EXECUTION VERSION
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AGREEMENT AND PLAN OF MERGER
DATED AS OF
SEPTEMBER 15, 2004
BY AND AMONG
AMERICAN MEDICAL SECURITY GROUP, INC.,
PACIFICARE HEALTH SYSTEMS, INC.
AND
ASHLAND ACQUISITION CORP.
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS....................................................................................1
Section 1.1 Definitions........................................................................1
ARTICLE II THE MERGER....................................................................................8
Section 2.1 The Merger; Closing................................................................8
Section 2.2 Conversion of Shares...............................................................9
Section 2.3 Surrender and Payment..............................................................9
Section 2.4 Stock Options and Other Equity Awards.............................................11
Section 2.5 Adjustments.......................................................................12
Section 2.6 Withholding Rights................................................................12
Section 2.7 Lost Certificates.................................................................12
ARTICLE III CERTAIN GOVERNANCE MATTERS..................................................................12
Section 3.1 Articles of Incorporation of the Surviving Corporation............................12
Section 3.2 Bylaws of the Surviving Corporation...............................................12
Section 3.3 Directors and Officers of the Surviving Corporation...............................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................13
Section 4.1 Organization and Qualification; Charter Documents.................................13
Section 4.2 Corporate Authorization; Enforceability; Board Action.............................14
Section 4.3 Consents and Approvals; No Violations.............................................15
Section 4.4 Capitalization....................................................................16
Section 4.5 SEC Filings and Financial Statements..............................................17
Section 4.6 Absence of Certain Changes........................................................19
Section 4.7 Undisclosed Liabilities...........................................................19
Section 4.8 Litigation........................................................................19
Section 4.9 Compliance with Laws..............................................................19
Section 4.10 Reserves..........................................................................21
Section 4.11 Employee Benefit Plans............................................................21
Section 4.12 Taxes.............................................................................23
Section 4.13 Contracts.........................................................................23
Section 4.14 Intellectual Property.............................................................25
Section 4.15 Properties and Assets.............................................................25
Section 4.16 Environmental Matters.............................................................26
Section 4.17 Transactions with Affiliates......................................................27
Section 4.18 Insurance Issued by the Insurance Companies.......................................27
Section 4.19 Insurance.........................................................................28
Section 4.20 Adverse Communications............................................................28
Section 4.21 Capital or Surplus Maintenance....................................................28
Section 4.22 Disclosure Documents..............................................................28
Section 4.23 Opinions of Financial Advisors....................................................29
Section 4.24 Finders' or Advisors' Fees........................................................29
Section 4.25 Rating Matter.....................................................................29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY...............................29
Section 5.1 Organization and Qualification; Charter Documents.................................30
Section 5.2 Corporate Authorization; Enforceability; Board Action.............................30
Section 5.3 Consents and Approvals; No Violations.............................................31
Section 5.4 SEC Filings and Financial Statements..............................................32
Section 5.5 Litigation........................................................................32
Section 5.6 Compliance with Laws..............................................................33
Section 5.7 No Parent Vote Required...........................................................34
Section 5.8 Parent Ownership of Company Securities............................................34
Section 5.9 Disclosure Documents..............................................................34
Section 5.10 Finders' or Advisors' Fees........................................................34
Section 5.11 Financing.........................................................................34
Section 5.12 Ownership and Operations of Merger Subsidiary.....................................34
ARTICLE VI COVENANTS....................................................................................35
Section 6.1 Conduct of the Company's Business Pending the Merger..............................35
Section 6.2 Preparation of Proxy Statement; Shareholder Meeting...............................38
Section 6.3 Access to Information; Confidentiality............................................39
Section 6.4 No Solicitation; Unsolicited Proposals............................................40
Section 6.5 Company Board of Directors' Recommendation........................................42
Section 6.6 Regulatory Filings; Reasonable Best Efforts.......................................43
Section 6.7 Employee Benefits.................................................................45
Section 6.8 Public Announcements..............................................................48
Section 6.9 Further Assurances................................................................48
Section 6.10 Notification of Certain Matters...................................................48
Section 6.11 Indemnification; D&O Insurance....................................................49
Section 6.12 Undertakings of Parent............................................................51
Section 6.13 FIRPTA Matters....................................................................51
ARTICLE VII CONDITIONS TO THE MERGER....................................................................52
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger........................52
Section 7.2 Conditions to Obligations of Parent and Merger Subsidiary.........................52
Section 7.3 Conditions to Obligation of the Company...........................................53
Section 7.4 Frustration of Closing Conditions.................................................54
ARTICLE VIII TERMINATION AND EXPENSES...................................................................54
Section 8.1 Termination.......................................................................54
Section 8.2 Effect of Termination.............................................................55
Section 8.3 Fees and Expenses.................................................................56
ARTICLE IX MISCELLANEOUS................................................................................57
Section 9.1 Non-Survival of Representations and Warranties and Agreements.....................57
Section 9.2 Representations and Warranties....................................................57
Section 9.3 Amendments; No Waivers............................................................57
Section 9.4 Notices...........................................................................58
Section 9.5 Successors and Assigns............................................................58
Section 9.6 Governing Law.....................................................................59
Section 9.7 Consent to Jurisdiction...........................................................59
Section 9.8 Waiver of Jury Trial..............................................................59
Section 9.9 Counterparts; Effectiveness.......................................................59
Section 9.10 Entire Agreement..................................................................59
Section 9.11 Third Party Beneficiaries.........................................................59
Section 9.12 Severability......................................................................60
Section 9.13 Specific Performance..............................................................60
Section 9.14 Construction......................................................................60
INDEX OF DEFINED TERMS
Acquisition Proposal.........................................................42
Actual Performance Amount....................................................47
affiliate....................................................................60
Agreement.....................................................................1
Antitrust Division...........................................................44
ASO Contracts.................................................................1
Beneficially Own..............................................................2
Beneficially Owning...........................................................2
Bonus Amount.................................................................47
Bonus Eligible Employee......................................................47
Business Day..................................................................2
Certificate...................................................................9
Client Contract...............................................................2
Closing.......................................................................8
Closing Date..................................................................8
Code..........................................................................2
Company.......................................................................1
Company Affiliated Group.....................................................23
Company Bonus Plans..........................................................47
Company Change in Recommendation.............................................42
Company Common Stock..........................................................9
Company Contracts............................................................24
Company Deferred Compensation Plans...........................................2
Company Disclosure Letter....................................................13
Company Employee Plans.......................................................21
Company Employees............................................................45
Company Intellectual Property................................................25
Company Options..............................................................11
Company Organizational Documents.............................................14
Company Permit................................................................2
Company Recommendation.......................................................39
Company Regulatory Filings...................................................20
Company Requisite Regulatory Approvals.......................................53
Company Rights...............................................................16
Company Rights Agreement.....................................................16
Company SEC Documents.........................................................2
Company Shareholder Approval.................................................14
Company Shareholder Meeting..................................................39
Company State Regulatory Filings.............................................18
Company Stock Option Plans...................................................11
Company Subsidiary Organizational Documents..................................14
Confidentiality Agreement....................................................40
Contract......................................................................2
Copyrights...................................................................25
Effective Time................................................................8
End Date.....................................................................54
Environmental Laws............................................................2
ERISA........................................................................21
ERISA Affiliate..............................................................21
Exchange Act.................................................................16
FTC..........................................................................44
GAAP..........................................................................2
Governmental Authority........................................................2
Governmental Consents........................................................53
Hazardous Material............................................................3
Health Care Laws..............................................................3
Health Plan...................................................................3
Health Plan Contract..........................................................3
Health Plan Members...........................................................3
Xxxxxxxx.....................................................................29
HSR Act......................................................................15
including....................................................................60
Indemnified Parties..........................................................49
Insurance Contract............................................................3
Insurance Products............................................................3
Insured.......................................................................4
Intellectual Property........................................................25
IP Licenses...................................................................4
JPMorgan.....................................................................29
knowledge of Parent...........................................................4
knowledge of the Company......................................................4
Law...........................................................................4
Leased Real Property.........................................................26
Leases........................................................................4
Liability.....................................................................4
Lien..........................................................................4
Litigation...................................................................19
Material Adverse Effect.......................................................4
Material Company Contract.....................................................5
Maximum Premium..............................................................51
Merger........................................................................1
Merger Consideration..........................................................9
Merger Subsidiary.............................................................1
Merger Subsidiary Common Stock................................................9
Monthly Average Actual Performance Amount....................................47
Option Exchange Ratio.........................................................5
Owned Real Property..........................................................25
Paid Expenses................................................................56
Parent........................................................................1
Parent Common Stock..........................................................11
Parent Disclosure Letter.....................................................29
Parent Permit.................................................................5
Parent Requisite Regulatory Approvals........................................54
Parent SEC Documents..........................................................6
Parent Trading Price..........................................................6
parties......................................................................61
party........................................................................61
Patents......................................................................25
Paying Agent..................................................................9
Payor.........................................................................6
Payor Contract................................................................6
Permitted Liens...............................................................6
Person........................................................................6
PPO...........................................................................6
Pre-Closing Period...........................................................35
Provider Contracts............................................................6
Providers.....................................................................6
Proxy Statement..............................................................38
Regulatory Material Adverse Effect...........................................44
Release.......................................................................7
Representative................................................................7
Restraints...................................................................52
SAP...........................................................................7
Xxxxxxxx-Xxxxx Act...........................................................18
SEC...........................................................................7
SEC Material Company Contract................................................23
Securities Act...............................................................16
Severance Agreements.........................................................45
Software......................................................................7
Subsidiary....................................................................7
Superior Proposal............................................................42
Surviving Corporation.........................................................8
Tax Return....................................................................7
Taxes.........................................................................7
Termination Fee..............................................................56
Third Party...................................................................8
Title IV Plan................................................................21
TPA...........................................................................8
Trademarks...................................................................25
WBCL..........................................................................1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 15, 2004, is entered into by and among AMERICAN MEDICAL SECURITY
GROUP, INC., a Wisconsin corporation (the "Company"), PACIFICARE HEALTH
SYSTEMS, INC., a Delaware corporation ("Parent"), and ASHLAND ACQUISITION
CORP., a newly-formed Wisconsin corporation and a wholly-owned subsidiary of
Parent ("Merger Subsidiary").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company, Parent
and Merger Subsidiary deem it advisable and in the best interests of their
respective shareholders that the parties consummate the transactions
contemplated herein, upon the terms and subject to the conditions provided for
herein;
WHEREAS, in furtherance thereof, the respective Boards of Directors
of the Company, Parent (on its own behalf and as the sole shareholder of
Merger Subsidiary), and Merger Subsidiary have approved and adopted this
Agreement and resolved that the transactions contemplated hereby are advisable
and in the best interests of their respective shareholders, including the
consummation of the merger of Merger Subsidiary with and into the Company (the
"Merger") upon the terms and subject to the conditions set forth herein and in
accordance with the provisions of the Wisconsin Business Corporation Law (the
"WBCL"); and
WHEREAS, the Board of Directors of the Company has resolved to
recommend to its shareholders approval and adoption of this Agreement and the
transactions contemplated hereby (including the Merger), upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the adequacy of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used herein, the following terms shall
have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ASO Contracts" means Contracts entered into by the Company or any
Subsidiary for the administration of health care benefits or services for
which the applicable employer or other plan sponsor remains financially
responsible on a self-insured basis, and excluding any Insurance Contracts and
Health Plan Contracts.
"Beneficially Own" or "Beneficially Owning" shall have the meaning
set forth in Rule 13d-3 promulgated under the Exchange Act.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which banks are required or authorized to be closed in Green Bay,
Wisconsin.
"Client Contract" means any ASO Contract, Health Plan Contract,
Insurance Contract, Payor Contract or any other Contract pursuant to which a
Person pays a premium, reimbursement or other amount to the Company or any of
its Subsidiaries for furnishing goods or services to or for the benefit, or on
behalf, of such Person.
"Code" means the Internal Revenue Code of 1986.
"Company Deferred Compensation Plans" shall mean the Company's
Directors Deferred Compensation Plan, effective January 1, 2000, and the
Deferred Stock Agreement, dated as of November 17, 1998, between the Company
and the Chief Executive Officer of the Company.
"Company Permit" means all licenses, registrations, franchises,
permits, certificates, approvals, accreditation or other similar
authorizations required for the business operated by the Company or its
Subsidiaries, including any insurance license, managing general agent license,
PPO license, TPA license, utilization review agent license, producer license
or managed care organization certificate.
"Company SEC Documents" means any forms, reports, schedules,
statements, prospectuses and other documents and exhibits publicly filed with
or furnished to the SEC by the Company or any of its Subsidiaries since
January 1, 2001 through the date hereof (as such forms, reports, schedules,
statements, prospectuses and other documents have been amended and
supplemented since the time of their respective filing or furnishing through
the date hereof).
"Contract" shall mean, with respect to any Person, any agreement,
undertaking, contract, commitment, obligation, indenture, deed of trust or
other instrument, document or agreement (whether written or oral) to which
such Person is bound.
"Environmental Laws" means federal, state, local and foreign Laws,
judicial decisions, injunctions, permits and governmental agreements relating
to human health or the environment (including ambient air, surface water,
ground water, land surface or subsurface strata), including Hazardous
Materials.
"GAAP" means United States generally accepted accounting principles
consistently applied throughout the periods involved.
"Governmental Authority" means any nation or government, state or
other political subdivision thereof, entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of
government, including any domestic (federal, state or local) or foreign
governmental or regulatory authority, agency, department, board, commission,
administration or instrumentality, court, tribunal or arbitrator or any
self-regulatory organization (including state departments or divisions of
insurance and state departments of health).
"Hazardous Material" means all substances or materials regulated as
hazardous, toxic, explosive, dangerous, flammable or radioactive under any
Environmental Law, including (a) petroleum, asbestos or polychlorinated
biphenyls and (b) in the United States, all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5.
"Health Care Laws" mean all Laws relating to: (a) the licensure,
certification, qualification or authority to transact business relating to the
provision of, payment or reimbursement for or administration of health care
benefits or insurance, including the Laws governing insurance companies, PPOs
or other Payors; (b) the administration of claims or benefits for health
services or processing or payment of claims for health services, including
TPAs, utilization review agents and Persons performing quality assurance,
credentialing or coordination of benefits; (c) ERISA; and (d) the Health
Insurance Portability and Accountability Act of 1996.
"Health Plan" means any or all of the prepaid health care benefit
plans offered, sold or administered by the Company or any of its Subsidiaries
that involve the arrangement, delivery, administration and/or payment of
health care benefits to or for Health Plan Members.
"Health Plan Contract" means any Contract for the provision of Health
Plan benefits that the Company or any of its Subsidiaries has entered into
with (a) an eligible individual who subscribes to a Health Plan (which
subscription may be on behalf of the individual alone or the individual
together with one or more eligible dependents), or (b) an employer or other
group that purchases the Health Plan for its eligible employees or other
individuals (together, if applicable, with such employees' or other
individuals' eligible dependents), which in either case, the Company or one of
its Subsidiaries has assumed financial risk for the provision of such Health
Plan benefits.
