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AGREEMENT AND PLAN OF MERGER
AMONG
HUMANA INC.
HEW, INC.
AND
EMPHESYS FINANCIAL GROUP, INC.
DATED AS OF AUGUST 9, 1995
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TABLE OF CONTENTS
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Parties and Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
THE OFFER
Section 1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
THE MERGER
Section 2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.4 Certificate of Incorporation and Bylaws; Directors and Officers . . . . . . . . . . . . . . . . . . . . . 6
Section 2.5 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.6 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.7 Dissenting Company Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.8 Merger Without Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.9 No Further Ownership Rights in Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.10 Closing of Company Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.2 Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.3 Offer Documents and Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.4 Other Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.5 Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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Section 4.7 Offer Documents and Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.8 Absence of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.10 Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.11 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.12 Employment Relations and Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.13 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.14 Accreditations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.15 Monthly Business Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.16 State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.18 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Section 5.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.3 Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Conduct of Business by the Company Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.2 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.3 Conduct of Business of Sub Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Company Stockholder Approval; Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.4 Company Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.5 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.6 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.7 Real Estate Transfer and Gains Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.8 1996 Monthly Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.9 Indemnification; Directors and Officers Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.10 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.11 Severance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.12 Board Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.13 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.5 Procedure for Termination, Amendment or Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.5 Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.9 Enforcement of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.10 Incorporation of Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
EXHIBIT A Conditions of the Offer
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 9, 1995 (this
"Agreement"), among Humana Inc., a Delaware corporation ("Parent"), HEW, Inc.,
a Delaware corporation ("Sub") and a wholly owned subsidiary of Parent, and
EMPHESYS Financial Group, Inc., a Delaware corporation (the "Company") (Sub and
the Company being hereinafter collectively referred to as the "Constituent
Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved the acquisition of the Company by Parent pursuant to
a tender offer (the "Offer") by Parent for all of the outstanding shares of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company at
a price of $37.50 per share, net to the seller in cash, followed by a merger
(the "Merger") of Sub with and into the Company upon the terms and subject to
the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has adopted
resolutions approving the Offer and the Merger and recommending that the
Company's stockholders accept the Offer;
WHEREAS, Parent has informed the Company that Parent has
previously entered into a Stock Option and Tender Agreement (the "Stock Option
Agreement") with Lincoln National Corporation and American States Insurance
Company (collectively, "Stockholder") pursuant to which Stockholder has agreed,
among other things, (i) to tender all of the shares of Common Stock that
Stockholder now owns or hereafter acquires (the "Stockholder Shares"), (ii) to
grant Parent the option to purchase all of the Stockholder Shares, (iii) to
appoint Parent as Stockholder's proxy to vote the Stockholder Shares, and (iv)
with respect to certain questions put to stockholders of the Company for a
vote, to vote the Stockholder Shares, in each case, in accordance with the
terms and conditions of the Stock Option Agreement; and
WHEREAS, pursuant to the Merger, each issued and outstanding
share of Common Stock not owned directly or indirectly by Parent or the Company
will be converted into the right to receive the per share consideration paid
pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
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ARTICLE I
THE OFFER
Section 1.1 The Offer. (a) Subject to the provisions of
this Agreement, as promptly as practicable but in no event later than August
16, 1995, Sub shall, and Parent shall cause Sub to, commence, within the
meaning of Rule 14d-2 under the Exchange Act (as hereinafter defined), the
Offer. The obligation of Sub to, and of Parent to cause Sub to, commence the
Offer and accept for payment, and pay for, any shares of Common Stock tendered
pursuant to the Offer shall be subject to the conditions set forth in Exhibit A
and to the terms and conditions of this Agreement. The initial expiration date
of the Offer shall be September 15, 1995. Without the prior written consent of
the Company, Sub shall not (i) waive the Minimum Condition (as defined in
Exhibit A), (ii) reduce the number of shares of Common Stock subject to the
Offer, (iii) reduce the price per share of Common Stock to be paid pursuant to
the Offer, (iv) extend the Offer if all of the Offer conditions are satisfied
or waived, (v) change the form of consideration payable in the Offer, or (vi)
amend, add or waive any term or condition of the Offer (including the
conditions set forth on Exhibit A) in any manner that would adversely affect
the Company or its stockholders. Notwithstanding the foregoing, Sub may,
without the consent of the Company, extend the Offer (i) if at the then
scheduled expiration date of the Offer any of the conditions to Sub's
obligation to accept for payment and pay for shares of Common Stock shall not
have been satisfied or waived, until the later of (x) any period during which
the Offer may remain open pursuant to clauses (ii)-(v) below, and (y) the fifth
business day after the date Sub reasonably believes to be the earliest date on
which such conditions may be satisfied; (ii) for any period required by any
rule, regulation, interpretation or position of the SEC (as hereinafter
defined) or its staff applicable to the Offer; (iii) if the condition in clause
(f) of Exhibit A referring to a 10 business day period shall not have been
satisfied, for up to three business days after the scheduled expiration date of
such period; (iv) if all Offer conditions are satisfied or waived but the
number of shares of Common Stock tendered is less than 90% of the then
outstanding number of shares of Common Stock, for an aggregate period of not
more than 15 business days (for all such extensions) beyond the latest
expiration date that would be permitted under clause (i), (ii) or (iii) of this
sentence; and (v) if all Offer conditions are satisfied or waived but the
number of shares of Common Stock tendered is less than 90% of the then
outstanding number of shares of Common Stock, for an aggregate period of not
more than 10 business days (for all such extensions) beyond the latest
expiration date that would be permitted under clause (i), (ii), (iii) or (iv)
of this sentence (provided that Sub shall acknowledge that, except in the case
of an occurrence of an event that would cause the condition contained in
Section 8.1(b) not to be satisfied, all the Offer
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conditions shall be deemed to be waived and all shares of Common Stock which
are validly tendered and not withdrawn upon the expiration of such extended
period will be accepted and purchased. In addition to the right of Sub to
extend the Offer pursuant to the previous sentence, Sub shall have the right to
extend the Offer until five business days from the date on which Sub receives
all certificates required to have been delivered to it pursuant to Section 7.13
on or prior to the scheduled expiration date in effect prior to the extension
permitted by this sentence. The obligation of the Company to provide
certificates pursuant to Section 7.13 and the right of Parent to terminate this
Agreement pursuant to Section 9.3(c)(ii) shall remain in effect until Sub
acquires shares of Common Stock pursuant to the Offer without affecting the
right of Sub to extend the Offer pursuant to clause (iv) above; provided,
however, that if Sub exercises its right to extend the Offer pursuant to clause
(v) above, the Company's obligation to provide certificates pursuant to Section
7.13 shall cease and the Parent shall have no further right to terminate this
Agreement pursuant to Section 9.1(c)(ii). So long as this Agreement is in
effect and the Offer conditions have not been satisfied or waived, Sub shall,
and Parent shall cause Sub to, cause the Offer not to expire. Subject to the
terms and conditions of the Offer and the Agreement, Sub shall, and Parent
shall cause Sub to, pay for all shares of Common Stock validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the expiration of
the Offer.
(b) On the date of commencement of the Offer, Parent and Sub
shall file with the Securities and Exchange Commission (the "SEC") a Tender
Offer Statement on Schedule 14D-1 with respect to the Offer, which shall
contain an offer to purchase and a related letter of transmittal (such Schedule
14D-1 and the documents therein pursuant to which the Offer will be made,
together with any supplements or amendments thereto, the "Offer Documents").
The Company and its counsel shall be given an opportunity to review and comment
upon the Offer Documents prior to the filing thereof with the SEC. The Offer
Documents shall comply as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (including the
rules and regulations promulgated thereunder, the "Exchange Act"), and on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, the Offer Documents shall not 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, except that no
representation is made by Parent or Sub with respect to information supplied by
the Company for inclusion in the Offer Documents. Each of Parent, Sub and the
Company agrees promptly to correct any information provided by it for use in
the Offer Documents if and to the extent that such information shall have
become false or misleading in any material
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respect, and each of Parent, Sub and Company further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to holders of shares of Common Stock, in each case as
and to the extent required by applicable federal securities laws. Parent and
Sub agree to provide the Company and its counsel in writing with any comments
Parent, Sub or their counsel may receive from the SEC or its staff with respect
to the Offer Documents.
(c) Prior to or concurrently with the expiration of the
Offer, Parent shall provide or cause to be provided to Sub all of the funds
necessary to purchase any shares of Common Stock that Sub becomes obligated to
purchase pursuant to the Offer.
Section 1.2 Company Actions. (a) The Company hereby
approves of and consents to the Offer and represents that the Board of
Directors of the Company at a meeting duly called and held has duly adopted
resolutions approving this Agreement, the Offer and the Merger, determining
that the Merger is advisable and that the terms of the Offer and Merger are
fair to, and in the best interests of, the Company's stockholders and
recommending that the Company's stockholders accept the Offer and approve the
Merger and this Agreement. The Company represents that its Board of Directors
has received the written opinion of Xxxxxx Xxxxxxx & Co. Incorporated that the
proposed consideration to be received by the holders of shares of Common Stock
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view. Subject to the fiduciary duties of the Board of Directors of
the Company under applicable law as determined by the Board of Directors in
good faith after consultation with the Company's outside counsel, the Company
hereby consents to the inclusion in the Offer Documents of the recommendation
of the board of directors of the Company described in the first sentence of
this Section 1.2.
(b) On the date the Offer Documents are filed with the SEC,
the Company shall file with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendations described in
paragraph (a) above (subject to the fiduciary duties of the Board of Directors
of the Company under applicable law as determined by the Board of Directors in
good faith after consultation with the Company's outside counsel) and shall
mail the Schedule 14D-9 to the stockholders of the Company. To the extent
practicable, the Company shall cooperate with Parent in mailing or otherwise
disseminating the Schedule 14D-9 with the appropriate Offer Documents to the
Company's stockholders. Parent and its counsel shall be given an opportunity
to review and comment upon the Schedule 14D-9 prior to the filing thereof with
the SEC. The Schedule 14D-9 shall comply as to form in all material respects
with the requirements of the Exchange Act and, on the date filed with the SEC
and on the date first published, sent or given to
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the Company's stockholders, shall not 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, except that no
representation is made by the Company with respect to information supplied by
Parent or Sub for inclusion in the Schedule 14D-9. Each of the Company, Parent
and Sub agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and disseminated to the holders of shares of Common Stock,
in each case as and to the extent required by applicable federal securities
laws. The Company agrees to provide Parent and Sub and their counsel in
writing with any comments the Company or its counsel may receive from the SEC
or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Sub with mailing labels containing the names and
addresses of the record holders of Common Stock as of a recent date and of
those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control
regarding the beneficial owners of Common Stock, and shall furnish to Sub such
information and assistance (including updated lists of stockholders, security
position listings and computer files) as Sub may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of law, and except for such steps as are necessary to disseminate
the Offer Documents and any other documents necessary to consummate the Merger,
Parent and Sub and each of their affiliates and associates shall hold in
confidence the information contained in any of such labels, lists and files,
will use such information only in connection with the Offer and the Merger,
and, if this Agreement is terminated, will promptly deliver to the Company all
copies of such information then in their possession.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the General Corporation Law of the
State of Delaware, as amended (the "DGCL"), Sub shall be merged with and into
the Company at the Effective Time (as hereinafter defined). Following the
Merger, the separate corporate existence of Sub shall cease and the
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Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Sub in accordance with the DGCL.
