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EXHIBIT 3
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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 14, 1997
AMONG
MEDPARTNERS, INC.,
TALMED MERGER CORPORATION
AND
XXXXXXX MEDICAL MANAGEMENT HOLDINGS CORPORATION
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TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
AMONG
MEDPARTNERS, INC.,
TALMED MERGER CORPORATION
AND
XXXXXXX MEDICAL MANAGEMENT HOLDINGS CORPORATION
Page
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Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Effect of the Merger on the Capital Stock of the Constituent Corporations; Merger
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Payment of Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Certificate of Incorporation of Surviving Corporation . . . . . . . . . . . . . . . . . 8
3.4 By-laws of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 Directors and Officers of Surviving Corporation . . . . . . . . . . . . . . . . . . . . 8
Section 4. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . 9
4.1 Organization, Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Company Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Foreign Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 SEC Filings; Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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4.7 Contracts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 Properties and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.10 Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.11 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.12 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.13 Employee Benefit Plans; Employment Matters . . . . . . . . . . . . . . . . . . . . . . . 15
4.14 Compliance with Laws in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.15 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.16 Commissions and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.17 No Untrue Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.18 Amendment of Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.19 14D-1 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5. Representations and Warranties of the Parent and the Subsidiary . . . . . . . . . . . . 18
5.1 Organization, Existence and Good Standing of the Parent and Subsidiary . . . . . . . . . 18
5.2 Power and Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 No Contracts or Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 The Parent to Cause Subsidiary to Perform . . . . . . . . . . . . . . . . . . . . . . . 19
5.9 Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10 14D-9 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.11 Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6. Access to Information and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Return of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Effect of Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Material Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 Exemption from State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Public Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 Resignation of Company Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Notice of Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 No Solicitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.8 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.9 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.10 Additional Agreements Regarding Benefit Plans . . . . . . . . . . . . . . . . . . . . . 23
7.11 Physician Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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7.12 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.13 Antitrust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.14 Share Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8. Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.5 Procedure for Termination, Amendment, Extension or Waiver . . . . . . . . . . . . . . . 27
8.6 Termination Fee; Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9. Conditions to the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.1 Mutual Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 29
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.6 Material Adverse Change or Material Adverse Effect . . . . . . . . . . . . . . . . . . . 30
10.7 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.9 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.12 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.13 No Rule of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Exhibit 1.1 Conditions of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit 7.11 Nontransferable Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 14, 1997 (the
"Agreement"), among MEDPARTNERS, INC., a Delaware corporation (the "Parent"),
TALMED MERGER CORPORATION, a Delaware corporation (the "Subsidiary"), and
XXXXXXX MEDICAL MANAGEMENT HOLDINGS CORPORATION, a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Parent, the Company
and the Subsidiary have each determined that it is in the best interests of
their respective stockholders for the Parent to acquire the Company upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, the Parent proposes to
cause the Subsidiary to make a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "Offer") to purchase all the
outstanding shares of Common Stock, par value $.01 per share, of the Company
and associated Rights, as defined in Section 4.2 ("Company Common Stock" or
"Company Shares"), at a purchase price of US$63.00 per share (such amount, or
any greater amount to be paid per share of Company Common Stock in the Offer,
being referred to as the "Per Share Amount"), net to the seller in cash, upon
the terms and subject to the conditions set forth in this Agreement and in the
Offer; and the Board of Directors of the Company has unanimously approved the
Offer and is recommending that the Company's stockholders accept the Offer and
tender their shares of Company Common Stock pursuant to the Offer;
WHEREAS, in furtherance of such acquisition, the respective Boards of
Directors of the Parent, the Company and the Subsidiary have approved the
merger of the Subsidiary with and into the Company (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement and in
accordance with the provisions of the Delaware General Corporation Law (the
"DGCL"), whereby each share of Company Common Stock, other than shares owned
directly or indirectly by the Parent or by the Company and other than
Dissenting Shares (as defined in Section 3.1(d)), will be converted into the
right to receive the Per Share Amount; and
WHEREAS, each of the Parent, the Subsidiary and the Company desire to
make certain representations, warranties, covenants and agreements in
connection with the Offer and also to prescribe various conditions to the
Offer.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
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SECTION 1. THE OFFER
1.1 The Offer. (a) Subject to the provisions of this Agreement,
as promptly as practicable, but in no event later than five business days after
the date of the public announcement of this Agreement, the Subsidiary shall,
and the Parent shall cause the Subsidiary to, commence the Offer. The
obligation of the Subsidiary to, and of the Parent to cause the Subsidiary to,
commence the Offer and accept for payment, and pay for, any shares of Company
Common Stock tendered pursuant to the Offer shall be subject to the conditions
set forth in Exhibit 1.1 (any and all of which may, except as limited by the
following sentence, be waived in whole or in part by the Subsidiary in its sole
discretion), and to the terms and conditions of this Agreement. The Subsidiary
expressly reserves the right to modify the terms and conditions of the Offer,
except that, without the prior written consent of the Company or as expressly
permitted by this Agreement, the Subsidiary shall not (i) reduce the number of
shares of Company Common Stock subject to the Offer, (ii) reduce the Per Share
Amount, (iii) modify or add to the conditions set forth in Exhibit 1.1, (iv)
allow the Offer to expire prior to September 19, 1997; (v) except as provided
in the following sentence, extend the term of the Offer, (vi) change the form
of consideration payable in the Offer or (vii) make any other modifications
that are otherwise materially adverse to holders of Company Common Stock.
Notwithstanding the foregoing, the Subsidiary may, without the consent of the
Company, (A) extend the term of the Offer on one or more occasions beyond any
scheduled expiration date of the Offer if, at any such scheduled expiration
date, any of the conditions to the Subsidiary's obligation to accept for
payment, and pay for, shares of Company Common Stock tendered pursuant to the
Offer shall not have been satisfied or waived (provided, however, that the
Subsidiary may not extend the Offer under this subsection (A) for a total of
more than 60 days from the commencement of the Offer), (B) extend the Offer for
a period not to exceed 10 business days, notwithstanding that all conditions to
the Offer are satisfied as of such expiration date of the Offer, if,
immediately prior to that expiration date (as it may be extended), the Company
Shares validly tendered and not withdrawn pursuant to the Offer equal more than
75% but less than 90% of the outstanding Company Shares, and (C) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer or any other applicable law.
(b) The Per Share Amount shall, subject to applicable withholding
of taxes, be net to the seller in cash, upon the terms and subject to the
conditions of the Offer. Subject to the terms and conditions of the Offer and
this Agreement, the Subsidiary shall, and the Parent shall cause the Subsidiary
to, pay for all shares of Company Common Stock validly tendered and not
withdrawn pursuant to the Offer promptly after the expiration of the Offer.
The Parent shall provide or cause to be provided to the Subsidiary on a timely
basis the funds necessary to pay for any shares of Company Common Stock that
the Subsidiary becomes obligated to accept for payment, and pay for, pursuant
to the Offer or this Agreement.
(c) On the date of commencement of the Offer, the Parent and the
Subsidiary shall file with 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 and summary advertisement (such Schedule 14D-1
and the documents included therein pursuant to which the Offer will be
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made, together with any supplements or amendments thereto, the "Offer
Documents"). The Parent and the Subsidiary agree that the Offer Documents
shall comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
when first published, sent or given to 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 Parent or the
Subsidiary with respect to information supplied by the Company for inclusion in
the Offer Documents or incorporated therein by reference to any statement,
report or other document filed by or on behalf of the Company with the SEC.
Each of the Parent, the Subsidiary and the Company agrees to correct promptly
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 respect, and each of the Parent and the Subsidiary further agrees to
take all steps necessary to amend or supplement the Offer Documents and to
cause the Offer Documents as so amended or supplemented to be filed with the
SEC and to be disseminated to the Company's stockholders, in each case as and
to the extent required by applicable federal securities laws. The Company and
its counsel shall be given reasonable opportunity to review and comment upon
the Offer Documents and all amendments and supplements thereto prior to their
filing with the SEC or dissemination to stockholders of the Company. The
Parent and the Subsidiary agree to provide the Company and its counsel any
comments the Parent, the Subsidiary or their counsel may receive from the SEC
or its staff with respect to the Offer Documents promptly after the receipt of
such comments and shall provide the Company and its counsel an opportunity to
participate in the response of the Parent and/or the Subsidiary to such
comments.
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 by unanimous vote of those present
adopted resolutions (i) approving this Agreement, the Offer and the Merger, (ii)
determining that the terms of the Offer and the Merger are fair to, and in the
best interests of, the Company's stockholders, and (iii) recommending that the
Company's stockholders accept the Offer, tender their shares pursuant to the
Offer and approve this Agreement. Subject to the fiduciary duties of the Board
under applicable law as advised by independent counsel (which may be the
Company's regularly engaged outside counsel) ("Independent Counsel"), the
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Board described in the immediately preceding sentence.
The Company has been advised by each of its directors and executive officers
that, subject to their fiduciary and contractual obligations, they intend to
tender all shares of Company Common Stock beneficially owned by them to the
Subsidiary pursuant to the Offer, unless to do so would potentially subject them
to short-swing liability under Section 16 of the Exchange Act.
