Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 17, 2001
AMONG
WELLPOINT HEALTH NETWORKS INC.
RWP ACQUISITION CORP.
AND
RIGHTCHOICE MANAGED CARE, INC.
Table of Contents
Page
ARTICLE I THE MERGER 2
1.1. The Merger 2
1.2. Closing 2
1.3. Effective Time 2
1.4. Effects of the Merger 2
1.5. Certificate of Incorporation 2
1.6. By-Laws 3
1.7. Officers and Directors of Surviving Corporation 3
1.8. Effect on Capital Stock 3
1.9. Cash Elections 4
1.10. Proration 6
1.11. Company Stock Options 7
1.12. Certain Adjustments 8
1.13. Headquarters 8
ARTICLE II EXCHANGE OF CERTIFICATES 9
2.1. Exchange Fund 9
2.2. Exchange Procedures 9
2.3. Distributions with Respect to Unexchanged Shares 10
2.4. No Further Ownership Rights in Company Common Stock 10
2.5. No Fractional Shares of Purchaser Common Stock 10
2.6. Termination of Exchange Fund 11
2.7. No Liability 11
2.8. Investment of the Exchange Fund 11
2.9. Lost Certificates 12
2.10. Withholding Rights 12
2.11. Further Assurances 12
2.12. Stock Transfer Books 12
ARTICLE III REPRESENTATIONS AND WARRANTIES 13
3.1. Representations and Warranties of Purchaser 13
3.2. Representations and Warranties of Company 17
3.3. Representations and Warranties of Purchaser and Merger
Sub 29
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS 30
4.1. Conduct of Business of Company Pending the Merger 30
4.2. Conduct of Business of Purchaser Pending the Merger 32
4.3. Governmental Filings 33
ARTICLE V ADDITIONAL AGREEMENTS 33
5.1. Preparation of Form S-4 and the Proxy Statement;
Stockholders Meeting 33
5.2. Accountant's Letters 34
5.3. Access to Information 35
5.4. Reasonable Best Efforts 35
5.5. No Solicitation of Transactions 36
5.6. Employee Benefits Matters. 37
5.7. Directors' and Officers' Indemnification and
Insurance 38
5.8. Notification of Certain Matters 39
5.9. Public Announcements 39
5.10. Listing of Shares of Purchaser Common Stock 40
5.11. Affiliates 40
5.12. Transition Team 40
5.13. Management Responsibilities. 40
5.14. Tax-Free Reorganization Treatment 41
ARTICLE VI CONDITIONS PRECEDENT 41
6.1. Conditions to Each Party's Obligation to Effect the
Merger 41
6.2. Additional Conditions to Obligations of Purchaser and
Merger Sub 42
6.3. Additional Conditions to Obligations of Company 43
ARTICLE VII TERMINATION AND AMENDMENT 44
7.1. Termination 44
7.2. Effect of Termination 45
7.3. Fees and Expenses 45
7.4. Amendment 46
7.5. Extension; Waiver 46
ARTICLE VIII GENERAL PROVISIONS 47
8.1. Non-Survival of Representations, Warranties and
Agreements 47
8.2. Notices 47
8.3. Interpretation 48
8.4. Counterparts 48
8.5. Entire Agreement; No Third Party Beneficiaries 48
8.6. Governing Law 48
8.7. Severability 49
8.8. Assignment 49
8.9. Submission to Jurisdiction; Waivers 49
8.10. Enforcement 50
8.11. Definitions 50
AGREEMENT AND PLAN OF MERGER, dated as of October 17,
2001 (this "Agreement"), among WellPoint Health Networks Inc., a
Delaware corporation ("Purchaser"), RWP Acquisition Corp., a
Delaware corporation and a direct wholly owned subsidiary of
Purchaser ("Merger Sub"), and RightCHOICE Managed Care, Inc., a
Delaware corporation ("Company").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of Company and
Purchaser deem it advisable and in the best interests of each
corporation and its respective stockholders that Company and
Purchaser engage in a business combination in order to advance
the long-term strategic business interests of Company and
Purchaser;
WHEREAS, the combination of Company and Purchaser shall
be effected by the terms of this Agreement through a merger as
outlined below (the "Merger");
WHEREAS, in furtherance thereof, the respective Boards
of Directors of Company and Purchaser have approved the Merger,
upon the terms and subject to the conditions set forth in this
Agreement, pursuant to which each share of common stock, $0.01
par value, of Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time (as defined
in Section 1.3), other than Company Treasury Shares (as defined
in Section 1.8(a)), Dissenting Shares (as defined in Section
1.8(d)) and shares of Company Common Stock owned by Purchaser or
Merger Sub, will be converted into the right to receive, at the
election of the holders thereof and subject to possible proration
under Section 1.10 hereof, either (i) shares of common stock, par
value $0.01 per share, of Purchaser ("Purchaser Common Stock") or
(ii) an amount of cash, as set forth in Section 1.8;
WHEREAS, for Federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations promulgated
thereunder, and the parties intend, by executing this Agreement,
to adopt a plan of reorganization within the meaning of Section
368(a) of the Code and the regulations promulgated thereunder;
and
WHEREAS, Purchaser and The Missouri Foundation For
Health (the "Foundation") have entered into a Voting and Lockup
Agreement simultaneously herewith, which has been approved by the
Board of Directors of Company for the purposes of Section 203 of
the DGCL (as defined in Section 1.1).
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Company shall be merged
with and into Merger Sub at the Effective Time. Immediately
following the Merger, the separate corporate existence of Company
shall cease and Merger Sub shall continue as the surviving
corporation (the "Surviving Corporation") under the name
RightChoice Managed Care, Inc.
1.2. Closing. Subject to the terms and conditions hereof, the
closing of the Merger and the transactions contemplated by this
Agreement (the "Closing") will take place on the second Business
Day after the satisfaction or waiver (subject to applicable law)
of the conditions set forth in Article VI (other than any such
conditions which by their terms cannot be satisfied until the
Closing Date, which shall be required to be so satisfied or
waived on the Closing Date), unless another time or date is
agreed to in writing by the parties hereto (the actual time and
date of the Closing being referred to herein as the "Closing
Date"). The Closing shall be held at the offices of Xxxxxxx
Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, unless another place is agreed to in writing by the
parties hereto.
1.3. Effective Time. At the Closing, the parties shall file a
certificate of merger (the "Certificate of Merger") in such form as is
required by and executed in accordance with the relevant
provisions of the DGCL. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with the
Secretary of State of Delaware or at such subsequent time as
Purchaser and Company shall agree and as shall be specified in
the Certificate of Merger (the date and time the Merger becomes
effective being the "Effective Time").
1.4. Effects of the Merger. At and after the Effective Time,
the Merger will have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and
franchises of Company and Merger Sub shall be vested in the
Surviving Corporation, and all debts, liabilities and duties of
Company and Merger Sub shall be the debts, liabilities and duties
of the Surviving Corporation.
1.5. Certificate of Incorporation. The certificate of
incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation,
until thereafter changed or amended as provided therein or by
applicable law.
1.6. By-Laws. At the Effective Time and without any further action
on the part of Company and Merger Sub, the by-laws of Merger Sub
shall be the by-laws of the Surviving Corporation and thereafter
may be amended or repealed in accordance with their terms or the
certificate of incorporation of the Surviving Corporation and as
provided by law.
1.7. Officers and Directors of Surviving Corporation. Subject to
Section 5.13, the officers of Merger Sub as of the
Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or
otherwise ceasing to be an officer or until their respective
successors are duly elected and qualified, as the case may be.
The directors of Merger Sub as of the Effective Time shall serve
as directors of the Surviving Corporation until the earlier of
their resignation or removal or otherwise ceasing to be a
director or until their respective successors are duly elected
and qualified.
1.8. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock:
(a) All shares of Company Common Stock that are owned
by Company as treasury stock or otherwise (the "Company Treasury
Shares") or by Parent or Merger Sub shall be canceled and retired
and shall cease to exist and no cash, Purchaser Common Stock or
other consideration shall be delivered in exchange therefor.
(b) Subject to Section 1.10, each share of Company
Common Stock issued and outstanding immediately prior to the
Effective Time (other than the Company Treasury Shares, the
Dissenting Shares and shares of Company Common Stock owned by
Purchaser or Merger Sub) shall be converted at the Effective Time
into the following (the "Merger Consideration"):
(i) for each such share of Company Common Stock with respect to
which an election to receive cash has been effectively made and
not revoked or lost pursuant to Section 1.9 (the "Electing
Company Shares"), the right to receive $66 in cash (the "Cash
Consideration"); and
(ii) for each such share of Company Common Stock (other than
Electing Company Shares), the right to receive 0.6161 (the
"Exchange Ratio") of a fully paid and nonassessable share of
Purchaser Common Stock (the "Stock Consideration").
Upon such conversion, all such shares of Company Common Stock
shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each Company
Certificate (as defined in Section 1.9(b)) shall thereafter
represent the right to receive the Merger Consideration and cash
for fractional shares in accordance with Section 2.5 upon the
surrender of the Company Certificate in accordance with the terms
hereof.
(c) Each share of common stock, par value $0.01, of
Merger Sub (the "Merger Sub Common Stock") outstanding
immediately prior to the Effective Time shall remain outstanding
and unchanged following the Effective Time as shares of the
Surviving Corporation.
(d) Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are
owned by stockholders that have properly perfected their rights
of appraisal within the meaning of Section 262 of the DGCL (the
"Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration, unless and until such
stockholders shall have failed to perfect any available right of
appraisal under applicable law, but, instead, the holders thereof
shall be entitled to payment of the appraised value of such
Dissenting Shares in accordance with Section 262 of the DGCL. If
any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right of appraisal, the shares
of Company Common Stock held by such stockholder shall not be
deemed Dissenting Shares for purposes of this Agreement and shall
thereupon be deemed to have been converted into the Merger
Consideration at the Effective Time in accordance with Section
1.8(b) (and, if no election is timely made by such holder
pursuant to Section 1.9, into the Cash Consideration, subject to
proration pursuant to Section 1.10). Company shall give
Purchaser (A) prompt notice of any demands for appraisal filed
pursuant to Section 262 of the DGCL received by Company,
withdrawals of such demands and any other instruments served or
delivered in connection with such demands pursuant to the DGCL
and received by Company and (B) the opportunity to participate in
all negotiations and proceedings with respect to demands made
pursuant to Section 262 of the DGCL. Company shall not, except
with the prior written consent of Purchaser, (x) make any payment
with respect to any such demand, (y) offer to settle or settle
any such demand or (z) waive any failure to timely deliver a
written demand for appraisal or timely take any other action to
perfect appraisal rights in accordance with the DGCL.
1.9. Cash Elections. (a) Each person who, on or prior to the
Election Date (as defined in Section 1.9(c)), is a record holder of shares
of Company Common Stock shall be entitled, with respect to all or any portion of
such person's shares, other than Company Treasury Shares and
Dissenting Shares, to make an unconditional election (a "Cash
Election") on or prior to such Election Date to receive cash for
such holder's shares of Company Common Stock, on the basis
hereinafter set forth; provided, however, that, unless the
nominee advises the Exchange Agent (as defined in Section 1.9(b))
otherwise in writing, each of the beneficial owners of shares
held of record by a bank, trust company, broker, dealer or other
recognized nominee (including, for these purposes, shares
allocated to participants' accounts under any Company Benefit
Plans), shall be treated as a separate record holder and either
directly or through such nominee may submit a separate Form of
Election (as defined in Section 1.9(c)) for shares that are
beneficially owned by such beneficial owner.
(b) Prior to the Effective Time, Purchaser shall appoint,
subject to the approval of Company (which approval shall not be
unreasonably withheld or delayed), an exchange agent (the
"Exchange Agent") for the purpose of exchanging certificates
which immediately prior to the Effective Time evidenced shares of
Company Common Stock (the "Company Certificates") for the Merger
Consideration.
(c) Purchaser shall prepare a form of election (the "Form of
Election") which shall be subject to the approval of Company
(which approval shall not be unreasonably withheld or delayed) to
be mailed by Company to the record holders of shares of Company
Common Stock not more than 60 Business Days nor less than 20
Business Days prior to the Election Date. The Form of Election
may be included on the proxy solicited from stockholders of
Company in connection with the approval of Company's stockholders
of the Merger and the Certificate of Incorporation Amendment (as
defined in Section 5.1(b)). The Form of Election shall be used
by each record holder of shares of Company Common Stock who
wishes to elect to receive cash for any or all shares of Company
Common Stock held by such holder, subject to the proration
provisions of Section 1.10. Company shall use its reasonable
efforts to make the Form of Election available to all persons who
become holders of shares of Company Common Stock during the
period between the record date for the mailing of the Form of
Election and the Election Date. Any holder's election to receive
cash shall have been properly made only if the Exchange Agent
shall have received at its designated office, by 5:00 p.m., New
York City time, on the Business Day specified by Company in the
Form of Election (or a later Business Day specified by Company,
reasonably acceptable to Purchaser, in a subsequent press
release) (the "Election Date"), which Election Date shall be two
Business Days prior to the date on which Purchaser reasonably
believes the Effective Time will occur, a Form of Election
properly completed and signed and accompanied by Company
Certificates representing the shares of Company Common Stock to
which such Form of Election relates, duly endorsed in blank or
otherwise in form acceptable for transfer on the books of Company
(or by an appropriate guarantee of delivery of such Company
Certificates as set forth in such Form of Election from a firm
which is an "eligible guarantor institution" (as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")); provided that such Company
Certificates are in fact delivered to the Exchange Agent by the
time set forth in such guarantee of delivery). Notwithstanding
the foregoing, in order to make its election, the Foundation
shall not be required to deliver with its Form of Election the
Company Certificate representing the shares of Company Common
Stock to which its Form of Election relates if such delivery
would violate the Voting Trust and Divestiture Agreement to which
it, Company and the trustee named therein are parties; provided
that such Company Certificate shall be delivered to the Exchange
Agent as soon as practicable thereafter and in any event prior to
receipt of any consideration delivered in exchange therefor. Any
Form of Election may be revoked by the stockholder submitting it
only by written notice received by the Exchange Agent prior to
5:00 p.m., New York City time, on the Election Date. If a Form
of Election is revoked, the Company Certificate or Company
Certificates (or guarantees of delivery, as appropriate) for the
shares of Company Common Stock to which such Form of Election
relates shall be promptly returned by the Exchange Agent to the
stockholder of Company submitting the same.