Section 2.2 Effective Time. The Merger shall become
effective when the Certificate of Merger or, if applicable, the Certificate of
Ownership and Merger (each, the "Certificate of Merger"), executed in
accordance with the relevant provisions of the DGCL, are accepted for record by
the Secretary of State of the State of Delaware. When used in this Agreement,
the term "Effective Time" shall mean the later of the date and time at which
the Certificate of Merger is accepted for record or such later time established
by the Certificate of Merger. The filing of the Certificate of Merger shall be
made as soon as practicable after the satisfaction or waiver of the conditions
to the Merger set forth herein.
Section 2.3 Effects of the Merger. The Merger shall have the
effects set forth in the DGCL.
Section 2.4 Certificate of Incorporation and Bylaws;
Directors and Officers. (a) The Certificate of Incorporation of the Sub, as in
effect immediately prior to the Effective Time, shall be amended to change the
name of Sub to "EMPHESYS Financial Group, Inc." and, as so amended, the
Certificate of Incorporation and the Bylaws of Sub, shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by Certificate of Incorporation and
applicable law.
(b) The directors and officers of Sub immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation as of the Effective Time.
Section 2.5 Conversion of Securities. As of the Effective
Time, by virtue of the Merger and without any action on the part of any
stockholder of the Company:
(a) All shares of Common Stock that are held in the treasury
of the Company or by any wholly owned Subsidiary (as hereinafter
defined) of the Company and any shares of Common Stock owned by
Parent, Sub or any other wholly owned Subsidiary of Parent shall be
cancelled and no consideration shall be delivered in exchange
therefor.
(b) Each share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be
cancelled in accordance with Section 2.5(a) and other than Dissenting
Company Common Shares (as defined in Section 2.7)) shall be converted
into the right to receive from the Surviving
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Corporation in cash, without interest, the per share consideration in
the Offer (the "Merger Consideration"). All such shares of Common
Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and each holder of a
certificate or certificates (the "Certificates") representing any such
shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration.
(c) Each issued and outstanding share of the capital stock of
Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
Section 2.6 Exchange of Certificates. (a) Paying Agent.
Parent shall authorize a commercial bank or trust company having net capital of
not less than $20 million (or such other person or persons as shall be
reasonably acceptable to the Company) to act as paying agent hereunder (the
"Paying Agent") for the payment of the Merger Consideration upon surrender of
Certificates. All of the fees and expenses of the Paying Agent shall be borne
by Parent.
(b) Surviving Corporation to Provide Funds. Parent shall
take all steps necessary to enable and cause the Surviving Corporation to
deposit in trust with the Paying Agent prior to the Effective Time cash in an
amount necessary to pay for all of the shares of Common Stock pursuant to
Section 2.5 (determined as though there are no Dissenting Company Common
Shares) and, in connection with the Company Stock Options, pursuant to Section
7.4. Such amount shall hereinafter be referred to as the "Exchange Fund." If
the amount of cash in the Exchange Fund is insufficient to pay all of the
amounts required to be paid pursuant to Sections 2.5, 2.7 or 7.4, Parent from
time to time after the Effective Time shall take all steps necessary to enable
and cause the Surviving Corporation to deposit in trust additional cash with
the Paying Agent sufficient to make all such payments.
(c) Exchange Procedures. As soon as practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
Certificate, other than Parent, the Company and any Subsidiary of Parent or the
Company, (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Paying Agent and shall be in a
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with such letter of transmittal,
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duly executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the shares of Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.5, and the Certificates so surrendered shall forthwith be
cancelled. No interest will be paid or will accrue on the cash payable upon
the surrender of any Certificate. If payment is to be made to a person other
than the person in whose name the Certificate so surrendered is registered, it
shall be a condition of payment that such Certificate shall be properly
endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by
reason of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.6, each Certificate (other than
Certificates representing Dissenting Company Common Shares and Certificates
representing any shares of Common Stock owned by Parent or any Subsidiary of
Parent) shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the amount of cash, without interest,
into which the shares of Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 2.5. Notwithstanding
the foregoing, none of the Paying Agent, the Surviving Corporation or any party
hereto shall be liable to a former stockholder of the Company for any cash or
interest delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws. Any portion of the Exchange Fund that
remains unclaimed by the stockholders of the Company for one year after the
Effective Time shall be repaid to the Surviving Corporation (including, without
limitation, all interest and other income received by the Paying Agent in
respect of all such funds). Thereafter, holders of shares of Common Stock
shall look only to Parent or the Surviving Corporation (subject to the terms of
this Agreement, abandoned property, escheat and other similar laws) as general
creditors thereof with respect to any Merger Consideration that may be payable
upon due surrender of the Certificates held by them.
Section 2.7 Dissenting Company Common Shares.
Notwithstanding any provision of this Agreement to the contrary, if required by
the DGCL but only to the extent required thereby, shares of Common Stock which
are issued and outstanding immediately prior to the Effective Time and which
are held by holders of such shares of Common Stock who have properly exercised
appraisal rights with respect thereto in accordance with Section 262 of the
DGCL (the "Dissenting Company Common Shares") will not be exchangeable for the
right to receive the Merger Consideration, and holders of such shares of Common
Stock will be entitled to receive payment of the appraised value of such shares
of Common Stock in accordance with the provisions of such Section 262 unless
and until such holders fail to perfect or
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effectively withdraw or lose their rights to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such shares of Common Stock will
thereupon be treated as if they had been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company will give Parent
prompt notice of any demands received by the Company for appraisals of shares
of Common Stock. The Company shall not, except with the prior written consent
of Parent, make any payment with respect to any demands for appraisal or offer
to settle or settle any such demands.
Section 2.8 Merger Without Meeting of Stockholders.
Notwithstanding the foregoing, in the event that Sub, or any other direct or
indirect subsidiary of Parent, shall acquire at least 90 percent of the
outstanding shares of Common Stock, the parties hereto agree to take all
necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
Section 2.9 No Further Ownership Rights in Common Stock. All
cash paid upon the surrender of Certificates in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to the shares of Common Stock.
Section 2.10 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Common Stock shall thereafter be made. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged as provided in this Article II.
Section 2.11 Further Assurances. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets
of either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations in the Merger,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of such Constituent Corporations, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers,
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franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 3.1 Organization, Standing and Power. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted.
Section 3.2 Authority; Non-Contravention. Parent has all
requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent. This Agreement has been duly executed and delivered by
Parent and (assuming the valid authorization, execution and delivery of this
Agreement by the Company) constitutes a valid and binding obligation of Parent
enforceable against Parent in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (i) the Certificate of
Incorporation or Bylaws of Parent or any provision of the comparable charter or
organization documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or
any of its Subsidiaries or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its Subsidiaries
or any of their respective properties or assets, other than, in the case of
clauses (ii) or (iii), any such conflicts, violations, defaults, rights, liens,
security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially
impair the ability of Parent to perform its obligations hereunder or prevent
the consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or
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approval of, any domestic (federal and state), foreign or supranational court,
commission, governmental body, regulatory or administrative agency, authority
or tribunal (a "Governmental Entity") is required by or with respect to Parent
or any of its Subsidiaries in connection with the execution and delivery of
this Agreement by Parent or is necessary for the consummation of the Offer, the
Merger and the other transactions contemplated by this Agreement, except for
(i) in connection, or in compliance, with the Exchange Act, (ii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (iii) the filing required with
the California Department of Corporations (the "DOC") and the Office of the
Commissioner of Insurance of the State of Wisconsin (the "OCI") in connection
with, and the approval of the DOC and the OCI of, the change-in-control
contemplated by this Agreement and any other required filings with or approvals
by state agencies regulating corporations or insurance companies applicable to
the transactions contemplated hereby (collectively, such filings and approvals
are the "Insurance Approvals"), (iv) such filings and consents, if any, as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Offer, the Merger or the transactions contemplated by this Agreement, (v)
such filings, if any, as may be required in connection with the Gains Taxes
described in Section 7.7, (vi) such filings and approvals as may be required
under the Xxxx-Xxxxx-Xxxxxx Improvements Act of 1976, as amended (the
"Improvements Act"), and (vii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse
Effect on Parent, materially impair the ability of Parent to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. For purposes of this Agreement (a) "Material Adverse
Change" or "Material Adverse Effect" means, when used with respect to Parent,
Sub or the Company, as the case may be, any change or effect, either
individually or in the aggregate, that is or may be materially adverse to the
business, assets, liabilities, properties, condition (financial or otherwise)
or results of operations of all or any material part of Parent and its
Subsidiaries taken as a whole, Sub, or the Company and its Subsidiaries taken
as a whole, as the case may be, and (b) "Subsidiary" means any significant
corporation, partnership, joint venture or other legal entity of which Parent
or the Company, as the case may be (either alone or through or together with
any other Subsidiary), owns, directly or indirectly, 50% or more of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity. Except for the approval by the DOC and the
OCI (or any other regulatory authority having
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jurisdiction over the Company) required by virtue of the change-in-control of
the Company contemplated by this Agreement, no approval by any state insurance
regulatory agency pursuant to any insurance statute or regulation is required
in order to consummate the transactions contemplated by this Agreement.
Section 3.3 Offer Documents and Proxy Statement. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, the information
statement, if any, filed by the Company in connection with the Offer pursuant
to Rule 14F-1 promulgated under the Exchange Act (the "Information Statement"),
or the proxy statement (together with any amendments or supplements thereto,
the "Proxy Statement") relating to the Stockholder Meeting (as defined in
Section 7.1) will (i) in the case of the Offer Documents, the Schedule 14D-9
and the Information Statement, at the respective time such documents are filed
with the SEC or first published, sent or given to the Company's stockholders,
or (ii) in the case of the Proxy Statement, at the time of the mailing of the
Proxy Statement and at the time of the Stockholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. If at any time
prior to the purchase of shares of Common Stock pursuant to the Offer there
shall occur any event with respect to Parent, its officers and directors or any
of its Subsidiaries which is required to be described in the Offer Documents,
such event shall be so described, and an amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company.