(b) On the date the Offer Documents are filed with the SEC, or as
soon thereafter as is practicable, 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, subject to the fiduciary duties of the Board under
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applicable law as advised by Independent Counsel, the recommendation described
in Section 1.2(a) and shall mail the Schedule 14D-9 to the stockholders of the
Company. The Company agrees that the Schedule 14D-9 shall comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
when first published, sent or given to 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 the Parent or the Subsidiary for inclusion in the
Schedule 14D-9. Each of the Company, the Parent and the Subsidiary agrees to
correct promptly 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 amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. The Parent and its counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 and all amendments and supplements thereto prior to their filing with the
SEC or dissemination to stockholders of the Company. The Company agrees to
provide the Parent and its counsel 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 and shall provide the Parent and
its counsel an opportunity to participate in the response of the Company to
such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish the Subsidiary promptly with mailing labels
containing the names and addresses of the record holders of Company Common
Stock as of the most recent practicable 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 Company Common Stock, and shall furnish to the Subsidiary such
information and assistance (including updated lists of stockholders, security
position listings and computer files) as the Parent may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, the Parent and the Subsidiary shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger and, if this
Agreement shall be terminated, will, upon request, deliver to the Company all
copies of such information then in their possession or control.
1.3 Directors. (a) Promptly upon the purchase of Company Shares
by the Subsidiary pursuant to the Offer, seven of the Company's nine directors
will resign, and the Parent shall designate three replacements for appointment
or election to the Company's Board of Directors. The Company shall, upon
request of the Subsidiary, use its best efforts promptly to cause the Parent's
designees to be so appointed or elected. The remaining two directors (and any
successors appointed or elected before the Effective Time, as defined in
Section 2.3 below,
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which successors shall not be affiliated with the Parent) are referred to as
the "Original Directors." The Company shall promptly take all actions required
by Section 14(f) of the Exchange Act and related Rule 14f-1 in order to fulfill
its obligations under this Section 1.3(a), including mailing to stockholders
the required information (or, at the Parent's request, furnishing such
information to the Parent for inclusion in the Offer Documents initially filed
with the SEC and distributed to the stockholders of the Company) as is
necessary to enable the Parent's designees to be elected to the Company's Board
of Directors. The Parent or the Subsidiary will supply the Company in writing,
and be solely responsible for, any information with respect to either of them
and their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1 as is necessary in connection with the appointment of any
of the Parent's designees under Section 1.3(a).
(b) Once the Parent's designees constitute a majority of the
Company's Board of Directors, any amendment of this Agreement, any termination
of this Agreement by the Company, any extension of time for performance of any
of the obligations of the Parent or the Subsidiary hereunder, any waiver of any
condition or any of the Company's rights hereunder or other action by the
Company hereunder may be effected only by the joint action of the Original
Directors.
SECTION 2. THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, the Subsidiary shall
be merged with and into the Company at the Effective Time (as defined in
Section 2.3). Following the Effective Time, the separate corporate existence
of the Subsidiary shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") as a business corporation
incorporated under the laws of the State of Delaware under a name to be
designated by the Parent and shall succeed to and assume all the rights and
obligations of the Subsidiary and the Company in accordance with the DGCL.
2.2 The Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. Central Time on a date to be specified by the parties
(the "Closing Date"), which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Section 9.1, at
the offices of Xxxxxxx Xxxxxxxxx & Young, L.L.C., Birmingham, Alabama, unless
another date or place is agreed to in writing by the parties hereto.
2.3 Effective Time. Subject to the provisions of this Agreement,
the Company and the Subsidiary shall file a Certificate of Merger (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL, and shall make all other filings or recordings required under the
DGCL to effect the Merger on the Closing Date. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such other time as the
Parent, the Subsidiary and the Company shall agree should be specified in the
Certificate of Merger (the "Effective Time").
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2.4 Effect of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto and any other applicable laws, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and the Subsidiary shall vest in the Surviving Corporation, and all
debts, liabilities, restrictions, disabilities and duties of the Company and
the Subsidiary shall become the debts, liabilities, restrictions, disabilities
and duties of the Surviving Corporation.
SECTION 3. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; MERGER CONSIDERATION
3.1 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of any holder of the Company
Shares or any shares of capital stock of the Subsidiary:
(a) Subsidiary Common Stock. Each share of Common Stock, par
value $.01 per share, of the Subsidiary issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Company Common Stock. Each
share of Company Common Stock that is owned by the Company, the Parent or by
any subsidiary of the Company or the Parent shall automatically be canceled and
retired and shall cease to exist, and no cash or other consideration shall be
delivered in exchange therefor.
(c) Conversion of the Company Shares. At the Effective Time, each
Company Share (other than the Company Shares to be canceled in accordance with
Section 3.1(b)) issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive the Per Share Amount (the "Merger
Consideration"). Upon such conversion, all such Company Shares shall be
canceled and cease to exist, and each holder thereof shall cease to have any
rights with respect thereto other than the right to receive the Merger
Consideration paid in exchange therefor in accordance with the terms provided
herein.
(d) No Conversion of Dissenting Shares. Notwithstanding Section
3.1(c), if dissenters rights are available in connection with the Merger
pursuant to Section 262 of the DGCL, shares of Company Common Stock held by a
holder who has not voted in favor of the Merger and who, subject to and in
accordance with Section 262 of the DGCL, has demanded and perfected such
holder's right to an appraisal of such holder's shares of Company Common Stock
and has not effectively withdrawn or lost the right to such appraisal
("Dissenting Shares"), shall not be converted into a right to receive the
Merger Consideration, unless such holder withdraws or otherwise loses the right
to appraisal for such holder's shares of Company Common Stock. If after the
Effective Time such holder withdraws or loses the right to appraisal for such
holder's shares of Company Common Stock, such shares of Company Common Stock
shall be treated as if they had been converted as of the Effective Time into
the right to receive the Merger
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Consideration payable in respect of such shares of Company Common Stock
pursuant to Section 3.1(c).
3.2 Payment of Merger Consideration.
(a) Payment Agent. Prior to the expiration date of the Offer, the
Parent shall designate a bank or trust company reasonably acceptable to the
Company to act as payment agent in the Merger (the "Payment Agent"), and, from
time to time, prior to or after the Effective Time, the Parent shall make
available, or cause the Surviving Corporation to make available, to the Payment
Agent cash in amounts and at the times necessary for the payment of the Merger
Consideration (the "Payment Fund") upon surrender of certificates representing
Company Common Stock as part of the Merger pursuant to Section 3.1.
(b) Exchange Procedure. As soon as reasonably practicable after
the Effective Time, the Surviving Corporation shall cause the Payment Agent to
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates"), (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 delivery of the Certificates to the
Payment Agent and shall be in such form and have such other provisions as the
Parent may 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 Payment Agent or to such other agent or
agents as may be appointed by the Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration, and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Parent that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 3.2, each Certificate 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 Company Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.1. No interest will be paid or will accrue on the cash payable
upon the surrender of any Certificate.
(c) Termination of Payment Fund. If any portion of the Payment
Fund remains undistributed to the holders of the Certificates for six months
after the Effective Time, the Parent may require the Payment Agent to deliver
such portion to the Parent, and any holders of the Certificates who have not
theretofore complied with this Section 3 shall thereafter look only to the
Parent for payment of the Merger Consideration.
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(d) No Liability. None of the Parent, the Surviving Corporation
or the Payment Agent shall be liable to any person in respect of any of the
Merger Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Investment of Payment Fund. The Payment Agent shall invest
such portions of the Merger Consideration as the Parent directs (it being
understood that any and all interest earned on funds made available to the
Payment Agent pursuant to this Agreement shall be the property of, and shall be
turned over to, the Parent), provided that such investments shall be in
obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Xxxxx'x
Investors Services, Inc. or Standard & Poor's Corporation, respectively, or in
deposit accounts, certificates of deposit or banker's acceptances of,
repurchase or reverse repurchase agreements with, or Eurodollar time deposits
purchased from, commercial banks with capital, surplus and undivided profits
aggregating in excess of US$100 million (based on the most recent financial
statements of such bank which are then publicly available at the SEC or
otherwise). The Merger Consideration shall not be used for any other purpose,
except as provided in this Agreement.
(f) No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender of Certificates in accordance with this Section 3 shall
be deemed to have been paid in full satisfaction of all rights pertaining to
the shares of Company Common Stock theretofore represented by such
Certificates, and, from and after the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Payment Agent
for any reason, they shall be cancelled and exchanged as provided in this
Section 3.
3.3 Certificate of Incorporation of Surviving Corporation. The
Certificate of Incorporation of the Subsidiary, effective immediately following
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation from and after the Effective Time and until thereafter amended as
provided by law and such Certificate of Incorporation; provided, however, that
at the Effective Time of the Merger such Certificate of Incorporation shall be
amended to change the Surviving Corporation's name as contemplated by Section
2.1.
3.4 By-laws of Surviving Corporation. The By-laws of the
Subsidiary shall be the By-laws of the Surviving Corporation from and after the
Effective Time and until thereafter altered, amended or repealed in accordance
with the DGCL, the Certificate of Incorporation of the Surviving Corporation
and the said By-laws.