(d) The determination of the Exchange Agent (or the mutual
determination of Company and Purchaser in the event that the
Exchange Agent declines to make any such determination) shall be
binding as to whether or not Cash Elections have been properly
made or revoked pursuant to this Section 1.9 with respect to
shares of Company Common Stock and as to when Cash Elections and
revocations were received by it. If the Exchange Agent
reasonably determines in good faith that any Cash Election was
not properly made with respect to shares of Company Common Stock,
such shares shall be treated by the Exchange Agent as shares
which were not Electing Company Shares at the Effective Time, and
such shares shall be converted in the Merger into the right to
receive the Stock Consideration pursuant to Section 1.8(b)(ii),
subject to proration as provided in Section 1.10. The Exchange
Agent (or Company and Purchaser by mutual agreement in the event
that the Exchange Agent declines to make any such determination)
shall also make all computations as to the allocation and the
proration contemplated by Section 1.10, and any such computation
shall be conclusive and binding on the stockholders of Company.
The Exchange Agent may, with the mutual written agreement of
Company and Purchaser, make such rules as are consistent with
this Section 1.9 for the implementation of the Cash Elections
provided for herein and as shall be necessary or desirable to
fully effect such Cash Elections.
1.10. Proration.
(a) Proration Requirements. Notwithstanding anything in this
Agreement to the contrary, the number of shares of Company Common Stock (the
"Maximum Cash Election Number") to be converted into the right
to receive Cash Consideration in the Merger shall be equal to
(i) 30 percent of the number of issued and outstanding shares
of Company Common Stock immediately prior to the Effective Time
less (ii) the number of Dissenting Shares, if any. The number
of shares of Company Common Stock to be converted into the
right to receive Stock Consideration in the Merger (the
"Maximum Stock Number") shall be equal to (i) the number of
issued and outstanding shares of Company Common Stock
immediately prior to the Effective Time less (ii) the sum of
(A) the Maximum Cash Election Number and (B) the number of
Dissenting Shares, if any.
(b) Procedures for Reducing Number of Electing Company
Shares. If the aggregate number of shares of Company
Common Stock in respect of which Cash Elections have been made
(the "Electing Number") exceeds the Maximum Cash Election
Number, each Electing Company Share shall be converted into the
right to receive shares of Purchaser Common Stock or cash in
accordance with the terms of Section 1.8 in the following
manner:
(i) a proration factor (the "Cash Proration Factor") shall be
determined by dividing the Maximum Cash Election Number by the
Electing Number;
(ii) the number of Electing Company Shares covered by each Cash
Election that will be converted into the right to receive Cash
Consideration shall be determined by multiplying the Cash
Proration Factor by the total number of Electing Company Shares
covered by such Cash Election; and
(iii) all Electing Company Shares, other than those shares
converted into the right to receive Cash Consideration in
accordance with Section 1.10(b)(ii), shall be converted into the
right to receive shares of Purchaser Common Stock (on a
consistent basis among stockholders of Company who made Cash
Elections, pro rata to the respective numbers of shares of
Company Common Stock as to which they made such Cash Elections)
as if such shares were not Electing Company Shares, in accordance
with the terms of Section 1.8(b)(ii).
(c) Procedures for Increasing Number of Electing Company Shares. If
the number of shares (the "Non-Electing Number")
of Company Common Stock as to which no Cash Elections were
made, other than Company Treasury Shares and Dissenting Shares
(such shares, the "Non-Electing Shares"), exceeds the Maximum
Stock Number, each Non-Electing Share shall be converted into
the right to receive shares of Purchaser Common Stock or cash
in accordance with the terms of Section 1.8 in the following
manner:
(i) a proration factor (the "Stock Proration Factor") shall be
determined by dividing the Maximum Stock Number by the Non-
Electing Number;
(ii) the number of Non-Electing Shares to be converted into the
right to receive the Stock Consideration shall be determined by
multiplying the Stock Proration Factor by the total number of Non-
Electing Shares; and
(iii) all Non-Electing Shares, other than those converted
into the right to receive Stock Consideration in accordance with
Section 1.10(c)(ii), shall be converted into the right to receive
Cash Consideration (on a consistent basis among stockholders of
Company who held Non-Electing Shares, pro rata to the respective
number of Non-Electing Shares) as if such shares were Electing
Company Shares, in accordance with the terms of Section
1.8(b)(i).
1.11. Company Stock Options. Company and Purchaser shall take
all action reasonably necessary so that, immediately prior to the Effective
Time, each stock option (the "Company Stock Options") heretofore
granted or granted after the date hereof in compliance with the
provisions hereof under any stock option or similar plan of
Company (the "Company Stock Option Plans") and outstanding
immediately prior to the Effective Time shall become vested and
exercisable as of the Effective Time and shall be converted into
an option to purchase a number of shares of Purchaser Common
Stock (a "Converted Option") equal to the product of the number
of shares of Company Common Stock subject to such Company Stock
Option multiplied by the Exchange Ratio (provided that any
fractional share resulting from such multiplication shall be
rounded down to the nearest whole share). The terms and
conditions of the Converted Option shall otherwise remain the
same as the terms and conditions of the Company Stock Option,
except that the exercise price per share of each Converted Option
shall equal the exercise price per share of such Company Stock
Option divided by the Exchange Ratio (provided that such exercise
price shall be rounded up to the nearest whole cent). Purchaser
shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Purchaser Common Stock for
delivery upon exercise of the Converted Options. Purchaser shall
use its reasonable best efforts to cause the registration of the
shares of Purchaser Common Stock subject to the Converted Options
to become effective as part of the Form S-4 or a registration
statement on Form S-8, on the same date as the Form S-4 is
declared effective; and, thereafter, Purchaser shall file one or
more registration statements on appropriate forms with respect to
shares of Purchaser Common Stock subject to the Converted Options
and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration
statements for so long as the Converted Options remain
outstanding. Company and Purchaser shall take all such steps as
may be required to cause the transactions contemplated by this
Section 1.11 and any other dispositions of Company equity
securities (including derivative securities) or acquisitions of
Purchaser equity securities (including derivative securities) in
connection with this Agreement by each individual who (i) is a
director or officer of Company or (ii) at the Effective Time will
become a director or officer of Purchaser to become exempt under
Rule 16b-3 promulgated under the Exchange Act. As soon as
practicable after the Effective Time, Purchaser shall deliver or
cause to be delivered to each holder of Converted Options an
appropriate notice setting forth such holder's rights pursuant to
the Company Stock Option Plan and agreements evidencing the
grants of such Converted Options, after giving effect to the
transactions hereunder.
1.12. Certain Adjustments. If, between the date of this Agreement
and the Effective Time, the outstanding Purchaser Common Stock or Company
Common Stock shall have been changed into a different number of
shares or different class by reason of any reclassification,
recapitalization, stock split, split-up, combination or exchange
of shares or a stock dividend or dividend payable in any other
securities shall be declared with a record date within such
period, or any similar event shall have occurred, the Merger
Consideration shall be appropriately adjusted to provide to the
holders of Company Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
1.13. Headquarters. From and after the Effective Time, the
headquarters of Blue Cross and Blue Shield of Missouri shall be located in the
State of Missouri. From the Effective Time to the earlier of the
date two years thereafter or a change of control of Purchaser or
the Surviving Corporation, the headquarters and the principal
executive offices of Purchaser's central U.S. business region
(which consists of the states of Arkansas, Illinois, Iowa,
Indiana, Kansas, Kentucky, Michigan, Missouri, Ohio, West
Virginia and Wisconsin) (the "Central Business Region") shall be
located in the state of Missouri. For the purposes of this
Section 1.13, a "change of control" shall occur as a result of
any transaction in which the stockholders of Purchaser or
Surviving Corporation, as applicable, immediately prior to such
transaction do not own, directly or indirectly, at least 80% of
Purchaser or Surviving Corporation, as applicable, immediately
after such transaction.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1. Exchange Fund. Purchaser shall deposit with the Exchange
Agent, in trust for the benefit of holders of shares of Company Common
Stock, at or prior to the Effective Time, (i) certificates
representing the Purchaser Common Stock issuable pursuant to
Section 1.8 in exchange for outstanding shares of Company Common
Stock and (ii) cash sufficient to pay the cash portion of the
Merger Consideration. Purchaser agrees to make available to the
Exchange Agent from time to time as needed, additional cash
sufficient to pay cash in lieu of fractional shares pursuant to
Section 2.5 and any dividends and other distributions pursuant to
Section 2.3. Any cash and certificates of Purchaser Common Stock
deposited with the Exchange Agent shall hereinafter be referred
to as the "Exchange Fund."
2.2. Exchange Procedures. Within five Business Days after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each holder of a Company Certificate who has not surrendered
the Company Certificate representing all of the shares of Company
Common Stock owned by such holder pursuant to Section 1.9 (i) a
letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to the Company Certificates
shall pass, only upon delivery of the Company Certificates to the
Exchange Agent, and which letter shall be in customary form and
have such other provisions as Purchaser may reasonably specify
and (ii) instructions for effecting the surrender of such Company
Certificates in exchange for the applicable Merger Consideration.
Upon surrender of a Company Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Exchange
Agent, the holder of such Company Certificate shall be entitled
to receive in exchange therefor (A) one or more shares of
Purchaser Common Stock (which shall be in uncertificated
book-entry form unless a physical certificate is requested)
representing, in the aggregate, the whole number of shares that
such holder has the right to receive pursuant to Sections 1.8 and
1.10 (after taking into account all shares of Company Common
Stock then held by such holder) and (B) a check for the cash
portion of the Merger Consideration (subject to the proration
provisions of Section 1.10) and for the cash that such holder has
the right to receive pursuant to the provisions of this Article
II, including cash in lieu of any fractional shares of Purchaser
Common Stock pursuant to Section 2.5 and dividends and other
distributions pursuant to Section 2.3. No interest will be paid
or will accrue on any cash payable for the cash portion of the
Merger Consideration or pursuant to Section 2.3 or Section 2.5.
In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of Company, one
or more shares of Purchaser Common Stock evidencing, in the
aggregate, the proper number of shares of Purchaser Common Stock
and a check for the cash portion of the Merger Consideration, the
cash in lieu of any fractional shares of Purchaser Common Stock
pursuant to Section 2.5 and any dividends or other distributions
to which such holder is entitled pursuant to Section 2.3, may be
issued with respect to such Company Common Stock to such a
transferee if the Company Certificate representing such shares of
Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes
have been paid. Persons who have made an effective Cash Election
as provided in Sections 1.9 and 1.10 and surrendered Company
Certificates as provided therein shall be treated as if they have
properly surrendered Company Certificates together with the
letter of transmittal pursuant to this Section 2.2.
2.3. Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made
with respect to shares of Purchaser Common Stock with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered Company Certificate with respect to the shares of
Purchaser Common Stock that such holder would be entitled to
receive upon surrender of such Company Certificate until such
holder shall surrender such Company Certificate in accordance
with Section 2.2. Subject to the effect of applicable laws,
following surrender of any such Company Certificate, there shall
be paid to such holder of shares of Purchaser Common Stock
issuable in exchange therefor, without interest, (a) promptly
after the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time
but prior to such surrender and a payment date prior to such
surrender payable with respect to such shares of Purchaser Common
Stock and (b) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such shares
of Purchaser Common Stock.
2.4. No Further Ownership Rights in Company Common Stock. All
shares of Purchaser Common Stock issued and cash
paid upon conversion of shares of Company Common Stock in
accordance with the terms of Article I and this Article II
(including any cash paid pursuant to Section 2.3 or 2.5) shall be
deemed to have been issued or paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock. Until
surrendered as contemplated by this Article II, each Company
Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the
Merger Consideration.
2.5. No Fractional Shares of Purchaser Common Stock.
(a) No certificates or scrip or shares of Purchaser Common Stock
representing fractional shares of Purchaser Common Stock or
book-entry credit of the same shall be issued upon the surrender
for exchange of Company Certificates and such fractional share
interests will not entitle the owner thereof to vote or to have
any rights of a stockholder of Purchaser or a holder of shares of
Purchaser Common Stock.
(b) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a
fraction of a share of Purchaser Common Stock (after taking into
account all Company Certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of
Purchaser Common Stock multiplied by (ii) the closing price for a
share of Purchaser Common Stock on the New York Stock Exchange,
Inc. ("NYSE") Composite Transactions Tape on the date of the
Effective Time or, if such date is not a Business Day, the
Business Day immediately following the date on which the
Effective Time occurs. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to
holders of fractional interests, the Exchange Agent shall so
notify Purchaser, and Purchaser shall cause the Surviving
Corporation to deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such
holders of fractional interests subject to and in accordance with
the terms hereof.
2.6. Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Company Certificates for six
months after the Effective Time shall be delivered to Purchaser
or otherwise on the instruction of Purchaser and any holders of
the Company Certificates who have not theretofore complied with
this Article II shall thereafter look only to the Surviving
Corporation and Purchaser for the Merger Consideration with
respect to the shares of Company Common Stock formerly
represented thereby to which such holders are entitled pursuant
to Section 1.8 and Section 2.2, any cash in lieu of fractional
shares of Purchaser Common Stock to which such holders are
entitled pursuant to Section 2.5 and any dividends or
distributions with respect to shares of Purchaser Common Stock to
which such holders are entitled pursuant to Section 2.3. Any such
portion of the Exchange Fund remaining unclaimed by holders of
shares of Company Common Stock five years after the Effective
Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any
Governmental Entity (as defined in Section 3.1(c)(iii)) shall, to
the extent permitted by law, become the property of Purchaser
free and clear of any claims or interest of any Person previously
entitled thereto.
2.7. No Liability. None of Purchaser, Merger Sub, Company, the
Surviving Corporation or the Exchange Agent shall be liable to any Person
in respect of any Merger Consideration from the Exchange Fund
delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
2.8. Investment of the Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Purchaser on a
daily basis. Any interest and other income resulting from such investments shall
promptly be paid to Purchaser.
2.9. Lost Certificates. If any Company Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the Person claiming such Company Certificate to be lost,
stolen or destroyed and, if required by the Surviving
Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with
respect to such Company Certificate, the Exchange Agent will
deliver in exchange for such lost, stolen or destroyed Company
Certificate the applicable Merger Consideration with respect to
the shares of Company Common Stock formerly represented thereby,
any cash in lieu of fractional shares of Purchaser Common Stock,
and unpaid dividends and distributions on shares of Purchaser
Common Stock deliverable in respect thereof, pursuant to this
Agreement.