Section 3.4 Financing. Parent has on hand or available
through committed bank facilities all of the funds necessary to consummate the
Offer and the Merger and the transactions contemplated hereby on a timely basis
and to pay any and all related fees and expenses.
Section 3.5 Brokers. No broker, investment banker or other
person, other than Xxxxx Xxxxxx Inc., the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Sub.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
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Section 4.1 Organization, Standing and Power. The Company
and each of its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on
its business as now being conducted. The Company and each of its Subsidiaries
is duly qualified to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the nature
of its activities makes such qualification necessary, except where the failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 4.2 Capital Structure. The authorized capital stock
of the Company consists of 50,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock, par value $5.00 per share ("Preferred Stock"). At
the close of business on August 7, 1995, (i) 17,063,893 shares of Common Stock
were issued and outstanding, (ii) 653,700 shares of Common Stock were reserved
for issuance upon the exercise of outstanding Company Stock Options (as defined
in Section 7.4) and (iii) 4,562 shares of Common Stock were held by the Company
in its treasury. As of the date hereof there are no shares of Preferred Stock
outstanding. There are no outstanding stock appreciation rights ("SARs") which
were not granted in tandem with a related Company Stock Option. All
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable (except to the extent Section 180.0622(2)(b) of the
Wisconsin Business Corporation Law may be applicable) and not subject to
preemptive rights. Except for 653,700 Company Stock Options (as defined
herein) under the 1994 Stock Incentive Plan ("the Stock Plan"), there are no
options, warrants, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the 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 the
Company or of any of its Subsidiaries. No shares of the Company's capital
stock have been issued other than pursuant to the exercise of stock options
already in existence on such date since August 7, 1995. The Company has not
granted any stock options for any capital stock of the Company since August 7,
1995. The Company has not adopted a shareholder's rights or a similar plan.
Section 4.3 Subsidiaries. All of the outstanding capital
stock of, or ownership interests in, each Subsidiary of the Company is owned by
the Company, directly or indirectly. Except as set forth in the letter from
the Company to Parent dated the date hereof, which letter relates to this
Agreement and is designated therein as the Company Disclosure Letter (the
"Company Disclosure Letter"), all of such capital stock or ownership interest
is owned by the Company, directly or
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indirectly, free and clear of any security interests, liens, claims, pledges,
options, rights of first refusal, agreements, charges or other encumbrances of
any nature ("Liens") or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). There are no (i) securities of the Company or any of its
Subsidiaries convertible into or exchangeable for, (ii) options or other rights
to acquire from the Company or any of its Subsidiaries, or (iii) other
contracts, understandings, arrangements or obligations (whether or not
contingent) providing for the issuance or sale, directly or indirectly, in each
case, with respect to any capital stock or other ownership interests in, or any
other securities of, any Subsidiary of the Company. There are no outstanding
contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
or other ownership interest in any Subsidiary of the Company nor are there any
irrevocable proxies with respect to any shares of the capital stock of any of
the Company's Subsidiaries. All of the shares of capital stock of each
Subsidiary of the Company are validly existing, fully paid and non-assessable
(except to the extent Section 180.0622(2)(b) of the Wisconsin Business
Corporation Law may be applicable). Except for statutory and regulatory
restrictions, there are no restrictions which prevent or limit the payment of
dividends by any of the Company's Subsidiaries.
Section 4.4 Other Interests. Except for the Company's
interest in its Subsidiaries, investments in ordinary course consistent with
past practice, and as set forth in the Company Disclosure Letter, neither the
Company nor its Subsidiaries owns directly or indirectly any interest or
investment (whether equity or debt) in, nor is the Company or any of its
Subsidiaries subject to any obligation or requirement to provide for or to make
any investment (in the form of a loan, capital contribution or otherwise) to or
in, any corporation, partnership, joint venture, business, trust or entity.
Section 4.5 Authority; Non-Contravention. The Board of
Directors of the Company has declared the Merger advisable and the Company has
all requisite power and authority to enter into this Agreement and, subject to
approval of the Merger by the stockholders of the Company (if required), to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to such approval of the
Merger by the stockholders of the Company (if required). This Agreement has
been duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by Parent and Sub)
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. Except as set forth in the Company
SEC Documents (as hereinafter
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defined) or the Company Disclosure Letter, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under, any
provision of (i) the Certificate of Incorporation or Bylaws of the Company
(true and complete copies of which as of the date hereof have been delivered to
Parent) or any provision of the comparable charter or organization documents of
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its Subsidiaries or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clause (ii) or (iii), any such
conflicts, violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by
or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated hereby, except for (i) in
connection or in compliance with the provisions of the Exchange Act, (ii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business, (iii) the Insurance
Approvals, (iv) such filings and consents, if any, as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Offer, the
Merger or the transactions contemplated by this Agreement, (v) such filings, if
any, as may be required in connection with the Gains Taxes described in Section
7.7, (vi) such filings and approvals as may be required under the Improvements
Act, and (vii) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company, materially impair the ability of Company to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby. Except for the approval by the DOC and the OCI required by virtue of
the change-in-control of the Company contemplated by this Agreement,
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no approval by any state insurance regulatory agency pursuant to any insurance
statute or regulation is required in order to consummate the transactions
contemplated by this Agreement.
Section 4.6 SEC Documents. (a) Since January 1, 1994, the
Company has filed all documents with the SEC required to be filed under the
Securities Act of 1933, as amended (including the rules and regulations
promulgated thereunder), or the Exchange Act (the "Company SEC Documents"). As
of their respective dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
dates thereof and the consolidated results of their operations and changes in
financial position for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein).
(b) Except as set forth in the Company SEC Documents or the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries has
any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected on a balance
sheet, or in the notes thereto, prepared in accordance with generally accepted
accounting principles, except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since December 31,
1994 which would not, individually or in the aggregate, have a Material Adverse
Effect.
Section 4.7 Offer Documents and Proxy Statement. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Offer Documents or the Schedule 14D-9, the
Information Statement, if any, the Proxy Statement, if any, or any amendment or
supplement thereto, will (i) in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times such documents are
filed with the SEC or first published, sent or given to the Company's
stockholders, or (ii) in the case of the Proxy Statement, at the time of the
mailing of the Proxy Statement and at the time of the Stockholder Meeting,
contain any untrue
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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 the
light of the circumstances under which they are made, not misleading. If at
any time prior to the Effective Time any event with respect to the Company, its
officers and directors or any of its Subsidiaries should occur which is
required to be described in an amendment of, or a supplement to, the Proxy
Statement or the Offer Documents, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as required
by law, disseminated to the stockholders of the Company. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act.
Section 4.8 Absence of Certain Events. Since December 31,
1994, the Company and its Subsidiaries have operated their respective
businesses only in the ordinary course substantially consistent with its
historical practices and, except as disclosed in the Company Disclosure Letter,
there has not occurred (i) any event, occurrence or conditions which,
individually or in the aggregate, has, or is reasonably likely to have, a
Material Adverse Effect on the Company; (ii) any entry into or any commitment
or transaction that, individually or in the aggregate, has or is reasonably
likely to have, a Material Adverse Effect on the Company; (iii) any change by
the Company or any of its Subsidiaries in its accounting methods, principles or
practices; (iv) any amendments or changes in the Certificate of Incorporation
or Bylaws of the Company; (v) any revaluation by the Company or any of its
Subsidiaries of any of their respective assets, including, without limitation,
write-offs of accounts receivable, other than in the ordinary course of the
Company's and its Subsidiaries' businesses consistent with past practices; (vi)
any damage, destruction or loss which resulted in or is reasonably likely to
result in a Material Adverse Effect on the Company; or (vii) except for regular
quarterly dividends of $0.15 per share, any declaration, setting aside or
payment of any dividend or other distribution with respect to any shares of
capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company or any of its Subsidiaries of any outstanding shares
of capital stock or other securities of, or other ownership interests in, the
Company.
Section 4.9 Litigation. Except as disclosed in the Company
Disclosure Letter, there are no actions, suits or proceedings pending against
the Company or its Subsidiaries or, to the knowledge of the Company, threatened
against the Company or its Subsidiaries, at law or in equity, or before or by
any federal or state commission, board, bureau, agency, regulatory or
administrative instrumentality or other Governmental Entity or any arbitrator
or arbitration tribunal, that are reasonably likely to have a Material Adverse
Effect on the Company, and, to the knowledge of the Company, no development has
occurred with respect to any pending or threatened action, suit or proceeding
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that is reasonably likely to result in a Material Adverse Effect on the Company
or would prevent or delay the consummation of the transactions contemplated
hereby.
Section 4.10 Compliance with Applicable Law. The Company and
its Subsidiaries hold, and at all required times have held, all permits,
licenses, variances, exceptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses (the
"Company Permits"), except for failures to hold such permits, licenses,
variances, exemptions, orders and approvals which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company from and after the
date of this Agreement. The Company and its Subsidiaries are, and at all times
have been, in compliance with the terms of the Company Permits, except where
the failure so to comply would not have a Material Adverse Effect on the
Company. The businesses of the Company and its Subsidiaries are not being, and
have not been, conducted in violation of any law, ordinance or regulation of
any Governmental Entity except for violations or possible violations which
individually or in the aggregate do not and will not have a Material Adverse
Effect on the Company. Except as set forth in the Company Disclosure Letter,
no investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending or, to the knowledge of the
Company, threatened, nor, to the knowledge of the Company, has any Governmental
Entity indicated an intention to conduct the same, other than, in each case,
those which the Company reasonably believes will not have a Material Adverse
Effect on the Company.