3.5 Directors and Officers of Surviving Corporation. The
directors and officers of the Subsidiary immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and By-laws of
the Surviving Corporation.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and the
Subsidiary as follows:
4.1 Organization, Existence and Good Standing. The Company is a
Delaware corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has all necessary
corporate power to own its properties and assets and to carry on its business
as presently conducted.
4.2 Company Capital Stock. The Company's authorized capital
consists of 15 million shares of Common Stock and 1.2 million shares of
preferred stock, no par value (the "Preferred Stock") of which 3,000,758 shares
of Common Stock and no shares of Preferred Stock are issued and outstanding as
of the date of this Agreement. Pursuant to a Rights Agreement, dated as of May
21, 1997, as amended, by and between the Company and American Stock Transfer &
Trust Company, as Rights Agent (the "Rights Agreement"), the Company has issued
to its stockholders certain rights (the "Rights") to purchase shares of Junior
Participating Cumulative Preferred Stock of the Company, which Junior
Participating Cumulative Preferred Stock is, under certain circumstances,
convertible into Company Common Stock. There were 174,252 shares of Company
Common Stock reserved for issuance upon exercise of outstanding Stock Options
(as defined in Section 7.10) as of the date of this Agreement. All of the
issued and outstanding Company Shares are duly and validly issued, fully paid
and nonassessable. Except for the Rights Agreement or as set forth in Exhibit
4.2 to the Disclosure Schedule delivered to the Parent and the Subsidiary by
the Company at the time of the execution and delivery of this Agreement (the
"Company Disclosure Schedule"), there are no options, warrants, or similar
rights granted by the Company or any other agreements to which the Company is a
party providing for the issuance or sale by it of any additional securities
which would remain in effect after the Effective Time. There is no liability
for dividends declared or accumulated but unpaid with respect to any of the
Company Shares.
4.3 Subsidiaries. (a) Exhibit 4.3 to the Company Disclosure
Schedule lists all of the Company's subsidiaries (the "Company Subsidiaries")
and states with respect to each Company Subsidiary, its jurisdiction of
incorporation, its authorized and outstanding capital stock, and the ownership
of its outstanding voting securities. Other than the Company Subsidiaries and
except as described in such Exhibit 4.3, the Company does not own stock in and
does not control, directly or indirectly, any other corporation, association or
business organization, nor does the Company own an equity interest in, or
control, directly or indirectly, any other joint venture or partnership.
(b) Each Company Subsidiary is duly organized in its jurisdiction
of organization, is validly existing and in good standing in that jurisdiction,
and has all necessary corporate power to own its properties and assets and to
carry on its business as presently conducted.
(c) Except as set forth in Exhibit 4.3 to the Company Disclosure
Schedule, (i) all of the issued and outstanding shares of each Company
Subsidiary are duly and validly issued, fully paid and nonassessable, and held
of record and beneficially by the Company, and (ii) there are
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no options, warrants, or similar rights granted by the Company or any Company
Subsidiary, or any other agreements to which the Company or any Company
Subsidiary is a party, providing for the issuance or sale by the Company or any
Company Subsidiary of any Company Subsidiary securities and which would remain
in effect after the Effective Time.
4.4 Foreign Qualifications. The Company and each Company
Subsidiary is qualified to do business and is in good standing in each
jurisdiction where the nature or character of the property owned, leased or
operated by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to so qualify would not have
a material adverse effect on its business or operations.
4.5 Power and Authority. Subject to the satisfaction of the
conditions precedent set forth herein, the Company has the corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered or to be executed and delivered by it pursuant
to this Agreement, and, subject to the satisfaction of the conditions precedent
set forth herein has taken all action required by its Certificate of
Incorporation, By-laws or otherwise, to authorize the execution, delivery and
performance of this Agreement and such related documents. Except as set forth
in Exhibit 4.5 to the Company Disclosure Schedule, the execution and delivery
of this Agreement does not and, subject to the receipt of required regulatory
approvals (and, in the case of the Merger if less than 90% of the Company
Shares are purchased in the Offer, Company stockholder approval) and any other
required third-party consents or approvals, the consummation of the Offer and
Merger will not, violate any provisions of the Certificate of Incorporation or
By-laws of the Company or any provisions of, or result in the acceleration of
any obligation under, any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree, to which the Company is a party, or by
which it is bound, or violate any restrictions of any kind to which they are
subject which, if violated or accelerated would have a material adverse effect
on the Company.
4.6 SEC Filings; Financial Information. (a) The Company has
filed with the SEC and made available to the Parent all forms, reports and
documents required to be filed with the SEC (the "Company SEC Reports"). The
Company SEC Reports (i) were prepared in all material respects in accordance
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and (ii) did not at the time of filing (or if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a 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 were made, not
misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto), and each fairly presents in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as at the respective dates thereof and the consolidated statements
of income and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal
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and recurring year-end adjustments. The unaudited Balance Sheet dated June 30,
1997 included in the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1997 is referred to as the "Company Balance Sheet."
4.7 Contracts, etc. Exhibit 4.7 to the Company's Disclosure
Schedule lists all of the Company's "Material Contracts," defined as all
agreements to which the Company or any Company Subsidiary is a party or by
which any of them is bound, and which, as of the date of this Agreement, (i)
would be required to be filed as "material contracts" with the SEC pursuant to
the Exchange Act, or (ii) under which the consequences of a default, nonrenewal
or termination would have a material adverse effect on the Company
(collectively, the "Material Contracts"). The Company has made the Material
Contracts available to the Parent. Except as set forth in Exhibit 4.7 to the
Company Disclosure Schedule, to the Company's knowledge:
(a) All Material Contracts are (i) legally valid and binding in
accordance with their terms, (ii) in full force and effect, and (iii) do not
violate any federal, state or local law, rule, regulation or ordinance, and the
Company has provided the Parent and the Subsidiary with copies of all such
documents. All parties to the Material Contracts have complied with the
provisions of the Material Contracts, except for such failures as do not,
individually or in the aggregate, have a material adverse effect on the
Company. No party is in default under any Material Contract, and no event has
occurred which, but for the passage of time or the giving of notice or both,
would constitute a default thereunder, except, in each case, where the
invalidity of the Material Contract or the default or breach thereunder or
thereof would not, individually or in the aggregate, have a material adverse
effect on the Company. As of the date hereof, the Company has not received any
notice of termination or cancellation or a request to renegotiate any Material
Contract.
(b) No Material Contract will, by its terms, terminate as a result
of the transactions contemplated hereby or require any consent from any obligor
thereto in order to remain in full force and effect immediately after the
Effective Time, except for contracts or agreements which, if terminated, would
not have a material adverse effect on the Company.
(c) The Company has not granted any right of first refusal or
similar right in favor of any third party with respect to any material portion
of its properties or assets (excluding liens described in Section 4.8) or
entered into any non-competition agreement or similar agreement restricting its
ability to engage in any business in any location.
4.8 Properties and Assets. The Company or one of the Company
Subsidiaries owns or leases all of the real and personal property included in
the Company Balance Sheet (except assets recorded under capital lease
obligations and such property as has been disposed of during the ordinary
course of the Company's business since the date of the Company Balance Sheet),
free and clear of any liens, claims, charges, exceptions or encumbrances,
except for those if any, which in the aggregate are not material and which do
not materially affect the continued use of such property.
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4.9 Legal Proceedings. Except as listed in Exhibit 4.9 to the
Company Disclosure Schedule, there are no actions, suits or proceedings pending
or, to the knowledge of the Company, threatened against the Company, at law or
in equity, relating to or affecting the Company, that would reasonably be
expected to have a material adverse effect on the Company or the transactions
contemplated by this Agreement.
4.10 Subsequent Events. Except as set forth in Exhibit 4.10 to the
Company Disclosure Schedule or as contemplated by this Agreement, the Company
has not, since the date of the Company Balance Sheet:
(a) Incurred any material adverse change.
(b) Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation or liability
(absolute, accrued, contingent or otherwise) other than (i)
liabilities shown or reflected on the Company Balance Sheet or (ii)
liabilities incurred or due since the date of the Company Balance
Sheet in the ordinary course of business, which discharge or
satisfaction would have a material adverse effect on the Company.
(c) Increased or established any reserve for taxes or any
other liability on its books or otherwise provided therefor which
would have a material adverse effect on the Company, except as may
have been required due to income or operations of the Company since
the date of the Company Balance Sheet.
(d) Mortgaged, pledged or subjected to any material lien,
charge or other encumbrance any of the assets, tangible or intangible,
which assets are material to the business or financial condition of
the Company.
(e) Sold or transferred any of the assets material to the
consolidated business of the Company, canceled any material debts owed
to the Company or claims reflected as assets on the Company Balance
Sheet, or waived any material rights, except in the ordinary course of
business.
(f) Granted any general or uniform increase in the rates
of pay of employees or any material increase in salary payable or to
become payable by the Company to any officer or employee, consultant
or agent (other than normal increases consistent with past practices),
or by means of any bonus or pension plan, contract or other
commitment, increased in a material respect the compensation of any
officer, employee, consultant or agent.