2.10. Withholding Rights. Each of the Surviving Corporation and
Purchaser shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment
under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by the Surviving
Corporation or Purchaser, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or Purchaser, as the case may be,
and such amounts shall be delivered by the Surviving Corporation
or Purchaser, as the case may be, to the applicable Taxing
authority.
2.11. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of Company or
Merger Sub, any deeds, bills of sale, assignments or assurances
and to take and do, in the name and on behalf of Company or
Merger Sub, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the
rights, properties or assets acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the
Merger.
2.12. Stock Transfer Books. The stock transfer books of Company
shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of shares of Company Common Stock
thereafter on the records of Company. On or after the Effective
Time, any Company Certificates presented to the Exchange Agent or
Purchaser for any reason shall be converted into the Merger
Consideration with respect to the shares of Company Common Stock
formerly represented thereby, any cash in lieu of fractional
shares of Purchaser Common Stock to which the holders thereof are
entitled pursuant to Section 2.5 and any dividends or other
distributions to which the holders thereof are entitled pursuant
to Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Purchaser. Except as set
forth in the Purchaser Disclosure Schedule delivered by Purchaser to Company
prior to the execution of this Agreement (the "Purchaser Disclosure Schedule")
(each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified
therein), Purchaser represents and warrants to Company as
follows:
(a) Organization, Standing and Power; Subsidiaries.
Each of Purchaser and each of its Subsidiaries (as
defined in Section 8.11) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation or organization, has the requisite power and
authority to own, lease and operate its properties and to carry
on its business as now being conducted, except where the failure
to be so organized, existing and in good standing or to have such
power and authority would not reasonably be expected to have a
material adverse effect on Purchaser's ability to consummate the
Merger (a "Purchaser Material Adverse Effect"), and is duly
qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify
or to be in good standing would not reasonably be expected to
have a Purchaser Material Adverse Effect. The copies of the
certificate of incorporation and by-laws of Purchaser which were
previously furnished or made available to Company are true,
complete and correct copies of such documents as in effect on the
date of this Agreement.
(b) Capital Structure.
(i) The authorized capital stock of Purchaser consists of (A)
300,000,000 shares of Purchaser Common Stock of which 63,722,810
shares were issued and outstanding as of the date hereof and (B)
50,000,000 shares of Preferred Stock, $.01 par value per share,
none of which were outstanding. Since December 31, 2000 to the
date of this Agreement, there have been no issuances of shares of
the capital stock of Purchaser or any other securities of
Purchaser other than issuances of shares pursuant to options or
rights outstanding as of December 31, 2000 under the Benefit
Plans (as defined in Section 8.11) of Purchaser. All issued and
outstanding shares of the capital stock of Purchaser are duly
authorized, validly issued, fully paid and nonassessable, and no
class of capital stock is entitled to preemptive rights. There
were outstanding as of December 31, 2000 no options, warrants or
other rights to acquire capital stock from Purchaser other than
options, restricted stock and share equivalents representing in
the aggregate the right to purchase no more than 6,841,078 shares
of Purchaser Common Stock. All shares of Purchaser Common Stock
to be issued in connection with the Merger and the other
transactions contemplated hereby (including without limitation
all shares of Purchaser Common Stock to be issued upon exercise
of the Converted Options) will, when issued in accordance with
the terms hereof, have been duly authorized, validly issued, full
paid and non-assessable, free and clear of all Liens. As of the
date hereof, there are no stockholder agreements, voting trusts
or other agreements or understandings to which the Purchaser is a
party or by which it is bound relating to the voting of any
shares of the capital stock of the Purchaser.
(c) Authority, No Conflicts.
(i) Purchaser has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby, including, without limitation, the issuance
of the shares of Purchaser Common Stock to be issued in the
Merger and upon the exercise of Converted Options (the "Share
Issuance"). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
Purchaser. This Agreement has been duly executed and delivered by
Purchaser and, assuming that this Agreement constitutes the valid
and binding agreement of Company, constitutes a valid and binding
agreement of Purchaser, enforceable against it in accordance with
its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar
laws relating to or affecting creditors generally or by general
equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied
covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement by Purchaser
does not or will not, as the case may be, and the consummation by
Purchaser of the Merger and the other transactions contemplated
hereby will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation of a Lien on any assets
(any such conflict, violation, default, right of termination,
amendment, cancellation or acceleration, loss or creation, is
hereinafter referred to as a "Violation") pursuant to: (A) any
provision of the certificate of incorporation or by-laws of
Purchaser or any material Subsidiary of Purchaser or (B) except
as would not reasonably be expected to have a Purchaser Material
Adverse Effect, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations
and filings referred to in paragraph (iii) below, any loan or
credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Purchaser or any
Subsidiary of Purchaser, or their respective properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational,
national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or
commission or other authority thereof, or any quasi-governmental
or private body exercising any regulatory, taxing, importing or
other governmental or quasi-governmental authority (a
"Governmental Entity"), is required by or with respect to
Purchaser or any Subsidiary of Purchaser in connection with the
execution and delivery of this Agreement by Purchaser or Merger
Sub or the consummation of the Merger and the other transactions
contemplated hereby, except for those required under or in
relation to (A) the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), (B) state securities or
"blue sky" laws (the "Blue Sky Laws"), (C) the Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), (D) the Exchange Act; (E) the
DGCL with respect to the filing of the Certificate of Merger, (F)
rules and regulations of the NYSE, (G) the Missouri Department of
Insurance and the insurance regulators in the state of Illinois
and (H) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to
make or obtain would not reasonably be expected to have a
Material Adverse Effect on Purchaser. Consents, approvals,
orders, authorizations, registrations, declarations and filings
required under or in relation to any of the foregoing clauses (A)
through (G) are hereinafter referred to as "Necessary Consents."
(d) Reports and Financial Statements.
(i) Purchaser has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other
documents required to be filed by it with the SEC since January
1, 1999 (collectively, including all exhibits thereto, the
"Purchaser SEC Reports"). No Subsidiary of Purchaser is required
to file any form, report, registration statement, prospectus or
other document with the SEC. None of the Purchaser SEC Reports,
as of their respective dates (and, if amended or superseded by a
filing prior to the date of this Agreement or the Closing Date,
then on the date of such filing), contained or will contain any
untrue statement of a material fact or omitted or will omit 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
Reports, and any public announcements in a news release made by
Purchaser after the date hereof, as of the date of filing or
announcement, as applicable, will 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, in light of the circumstances, not misleading. Each of
the financial statements (including the related notes) included
in the Purchaser SEC Reports presents fairly, in all material
respects, the consolidated financial position and consolidated
results of operations and cash flows of Purchaser and its
Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim
financial statements, to normal and recurring adjustments that
were not or are not expected to be material in amount, and lack
of footnote disclosure. All of such Purchaser SEC Reports, as of
their respective dates (and as of the date of any amendment to
the respective Purchaser SEC Report), complied as to form in all
material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as disclosed in the Purchaser SEC Reports filed prior
to the date hereof, Purchaser and its Subsidiaries have not
incurred any liabilities or obligations (whether or not accrued,
contingent or otherwise) that are of a nature that would be
required to be disclosed on a balance sheet of Purchaser and its
Subsidiaries or the footnotes thereto prepared in conformity with
GAAP, other than (A) liabilities incurred in the ordinary course
of business or (B) liabilities that would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Purchaser.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by
Purchaser or Merger Sub for inclusion or incorporation by
reference in (A) the registration statement on Form S-4 to be
filed with the SEC by Purchaser in connection with the issuance
of shares of Purchaser Common Stock in connection with the
Merger, or any of the amendments or supplements thereto
(collectively, the "Form S-4") will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) the proxy
statement for use relating to the adoption by the stockholders of
Company of this Agreement or any of the amendments or supplements
thereto (collectively, the "Proxy Statement") will, on the date
it is first mailed to Company stockholders or at the time of the
Company Stockholders Meeting (as defined in Section 5.1), contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Form S-4 will
comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(e), no representation or warranty is made by Purchaser with
respect to statements made or incorporated by reference in the
Form S-4 based on information supplied by Company.
(f) Board Approval. The Board of Directors of Purchaser, by
resolutions duly adopted by unanimous vote at a meeting duly
called and held and not subsequently rescinded or modified in any
way (the "Purchaser Board Approval"), has duly approved this
Agreement, the Merger and the Share Issuance.
(g) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled
to any broker's or finder's fee or any other similar commission
or fee in connection with any of the transactions contemplated by
this Agreement, based upon arrangements made by or on behalf of
Purchaser, except Xxxxxxx Xxxxx & Co. Incorporated (the
"Purchaser Financial Advisor"), whose fees and expenses will be
paid by Purchaser in accordance with Purchaser's agreement with
such firm.
(h) Company Stock. Neither Purchaser nor any of its
Subsidiaries (including Merger Sub) is, nor at any time during
the last three years has any of such been, an "interested
stockholder" of Company as defined in Section 203 of the DGCL.
Neither Purchaser nor any of its Subsidiaries (including Merger
Sub) owns, (directly or indirectly, beneficially or of record)
and none of them is, a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, any shares of capital stock of
Company (other than as contemplated by this Agreement).
(i) No Vote Required. No vote, consent or other action of the
stockholders of Purchaser is required by law, Purchaser's
certificate of incorporation or by-laws or otherwise in order for
Purchaser and Merger Sub to consummate the Merger and the
transactions contemplated hereby.
(j) Litigation, Compliance with Laws.
(i) Except as disclosed in the Purchaser SEC Reports filed prior
to the date of this Agreement, there is no suit, action,
investigation or proceeding pending or, to the Knowledge of
Purchaser, threatened, against or affecting Purchaser or any
Subsidiary of Purchaser having, or which would reasonably be
expected to have, a Material Adverse Effect on Purchaser, nor is
there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Purchaser
or any Subsidiary of Purchaser having, or which reasonably would
be expected to have, a Material Adverse Effect on Purchaser.
(ii) Except as disclosed in the Purchaser SEC Reports filed prior
to the date of the Agreement and except as would not reasonably
be expected to have a Material Adverse Effect on Purchaser,
Purchaser and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental
Entities necessary for the operation of the businesses of
Purchaser and its Subsidiaries, taken as a whole (the "Purchaser
Permits"). Purchaser and its Subsidiaries are in compliance with
the terms of the Purchaser Permits, except where the failure to
so comply would not reasonably be expected to have a Material
Adverse Effect on Purchaser. Except as disclosed in the Purchaser
SEC Reports filed prior to the date of this Agreement, the
businesses of Purchaser and its Subsidiaries are not being
conducted in violation of, and Purchaser has not received any
notices of violations with respect to, any law, ordinance or
regulation of any Governmental Entity, except for possible
violations which would not reasonably be expected to have a
Material Adverse Effect on Purchaser.
(iii) Purchaser is in compliance in all material respects
with all rules and regulations of the BCBSA.
(k) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby and except as disclosed in the
Purchaser SEC Reports filed prior to the date of this Agreement,
since December 31, 2000, there has not been any change,
circumstance or event which has had, or would reasonably be
expected to have, a Material Adverse Effect on Purchaser.
3.2. Representations and Warranties of Company. Except as set
forth in the Company Disclosure Schedule delivered by Company to Purchaser
prior to the execution of this Agreement (the "Company Disclosure Schedule")
(each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified
therein), Company represents and warrants to Purchaser as
follows:
(a) Organization, Standing and Power; Subsidiaries.
(i) Each of Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or
organization, has the requisite power and authority to own, lease
and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority
would not reasonably be expected to have a Material Adverse
Effect on Company, and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where
the failure so to qualify or to be in good standing would not
reasonably be expected to have a Material Adverse Effect on
Company. The copies of the certificate of incorporation and
by-laws of Company which were previously furnished or made
available to Purchaser are true, complete and correct copies of
such documents as in effect on the date of this Agreement.
(ii) Section 3.2 of the Company Disclosure Schedule lists all the
Subsidiaries of Company which as of the date of this Agreement
are Significant Subsidiaries (as defined in Rule 1-02 of
Regulation S-X of the SEC). All the outstanding shares of capital
stock of, or other equity interests in, each such Significant
Subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by Company,
free and clear of all Liens and free of any other restriction
(including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership
interests). Except as set forth in the Company SEC Reports (as
defined in Section 3.2(d)), neither Company nor any of its
Subsidiaries directly or indirectly owns any equity or similar
interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or
other business association or entity, that is or would reasonably
be expected to be material to Company and its Subsidiaries taken
as a whole.
(b) Capital Structure.
(i) The authorized capital stock of Company consists of (A)
225,000,000 shares of Company Common Stock, of which 19,567,940
shares were outstanding as of the date hereof, and (B) 25,000,000
shares of Preferred Stock, $0.01 par value per share, of which no
shares are outstanding. Since December 31, 2000 to the date of
this Agreement, there have been no issuances of shares of the
capital stock of Company or any other securities of Company other
than issuances of shares pursuant to Company Stock Options
outstanding as of December 31, 2000 under the Company Stock
Option Plans. All issued and outstanding shares of the capital
stock of Company are duly authorized, validly issued, fully paid
and nonassessable, and no capital stock is entitled to preemptive
rights. There were outstanding as of the date hereof no options,
warrants or other rights to acquire capital stock from Company
other than Company Stock Options representing in the aggregate
the right to purchase no more than 980,405 shares of Company
Common Stock under the Company Stock Option Plans. Section
3.2(b) of the Company Disclosure Schedule sets forth a complete
and correct list, as of the date hereof, of the number of shares
of Company Common Stock subject to Company Stock Options or other
rights to purchase or receive Company Common Stock granted under
the Company Stock Option Plans or otherwise, the dates of grant
and the exercise prices thereof. No options or warrants or other
rights to acquire capital stock from Company have been issued or
granted since December 31, 2000 to the date of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness of Company
having the right to vote on any matters on which stockholders may
vote are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b),
as of the date of this Agreement, there are no securities,
options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Company or any
of its Subsidiaries is a party or by which any of them is bound
obligating Company or any of its Subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of Company or
any of its Subsidiaries or obligating Company or any of its
Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement,
there are no outstanding obligations of Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of Company or any of its Subsidiaries.
(c) Authority; No Conflicts.