"Health Plan Members" means, at the time of determining membership
status, any individual who is enrolled as a member under a Health Plan.
"Insurance Contract" means any of the insurance policies, Contracts
of insurance, policy endorsements, certificates of insurance and application
forms pertaining to the Insurance Products underwritten or reinsured by the
Company or any of its Subsidiaries.
"Insurance Products" means (a) any of the health insurance coverage
underwritten or reinsured in whole or in part by the Company or any of its
Subsidiaries on a traditional indemnity basis or as part of a PPO health
benefit plan or product, (b) any indemnity life, disability, accidental death
and dismemberment, dental or other insurance coverages underwritten or
reinsured in whole or in part by the Company or any of its Subsidiaries, (c)
any discount or preferred price arrangement included as part of a Contract
offered by the Company or any of its Subsidiaries with respect to products or
services provided by third parties and (d) any stop-loss coverage or other
insurance offered, underwritten or reinsured by the Company or any of its
Subsidiaries.
"Insured" means any individual who is covered under an Insurance
Product pursuant to an Insurance Contract.
"IP Licenses" means all licenses and agreements (excluding
"click-wrap" or "shrink-wrap" agreements or agreements contained in
"off-the-shelf" Software or the terms of use or service for any web site)
pursuant to which the Company and its Subsidiaries have acquired rights in
(including usage rights to) any Intellectual Property, or licenses and
agreements pursuant to which the Company and its Subsidiaries have licensed or
otherwise granted the right to use any Intellectual Property, including
license agreements, settlement agreements and covenants not to xxx.
"knowledge of Parent" means the actual knowledge, after reasonable
inquiry, of the executive officers of Parent, with respect to each such
individual employed as of the date hereof and as of the Closing Date as of
such respective dates.
"knowledge of the Company" means the actual knowledge, after
reasonable inquiry, of the executive officers of the Company and the Company's
Vice President of Corporate Legal, with respect to each such individual
employed as of the date hereof and as of the Closing Date as of such
respective dates.
"Law" shall mean any law (including common law), ordinance, writ,
statute, treaty, rule or regulation, including all Health Care Laws.
"Leases" means all leases, subleases or licenses, including all
amendments with respect thereto, pursuant to which the Company or any of its
Subsidiaries use or hold any material Leased Real Property.
"Liability" means any debt, liability, commitment or obligation of
any kind whatsoever, whether due or to become due, known or unknown, accrued
or fixed, or absolute or contingent.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"Material Adverse Effect" means, with respect to any Person, any
fact, event, circumstance, change or effect that, individually or together
with other facts, events, circumstances, changes or effects is, or would
reasonably be likely to be, materially adverse to the business, financial
condition or results of operations of such Person and its Subsidiaries, taken
as a whole; provided, however, that in no event shall any of the following,
alone or in combination, be deemed to constitute, nor shall any fact, event,
circumstance, change or effect relating to any of the following be taken into
account in determining whether there has been, is, or would reasonably be
likely to be, a Material Adverse Effect on or with respect to a Person: (i)
the economy in general in the United States; (ii) United States or global
financial or securities markets or conditions; (iii) the health and life
insurance industries generally if they do not have a materially
disproportionate affect on such Person; (iv) changes in applicable Law or in
GAAP; (v) any adverse development in any pending or threatened Litigation,
mediation or arbitration as of the date hereof (but limited, in the case of
threatened Litigation, mediation or arbitration, to such matters that are set
forth or referenced on the Company Disclosure Letter), other than any such
development that, considered in the aggregate with all other adverse or
positive developments relating to such Litigation, mediation or arbitration,
is materially adverse to the business, financial condition or results of
operations of such Person and its Subsidiaries, taken as a whole, when
compared with the status of such pending or threatened Litigation, mediation
or arbitration as of the date hereof; or (vi) the execution and delivery of
this Agreement or announcement of the transactions contemplated hereby,
including the identity of Parent, or consummation of the transactions
contemplated hereby.
"Material Company Contract" shall mean any Contract that (a) involves
annual revenues or expenditures of the Company or its Subsidiaries in excess
of $250,000 and relates to (i) the incurrence of indebtedness for borrowed
money (including sale and leaseback transactions, capitalized lease
transactions and other similar financing transactions), (ii) any reinsurance
arrangement, (iii) a Leasehold relationship, (iv) IP Licenses with respect to
any rights under any material Intellectual Property, (v) any outsourcing
agreements or (vi) any provisions that by their express terms require the
Company or any of its Subsidiaries with respect to a particular aspect of
their respective insurance businesses to deal exclusively with one or more
Persons with respect to such particular aspect of their respective insurance
businesses, (b) contains any provisions that by their express terms limit in
any material respect the manner or the localities in which the business of the
Company or its Subsidiaries, or following consummation of the transactions
contemplated hereby, Parent's or its Subsidiaries' business, is or would be
conducted under such Contract, (c) constitutes any material joint venture or
material partnership agreement or (d) grants any right of first refusal or
right of first offer or similar right that limits the ability of the Company
or any of its Subsidiaries to own, operate, sell, transfer, pledge or
otherwise dispose of any amount of assets or business with a value in excess
of $250,000 (other than investments permitted by the Company's investment
policy in effect on the date hereof). For purposes of this Agreement,
"Material Company Contracts" shall include SEC Material Company Contracts but
shall not include any Client Contract.
"Option Exchange Ratio" shall mean the quotient (to four decimal
places) of the Merger Consideration divided by the Parent Trading Price.
"Parent Permit" means all licenses, registrations, franchises,
permits, certificates, approvals, accreditation or other similar
authorizations required for the business operated by Parent or its
Subsidiaries, including any insurance license, managing general agent license,
PPO license, TPA license, utilization review agent license, producer license
or managed care organization certificate.
"Parent SEC Documents" means any forms, reports, schedules,
statements, prospectuses and other documents and exhibits publicly filed with
or furnished to the SEC by Parent or any of its Subsidiaries since January 1,
2001 through the date hereof (as such forms, reports, schedules, statements,
prospectuses and other documents have been amended and supplemented since the
time of their respective filing or furnishing through the date hereof).
"Parent Trading Price" means the average of the per share closing
trading price of Parent Common Stock on the NYSE Composite Transactions Tape
(or, if not reported thereby, as reported by any other authoritative source),
for the ten (10) trading days ending on the trading day immediately prior to
the Closing Date.
"Payor" means any health maintenance organization, competitive
medical plan, risk-bearing PPO, exclusive provider organization,
point-of-service plan, other managed care plan or program, indemnity insurance
carrier, self-funded employer plan or fund, Governmental Authority, TPA,
health and welfare fund or other Person that pays, covers, underwrites or
arranges for health care services for its employees, members, subscribers,
enrollees, insureds, beneficiaries or other eligible individuals. "Payor
Contract" means any Contract whereby a Payor has engaged the Company or any of
its Subsidiaries to provide, arrange for, or assume financial risk for some
health care coverage, services or treatment to which such Payor's eligible
individuals are entitled.
"Permitted Liens" means such of the following: (a) Liens disclosed in
the financial statements (or the notes thereto) of the Company SEC Documents,
(b) Liens for Taxes not yet due and payable or which are being contested in
good faith by appropriate proceedings, (c) original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary course of business, (d) mechanics', carriers', workers' or
repairmens' Liens arising in the ordinary course of business and securing
payments or obligations that are not delinquent and (e) Liens that do not
materially interfere with, or materially adversely affect, the value or use of
the respective underlying asset, as presently used, to which such Liens
relate.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an association
and any other entity or "group" (as such term is defined in Rule 13d-5(b)(1)
of the Exchange Act).
"PPO" means a preferred provider organization.
"Provider Contracts" means all Contracts with Providers or with
intermediaries that contract with Providers with respect to the payment for
health care or related services to Health Plan Members, Insureds or to Persons
covered under a Client Contract.
"Providers" means any and all hospitals (including hospital
providers), physicians, physician or medical groups, independent practice
associations, physician hospital organizations, integrated delivery systems,
pharmacies and pharmacists, mental health professionals, other medical or
health professionals, health care facilities or other providers of services or
products who or which have contracted with the Company or any of its
Subsidiaries to provide health care or related services or products.
"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into
the indoor or outdoor environment (including ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any real
property, including the movement of Hazardous Materials through or in the air,
soil, surface water or groundwater.
"Representative" means, with respect to any Person, its officers,
directors, employees, auditors, financial advisors, attorneys, accountants,
actuaries, consultants and other agents, advisors or representatives.
"SAP" means, with respect to any Person, the statutory accounting
principles and practices prescribed or permitted by its domiciliary state.
"SEC" means the Securities and Exchange Commission.
"Software" means all computer programs, including any and all
software implementations of algorithms, models and methodologies whether in
source code or object code form, databases and compilations, including any and
all electronic collections of data, all documentation, including user manuals
and training materials, related to any of the foregoing and the content and
information contained on any web site.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company or other Person of which (or in which),
directly or indirectly, more than 50% of (a) the issued and outstanding
capital stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the time capital
stock of any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) or (b) the interest in
the capital or profits of such partnership, joint venture, limited liability
company or other Person, is at the time owned by such first Person, or by such
first Person and one or more of its other Subsidiaries or by one or more of
such Person's other Subsidiaries.
"Tax Return" means any return, report or similar statement (including
any attachment or supplement thereto) supplied to or required to be supplied
to any taxing authority, including, any information return, claim for refund,
amended return or declaration of estimated Tax.
"Taxes" means any and all federal, state, local, foreign or other
taxes of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any taxing
authority, including, taxes, fees, duties, customs, tariffs or assessments,
obligations or other similar charges of any kind on or with respect to income,
franchises, premiums or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation or
unemployment compensation or net worth, and taxes or other similar charges of
any kind in the nature of excise, withholding, ad valorem or value added.
"Third Party" means any Person (or group of Persons) other than
Parent and its Subsidiaries.
"TPA" means a person who underwrites, collects charges or premiums
from, or adjusts or settles claims in connection with life or health coverage
and is regulated as a third party administrator under applicable Laws.
ARTICLE II
THE MERGER
Section 2.1 The Merger; Closing.
(a) As soon as reasonably practicable on the Closing Date, the
Company and Merger Subsidiary shall execute and file articles of merger with
the Department of Financial Institutions of the State of Wisconsin and make
all other filings or recordings required by the WBCL to be made in connection
with the Merger. The Merger shall become effective at such time as the
articles of merger are duly filed with the Department of Financial
Institutions of the State of Wisconsin or, if agreed to by the Company and
Parent, at such later time as is specified in the articles of merger (the
"Effective Time").
(b) Upon the terms and subject to the conditions set forth herein, at
the Effective Time, Merger Subsidiary shall be merged with and into the
Company in accordance with the requirements of the WBCL, whereupon the
separate existence of Merger Subsidiary shall cease. The Company shall be the
surviving corporation in the Merger (the "Surviving Corporation").
(c) The Merger will have the effects set forth in the WBCL, including
the effects set forth in Section 180.1106 of the WBCL. Without limiting the
generality of the foregoing, and subject thereto, from and after the Effective
Time, the Surviving Corporation shall possess all the rights, privileges,
immunities, powers and purposes and shall assume and be liable for all the
liabilities, obligations and penalties of the Company and Merger Subsidiary.
(d) The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP, Four Times Square, New York, New York 10036-6522, at 10:00 a.m.
local time, as soon as reasonably practicable, but in any event within two (2)
Business Days after the satisfaction or, to the extent permitted hereby,
waiver of all of the conditions to the Merger, other than those conditions
that by their nature are to be fulfilled at Closing, but subject to the
satisfaction or waiver of such conditions, unless this Agreement has been
heretofore terminated pursuant to its terms or another time or date is agreed
to in writing by the parties hereto (the actual time and date of the Closing
being referred to herein as the "Closing Date").
Section 2.2 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof:
(i) each share of common stock, no par value per share, of
the Company, together with the associated Company Right
(collectively, the "Company Common Stock"), outstanding immediately
prior to the Effective Time shall, except as otherwise provided in
Section 2.2(a)(ii), be converted into the right to receive an amount
in cash equal to $32.75 (the "Merger Consideration");
(ii) each share of Company Common Stock, held by the Company
as treasury stock immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto; and
(iii) each share of common stock, no par value per share, of
Merger Subsidiary ("Merger Subsidiary Common Stock") outstanding
immediately prior to the Effective Time shall be converted into and
become one share of common stock of the Surviving Corporation with
the same rights, powers and privileges as the share so converted, and
the shares so converted shall constitute the only outstanding shares
of capital stock of the Surviving Corporation.
(b) From and after the Effective Time, all shares of Company Common
Stock converted in accordance with Section 2.2(a)(i), and all shares of
Company Common Stock canceled pursuant to Section 2.2(a)(ii) shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any shares of Company
Common Stock (a "Certificate") shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration to which such
holder is entitled. From and after the Effective Time, all certificates
representing Merger Subsidiary Common Stock shall be deemed for all purposes
to represent only the number of shares of common stock of the Surviving
Corporation into which they were converted in accordance with Section
2.2(a)(iii).
Section 2.3 Surrender and Payment.
(a) Not less than ten (10) Business Days prior to the Effective Time,
Parent shall appoint a paying agent reasonably satisfactory to the Company
(the "Paying Agent") for the purpose of exchanging Certificates for the Merger
Consideration. On the same Business Day as the Effective Time, Parent shall
deposit, or cause to be deposited, with the Paying Agent by wire transfer of
immediately available funds, cash sufficient to make the cash payments
pursuant to Section 2.2(a)(i). On the Business Day immediately following the
Effective Time, Parent will send, or cause the Paying Agent to send, to each
holder of record of shares of Company Common Stock as of the Effective Time, a
letter of transmittal for use in such exchange (which shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the Certificates to the Paying Agent), which letter shall
be in such form as the Company and Parent may reasonably agree to use in
effecting delivery of shares of Company Common Stock to the Paying Agent.
(b) Each holder of shares of Company Common Stock that have been
converted into a right to receive the Merger Consideration as provided in this
Article II will be entitled to receive the Merger Consideration in respect of
the shares of Company Common Stock represented by such Certificate only upon
surrender to the Paying Agent of such Certificate, together with a properly
completed and duly executed letter of transmittal. Until so surrendered, each
such Certificate shall, after the Effective Time, represent for all purposes
only the right to receive such Merger Consideration. No interest will be paid
or accrued on the Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the Person in whose name the applicable surrendered
Certificate is registered, it shall be a condition to the payment of such
Merger Consideration that (i) the surrendered Certificate shall be properly
endorsed or otherwise be in proper form for transfer and (ii) the Person
requesting such payment of the Merger Consideration shall (A) pay to the
Paying Agent any transfer or other Taxes required as a result of such payment
to a Person other than the registered holder of such Certificate or (B)
establish to the reasonable satisfaction of Parent that such Tax either has
been paid or is not payable.