(g) Except for this Agreement and any other agreement
executed and delivered pursuant to this Agreement, entered into any
material transaction other than in the ordinary course of business or
permitted under other sections of this Agreement.
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(h) Issued any stock (other than pursuant to the Stock
Incentive Plans, as defined in Section 7.10), bonds or other
securities or any options or rights to purchase any of its securities.
4.11 Accounts Receivable. Since the date of the Company Balance
Sheet, the Company has not changed any principle or practice with respect to
the recordation of accounts receivable or the calculation of reserves therefor,
or any material collection, discount or write-off policy or procedure. The
Company is in compliance with the terms and conditions of all third-party payor
arrangements relating to its accounts receivable, except to the extent that
such noncompliance would not have a material adverse effect on the Company.
4.12 Tax Matters. Except as set forth in Exhibit 4.12 to the
Company Disclosure Schedule:
(a) Prior to its separation from FHP International
Corporation ("FHP") on February 14, 1997, the responsibility for
filing the Tax Returns of each of the Xxxxxxx Entities (as defined
below in this Section 4.12) was administered by FHP, and subsequently
by PacifiCare Health Systems, Inc. ("PacifiCare"). Except for any tax
periods prior to February 15, 1997, and based upon the best knowledge
of the officers of the Company:
(i) Each of the Xxxxxxx Entities (as defined
below in this Section 4.12) has filed all Tax Returns (as
defined below in this Section 4.12) that it was required to
file. All such Tax Returns were materially correct and
materially complete in all respects. All material Taxes (as
defined below in this Section 4.12) owed by any of the Xxxxxxx
Entities (whether or not shown on any Tax Return) have been
paid. None of the Xxxxxxx Entities currently is the
beneficiary of any extension of time within which to file any
Tax Return. No material claim has ever been made by an
authority in a jurisdiction where any of the Xxxxxxx Entities
does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no material security
interests on any of the assets of any of the Xxxxxxx Entities
that arose in connection with any failure (or alleged failure)
to pay any Tax.
(ii) Each of the Xxxxxxx Entities has withheld and
paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third
party.
(iii) There is no material dispute or claim
concerning any Tax liability of any of the Xxxxxxx Entities
either (A) claimed or raised by any authority in writing or
(B) as to which any of the officers (and employees responsible
for Tax matters) of the Xxxxxxx Entities has knowledge based
upon personal contact with any agent of such authority.
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(iv) None of the Xxxxxxx Entities has waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or
deficiency.
(v) None of the Xxxxxxx Entities has filed a
consent under Section 341(f) of the Internal Revenue Code of
1986, as amended (the "Code") concerning collapsible
corporations. None of the Talbert Entities has been a United
States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii). Except as set forth on
Exhibit 4.12(a) to the Company Disclosure Schedule, none of
the Xxxxxxx Entities is a party to any Tax allocation or
sharing agreement. Except as set forth on such Exhibit
4.12(a), none of the Xxxxxxx Entities has any liability for
the Taxes of any person (other than any of the Xxxxxxx
Entities) under Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) The unpaid Taxes of the Xxxxxxx Entities (A)
did not, as of June 30, 1997, materially exceed the reserve
for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) set forth in the Company Balance Sheet (or in any
notes thereto) and (B) do not materially exceed that reserve
as adjusted for the passage of time through the consummation
of the Offer in accordance with the past custom and practice
of the Xxxxxxx Entities in filing their Tax Returns.
(vii) As of February 28, 1997, the Company and the
Company Subsidiaries did not have any receivables from or any
liabilities payable to any of the other Xxxxxxx Entities.
(viii) As discussed in Section 6, the Company has
made or will make available to the Parent all Tax Returns and
tax records of the Xxxxxxx Entities (or copies of such returns
or records) currently in possession of any of the Xxxxxxx
Entities.
(b) With respect to the June 30, 1996 Tax Returns filed
by FHP, the officers of the Company are not aware of any failure by
FHP to include the Xxxxxxx Entities in its: (i) consolidated federal
income tax return as members of an affiliated group within the meaning
of Code Section 1504(a), (ii) California unitary return as members of
a unitary group, (iii) Arizona combined return as members of a unitary
business or (iv) combined Utah return as members of a unitary group.
(c) The officers of the Company are not aware of any
material unrecorded liabilities for Taxes for any of the Xxxxxxx
Entities nor any material
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unrecorded liabilities to FHP under the Tax Allocation Agreement
listed in Exhibit 4.12 to the Company Disclosure Schedule for the
periods preceding February 15, 1997.
(d) The officers of the Company are not aware of any Tax
Returns due for the Xxxxxxx Entities for Tax periods preceding
February 15, 1997 which FHP has not timely filed or caused to be
filed.
(e) The Company shall use its reasonable efforts to
obtain copies of all Tax returns (or portions of returns related to
any of the Xxxxxxx Entities) filed on behalf of the Xxxxxxx Entities
that are in the possession of PacifiCare or its related entities and
shall make such available to the Parent prior to the Closing Date.
(f) Prior to February 14, 1997, the Company was dormant
and had no material operations.
(g) To the Company's knowledge, FHP has never owned of
record any shares of common stock of the Company.
(h) Definitions: "Xxxxxxx Entities" means the Company,
Xxxxxxx Medical Management Corporation, Talbert Health Services
Corporation. Xxxxxx Xxxxxxxx, DDS, Inc. (CA), (dba Xxxxxxx Dental
Group); Xxxxx Xxxxxxx, DDS, Inc. (CA), (dba Xxxxxxx Dental Group);
Xxxxx Xxxxx, DDS, Inc. (CA), (dba Xxxxxxx Dental Group); Xxxx Xxxxxxx,
DDS, Inc. (CA), (dba Talbert Dental Group); Xxxxxxx Medical Group,
Inc. (CA), (dba Talbert Medical Group); Talbert Medical Group, LTD.
(NV); Xxxxxxx Dental Group, P.C. (AZ); Xxxxxxx Medical Group, P.C.
(AZ); Talbert Dental Group, Inc. (UT); and Xxxxxxx Medical Group, Inc.
(UT).
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including
taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
4.13 Employee Benefit Plans; Employment Matters. (a) Except as set
forth in Exhibit 4.13(a) to the Company Disclosure Schedule, the Company has
neither established nor
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maintained nor is obligated to make contributions to or under or otherwise
participate in (i) any bonus or other type of incentive compensation plan,
program or arrangement (whether or not set forth in a written document), (ii)
any pension, profit-sharing, retirement or other plan, program or arrangement,
or (iii) any other employee benefit plan, fund or program, including, but not
limited to, those described in Section 3(3) of ERISA. To the Company's
knowledge, all such plans listed in such Exhibit 4.13(a) (individually, a
"Company Plan" and collectively, the "Company Plans") have been operated and
administered in all material respects in accordance with, as applicable, ERISA,
the Code, the Age Discrimination in Employment Act of 1967, as amended, and the
related rules and regulations adopted by those federal agencies responsible for
the administration of such laws. To the Company's knowledge, no act or failure
to act by the Company has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Company Plans that is not subject to a statutory or
regulatory exception and that could have a material adverse effect on the
Company. No "reportable event" (as defined in ERISA, but excluding any event
for which notice is waived under the ERISA regulations) has occurred with
respect to any of the Company Plans which is subject to Title IV of ERISA. The
Company has not previously made, is not currently making, and is not obligated
in any way to make, any contributions to any multi-employer plan within the
meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
(b) Except as set forth in Exhibit 4.13(b) to the Company
Disclosure Schedule, the Company is not a party to any oral or written (i)
union, guild or collective bargaining agreement which agreement covers
employees in the United States (nor is it aware of any union organizing
activity currently being conducted in respect to any of its employees), (ii)
agreement with any executive officer or other key employee the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction of the nature contemplated by this Agreement and
which provides for the payment of in excess of Twenty-Five Thousand Dollars
($25,000.00), or (iii) agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement (except as
set forth in this Agreement).
4.14 Compliance with Laws in General. Except as set forth in
Exhibit 4.14 to the Company Disclosure Schedule, the Company has not received
any notices of, nor to the best of its knowledge, have there been any,
violations of any federal, state and local laws, regulations and ordinances
relating to its business and operations that would have a material adverse
effect on the Company, including, without limitation, the Occupational Safety
and Health Act, the Americans with Disabilities Act, the Medicare or applicable
Medicaid statutes and regulations, including billing and coding, and any
Environmental Laws, and no notice of any pending inspection or violation of any
such law, regulation or ordinance has been received by the Company which, if it
were determined that a violation had occurred, would have a material adverse
effect on the Company.