(i) Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby, subject in the case of the consummation of
the Merger to the adoption of this Agreement and the Certificate
of Incorporation Amendment by the Required Company Vote (as
defined in Section 3.2(h)). The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Company, subject in the case of the
consummation of the Merger to the adoption of this Agreement and
the Certificate of Incorporation Amendment by the Required
Company Vote. This Agreement has been duly executed and delivered
by Company and, assuming that this Agreement constitutes the
valid and binding agreement of Purchaser and Merger Sub,
constitutes a valid and binding agreement of Company, enforceable
against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or
affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
(ii) The execution and delivery of this Agreement by Company does
not or will not, as the case may be, and the consummation by
Company of the Merger and the other transactions contemplated
hereby will not, conflict with, or result in a Violation pursuant
to: (A) any provision of the certificate of incorporation or
by-laws of Company or any Subsidiary of Company (except as
provided herein with respect to the Certificate of Incorporation
Amendment) or (B) subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations
and filings referred to in paragraph (iii) below, any loan or
credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Company or any
Subsidiary of Company or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required by or with respect to Company or any Subsidiary of
Company in connection with the execution and delivery of this
Agreement by Company or the consummation of the Merger and the
other transactions contemplated hereby, except the Necessary
Consents and such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to
make or obtain would not reasonably be expected to have a
Material Adverse Effect on Company.
(d) Reports and Financial Statements.
(i) Company has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other
documents required to be filed by it with the SEC since January
1, 1999 (collectively, including all exhibits thereto, the
"Company SEC Reports"). No Subsidiary of Company is required to
file any form, report, registration statement or prospectus or
other document with the SEC. None of the Company SEC Reports, as
of their respective dates (and, if amended or superseded by a
filing prior to the date of this Agreement or the Closing Date,
then on the date of such filing), contained or will contain any
untrue statement of a material fact or omitted or will omit 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 Company SEC
Reports and any public announcements made by Company after the
date hereof as of the date of filing or announcement, as
applicable, will 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, in light of
the circumstances, not misleading. Each of the financial
statements (including the related notes) included in the Company
SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of
operations and cash flows of Company and its Subsidiaries as of
the respective dates or for the respective periods set forth
therein, all in conformity with GAAP applied on a consistent
basis throughout the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim
financial statements, to normal and recurring adjustments that
were not or are not expected to be material in amount, and lack
of footnote disclosure. All of such Company SEC Reports, as of
their respective dates (and as of the date of any amendment to
the respective Company SEC Report), complied as to form in all
material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as disclosed in the Company SEC Reports filed prior
to the date hereof, Company and its Subsidiaries have not
incurred any liabilities or obligations (whether or not accrued,
contingent or otherwise) that are of a nature that would be
required to be disclosed on a balance sheet of Company and its
Subsidiaries or the footnotes thereto prepared in conformity with
GAAP, other than (A) liabilities incurred in the ordinary course
of business or (B) liabilities that would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Company.
(e) Reserves. The loss reserves and other actuarial amounts of
Company and its Subsidiaries recorded in their respective
financial statements contained in the Company SEC Reports and all
statutory reports as of December 31, 2000 and June 30, 2001 (i)
were determined in accordance with generally accepted actuarial
standards consistently applied (except as otherwise noted in such
financial statements), (ii) were fairly stated in all material
respects in accordance with sound actuarial principles, (iii)
satisfied all applicable Laws and the requirements of the BCBSA
in all material respects and have been computed on the basis of
methodologies consistent with those used in computing the
corresponding reserves in the prior fiscal years and (iv) include
provisions for all actuarial reserves and related items which
ought to be established in accordance with applicable laws and
regulations and prudent insurance practices. Company is not
aware of any facts or circumstances which would necessitate, in
the good faith application of prudent reserving practices and
policies, any material adverse change in the statutorily required
reserves or reserves above those reflected in the most recent
balance sheet (other than increases consistent with past
experience resulting from increases in enrollment with respect to
services provided by the Company or its Subsidiaries). The
capital and surplus for Company on a consolidated basis is now,
and immediately prior to the Closing will be, not less than 200%
of the authorized control level as defined in NAIC Risk-Based
Capital Guidelines required by applicable law.
(f) Information Supplied.
(i) None of the information supplied or to be supplied by
Company for inclusion or incorporation by reference in (A) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and (B) the Proxy Statement will, on the date it is
first mailed to Company stockholders or at the time of the
Company Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange
Act and the Securities Act and the rules and regulations of the
SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(f), no representation or warranty is made by Company with
respect to statements made or incorporated by reference in the
Form S-4 or the Proxy Statement based on information supplied by
Purchaser or Merger Sub.
(g) Board Approval. The Board of Directors of Company, by resolutions
duly adopted by vote of those voting at a meeting duly called and
held and not subsequently rescinded or modified in any way (the
"Company Board Approval"), has duly (i) determined that this
Agreement and the Merger are advisable, fair to and in the best
interests of Company and its stockholders, and (ii) approved this
Agreement, the Merger, the Certificate of Incorporation Amendment
and, for the purposes of Section 203 of the DGCL, the Voting and
Lockup Agreement referred to in the fifth Whereas clause hereof.
No state takeover statute or other similar statute is applicable
to the Merger or the other transactions contemplated hereby.
(h) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock to
approve the Merger and the affirmative vote of a majority of the
outstanding shares of Company Common Stock to approve the
Certificate of Incorporation Amendment (the "Required Company
Vote") is the only vote of the holders of any class or series of
Company capital stock necessary to adopt this Agreement and
approve the Merger and the other transactions contemplated
hereby.
(i) Litigation, Compliance with Laws.
(i) Except as disclosed in the Company SEC Reports filed prior
to the date of this Agreement, there is no suit, action,
investigation or proceeding pending or, to the Knowledge of
Company, threatened, against or affecting Company or any
Subsidiary of Company having, or which would reasonably be
expected to have, a Material Adverse Effect on Company, nor is
there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Company or
any Subsidiary of Company having, or which reasonably would be
expected to have, a Material Adverse Effect on Company.
(ii) Except as disclosed in the Company SEC Reports filed prior
to the date of the Agreement and except as would not reasonably
be expected to have a Material Adverse Effect on Company, Company
and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities
necessary for the operation of the businesses of Company and its
Subsidiaries, taken as a whole (the "Company Permits"). Company
and its Subsidiaries are in compliance with the terms of the
Company Permits, except where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect on
Company. Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement, the businesses of Company
and its Subsidiaries are not being conducted in violation of, and
Company has not received any notices of violations with respect
to, any law, ordinance or regulation of any Governmental Entity,
except for possible violations which would not reasonably be
expected to have a Material Adverse Effect on Company.
(iii) Company is in compliance in all material respects with
all rules and regulations of the BCBSA.
(j) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions
contemplated hereby and except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, since December
31, 2000, Company and its Subsidiaries have conducted their
business only in the ordinary course and there has not been (i)
any change, circumstance or event which has had, or would
reasonably be expected to have, a Material Adverse Effect on
Company or (ii) any action taken by Company or any of its
Subsidiaries during the period from December 31, 2000 through the
date of this Agreement that, if taken during the period from the
date of this Agreement through the Effective Time, would have
constituted a breach of Section 4.1.
(k) Environmental Matters. Except as would not reasonably be
expected to have a Material Adverse Effect on Company, (i) the
operations of Company and its Subsidiaries have been and are in
compliance with all applicable Environmental Laws and with all
Environmental Permits, (ii) there are no pending or, to the
Knowledge of Company, threatened, actions, suits, claims,
investigations or other proceedings under or pursuant to
Environmental Laws against Company or its Subsidiaries or, to the
Knowledge of Company, involving any real property currently or
formerly owned, operated or leased by Company or its
Subsidiaries, (iii) Company and its Subsidiaries are not subject
to any Environmental Liabilities and, to the Knowledge of
Company, no facts, circumstances or conditions relating to,
arising from, associated with or attributable to any real
property currently or formerly owned, operated or leased by
Company or its Subsidiaries or operations thereon would
reasonably be expected to result in Environmental Liabilities,
(iv) all real property owned and all real property operated or
leased by Company or its Subsidiaries is free of Hazardous
Materials in conditions and concentrations that would reasonably
be expected to have an adverse effect on human health or the
environment and none of Company or any of its Subsidiaries has
disposed of any Hazardous Materials on or about such premises,
(v) no release, discharge, spillage or disposal of any Hazardous
Material and no soil, water or air contamination by any Hazardous
Material has occurred or is occurring in, from or on such
premises the result of which would have a Material Adverse Effect
on Company, and (vi) Company has provided to Purchaser all
Environmental Reports prepared or dated since January 1, 1991,
and any prior material Environmental Reports in the possession or
control of Company or any of its Subsidiaries.
As used in this Agreement, "Environmental Laws" means
any and all laws, rules, orders, regulations, statutes,
ordinances, guidelines, codes, decrees, or other legally
enforceable requirements (including, without limitation, common
law) of any international authority, foreign government, the
United States, or any state, local, municipal or other
Governmental Entity, regulating, relating to or imposing
liability or standards of conduct concerning protection of the
environment or of human health, including without limitation the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. 9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. 1801 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the
Clean Water Act, 33 U.S.C. 1251 et seq., the Clean Air Act, 42
U.S.C. 7401 et seq., the Toxic Substances Control Act, 15
U.S.C. 2601 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C., 136 et seq. and the Oil Pollution
Act of 1990, 33 U.S.C. 2701 et seq., as such laws have been
amended or supplemented, and the regulations promulgated pursuant
thereto, and all analogous state or local statutes. As used in
this Agreement, "Environmental Liabilities" with respect to any
person means any and all liabilities of or relating to such
person or any of its Subsidiaries (including any entity which is,
in whole or in part, a predecessor of such person or any of such
Subsidiaries), whether vested or unvested, contingent or fixed,
actual or potential, known or unknown, which (i) arise under
applicable Environmental Laws or with respect to Hazardous
Materials, and (ii) relate to actions occurring or conditions
existing, on or prior to the Closing Date. As used in this
Agreement, "Environmental Permits" means any and all permits,
consents, licenses, approvals, registrations, notifications,
exemptions and any other authorization required under any
applicable Environmental Law. As used in this Agreement,
"Environmental Report" means any report, study, assessment,
audit, or other similar document that addresses any issue of
noncompliance with, or liability under, any Environmental Law
that may affect Company or any of its Subsidiaries. As used in
this Agreement, "Hazardous Materials" means any gasoline or
petroleum (including crude oil or any fraction thereof) or
petroleum products, polychlorinated biphenyls, urea-formaldehyde
insulation, asbestos, pollutants, contaminants, radioactivity,
and any other substances of any kind, whether or not any such
substance is defined as hazardous or toxic under any
Environmental Law, that is regulated pursuant to or could give
rise to liability under any applicable Environmental Law.
(l) Intellectual Property. Except as would not reasonably be
expected to have a Material Adverse Effect on Company, (a)
Company and each of its Subsidiaries owns, or is licensed to use
(in each case, free and clear of any Liens), all Intellectual
Property used in or necessary for the conduct of its business as
currently conducted; (b) to the Knowledge of Company, the use of
any Intellectual Property by Company and its Subsidiaries does
not infringe on or otherwise violate the rights of any Person and
is in accordance with any applicable license pursuant to which
Company or any Subsidiary acquired the right to use any
Intellectual Property; (c) to the Knowledge of Company, no Person
is challenging or infringing on or otherwise violating any right
of Company or any of its Subsidiaries with respect to any
Intellectual Property owned by or licensed to Company or its
Subsidiaries; and (d) neither Company nor any of its Subsidiaries
has received any written notice of any pending claim with respect
to any Intellectual Property used by Company and its Subsidiaries
and to the Knowledge of Company no Intellectual Property owned or
licensed by Company or its Subsidiaries is being used or enforced
in a manner that would result in the abandonment, cancellation or
unenforceability of such Intellectual Property.
For purposes of this Agreement, "Intellectual Property"
shall mean trademarks, service marks, brand names, certification
marks, trade dress and other indications of origin, the goodwill
associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or
renewal of any such registration or application; inventions,
discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including,
without limitation, divisions, continuations, continued
prosecution applications, continuations in part and renewal
applications), and any renewals, extensions or reissues thereof,
in any jurisdiction; know-how, trade secrets and confidential
information and rights in any jurisdiction to limit the use or
disclosure thereof by any person; writings and other works,
whether copyrightable or not, in any jurisdiction; registrations
or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; and any
similar intellectual property or proprietary rights.
(m) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled
to any broker's or finder's fee or any other similar commission
or fee in connection with any of the transactions contemplated by
this Agreement, based upon arrangements made by or on behalf of
Company, except UBS Warburg LLC (the "Company Financial
Advisor"), whose fees and expenses will be paid by Company in
accordance with Company's agreements with such firm, copies of
which have been provided to Purchaser.
(n) Taxes. Company and each of its Subsidiaries (i) have
prepared in good faith and duly and timely filed (taking into
account any extension of time within which to file) all material
Tax Returns (as defined below) required to be filed by any of
them and all such filed Tax Returns are complete and accurate in
all material respects; (ii) have paid all Taxes that are shown as
due and payable on such filed Tax Returns or that Company or any
of its Subsidiaries are obligated to pay without the filing of a
Tax Return; (iii) have paid all other assessments received to
date in respect of Taxes other than those being contested in good
faith for which provision has been made in accordance with GAAP
on the most recent balance sheet included in Company's Annual
Report on Form 10-K for the year ended December 31, 2000; (iv)
have withheld from amounts owing to any employee, creditor or
other Person all Taxes required by law to be withheld and have
paid over to the proper governmental authority in a timely manner
all such withheld amounts to the extent due and payable; (v) have
not waived any applicable statute of limitations with respect to
United States federal or state income or franchise Taxes and have
not otherwise agreed to any extension of time with respect to a
United States federal or state income or franchise Tax assessment
or deficiency; (vi) have never been members of any consolidated
group for income tax purposes other than the consolidated group
of which Company is the common parent (or in which Company's
former parent corporation was the common parent); and (vii) are
not parties to any tax sharing agreement or arrangement other
than with each other. No liens for Taxes exist with respect to
any of the assets or properties of Company or its Subsidiaries,
except for statutory liens for Taxes not yet due or payable or
that are being contested in good faith. Company has made
available to Purchaser true and correct copies of the United
States federal income Tax Returns filed by Company and its
Subsidiaries for each of the years ended December 31, 1998 and
1999. There is no contract or agreement, plan or arrangement by
Company or its Subsidiaries covering any person that,
individually or collectively, could give rise to the payment of
any amount that would not be deductible by Company or its
Subsidiaries by reason of Section 280G of the Code or would
constitute compensation in excess of the limitation set forth in
Section 162(m) of the Code. There are not being conducted or, to
the Knowledge of Company, threatened in writing any material
audits, examinations, investigations, litigation, or other
proceedings in respect of Taxes of Company or any Subsidiary.
