated
Maturity;
(4) make the Security payable in money or securities other than that
stated in the Security;
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(5) make any change in Article 6 hereof that adversely affects the
rights of any holder;
(6) make any change in Section 5.4 hereof or this Section 7.2; or
(7) reduce the percentage of the principal amount of outstanding
Securities necessary for amendment to or waiver of compliance with any
provision of the Securities or for waiver of any default in respect thereof.
It shall not be necessary for the consent of the holders under this
Section 7.2 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 7.2 becomes effective, the
Company shall mail to each holder of the Securities a notice briefly
describing the amendment.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Notices.
Any request, demand, authorization, notice, waiver, consent or
communication shall be in writing and delivered in Person or mailed by first
class mail, postage prepaid, addressed as follows or transmitted by facsimile
transmission (confirmed by overnight courier) to the following facsimile
numbers:
if to the Company:
WellPoint Health Networks Inc.
0 XxxxXxxxx Xxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
if to the holder:
----------------------
----------------------
Attn:
Telephone Number:
Facsimile Number:
Any notice sent by facsimile shall be effective on the date such
facsimile is sent, and any notice sent by first class mail shall be effective
three days after being mailed.
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Section 8.2 Separability Clause.
In case any provision in this Note shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 8.3 Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS NOTE.
Section 8.4 No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company hereunder or
for any claim based on, in respect of or by reason of such obligations or
their creation.
Section 8.5 Assignment.
This Note shall not be assignable or transferable by the Company or
by the holder hereof. This Note shall be binding upon and inure to the benefit
of the Company, the holder and their respective heirs, successors and assigns,
if any.
Section 8.6 Investment Purposes.
The holder hereby represents that it is acquiring this Note solely
for purpose of investment and not with a view to, or for resale in connection
with, any distribution thereof in violation of the Securities Act.
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IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Note on behalf of the respective parties hereto as of the date
first written above.
WELLPOINT HEALTH NETWORKS INC.
By:
-------------------------
Name:
Title:
Agreed and accepted:
[HOLDER]
By: ______________________
Name:
Title:
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Xxxxxxxx X
[FORM OF AFFILIATE LETTER]
___________, 2002
WellPoint Health Networks, Inc.
Xxx XxxxXxxxx Xxx
Xxxxxxxx Xxxx, XX 00000
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger, dated as
of November __, 2001 (the "Merger Agreement"), among WellPoint Health
Networks, Inc., a Delaware corporation ("Purchaser"), CareFirst, Inc., a
Maryland corporation ("CareFirst") and CF Acquisition Corporation, a Maryland
corporation and a direct wholly owned subsidiary of Purchaser ("Merger Sub"),
Merger Sub will merge with and into CareFirst. Immediately following the
Merger, the separate corporate existence of Merger Sub shall cease and
CareFirst shall continue as the surviving corporation under the name
CareFirst, Inc. Capitalized terms used but not defined herein have the
meanings assigned to them in the Merger Agreement.
The undersigned has been advised that as of the date the Merger is
submitted to stockholders of CareFirst for approval the undersigned may be an
"affiliate" of CareFirst, as the term is defined for purposes of paragraphs
(c) and (d) of Rule 145 of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), although nothing contained herein shall be construed as an admission of
such fact, or as a waiver of any rights that the undersigned may have to
object to any claim that the undersigned is such an affiliate on or after the
date of this letter agreement.
As a result of the Merger, the undersigned will receive Purchaser
Common Stock in exchange for shares owned by the undersigned of CareFirst
Common Stock.
The undersigned hereby represents, warrants and covenants with and to
Purchaser that:
The undersigned understands that an investment in Purchaser
Common Stock acquired as a result of the Merger is highly
speculative and involves substantial economic risk. The undersigned
understands that
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it must bear the economic risk of this investment indefinitely
unless the Purchaser Common Stock is registered pursuant to the
Securities Act, or an exemption from registration is available, and
that the undersigned may sustain, and is financially able to
sustain, a complete loss of its investment in the Purchaser. The
undersigned understands that there is no assurance that any
exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow
the undersigned to transfer all or any portion of the Purchaser
Common Stock under the circumstances, in the amounts or at the times
the undersigned might propose.