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4.15 Regulatory Approvals. Except as set forth in Exhibit 4.15 to
the Company Disclosure Schedule, to the knowledge of the Company, the Company
holds all licenses, certificates of need and other regulatory approvals
required or necessary to be applied for or obtained in connection with its
business as presently conducted or as proposed to be conducted, except where
the failure to obtain such license, certificate of need or regulatory approval
would not have a material adverse effect on the Company. All such licenses,
certificates of need and other regulatory approvals relating to the business,
operations and facilities of the Company are in full force and effect, except
where any failure of such license, certificate of need or regulatory approval
to be in full force and effect would not have a material adverse effect on the
Company. Any and all past litigation concerning such licenses, certificates of
need and regulatory approvals, and all claims and causes of action raised
therein, has been finally adjudicated. No such license, certificate of need or
regulatory approval has been revoked, conditioned (except as may be customary)
or restricted, and no action (equitable, legal or administrative), arbitration
or other process is pending, or to the best knowledge of the Company,
threatened, which in any way challenges the validity of, or seeks to revoke,
condition or restrict any such license, certificate of need, or regulatory
approval. Subject to compliance with applicable securities laws and the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended ("HSR Act"), the
consummation of the Merger will not violate any law or restriction to which the
Company is subject which, if violated, would have a material adverse effect on
the Company.
4.16 Commissions and Fees. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
the Parent or the Company resulting from any action taken by the Company or its
officers, Directors or agents, or any of them, except for fees owed to Xxxxx
Xxxxxx Inc.
4.17 No Untrue Representations. No representation or warranty by
the Company in this Agreement, and no Exhibit or certificate issued by the
Company and furnished or to be furnished to the Parent and the Subsidiary
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact in response to
the disclosure requested, or omits or will omit to state a material fact
necessary to make the statements or facts contained therein in response to the
disclosure requested not misleading in light of all of the circumstances then
prevailing.
4.18 Amendment of Rights Agreement. The Rights Agreement has been
duly and validly amended to the extent necessary to permit the Parent and the
Subsidiary to perform their obligations under this Agreement and consummate the
transactions contemplated hereby.
4.19 14D-1 Information. The information supplied, and to be
supplied to, the Parent in writing by the Company for inclusion in the Parent's
Schedule 14D-1 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.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE
SUBSIDIARY
Each of the Parent and the Subsidiary hereby, jointly and severally,
represent and warrant to the Company as follows:
5.1 Organization, Existence and Good Standing of the Parent and
Subsidiary.
(a) The Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Parent has
all necessary corporate power and authority to own its properties and assets
and to carry on its business as presently conducted. The Parent is qualified
to do business and is in good standing in each jurisdiction where the nature or
character of the property owned, leased or operated by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect.
(b) The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Subsidiary's authorized capital consists of 1,000 shares of Common Stock, par
value $.01 per share, all of which shares are validly issued and outstanding,
fully paid and registered in the name of and owned by the Parent free and clear
of all liens, claims and encumbrances. The Subsidiary has all necessary
corporate power and authority to own its properties and assets and to carry on
its business as presently conducted. The Subsidiary is qualified to do
business and is in good standing in each jurisdiction where the nature or
character of the property owned, leased or operated by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect.
5.2 Power and Authority; Non-Contravention.
(a) Each of the Parent and the Subsidiary has all necessary
corporate power and authority to execute, deliver and perform this Agreement
and all agreements and other documents executed and delivered, or to be
executed and delivered, by it pursuant to this Agreement, and, subject to the
satisfaction of the conditions precedent set forth herein, has taken all
actions required by law, its Certificate of Incorporation, its By-laws or
otherwise, to authorize the execution and delivery of this Agreement and such
related documents. The Agreement has been duly and validly executed and
delivered by the Parent and the Subsidiary and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement does not and,
subject to compliance with the HSR Act, the consummation of the transactions
contemplated hereby will not, violate any provisions of the Certificate of
Incorporation or By-laws of either the Parent or the Subsidiary, or any
agreement, instrument, order, judgment or decree to which the Parent or the
Subsidiary is a party or by which either is bound, violate any restrictions of
any kind to which the Parent or the Subsidiary is subject, or result in the
creation of any lien, charge or encumbrance upon any of the property or assets
of the Subsidiary.
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5.3 Brokers. There are no claims for brokerage commissions,
investment bankers' fees or finder's fees in connection with the transaction
contemplated by this Agreement resulting from any action taken by either the
Parent or the Subsidiary or any of its officers, directors or agents, except
for fees owed to NationsBanc Capital Markets, Inc.
5.4 No Subsidiaries. The Subsidiary does not own stock in, and
does not control directly or indirectly, any other corporation, association or
business organization. The Subsidiary is not a party to any joint venture or
partnership.
5.5 Legal Proceedings. There are no actions, suits or proceedings
pending or threatened against either the Parent or the Subsidiary, that could
reasonably be expected to have a material adverse effect on the ability of the
Parent or the Subsidiary to consummate the transactions contemplated by this
Agreement.
5.6 No Contracts or Liabilities. The Subsidiary was formed solely
for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only
as contemplated hereby. Other than the obligations created under this
Agreement, the Subsidiary has no obligations or liabilities (contingent or
otherwise) under any contracts, claims, leases, loans or otherwise.
5.7 Available Funds. The Parent has funds available sufficient to
consummate the Offer and the Merger on the terms contemplated by this
Agreement. The Parent and the Subsidiary acknowledge, however, that they are
in any case obligated to accept for payment and promptly pay for all Company
Shares validly tendered pursuant to the Offer, subject to the conditions of the
Offer, and to consummate the Merger as contemplated by this Agreement.
5.8 The Parent to Cause Subsidiary to Perform. The Parent shall
cause the Subsidiary to fulfill the Subsidiary's covenants and obligations
under this Agreement.
5.9 Other Transactions. The Parent and its affiliates are not
engaged in, or intending to engage in or announce, prior to the Effective Time,
any other acquisition or similar transaction in the markets served by the
Company and the Company Subsidiaries.
5.10 14D-9 Information. The information supplied, and to be
supplied, to the Company in writing by the Parent and the Subsidiary for
inclusion in the Company's Schedule 14D-9 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.
5.11 Company Shares. Neither the Parent nor any of its affiliates
holds as of the date of this Agreement, or shall hold at any time prior to the
consummation of the Offer, any Company Shares.
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SECTION 6. ACCESS TO INFORMATION AND DOCUMENTS
6.1 Access to Information. Between the date hereof and the
Closing Date, the Company will give to the Parent and its counsel, accountants
and other representatives reasonable access to all the Company's properties,
documents, contracts, personnel files and other records and shall furnish the
Parent with copies of such documents and with such information with respect to
the Company's affairs as the Parent may from time to time reasonably request.
The Company will disclose and make available to the Parent and its
representatives all books, contracts, accounts, personnel records, letters of
intent, papers, records, communications with regulatory authorities and other
documents relating to the business and operations of the Company. In addition,
the Company shall make available to the Parent all such banking, investment and
financial information as shall be necessary to allow for the efficient
integration of the Company's banking, investment and financial arrangements
with those of the Parent at the Effective Time.
6.2 Return of Records. If the transactions contemplated hereby
are not consummated and this Agreement terminates, each party agrees to
promptly return all documents, contracts, records or properties of the other
party, all copies thereof furnished pursuant to this Section 6 or otherwise,
and all copies thereof made by or for the receiving party, and agrees to
promptly destroy any analyses, evaluations, compilations or other materials
derived from such documents. All information disclosed by any party or any
affiliate or representative of any party shall be deemed to be "Evaluation
Material" under the terms of the Confidentiality Agreement, dated July 23,
1997, between the Company and the Parent (the "Confidentiality Agreement").
6.3 Effect of Access. Nothing contained in this Section 6 shall
be deemed to create any duty or responsibility on the part of either party to
investigate or evaluate the value, validity or enforceability of any contract,
lease or other asset included in the assets of the other party. With respect
to matters as to which any party has made express representations or warranties
herein, the parties shall be entitled to rely upon such express representations
and warranties irrespective of any investigations made by such parties, except
to the extent that such investigations result in actual knowledge of the
inaccuracy or falsehood of particular representations and warranties.
SECTION 7. COVENANTS
7.1 Preservation of Business. From the date of this Agreement,
the Company will use its commercially reasonable best efforts to preserve the
business organization of the Company intact, to keep available to the Parent
and the Surviving Corporation the services of the present employees of the
Company, and to preserve for the Parent and the Surviving Corporation the
goodwill of the suppliers, customers and others having business relations with
the Company.
7.2 Material Transactions. Prior to the Effective Time, the
Company will not (other than as contemplated by the terms of this Agreement and
the related documents, other than in
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the ordinary course of business and consistent with prior practice, and other
than with respect to transactions for which binding commitments have been
entered into prior to the date hereof and transactions described in Exhibit 7.2
to the Company Disclosure Schedule which do not vary materially from the terms
set forth on such Exhibit 7.2), without first obtaining the written consent of
the Parent, which consent shall not be unreasonably withheld:
(a) Encumber any material asset or enter into any
material transaction or make any material contract or commitment
relating to the properties, assets and business of the Company, other
than in the ordinary course of business or as otherwise disclosed
herein.
(b) Enter into any employment contract which is not
terminable upon notice of 30 days or less, at will, and without
penalty to the Company except as provided herein.