Company's former parent corporation received a letter ruling
(200109039) (the "Letter Ruling") from the Internal Revenue
Service (dated December 4, 2000) holding that no gain or loss
would be recognized on its conversion to a for-profit stock
corporation. The Company and its Subsidiaries have not taken, or
failed to take, any actions that could adversely affect the
holdings of the Letter Ruling or conflict with any
representations made in connection therewith. Neither the Merger
nor the other transactions contemplated hereby could adversely
affect the holdings of the Letter Ruling or conflict with any
representations made in connection therewith. None of Company or
its Subsidiaries has been a party to a Section 355 transaction
that could give rise to a Tax liability pursuant to Section
355(e) of the Code.
As used in this Agreement, (1) the term "Tax"
(including, with correlative meaning, the terms "Taxes" and
"Taxable") means all federal, state, local and foreign income,
profits, premium, franchise, gross receipts, environmental,
customs duty, capital stock, severance, stamp, payroll, sales,
employment, unemployment, disability, use, property, withholding,
excise, production, value added, occupancy and other taxes,
duties or governmental levies of any nature whatsoever, together
with all interest, penalties and additions imposed with respect
to such amounts or filing requirements and any interest in
respect of such penalties and additions, and (ii) the term "Tax
Return" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates, information
returns, claim for refund, and amended returns) relating to
Taxes.
(o) Certain Contracts. (i) The Company Disclosure Schedule
lists, as of the date hereof, each of the the following
contracts, agreements or arrangements to which Company or any of
its Subsidiaries is a party or by which it is bound: (i) any
"material contract" (as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC), (ii) the ten largest provider and
the ten largest customer contracts measured in terms of payments
to or receipts from Company and its Subsidiaries, (iii) any
contract that involves annual premiums, premium equivalents or
payments greater than $5 million and 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 (other than customer agreements that are not terminable
within one year solely as a result of Health Insurance
Portability and Accountability Act of 1996 ("HIPAA") or other
statutory or regulatory requirements), (iv) promissory notes,
loans, agreements, indentures, evidences of indebtedness or other
instruments providing for the lending of money, whether as
borrower, lender or guarantor in amounts greater than $500,000
(excluding trade payables or receivables arising in the ordinary
course of business), (v) any contract or other agreement
restricting the payment of dividends or the repurchase of stock
or other equity, (vi) employment agreements, (vii) change in
control or similar arrangements with any officers, employees or
agents of Company or any of its Subsidiaries that will result in
any obligation (absolute or contingent) to make any payment to
any officers, employees or agents of Company or any of its
Subsidiaries following either the consummation of the
transactions contemplated hereby, termination of employment, or
both, (viii) labor contracts, (ix) joint venture, partnership
agreements or other similar agreements, (x) any contract for the
pending acquisition, directly or indirectly (by merger or
otherwise), of any entity or business, (xi) any contract,
agreement or policy for reinsurance, (xii) any contract or
agreement that is material to the business, assets or condition
(financial or otherwise) of the Company and its Subsidiaries
taken as a whole, or (xiii) any non-competition agreement or any
other agreement or arrangement that limits or otherwise restricts
Company or any of its Subsidiaries or any successor thereto or
that would, after the Effective Time, limit or restrict Purchaser
or any of its affiliates (including the Surviving Corporation) or
any successor thereto, from engaging or competing in any line of
business or in any geographic area (other than exclusivity
provisions or arrangements with providers of healthcare services)
(collectively, the "Material Contracts").
(ii) Neither Company nor any of its Subsidiaries is, or has
received any notice or has any Knowledge that any other party is,
in default (or would be in default but for the lapse of time or
the giving of notice or both) in any respect under any such
Material Contract, except for those defaults which could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Company.
(p) Employee Benefit Plans.
(i) Section 3.2(p)(i) of the Company Disclosure Schedule
contains a true and complete list of each Benefit Plan, stock
purchase, stock option, severance, employment, change-in-control,
fringe benefit, collective bargaining, bonus, incentive, deferred
compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject
to ERISA, whether formal or informal, oral or written, legally
binding or not under which any employee or former employee of
Company or any of its Subsidiaries has any present or future
right to benefits or under which Company or any of its
Subsidiaries has any present or future liability. All such plans,
agreements, programs, policies and arrangements shall be
collectively referred to as the "Company Plans"; provided,
however, that for purposes of this Section 3.2(p), the terms
Benefit Plans and Company Plans shall not include any benefit
plans, agreements, policies, programs or arrangements sold or
marketed by Company or its Subsidiaries.
(ii) With respect to each Company Plan, Company has delivered or
made available to Purchaser a current, accurate and complete copy
(or, to the extent no such copy exists, an accurate description)
thereof and, to the extent applicable, (A) any related trust
agreement, annuity contract or other funding instrument; (B) the
most recent determination letter; (C) any summary plan
description and other written communications (or a description of
any oral communications) by Company or any of its Subsidiaries to
its employees concerning the extent of the benefits provided
under a Company Plan; and (D) for the three most recent years:
(1) the Form 5500 and attached schedules; (II) audited financial
statements; (III) actuarial valuation reports; and (IV) attorney
responses to auditors' requests for information.
(iii) (A) Each Company Plan has been established and
administered in accordance with its terms, and in material
compliance with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations and if intended to
be qualified within the meaning of Section 401(a) of the Code is
so qualified; (B) with respect to any Company Plan, no actions,
suits or claims (other than routine claims for benefits in the
ordinary course) are pending or, to the Knowledge of Company
threatened; (C) neither Company nor any other party has engaged
in a prohibited transaction, as such term is defined under
Section 4975 of the Code or Section 406 of ERISA, which would
subject Company, the Surviving Corporation or any of their
Subsidiaries to any taxes, penalties or other liabilities under
Section 4975 of the Code or Section 409 or 502(i) of ERISA and
Company has no other liability under the Code with respect to any
Company Plan, including liability under any other provision of
Chapter 43 of the Code; (D) no Plan provides for an increase in
benefits on or after the Closing Date; and (E) each Company Plan
may be amended or terminated without additional obligation or
liability as a result of such termination or amendment (other
than those obligations and liabilities which have accrued as of
the time immediately prior to such termination or amendment in
accordance with the terms of such Company Plan).
(iv) Neither Company nor any member of its Controlled Group has
ever maintained, sponsored, administered or contributed to an
employee benefit plan subject to Title IV of ERISA, a
multiemployer plan (within the meaning of Section 4001(a)(3) of
ERISA) or a welfare benefit plan that provide coverage or
benefits to former employees (other than benefit continuation
rights under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended).
(v) No Company Plan exists which could result in the payment to
any employee of Company or any of its Subsidiaries of any money
or other property or rights or accelerate or provide any other
rights or benefits to any such employee as a result of the
transactions contemplated by this Agreement.
(vi) To the Knowledge of Company, all individuals who are or have
been eligible to participate in the Company Plans based upon the
eligibility provisions set forth therein or under applicable law
have been provided with a timely opportunity to participate.
(q) Labor Matters. (1) Neither Company nor any of its
Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization (other
than contracts or other agreements or understandings with labor
unions or labor organizations in connection with products and
services offered and sold to such unions and organizations by
Company or its Subsidiaries); (2) neither Company nor any of its
Subsidiaries is the subject of any proceeding asserting that it
or any Subsidiary has committed an unfair labor practice or sex,
age, race or other discrimination or seeking to compel it to
bargain with any labor organization as to wages or conditions of
employment; (3) there are no current or threatened organizational
activities or demands for recognition by a labor organization
seeking to represent employees of Company or any Subsidiary, or
labor strike and no such activities have occurred during the past
24 months; (4) no grievance, arbitration, complaint or
investigation relating to labor or employment matters is pending
or, to the Knowledge of Company, threatened against Company or
any of its Subsidiaries which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect
with respect to Company; (5) Company and each Subsidiary is in
compliance with all applicable laws (domestic and foreign),
agreements, contracts, and policies relating to employment,
employment practices, wages, hours, and terms and conditions of
employment except for failures so to comply, if any, that
individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect with respect to Company; (6)
Company has complied in all material respects with its payment
obligations to all employees of Company and its Subsidiaries in
respect of all wages, salaries, commissions, bonuses, benefits
and other compensation due and payable to such employees under
any Company policy, practice, agreement, plan, program or any
statute or other law; (7) Company is not liable for any severance
pay or other payments to any employee or former employee arising
from the termination of employment under any benefit or severance
policy, practice, agreement, plan, or program of Company, nor
will Company have any liability which exists or arises, or may be
deemed to exist or arise, under any applicable law or otherwise,
as a result of or in connection with the transactions
contemplated hereunder or as a result of the termination by
Company of any persons employed by Company or any of its
Subsidiaries on or prior to the Effective Time of the Merger
except as required by Code Section 4980B; and (8) Company is in
compliance with its obligations pursuant to the Worker Adjustment
and Retraining Notification Act of 1988 ("WARN") and part 6 and 7
of Title I of ERISA, to the extent applicable, and all other
employee notification and bargaining obligations arising under
any collective bargaining agreement or statute.
(r) Affiliate Transactions. Except as disclosed in the Company
SEC Reports, there are no contracts, commitments, agreements,
arrangements or other transactions between Company or any of its
Subsidiaries, on the one hand, and any (i) officer or director of
Company or any of its Subsidiaries, (ii) record or beneficial
owner of five percent or more of the voting securities of Company
or (iii) affiliate (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) of any such officer, director
or beneficial owner, on the other hand.
(s) Statutory Financial Statements. Except as otherwise set
forth therein, the annual statements and the quarterly statements
filed by Company or any of its Subsidiaries with the Missouri
Department of Insurance ("DOI") for the years ended December 31,
1999 and 2000, for the quarterly period ended June 30, 2001 and
for each quarterly period ending after June 30, 2001 and prior
to the Closing Date (the "DOI Filings") and the statutory balance
sheets and income statements included in such DOI Filings fairly
present in all material respects the statutory financial
condition and results of operations of Company or such
Subsidiaries, as applicable, as of the date and for the periods
indicated therein and have been prepared in accordance with
applicable statutory accounting principles consistently applied
throughout the periods indicated, except as may be reflected in
the notes thereto and subject to the absence of notes required by
statutory accounting principles and to normal year-end
adjustments.
(t) Insurance. Company has provided or made available to
Purchaser true, correct and complete copies of all policies of
insurance to which Company is a party or is a beneficiary or
named insured. Company maintains insurance coverage with
reputable insurers in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged
in businesses similar to that of Company (taking into account the
cost and availability of such insurance).
(u) Opinion of Company Financial Advisor. The Board of
Directors of Company has received the opinion of the Company
Financial Advisor, dated the date of this Agreement, to the
effect that, as of such date, the Merger Consideration is fair,
from a financial point of view, to the holders of Company Common
Stock (other than Purchaser and its affiliates), a copy of which
opinion will promptly be made available to Purchaser after
receipt by Company.
3.3. Representations and Warranties of Purchaser and Merger
Sub. Purchaser and Merger Sub represent and warrant to Company as follows:
(a) Organization. Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware
and Merger Sub is a direct wholly-owned subsidiary of Purchaser.