The undersigned represents that, by reason of its or of its
management's business or financial experience, the undersigned has
the capacity to protect its own interests in connection with the
transactions contemplated in the Merger Agreement.
The undersigned acknowledges and agrees that the Purchaser
Common Stock must be held indefinitely unless it is subsequently
registered under the Securities Act or an exemption from such
registration is available.
The undersigned will not sell, transfer or otherwise dispose of the
Purchaser Common Stock received in the Merger unless (i) such sale, transfer
or other disposition has been registered under the Securities Act, (ii) such
sale, transfer or other disposition is made in conformity with the provisions
of Rule 145 under the Securities Act (as such rule may hereafter from time to
time be amended) or (iii) in the opinion of counsel in form and substance
reasonably satisfactory to Purchaser, or under a "no-action" or interpretive
letter obtained by the undersigned from the Commission specifically issued
with respect to a transaction to be engaged in by the undersigned, such sale,
transfer or other disposition will not violate or is otherwise exempt from
registration under the Securities Act.
The undersigned understands and agrees that this letter agreement
shall apply to all shares of the capital stock of CareFirst that are deemed to
be beneficially owned by the undersigned pursuant to applicable federal
securities laws.
The undersigned has carefully read this letter agreement and
discussed its requirements and other applicable limitations upon the
undersigned's ability to sell, transfer or otherwise dispose of the capital
stock of Purchaser, to the extent the undersigned felt necessary, with the
undersigned's counsel or counsel for CareFirst, as applicable.
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This letter agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
Very truly yours,
[SIGNATORY]
---------------------------------
Name:
Title:
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Appendix H
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT is made and entered into this ____ day
of ____________, by and among _______, _______ and _______ (collectively, the
"Tax Exempt Entities"), CareFirst, Inc., a Maryland corporation ("CareFirst"),
and Wellpoint Health Networks Inc., a Delaware corporation ("Wellpoint").
WHEREAS, CareFirst, Wellpoint and Congress Acquisition Corporation, a
Maryland corporation ("Congress"), have entered into an Agreement and Plan of
Merger dated as of ________, 2001 (as the same may be amended, supplemented or
modified, the "Merger Agreement") which provides that Congress will merge with
and into CareFirst (the "Merger");
WHEREAS, prior to the Merger, CareFirst converted its Primary
CareFirst Insurers (as defined in the Merger Agreement) from not-for-profit to
for-profit status and issued 100% of its outstanding shares of capital stock
to the Tax Exempt Entities (collectively, the "Conversion");
WHEREAS, CareFirst has received an Internal Revenue Service ("IRS")
private letter ruling dated _________, that the Conversion qualifies as a tax
free reorganization and that no gain or loss will be recognized by CareFirst
from the Conversion for Federal income tax purposes (the "IRS Ruling");
WHEREAS, it is a condition to Wellpoint's obligation to consummate
the Merger that the Tax Exempt Entities enter into this Agreement;
WHEREAS, the Tax Exempt Entities are the beneficiaries of an
insurance policy issued by _____________ (the "Insurance Policy") covering any
liability of the Tax Exempt Entities that may arise under this Agreement.
NOW THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth herein, and intending to be legally bound, the
parties hereto agree as follows:
1. Indemnity. Each Tax Exempt Entity agrees to indemnify, defend and save
Wellpoint, CareFirst and their respective affiliates harmless from and against
such Tax Exempt Entity's Pro Rata Share (as defined below) of the net amount
of Federal income tax liabilities (together with any penalties, interest,
fines and additions to tax, but not taxes, if any, resulting from the receipt
of indemnity payments by CareFirst pursuant to this Agreement) incurred by
CareFirst, as a result of a revocation or modification, in whole or in part,
of the IRS Ruling; provided, however, that the Tax Exempt Entities shall have
no liability under this Agreement if the revocation or modification, of the
IRS Ruling is a result of (i) actions taken by CareFirst or Wellpoint
following the Merger, without the consent of the Tax Exempt Entities or (ii)
the transaction not being consummated (other than due to actions taken by the
Tax Exempt Entities) in accordance with the terms set forth in the IRS Ruling
or the request for the IRS Ruling CareFirst or Wellpoint shall promptly notify
the Tax Exempt Entities of any assertion by the IRS of a tax liability for
which the Tax Exempt Entities may be responsible under this Agreement. The Tax
Exempt Entities shall have the opportunity to participate jointly with
Wellpoint and CareFirst in contesting any such asserted tax liability. The
settlement of any claim which would result in a payment by the Tax Exempt
2
Entities under this Agreement without the Tax Exempt Entities' written consent
shall constitute a waiver of the right to indemnity; provided, however, the
Tax Exempt Entities shall not unreasonably withhold their consent to any
settlement.