Section 4.11 Employee Plans. (a) The Company and each of its
Subsidiaries have complied with and performed all contractual obligations and
all obligations under applicable federal, state and local laws, rules and
regulations (domestic and foreign) required to be performed by it under or with
respect to any of the Company Benefit Plans (as defined below) or any related
trust agreement or insurance contract, other than where the failure to so
comply or perform will not have, nor is reasonably likely to have, a Material
Adverse Effect on the Company. All contributions and other payments required
to be made by the Company and its Subsidiaries to any Company Benefit Plan or
Multiemployer Plans (as defined below), prior to the date hereof have been
made, other than where the failure to so contribute or make payments will not
have, nor is reasonably likely to have, a Material Adverse Effect on the
Company and all accruals or contributions required to be made under any Company
Benefit Plan or Multiemployer Plan have been made. There is no claim, dispute,
grievance, charge, complaint, restraining or injunctive order, litigation or
proceeding pending, threatened or anticipated (other than routine claims for
benefits) against or relating to any Company Benefit Plan or against the assets
of any Company Benefit Plan, which will have, or is reasonably likely to have,
a Material Adverse Effect on the Company. Neither the
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Company nor any of its Subsidiaries has communicated generally to employees or
specifically to any employee regarding any future increase of benefit levels
(or future creations of new benefits) with respect to any Company Benefit Plan
beyond those reflected in the Company Benefit Plans, which benefit increases or
creations, either individually or in the aggregate, will have or are reasonably
likely to have, a Material Adverse Effect on the Company. Neither the Company
nor any of its Subsidiaries presently sponsors, maintains, contributes to, nor
is the Company or its Subsidiaries required to contribute to, nor has the
Company or any of its Subsidiaries ever sponsored, maintained, contributed to,
or been required to contribute to, any employee pension benefit plan within the
meaning of section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any multiemployer plan within the meaning of section
3(37) or 4001(a)(3) of ERISA, other than the Company's profit sharing plan
which is qualified under Section 401 of the Internal Revenue Code of 1986, as
amended.
(b) Neither the Company nor any of its Subsidiaries has
incurred, nor has any event occurred which has imposed or is reasonably likely
to impose upon the Company or any of its Subsidiaries, any withdrawal liability
(partial or complete) in respect of any multiemployer plan (within the meaning
of section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan"), which
withdrawal liability has not been satisfied or discharged in full or which,
either individually or in the aggregate, will cause, or is reasonably likely to
cause, a Material Adverse Effect on the Company.
(c) Except as set forth in the Company Disclosure Letter, the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby will not result in the imposition of any federal excise tax
with respect to any Company Benefit Plan.
(d) Except as set forth in the Company Disclosure Letter, no
payment or benefit which will or may be made by the Company or any of its
Subsidiaries with respect to any of their employees under any plan or agreement
in effect on the date hereof will be characterized as an "excess parachute
payment" within the meaning of section 280G(b)(1) of the Internal Revenue Code,
as amended.
(e) All awards pursuant to the Company's Management Incentive
Plan are based on the Company's performance and are not discretionary. The
maximum amount of such awards in respect of 1995 is set forth in the Company
Disclosure Letter. Since April 1, 1995 (i) the Company's Management Incentive
Plan has not been modified or amended and (ii) the dollar amount of benefits to
which any participant under the Company's Management Incentive Plan is entitled
(or the method of determining entitlement to benefits) has not been modified.
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(f) (i) "Plan" means any bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workers' compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, including, but not limited to, any "employee benefit
plan" within the meaning of section 3(3) of ERISA and (ii) "Company Benefit
Plan") means any employee pension benefit plan and any Plan, other than a
Multiemployer Plan, established by the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries contributes or has contributed
(including any such Plans not now maintained by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries does not now
contribute, but with respect to which the Company or any of its Subsidiaries
has or may have any liability).
Section 4.12 Employment Relations and Agreement. (a) Except
as would not constitute a Material Adverse Effect on the Company, (i) each of
the Company and its Subsidiaries is, and at all times has been, in compliance
in all material respects with all federal, state or other applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice; (ii) no unfair labor practice complaint against the Company or
any of its Subsidiaries is pending before the National Labor Relations Board;
(iii) there is no labor strike, dispute, slowdown or stoppage actually pending
or threatened against or involving the Company or any of its Subsidiaries, (iv)
no representation question exists respecting the employees of the Company or
any of its Subsidiaries; (v) no grievance exists, no arbitration proceeding
arising out of or under any collective bargaining agreement is pending and no
claim therefor has been asserted; (vi) no collective bargaining agreement is
currently being negotiated by the Company or any of its Subsidiaries; and (vii)
the Company and its Subsidiaries taken as a whole have not experienced any
material labor difficulty during the last three years. There has not been and,
to the knowledge of the Company, there will not be, any change in relations
with employees of the Company or any of its Subsidiaries as a result of the
transactions contemplated by this Agreement which could have a Material Adverse
Effect on the Company.
(b) Except as set forth in the Company Disclosure Letter and
other than employment agreements with Messrs. Xxxxxxx X. Xxxxxx and Xxxxxxx X.
Xxxx (the "Officer Employment Agreements"), neither the Company nor any of its
Subsidiaries has any written, or to the knowledge of the Company, any binding
oral, employment or severance agreement with any other person. The copies of
the Officer Employment Agreements previously delivered to Parent are true and
correct and such Officer
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Employment Agreements have not since been amended, modified or rescinded.
Section 4.13 Contracts. Except as set forth in the Company
Disclosure Letter, to the knowledge of the Company, neither the Company nor its
Subsidiaries is a party to, or has any obligation under, any contract or
agreement, written or oral, which contains any covenants currently or
prospectively limiting the freedom of the Company, any of its Subsidiaries or
any of their respective affiliates to engage in any line of business or to
compete with any entity. Neither the Company nor its Subsidiaries is a party
to, or has any obligation under, any contract or agreement, written or oral,
which contains any covenant currently or prospectively limiting the freedom of
the Company, any of its Subsidiaries or any of their respective affiliates to
engage in any line of business or to compete with any entity and which covenant
would materially impair the ability of Parent and its Subsidiaries (including,
after consummation of the Offer, the Company and its Subsidiaries) to conduct
their business as now anticipated to be conducted in the future. All contracts
and agreements to which the Company or any of its Subsidiaries is a party or by
which any of their respective assets is bound are valid and binding, in full
force and effect and enforceable against the parties thereto in accordance with
their respective terms, other than (i) such failures to be so valid and
binding, in full force and effect or enforceable which, would not, either
individually or in the aggregate, have, or be reasonably likely to have, a
Material Adverse Effect on the Company, and (ii) subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity. There is not under any such contract
or agreement any existing default, or event which, after notice or lapse of
time, or both, would constitute a default, by the Company or any of its
Subsidiaries, or to the Company's knowledge, any other party, except to the
extent such default would not, or would be reasonably likely not to, cause a
Material Adverse Effect on the Company.
Section 4.14 Accreditations. Except as set forth in the
Company Disclosure Schedule, none of the Company or its Subsidiaries has been
denied or failed to obtain any accreditation by any health maintenance
organization or insurance accreditation agency from whom the Company sought
accreditation.
Section 4.15 Monthly Business Plans. The Company has
previously delivered to Parent true and complete copies of monthly business
plans of the Company for each month through December 1995 ("Monthly Plans").
Section 4.16 State Takeover Statutes. Pursuant to Article
Tenth of the Company's Certificate of Incorporation, Section 203 of the DGCL is
inapplicable to the transactions contemplated by this Agreement.
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Section 4.17 Taxes. Except as may be disclosed in the
Company Disclosure Letter, (i) the Company and each Subsidiary have filed all
material Tax Returns required to have been filed on or before the date hereof,
which returns are true and complete in all material respects; (ii) the Company
and each Subsidiary have duly paid or made provision on its books for the
payment of all material Taxes (including material estimated Taxes) which are
due and payable on or before the date hereof, taking into account applicable
extensions to pay such Taxes (whether or not shown on any such Tax Returns),
and the Company and each Subsidiary have withheld or collected all material
Taxes they are required to withhold and collect, other than Taxes otherwise
described in this clause (ii) that are being contested by the Company or a
Subsidiary in good faith; (iii) neither the Company nor any Subsidiary has
waived any statute of limitations in respect of material Taxes of the Company
or such Subsidiary; (iv) the Tax Returns referred to in clause (i) relating to
federal and state income Taxes have been examined by the Internal Revenue
Service or the appropriate state taxing authority or the period for assessment
of the Taxes in respect of which such Tax Returns were required to be filed has
expired; (v) no issues that have been raised in writing by the relevant taxing
authority in connection with the examination of the Tax Returns referred to in
clause (i) are currently pending; and (vi) all deficiencies asserted or
assessments made as a result of any examination of the Tax Returns referred to
in clause (i) by a taxing authority have been paid in full. For purposes of
this Agreement (a) "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means any federal, state, local or foreign income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, premium,
withholding, alternative or added minimum, ad valorem, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, imposed
by any governmental authority, and (b) "Tax Return" means any return, report or
similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
Section 4.18 Brokers. No broker, investment banker or other
person, other than Xxxxxx Xxxxxxx & Co. Incorporated, the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company, which arrangements provide for the payment to Xxxxxx Xxxxxxx & Co.
Incorporated of a fee of $3,910,000 and expenses in connection with the
transactions contemplated by this Agreement, and do not bind Parent and its
affiliates (including, after consummation of the Offer, the Company and its
Subsidiaries) other than with respect to indemnification and contribution and
the payment of such fees and expenses.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Parent and Sub jointly and severally represent and warrant to
the Company as follows:
Section 5.1 Organization and Standing. Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Sub was organized solely for the purpose of acquiring the
Company engaging in the transactions contemplated by this Agreement and has not
engaged in any business since it was incorporated which is not in connection
with the acquisition of the Company and this Agreement.
Section 5.2 Capital Structure. The authorized capital stock
of Sub consists of 1,000 shares of common stock, par value $.01 per share, all
of which are validly issued and outstanding, fully paid and nonassessable and
are owned by Parent free and clear of all Liens.