(d) After the Effective Time, there shall be no further registration
of transfers of shares of capital stock of the Company on the stock records
of, or relating to, the Company. If, after the Effective Time, Certificates
are presented to the Paying Agent, the Surviving Corporation or Parent, they
shall be canceled and exchanged for the Merger Consideration provided for, and
in accordance with the procedures and subject to the limitations set forth, in
this Article II.
(e) Parent shall cause the Paying Agent to invest any portion of the
Merger Consideration deposited with the Paying Agent in a money market fund
registered under the Investment Company Act of 1940, the principal of which is
invested solely in obligations issued or guaranteed by the United States
Government and repurchase agreements in respect of such obligations. Any
interest and other income resulting from such investment shall be the property
of, and shall be paid to, Parent. Any losses resulting from such investment
shall not in any way diminish Parent's and Merger Subsidiary's obligation to
pay the full amount of the Merger Consideration.
(f) Any portion of the Merger Consideration made available to the
Paying Agent pursuant to Section 2.3(a) that remains unclaimed by the holders
of shares of Company Common Stock one (1) year after the Effective Time shall
be returned to Parent and any such holder who has not exchanged such holder's
shares of Company Common Stock for the Merger Consideration in accordance with
this Section 2.3 prior to that time shall thereafter look only to Parent for
delivery of the Merger Consideration in respect of such holder's shares
without any interest thereon. Notwithstanding the foregoing, none of Parent,
the Surviving Corporation, the Company, the Paying Agent or their respective
Representatives shall be liable to any Person for any Merger Consideration
delivered to a public official pursuant to applicable abandoned property,
escheat or similar Laws. If any Certificate shall not have been surrendered
immediately prior to such date on which any Merger Consideration would
otherwise escheat to or become the property of any Governmental Authority, any
such Merger Consideration shall, to the extent permitted by applicable Law,
become the property of the Surviving Corporation, free and clear of all claims
or interests of any Person previously entitled thereto.
Section 2.4 Stock Options and Other Equity Awards.
(a) All stock options (the "Company Options") outstanding, whether or
not exercisable and vested, immediately prior to the Effective Time under the
Company's Equity Incentive Plan, amended and restated February 18, 2004, and
the Company's 1995 Director Stock Option Plan, amended as of November 29, 2001
(collectively, the "Company Stock Option Plans"), held by an option holder
shall, effective as of the Effective Time, be cancelled, subject to the
Company's receipt of any necessary waiver, consent or release from the holder
thereof to effectuate such cancellation, in exchange for a single lump sum
cash payment to the holder thereof from the Company to be made on the Closing
Date in an amount equal to the product of (i) the number of shares of Company
Common Stock subject to such Company Option immediately prior to the Effective
Time and (ii) the difference, if any, of the Merger Consideration less the per
share exercise price of such Company Option.
(b) Notwithstanding anything to the contrary contained in the Company
Stock Option Plans and Deferred Compensation Plans, immediately prior to the
Effective Time, each outstanding award, whether or not vested (other than the
Company Options which are addressed in Section 2.4(a) and Section 2.4(d))
under the Company Stock Option Plans and the Company Deferred Compensation
Plans that is denominated in Company Common Stock or Company Common Stock
units (including restricted stock, deferred stock and deferred stock units)
shall be cancelled for a payment to the holder thereof to be made on the
Closing Date in an amount equal to the product of (i) the number of shares of
Company Common Stock subject to such award and (ii) the Merger Consideration.
(c) Prior to the Closing Date, the Company will use its reasonable
best efforts to obtain all necessary waivers, consents or releases from
holders of Company Options in order to give effect to the transactions
contemplated by this Section 2.4.
(d) If the Company does not obtain any necessary waiver, consent or
release from a Company Option holder, then, by virtue of the Merger, each
Company Option held by such holder shall be converted, effective as of the
Effective Time, into an option to purchase shares of common stock, par value
$0.01 per share, of Parent ("Parent Common Stock") upon the same terms and
conditions as were in effect immediately prior to the Merger, except that the
number of shares subject to such option shall be multiplied by the Option
Exchange Ratio and the option price per share of such option shall be divided
by the Option Exchange Ratio.
Section 2.5 Adjustments. If, at any time during the period between
the date hereof and the Effective Time, any change in the outstanding shares
of Company Common Stock shall occur by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any similar transaction, or any stock dividend thereon with a
record date during such period, the Merger Consideration shall be
appropriately adjusted to provide the holders of shares of Company Common
Stock or Company Options the same economic effect as contemplated hereby prior
to such event.
Section 2.6 Withholding Rights. Each of the Company, the Surviving
Corporation, Parent and Paying Agent shall be entitled to deduct and withhold
from the consideration otherwise payable to any Person pursuant to this
Article II such amounts as it is required to deduct and withhold with respect
to the making of such payment under any provision of federal, state, local or
foreign Tax Law, including any withholding from any payment that is treated as
wages or compensation for the performance of services. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the Person in respect of
which such deduction and withholding was made.
Section 2.7 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming the Certificate to be lost, stolen or destroyed and, if
reasonably required by Parent or the Surviving Corporation, the posting by
that Person of a bond, in such reasonable amount as Parent or the Surviving
Corporation may direct or the delivery of an agreement of indemnification in
form reasonably satisfactory to Parent, as indemnity against any claim that
may be made against it with respect to such Certificate, the Paying Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration to be paid in respect of the shares of Company Common
Stock represented by such Certificate as contemplated by this Article II.
ARTICLE III
CERTAIN GOVERNANCE MATTERS
Section 3.1 Articles of Incorporation of the Surviving Corporation.
At the Effective Time and without any further action on the part of the
Company or Merger Subsidiary, the articles of incorporation of the Company in
effect at the Effective Time shall be the articles of incorporation of the
Surviving Corporation (until amended in accordance with applicable Law and as
provided in such articles of incorporation).
Section 3.2 Bylaws of the Surviving Corporation. At the Effective
Time and without any further action on the part of the Company or Merger
Subsidiary, the bylaws of the Company in effect at the Effective Time shall be
the bylaws of the Surviving Corporation (until amended in accordance with
applicable Law and as provided in such bylaws).
Section 3.3 Directors and Officers of the Surviving Corporation. From
and after the Effective Time, until successors are duly elected or appointed
and qualified in accordance with applicable Law and the organizational
documents of the Surviving Corporation, (a) the directors of the Company at
the Effective Time shall be the directors of the Surviving Corporation and (b)
the officers of the Company at the Effective Time shall be the officers of the
Surviving Corporation. Immediately after the Effective Time, Parent and the
Surviving Corporation shall take all action necessary to elect and/or appoint
as directors of the Surviving Corporation designees of Parent so that such
designees constitute the entire board of directors of the Surviving
Corporation immediately after the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the written disclosure letter delivered by the
Company to Parent in connection with the execution and delivery of this
Agreement (the "Company Disclosure Letter"), it being acknowledged and agreed
by Parent that any matter set forth in any section or subsection of the
Company Disclosure Letter shall be deemed to be a disclosure for all purposes
of this Agreement and all other sections or subsections of the Company
Disclosure Letter to which such matter could reasonably be expected to be
pertinent, but shall expressly not be deemed to constitute an admission by the
Company or any of its Subsidiaries, or otherwise imply, that any such matter
rises to the level of a Material Adverse Effect on the Company or is otherwise
material for purposes of this Agreement or the Company Disclosure Letter, the
Company hereby represents and warrants to Parent as follows:
Section 4.1 Organization and Qualification; Charter Documents.
(a) Each of the Company and its Subsidiaries is duly organized,
validly existing and in good standing (with respect to jurisdictions that
recognize such concept) under the laws of its jurisdiction of incorporation or
organization and has the requisite corporate power and corporate authority and
any necessary Company Permit to own, operate and lease the properties that it
purports to own, operate or lease and to carry on its business as it is being
conducted as of the date hereof, except for such failures to be in good
standing or to have corporate power, corporate authority or a Company Permit
that, individually or in the aggregate, have not resulted in or would not
reasonably be likely to have a Material Adverse Effect on the Company. Each of
the Company and its Subsidiaries is duly qualified or licensed to do business,
and is in good standing (with respect to jurisdictions that recognize such
concept), in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification or
licensure necessary, except for such failures to be so qualified or licensed
and in good standing that, individually or in the aggregate, have not resulted
in or would not reasonably be likely to have a Material Adverse Effect on the
Company. Section 4.1(a) of the Company Disclosure Letter sets forth a complete
list of the Company's Subsidiaries, together with the jurisdiction of
organization of each Subsidiary, as of the date hereof.
(b) The Company has made available to Parent prior to the execution
of this Agreement complete and correct copies of (i) the articles of
incorporation of the Company (including any certificates of designation), as
amended and currently in effect and the bylaws of the Company, as amended and
currently in effect (collectively, the "Company Organizational Documents"),
and (ii) the articles or certificate of incorporation and bylaws or similar
organizational documents of each of its Subsidiaries, as amended and currently
in effect (collectively, the "Company Subsidiary Organizational Documents").
Section 4.2 Corporate Authorization; Enforceability; Board Action.
(a) The Company has the requisite corporate power and authority to
enter into this Agreement and, subject to the satisfaction of the conditions
set forth in Section 7.1 and Section 7.2 hereof, to consummate the
transactions contemplated hereby (including the Merger). The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company and no other corporate proceedings on the
part of the Company are necessary to authorize the execution and delivery of
this Agreement or to consummate the Merger and the other transactions
contemplated hereby, subject in the case of the consummation of the Merger to
the affirmative vote of a majority of the votes that holders of the
outstanding shares of Company Common Stock are entitled to cast on the
approval and adoption of this Agreement and the transactions contemplated
hereby (including the Merger) in accordance with Section 180.1103 of the WBCL
(the "Company Shareholder Approval"). This Agreement has been duly executed
and delivered by the Company and, assuming due authorization, execution and
delivery of this Agreement by each of Parent and Merger Subsidiary,
constitutes a valid and binding agreement of the Company enforceable against
the Company in accordance with its terms, except to the extent that such
enforcement may be subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws, now or hereafter in effect,
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
(b) The Board of Directors of the Company, at a meeting duly called
and held, unanimously has (i) determined that this Agreement and the
transactions contemplated hereby (including the Merger) are advisable and in
the best interests of the Company and the Company's shareholders, (ii)
approved and adopted this Agreement and the transactions contemplated hereby
(including the Merger), (iii) resolved (subject to Section 6.5(b)) to
recommend that the Company's shareholders vote for the approval and adoption
of this Agreement and the transactions contemplated hereby (including the
Merger), and (iv) directed (subject to Section 6.5(b)) that this Agreement and
the Merger be submitted to its shareholders for consideration in accordance
with this Agreement. The Company will furnish to Parent within ten (10)
Business Days from the date hereof a certified copy of resolutions of the
Board of Directors of the Company approving and adopting this Agreement, the
Merger and the other transactions contemplated hereby.
(c) The Board of Directors of the Company, at a meeting duly called
and held, unanimously has resolved to, and has taken all action necessary to
render the Company Rights Agreement inapplicable to this Agreement, the Merger
and the other transactions contemplated hereby.
(d) No "fair price," "merger moratorium," "control share acquisition"
or other similar anti-takeover statute or regulation (including the provisions
of Sections 180.1130 to 180.1134 and Sections 180.1140 to 180.1144 of the
WBCL, inclusive) applies or purports to apply to the Company with respect to
this Agreement, the Merger or the other transactions contemplated hereby.
(e) The Company Shareholder Approval is the only vote of the holders
of any class or series of Company capital stock necessary to approve and adopt
this Agreement, approve the Merger and consummate the Merger and the other
transactions contemplated hereby.
Notwithstanding anything in this Agreement to the contrary, to the
extent the accuracy of the Company's representations and warranties set forth
in Sections 4.2(a), (d) and (e) is based on the accuracy of Parent's
representations and warranties in Section 5.8, the Company's representations
and warranties in such subsections of Section 4.2 shall be limited to the
extent affected by any inaccuracy in Section 5.8.
Section 4.3 Consents and Approvals; No Violations.
(a) Except as set forth in Section 4.3(a) of the Company Disclosure
Letter, the execution and delivery by the Company of this Agreement does not,
and the consummation by the Company of the Merger and the other transactions
contemplated hereby and compliance by the Company with any of the provisions
hereof will not, conflict with or result in any violation or breach of, or
default (with or without notice or lapse of time, or both) under, (i) the
articles of incorporation or bylaws of the Company or the similar
organizational documents of any of its Subsidiaries, (ii) assuming compliance
with the matters referred to in Section 4.3(b) below, any Contract to which
the Company or any of its Subsidiaries is a party or any of their respective
properties or other assets is subject or (iii) assuming compliance with the
matters referred to in Section 4.3(b) below, any Law applicable to the Company
or any of its Subsidiaries, other than, in the case of clauses (ii) and (iii),
any such conflicts, violations, breaches or defaults that, individually or in
the aggregate, would not be reasonably likely to (A) have a Material Adverse
Effect on the Company or (B) prevent or materially delay the consummation of
any of the transactions contemplated hereby.
(b) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby (including the Merger) require no action by or filing with, any
Governmental Authority other than (i) the filing of articles of merger in
connection with the Merger in accordance with the WBCL, (ii) compliance with
any applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx"), (xxx) compliance with any applicable requirements
of the Securities Exchange Act of 1934 (the "Exchange Act"), (iv) compliance
with any applicable requirements of the Securities Act of 1933 (the
"Securities Act"), (v) those set forth in Section 4.3(b) of the Company
Disclosure Letter and (vi) such other filings, consents and/or approvals that,
individually or in the aggregate, would not reasonably be likely to have a
Material Adverse Effect on the Company.