(b) Corporate Authorization. Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance by Merger Sub of this Agreement and the
consummation by Merger Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Merger Sub. Purchaser, in its capacity as
sole stockholder of Merger Sub, has adopted this Agreement and
approved the Merger and the other transactions contemplated
hereby as required by the DGCL. This Agreement has been duly
executed and delivered by Merger Sub and, assuming that this
Agreement constitutes the valid and binding agreement of Company,
constitutes a valid and binding agreement of Merger Sub,
enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
(c) Non-Contravention. The execution, delivery and performance
by Merger Sub of this Agreement and the consummation by Merger
Sub of the transactions contemplated hereby do not and will not
contravene or conflict with the certificate of incorporation or
by-laws of Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any
activities other than in connection with the organization of
Merger Sub, the negotiation and execution of this Agreement and
the consummation of the transactions contemplated hereby. Merger
Sub has no Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Conduct of Business of Company Pending the Merger. Company
covenants and agrees that, during the period
from the date hereof to the Effective Time and except as
otherwise agreed to in writing by Purchaser, the businesses of
Company and its Subsidiaries shall be conducted only in, and
Company and its Subsidiaries shall not take any action except in,
the ordinary course of business and in a manner consistent with
past practice and in compliance with applicable laws; and Company
and its Subsidiaries shall each use its commercially reasonable
efforts to preserve substantially intact the business
organization of Company and its Subsidiaries, to keep available
the services of the present officers, employees and consultants
of Company and its Subsidiaries and to preserve the present
relationships of Company and its Subsidiaries with such of the
customers, suppliers, licensors, licensees, or distributors with
which Company or any of its Subsidiaries has significant business
relations. By way of amplification and not limitation, neither
Company nor any of its Subsidiaries shall, between the date of
this Agreement and the Effective Time, except as set forth in
Section 4.1 of the Company Disclosure Schedule, directly or
indirectly do, or propose or commit to do, any of the following:
(a) Except for the Certificate of Incorporation Amendment, amend
its certificate of incorporation or by-laws or, equivalent
organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, (A) any shares of capital stock of any class, or
any options, warrants, convertible securities or other rights of
any kind to acquire any shares of capital stock, or any other
ownership interest (including but not limited to stock
appreciation rights or phantom stock), of Company or any of its
Subsidiaries (except for the issuance of securities issuable
pursuant to options outstanding as of the date hereof under any
Benefit Plans), except for the issuance of options to officers
and employees (which issuance shall be in the ordinary course of
business in accordance with past practices) to purchase up to
160,000 shares of Company Common Stock under the Company Stock
Option Plans;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital
stock;
(e) Acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business
organization or division or line of business;
(f) Modify its current investment policies or investment
practices in any material respect except to accommodate changes
in applicable law;
(g) Transfer, lease, mortgage, or otherwise dispose of or
subject to any lien any of its assets, including capital stock of
Subsidiaries, with a fair market value in excess of $5 million
individually or $10 million in the aggregate (except (i) by
incurring Permitted Liens; (ii) in the ordinary course of
business consistent with past practice; and (iii) equipment and
property no longer used in the operation of Company's business);
(h) Incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any
person, or make any loans, advances or capital contributions to,
or investments in, any other person in excess of $5 million
individually or $10 million in the aggregate;
(i) Enter into or amend any Material Contract, any other
contract or agreement (with "other contract or agreement" being
defined for purposes of this subsection as a contract or
agreement which involves Company incurring a liability in excess
of $1 million individually or $10 million in the aggregate and
which is not terminable by Company without penalty upon one year
or less notice (other than (x) contracts or amendments issued or
entered into in the ordinary course of business with customers or
providers of Company or its Subsidiaries using Company's or any
of its Subsidiary's standard templates, as the same may be
amended with non-material changes made for other customers or
providers or for purposes of compliance with laws or
accreditation requirements and (y) customer agreements that are
not terminable within one year solely as a result of HIPAA or
other statutory or regulatory requirements)) or agreement with an
affiliate of Company;
(j) Except to the extent required under this Agreement or
pursuant to applicable law, increase the compensation or fringe
benefits of any of its directors, officers or employees, except
for increases in salary or wages of officers and employees of
Company or its Subsidiaries in the ordinary course of business in
accordance with past practice, or grant any severance or
termination pay not currently required to be paid under existing
severance plans or enter into, or amend, any employment,
consulting or severance agreement or arrangement with any present
or former director, officer or other employee of Company or any
of its Subsidiaries, or establish, adopt, enter into or amend or
terminate any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination,
welfare, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any directors, officers or
employees;
(k) Except as may be required as a result of a change in law or
in generally accepted accounting or actuarial principles, make
any change to the accounting practices or principles or reserving
or underwriting practices or principles used by it;
(l) Take, or permit any of its Subsidiaries to take, any action
that would prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code;
(m) Settle or compromise any pending or threatened suit, action
or claim in excess of $500,000;
(n) Adopt a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other
reorganization of Company or any of its Subsidiaries;
(o) Effectuate a "plant closing" or "mass layoff", as those
terms are defined in WARN, affecting in whole or in part any site
of employment, facility, operating unit or employee of Company or
any of its Subsidiaries;
(p) Fail to maintain in full force and effect the existing
insurance policies covering Company or its Subsidiaries or their
respective properties, assets and businesses or comparable
replacement policies to the extent available for a cost not
exceeding 150% of the current cost of such policy;
(q) Authorize or make capital expenditures which are, in the
aggregate, in excess of $10 million for Company and its
Subsidiaries taken as a whole;
(r) Expand its marketing efforts beyond those states in which
its products are offered as of the date of this Agreement;
(s) Make any Tax election or settle or compromise any material
federal, state, local or foreign Tax liability, change any annual
tax accounting period, change any method of Tax accounting, enter
into any closing agreement relating to any Tax, surrender any
right to claim a Tax refund, or consent to any extension or
waiver of the limitations period applicable to any Tax claim or
assessment;
(t) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections
4.1(a) through 4.1(s) or any action which would result in any of
the conditions set forth in Article VI not being satisfied or
materially delay the Closing.
4.2. Conduct of Business of Purchaser Pending the Merger.
Purchaser shall not, between the date of this
Agreement and the Effective Time, except as set forth in Section
4.2 of the Purchaser Disclosure Schedule, directly or indirectly
do, or propose or commit to do, any of the following:
(a) Amend its certificate of incorporation or by-laws or
equivalent organizational documents in a manner adverse to
Company or its stockholders;
(b) Take, or permit any of its Subsidiaries to take, any action
that would prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code;
(c) 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,
dissolution, restructuring, recapitalization or other
reorganization of Purchaser; or
(e) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections
4.2(a) through (d) or any action which would result in any of the
conditions set forth in Article VI not being satisfied or
materially delay the Closing.
4.3. Governmental Filings. Each of Purchaser and Company shall
(a) confer on a regular and frequent basis with the other and (b) report (to
the extent permitted by law or regulation or any applicable
confidentiality agreement) on operational matters. Company and
Purchaser shall file all reports required to be filed by each of
them with the SEC (and all other Governmental Entities) between
the date of this Agreement and the Effective Time and each of
Purchaser (to the extent any report, announcement and publication
relates to this Agreement and the Merger or materially impacts
the Merger) and Company shall (to the extent permitted by law or
regulation or any applicable confidentiality agreement) deliver
to the other party copies of all such reports, announcements and
publications promptly after the same are filed.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Preparation of Form S-4 and the Proxy Statement;
Stockholders Meeting. (a) Promptly following the date of this Agreement,
Company and Purchaser shall prepare and Company shall file with
the SEC the Proxy Statement, and Purchaser shall prepare and file
with the SEC the Form S-4, in which the Proxy Statement will be
included as a prospectus. Each of Company and Purchaser shall use
its reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable
after such filing. Company will use its reasonable best efforts
to cause the Proxy Statement to be mailed to its stockholders as
promptly as practicable after the Form S-4 is declared effective
under the Securities Act. Purchaser shall also take any action
(other than qualifying to do business in any jurisdiction in
which it is not now so qualified) required to be taken under any
applicable state securities law in connection with the issuance
of Purchaser Common Stock in connection with the Merger, and
Company shall furnish all information concerning Company and the
holders of Company Common Stock and rights to acquire Company
Common Stock pursuant to the Company Stock Option Plans as may be
reasonably required in connection with any such action. Each of
Purchaser and Company shall furnish all information concerning
itself to the other as may be reasonably requested in connection
with any such action and the preparation, filing and distribution
of the Form S-4 and the preparation, filing and distribution of
the Proxy Statement. Company, Purchaser and Merger Sub each agree
to correct any information provided by it for use in the Form S-4
or the Proxy Statement that shall have become false or
misleading.
(b) Company, acting through its Board of Directors, shall,
subject to and in accordance with its certificate of
incorporation and by-laws, promptly and duly call, give notice
of, convene and hold as soon as practicable following the date
upon which the Form S-4 becomes effective a meeting of the
holders of Company Common Stock (the "Company Stockholders
Meeting") for the purpose of voting to approve and adopt this
Agreement and the transactions contemplated hereby and an
amendment or repeal of the ownership limitations included in its
certificate of incorporation so as to permit the consummation of
the transactions contemplated hereby (the "Certificate of
Incorporation Amendment"), and (i) except as otherwise provided
herein, recommend approval and adoption of this Agreement and the
transactions contemplated hereby and the Certificate of
Incorporation Amendment by the stockholders of Company and
include in the Proxy Statement such recommendation and (ii) use
its reasonable efforts to solicit and obtain such approval. The
Board of Directors of Company shall not withhold, withdraw, amend
or modify in a manner adverse to Purchaser its recommendation
referred to in clause (i) of the preceding sentence (or announce
publicly its intention to do so), except that such Board of
Directors shall be permitted to withhold, withdraw, amend or
modify its recommendation (or publicly announce its intention to
do so) if such Board of Directors determines in good faith, after
consultation with its outside legal counsel, that its failure to
withhold, withdraw, amend or modify its recommendation is, or is
reasonably likely to be, inconsistent with its fiduciary duties
in accordance with Delaware law. The parties hereto understand
and agree that, notwithstanding the foregoing, a communication by
the Board of Directors of Company to Company's stockholders
pursuant to Rule 14d-9(f) of the Exchange Act, or any similar
type of communication to Company's stockholders in connection
with the the making or amendment of a tender offer or exchange
offer, shall not be deemed to constitute a breach of Company's
obligations under this Section 5.1(b).
(c) Company will cause its transfer agent to make stock transfer
records relating to Company available to the extent reasonably
necessary to effectuate the intent of this Agreement.
5.2. Accountant's Letters. (a) Purchaser shall use reasonable
best efforts to cause to be delivered to Company a letter from Purchaser's
independent public accountants, dated the date on which the Form
S-4 shall become effective, addressed to Purchaser, in form and
substance reasonably satisfactory to Company and customary in
scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements
similar to the Form S-4.
(b) Company shall use reasonable best efforts to cause to be
delivered to Purchaser a letter from Company's independent public
accountants, dated the date on which the Form S-4 shall become
effective, addressed to Company and Purchaser, in form and
substance reasonably satisfactory to Purchaser and customary in
scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements
similar to the Form S-4.
5.3. Access to Information. Upon reasonable notice, each party
shall (and shall cause its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financial advisors and other
representatives of the other party reasonable access during
normal business hours, during the period prior to the Effective
Time, to such of its properties, books, contracts, commitments,
records, officers and employees as the other party may reasonably
request and, during such period, such party shall (and shall
cause its Subsidiaries to) furnish promptly to the other party
(a) a copy of each report, schedule, registration statement and
other document filed, published, announced or received by it
during such period pursuant to the requirements of Federal or
state securities laws, as applicable (other than documents which
such party is not permitted to disclose under applicable law),
and (b) consistent with its legal obligations, all other
information concerning it and its business, properties and
personnel as such other party may reasonably request; provided,
however, that either party may restrict the foregoing access to
the extent that any law, treaty, rule or regulation of any
Governmental Entity applicable to such party requires such party
or its Subsidiaries to restrict access to any properties or
information. The parties will hold any such information which is
non-public in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement
dated August 30, 2001 between Company and Purchaser (the
"Confidentiality Agreement"). Any investigation by Purchaser or
Company shall not affect the representations and warranties of
Company or Purchaser, as the case may be.
5.4. Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts
to prepare and file as promptly as practicable all documentation to
effect all necessary applications, notices, petitions, filings,
tax ruling requests and other documents and to obtain as promptly
as practicable all consents, waivers, licenses, orders,
registrations, approvals, permits, tax rulings and authorizations
necessary or advisable to be obtained from any third party and/or
any Governmental Entity in order to consummate the Merger or any
of the other transactions contemplated by this Agreement. Upon
the terms and subject to the conditions hereof, each party will
use its reasonable best efforts to take, or cause to be taken,
all actions to do, or cause to be done, all things reasonably
necessary to satisfy the conditions to Closing set forth herein
and to consummate the transactions contemplated hereby.
(b) In furtherance and not in limitation of the foregoing, each
party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect
to the transactions contemplated hereby as promptly as
practicable after the date hereof and to supply as promptly as
practicable any additional information and documentary material
that may be requested pursuant to the HSR Act. Each of Purchaser
and Company shall cooperate in all respects with each other in
connection with any filing or submission and in connection with
any investigation or other inquiry.
(c) In furtherance and not in limitation 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 DOI and shall coordinate
the conduct of the hearing or hearings before the DOI in
connection with such filings. Company and Purchaser will
reasonably cooperate with regard to the content of the filings
referred to in the first sentence of this Section 5.4(c). Company
and Purchaser, as the case may be, shall submit all such filings
and hearing testimony, witness lists and other similar materials
relating to hearing to the other for its review prior to filing.
5.5. No Solicitation of Transactions. Company agrees that neither
it nor any of its Subsidiaries nor any of the officers and directors of it or
its Subsidiaries shall, and that it shall direct and cause its and
its Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained
by it or any of its Subsidiaries) not to, directly or indirectly,
(A) initiate or solicit or knowingly encourage or facilitate
(including by way of furnishing information) any inquiries or the
making of any proposal or offer with respect to an Alternative
Transaction (as defined in Section 8.11), (B) have any discussion
with or provide any confidential information or data to any
Person relating to an Alternative Transaction or engage in any
negotiations concerning an Alternative Transaction.
Notwithstanding the foregoing, Company or its Board of Directors
shall be permitted to (A) to the extent applicable, comply with
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act with
regard to a proposal or offer for an Alternative Transaction; (B)
make any disclosure required by applicable law or by obligations
pursuant to any listing agreement with or rules of any securities
exchange; or (C) engage in any discussions or negotiations with,
or provide any information to, any Person in response to an
unsolicited bona fide written proposal or offer for an
Alternative Transaction by any such Person, if and only to the
extent that, in the case of the actions referred to in clause
(C), (i) the Board of Directors of Company concludes in good
faith, after consultation with its outside legal counsel, that
the failure to provide such information or engage in such
negotiations or discussions is or is reasonably likely to be
inconsistent with the directors' fiduciary duties in accordance
with Delaware law, (ii) prior to providing any information or
data to any Person in connection with a proposal or offer for an
Alternative Transaction by any such Person, the Board of
Directors of Company receives from such Person an executed
confidentiality agreement containing terms and provisions at
least as restrictive as those contained in the Confidentiality
Agreement (which shall not preclude discussions or negotiations
relating to the proposal or offer from such Person) and (iii)
prior to providing any information or data to any Person or
entering into discussions or negotiations with any Person, the
Board of Directors of Company notifies Purchaser promptly of such
inquiries, proposals or offers received by, or any such
discussions or negotiations sought to be initiated or continued
with, any of its representatives indicating the name of such
Person and providing to Purchaser a copy of such written proposal
or offer for an Alternative Transaction. Company agrees that it
will keep Purchaser informed, on a prompt basis, of the status
and terms of any such proposals or offers and the status of any
such discussions or negotiations and that it will deliver to
Purchaser copies of (or, if oral, summaries of) any changes to
any proposals or offers. Company agrees that it will immediately
cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore
with respect to any Alternative Transaction or similar
transaction or arrangement and will not waive any rights under
any standstill or confidentiality agreements entered into with
such parties. Company agrees that it will take the necessary
steps to promptly inform the individuals or entities referred to
in the first sentence of this Section 5.5 of the obligations
undertaken in this Section 5.5.
5.6. Employee Benefits Matters.
(a) Continuation and Comparability of Benefits. From the
Effective Time until December 31, 2002, the Surviving Corporation
shall provide compensation and employee benefits to the employees
of Company and its Subsidiaries (other than those employees whose
terms and conditions of employment are subject to a collective
bargaining agreement) employed as of the Effective Time that are
in the aggregate no less favorable than the lesser of (i) those
provided to the employees of Company and its Subsidiaries as of
the date of this Agreement and (ii) those provided to Purchaser's
similarly situated employees. On or prior to January 1, 2003,
the Purchaser shall have caused the compensation and employee
benefits to the employees of Purchaser (other than employees of
the Surviving Corporation and its Subsidiaries), on the one hand,
and the employees of the Surviving Corporation and its
Subsidiaries, on the other hand, to be in the aggregate
comparable for similarly situated employees.