(c) Enter into any contract or agreement (i) which cannot
be performed within three months or less, or (ii) which involves the
expenditure of over One Hundred Thousand Dollars ($100,000).
(d) Make any payment or distribution to the trustee under
any bonus, pension, profit-sharing or retirement plan or incur any
obligation to make any such payment or contribution which is not in
accordance with the Company's usual past practice, or, except as
required pursuant to the Employee Benefits and Compensation Allocation
Agreement dated as of February 14, 1997 between the Company and FHP,
make any payment or contributions or incur any obligation pursuant to
or in respect of any other plan or contract or arrangement providing
for bonuses, executive incentive compensation, pensions, deferred
compensation, retirement payments, profit-sharing or the like,
establish or enter into any such plan, contract or arrangement, or
terminate any plan.
(e) Extend credit to anyone, except in the ordinary
course of business consistent with prior practices.
(f) Guarantee the obligation of any person, firm or
corporation other than the Xxxxxxx Entities, except in the ordinary
course of business consistent with prior practices.
(g) Amend its Certificate of Incorporation or By-laws.
(h) Take any action described in Section 4.10(b) to
4.10(h), inclusive.
7.3 Exemption from State Takeover Laws. The Company shall take
all reasonable steps necessary and within its power to exempt the Offer and the
Merger from the requirements of any state takeover statute or other similar
state law which would prevent or impede the consummation of the transactions
contemplated hereby.
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7.4 Public Disclosures. The Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statement 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
requirements of the NYSE or NASDAQ. The parties shall issue a joint press
release, mutually acceptable to the Parent and the Company, promptly upon
execution and delivery of this Agreement.
7.5 Resignation of Company Directors. At the Effective Time, the
Original Directors shall be deemed to have resigned.
7.6 Notice of Subsequent Events. Each party hereto shall notify
the other parties of any changes, additions or events of which they have
knowledge which would cause any material change in or material addition to any
Exhibit to its Disclosure Schedule delivered by the notifying party under this
Agreement, promptly after the occurrence of the same. If the effect of such
change or addition would, individually or in the aggregate with the effect of
changes or additions previously disclosed pursuant to this Section 7.6,
constitute a material adverse effect on the notifying party, the non-notifying
party may, within ten days after receipt of such notice and so long as Company
Shares have not been purchased in the Offer, elect to terminate this Agreement.
If the non-notifying party does not give written notice of such termination
within such 10-day period, the non-notifying party shall be deemed to have
consented to such change or addition and shall not be entitled to terminate
this Agreement by reason thereof.
7.7 No Solicitations. The Company shall not, directly or
indirectly, furnish information and access, in response to unsolicited requests
therefor, to any corporation, partnership, person or other entity or group,
participate in discussions and negotiate with such corporation, partnership,
person or other entity or group concerning any proposal to acquire such party
upon a merger, purchase of assets, purchase of or tender offer for shares of
its Common Stock or similar transaction (an "Acquisition Transaction").
Notwithstanding the foregoing, if prior to the acceptance for payment of
Company Shares pursuant to the Offer, the Board of Directors, after receiving
advice from outside legal counsel to the Company, determines that a failure to
act would be inconsistent with its fiduciary duties to the Company's
stockholders under applicable law, the Company may (i) furnish information
about and access to the Company to any third party in response to an
unsolicited request pursuant to a confidentiality agreement with terms and
conditions similar to the Confidentiality Agreement, (ii) participate in
discussions and negotiations regarding any potential Acquisition Transaction,
and/or (iii) terminate this Agreement. The Company shall notify the Parent of
any unsolicited request for information and access in connection with a
possible Acquisition Transaction involving such party, such notification to
include the identity of such third party and the proposed material terms of
such possible Acquisition Transaction.
7.8 Other Actions. Subject to the provisions of Section 7.6
hereof, none of the Company, the Parent and the Subsidiary shall knowingly or
intentionally take any action, or omit to take any action, if such action or
omission would, or reasonably might be expected to, result in any of its
representations and warranties set forth herein being or becoming untrue in any
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material respect, or in any of the conditions to the Offer set forth in this
Agreement not being satisfied, or (unless such action is required by applicable
law) which would materially adversely affect the ability of the Company or the
Parent to obtain any consents or approvals required for the consummation of the
Offer or the Merger without imposition of a condition or restriction which
would have a material adverse effect on the Surviving Corporation or (unless
such action is permitted by Section 7.7) which would otherwise materially
impair the ability of the Company or the Parent to consummate the Offer and the
Merger in accordance with the terms of this Agreement or materially delay such
consummation.
7.9 Cooperation. (a) The Parent, the Subsidiary and the Company
shall together, or pursuant to an allocation of responsibility agreed to
between them, (i) cooperate with one another in determining whether any filings
required to be made or consents required to be obtained in any jurisdiction
prior to the Effective Time in connection with the consummation of the
transactions contemplated hereby and cooperate in making any such filings
promptly and in seeking to obtain timely any such consents, (ii) cooperate with
one another in coordinating the plan devised by the Parent for the swift
integration of the Company and the Company Subsidiaries with the operations of
the Parent as soon as practicable after the Effective Time, (iii) use their
respective best efforts to cause to be lifted any injunction prohibiting the
Merger, or any part thereof, or the other transactions contemplated hereby, and
(iv) furnish to one another and to one another's counsel all such information
as may be required to effect the foregoing actions.
(b) Subject to the terms and conditions herein provided, and
unless this Agreement shall have been validly terminated as provided herein,
each of the Parent, the Subsidiary and the Company shall use all reasonable
efforts (i) to take, or cause to be taken, all actions necessary to comply
promptly with all legal requirements which may be imposed on such party (or any
subsidiaries or affiliates of such party) with respect to this Agreement and to
consummate the transactions contemplated hereby and (ii) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order or
approval of, or any exemption by, any governmental entity and/or any other
public or private third party which is required to be obtained or made by such
party or any of its subsidiaries or affiliates in connection with this
Agreement and the transactions contemplated hereby. Each of the Parent, the
Subsidiary and the Company will promptly cooperate with and furnish information
to the other in connection with any such burden suffered by, or requirement
imposed upon, either of them or any of their subsidiaries or affiliates in
connection with the foregoing.
7.10 Additional Agreements Regarding Benefit Plans. (a) As soon as
practicable following the date of this Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering the Stock Incentive
Plans (as defined below)) shall adopt such resolutions or take such other
actions (if any) as are required to provide that each outstanding stock option
to purchase shares of Company Common Stock (a "Stock Option") heretofore
granted under any stock option or stock purchase plan, program or arrangement
or other option agreement or contingent stock grant plan of the Company or any
of its subsidiaries (collectively, the "Stock Incentive Plans") shall be
accelerated so as to be fully exercisable on or prior to the consummation of
the Offer, and the Company shall assure that (i) any Stock Options (other than
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options granted under Article 7 of the Xxxxxxx Medical Management Holdings
Corporation 1996 Stock Incentive Plan) may be exercised and the corresponding
Company Common Stock be available to be tendered pursuant to the Offer, except
to the extent that such tender could result in short-swing profit liability
under Section 16 of the Exchange Act, (ii) Stock Options granted under Article
7 of the Xxxxxxx Medical Management Holdings Corporation 1996 Stock Incentive
Plan, except for any Stock Option granted within six months of the termination
of such Stock Option, shall be fully exercisable on consummation of the Offer
and prior to any of the resignations contemplated pursuant to Section 1.3, and
(iii) any Stock Options not tendered that remain outstanding immediately after
the consummation of the Offer shall no later than immediately prior to the
consummation of the Merger, be converted into, surrendered in exchange or
otherwise settled for an amount in cash from the Company, payable at the time
of such conversion, exchange or settlement, equal to the product of (x) the
number of shares of Company Common Stock then subject to the Stock Option and
(y) the excess of the Per Share Amount over the per share exercise price of the
Stock Option, subject, in each case to any applicable withholding taxes. A
listing of all outstanding Stock Options as of August 14, 1997, showing the
portions of such Stock Options that are exercisable as of such date, the dates
upon which such Stock Options expire and the exercise price of such Stock
Options, is set forth in Exhibit 7.10 of the Company Disclosure Schedule.
(b) All Stock Incentive Plans shall terminate as of the Effective
Time, and the Company shall use its best efforts to ensure that following the
Effective Time no holder of a Stock Option or any participant in any Stock
Incentive Plan shall have any right thereunder to acquire any capital stock of
the Company, the Parent or the Subsidiary.
(c) All service credited to each employee by the Company through
the Effective Time shall be recognized by the Parent for all purposes,
including for purposes of eligibility, vesting and benefit accruals under any
employee benefit plan provided by the Surviving Corporation or the Parent for
the benefit of the employees; provided, however, that, to the extent necessary
to avoid duplication of benefits, amounts payable under employee benefit plans
provided by the Surviving Corporation or the Parent may be reduced by amounts
payable under similar Company plans with respect to the same periods of
service.
(d) The Parent hereby agrees not to take any action, or omit to
take any action, that would cause the Surviving Corporation not to honor
(without modification) and assume the employment agreements, executive
termination agreements and individual benefit arrangements listed in Exhibit
4.13(a) to the Company Disclosure Schedule, all as in effect on the date hereof
or as amended after the date hereof with the Parent's consent pursuant to
Section 7.2.