Section 4.4 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
50,000,000 shares of Company Common Stock of which, as of September 10, 2004,
13,683,383 shares (including shares of restricted stock) are issued and
outstanding and (ii) 500,000 shares of preferred stock, no par value, of
which, as of the date hereof, none were issued and outstanding and 10,000
shares of which have been designated as Series B Junior Cumulative Preferred
Stock, of which 5,000 shares are reserved for issuance upon the exercise of
preferred share purchase rights (the "Company Rights") issued pursuant to the
Rights Agreement, dated as of August 9, 2001, between the Company and Firstar
Bank, N.A. (with LaSalle Bank, N.A. as successor rights agent), amended as of
February 1, 2002 and June 4, 2002 (the "Company Rights Agreement"). As of
September 10, 2004, there were 2,970,932 shares of Company Common Stock held
in treasury. As of September 10, 2004, there were (I) Company Options to
purchase in the aggregate 2,419,262 shares of Company Common Stock
outstanding, all of which were granted under Company Stock Option Plans, (II)
20,700 shares of restricted Company Common Stock, all of which were granted
under Company Stock Option Plans and (III) 9,178.69 deferred stock units and
73,506 shares of deferred stock of the Company issuable pursuant to the
Company Deferred Compensation Plans. Section 4.4(a) of the Company Disclosure
Letter sets forth a list of all Company Options outstanding as of September
10, 2004, including the name of the holder of each such Company Option, the
number of shares of Company Common Stock subject thereto and the exercise
price thereof. All the outstanding shares of the Company's capital stock are,
and all shares that may be issued pursuant to the exercise of outstanding
Company Options pursuant to the Company Stock Option Plans will be, when
issued in accordance with the respective terms and conditions thereof, duly
authorized, validly issued, fully paid and nonassessable (subject in the case
of nonassessability to Section 180.0622(2)(b) of the WBCL, as judicially
interpreted, to the extent applicable). There are no debentures, notes or
other indebtedness having voting rights with respect to matters generally
submitted to the shareholders of the Company (or convertible into securities
having such rights) of the Company or any of its Subsidiaries issued and
outstanding. Except as set forth above or in Section 4.4(a) of the Company
Disclosure Letter and except for the transactions provided for in this
Agreement, as of the date hereof, (i) there are no shares of capital stock of
the Company authorized, issued or outstanding and (ii) there are no existing
options, warrants, calls, pre-emptive rights, subscriptions, convertible
securities, agreements or commitments obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock of, or other equity interest in, the Company
or any of its Subsidiaries or securities convertible into or exchangeable for
such shares or equity interests or obligations of the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
pre-emptive right, subscription, convertible security, agreement or
commitment. Except as set forth in Section 4.4(a) of the Company Disclosure
Letter, there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company Common
Stock or other capital stock of the Company or any of its Subsidiaries or to
provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any of its Subsidiaries or any other Person
other than with respect to any such other Person any investment (I) undertaken
as part of or in connection with the Company's or one of its Subsidiary's
investment portfolios to the extent permitted by the Company's investment
policy in effect on the date hereof or (II) not exceeding an unsatisfied
aggregate commitment after the date hereof of $500,000 by the Company or any
of its Subsidiaries, nor has the Company or any of its Subsidiaries granted or
agreed to grant to any Person any stock appreciation rights or similar
equity-based rights. Except as permitted hereby, following the Merger, neither
the Company nor any of its Subsidiaries will have any obligation to issue,
transfer or sell any shares of its capital stock pursuant to any employee
benefit plan or otherwise.
(b) Except as set forth in Section 4.4(b) of the Company Disclosure
Letter, all of the outstanding capital stock of, or other ownership interests
in, each Subsidiary of the Company is, directly or indirectly, owned by the
Company, and all such capital stock has been validly issued and is fully paid
and nonassessable (subject in the case of nonassessability to Section
180.0622(2)(b) of the WBCL, as judicially interpreted, to the extent
applicable), and owned by either the Company or one of its Subsidiaries free
and clear of all Liens. No Subsidiary of the Company owns any shares of
capital stock of the Company.
(c) There are no voting trusts or other agreements or understandings
to which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its Subsidiaries.
Section 4.5 SEC Filings and Financial Statements.
(a) The Company has filed with, or furnished to, the SEC, all Company
SEC Documents. Except as set forth in Section 4.5(a) of the Company Disclosure
Letter, as of their respective dates or, if amended or supplemented, as of the
date of the last such amendment or supplement, the Company SEC Documents (i)
did not 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 light of the circumstances under which they were made,
not misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be.
Each of the consolidated financial statements included in the Company SEC
Documents have been prepared from, and are in accordance with, the books and
records of the Company and its consolidated Subsidiaries and comply, as of
their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except as may be indicated in the notes thereto) and fairly present
in all material respects the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof or for the
periods presented therein (subject, in the case of any unaudited interim
financial statements, to normal and recurring year-end adjustments that,
individually or in the aggregate, would not reasonably be likely to have a
Material Adverse Effect on the Company).
(b) The annual statements for the fiscal years ended December 31,
2003 and December 31, 2002, and the quarterly statements for the periods ended
March 31, 2004 and June 30, 2004 of United Wisconsin Life Insurance Company
and American Medical Security Insurance Company of Georgia filed with the
insurance regulatory authorities of the states of Wisconsin and Georgia,
respectively ("Company State Regulatory Filings"), copies of which have been
made available to Parent prior to the date hereof, fairly present in all
material respects each such Subsidiary's respective financial condition as of
the dates thereof and their respective results of operations and cash flows
for the periods then ended in conformity with SAP, except as may be reflected
in the notes thereto and subject to normal year-end adjustments. The other
information contained in such annual statements presents in all material
respects the information required to be contained therein in conformity with
SAP consistently applied.
(c) Neither the Company nor any of its Subsidiaries is a party to, or
as of the date hereof has any commitment to become a party to, any joint
venture, partnership or any "off-balance sheet arrangement" as defined in Item
303(a) of Regulation S-K under the Exchange Act, where the result, purpose or
intended effect of such Contract or arrangement is to avoid disclosure of any
material transaction involving, or material liabilities of, the Company or any
of its Subsidiaries in the Company SEC Documents.
(d) The Company has established and maintained disclosure controls
and procedures (as such term is defined in Rule 13a-15(e) under the Exchange
Act) as required by Rule 13a-15 under the Exchange Act. The Company's
disclosure controls and procedures are reasonably designed to ensure that all
material information required to be disclosed by the Company in the reports
that it files or furnishes under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the SEC, and that all such material information is accumulated and
communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications
required pursuant to Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002
(the "Xxxxxxxx-Xxxxx Act").
(e) The Company and each of its Subsidiaries maintains a system of
internal accounting controls sufficient to comply in all material respects
with the legal and accounting requirements applicable to the Company and such
Subsidiaries.
(f) The Company has not, in violation of the Xxxxxxxx-Xxxxx Act,
including through a Subsidiary, extended or maintained credit, arranged for
the extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the Company.
Section 4.6 Absence of Certain Changes. Except for the matters
contemplated hereby or as set forth in Section 4.6 of the Company Disclosure
Letter, since July 1, 2004 through the date hereof, the Company and its
Subsidiaries have conducted their respective businesses and operations in the
ordinary course of business and there has not occurred (i) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to the equity interests of the Company
or of any of its Subsidiaries other than dividends paid to the Company or any
of its Subsidiaries by a wholly-owned Subsidiary or (ii) any change by the
Company or any of its Subsidiaries in accounting principles or methods
materially affecting the consolidated financial position or results of
operations of the Company, except insofar as may have been required by a
change in GAAP or applicable Law. Except for the matters contemplated hereby
or as set forth in Section 4.6 of the Company Disclosure Letter, since July 1,
2004, there has not occurred any fact, event, circumstance, change or effect
(including the incurrence of any Liabilities outside the ordinary course of
business) that has had, or would reasonably be likely to have, individually or
in the aggregate, a Material Adverse Effect on the Company.
Section 4.7 Undisclosed Liabilities. Since July 1, 2004, neither the
Company nor any of its Subsidiaries has incurred any Liabilities that would be
required by GAAP or SAP to be set forth on a consolidated balance sheet or
notes thereto of the Company and its consolidated Subsidiaries, except for (a)
Liabilities set forth in Section 4.7 of the Company Disclosure Letter, (b)
Liabilities incurred since July 1, 2004, which, individually or in the
aggregate, would not reasonably be likely to have a Material Adverse Effect on
the Company, (c) Liabilities under Company Contracts, (d) Liabilities incurred
pursuant to Client Contracts and (e) Liabilities incurred pursuant to this
Agreement or the transactions contemplated hereby.
Section 4.8 Litigation.
(a) Except as set forth in Section 4.8(a) of the Company Disclosure
Letter, as of the date hereof, there is no litigation, suit, action, claim,
investigation or other proceeding (each, a "Litigation") by or before any
Governmental Authority pending or, to the knowledge of the Company, threatened
in writing against or affecting the Company or any of its Subsidiaries, except
for such Litigations that, individually or in the aggregate, would not
reasonably be likely to have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 4.8(b) of the Company Disclosure
Letter, as of the date hereof, there are no judgments, injunctions, writs,
orders or decrees binding on the Company or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be likely to have a
Material Adverse Effect on the Company.
Section 4.9 Compliance with Laws.
(a) Except as set forth in Section 4.9(a) of the Company Disclosure
Letter, the Company and each of its Subsidiaries are, and have been at all
times since January 1, 2001, in compliance with all applicable Laws, except to
the extent that the failure to be in compliance with such Laws has not had,
and would not, individually or in the aggregate, reasonably be likely to have,
a Material Adverse Effect on the Company.
(b) Except as set forth in Section 4.9(b) of the Company Disclosure
Letter or as would not, individually or in the aggregate, reasonably be likely
to have a Material Adverse Effect on the Company, (i) all Company Permits are
valid and in full force and effect, (ii) neither the Company nor any of its
Subsidiaries is in default under, or in violation of, any Company Permit and,
to the knowledge of the Company, no event has occurred or condition exists
which constitutes or, that with notice or lapse of time or both, would
constitute, a default under, or violation of, any material Company Permit,
(iii) none of the Company Permits shall be terminated or impaired or become
terminable in whole or in part as a result of the transactions contemplated
hereby and (iv) all applications required to have been filed since January 1,
2001 for the renewal of any Company Permits have been duly filed on a timely
basis (after giving effect to any grace periods or extensions) with the
appropriate Governmental Authorities.
(c) Except as set forth in Section 4.9(c) of the Company Disclosure
Letter, since January 1, 2001 through the date hereof, to the knowledge of the
Company, neither the Company nor any of its Subsidiaries has (i) received any
written notice, or become a party to any enforcement action, administrative
order or decree, stipulation, injunction or market conduct examination issued
by or from any Governmental Authority, that (x) alleges any noncompliance (or
that the Company or any of its Subsidiaries is under investigation or the
subject of an inquiry by any such Governmental Authority for such alleged
noncompliance) with any applicable Law or (y) would reasonably be likely to
result in a fine, assessment or cease and desist order, or the suspension,
revocation, limitation or restriction of any Company Permit, except in the
case of clause (x) or (y) as would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect on the Company, and
(ii) entered into any material agreement or material settlement with any
Governmental Authority with respect to its actual or alleged material
non-compliance with, or violation of, any applicable Law.
(d) Except as set forth in Section 4.9(d) of the Company Disclosure
Letter, since January 1, 2001, the Company and each of its Subsidiaries has
timely filed (after giving effect to any grace periods or extensions) all
material regulatory reports, schedules, statements and other documents,
together with any amendments required to be made with respect thereto, that
each was required to file with any Governmental Authority (the "Company
Regulatory Filings"), including state health and insurance regulatory
authorities and any applicable federal regulatory authorities, and have timely
paid all material fees and assessments due and payable in connection
therewith. Since January 1, 2001, all Company Regulatory Filings complied in
all material respects with applicable Law in effect when filed and no material
deficiencies have been asserted in writing by any such regulatory authority
with respect to Company Regulatory Filings that have not been satisfied or are
being disputed in good faith.
(e) The Company and its Subsidiaries are, and the Company's and its
Subsidiaries' businesses are being conducted, in compliance in all material
respects with the Health Insurance Portability and Accountability Act of 1996.
Section 4.10 Reserves. The loss reserves contained in the Company
State Regulatory Filings for claims, benefits and any other liabilities under
Insurance Contracts, Health Plan Contracts and Provider Contracts (a) were
determined in all material respects in accordance with generally accepted
actuarial principles, consistently applied (except as otherwise noted in such
financial statements), and (b) are based on actuarial assumptions that are in
accordance with those called for by the provisions of the related Contracts.
Section 4.11 Employee Benefit Plans.
(a) Section 4.11(a) of the Company Disclosure Letter contains a true
and complete list of each deferred compensation, incentive compensation,
equity compensation plan, "welfare" plan, fund or program (within the meaning
of Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); "pension" plan, fund or program (within the meaning of
Section 3(2) of ERISA); each employment, termination or severance agreement;
and each other material employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by the Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA, or to which the Company or an ERISA Affiliate is party, for
the benefit of any employee, consultant or director of the Company or any
Subsidiary (the "Company Employee Plans"). No Company Employee Plan is subject
to Title IV of ERISA (a "Title IV Plan"). With respect to each Company
Employee Plan, the Company has heretofore delivered or made available to
Parent true and complete copies of the Company Employee Plan and any
amendments thereto (or if the Company Employee Plan is not a written plan, a
description thereof), any related trust or other funding vehicle, and the most
recent determination letter received from the Internal Revenue Service with
respect to each Company Employee Plan intended to qualify under Section 401 of
the Code.
(b) No material liability under Title IV or Section 302 of ERISA has
been incurred by the Company or by any ERISA Affiliate that has not been
satisfied in full, and neither the Company nor any ERISA Affiliate made, or
was required to make, contributions to any Title IV Plan during the five (5)
year period ending on the last day of the most recent Title IV Plan year ended
prior to the Closing Date.
(c) Each Company Employee Plan has been operated and administered in
all material respects in accordance with its terms and applicable Law,
including ERISA and the Code.
(d) Each Company Employee Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the
Code.
(e) Except as set forth in Section 4.11(e) of the Company Disclosure
Letter, there are no pending or, to the knowledge of the Company, threatened
or anticipated material claims by or on behalf of any Company Employee Plan,
by any Person or beneficiary covered under any such Company Employee Plan, or
otherwise involving any such Company Employee Plan (other than routine claims
for benefits).
(f) Except as set forth in Section 4.11(f) of the Company Disclosure
Letter, no Company Employee Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for periods extending
beyond retirement or other termination of service, other than (i) coverage
mandated by applicable Law, (ii) death benefits under any "pension plan,"
(iii) as part of benefits under Severance Agreements or (iv) benefits the full
cost of which is borne by the current or former participant (or his or her
beneficiary).
(g) Except as set forth in Section 4.11(g) of the Company Disclosure
Letter, the consummation of the transactions contemplated hereby will not,
either alone or in combination with another event, (i) entitle any current or
former employee, officer, director or consultant of the Company or any ERISA
Affiliate to severance pay or other severance benefits or (ii) accelerate the
time of payment or vesting, or increase the amount of compensation or benefits
due any such employee or officer.
(h) Except as set forth in Section 4.11(h) of the Company Disclosure
Letter, (i) no work stoppage, slowdown, lockout, labor strike, or material
arbitrations against the Company or any of its Subsidiaries are pending or, to
the knowledge of the Company, threatened, (ii) no unfair labor practice
charges, grievances or complaints are pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, except as
would not, individually or in the aggregate, reasonably be likely to have a
Material Adverse Effect on the Company, (iii) neither the Company nor any of
its Subsidiaries is delinquent in payments to any of its employees for any
wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it or amounts required to be reimbursed to such
employees, (iv) as of the date hereof, no employee of the Company at the
officer level or above has given written notice to the Company or any of its
Subsidiaries that any such employee intends to terminate his or her employment
with the Company or any of its Subsidiaries and (v) neither the Company nor
any of its Subsidiaries is a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating to employees
or employment practices, except for any citation that has been satisfied.