(b) Pre-Existing Limitations; Service Credit. With respect to
any Benefit Plans in which any Company Employees first become
eligible to participate, on or after the Effective Time, and
which are plans that the Company Employees did not participate in
prior to the Effective Time (the "New Company Plans"), Purchaser
shall: (A) waive all pre-existing conditions, exclusions and
waiting periods with respect to participation and coverage
requirements applicable to the Company Employees under any health
and welfare New Company Plans in which such employees may be
eligible to participate after the Effective Time, and
deductibles, coinsurance or maximum out-of-pocket payments made
by Company employees during the calendar year in which the
Effective Time occurs shall reduce the amount of deductibles,
coinsurance and maximum out-of-pocket payments under the New
Company Plans; provided that such Company Employee and covered
family members were enrolled in comparable coverage under the
Benefit Plans of Company on the Effective Time and continuously
thereafter until the effective time of coverage in the New
Company Plans, and (B) recognize service of the Company Employees
with Company accrued prior to the Effective Time for purposes of
eligibility to participate and vesting credit in any New Company
Plan in which such employees may be eligible to participate after
the Effective Time, to the extent service is taken into account
under the applicable New Company Plan; provided, however, in no
event shall any credit be given to the extent it would result in
the duplication of benefits for the same period of service.
Service with Company will also be recognized under any New
Company Plan that is a defined benefit pension plan with a
benefit formula based upon final average compensation, with an
offset for any benefit payable for the same period of service
with Company under any defined benefit plan of Company. Purchaser
shall credit each of the Company employees with accrued sick
leave and vacation as of the Effective Time. Purchaser shall, or
shall cause the Surviving Corporation to, either (i) maintain
Company's Code Section 125 plans (the "Company 125 Plans") for
the remainder of the calendar year in which the Effective Time
occurs or (ii) terminate the Company 125 Plans after the
Effective Time and adopt new Code Section 125 plans (the "New 125
Plans") for Company employees who were participating in the
Company 125 Plans and transfer the account balances of such
employees under the Company 125 Plans to the New 125 Plans as
soon as practicable after such New 125 Plans are established.
(c) Retention Plan. As soon as reasonably practicable after the
date hereof, Purchaser and Company shall use commercially
reasonable efforts to develop a targeted retention plan for key
non-executive employees of Company and its Subsidiaries with such
terms and conditions (including the payment dates and payment
amounts) as are mutually acceptable to Purchaser and Company.
5.7. Directors' and Officers' Indemnification and Insurance.
(a) The Surviving Corporation shall, and Purchaser
shall cause the Surviving Corporation to, (i) indemnify and hold
harmless, and provide advancement of expenses to, all past and
present directors, officers and employees of Company and its
Subsidiaries (the "Indemnified Personnel") to the same extent
such persons are indemnified or have the right to advancement of
expenses as of the date of this Agreement by Company pursuant to
Company's certificate of incorporation, by-laws and
indemnification agreements, if any, in existence on the date
hereof with any current or former directors, officers and
employees of Company and its Subsidiaries for acts or omissions
occurring at or prior to the Effective Time (including for acts
or omissions occurring in connection with the approval of this
Agreement and the consummation of the transactions contemplated
hereby), and (ii) purchase as of the Effective Time a tail policy
to the current policy of directors' and officers' liability
insurance and fiduciary liability insurance maintained by Company
which tail policy shall be effective for a period from the
Effective Time through and including the date six years after the
Closing Date with respect to claims arising from facts or events
that occurred on or before the Effective Time; provided, however,
that in no event shall the Surviving Corporation be required to
expend in excess of 900% of the annual premium currently paid by
Company for its current policy of directors' and officers'
liability insurance and fiduciary liability insurance; and,
provided, further, that if the premium of such insurance coverage
exceeds such amount, the Surviving Corporation after consultation
with Company shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(b) The certificate of incorporation and by-laws of
the Surviving Corporation shall contain provisions with respect
to indemnification, advancement of expenses and exculpation from
liability at least as favorable to the Indemnified Personnel as
those set forth in the current certificate of incorporation and
by-laws of the Company, and for a period of six years from the
Effective Time, those provisions shall not be repealed or amended
or otherwise modified in any manner that would adversely affect
the rights thereunder of the Indemnified Personnel, except to the
extent, if any, that such modification is required by applicable
law.
(c) Notwithstanding anything herein to the contrary,
if any claim, action, suit, proceeding or investigation (whether
arising before, at or after the Effective Time) is made against
any Indemnified Personnel, on or prior to the sixth anniversary
of the Effective Time, the provisions of this Section 5.7 shall
continue in effect until the final disposition of such claim,
action, suit, proceeding or investigation.
(d) The covenants contained in this Section 5.7 are
intended to be for the benefit of, and shall be enforceable by,
each of the Indemnified Personnel and their respective heirs and
legal representatives and shall not be deemed exclusive of any
other rights to which an Indemnified Personnel is entitled,
whether pursuant to law, contract or otherwise.
(e) In the event that the Surviving Corporation or any
of its successors or assigns (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors or assigns of the
Surviving Corporation, as the case may be, shall succeed to the
obligations set forth in this Section 5.7.
5.8. Notification of Certain Matters. Company shall use
reasonable commercial efforts to give prompt notice to Purchaser, and
Purchaser shall use reasonable commercial efforts to give prompt notice to
Company, to the extent that either acquires Knowledge of (i) the
occurrence or non-occurrence of any event the occurrence or non-
occurrence of which would be reasonably likely to cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate and (ii) any failure of Company, Purchaser
or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.8 shall not limit or otherwise
affect the remedies available hereunder to the party receiving
such notice.
5.9. Public Announcements. Purchaser and Company shall develop
a joint communications plan and each party shall (i) ensure that all
press releases and other public statements with respect to this
Agreement or the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless
otherwise required by applicable law or by obligations pursuant
to any listing agreement with or rules of any securities
exchange, consult with each other before issuing any press
release or otherwise making any public statement with respect to
this Agreement or the transactions contemplated hereby. In
addition to the foregoing, except to the extent disclosed in or
consistent with the Proxy Statement in accordance with the
provisions of Section 5.1, neither Purchaser nor Company shall
issue any press release or otherwise make any public statement or
disclosure concerning the other party or the other party's
business, financial condition or results of operations without
the consent of the other party, which consent shall not be
unreasonably withheld or delayed.
5.10. Listing of Shares of Purchaser Common Stock. Purchaser
shall use its reasonable best efforts to cause the shares of Purchaser Common
Stock to be issued in the Merger to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date.
5.11. Affiliates. Promptly after execution and delivery of this
Agreement, Company shall deliver to Purchaser a letter
identifying all persons who, in the opinion of Company, may be
deemed as of the date hereof "affiliates" of Company for purposes
of Rule 145 under the Securities Act, and such list shall be
updated as necessary to reflect changes from the date thereof.
Company shall use reasonable efforts to cause each person
identified on such list to deliver to Purchaser not less than 30
days prior to the Effective Time, a written agreement
substantially in the form attached as Exhibit 5.11 hereto (an
"Affiliate Agreement").
5.12. Transition Team. Promptly following execution of this
Agreement, the parties shall establish a transition planning team (the
"Transition Team") comprised of an equal number of
representatives of Company and Purchaser. The Transition Team
shall be responsible for facilitating a transition and
integration planning process to ensure the successful combination
of the operations of Company 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 which, among
other things, shall include an information systems action plan
intended to facilitate the most effective combination of the
information systems resources of Company and Purchaser. The
Transition Team, or designated representatives thereof, shall
meet monthly to review the financial performance of Company and
its affiliates and at such meetings Company shall advise the
Transition Team of the status of achieving Company's then current
Operating Plan (as has been presented to Purchaser), including
all of the material components thereof, such as 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 Company's business planning and underwriting process.
5.13. Management Responsibilities. At the Effective Time, the
Chairman and Chief Executive Officer of Company shall be named the President
of the Central Business Region with overall responsibility for
HealthLink, Blue Cross and Blue Shield of Missouri, and all of
the business operations of the Surviving Corporation in the
Central Business Region. Other senior executives of Company and
its Subsidiaries will be assigned significant responsibilities
with respect to the business of the Surviving Corporation,
including the current President of HealthLink who shall be
responsible for HealthLink and the current President and Chief
Operating Officer of Company who shall be responsible for Blue
Cross and Blue Shield of Missouri.
5.14. Tax-Free Reorganization Treatment. The parties hereto shall
use their commercially reasonable efforts to cause the Merger to be treated as
a reorganization within the meaning of Section 368(a) of the Code
and shall not knowingly take or fail to take any action which
action or failure to act would jeopardize the qualification of
the Merger as a reorganization within the meaning of
Section 368(a) of the Code. Unless required by law, each of
Purchaser, Merger Sub, and Company shall not file any Return or
take any position inconsistent with the treatment of the Merger
as a reorganization described in Section 368(a) of the Code.
Prior to the Effective Time, the parties shall use their
commercially reasonable efforts to obtain the opinion of its tax
counsel in such form and upon such matters as described in
Section 6.2(c) and Section 6.3(c).
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of Company, Purchaser and
Merger Sub to effect the Merger are subject to the satisfaction
or waiver on or prior to the Closing Date of the following
conditions:
(a) No Injunctions or Restraints, Illegality. (i) No
Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree,
judgment, injunction or other order (whether temporary,
preliminary or permanent), in any case which is in effect and
which prevents or prohibits consummation of the Merger or any
other transactions contemplated in this Agreement; and (ii) no
Governmental Entity shall have instituted any action or
proceeding (which remains pending at what would otherwise be the
Closing Date) before any United States court or other
governmental body of competent jurisdiction seeking to enjoin,
restrain or otherwise prohibit consummation of the transactions
contemplated by this Agreement.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been
terminated or shall have expired.
(c) NYSE Listing. The shares of Purchaser Common Stock to be
issued in the Merger and such other shares to be reserved for
issuance in connection with the Merger shall have been approved
for listing on the NYSE, subject to official notice of issuance.
(d) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Form S-4 shall have
been issued by the SEC and no proceedings for that purpose shall
have been initiated or threatened by the SEC.
(e) Stockholder Approval. The Merger and the Certificate of
Incorporation Amendment shall have been approved by the Required
Company Vote at the Company Stockholders Meeting.
(f) Required Governmental Consents. Any material governmental
consents or approvals required to consummate the transactions
contemplated hereby shall have been obtained, and shall be in
full force and effect.
(g) BCBSA. Any required approval of the BCBSA shall have been
obtained, and the license of Company to use the Blue Cross and
Blue Shield name in Company's licensed service area shall remain
in full force and effect.
6.2. Additional Conditions to Obligations of Purchaser and
Merger Sub. The obligations of Purchaser and Merger Sub to
effect the Merger are subject to the satisfaction or waiver by
Purchaser, on or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties. Each of the representations
and warranties of Company set forth in this Agreement (read
without any materiality, material or Material Adverse Effect
qualifications) shall be true and correct as of the Closing Date
as though made on and as of the Closing Date (except to the
extent that such representations and warranties speak as of
another date) other than such failures to be true and correct
that in the aggregate would not reasonably be expected to have a
Material Adverse Effect on Company. Purchaser shall have received
a certificate of the chief executive officer and the chief
financial officer of Company to such effect.
(b) Performance of Obligations of Company. Company shall have
performed or complied in all material respects with all
agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date, and Purchaser
shall have received a certificate of the chief executive officer
and the chief financial officer of Company to such effect.
(c) Tax Opinion. Purchaser shall have received from Xxxxxxx
Xxxxxxx & Xxxxxxxx, counsel to Purchaser, on the Closing Date, a
written opinion dated as of such date, based on customary
representations of Company and Purchaser that counsel to
Purchaser deems relevant, to the effect that (i) the Merger will
be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and (ii)
Company, Purchaser and Merger Sub will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
(d) Required Governmental Consents. Any material governmental
consents or approvals required to consummate the transactions
contemplated hereby shall have been obtained, and shall be in
full force and effect, without any conditions that are material
and adverse to Company or Purchaser or any of their Subsidiaries
and that differ materially in character, degree or scope from
conditions commonly imposed by such consents or approvals.
(e) Required Third Party Consents. Any material third party
consents or approvals required to consummate the transactions
contemplated hereby shall have been obtained and shall be in full
force and effect.
(f) No Material Adverse Change. At any time on or after the
date of this Agreement there shall not have occurred any change,
circumstance or event that, individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse
Effect on Company.
(g) Appraisal Rights Exercise. The aggregate number of shares of
Company Common Stock owned by Persons who have made a demand for
appraisal rights under Section 262 of the DGCL shall constitute
less than 30% of the outstanding shares of Company Common Stock
outstanding as of the date of the Company Stockholders Meeting
called for the purpose of voting on the Merger.
6.3. Additional Conditions to Obligations of Company. The
obligations of Company to effect the Merger are
subject to the satisfaction of, or waiver by Company, on or prior
to the Closing Date of the following additional conditions:
(a) Representations and Warranties. Each of the representations
and warranties of Purchaser set forth in this Agreement (read
without any materiality, material or Material Adverse Effect
qualifiations) shall be true and correct as of the Closing Date
as though made on and as of the Closing Date (except to the
extent that such representations and warranties speak as of
another date) other than such failures to be true and correct
that in the aggregate would not reasonably be expected to have a
Material Adverse Effect on Purchaser. Company shall have
received a certificate of the chief executive officer and the
chief financial officer of Purchaser to such effect.
(b) Performance of Obligations of Purchaser and Merger Sub.
Purchaser and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required to
be performed by them under this Agreement at or prior to the
Closing Date. Company shall have received a certificate of the
chief executive officer and the chief financial officer of
Purchaser to such effect.
(c) Tax Opinion. Company shall have received from Xxxxx, Rice &
Xxxxxxxx, X.X., counsel to Company, on the Closing Date, a
written opinion dated as of such date, based on customary
representations of Company and Purchaser that counsel to Company
deems relevant, to the effect that (i) the Merger will be treated
for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code; and (ii) Company,
Purchaser and Merger Sub will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
(d) Price of Purchaser Common Stock. The Average Purchaser Price
(as defined in Section 8.11) shall be at least $91.05; provided
that this condition shall expire at the end of the tenth Business
Days after the Determination Date.
(e) Representation on Purchaser Board. One of Company's current
directors (who is not currently an employee of Company) shall
have been appointed to the board of directors of Purchaser to
serve until at least the 2004 Annual Meeting of Stockholders of
Purchaser.