(e) To provide bonuses for certain employees who do not
participate in the Company's Management Incentive Program, and to reward them
for staying with the Company to facilitate the transactions contemplated by
this Agreement, the Parent shall contribute US $923,000 to be paid to the
employees, and in the amounts, listed in the schedule attached to the letter
agreement of even date herewith between the Company and the Parent. These
respective amounts shall be paid on January 1, 1998 to the listed employees
then employed by the Surviving Corporation or any of its affiliates. If any
listed employee is terminated before
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January 1, 1998, other than for cause, he or she will be paid the designated
amount on the effective date of termination.
(f) The Parent hereby agrees to cause the Company and the
Surviving Corporation to pay, at the time of the consummation of the Offer, to
each employee currently participating in the Company's Management Incentive
Program cash awards in the amounts listed on the schedule attached to the
letter agreement of even date herewith between the Company and the Parent.
7.11 Physician Warrants. As soon as possible following the
purchase of Company Shares pursuant to the Offer, the Parent shall offer to
those physicians who are employed by Xxxxxxx Medical Group, Inc. (CA) (dba
Talbert Medical Group), Talbert Medical Group, Ltd. (NV), Xxxxxxx Medical
Group, P.C. (AZ), or Xxxxxxx Medical Group, Inc. (UT) and who are designated by
the Company before such purchase warrants to purchase the common stock of the
Parent (the "Warrants"). The Warrants shall be issued pursuant to Warrant
Agreements in substantially the form attached as Exhibit 7.11. Promptly
following the purchase of Company Shares in the Offer, the Parent shall cause
the offer and sale of the Warrants to be registered under the Securities Act of
1933.
7.12 Indemnification and Insurance. (a) The Parent and the
Subsidiary agree that all rights to indemnification for acts or omissions
occurring prior to the Effective Time now existing in favor of the current or
former directors, officers, employees and agents (the "Indemnified Parties") of
the Company and its subsidiaries as provided in their respective articles of
incorporation or by-laws (or similar organizational documents) shall survive
the Merger and shall continue in full force and effect in accordance with their
terms for a period of not less than six years. From and after the Effective
Time and for a period of not less than six years thereafter, the Parent shall,
and shall cause the Surviving Corporation to, indemnify and hold harmless any
and all Indemnified Parties to the full extent such persons may be indemnified
under applicable law, their respective certificates of incorporation or by-laws
(or similar organizational documents) or pursuant to indemnification agreements
as in effect on the date of this Agreement for acts or omissions occurring at
or prior to the Effective Time, and the Parent shall, or shall cause the
Surviving Corporation to, advance litigation expenses incurred by such persons
in connection with defending any action arising out of such acts or omissions
to the extent permitted by law or as otherwise provided by the respective terms
and provisions of such certificates of incorporation, by-laws, similar
documents or indemnification agreements as in effect on the date hereof.
(b) For not less than four years from the Effective Time, the
Parent shall cause to be maintained in effect directors' and officers'
liability insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered to the Parent) on terms (including coverage
amounts) comparable to those now applicable under the current Company policy;
provided, however, that in no event shall the Parent be required to pay a
premium in any one year in an amount in excess of 175% of the annual premium
paid by the Company (which annual premium the Company represents and warrants
to be approximately US$282,000); and provided further that
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if the annual premiums of such insurance coverage exceed such amount, the
Parent shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(c) This Section 7.12 shall survive the consummation of the
Merger, is intended to benefit the Company, the Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all successors
and assigns of the Parent and the Surviving Corporation.
7.13 Antitrust. The Parent, the Subsidiary and the Company shall
take such actions as may be necessary to obtain any governmental consents,
orders or approvals required for the consummation of the Offer and the Merger,
or to avoid the imposition of any prohibition or the seeking of any restraining
order or similar act. Such actions may include the making of filings and
requests for extensions and waivers. Such actions may also include the sale or
other disposition of assets.
7.14 Share Repurchase. Before the Closing Date and after the
purchase of Company Shares pursuant to the Offer, the Company shall, and the
Parent shall cause the Company to, purchase, for a cash consideration equal to
the Per Share Amount, from any current or former director or officer of the
Company whose service with the Company is terminated for any reason between the
consummation of the Offer and the Closing Date, all shares of Company Common
Stock held by any such individual who desires so to sell such shares, promptly
upon delivery to the Company of the certificates therefor for cancellation.
SECTION 8. TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time
prior to the purchase of Company Shares pursuant to the Offer:
(a) by mutual written consent of the Parent, the Subsidiary and
the Company;
(b) by either the Parent or the Company;
(i) if a United States federal or state court of
competent jurisdiction or other United States federal or state
governmental entity shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the Offer (or the acceptance of or payment for Company
Shares) or the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; provided, that the party
seeking to terminate this Agreement shall have used all reasonable
efforts to remove such order, decree, ruling or other action;
(ii) if, before the purchase of Company Shares in the
Offer, there is, or is discovered, a material breach by the other
party of any representation, warranty, covenant or other agreement
contained in this Agreement that cannot
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be or has not been cured within 10 days after the occurrence or
discovery of such breach by the breaching party, whichever is later (a
"Material Breach") (provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or other
agreement contained in this Agreement);
(c) by the Company if the Parent and the Subsidiary fail to
commence the Offer in accordance with this Agreement, or if the Offer expires
without the purchase of Company Shares pursuant to the Offer; or
(d) by the Company under the circumstances described in the second
sentence of Section 7.7.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of any
party, other than the provisions of Sections 6.2, 7.4, 8.2 and 8.6, and except
to the extent that such termination results from the willful and material
breach by a party of any of its representations, warranties, covenants or other
agreements set forth in this Agreement.
8.3 Amendment. This Agreement may be amended by the parties at
any time before or after any required approval of matters presented in
connection with the Merger by the holders of the Company Shares; provided,
however, that after such approval, there shall be made no amendment that
pursuant to Section 251(d) of the DGCL requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
8.4 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.3, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3, or an extension or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of each of the
Parent, the Subsidiary and the Company, action by its Board of Directors or the
duly authorized designee of the Board of Directors. Once the Subsidiary's
designees are appointed or elected to the Board of Directors of the Company as
provided in Section 1.3, the affirmative vote of the Original Directors shall
be required for the Company to agree to any such termination, amendment,
extension or waiver.
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8.6 Termination Fee; Expenses. In the event of a termination of
this Agreement by the Company pursuant to Section 8.1(d), the Company shall pay
to the Parent, in immediately available funds, the sum of $8 million and shall
promptly reimburse upon demand therefor (up to a maximum amount of $2 million)
all documented out-of-pocket expenses incurred by Parent and Subsidiary in
connection with the transactions contemplated by this Agreement. In the event
that Company Shares are not purchased pursuant to the Offer, the Parent shall
pay to the Company, in immediately available funds, the sum of $8 million and
shall promptly reimburse upon demand therefor (up to a maximum amount of $2
million) all documented out-of-pocket expenses incurred by the Company in
connection with the transactions contemplated by this Agreement, unless such
failure to purchase Company Shares is (i) attributable solely to an event of
the kind described in Section 8.1(b)(i) that is not the result of any action or
inaction by the Parent or the Subsidiary which constitutes a breach of this
Agreement, (ii) attributable solely to Parent's valid termination of this
Agreement pursuant to Section 8.1(b)(ii) by reason of the Company's breach of a
representation, warranty, covenant or agreement set forth in this Agreement, or
(iii) attributable solely to a failure of a condition set forth in Exhibit 1.1
by reason of any act, event or circumstance that is beyond the control of the
Parent and the Subsidiary. Notwithstanding this Section 8.2, no payment of the
fee contemplated by this Section 8.6 shall relieve any party to this Agreement
from liability to another for its willful and material breach of any of its
representations, warranties, covenants or other agreements set forth in this
Agreement. Except as otherwise required by the preceding sentences of this
Section 8.6, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expense.
SECTION 9. CONDITIONS TO THE CLOSING
9.1 Mutual Conditions. The respective obligations of each party
to effect the Merger shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions (any of which may be waived in
writing by the Parent, the Subsidiary and the Company, to the extent permitted
by applicable law):
(a) None of the Parent, the Subsidiary or the Company nor any of
their respective subsidiaries shall be subject to any order, decree or
injunction by a United States federal or state court of competent jurisdiction
which prevents the consummation of the Merger.
(b) No statute, rule or regulation shall have been enacted or
promulgated by the government or any governmental agency of the United States
or any state that prohibits the consummation of the Merger.
(c) The Subsidiary shall have purchased and paid for Company
Shares pursuant to the Offer.
(d) Any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated.
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(e) If required by law, the holders of shares of the Company
Common Stock shall have approved the adoption of this Agreement.
SECTION 10. MISCELLANEOUS
10.1 Nonsurvival of Representations and Warranties. None of the
Company's representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the purchase of Company
Shares in the Offer. All covenants and agreements set forth in this Agreement
shall survive in accordance with their terms.