(i) Neither the Company nor any of its Subsidiaries is a party to, or
otherwise bound by, any collective bargaining agreement or any other
agreement, work rules or practices with a labor union, labor organization or
works council, nor are any such agreements, work rules or practices being
negotiated as of the date hereof. None of the employees of the Company or any
of its Subsidiaries is represented by any labor union, labor organization or
works council in his or her capacity as an employee of the Company or any of
its Subsidiaries. As of the date hereof, no labor union, labor organization or
works council or group of employees of the Company or any of its Subsidiaries
has made a pending demand for recognition or certification to the Company or
any of its Subsidiaries, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or, to the knowledge of the Company, threatened to be brought or filed with
any Governmental Authority or any labor relations tribunal or authority. To
the knowledge of the Company, as of the date hereof, no labor union, labor
organization or works council is seeking to organize any employees of the
Company or any of its Subsidiaries.
Section 4.12 Taxes.
(a) Except as set forth in Section 4.12(a) of the Company Disclosure
Letter, all federal, state, local and foreign Tax Returns required to be filed
by or on behalf of the Company, each of its Subsidiaries, and each affiliated,
combined, consolidated or unitary group of which the Company or any of its
Subsidiaries is a member (a "Company Affiliated Group") have been timely filed
or requests for extensions have been timely filed and any such extension shall
have been granted and shall not have expired, and all such filed Tax Returns
are true, complete and accurate in all material respects. All Taxes due and
owing by the Company, any Subsidiary of the Company or any Company Affiliated
Group have been paid, or adequately reserved for, except to the extent any
failure to pay or reserve would not reasonably be likely to have, individually
or in the aggregate, a Material Adverse Effect on the Company. Except as set
forth in Section 4.12(a) of the Company Disclosure Letter, there is no audit,
examination, deficiency, refund litigation or proposed adjustment in writing
with respect to any Taxes due and owing by the Company, any Subsidiary of the
Company or any Company Affiliated Group, which, if determined adversely, would
reasonably be likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company. All assessments for Taxes due and owing by the
Company, any Subsidiary of the Company or any Company Affiliated Group with
respect to completed and settled examinations or concluded litigation have
been paid. The Company and each of its Subsidiaries have complied in all
material respects with all rules and regulations relating to the withholding
of Taxes.
(b) Except as set forth in Section 4.12(b) of the Company Disclosure
Letter or as would not, individually or in the aggregate, reasonably be likely
to have a Material Adverse Effect on the Company, neither the Company nor any
Subsidiary of the Company has (i) entered into a closing agreement or other
similar agreement with a taxing authority relating to Taxes of the Company or
any Subsidiary of the Company with respect to a taxable period for which the
statute of limitations is still open or (ii) granted any consent to extend any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax, in either case, that is still outstanding. There are
no Liens relating to Taxes upon the assets of the Company or any Subsidiary of
the Company other than Liens relating to current Taxes not yet due and
payable.
Section 4.13 Contracts.
(a) Except as set forth in Section 4.13(a) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or bound
by, as of the date hereof, any Company Contract (as defined in Section
4.13(c)) that is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) (each an "SEC Material Company
Contract").
(b) Prior to the date hereof, the Company has made available to
Parent or Parent's Representatives true and correct copies of forms of (i) a
sampling of relevant Health Plan Contracts (and related application and
enrollment forms), (ii) the top twenty (20) Provider Contracts ranked by
number of Health Plan Members utilizing the PPO and (iii) a sampling of
relevant ASO Contracts used in the business of the Company and/or its
Subsidiaries as of the date hereof. Except as set forth in Section 4.13(b) of
the Company Disclosure Letter, if required, each such form and any rates
applicable thereto have been appropriately and timely filed and, if required,
approved by applicable Governmental Authorities and otherwise conform, in all
material respects, to the requirements of applicable Laws, except as would
not, individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect on the Company.
(c) Except as set forth in Section 4.13(c) of the Company Disclosure
Letter, or as would not, individually or in the aggregate, reasonably be
likely to have a Material Adverse Effect on the Company, each Company Contract
is a legal, valid and binding obligation of the Company or a Company
Subsidiary party thereto and, to the knowledge of the Company, each other
party thereto, and is in full force and effect in accordance with its terms
except to the extent that such enforcement may be subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now
or hereafter in effect, affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity). For purposes of this Agreement, the term
"Company Contracts" means, collectively, all Material Company Contracts,
Provider Contracts and other Contracts to which the Company or any of its
Subsidiaries is a party (without regard to any dollar or materiality
thresholds); provided that "Company Contracts" shall not include any Client
Contract. The Company and each of its Subsidiaries have performed all
obligations required to be performed by them under each Company Contract and,
to the knowledge of the Company, each other party to each Company Contract has
performed all obligations required to be performed by it under such Company
Contract, except, in each case of the Company or its Subsidiaries or each such
other party, as would not, individually or in the aggregate, reasonably be
likely to have a Material Adverse Effect on the Company.
(d) Since January 1, 2001 through the date hereof, to the knowledge
of the Company, (i) neither the Company nor any of its Subsidiaries has
received written notice of any violation or default under any Material Company
Contract to which it is a party and (ii) there is no such written threat of a
violation or default by the Company or any of its Subsidiaries, as the case
may be, or written threat of a violation or default by any other party to a
Material Company Contract that has been received by the Company or one of its
Subsidiaries, except in the case of clause (i) or (ii) for violations or
defaults or threats of violations or defaults that, individually or in the
aggregate, would not reasonably be likely to have a Material Adverse Effect on
the Company.
(e) The Company has made available to Parent prior to the date hereof
true and complete copies of the Material Company Contracts, except for
reinsurance arrangements not in force as of the date hereof.
Section 4.14 Intellectual Property.
(a) As used herein: (i) "Intellectual Property" means all U.S. and
foreign (A) trademarks, service marks, trade names, Internet domain names,
designs, logos, slogans and general intangibles of like nature, together with
goodwill, registrations and applications related to the foregoing
("Trademarks"), (B) patents and pending patent applications ("Patents"), (C)
registered and unregistered copyrights and all registrations and applications
to register the same ("Copyrights"), (D) trade secrets, including confidential
information, technology, know-how, inventions, processes, formulae,
algorithms, models and methodologies and (E) Software; and (ii) "Company
Intellectual Property" means the Intellectual Property and Software used in
the business of the Company or any of its Subsidiaries as presently conducted.
(b) Except as set forth in Section 4.14(b) of the Company Disclosure
Letter or as would not, individually or in the aggregate, reasonably be likely
to have a Material Adverse Effect on the Company, to the knowledge of the
Company:
(i) All material Trademark and Copyright regulations and all
material Patents owned by the Company and its Subsidiaries are in
full force and effect and have not lapsed, expired or been abandoned,
and are not the subject of any opposition filed with the United
States Patent and Trademark Office or any other intellectual property
registry.
(ii) No claims are currently pending against the Company or
any of its Subsidiaries and, to the knowledge of Company, no threat
of a claim has been asserted in writing by any Third Party against
the Company or any of its Subsidiaries since January 1, 2001, in each
case related to the use in the conduct of the businesses of the
Company and its Subsidiaries of Company Intellectual Property.
(iii) The conduct of the businesses of the Company and its
Subsidiaries does not infringe, misappropriate or otherwise violate
any material Intellectual Property rights of any Third Party.
(iv) No Third Party is infringing any material Intellectual
Property owned by the Company or its Subsidiaries.
Section 4.15 Properties and Assets.
(a) Section 4.15(a) of the Company Disclosure Letter sets forth the
address or other description of each parcel of real property owned by the
Company or its Subsidiaries (collectively, the "Owned Real Property"). Except
as set forth in Section 4.15(a) of the Company Disclosure Letter and subject
to any Permitted Liens, (i) the Company or one of its Subsidiaries has good
and merchantable title to the Owned Real Property and to all of the buildings,
structures and other improvements located thereon, (ii) the Company and its
Subsidiaries have not leased, licensed or, to the knowledge of the Company,
otherwise granted any Person the right to use or occupy such Owned Real
Property or any portion thereof and (iii) the Company and its Subsidiaries
have not collaterally assigned or granted any other security interest in such
Owned Real Property. The Owned Real Property constitutes all of the real
property owned by the Company and its Subsidiaries.
(b) Section 4.15(b) of the Company Disclosure Letter lists, as of the
date hereof, each parcel of all leasehold or subleasehold estates and other
rights to use or occupy any land, buildings or structures used by the Company
or its Subsidiaries in the course of their respective businesses (the "Leased
Real Property"). Prior to the date hereof, the Company has made available to
Parent a true and complete schedule of the Leases. Except as set forth in
Section 4.15(b) of the Company Disclosure Letter or as, individually or in the
aggregate, would not reasonably be likely to have a Material Adverse Effect on
the Company, (i) the Company and its Subsidiaries have not subleased or
licensed to any Person the right to use or occupy such Leased Real Property or
any portion thereof, (ii) to the knowledge of the Company, there are no
disputes with respect to such Lease, (iii) the Company and its Subsidiaries
have not collaterally assigned or granted any other security interest in such
Lease or any interest therein and (iv) there are no Liens, except for
Permitted Liens, on the estate or interest created by such Lease.
(c) Since January 1, 2001 through the date hereof, (i) no written
notice from any Governmental Authority has been received by the Company or any
of its Subsidiaries requiring or calling attention to the need for any
material work, repair, construction, alteration or installation on, or in
connection with, the Owned Real Property or the Leased Real Property, and (ii)
no material assessment for public improvement that is due and remains unpaid
has been made against any Owned Real Property or Leased Real Property and, to
the knowledge of the Company, there are no currently proposed or pending
assessments for public improvements against any Owned Real Property or Leased
Real Property.
(d) The Company and its Subsidiaries have good title to their owned
assets, or in the case of assets and properties that they lease, license or
have other rights in, valid rights by lease, license or other agreement to
use, all assets and properties (in each case, tangible and intangible)
necessary to permit the Company and its Subsidiaries to conduct their business
as currently conducted, except where the failure to have such title, or rights
by lease, license, or other agreement to use would not reasonably be likely to
have a Material Adverse Effect on the Company. The assets and properties (in
each case, tangible and intangible) owned or used by the Company and its
Subsidiaries are in satisfactory condition and repair for their continued use
as they have been used and are adequate in all material respects for their
current use, reasonable wear and tear excepted, except where the failure to be
in satisfactory condition and repair would not reasonably be likely to have a
Material Adverse Effect on the Company.
Section 4.16 Environmental Matters.
(a) The Company and its Subsidiaries are, and have been since January
1, 2001, in compliance with all Environmental Laws, including possessing all
material Company Permits required for its operations under applicable
Environmental Laws, except for non-compliance that, individually or in the
aggregate, would not reasonably be likely to have a Material Adverse Effect on
the Company.
(b) Neither the Company nor any of its Subsidiaries has received
written notice of, and, to the knowledge of the Company, is not the subject
of, any actions, claims, investigations, demands, requests for information,
citation, complaint or notices by any person alleging Liability arising under,
or non-compliance with any Environmental Law that would reasonably be likely
to have a Material Adverse Effect on the Company.
(c) With respect to any Owned Real Property or Leased Real Property
currently or formerly owned or leased, as the case may be, by the Company or
its Subsidiaries there have been no Releases of Hazardous Materials that have
or are reasonably likely to result in a claim against the Company or any of
its Subsidiaries that would reasonably be expected to have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries has
entered into any agreement that may require them to pay to, reimburse,
guarantee, pledge, defend, indemnify or hold harmless any Person from or
against any Liabilities arising out of or related to the generation,
manufacture, use, transportation or disposal of Hazardous Materials, or
otherwise arising in connection with or under Environmental Laws, except as
would not reasonably be likely to have a Material Adverse Effect on the
Company.
Section 4.17 Transactions with Affiliates. Except as set forth in
Section 4.17 of the Company Disclosure Letter, since January 1, 2001, there
has been no transaction, or series of similar transactions, agreements,
arrangements or understandings, nor are there any currently proposed
transactions, or series of similar transactions, agreements, arrangements or
understandings to which the Company or any of its Subsidiaries was or is to be
a party, that would be required to be disclosed under Item 404 of Regulation
S-K promulgated under the Securities Act.
Section 4.18 Insurance Issued by the Insurance Companies. To the
knowledge of the Company:
(a) Except as is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on the Company, all benefits claimed
by any Person under any Insurance Contract have in all material respects been
paid in accordance with the terms of the Insurance Contracts under which they
arose, such payments were not materially delinquent and were paid (or will be
paid) without fines or penalties (excluding any statutorily imposed interest
for payments after a specified time period), except for any such claim for
benefits for which the Company believes there is a reasonable basis to contest
payment and is taking such action.
(b) Except as is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on the Company, each insurance agent
or broker, at the time such agent or broker wrote, sold or produced Insurance
Products, to the extent required by applicable Law, was duly appointed by the
applicable Subsidiary of the Company to act as an agent for such Subsidiary of
the Company and was duly licensed as an insurance agent or broker (for the
type of business written, sold or produced by such insurance agent or broker)
in the particular jurisdiction in which such agent or broker wrote, sold or
produced such business for such Subsidiary of the Company.
Section 4.19 Insurance.
(a) Section 4.19(a) of the Company Disclosure Letter sets forth a
list of, and true and complete copies of, all material insurance policies and
fidelity bonds in effect as of the date hereof issued by Third Parties to the
Company (excluding any reinsurance and policies issued to Third Parties where
the Company or its Subsidiaries are an additional named insured) relating to
the assets, business, operations, employees, directors or officers of the
Company and its Subsidiaries. All premiums payable under all such policies and
bonds have been timely paid and the Company and its Subsidiaries have
otherwise complied in all material respects with the terms and conditions of
all such policies and bonds. Such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage) have
been in effect since January 1, 2001 and remain in full force and effect.
(b) All reinsurance Contracts relating to the business of the Company
and its Subsidiaries are in full force and effect in accordance with their
terms and neither the Company nor any of Subsidiaries is in breach of any
material provision thereof and, to the knowledge of the Company, no other
party to such reinsurance agreements is in breach of any provision thereof. To
the knowledge of the Company, there is no event that has occurred that, with
the passage of time or the giving of notice, or both, would create a default
or breach by the Company or any of its Subsidiaries under any reinsurance
Contracts.
Section 4.20 Adverse Communications. Except as set forth in Section
4.20 of the Company Disclosure Letter, since January 1, 2001 through the date
hereof, neither the Company nor any of its Subsidiaries has received any
written communication from any agent or broker which generates for the
Company's insurance subsidiaries, either directly or indirectly, more than
$25,000,000 in annual gross written premium, which communication cancelled,
gave notice of cancellation or threatened cancellation of, the relationship
between it and such Company insurance subsidiary.