Section 5.3 Authority; Non-Contravention. Sub has the
requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement, the performance by Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly authorized
by its Board of Directors and Parent as its sole stockholder, and, except for
the corporate filings required by state law, no other corporate proceedings on
the part of Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Sub and (assuming the due authorization, execution and delivery
hereof by the Company) constitutes a valid and binding obligation of Sub
enforceable against Sub in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Sub
under, any provision of (i) the Certificate of Incorporation or Bylaws of Sub,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to Sub or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Sub or any of its properties or
assets, other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights,
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liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Sub, materially impair
the ability of Sub to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Conduct of Business by the Company Pending the
Merger. Except as otherwise expressly contemplated by this Agreement or as
described in the Company Disclosure Letter, during the period from the date of
this Agreement through the Effective Time, the Company shall, and shall cause
its Subsidiaries to, in all material respects carry on their respective
businesses in, and not enter into any material transaction other than in
accordance with, the regular and ordinary course and, to the extent consistent
therewith, use its reasonable best efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers and
others having business dealings with them. Without limiting the generality of
the foregoing, and, except as otherwise expressly contemplated by this
Agreement or as described in the Company Disclosure Letter, the Company shall
not, and shall not permit any of its Subsidiaries to, without the prior written
consent of Parent:
(a) (x) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of,
any of its capital stock, or otherwise make any payments to
stockholders of the Company in their capacity as such, other than (1)
dividends declared prior to the date of this Agreement, and (2)
dividends payable to the Company declared by any of the Company's
Subsidiaries, (y) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock or (z) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or equity equivalent (other than,
in the case of the Company, the issuance of Common Stock during
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the period from the date of this Agreement through the Effective Time
upon the exercise of Company Stock Options outstanding (as set forth
in Section 4.2) on the date of this Agreement in accordance with their
current terms;
(c) amend its charter or bylaws;
(d) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or
equity in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets, in each
case that are material, individually or in the aggregate, to the
Company and its Subsidiaries taken as a whole;
(e) sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of, any of its assets that are material,
individually or in the aggregate, to the Company and its Subsidiaries
taken as a whole;
(f) incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others, except for borrowings or
guarantees incurred in the ordinary course of business consistent with
past practice, or make any loans, advances or capital contributions
to, or investments in, any other person, other than to the Company or
any wholly owned Subsidiary of the Company and other than in the
ordinary course of business consistent with past practice;
(g) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of any Subsidiary of the Company;
(h) enter into or adopt or amend any existing severance plan,
agreement or arrangement or, other than in the ordinary course of
business, enter into or amend any employee benefit plan (including
without limitation, the Stock Plan) or employment or consulting
agreement except (x) as permitted by Section 7.11 or (y) with respect
to employees that are not executive officers or directors,
compensation increases associated with promotions and regular reviews
in the ordinary course of business consistent with past practices; or
(i) waive, amend or allow to lapse any term or condition of
any confidentiality or "standstill" agreement to which the Company is
a party.
During the period from the date of this Agreement through the Effective Time,
(i) as requested by Parent, the Company shall
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confer on a regular basis with one or more representatives of Parent with
respect to material operational matters; (ii) the Company shall, within 20 days
following each fiscal month, deliver to Parent financial statements, including
an income statement and balance sheet for such month, together with a statement
reconciling differences between the projected results of operations for such
month set forth in the applicable Monthly Plan and the actual results of
operations set forth in the financial statements delivered pursuant to this
clause (ii); and (iii) upon the knowledge of the Company of any Material
Adverse Change on the Company, any material litigation or material governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the breach in any material respect of any
representation or warranty contained herein, the Company shall promptly notify
Parent thereof.
Section 6.2 Acquisition Proposals. From and after the date
of this Agreement and prior to the Effective Time, except as provided below,
the Company agrees (a) that neither the Company nor its Subsidiaries shall, and
the Company shall direct and use its reasonable best efforts to cause its
officers, directors, employees and authorized agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, the Company or
its Subsidiaries (any such proposal or offer being hereinafter referred to as
an "Acquisition Proposal") or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; (b) 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 of the foregoing and will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 6.2; and (c) that it will notify Parent immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with, it, but need not disclose the identity of the other party or the terms of
its proposals; provided, however, that nothing contained in this Section 6.2
shall prohibit the Board of Directors of the Company from (i) furnishing
information to or entering into discussions or negotiations with, any person or
entity that makes an unsolicited bona fide proposal in writing, not subject to
any financing condition, to acquire the Company pursuant to a merger,
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consolidation, share exchange, purchase of a substantial portion of the assets,
business combination or other similar transaction, if, and only to the extent
that (A) the Board of Directors determines in good faith after consultation
with the Company's outside counsel that such action is required for the Board
of Directors to comply with its fiduciary duties to stockholders imposed by
laws, (B) prior to or concurrently with furnishing such information to, or
entering into discussions or negotiations with, such a person or entity, the
Company provides written notice to Parent to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such a
person or entity, and (C) the Company keeps Parent informed of the status (not
the identity or terms) of any such discussions or negotiations; and (ii) to the
extent applicable, complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal. Subject to Article IX, nothing in this
Section 6.02 shall (x) permit the Company to terminate this Agreement, (y)
permit the Company to enter into any agreement with respect to an Acquisition
Proposal during the term of this Agreement, or (z) effect any other obligation
of any party under this Agreement.
Section 6.3 Conduct of Business of Sub Pending the Merger.
During the period from the date of this Agreement through the Effective Time,
Sub shall not engage in any activities of any nature except as provided in or
contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Company Stockholder Approval; Proxy Statement.
(a) If approval of the Merger by the stockholders of the Company is required by
applicable law, the Company shall call a meeting of its stockholders (the
"Stockholder Meeting") for the purpose of voting upon the Merger and shall use
its reasonable best efforts to obtain stockholder approval of the Merger. The
Stockholder Meeting shall be held as soon as practicable following the purchase
of shares of Common Stock pursuant to the Offer and the Company will, through
its Board of Directors but subject to the fiduciary duties of its Board of
Directors under applicable law as determined by the Board of Directors in good
faith after consultation with the Company's outside counsel, recommend to its
stockholders the approval of the Merger and not rescind its declaration that
the Merger is advisable. The record date for the Stockholder Meeting shall be
a date subsequent to the date Parent or Sub becomes a record holder of Common
Stock purchased pursuant to the Offer.
(b) If required by applicable law, the Company will, as soon
as practicable following the expiration of the Offer,
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prepare and file a preliminary Proxy Statement with the SEC and will use its
reasonable best efforts to respond to any comments of the SEC or its staff and
to cause the Proxy Statement to be cleared by the SEC. The Company will notify
Parent of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the
Proxy Statement or the Merger. The Company shall give Parent and its counsel
the opportunity to review the Proxy Statement prior to its being filed with the
SEC and shall give Parent and its counsel the opportunity to review all
amendments and supplements to the Proxy Statement and all responses to requests
for additional information and replies to comments prior to their being filed
with, or sent to, the SEC. Each of the Company and Parent agrees to use its
reasonable best efforts, after consultation with the other parties hereto to
respond promptly to all such comments of and requests by the SEC. As promptly
as practicable after the Proxy Statement has been cleared by the SEC, the
Company shall mail the Proxy Statement to the stockholders of the Company. If
at any time prior to the approval of this Agreement by the Company's
stockholders there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Company will prepare and
mail to its stockholders such an amendment or supplement.
(c) The Company shall use its reasonable best efforts to
obtain the necessary approvals by its stockholders of the Merger, this
Agreement and the transactions contemplated hereby.
(d) Parent agrees, subject to applicable law, to cause all
shares of Common Stock purchased pursuant to the Offer and all other shares of
Common Stock owned by Sub or any other Subsidiary of Parent to be voted in
favor of the approval of the Merger.
Section 7.2 Access to Information. The Company shall, and
shall cause each of its Subsidiaries to, afford to Parent, and to Parent's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably require
during normal business hours during the period from the date of this Agreement
through the Effective Time to all their respective properties, books,
contracts, commitments and records and, during such period, the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to Parent (i) a
copy of each report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of federal or state laws
and (ii) all other information concerning its business, properties and
personnel as Parent may reasonably request. In no event shall the Company be
requested to supply to
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Parent, or to Parent's accountants, counsel, financial advisors or other
representatives, any information relating to indications of interest from, or
discussions with, any other potential acquirors of the Company which were
received or conducted prior to the date hereof, except to the extent necessary
for use in the Offer Documents, the Schedule 14D-9 and the Proxy Statement.
Except as required by law, Parent will hold, and will cause its affiliates,
associates and representatives to hold, any nonpublic information in confidence
until such time as such information otherwise becomes publicly available and
shall use its reasonable best efforts to ensure that such affiliates,
associates and representatives do not disclose such information to others
without the prior written consent of the Company. In the event of termination
of this Agreement for any reason, Parent shall promptly destroy all nonpublic
documents so obtained from the Company or any of its Subsidiaries and any
copies made of such documents for Parent.
Section 7.3 Fees and Expenses. (a) Whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
(b) In the event that (A) any person (other than Parent or
any of its affiliates) shall have become, prior to the termination of this
Agreement, the beneficial owner of 50% or more of the outstanding shares of
Common Stock, (B) the Offer shall have expired at a time when the Minimum
Condition (as defined in Exhibit A) shall not have been satisfied and at any
time on or prior to nine months after the expiration of the Offer any person
(other than Parent or any of its affiliates) shall acquire beneficial ownership
of 50% or more of the outstanding shares of Common Stock or shall consummate an
Acquisition Proposal, (C) at any time prior to the termination of this
Agreement any person (other than Parent or any of its affiliates) shall
publicly announce any Acquisition Proposal and, at any time on or prior to nine
months after the termination of this Agreement, shall become the beneficial
owner of 50% or more of the outstanding shares of Common Stock or shall
consummate an Acquisition Proposal, or (D) the Company terminates this
Agreement pursuant to Section 9.1(b)(ii), then the Company shall, in the case
of clause (A), (B) or (C), promptly, but in no event later than two business
days after the first of such events to occur, or, in the case of clause (D) at
or prior to the time of such termination, pay Parent $18 million. If the
Company fails to pay such amount when due in accordance with the immediately
preceding sentence, which failure is finally determined by a court of competent
jurisdiction, Parent shall be entitled to the payment from the Company, in
addition to such amount, of any legal fees and expenses incurred in procuring
such judicial determination.
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(c) In the event the Board of Directors of the Company shall
modify or amend its recommendation of the Offer and/or the Merger in a manner
adverse to Parent or shall withdraw its recommendation of the Offer or shall
recommend any Acquisition Proposal, or shall resolve to do any of the
foregoing, or shall have failed to reject any Acquisition Proposal within 10
business days after receipt by the Company or public announcement thereof, the
Company shall reimburse Parent and Sub (not later than two business days after
submission of statements therefor) for all reasonable, documented cost and
expenses (including, without limitation, all legal, investment banking,
printing, depositary and related fees and expenses, but excluding any internal
allocations of overhead attributable to the Offer, the Merger or the
transactions contemplated by this Agreement); provided, however, that the
amount to be paid to Parent and Sub pursuant to this Section 7.3(c) shall not
exceed $2 million; provided, further, that any amount paid pursuant to this
Section 7.3(c) shall be credited against any amount that may become payable
pursuant to Section 7.3(b); and provided, further, that if the Company has paid
$18 million pursuant to Section 7.3(b) prior to any payment pursuant to this
Section 7.3(c), then no amount shall be payable pursuant to this Section
7.3(c).