10.2 Notices. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery
or by facsimile and overnight courier to the parties hereto at the following
addresses, or at such other address as a party may advise the other in writing
from time to time:
If to the Parent or the Subsidiary:
MedPartners, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: President
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxxxx & Xxxxx, L.L.C.
0000 XxXxxxx/Xxxxxxx Xxxxx
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx E.L. Xxxxxx, Esq.
Fax: (000) 000-0000
If to the Company:
Xxxxxxx Medical Management Holdings Corporation
0000 Xxxxxx Xxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: President
Fax: 000-000-0000
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with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: C. Xxxxx Xxxxx, Esq.
Fax: 000-000-0000
All such communications shall be deemed to have been delivered on the
date of hand delivery or on the next business day following the deposit of such
communications with the overnight courier.
10.3 Further Assurances. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
10.4 Governing Law. This Agreement shall be interpreted, construed
and enforced with the laws of the State of Delaware, applied without giving
effect to any conflicts-of-law principles.
10.5 Knowledge. "To the knowledge", "to the best knowledge,
information and belief", or any similar phrase shall be deemed to refer to the
knowledge of the Chief Executive Officer or Chief Financial Officer of a party
and to include the assurance that such knowledge is based upon a reasonable
investigation, unless otherwise expressly provided.
10.6 Material Adverse Change or Material Adverse Effect. "Material
adverse change" or "material adverse effect" means, when used in this Agreement
or Exhibit 1.1 hereto in connection with the Company or the Parent, any change,
effect, event or occurrence that has, or is reasonably likely to have,
individually or in the aggregate, a material adverse impact on the business or
financial position of such party and its subsidiaries and other controlled
entities identified herein or in any Schedule or Disclosure Schedule delivered
pursuant to this Agreement, including the subsidiaries and other entities,
taken as a whole; provided, however, that "material adverse change" and
"material adverse effect" shall be deemed to exclude the impact of (i) changes
in generally accepted accounting principles, (ii) changes in applicable law,
(iii) changes or effects of any kind that impact the party's industry generally
or, as to the Company, Southern California, (iv) changes in Medicare
reimbursement rates, (v) changes or effects that are reasonably expected to
have only short-term impacts on the party, (vi) changes or effects arising from
the announcement of this Agreement or from any party's performance under this
Agreement, and (vii) any changes resulting from any restructuring or other
similar charges or write-offs taken by the Company with the consent of the
Parent.
10.7 Hazardous Materials. The term "Hazardous Materials" means any
material which has been determined by any applicable governmental authority to
be harmful to the health or safety of human or animal life or vegetation,
regardless of whether such material is found on or below the surface of the
ground, in any surface or underground water, airborne in ambient
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35
air or in the air inside any structure built or located upon or below the
surface of the ground or in building materials or in improvements of any
structures, or in any personal property located or used in any such structure,
including, but not limited to, all hazardous substances, imminently hazardous
substances, hazardous wastes, toxic substances, infectious wastes, pollutants
and contaminants from time to time defined, listed, identified, designated or
classified as such under any Environmental Laws (as defined in Section 10.8
regardless of the quantity of any such material).
10.8 Environmental Laws. The term "Environmental Laws" means any
federal, state or local statute, regulation, rule or ordinance, and any
judicial or administrative interpretation thereof, regulating the use,
generation, handling, storage, transportation, discharge, emission, spillage or
other release of Hazardous Materials or relating to the protection of the
environment.
10.9 Captions. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
10.10 Entire Agreement. This Agreement, the Company Disclosure
Schedule, the Exhibits attached hereto and the Confidentiality Agreement
contain the entire agreement of the parties and supersede any and all prior or
contemporaneous agreements between the parties, written or oral, with respect
to the transactions contemplated hereby.
10.11 Counterparts. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
10.12 Binding Effect. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto, and their respective successors
and assigns, and, except as contemplated by Sections 1.3(b), 7.10, 7.11, 7.12
and 7.14, no other person shall acquire or have any right under or by virtue of
this Agreement. No party may assign any right or obligation hereunder without
the prior written consent of the other parties.
10.13 No Rule of Construction. The parties agree that, because all
parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language
in favor of or against any party by reason of that party's role in drafting
this Agreement.
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IN WITNESS WHEREOF, the Parent, the Subsidiary and the Company have
caused this Agreement to be executed by their respective duly authorized
officers, all as of the day and year first above written.
MEDPARTNERS, INC.
By /s/ XXXXX X. HOUSE
---------------------------------------
Xxxxx X. House
Chairman and Chief Executive
Officer
TALMED MERGER CORPORATION
By /s/ XXXXX X. HOUSE
---------------------------------------
Xxxxx X. House
Chairman of the Board
XXXXXXX MEDICAL MANAGEMENT
HOLDINGS CORPORATION
By /s/ XXXX X. XXXXXXXXX
---------------------------------------
Xxxx X. Xxxxxxxxx
President and CEO
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EXHIBIT 1.1
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Agreement, the
Subsidiary shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to the Subsidiary's obligation to pay for or return
tendered shares of Company Common Stock after the termination or withdrawal of
the Offer), to pay for any shares of Company Common Stock tendered pursuant to
the Offer unless (i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of shares of Company Common
Stock which would constitute not less than 51% (determined on a fully diluted
basis) of the outstanding shares of Company Common Stock (the "Minimum
Condition"), and (ii) any waiting period under the HSR Act applicable to the
purchase of shares of Company Common Stock pursuant to the Offer shall have
expired or been terminated. Furthermore, notwithstanding any other terms of
the Offer or the Agreement, the Subsidiary shall not be required to accept for
payment or, subject as aforesaid, to pay for any shares of Company Common Stock
not theretofore accepted for payment or paid for, and may terminate the Offer
if, at any time on or after the date of the Agreement and before the acceptance
of such shares for payment, any of the following events shall occur (other than
as a result of any action or inaction of the Parent or any of its subsidiaries
which constitutes a breach of the Agreement):
(a) there shall have been entered any order, preliminary
or permanent injunction, decree, judgment or ruling in any suit,
action or proceeding that (i) makes illegal or otherwise directly or
indirectly restrains or prohibits the acquisition by the Parent or the
Subsidiary of any shares of Company Common Stock under the Offer or
the making or consummation of the Offer or the Merger, the performance
by the Company of any of its obligations under this Agreement or the
consummation of any purchase of Company Common Stock contemplated
hereby, (ii) prohibits or limits the ownership or operation by the
Company, the Parent or any of their respective subsidiaries of a
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or the Parent and its subsidiaries,
taken as a whole, or compels the Company or the Parent to dispose of
or hold separate any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or the Parent and its
subsidiaries, taken as a whole, as a result of the Offer or the
Merger, (iii) imposes material limitations on the ability of the
Parent or the Subsidiary to acquire or hold, or exercise full rights
of ownership of, any shares of Company Common Stock accepted for
payment pursuant to the Offer including, without limitation, the right
to vote such Company Common Stock on all matters properly presented to
the stockholders of the Company or (iv) prohibits the Parent or any of
its subsidiaries from effectively controlling in any material respect
the business or operations of the Company and its subsidiaries, taken
as a whole; or
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38
(b) there shall be any law enacted, entered, enforced,
promulgated or deemed applicable to the Offer or the Merger, or any
other action shall be taken by any governmental entity, other than the
application to the Offer or the Merger of applicable waiting periods
under the HSR Act, that results, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above; or
(c) there shall have occurred any material adverse change
to the Company; or
(d) (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse
to the Parent or the Subsidiary its approval or recommendation of the
Offer, the Merger or this Agreement, or approved or recommended any
other acquisition proposal or (ii) the Company shall have entered into
any agreement to consummate any acquisition proposal; or
(e) any of the representations and warranties of the
Company set forth in the Agreement that are qualified as to
materiality shall not be true and correct or any such representations
and warranties that are not so qualified shall not be true and correct
in any respect that is reasonably likely to have a material adverse
effect, in each case at the date of the Agreement and at the scheduled
expiration of the Offer; or
(f) the Company shall have failed to perform in any
material respect any material obligation or to comply in any material
respect with any material agreement or material covenant of the
Company to be performed or complied with by it under this Agreement;
or
(g) there shall have occurred and be continuing to exist
for at least three business days (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock
Exchange (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index), (ii) a declaration
of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States which in any case is reasonably
expected to have a material adverse effect or to materially adversely
affect the Parent's or the Subsidiary's ability to complete the Offer
or the Merger or materially delay the consummation of the Offer, the
Merger or both or (iv) in case of any of the foregoing existing on the
date of this Agreement, material acceleration or worsening thereof; or
(h) the Agreement shall have been terminated in accordance
with its terms.
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Subject to the provisions of the Agreement, the foregoing conditions
are for the sole benefit of the Parent and may, subject to the terms of the
Agreement, be waived by the Subsidiary and the Parent in whole or in part at
any time and from time to time in their sole discretion. The failure by the
Parent at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time. Terms
used but not defined herein shall have the meanings assigned to such terms in
the Agreement to which this Exhibit 1.1 is a part.
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