Section 4.21 Capital or Surplus Maintenance. None of the Company's
Subsidiaries is subject to any requirement to maintain capital or surplus
amounts or levels, or is subject to any restriction on the payment of
dividends or other distributions on its shares of capital stock, except (a)
for any such requirements or restrictions under applicable Laws, (b) to
maintain the Company's ratings pursuant to applicable guidelines of rating
agencies or (c) as required by the terms of the Company's credit facility in
place on the date hereof.
Section 4.22 Disclosure Documents. The Proxy Statement at the date
first mailed to the shareholders of the Company, at the time of the Company
Shareholder Meeting and at the time filed with the SEC, as the case may be,
will 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 are made,
not misleading; provided, however, that no representation is made by the
Company with respect to statements made therein based on information supplied
by or on behalf of Parent or Merger Subsidiary for inclusion or incorporation
by reference in such documents. The Proxy Statement will comply in all
material respects with the provisions of the Exchange Act.
Section 4.23 Opinions of Financial Advisors. The Company has received
the opinions of X.X. Xxxxxx Securities Inc. ("JPMorgan") and Xxxxxxxx Xxxxx
Xxxxxx & Xxxxx Financial Advisors, Inc. ("Houlihan"), which opinions will be
delivered to the Board of Directors of the Company in written form dated the
date hereof, to the effect that, as of the date of their respective opinions,
the Merger Consideration is fair from a financial point of view to the holders
of Company Common Stock.
Section 4.24 Finders' or Advisors' Fees. Except for JPMorgan and
Xxxxxxxx, there is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of the Company or
any of its Subsidiaries who is entitled to any fee or commission in connection
with the transactions contemplated hereby. The Company has provided Parent a
summary of the economic terms of the agreement between the Company and XX
Xxxxxx pursuant to which such firm would be entitled to any payment relating
hereto in connection with the Merger or the other transactions contemplated
hereby; and such agreement is the only agreement providing for the payment of
any consideration to XX Xxxxxx with respect hereto in connection with the
Merger or the other transactions contemplated hereby. The Company has provided
Parent a summary of the economic terms of the agreement between the Company
and Xxxxxxxx pursuant to which such firm would be entitled to any payment
relating hereto in connection with the Merger or the other transactions
contemplated hereby and such agreement is the only agreement providing for the
payment of any consideration to Xxxxxxxx with respect hereto in connection
with the Merger or the other transactions contemplated hereby.
Section 4.25 Rating Matter. Except as set forth in Section 4.25 of
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
has used a tier rating renewal methodology (or any other renewal rating
methodology applying a rating factor to specific individuals based on changes
in their individual health status) as a basis for adjusting premium rates in
whole or in part for any Insurance Product renewed or reinstated on or after
January 1, 2003.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Except as set forth in (i) the written disclosure letter delivered by
Parent and Merger Subsidiary to the Company in connection with the execution
and delivery of this Agreement (the "Parent Disclosure Letter"), it being
acknowledged and agreed by the Company that any matter set forth in any
section or subsection of the Parent Disclosure Letter shall be deemed to be a
disclosure for all purposes of this Agreement and all other sections or
subsections of the Parent Disclosure Letter to which such matter could
reasonably be expected to be pertinent, but shall expressly not be deemed to
constitute an admission by Parent or any of its Subsidiaries, or otherwise
imply, that any such matter rises to the level of a Material Adverse Effect on
Parent or is otherwise material for purposes of this Agreement or the Parent
Disclosure Letter or (ii) with respect to Sections 5.4, 5.5 and 5.6, in or,
incorporated by reference in, the Parent SEC Documents, Parent and Merger
Subsidiary jointly and severally hereby represent and warrant to the Company
as follows:
Section 5.1 Organization and Qualification; Charter Documents.
(a) Each of Parent and Merger Subsidiary is a corporation duly
organized, validly existing and in good standing (with respect to
jurisdictions that recognize such concept) under the laws of its jurisdiction
of incorporation or organization and has the requisite corporate power and
corporate authority and any necessary Parent Permit to own, operate and lease
the properties that it purports to own, operate or lease and to carry on its
business as it is being conducted as of the date hereof, except for such
failures to be in good standing or to have corporate power, corporate
authority or a Parent Permit that, individually or in the aggregate, have not
resulted in or would not reasonably be likely to have a Material Adverse
Effect on Parent. Each of Parent and Merger Subsidiary is duly qualified or
licensed to do business, and is in good standing (with respect to
jurisdictions that recognize such concept), in each jurisdiction where the
character of its properties owned, operated or leased or the nature of its
activities makes such qualification or licensure necessary, except for such
failures to be so qualified or licensed and in good standing that,
individually or in the aggregate, have not resulted in or would not reasonably
be likely to have a Material Adverse Effect on Parent.
(b) Parent and Merger Subsidiary have made available to the Company
prior to the execution of this Agreement complete and correct copies of (i)
the certificate of incorporation of Parent (including any certificates of
designation), as amended and currently in effect and the bylaws of Parent, as
amended and currently in effect and (ii) the articles of incorporation and
bylaws of Merger Subsidiary, as amended and currently in effect.
Section 5.2 Corporate Authorization; Enforceability; Board Action.
(a) Each of Parent and Merger Subsidiary has the requisite corporate
power and authority to enter into this Agreement and, subject to the
satisfaction of the conditions set forth in Section 7.1 and Section 7.3
hereof, to consummate the transactions contemplated hereby (including the
Merger). The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of each of Parent and Merger Subsidiary
and no other corporate proceedings on the part of either Parent or Merger
Subsidiary are necessary to authorize the execution and delivery of this
Agreement or to consummate the Merger and the other transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Merger Subsidiary and, assuming due authorization, execution and delivery
of this Agreement by the Company, constitutes a valid and binding agreement of
each of Parent and Merger Subsidiary enforceable against each such party in
accordance with its terms, except to the extent that such enforcement may be
subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium
or other similar Laws, now or hereafter in effect, affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity).
(b) The Board of Directors of Parent, at a meeting duly called and
held, unanimously has (i) determined that this Agreement and the transactions
contemplated hereby (including the Merger) are advisable and in the best
interests of Parent and Parent's shareholders and (ii) approved and adopted
this Agreement and the transactions contemplated hereby (including the
Merger). Parent, in its capacity as the sole shareholder of Merger Subsidiary,
has consented in writing to the approval and adoption of this Agreement and
the transactions contemplated hereby (including the Merger). Parent will
furnish to the Company within ten (10) Business Days from the date hereof a
certified copy of resolutions of the Board of Directors of Parent approving
and adopting this Agreement, the Merger and the other transactions
contemplated hereby.
(c) The Board of Directors of Merger Subsidiary, by a validly adopted
unanimous written consent, has (i) determined that this Agreement and the
transactions contemplated hereby (including the Merger) are advisable and in
the best interests of Merger Subsidiary and Merger Subsidiary's sole
shareholder, (ii) approved and adopted this Agreement and the transactions
contemplated hereby (including the Merger), and (iii) recommended that Parent,
as Merger Subsidiary's sole shareholder, approve and adopt this Agreement and
the transactions contemplated hereby (including the Merger).
Section 5.3 Consents and Approvals; No Violations.
(a) Except as set forth in Section 5.3(a) of the Parent Disclosure
Letter, the execution and delivery by Parent and Merger Subsidiary of this
Agreement does not, and the consummation by Parent and Merger Subsidiary of
the Merger and the other transactions contemplated hereby and compliance by
Parent and Merger Subsidiary with any of the provisions hereof will not,
conflict with or result in any violation or breach of, or default (with or
without notice or lapse of time, or both) under (i) the certificate of
incorporation or bylaws of Parent or the similar organizational documents of
any of its Subsidiaries, (ii) assuming compliance with the matters referred to
in Section 5.3(b) below, any Contract to which Parent or any of its
Subsidiaries is a party or any of their respective properties or other assets
is subject or (iii) assuming compliance with the matters referred to in
Section 5.3(b) below, any Law applicable to Parent or any of its Subsidiaries,
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, breaches or defaults that, individually or in the aggregate, would
not be reasonably likely to (A) have a Material Adverse Effect on Parent or
(B) prevent or materially delay the consummation of any of the transactions
contemplated hereby.
(b) The execution, delivery and performance by Parent and Merger
Subsidiary of this Agreement and the consummation by Parent and Merger
Subsidiary of the transactions contemplated hereby (including the Merger)
require no action by or filing with, any Governmental Authority other than (i)
the filing of articles of merger in connection with the Merger in accordance
with the WBCL, (ii) compliance with any applicable requirements of the HSR
Act, (iii) compliance with any applicable requirements of the Exchange Act,
(iv) compliance with any applicable requirements of the Securities Act, (v)
those set forth in Section 5.3(b) of the Parent Disclosure Letter and (vi)
such other filings, consents and/or approvals that, individually or in the
aggregate, would not reasonably be likely to have a Material Adverse Effect on
Parent.
Section 5.4 SEC Filings and Financial Statements.
(a) Parent has filed with, or furnished to, the SEC, all Parent SEC
Documents. As of their respective dates or, if amended or supplemented, as of
the date of the last such amendment or supplement, the Parent SEC Documents
(i) did not 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 light of the circumstances under which they were made,
not misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be.
Each of the consolidated financial statements included in the Parent SEC
Documents have been prepared from, and are in accordance with, the books and
records of Parent and its consolidated Subsidiaries and comply as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except as may be indicated in the notes thereto) and fairly present
in all material respects the consolidated financial position and the
consolidated results of operations and cash flows of Parent and its
consolidated Subsidiaries as at the respective dates thereof or for the
periods presented therein (subject, in the case of any unaudited interim
financial statements, to normal and recurring year-end adjustments that,
individually or in the aggregate, would not reasonably be likely to have a
Material Adverse Effect on Parent).
(b) The annual statements for the fiscal years ended December 31,
2003 and December 31, 2002, and the quarterly statements for the periods ended
March 31, 2004 and June 30, 2004 of PacifiCare Life and Health Insurance
Company and PacifiCare Life Assurance Company filed with the insurance
regulatory authorities of the states of Indiana and Colorado, respectively,
copies of which have been made available to the Company prior to the date
hereof, fairly present in all material respects each such Subsidiary's
respective financial condition as of the dates thereof and their respective
results of operations and cash flows for the periods then ended in conformity
with SAP, except as may be reflected in the notes thereto and subject to
normal year-end adjustments.
Section 5.5 Litigation.
(a) Except as set forth in Section 5.5(a) of the Parent Disclosure
Letter, as of the date hereof, there is no Litigation by or before any
Governmental Authority pending or, to the knowledge of Parent, threatened in
writing against, by or affecting Parent or any of its Subsidiaries, except for
such Litigations that, individually or in the aggregate, would not reasonably
be likely to have a Material Adverse Effect on Parent.
(b) Except as set forth in Section 5.5(b) of the Parent Disclosure
Letter, as of the date hereof, there are no judgments, injunctions, writs,
orders or decrees binding on Parent or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be likely to have a
Material Adverse Effect on Parent.
Section 5.6 Compliance with Laws.
(a) Except as set forth in Section 5.6(a) of the Parent Disclosure
Letter, Parent and each of its Subsidiaries are, and have been at all times
since January 1, 2001, in compliance with all applicable Laws, except to the
extent that the failure to be in compliance with any such Laws has not had,
and would not, individually or in the aggregate, reasonably be likely to have
a Material Adverse Effect on Parent.
(b) Except as set forth in Section 5.6(b) of the Parent Disclosure
Letter or as would not, individually or in the aggregate, reasonably be likely
to have a Material Adverse Effect on Parent, (i) all Parent Permits are valid
and in full force and effect, (ii) neither Parent nor any of its Subsidiaries
is in default under, or in violation of, any Parent Permit, and, to the
knowledge of Parent, no event has occurred or condition exists which
constitutes or, that with notice or lapse of time or both, would constitute, a
material default under, or material violation of, any material Parent Permits,
(iii) none of the Parent Permits shall be terminated or impaired or become
terminable as a result of the transactions contemplated hereby and (iv) all
applications required to have been filed since January 1, 2001 for the renewal
of any Parent Permits have been duly filed on a timely basis (after giving
effect to any grace periods or extensions) with the appropriate Governmental
Authorities.
(c) Except as set forth in Section 5.6(c) of the Parent Disclosure
Letter, since January 1, 2001 through the date hereof, to the knowledge of
Parent, neither Parent nor any of its Subsidiaries has (i) received any
written notice, or become a party to any enforcement action, administrative
order or decree, stipulation, injunction, market conduct examination issued by
or from any Governmental Authority, that (x) alleges any noncompliance (or
that Parent or any of its Subsidiaries is under investigation or the subject
of an inquiry by any such Governmental Authority for such alleged
noncompliance) with any applicable Law or (y) would reasonably be likely to
result in a fine, assessment or cease and desist order, or the suspension,
revocation or limitation or restriction of any Parent Permit, except in the
case of clause (x) or (y) as would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect on Parent and (ii)
neither Parent nor any of its Subsidiaries has entered into any material
agreement or material settlement with any Governmental Authority with respect
to its actual or alleged material non-compliance with, or violation of, any
applicable Law.
(d) Except as set forth in Section 5.6(d) of the Parent Disclosure
Letter or as would not reasonably be likely to have a Material Adverse Effect
on Parent, since January 1, 2001, Parent and each of its Subsidiaries has
timely filed (after giving effect to any grace periods or extensions) all
material regulatory reports, schedules, statements, and other documents,
together with any amendments required to be made with respect thereto, that
each was required to file with any Governmental Authority, including state
health and insurance regulatory authorities and any applicable federal
regulatory authorities, and have timely paid all material fees and assessments
due and payable in connection therewith.
Section 5.7 No Parent Vote Required. No vote or other action of the
shareholders of Parent is required by applicable Law, the certificate of
incorporation of Parent, the bylaws of Parent or otherwise in order for Parent
and Merger Subsidiary to consummate the Merger and the transactions
contemplated hereby.
Section 5.8 Parent Ownership of Company Securities. Parent and its
Subsidiaries do not Beneficially Own any shares of Company Common Stock or any
options, warrants or other rights to acquire Company Common Stock. Neither
Parent nor Merger Subsidiary is, or will become prior to the Effective Time, a
"significant shareholder" or an "interested stockholder" with respect to the
Company within the meaning of Section 180.1130(11) and Section 180.1140(8),
respectively, of the WBCL.
Section 5.9 Disclosure Documents. The information furnished to the
Company by or on behalf of Parent and Merger Subsidiary for inclusion or
incorporation by reference in the Proxy Statement will not, at the date first
mailed to the shareholders of the Company, at the time of the Company
Shareholder Meeting and at the time filed with the SEC, as the case may be,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that no representation is made by Parent with
respect to statements made therein based on information supplied by or on
behalf of the Company for inclusion or incorporation by reference in such
documents.
Section 5.10 Finders' or Advisors' Fees. Except for MTS Health
Partners, L.P. and Xxxxxx Xxxxxxx & Co. Incorporated, there is no investment
banker, broker, finder or other intermediary that has been retained by or is
authorized to act on behalf of Parent or Merger Subsidiary who is entitled to
any fee or commission in connection with the transactions contemplated hereby.