Section 7.4 Company Stock Options. (a) The Company shall (i)
terminate the Stock Plan immediately prior to the Effective Time without
prejudice to the holders of Company Stock Options (as hereinafter defined) and
(ii) grant no additional Company Stock Options.
(b) Immediately upon the consummation of the Offer, provided
that a "Change of Control" has occurred under the terms of Stock Plan (which
Parent acknowledges and agrees shall occur upon the purchase of shares of
Common Stock following satisfaction of the Minimum Condition), all outstanding
employee stock options, whether or not then fully exercisable or vested, to
purchase shares of Common Stock (a "Company Stock Option") heretofore granted
under the Stock Plan shall become fully exercisable and vested, and, pursuant
to the terms of the Stock Plan, the Company Stock Options shall, upon their
surrender to the Company by the holders thereof, be cancelled by the Company,
and the holders thereof shall receive a cash payment from the Company in an
amount (if any) equal to the number of shares of Common Stock subject to each
surrendered option multiplied by the difference (if positive) between the
exercise price per share of Common Stock covered by the option and the highest
per share price paid to stockholders of the Company in the Offer; provided,
however, that the making of such payment to any such holder shall be
conditioned on such holder acknowledging the cancellation of all Company Stock
Options held by such holder, including any Company Stock Options as to which
the exercise price equals or exceeds $37.50 (the "Out-of-the-Money Options").
The Company shall use its best efforts to cause each holder of Out-of-the-Money
Options to acknowledge, prior to the purchase of shares of
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Common Stock pursuant to the Offer, the cancellation without consideration
therefor of such holder's Out-of-the-Money Options and to cause each other
holder of Company Stock Options to surrender their Company Stock Options in
accordance with the prior sentence. Any Company Stock Option not cancelled in
accordance with this paragraph (b) immediately prior to the consummation of the
Offer shall be cancelled at the Effective Time in exchange for an amount in
cash, payable at the Effective Time, equal to the amount which would have been
paid had such Company Stock Option been cancelled immediately prior to the
consummation of the Offer.
Section 7.5 Reasonable Best Efforts. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger, and
the other transactions contemplated by this Agreement, including (a) promptly
making their respective filings and thereafter making any other required
submission under the Improvements Act with respect to the Offer and the Merger;
(b) cooperating with one another to prepare and present to OCI and DOC as soon
as practicable all filings and other presentations necessary in connection with
seeking the Insurance Approvals; (c) diligently opposing any objections to,
appeals from or petitions to reconsider or reopen any such approval by persons
not a party to this Agreement; (d) in addition to the foregoing, the obtaining
of all necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by any Governmental Entity, (e) the obtaining of all
necessary consents, approvals or waivers from third parties, (f) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (g)
the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by this Agreement; provided, however,
that the Company shall not be under any obligation to take any action to the
extent that the Board of Directors shall conclude in good faith, after
consultation with its outside counsel, that such action could be inconsistent
with the Board of Director's fiduciary obligations under applicable law.
Section 7.6 Public Announcements. Parent and Sub, on the one
hand, and the Company, on the other hand, will consult
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with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange.
Section 7.7 Real Estate Transfer and Gains Taxes. Parent and
the Company agree that either the Company or the Surviving Corporation will pay
any stamp tax, recording tax, sales tax, use tax, real property transfer or
gains tax, stock transfer tax or similar tax, or any other state or local tax
which is attributable to the transfer of the beneficial ownership of the
Company's or its Subsidiaries real property, if any (collectively, the "Gains
Taxes"), and any penalties or interest with respect to the Gains Taxes, payable
in connection with the consummation of the Offer or the Merger. The Company
agrees to cooperate with Sub in the filing of any returns with respect to the
Gains Taxes, including supplying in a timely manner a complete list of all real
property interests held by the Company or its Subsidiaries and any information
with respect to such property that is reasonably necessary to complete such
returns. The portion of the consideration allocable to the real property of
the Company and its subsidiaries shall be determined by Sub or Parent in its
reasonable discretion. The stockholders of the Company shall be deemed to have
agreed to be bound by the allocation established pursuant to this Section 7.7
in the preparation of any return with respect to the Gains Taxes.
Section 7.8 1996 Monthly Plans. The Company shall prepare,
in a manner (as to substance and timing) consistent with its past practices,
monthly plans of the Company for each of January and February 1996, and,
promptly following such preparation, supply them to Parent; provided, however,
that, in any event, such plans shall be supplied to Parent by November 1, 1995.
If Parent informs the Company in writing by November 13, 1995 that it approves
such plans for purposes of Section 7.13, then they shall be deemed to be
"Monthly Plans" in existence for purposes of Section 7.13.
Section 7.9 Indemnification; Directors and Officers
Insurance. (a) From and after the Effective Time, Parent agrees to, and to
cause the Surviving Corporation to, indemnify and hold harmless all past and
present officers, directors, employees and agents (the "Indemnified Parties")
of the Company and of its Subsidiaries to the full extent such persons may be
indemnified by the Company pursuant to the Company's Certificate of
Incorporation and Bylaws as in effect as of the date hereof for acts and
omissions occurring at or prior to the Effective Time and shall advance
reasonable litigation expenses incurred by such persons in connection with
defending any action arising out of such acts or omissions, provided that such
persons provide the
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requisite affirmations and undertaking, as set forth in the Company's Bylaws
prior to the Effective Time.
(b) Any Indemnified Party will promptly notify the Parent and
the Surviving Corporation of any claim, action, suit, proceeding or
investigation for which such party may seek indemnification under this Section;
provided, however, that the failure to furnish any such notice shall not
relieve Parent or the Surviving Corporation from any indemnification obligation
under this Section except to the extent Parent or the Surviving Corporation is
materially prejudiced thereby. In the event of any such claim, action, suit,
proceeding, or investigation, (x) the Surviving Corporation will have the right
to assume the defense thereof, and the Surviving Corporation will not be liable
to such Indemnified Parties for any legal expenses of other counsel or any
other expenses subsequently incurred thereafter by such Indemnified Parties in
connection with the defense thereof, except that all Indemnified Parties (as a
group) will have the right to retain one separate counsel, reasonably
acceptable to such Indemnified Party and Parent, at the expense of the
indemnifying party if the named parties to any such proceeding include both the
Indemnified Party and the Surviving Corporation and the representation of such
parties by the same counsel would be inappropriate due to a conflict of
interest between them, (y) the Indemnified Parties will cooperate in the
defense of any such matter, and (z) the Surviving Corporation will not be
liable for any settlement effected without its prior written consent. In
addition, Parent will provide, or cause the Surviving Corporation to provide,
for a period of not less than six years after the Effective Time, the Company's
current directors and officers an insurance and indemnification policy that
provides coverage for events occurring at or prior to the Effective Time (the
"D&O Insurance") that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; provided, however, that Parent and the Surviving Corporation shall
not be required to pay an annual premium for the D&O Insurance in excess of one
and one-half times the last annual premium paid prior to the date hereof, but
in such case shall purchase as much such coverage as possible for such amount.
Section 7.10 Employee Benefits. (a) Until at least December
31, 1996, Parent shall maintain employee benefits and programs for retirees,
officers and employees of the Company (other than Messrs. Xxxxxxx X. Xxxxxx and
Xxxxxxx X. Xxxx, as to whom benefits shall be as set forth in the agreements
now in existence between the Company and such individuals) and its Subsidiaries
that are no less favorable in the aggregate than those being provided to such
retirees, officers and employees on the date hereof (it being understood that
Parent will not be obligated to continue any one or more employee benefits or
programs). For purposes of eligibility to participate in and vesting in all
benefits provided to retirees, officers and
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employees, retirees, officers and employees of the Company and its Subsidiaries
will be granted their years of service with the Company and its Subsidiaries
and years of service with prior employers to the extent service with prior
employers is taken into account under plans of the Company. Amounts paid
before the Effective Time by retirees, officers and employees of the Company
under any medical plans of the Company shall after the Effective Time be taken
into account in calculating balances for deductibles and maximum out-of-pocket
limits applicable under the medical plan of Parent for the plan year during
which the Effective Time occurs as if such amounts had been paid under such
medical plan of Parent.
(b) After the Effective Time, Parent shall cause the Company
to maintain for 1995, without modification or amendment, its Management
Incentive Plan for all covered employees. Parent agrees that the following
principles shall apply for purposes of determining bonuses for 1995 under the
Company's Management Incentive Plan: (1) only persons who are employees of the
Company or any of its Subsidiaries at the time that bonuses are paid (which
shall not be later than February 28, 1996) and who, at such time, are covered
by such plan shall be eligible to receive such bonuses, except that employees
that are terminated (actually or constructively) without cause prior to the
date that bonuses are paid shall be eligible to receive a pro rata portion of
such bonuses; (2) whether any bonuses are payable under such plan and, if so,
the amounts thereof shall be determined as if the transactions contemplated
hereby had not occurred and the Company had remained an independent,
publicly-owned company through December 31, 1995, taking into account to the
extent reasonably applicable the limitations imposed by Section 6.1(a); and (3)
the timing of payment of any bonuses payable pursuant to clause (2) above shall
be consistent with past practices. The pro rata portion of an employee's bonus
shall be the amount determined pursuant to the preceding sentence multiplied by
a fraction, the numerator of which shall be the number of days during 1995 for
which such employee was employed by the Company or any of its Subsidiaries and
the denominator of which shall be 365.
(c) The foregoing shall not constitute any commitment,
contract, understanding or guarantee (express or implied) on the part of the
Surviving Corporation of a post-Effective Time employment relationship of any
term or duration or on any terms other than those the Surviving Corporation may
establish. Employment of any of the employees by the Surviving Corporation
shall be "at will" and may be terminated by the Surviving Corporation at any
time for any reason (subject to any legally binding agreement, or any
applicable laws or collective bargaining agreement, or any arrangement or
commitment). No provision of this Agreement shall create any third-party
beneficiary with respect to any employee (or dependent thereof)
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of the Company or any of its Subsidiaries in respect of continued employment or
resumed employment.
Section 7.11 Severance Policy. (a) With respect to any
officer whom the Company Disclosure Letter states is covered by a severance
policy separate from the standard severance policy for the Company's employees
(which separate severance policy is referred to in the Disclosure Letter),
Parent shall maintain such separate policy as in effect on the date hereof,
and, as to all other officers and employees, Parent shall maintain the
Company's standard severance policy as in effect on the date hereof for a
period of at least six months from the Effective Time.
(b) Parent shall honor or cause to be honored all
severance and employment agreements with the Company's officers and employees
to the extent disclosed in the Company Disclosure Letter.