(f) No Material Adverse Change. At any time on or after the
date of this Agreement there shall not have occurred any change,
circumstance or event that, individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse
Effect on Purchaser.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the
Closing Date, whether before or after approval of matters
presented in connection with the Merger by the stockholders of
Company:
(a) By mutual written consent of Purchaser and Company;
(b) By either Purchaser or Company if the Merger shall not have
been consummated on or before June 30, 2002 (other than due
principally to the failure of the party seeking to terminate this
Agreement to perform its obligations under this Agreement
required to be performed at or prior to the Effective Time);
(c) By Purchaser or Company if any required approval of the
stockholders of Company for this Agreement, the Merger or the
Certificate of Incorporation Amendment shall not have been
obtained by reason of the failure to obtain the required vote
upon a vote held at a duly held meeting of stockholders or at any
adjournment thereof;
(d) By Purchaser or Company if any court or other governmental
body of competent jurisdiction shall have issued a final order,
decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action is or shall have become final and
nonappealable; provided that the party seeking to terminate this
Agreement pursuant to this Section 7.1(d) shall have used its
reasonable best efforts to take, or cause to be taken, all
actions to do, or cause to be done, all things reasonably
necessary to prevent the entry of such order, decree, ruling or
other action.
(e) By Company if (i) prior to the Closing Date there shall have
been a breach or inaccuracy of any representation, warranty,
covenant or agreement on the part of Purchaser or Merger Sub
contained in this Agreement, which breach would (1) give rise to
the failure of a condition set forth in Section 6.3 and (2) is
incapable of being cured by Purchaser or is not cured within 30
days of notice of such breach, or (ii) any of the conditions set
forth in Section 6.1 shall have become incapable of fulfillment;
(f) By Purchaser if (i) prior to the Closing Date there shall
have been a breach or inaccuracy of any representation,
warranty, covenant or agreement on the part of Company contained
in this Agreement, which breach would (1) give rise to the
failure of a condition set forth in Section 6.2 and (2) is
incapable of being cured by Company or is not cured within 30
days of notice of such breach or (ii) any of the conditions set
forth in Section 6.1 shall have become incapable of fulfillment;
(g) By Purchaser or Company if, prior to the receipt of the
approval of Company's stockholders of the Merger, (i) the Board
of Directors of Company authorizes Company to execute a binding
written agreement with respect to a transaction that constitutes
a Superior Proposal, (ii) Company 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 five days
after the receipt of such written notice and documentation,
provide a written offer that is at least as favorable as the
Superior Proposal to the stockholders of Company; or
(h) By Company on or prior to the tenth Business Day after the
Determination Date if the Average Purchaser Price is less than
$91.05.
7.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, the obligations of the parties under
this Agreement shall terminate, except for the obligations in the
confidentiality provisions of Section 5.3 and Sections 7.3 and
8.1, and there shall be no liability on the part of any party
hereto; provided, however, that termination of this Agreement
pursuant to Section 7.1(e) or 7.1(f) shall not relieve a
defaulting or breaching party from liability to the other party
hereto (unless the fee set forth in Section 7.3 is paid in
connection with such termination).
7.3. Fees and Expenses. (a) If (A) Purchaser or Company
terminates this Agreement pursuant to Section 7.1(c) and an Alternative
Transaction or the intention to propose an Alternative
Transaction shall have been publicly announced and not withdrawn
prior to the Company Stockholders Meeting and within 12 months
thereafter Company enters into an agreement with respect to an
Alternative Transaction or an Alternative Transaction is
consummated, (B) Purchaser terminates this Agreement pursuant to
Section 7.1(f) as a result of a breach of a representation or
covenant by Company and the Board of Directors of Company was
aware of the existence of an Alternative Transaction or the
intention to propose an Alternative Transaction and such
Alternative Transaction had not been withdrawn prior to such
breach and within 12 months thereafter Company enters into an
agreement with respect to an Alternative Transaction or an
Alternative Transaction is consummated or (C) Purchaser or
Company terminates this Agreement pursuant to Section 7.1(g),
then Company shall pay to Purchaser, within one Business Day
following the date Company enters into an agreement with respect
to an Alternative Transaction or an Alternative Transaction is
consummated (in the cases of clauses (A) and (B) above) or within
one Business Day following the date of such termination (in the
case of clause (C) above), a fee, in cash, of $40.24 million,
which the parties agree shall be the appropriate measure of
liquidated damages and shall represent complete reimbursement of
expenses incurred by Purchaser and Merger Sub up to the date of
termination, and which amount shall be the total damages and sole
remedy of Purchaser and Merger Sub upon the termination of this
Agreement for any of the reasons described in this Section
7.3(a).
(b) Except as otherwise specifically provided herein, each party
shall bear its own Expenses in connection with this Agreement and
the transactions contemplated hereby, except that each Purchaser
and Company shall bear and pay one-half of the costs and expenses
incurred in connection with the filing, printing and mailing of
the Form S-4 and the Proxy Statement. As used in this Agreement,
"Expenses" includes all out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a
party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby, including the
preparation, printing, filing and mailing of the Form S-4 and the
Proxy Statement and the solicitation of stockholder approvals and
all other matters related to the transactions contemplated
hereby.
7.4. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters
presented in connection with the Merger by the stockholders of
Company, but, after any such approval, no amendment shall be made
which by law or in accordance with the rules of any relevant
stock exchange requires further approval by such stockholders
without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of
the parties hereto.
7.5. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards
of Directors, may, to the extent legally allowed, (i) extend the
time for the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) waive compliance with
any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1. Non-Survival of Representations, Warranties and
Agreements. Subject to the proviso in Section 7.2, none of the
representations, warranties, covenants and other agreements in
this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements,
shall survive the Effective Time or the termination of this
Agreement pursuant to Section 7.1, as the case may be, except for
those covenants and agreements contained herein and therein that
by their terms apply or are to be performed in whole or in part
after the Effective Time. Notwithstanding the foregoing, this
Article VIII shall survive the Effective Time and the
confidentiality provisions of Section 5.3 and Section 7.3 shall
survive the termination of this Agreement.
8.2. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (a) on the date of
delivery if delivered personally, or by telecopy upon
confirmation of receipt, (b) on the first Business Day following
the date of dispatch if delivered by a recognized next-day
courier service, or (c) on the third Business Day following the
date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to
receive such notice:
(a) if to Purchaser or Merger Sub, to
WellPoint Health Networks Inc.
0 XxxxXxxxx Xxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
(b) if to Company, to
RightCHOICE Managed Care, Inc.
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to
Xxxxx, Xxxx & Xxxxxxxx, X.X.
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxx
8.3. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless
otherwise indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The parties have
participated jointly in the negotiating and drafting of this
Agreement. In the event of an ambiguity or a question of intent
or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of
the authorship of any provisions of this Agreement.
8.4. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5. Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement and the Confidentiality Agreement constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement; provided, however, that
Sections 1.11 and 5.7 may be enforced against Purchaser or the
Surviving Corporation, as the case may be, by the Persons
identified or described therein.
8.6. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware.
8.7. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of
the parties hereto, in whole or in part (whether by operation of
law or otherwise), without the prior written consent of the other
party, and any attempt to make any such assignment without such
consent shall be null and void, except that Merger Sub may
assign, in its sole discretion, any or all of its rights,
interests and obligations under this Agreement to any direct
wholly owned Subsidiary of Purchaser without the consent of
Company, but no such assignment shall relieve Merger Sub of any
of its obligations under this Agreement. Subject to the
preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.9. Submission to Jurisdiction; Waivers. Each of Purchaser
and Company irrevocably agrees that any legal action or proceeding with
respect to this Agreement or for recognition and enforcement of any judgment in
respect hereof brought by the other party hereto or its
successors or assigns may be brought and determined in the Courts
of the State of Missouri and each of Purchaser and Company hereby
irrevocably submits with regard to any such action or proceeding
for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the
aforesaid courts. Each of Purchaser and Company hereby
irrevocably waives, and agrees not to assert, by way of motion,
as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it
is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to lawfully serve
process, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), and (c) to the
fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper and (iii) this Agreement, or the subject
matter hereof, may not be enforced in or by such courts.
8.10. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms. It is
accordingly agreed that the parties shall be entitled to specific
performance of the terms hereof, this being in addition to any
other remedy to which they are entitled at law or in equity.
8.11. Definitions. As used in this Agreement.
(a) "Alternative Transaction" means any of the following events:
(i) the acquisition of Company by merger, reorganization, share
exchange, consolidation, business combination, recapitalization,
dissolution or otherwise by any person other than Purchaser,
Merger Sub or any affiliate thereof (a "Third Party"); (ii) the
acquisition by a Third Party of 20% or more of the assets of
Company and its Subsidiaries, taken as a whole; (iii) the
acquisition by a Third Party of 20% or more of the outstanding
shares of Company Common Stock; (iv) the adoption by Company of a
plan of liquidation; or (v) the repurchase by Company or any of
its Subsidiaries of 20% or more of the outstanding shares of
Company Common Stock (other than, for the purposes of Section
7.3, repurchases of shares of Company Common Stock from the
Foundation).
(b) "Average Purchaser Price" means the average (rounded to the
nearest thousandth) of the closing trading prices of Purchaser
Common Stock on the NYSE, as reported in the Wall Street Journal,
Eastern Edition (or such other source as the parties shall agree
in writing), for the 20 full trading days ending on, and
including, the Determination Date.
(c) "BCBSA" means the Blue Cross Blue Shield Association.
(d) "Benefit Plans" means, with respect to any Person, each
employee benefit plan, program, arrangement and contract
(including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and any bonus,
deferred compensation, stock bonus, stock purchase, restricted
stock, stock option, employment, termination, stay agreement or
bonus, change in control and severance plan, program, arrangement
and contract) in effect on the date of this Agreement or
disclosed on the Company Disclosure Schedule or the Purchaser
Disclosure Schedule, as the case may be, to which such Person or
its Subsidiary is a party, which is maintained or contributed to
by such Person, or with respect to which such Person could incur
material liability under Section 4069, 4201 or 4212(c) of ERISA.
(e) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(f) "Business Day" means any day on which banks are not required
or authorized to close in the City of New York.
(g) "Controlled Group" means any trade or business (whether or
not incorporated) under common control with Company within the
meaning of Sections 414(b), (c), (m) or (o) of the Code.
(h) "Determination Date" means the Business Day immediately
following the day on which all conditions set forth in Article VI
(other than the condition set forth in Section 6.3(d)) have been
satisfied or waived (other than those conditions that by their
terms cannot be satisfied until the Closing Date); provided that
if after such Business Day (or after the establishment of a later
Determination Date pursuant to this proviso) an event occurs
which causes any condition set forth in Article VI (other than
the condition set forth in Section 6.3(d)) to no longer be
satisfied, then "Determination Date" means the Business Day
immediately following the day on which all conditions set forth
in Article VI (other than the conditions set forth in Section
6.3(d)) have again been satisfied or waived (other than those
conditions that by their terms cannot be satisfied until the
Closing Date), and, in such event, such later Determination Date
shall be used to calculate the Average Purchaser Price and for
purposes of Section 6.3(d) and Section 7.1(h).
(i) "good standing" means, when used with respect to the status
of any corporation domiciled or doing business in a particular
state, that such corporation has filed its most recent required
annual report and (i) if a domestic corporation, has not filed
articles of dissolution, and (ii) if a foreign corporation, has
not applied for a certificate of withdrawal and is not the
subject of a proceeding to revoke its certificate of authority.
(j) "Known" or "Knowledge" means, (i) with respect to Company,
the actual knowledge of Xxxx X. X'Xxxxxx, Xxxxxx Xxx Xxxxxx,
Xxxxxx X. Xxxxx, Xxxxxx Xxxxxxxx and Xxxxx Xxx and (ii) with
respect to Purchaser, the actual knowledge of Xxxxxxx X.
Xxxxxxxxx, Xxxxx X. Xxxxx or Xxxxxx X. Xxxxxx.
(k) "Liens" means any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
other), other charge or security interest; or any preference,
priority or other agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any capital
lease having substantially the same economic effect as any of the
foregoing).
(l) "Material Adverse Effect" means, with respect to Purchaser
or Company, any effect that is material and adverse to the
business, assets or financial condition of Purchaser and its
Subsidiaries, taken as a whole, or Company and its Subsidiaries,
taken as a whole, respectively.
(m) "the other party" means, with respect to Company, Purchaser
and means, with respect to Purchaser, Company.
(n) "Permitted Liens" means (i) any liens for taxes not yet due
or which are being contested in good faith by appropriate
proceedings, (ii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other similar liens, (iii) pledges
or deposits in connection with workers' compensation,
unemployment insurance, and other social security legislation and
(iv) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which,
in the aggregate, are not substantial in amount and which do not
in any case materially detract from the value of the property
subject thereto.
(o) "Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated
organization, other entity or group (as defined in the Exchange
Act).
(p) "SEC" means the Securities and Exchange Commission.
(q) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or
unincorporated, (i) of which such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any
Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the
securities or other interests of which having by their terms
ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its
Subsidiaries.
(r) "Superior Proposal" means a bona fide written proposal made
by a Person other than Purchaser, Merger Sub or an affiliate
thereof which is (A) for a merger, consolidation, share exchange,
business combination, reorganization, recapitalization,
liquidation, dissolution or other similar transaction involving,
or any purchase or acquisition of, (i) more than fifty percent
(50%) of the voting power of Company's capital stock or (ii) all
or substantially all of the consolidated assets of Company and
its Subsidiaries, and (B) otherwise on terms which Company's
Board of Directors determines in good faith after consultation
with its advisors would result in a transaction that, if
consummated, is more favorable to Company's stockholders, from a
financial point of view (which determination of the Board of
Directors shall take into account, among other things, the legal,
financial, regulatory and other aspects of the proposal,
including conditions to consummation and the likelihood of timely
consummation), than the transactions contemplated hereby.
________________________
[Intentionally Left Blank]
IN WITNESS WHEREOF, Purchaser, Merger Sub and Company
have caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first
written above.
WELLPOINT HEALTH NETWORKS INC.
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Secretary
RWP ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Secretary
RIGHTCHOICE MANAGED CARE, INC.
By: /s/ Xxxx X'Xxxxxx
Name: Xxxx X'Xxxxxx
Title: Chairman and Chief Executive Officer