Section 5.11 Financing. Parent has and will have, immediately prior
to, from and after the Effective Time, sufficient funds on-hand and available
through existing liquidity facilities (without restrictions on drawdown that
would delay payment of the Merger Consideration in accordance with Article II
hereof) to consummate the transactions contemplated hereby, including payment
of any amounts under Article II and Section 6.11.
Section 5.12 Ownership and Operations of Merger Subsidiary. Parent
owns of record and Beneficially Owns all outstanding shares of capital stock
of Merger Subsidiary. Merger Subsidiary was formed solely for the purpose of
engaging in the transactions contemplated hereby, and has engaged in no other
business or other activities or incurred any liabilities, other than in
connection with or as contemplated herein.
ARTICLE VI
COVENANTS
Section 6.1 Conduct of the Company's Business Pending the Merger.
(a) Except for matters set forth in Section 6.1(a) of the Company
Disclosure Letter or otherwise contemplated hereby or with the prior written
consent of Parent, from and after the date hereof and prior to the Effective
Time or such earlier date as this Agreement may be terminated in accordance
with its terms (the "Pre-Closing Period"), the Company covenants and agrees
that the business of the Company and its Subsidiaries shall be conducted only
in the ordinary course of business consistent (except where indicated below)
with past practice and, to the extent consistent therewith, each of the
Company and its Subsidiaries shall use its commercially reasonable efforts to
preserve its business organization intact and maintain its existing relations
with its key customers, suppliers, brokers, agents, employees, creditors and
business partners.
(b) Without limiting the provisions of paragraph (a), the Company
covenants and agrees that, except as set forth in Section 6.1(b) of the
Company Disclosure Letter or as expressly permitted herein, or with the prior
written consent of Parent, during the Pre-Closing Period, neither the Company
nor any of its Subsidiaries will:
(i) amend or propose to amend its articles of incorporation
or bylaws or similar organizational documents;
(ii) issue, sell, transfer, pledge, dispose of or encumber
any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights
of any kind to acquire, any shares of capital stock of any class of
the Company or its Subsidiaries, other than issuances pursuant to the
exercise of Company Options outstanding on the date hereof or Company
Options that prior to the date hereof, the Company has agreed in
writing to issue and which are listed in Section 4.4(a) of the
Company Disclosure Letter;
(iii) (A) directly or indirectly, split, combine or
reclassify the outstanding shares of capital stock of the Company, or
any outstanding capital stock of any of the Subsidiaries of the
Company; or (B) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock;
(iv) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its
capital stock other than dividends paid to the Company or any
wholly-owned Subsidiary by a wholly-owned Subsidiary;
(v) (A) increase the compensation or benefits payable to any
director, officer, other employee or consultant of the Company or any
of its Subsidiaries, other than in the ordinary course of business
consistent with past practice to an employee of the Company that is
not an officer under Section 16 of the Exchange Act; (B) make any new
grant of any severance or termination payment to (or amend any such
existing arrangement with) any director, officer, other employee or
consultant of the Company or any of its Subsidiaries, other than
severance or termination arrangements in connection with the
termination in the ordinary course of business in amounts consistent
with past practice to an employee or consultant of the Company that
is not an officer under Section 16 of the Exchange Act; (C) hire any
employee with an annual base salary in excess of $150,000, or promote
any employee to any such position except in order to fill a position
vacated after the date hereof; (D) enter into any severance or
deferred compensation or other similar agreement (or amend any such
existing agreement to materially increase benefits thereunder) with
any director, officer, other employee or consultant of the Company or
any of its Subsidiaries (other than agreements to make payments
permitted under clause (B) above) or amend any generally applicable
severance or termination policy to materially increase benefits
thereunder; or (E) permit any director, officer or employee of the
Company or any of its Subsidiaries who is not already a party to an
agreement or a participant in a plan providing benefits upon or
following a "change in control" to become a party to any such
agreement or a participant in any such plan, other than in the case
of clauses (A) to (D), pursuant to a pre-existing Contract that was
disclosed to Parent or as required by applicable Law;
(vi) (A) adopt any new benefit plan, terminate any Company
Employee Plan or modify any Company Employee Plan in a way that would
result in a material additional cost to Parent, the Company or any of
their respective Subsidiaries, except for any amendments to a Company
Employee Plan required to maintain its qualified plan status under
Section 401(a) of the Code; or (B) modify any actuarial cost method,
assumption or practice used in determining benefit obligations,
annual expense and funding for any Company Employee Plan, except to
the extent required by GAAP;
(vii) (A) enter into any material transaction pursuant to
which the Company or any of its Subsidiaries obtains insurance from
any Third Party other than in the ordinary course of business; or (B)
materially change any reinsurance program other than in the ordinary
course of business;
(viii) take any action to cause any material insurance
policy naming the Company or any of its Subsidiaries as a beneficiary
or a loss payable payee to be cancelled or terminated, without notice
to Parent, except in the ordinary course of business;
(ix) establish any new, or fund any existing, "rabbi" or
similar trust (except in accordance with the current terms of any
Company Employee Plan), or enter into any other arrangement for the
purpose of securing non-qualified retirement benefits, termination
benefits or deferred compensation;
(x) materially modify, materially amend or terminate or
materially waive, materially release or assign any material rights or
material claims under any Material Company Contract;
(xi) (A) incur any indebtedness for borrowed money or issue
debt securities or assume or guarantee the obligations of any Person
(other than a wholly-owned Subsidiary of the Company) for borrowed
money, except for indebtedness incurred under the Company's existing
credit facilities in the ordinary course of business consistent with
past practice; (B) make any loans, advances or capital contributions
to, or investments in, any other Person (other than to wholly-owned
Subsidiaries of the Company), except in the ordinary course of
business consistent with past practice and as otherwise permitted
under the Company's existing investment policy; or (C) enter into any
material commitment or transaction (including any borrowing, capital
expenditure or purchase, sale or lease of assets) requiring a capital
expenditure by the Company or its Subsidiaries, other than capital
expenditures incurred or committed to (I) in 2004, pursuant to the
Company's capital expenditures budget for 2004 and (II) in 2005,
pursuant to the Company's preliminary capital expenditures budget for
2005 (capital expenditures for 2005 will be determined on a pro rata
basis through Closing for purposes of this clause (II)), in each case
as such budgets were previously made available to Parent and other
capital expenditures that do not exceed $2,000,000 in the aggregate;
(xii) (A) make, revoke or change a material Tax election
with respect to the Company or any of its Subsidiaries; (B) change a
material method of reporting income or deductions for Tax purposes
with respect to the Company or any of its Subsidiaries; or (C) settle
or compromise any material Tax liability or refund of the Company or
any of its Subsidiaries other than with respect to any proceeding
with respect to a material Tax liability of the Company or any of its
Subsidiaries in progress as of the date hereof in an aggregate amount
not to exceed the amount reserved for Tax liabilities on the
consolidated balance sheet of the Company, dated as of June 30, 2004,
included in the Form 10-Q filed by the Company on August 5, 2004.
(xiii) change any of the accounting principles used by it,
unless required by GAAP or applicable Law;
(xiv) pay, discharge or satisfy any Liabilities, other than
the payment, discharge or satisfaction of any such Liabilities (A) in
the ordinary course of business consistent with past practice, (B)
outside of the ordinary course of business in an aggregate amount not
exceeding $500,000 with respect to any Liability relating to a
specific matter or (C) pursuant to any settlement or compromise
regarding any Litigation (whether or not commenced prior to the date
hereof), other than settlements or compromises where the amount paid
(after giving effect to insurance proceeds to be actually received)
does not exceed in each case the amount that is fully reserved on the
consolidated balance sheet of the Company, dated as of June 30, 2004,
included in the Form 10-Q filed by the Company with the SEC on August
5, 2004, or disclosed in writing to Parent prior to the date hereof
with respect to such Litigation, plus an amount in addition to such
reserved or disclosed amounts not to exceed $2,000,000 in the
aggregate for all settlements or compromises of any Litigation made
pursuant to this proviso; provided that nothing in this clause (xiv)
shall prohibit, restrict or limit any action that the Company or its
Subsidiaries are authorized or permitted to undertake pursuant to any
other clause of this Section 6.1(b);
(xv) sell, transfer, lease, license, pledge or encumber any
assets of the Company or any of its Subsidiaries, except (A) pursuant
to Contracts in existence as of the date hereof or (B) in the
ordinary course of business, which may include the disposal of
obsolete or surplus equipment or the selling of investments through
the Company's investment managers;
(xvi) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof, except any acquisition (by merger,
consolidation, or acquisition of stock or assets) as part of or in
connection with (A) one or more intracompany reorganizations or (B)
the Company's or one of its Subsidiary's investment portfolios
consistent with the Company's existing investment policy;
(xvii) take any action to cause the Company Common Stock to
cease to be listed for trading on the New York Stock Exchange prior
to the Closing Date; and
(xviii) enter into a Contract to do any of the foregoing, or
to authorize, recommend or announce an intention to do any of the
foregoing.
(c) Nothing contained herein shall give to Parent or Merger
Subsidiary, directly or indirectly, rights to control or direct the Company's
operations prior to the Effective Time. Prior to the Effective Time, the
Company shall exercise, consistent with the terms and conditions hereof,
complete control and supervision of its operations.
Section 6.2 Preparation of Proxy Statement; Shareholder Meeting.
(a) As promptly as reasonably practicable following the date hereof,
the Company shall with the timely cooperation and assistance of Parent prepare
and file with the SEC the proxy statement relating to the matters to be
submitted to the Company shareholders at the Company Shareholder Meeting (such
proxy statement and any amendments or supplements thereto, the "Proxy
Statement"). The Company shall use its reasonable best efforts to have the
Proxy Statement cleared by the SEC. The Company shall, as promptly as
practicable after receipt thereof, provide Parent copies of any written
comments, and advise Parent of any oral comments or communications regarding
the Proxy Statement received from the SEC. The Company and Parent shall
cooperate and provide the other with a reasonable opportunity to review and
comment on any amendment or supplement to the Proxy Statement prior to filing
the same with the SEC, and such parties will promptly provide each other with
copies of such filings made with the SEC.
(b) The Company will use its reasonable best efforts to cause the
Proxy Statement to be mailed to the Company's shareholders as promptly as
reasonably practicable after being cleared by the SEC.
(c) If at any time prior to the Effective Time, any information
relating to the Company or Parent, or any of their respective affiliates,
officers or directors, should be discovered by the Company or Parent, as the
case may be, that should be set forth in an amendment or supplement to the
Proxy Statement so that such document would not include any misstatement of a
material fact or omit any material fact necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading, the party that discovers such information shall promptly notify
the other party and, to the extent required by Law, the Company and Parent
shall cooperate to cause an appropriate amendment or supplement describing
such information promptly to be filed with the SEC and disseminated to the
shareholders of the Company.
(d) Subject to Section 6.2(e), the Company shall, in accordance with
applicable Law and the articles of incorporation and bylaws of the Company,
(i) duly take all lawful action to call and give notice of, and use its
reasonable best efforts to convene and hold, a meeting of its shareholders as
soon as reasonably practicable after the date hereof (the "Company Shareholder
Meeting") for the purpose of obtaining the Company Shareholder Approval with
respect to the transactions contemplated hereby and (ii) use its reasonable
best efforts to solicit the approval of this Agreement. In furtherance of the
foregoing, except as set forth in Section 6.5(b), the Board of Directors of
the Company shall recommend approval of this Agreement by the shareholders of
the Company as set forth in Section 4.2(b) (the "Company Recommendation").
(e) Notwithstanding any other provision of this Agreement, in the
event that the Company effects a Company Change of Recommendation in
compliance with Section 6.5(b), the Company shall not be obligated, pursuant
to Section 6.2(d) or any other provision of this Agreement, to give notice of,
convene or hold the Company Shareholder Meeting, or solicit from its
shareholders proxies in favor of the adoption and approval of this Agreement
and the Merger.
Section 6.3 Access to Information; Confidentiality.
(a) Subject to compliance with applicable Law and Section 6.3(b), the
Company shall, and shall cause its Subsidiaries to, give Parent and its
Representatives reasonable access to the offices, facilities, personnel,
properties, books and records of the Company and its Subsidiaries (including
giving permission to the Company's auditors to share its work papers) during
normal business hours, furnish to Parent and its Representatives such
financial and operating data and all other information as such Persons may
reasonably request and shall instruct its Representatives to cooperate with
Parent in its investigation of the business of the Company; provided, however,
that no investigation of the Company's business shall affect any
representation or warranty made by the Company hereunder. Each party will use
its reasonable best efforts to minimize any disruption to the businesses of
the Company and its Subsidiaries that may result from requests for access,
data and information hereunder.
(b) All information provided or obtained in connection with the
transactions contemplated hereby will be held by Parent in accordance with the
Confidentiality Agreement, dated August 6, 2004, between Parent and the
Company (the "Confidentiality Agreement"). In the event of a conflict or
inconsistency between the terms hereof and the Confidentiality Agreement, the
terms hereof will govern. Notwithstanding the foregoing, the Company shall not
be required to provide any information that it reasonably believes it may not
provide to Parent by reason of contractual or legal restrictions, including
applicable Laws, or which it believes is competitively sensitive information.
In addition, the Company may designate any competitively sensitive information
provided to Parent under this Agreement as "outside counsel only" and such
information shall be given only to the outside counsel of Parent and may not
be shared with Parent or any of its Subsidiaries or any of their respective
Representatives (other than such outside counsel).
Section 6.4 No Solicitation; Unsolicited Proposals.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement pursuant to Section 8.1, the Company shall not,
and shall cause its Subsidiaries not to, and shall not authorize or permit its
Representatives on its behalf to, directly or indirectly, (i) solicit,
initiate, knowingly facilitate or encourage any inquiries or the making,
announcement or submission of any proposal that constitutes, or may reasonably
be expected to lead to, an Acquisition Proposal (including the granting of any
waiver under Sections 180.1140 to 180.1144 of the WBCL), (ii) other than
informing Persons of the existence of the provisions contained in this Section
6.4, participate or engage in any substantive discussions or any negotiations
with, or disclose or provide any non-public information or data relating to
the Company or its Subsidiaries or afford access to the properties, books or
records or employees of the Company or its Subsidiaries to, any Third Party
making, or in furtherance of, an Acquisition Proposal or an indication of
interest that could lead to an Acquisition Proposal or (iii) enter into any
agreement in principle, letter of intent, memorandum of understanding or other
agreement (other than a confidentiality agreement) with respect to any
Acquisition Proposal. The Company shall, and shall cause its Subsidiaries to,
and shall cause its Representatives on its behalf to, immediately cease and
terminate any existing discussions or negotiations with any Third Party
conducted heretofore by the Company, its Subsidiaries or the Company's
Representatives with respect to any Acquisition Proposal and shall request
that all such Third Parties who executed on or after June 1, 2004 a
confidentiality agreement in connection with the consideration of a possible
Acquisition Proposal to return to the Company, or destroy, all confidential
information heretofore furnished to such Third Party by or on behalf of the
Company in accordance with the terms of such confidentiality agreement,
including the rights of such Third Parties to retain confidential information
in accordance with the terms of such confidentiality agreements.