(c) Parent and its Subsidiaries shall provide reasonable and
customary outplacement services ("Outplacement Services") to officers of the
Company and its Subsidiaries who are terminated by the Company as a result of,
or within one year following, the Merger, which Outplacement Services provided
to such officer shall include one-on-one counseling and assistance; provided,
however, that the amount paid by Parent to provide Outplacement Services shall
not exceed $15,000 for any individual officer or $250,000 in the aggregate.
Section 7.12 Board Representations. Promptly upon the
purchase of shares of Common Stock pursuant to the Offer, Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as will give Parent, subject
to compliance with Section 14(f) of the Exchange Act and the rule and
regulations promulgated thereunder, representation on the Board of Directors
equal to the product of (a) the total number of directors on the Board of
Directors and (b) the percentage that the number of shares of Common Stock
purchased by Parent bears to the number of shares of Common Stock outstanding,
and the Company shall, upon request by Parent, promptly increase the size of
the Board of Directors and/or exercise its reasonable best efforts to secure
the resignations of such number of directors as is necessary to enable Parent's
designees to be elected to the Board of Directors and shall cause Parent's
designees to be so elected. The Company shall take, at its expense, all action
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 7.12 and shall include in the Schedule 14D-9 or
otherwise timely mail to its stockholders such information with respect to the
Company and its officers and directors as is required by Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this Section 7.12. Parent will
supply to the Company in writing and be solely responsible for any information
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with respect to itself and its or Parent's nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
Section 7.13 Certificates. (a) Until Sub acquires shares of
Common Stock pursuant to the Offer (subject to the limitation set forth in
Section 1.1(a)), the Company shall deliver certificates to Parent and Sub
containing the following information, each certificate being certified by the
Chairman of the Board and the President of the Company as true and correct and
as being prepared in accordance with the provisions of this Section 7.13 and
the Company Disclosure Letter:
(x) No later than the tenth calendar day of each month, (1)
the number of insured members (the "Members") in the Company's medical
plans as of the end of the month immediately prior to said month (the
"Prior Month") and (2) the Adjusted Premiums (as such term is defined
below) for the period (the "Premium Measurement Period") from July 1,
1995 through the end of the Prior Month, inclusive; and
(y) No later than the first calendar day of each month, the
Company's Adjusted Pretax Income (as such term is defined below) for
the period (the "Pretax Measurement Period") from January 1, 1995
through the end of the month immediately prior to the Prior Month,
inclusive.
Notwithstanding the foregoing, if a Monthly Plan does not exist for January or
February 1996, any certificate which is required to provide information as of
or for a period ending January 31 or February 29, 1996 shall provide the
relevant information as of December 31, 1995 or for the period ending December
31, 1995, as the case may be, whether or not an earlier certificate provided
such information as of such date or for such period, it being understood and
agreed that any such later certificate shall take into account any actual
claims experience available through December 31, 1995. For purposes of the
foregoing, (I) except as otherwise provided, all calculations shall be made in
accordance with generally accepted accounting principles applied on a
consistent basis with the accounting principles used in preparing the Company's
Consolidated Statement of Income for the year ended December 31, 1994 as
included in the Company SEC Documents (the "Income Statement"), (II) except as
otherwise provided, all terms shall have the meanings customarily used for such
terms in the healthcare industry, (III) the term "Adjusted Premiums" shall mean
the Company's consolidated earned premiums (including administrative fees and
any other items of revenue of the type included under the caption
"Administrative fees and other" in the Income Statement) but shall not include
premium reserve adjustments related to reserves which arose prior to July 1,
1995, investment income or realized gains or losses on investments and (IV) the
term "Adjusted Pretax Income" shall mean the Company's consolidated pretax
income as adjusted for certain
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exclusions, adjustments and assumptions set forth in the Company Disclosure
Letter.
(b) Until Sub acquires shares of Common Stock pursuant to the
Offer (subject to the limitations set forth in Section 1.1(a)), on or prior to
the 20th calendar day of each month the Company shall deliver to Parent and Sub
a draft of the certificate (the "Pretax Certificate") referred to in clause (y)
of paragraph (a) of this Section 7.13 which is required to be delivered on the
first day of the following month, accompanied by a report of Ernst & Young, the
Company's independent public accountants, of the type contemplated by Rule
436(d) promulgated under the Securities Act of 1933, as amended, and stating
that the Adjusted Pretax Income included in the draft certificate was
determined in a manner consistent with the methodology set forth in Section
7.13(a) and the Company Disclosure Letter. The Company agrees to make the
appropriate officers and employees of the Company and its Subsidiaries and
representatives of Ernst & Young available to discuss the draft certificate
with representatives of Parent and Sub, together with Coopers & Xxxxxxx, their
independent public accountants. Subject to the Company complying with its
obligations pursuant to Section 7.13(a) in a manner which under reasonable
circumstances would permit Parent and Sub to complete their review within the
time period hereinafter provided, Parent and Sub agree to complete their review
and provide the Company with a detailed description of their comments and
proposed modifications within five business days after the receipt of the draft
certificate (which proposed modifications shall, in the reasonable judgment of
the Parent and Sub, be necessary in order for the Adjusted Pretax Income to
have been determined in a manner consistent with the methodology set forth in
Section 7.13(a) hereof and the Company Disclosure Letter).
(c) If the Pretax Certificate is accompanied by a certificate
from Milliman & Xxxxxxxxx (or such other firm acceptable to Parent and Sub)
stating that, in its professional opinion, the medical claims component of
Adjusted Pretax Income included in the Pretax Certificate was determined in a
manner consistent with the methodology set forth in Section 7.13(a), Parent and
Sub shall be bound by such determination but solely as it relates to the
medical claims component of Adjusted Pretax Income. All fees and expenses of
Xxxxxxxx and Xxxxxxxxx (or such other firm) shall be paid by the Company.
(d) For purposes of exercising its right to terminate this
Agreement pursuant to Section 9.1(c)(ii), notwithstanding the fact that the
calculations included in the certificates delivered pursuant to this Section
7.13 comply with the thresholds established herein, Parent and Sub have the
right, exercised in good faith, to disagree with any of the calculations made
by the Company in such certificates (except to the extent provided in Section
7.13(c)) and to take any permitted action
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under Section 9.1(c)(ii) had their calculations been included in such
certificates (subject to the obligation of Parent and Sub, in any proceeding
commenced by the Company claiming that Parent and Sub breached their
obligations under this Agreement by improperly exercising their right to
terminate pursuant to Section 9.1(c)(ii), to demonstrate that the Company's
calculations were inaccurate and that, if the calculations were prepared
accurately, Parent and Sub would have had the right to terminate this
Agreement) unless in the case of calculation of Adjusted Pretax Income, (i) the
Company modified its calculation of Adjusted Pretax Income contained in the
corresponding draft certificate to take into account all of the comments
provided to the Company by Parent and Sub, (ii) Parent and Sub acknowledged in
writing to the Company that they had no comments on the calculation of Adjusted
Pretax Income or (iii) Parent and Sub do not comply with their obligations
pursuant to the last sentence of Section 7.13(b).
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. If approval of the Merger by the
holders of the Common Stock is required by applicable law, the Merger
shall have been approved by the requisite vote of such holders.
(b) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree or
injunction which prohibits or has the effect of prohibiting the
consummation of the Merger; provided, however, that the Company,
Parent and Sub shall use their reasonable best efforts to have any
such order, decree or injunction vacated.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after any approval by
the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
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(b) by the Company if:
(i) the Offer has not been timely commenced (except
as a result of actions or omissions by the Company) in accordance with
Section 1.1(a); or
(ii) there is an offer to acquire all of the
outstanding shares of Common Stock or substantially all of the assets
of the Company for consideration that provides stockholders of the
Company a value per share of Common Stock which, in the good faith
judgment of the Board of Directors of the Company, provides a higher
value per share than the consideration per share pursuant to the Offer
or the Merger and the Board of Directors of the Company determines in
good faith after consultation with the Company's outside counsel that
the failure to approve such offer would not be consistent with the
fiduciary duties to stockholders of the Board of Directors of the
Company; provided, however, that the right to terminate this Agreement
pursuant to this clause shall not be available (i) if the Company has
breached in any material respect its obligations under Section 6.2,
(ii) in respect of an offer that is subject to a financing condition,
(iii) in respect of an offer involving consideration that is not
entirely cash or does not permit stockholders to receive the payment
of the offered consideration in respect of all shares at the same
time, unless the Board of Directors of the Company has been furnished
with a written opinion of a nationally recognized investment banking
firm to the effect that such offer provides a higher value per share
than the consideration per share pursuant to the Offer or the Merger
or (iv) if, prior to or concurrently with any purported termination
pursuant to this clause, the Company shall not have paid the fee
contemplated by Section 7.3(b).
(iii) there has been a breach by Parent or Sub of
any representation or warranty that would have a material adverse
effect on Parent's or Sub's ability to perform its obligations under
this Agreement and which breach has not been cured within five
business days following receipt by Parent or Sub of notice of the
breach; or
(iv) Parent or Sub fails to comply in any material
respect with any of its material obligations or covenants contained
herein, including, without limitation, the obligation of Sub to
purchase shares of Common Stock pursuant to the Offer, unless such
failure results from a breach of the Company of any obligation,
representation, or warranty hereunder, which has not been cured within
five business days following Company's receipt of notice of the
breach;
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(c) by Parent if:
(i) the Board of Directors of the Company shall have
failed to recommend, or withdrawn, modified or amended in any material
respect its approval or recommendations of the Offer or the Merger or
shall have resolved to do any of the foregoing, or shall have failed
to reject an Acquisition Proposal within 10 business days after
receipt by the Company or public announcement thereof; or
(ii) the information contained in the last
certificates delivered to Parent and Sub in accordance with Section
7.13(a) do not satisfy all of the following thresholds:
(x) the number of Members are at least 95% of the
number of Members forecasted for the end of the applicable
month in the Monthly Plans;
(y) the Adjusted Premiums are at least 90% of the
Adjusted Premiums forecasted for the applicable Premium
Measurement Period in the Monthly Plans; and
(z) the Adjusted Pretax Income is at least 90% of the
Adjusted Pretax Income forecasted for the applicable Pretax
Measurement Period in the Monthly Plans; or
(d) by either Parent or the Company if:
(i) the Merger has not been effected on or prior to
the close of business on March 31, 1996; provided, however , that the
right to terminate this Agreement pursuant to this clause shall not be
available (y) to Parent if Sub or any affiliate of Sub acquires shares
of Common Stock pursuant to the Offer, or (z) to any party whose
failure to fulfill any obligation of this Agreement has been the cause
of, or resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date; or
(ii) any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and nonappealable; or
(iii) upon a vote at a duly held meeting or upon any
adjournment thereof, the stockholders of the Company shall have failed
to give any approval required by applicable law; or
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(iv) as the result of the failure of any of the
conditions set forth in Exhibit A hereto, the Offer shall have
terminated or expired in accordance with its terms without Sub having
purchased any shares of Common Stock pursuant to the Offer; provided,
however, that the right to terminate this Agreement pursuant to this
Section 9.1(d)(iv) shall not be available to any party whose failure
to fulfill any of its obligations under this Agreement results in the
failure of any such condition; or
(v) Parent or the Company shall have reasonably
determined that any Offer condition (other than the Minimum Condition
(as defined in Exhibit A)) is not capable of being satisfied at any
time in the future; provided, however , that the right to terminate
this Agreement pursuant to this clause shall not be available to any
party whose failure to fulfill any obligation of this Agreement has
been the cause of, or resulted in, such Offer condition being
incapable of satisfaction.