2. Miscellaneous.
-------------
(a) Financial Assurances. Each Tax Exempt Entity covenants and agrees
that during the term of this Agreement it will have assets or other available
resources sufficient to satisfy any liability or obligation it may have under
this Agreement.
(b) Further Agreements. No party to this Agreement will take any
position inconsistent with the IRS Ruling or the request for the IRS Ruling.
(c) Termination. This Agreement shall terminate on the expiration
of the applicable statute of limitations for the taxable year in which the
Conversion occurs. This Agreement shall also terminate automatically in the
event CareFirst is audited by the IRS, the relevant tax year is closed and the
IRS determines that no tax is due with respect to the Conversion.
(d) No Setoff. No payment required to be made pursuant to this
Agreement shall be subject to any right of setoff, counterclaim, defense,
abatement, suspension, deferment or reduction on an unrelated claim.
(e) Amendments. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated orally or in writing, except that
any term of this Agreement may be amended by writing signed by each of the
parties hereto, and the observance of any such term may be waived (either
generally or in a particular instance and either retroactively or
prospectively) by a writing signed by the party against whom such waiver is to
be asserted.
(f) Notices. All notices and other communications provided for or
permitted hereunder shall be made in accordance with the notice provisions of
the Merger Agreement.
(g) Successors and Assigns. This Agreement (or any right or obligation
hereunder) may not be assigned by any party without the prior written consent
of the other parties (which consent shall not unreasonably be withheld),
except that each of CareFirst and Wellpoint may assign its rights and
obligations in this Agreement, whether by a writing or operation of law, to a
successor to all or substantially all of its business without such consent in
which event this Agreement shall inure to the benefit of and be binding upon
the successor. This Agreement shall not be binding upon any person who
receives a gift, grant or distribution by a Tax Exempt Entity made in
furtherance of the purposes which form the basis for its exemption from
federal income tax.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed within the State.
(i) Waiver, Remedies. No delay on the part of any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other
3
right, power or privilege hereunder, nor shall any single or partial exercise
of any right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. The waiver or consent (whether express or implied) by any party of
the breach of any term or condition of this Agreement shall not prejudice any
remedy of any other party in respect of any continuing or other breach of the
terms and conditions hereof, and shall not be construed as a bar to any right
or remedy which any party would otherwise have on any future occasion under
this Agreement.
(j) Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees and costs in addition to any other available remedy.
(k) Severability . In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reasons, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired or affected, it being intended that all other rights and privileges
shall be enforceable to the fullest extent permitted by law.
(l) No Lien. Nothing in this Agreement is intended to impose a lien or
encumbrance on any assets of the Tax Exempt Entities. Subject to Section 2(a)
of this Agreement, notwithstanding anything else in this Agreement to the
contrary, nothing in this Agreement shall prevent the Tax Exempt Entities from
conducting their operations in the ordinary course or from carrying out the
purposes that form the basis for their exemption from federal income tax .
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(m) Definition. "Pro Rata Share" shall mean ___% for ___, ___% for
___ and ___% for ___.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
___________________________________
By:________________________________
Name:______________________________
Title:_____________________________
___________________________________
By:________________________________
Name:______________________________
Title:_____________________________
___________________________________
By:________________________________
Name:______________________________
Title:_____________________________
CAREFIRST, INC.
By:________________________________
Name:______________________________
Title:_____________________________
WELLPOINT HEALTH NETWORKS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