Section 9.2 Effect of Termination. In the event of
termination of this Agreement by either Parent or the Company, as provided in
Section 9.1, this Agreement shall forthwith become void and there shall be no
liability hereunder on the part of the Company, Parent or Sub or their
respective officers or directors (except as set forth in the last two sentences
of Section 7.2 and except for Section 7.3, which shall survive the
termination); provided, however, that nothing contained in this Section 9.2
shall relieve any party hereto from any liability for any breach of this
Agreement.
Section 9.3 Amendment. This Agreement may be amended by the
parties hereto, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after any approval of the Merger by the
stockholders of the Company but, after the purchase of shares of common stock
pursuant to the Offer, no amendment shall be made which decreases the Merger
Consideration or which in any way materially adversely affects the rights of
such stockholders, without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Time,
the parties hereto may (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 and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party
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hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
Section 9.5 Procedure for Termination, Amendment or Waiver.
A termination of this Agreement pursuant to Section 9.1, an amendment of this
Agreement pursuant to Section 9.3 or a waiver pursuant to Section 9.4 shall, in
order to be effective, require (a) in the case of Parent, action by its Board
of Directors or the duly authorized designee of its Board of Directors and (b)
in the case of the Company, action by its Board of Directors.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time.
Section 10.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, sent by overnight courier or telecopied (with a confirmatory copy
sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Humana Inc.
The Humana Building
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: President and Chief Operating Officer
with a copy to:
Humana Inc.
The Humana Building
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Senior Vice President and General Counsel
and
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxx
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(b) if to the Company, to:
EMPHESYS Financial Group, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx Xxx, Xxxxxxxxx 00000
Attn: Chairman of the Board and
Chief Executive Officer
with a copy to:
EMPHESYS Financial Group, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx Xxx, Xxxxxxxxx 00000
Attn: Vice President, Secretary and
General Counsel
and
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxx and
Xxxxxxxxx X. Xxxxxxxx
Section 10.3 Interpretation. When a reference is made in
this Agreement to a Section, such reference shall be to a Section of 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." When the
phrase "knowledge of the Company" is used herein, it shall refer to the actual
knowledge of Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxx, Xxxx X. Xxxxxxxxxx, Xxxxx X.
Xxxxxxx, Xxx X. Xxxxxxxxx, Xxxxx X. Astar, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx,
Xxxxxxx X. Fasala, Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxx
M.D. As used in this Agreement, "business day" shall have the meaning ascribed
thereto in Rule 14d-1(c)(6) under the Exchange Act.
Section 10.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 10.5 Entire Agreement; No Third-Party Beneficiaries.
This Agreement, including the documents and instruments referred to herein, (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) except for the provisions of
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Section 7.9, 7.10 and 7.11, is not intended to confer upon any person other
than the parties any rights or remedies hereunder.
Section 10.6 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
Section 10.7 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Sub of any of
its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
Section 10.8 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
of law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby are 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 shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions be consummated as originally
contemplated to the fullest extent possible.
Section 10.9 Enforcement of this Agreement. 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 or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof
in any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which they are entitled at law or in equity.
Section 10.10 Incorporation of Exhibits. The Company
Disclosure Letter and all Exhibits and annexes attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes
as if fully set forth herein.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized all as of the date first written above.
HUMANA INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief
Operating Officer
HEW, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief
Operating Officer
EMPHESYS FINANCIAL GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman of the Board and
Chief Executive Officer
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EXHIBIT A
Notwithstanding any other term of the Offer or this Agreement,
Parent shall not be required to accept for payment or pay for, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) of the
Exchange Act, any shares of Common Stock not theretofore accepted for payment
or paid for and may terminate or amend the Offer as to such shares of Common
Stock unless (i) there shall have been validly tendered and not withdrawn prior
to the expiration of the Offer that number of shares of Common Stock which
would represent at least a majority of the outstanding shares of Common Stock
on a fully diluted basis (the "Minimum Condition"), (ii) any waiting period
under the Improvements Act applicable to the purchase of shares of Common Stock
pursuant to the Offer shall have expired or been terminated and (iii) all
necessary filings with the DOC and the OCI shall have been completed and each
of the DOC and the OCI shall have issued an order (which order shall not have
been stayed or enjoined) that (x) constitutes a final order approving,
exempting or otherwise authorizing consummation of the Offer and the Merger and
all other transactions contemplated by this Agreement as may require such
authorization and (y) does not impose on the Company, Parent, Sub or any of
their respective affiliates any terms or conditions which in the reasonable
opinion of Parent materially and adversely affect the economic benefits to
Parent of the transactions contemplated by this Agreement. Furthermore,
notwithstanding any other term of the Offer of this Agreement, Parent shall not
be required to accept for payment or, subject as aforesaid, to pay for any
shares of Common Stock not theretofore accepted for payment or paid for, and
may terminate or amend the Offer if at any time on or after the date of this
Agreement and before the acceptance of such shares of Common Stock for payment
or the payment therefor, any of the following conditions exist or shall occur
and remain in effect:
(a) there shall have been instituted or pending any action or
proceeding by any governmental, regulatory or administrative agency or
authority, which (i) seeks to challenge the acquisition by Parent of
shares of Common Stock pursuant to the Offer, restrain, prohibit or
delay the making or consummation of the Offer or the Merger, or obtain
any material damages in connection therewith, (ii) seeks to make the
purchase of or payment for some or all of the shares of Common Stock
pursuant to the Offer or the Merger illegal, (iii) seeks to impose
material limitations on the ability of Parent (or any of its
affiliates) effectively to acquire or hold, or to require Parent or
the Company or any of their respective affiliates or subsidiaries to
dispose of or hold separate, any material portion of the assets or the
business of Parent and its affiliates taken as a whole or the Company
and its subsidiaries taken as a whole, or (iv) seeks to impose
material limitations on the ability of
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Parent (or its affiliates) to exercise full rights of ownership of the
shares of Common Stock purchased by it, including, without limitation,
the right to vote the shares purchased by it on all matters properly
presented to the stockholders of the Company; or
(b) there shall have been promulgated, enacted, entered,
enforced or deemed applicable to the Offer or the Merger, by any
state, federal or foreign government or governmental authority or by
any court, domestic or foreign, any statute, rule, regulation,
judgment, decree, order or injunction, that could reasonably be
expected to, in the judgment of Parent, directly or indirectly, result
in any of the consequences referred to in clauses (i) through (iv) of
subsection (a) above; or
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States, (ii) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, (iii) the
commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States
which would reasonably be expected to have a Material Adverse Effect
on the Company or prevent (or materially delay) the consummation of
the Offer, (iv) any limitation (whether or not mandatory) by any
governmental or regulatory authority on, or any other event which, in
the reasonable judgment of Parent, is reasonably likely to materially
adversely affect, the nature or extension of credit or further
extension of credit by banks or other lending institutions in the
United States, or, (v) from the date of the Merger Agreement through
the date of termination or expiration of the Offer, a decline of at
least 25% in either the Dow Xxxxx Industrial Average or the Standard &
Poor's 500 Index; or
(d) the Company and Parent shall have reached an agreement or
understanding that the Offer or the Merger Agreement be terminated or
the Merger Agreement shall have been terminated in accordance with its
terms; or
(e) any of the representations and warranties made by the
Company in the Merger Agreement shall not have been true and correct
in all material respects when made, or shall thereafter have ceased to
be true and correct in any material respect as if made as of such
later date (other than representations and warranties made as of a
specified date), or the Company shall not in all material respects
have performed each obligation and agreement and complied with each
covenant to be performed and complied with by it under the Merger
Agreement; provided, however, that all
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references in this Agreement to the phrases "knowledge of the Company"
and "to the best knowledge of the Company," and variants thereof,
shall be disregarded for the purposes of determining whether the
Company shall have breached its representations, warranties and
covenants resulting in the ability of Parent to terminate this
Agreement pursuant to this clause (e);
(f) the Company's Board of Directors shall have modified or
amended its recommendation of the Offer in any manner adverse to
Parent or shall have withdrawn its recommendation of the Offer, or
shall have recommended acceptance of any Acquisition Proposal or shall
have resolved to do any of the foregoing, or shall have failed to
reject any Acquisition Proposal within 10 business days after receipt
of the Company or public announcement thereof; or
(g) (i) any corporation, entity or "group" (as defined in
Section 13(d)(3) of the Exchange Act) ("person"), other than Parent,
shall have acquired beneficial ownership of 50% or more of the
outstanding shares of Common Stock, or shall have been granted any
options or rights, conditional or otherwise, to acquire a total of 50%
or more of the outstanding shares of Common Stock; (ii) any new group
shall have been formed which beneficially owns 50% or more of the
outstanding shares of Common Stock; or (iii) any person (other than
Parent or one or more of its affiliates) shall have entered into an
agreement in principle or definitive agreement with the Company with
respect to a tender or exchange offer for any shares of Common Stock
or a merger, consolidation or other business combination with or
involving the Company.
The foregoing conditions are for the sole benefit of Parent
and may be asserted by Parent regardless of the circumstances giving rise to
any such condition and may be waived by Parent, in whole or in part, at any
time and from time to time, in the sole discretion of Parent. The failure by
Parent at any time to exercise any of the foregoing rights will not be deemed a
waiver of any right, the waiver of such right with respect to any particular
facts or circumstances shall not be deemed a waiver with respect to any other
facts or circumstances, and each right will be deemed an ongoing right which
may be asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing
provisions, all tendered shares of Common Stock not theretofore accepted for
payment shall forthwith be returned by the Paying Agent to the tendering
stockholders.
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