(b) Notwithstanding the restrictions set forth in Section 6.4(a), if,
at any time prior to the Company Shareholder Approval, (i) the Company
receives an unsolicited bona fide proposal from a Third Party relating to an
Acquisition Proposal and (ii) the Board of Directors of the Company concludes
in good faith (after receiving advice of its financial advisors and outside
counsel) that (A) such Acquisition Proposal is, or would reasonably be
expected to lead to, a Superior Proposal and (B) the failure to do so would
reasonably be expected to result in a breach by the Board of Directors of the
Company of its fiduciary duties to the Company's shareholders under applicable
Law, the Company may, after giving three (3) Business Days prior written
notice to Parent of the identity of such Third Party and the material terms
and conditions of its Acquisition Proposal and the Company's intention to
furnish non-public information or data or access, and after the Company enters
into an executed confidentiality agreement (provided that in the event that
such confidentiality agreement contains any "standstill" provisions or
restrictions on disclosure of information less favorable to the Company than
such provisions or restrictions in the Confidentiality Agreement, then the
Company and Parent shall enter into an amendment to such Confidentiality
Agreement to provide for a substantially comparable "standstill" and
equivalent restrictions on disclosure), (x) provide non-public information or
data relating to the Company or its Subsidiaries (provided that the Company
furnishes such non-public information to Parent concurrently with providing
such non-public information or data to a Third Party (to the extent that such
non-public information has not been previously furnished to Parent)), or
afford access to the properties, book or records or employees of the Company
or its Subsidiaries to the Third Party making such Acquisition Proposal and
its Representatives and (y) participate in discussions or negotiations
regarding such proposal.
(c) After the date hereof, the Company shall as soon as practicable
(and in any event within two (2) Business Days after becoming knowledgeable
thereof) notify Parent orally and in writing of any Acquisition Proposal or of
any request for information or inquiry that could lead to an Acquisition
Proposal, the material terms and conditions of such Acquisition Proposal,
request or inquiry, and the identity of the Person making such Acquisition
Proposal, request or inquiry. The Company shall inform Parent on a prompt
basis of the status and content of any discussions or negotiations regarding,
or relating to, any Acquisition Proposal and any material modification
thereto.
(d) Nothing contained herein shall prohibit or impede the Company
from taking and disclosing to its shareholders a position as required by Rule
14d-9, Rule 14e-2 or Item 1012(a) of Regulation M-A promulgated under the
Exchange Act or from making any other required disclosure to the Company's
shareholders if, in the good faith judgment of the Board of Directors of the
Company, after receiving advice of outside counsel, failure so to disclose
would reasonably be expected to be inconsistent with the fulfillment of its
fiduciary duties to the Company's shareholders under applicable Law.
(e) For purposes of this Agreement:
(i) "Acquisition Proposal" means any inquiry, offer,
proposal or indication of interest, as the case may be, by any Third
Party that relates to (1) a transaction or series of transactions
(including any merger, consolidation, recapitalization, liquidation
or other direct or indirect business combination) involving the
Company or the issuance or acquisition of shares of capital stock or
other equity securities of the Company representing 15% or more (by
voting power) of the outstanding capital stock of the Company, (2)
any tender or exchange offer that if consummated would result in any
Person, together with all affiliates thereof, Beneficially Owning
shares of capital stock or other equity securities of the Company
representing 15% or more (by voting power) of the outstanding capital
stock of the Company or (3) the acquisition, purchase or disposition
of the business or consolidated assets of the Company (including
capital stock or assets of any Subsidiary) outside the ordinary
course of business; and
(ii) "Superior Proposal" means any bona fide Acquisition
Proposal, on its most recently amended or modified terms which the
Board of Directors of the Company determines in its good faith
judgment (after receiving the advice of its outside counsel and
financial advisors) after taking into account, among other things,
the terms and conditions of the Acquisition Proposal and this
Agreement (as may be proposed to be amended by Parent), including
price, form of consideration, closing conditions, the ability to
fully finance the transaction and such other aspects of the
Acquisition Proposal as the Board of Directors of the Company in good
xxxxx xxxxx relevant (A) would, if consummated, result in a
transaction that is more favorable, from a financial point of view,
to the Company's shareholders than the transactions contemplated
hereby and (B) is reasonably likely to be completed.
Section 6.5 Company Board of Directors' Recommendation.
(a) Subject to Section 6.5(b), neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw, qualify, modify or amend
or propose to withdraw, qualify, modify or amend in any manner adverse to
Parent or Merger Subsidiary, the Company Recommendation (it being understood
that taking a neutral position or no position with respect to an Acquisition
Proposal shall be considered an adverse modification of the Company
Recommendation), (ii) approve any letter of intent, agreement in principle,
acquisition agreement or similar agreement (other than a confidentiality
agreement) relating to any Acquisition Proposal or (iii) approve or recommend
or propose to approve or recommend any Acquisition Proposal (each of the
foregoing being referred to as a "Company Change in Recommendation").
(b) Notwithstanding the provisions of Section 6.5(a), if, prior to
the Company Shareholder Meeting, (i) the Board of Directors of the Company
determines in good faith, after receiving advice of outside counsel, that it
would reasonably be expected to be required for the purpose of fulfilling its
fiduciary duties to the Company's shareholders under applicable Law, (ii) the
Company provides to Parent a notice in writing of the determination described
in clause (i), and (iii) at least four (4) Business Days have elapsed from
receipt by Parent of the notice referred to in clause (ii) above, and taking
into account any revised proposal made by Parent since receipt by it of the
notice referred to in clause (ii) above, the Board of Directors of the Company
maintains its determination described in clause (i) above, the Board of
Directors of the Company may (A) withdraw or modify its approval or
recommendation of the Merger and this Agreement and/or (B) upon termination of
this Agreement in accordance with Section 8.1(e), approve and enter into an
agreement relating to an Acquisition Proposal that constitutes a Superior
Proposal. In the event the Board of Directors of the Company shall undertake a
Company Change of Recommendation, Parent, upon its written request, shall be
released from all "standstill" provisions and restrictions on use of
confidential information (but not disclosure to third parties of information
except for disclosure to Parent's Representatives and financing sources,
credit rating agencies and Governmental Authorities which shall be permitted;
provided that any such Representatives and financing sources shall be bound by
an obligation of confidentiality and nondisclosure with respect to such
information for the benefit of the Company; and provided further that Parent
shall be responsible to the Company for any breach of such obligation of
confidentiality to the Company) under the Confidentiality Agreement to the
extent reasonably necessary to permit Parent to make an Acquisition Proposal.
In the event Parent is released from its "standstill" provisions and
restrictions on use of information, the Company shall be permitted to release
any other Person subject to similar provisions and restrictions to the same
extent Parent is so released.
Section 6.6 Regulatory Filings; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions set forth herein,
each of the parties shall use its reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, as promptly as practicable, but in
no event later than the End Date, the Merger and the other transactions
contemplated hereby in accordance with the terms hereof, including (i) the
obtaining of all necessary approvals under any applicable Health Care Laws
required in connection with this Agreement, the Merger and the other
transactions contemplated hereby, (ii) the obtaining of all necessary actions
or nonactions, waivers, consents, approvals and authorizations from
Governmental Authorities and the making of all necessary registrations and
filings (including filings with Governmental Authorities) and the taking of
all steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Authority, (iii) the
obtaining of all necessary waivers, consents, approvals and authorizations
from Third Parties and (iv) the execution and delivery of any additional
instruments necessary to consummate the Merger and the other transactions
contemplated hereby in accordance with the terms hereof and to fully carry out
the purposes of this Agreement. Notwithstanding anything to the contrary
contained in this Section 6.6(a) (except for the proviso in this sentence),
neither Parent nor any of its Subsidiaries shall be required to (A) sell,
divest, hold separate, otherwise dispose of or license any of their or of the
Company's or any of its Subsidiaries' respective businesses, product lines or
assets, (B) conduct their or the Company's or any of its Subsidiaries'
respective businesses in a specified manner or (C) agree to take any of the
actions set forth in clause (A) or (B), or agree to take any other action or
agree to any limitation that, in the case of clause (A), (B) or (C), would
have a (I) Material Adverse Effect (reading out the "would reasonably be
likely to be" language of such defined term) on either the Company or Parent
(it being agreed that in the case of measuring the effect on Parent in this
clause (I), "Material Adverse Effect" shall be the level of, and shall be
measured as to, what would have a "Material Adverse Effect" on the Company and
not the level or measure of what would have a "Material Adverse Effect" on
Parent), or (II) material adverse effect on the benefits, taken as a whole,
Parent reasonably expected to derive from the transactions contemplated
hereby, including the Merger (such Material Adverse Effect on either the
Company or Parent or such material adverse effect on such benefits, a
"Regulatory Material Adverse Effect"); provided, however, that Parent
understands and agrees that it will, and will cause its Subsidiaries to, take
or commit to take any of the foregoing actions so long as, or to the extent,
any such action would not have such a Regulatory Material Adverse Effect, in
each case as a condition to obtaining any and all approvals from any
Governmental Authority for any reason in order to consummate and make
effective, as promptly as practicable, but in no event later than the End
Date, the Merger and the other transactions contemplated hereby, including
taking any and all actions (so long as, or to the extent, any such actions
would not have a Regulatory Material Adverse Effect) necessary in order to
ensure that (x) no requirement for non-action, a waiver, consent, approval or
authorization of the United States Federal Trade Commission ("FTC"), the
Antitrust Division of the United States Department of Justice ("Antitrust
Division"), any authority enforcing applicable Health Care Laws, any State
Attorney General or any other Governmental Authority, (y) no decree, judgment,
injunction, temporary restraining order or any other order in any suit or
proceeding and (z) no other matter relating to any antitrust or competition
Law or relating to any Health Care Law or other Laws, would preclude
consummation of the Merger by the End Date. The Company shall agree if, but
solely if, requested by Parent in writing to divest, hold separate or
otherwise take or commit to take any action with respect to the businesses,
services or assets of the Company or any of its Subsidiaries in furtherance of
this Section 6.6(a); provided, however, that any such action may be
conditioned upon the consummation of the Merger and other transactions
contemplated hereby. In addition, upon the terms and subject to the conditions
herein provided and subject to the fiduciary duties of the Board of Directors
of the Company and its other obligations under applicable Law, none of the
parties hereto shall knowingly take or cause to be taken any action that would
reasonably be expected to materially delay or prevent the satisfaction by the
End Date of the conditions set forth in Sections 7.2(e) and 7.3(c). Each of
Parent and the Company undertakes and agrees to file as soon as practicable a
Notification and Report Form under the HSR Act with the FTC and the Antitrust
Division and to make as soon as practicable such filings and apply as soon as
practicable for such approvals and consents as are required under the Health
Care Laws.
(b) Each of Parent and the Company shall (i) respond as promptly as
practicable to all inquiries and requests received from the FTC, the Antitrust
Division, any State Attorney General or other Governmental Authority in
connection with antitrust matters or Health Care Laws and (ii) not extend any
waiting period under the HSR Act or enter into any agreement with the FTC, the
Antitrust Division, any State Attorney General or other Governmental Authority
not to consummate the transactions contemplated hereby, except with the prior
written consent of the other parties hereto.
(c) In connection with and without limiting the foregoing, if any
anti-takeover or similar statute or regulation is or may become applicable to
the transactions contemplated hereby, each of the parties and its Board of
Directors shall use their respective reasonable best efforts to grant or
secure any required approvals or consents and take all such actions as are
reasonable and legally permissible so that the transactions contemplated
hereby may be consummated as promptly as practicable upon and subject to the
terms contemplated hereby and otherwise act to eliminate or minimize the
effects (including any resulting delays) of any such statute or regulation on
the transactions contemplated hereby.
(d) In addition, each party shall, subject to applicable Law (i)
promptly notify the other party of any written communication to that party
from the FTC, the Antitrust Division, any State Attorney General or any other
Governmental Authority, including insurance, health or other regulatory
authorities, and, permit the other party to review in advance any proposed
communication to any of the foregoing, (ii) consult with the other party prior
to participating in any meeting or substantive discussion with any
Governmental Authority in respect of any filings, investigation or inquiry
concerning this Agreement or the Merger and provide the other party the
opportunity to attend and participate thereat and (iii) furnish the other
party with copies of all correspondence, filings, and written communications
(or a reasonably detailed summary of any oral communications) between them and
their respective representatives on the one hand, and any Governmental
Authority, including insurance, health or other regulatory authorities, or
members of their respective staffs on the other hand, with respect hereto and
the Merger.
Section 6.7 Employee Benefits.
(a) Notwithstanding anything to the contrary contained herein, from
and after the Effective Time, Parent shall honor or cause the Surviving
Corporation to honor, in accordance with their terms (without giving effect to
any amendments thereto after the Effective Time except if consented to by the
effected party), all benefits and obligations under the employment and
severance agreements listed in Section 6.7(a) of the Company Disclosure Letter
and the Company's Change of Control Severance Benefit Plan, as amended and
restated November 29, 2001 (such agreements and plan, collectively, the
"Severance Agreements"). Parent, Merger Subsidiary and the Company agree that
the consummation of the Merger shall constitute a "change in control" or
"change of control" or similar transaction for purposes of the Severance
Agreements.
(b) During the one year period following the Effective Time, Parent
shall, or shall cause the Surviving Corporation to, provide to the employees
of the Company and its Subsidiaries who are employed at the Effective Time and
who remain employed with the Surviving Corporation or any Subsidiary of Parent
("Company Employees") for so long as the Company Employee remains so employed,
compensation and employee benefits that, with respect to each employee, are
substantially as favorable in the aggregate to the compensation and benefits
provided to such employee under the Company Employee Plans immediately prior
to the Effective Time or pursuant to employee benefit plans maintained from
time to time after the Effective Time by Parent or any Subsidiary of Parent
for similarly-situated employees of Parent or such Subsidiary. Nothing in this
Section 6.7(b) is intended to constitute any commitment or obligation to any
Company Employees or to create any ongoing obligation to employ any Company
Employees or provide any specific benefits to any Company Employees.
(c) Parent shall provide each Company Employee who incurs a
termination of employment during the one-year period following the Effective
Time with severance payments and severance benefits that are no less favorable
than the severance payments and severance benefits to which such employee
would have been entitled with respect to such termination under the severance
policies of the Company as set forth in Section 6.7(c) of the Company
Disclosure Letter; provided that nothing in this Section 6.7(c) shall modify
or limit the provisions of the Severance Agreements.
(d) Parent shall, or shall cause the Surviving Corporation or
Parent's or the Surviving Corporation's Subsidiaries, as applicable, to, give
Company Employees full credit for such Company Employees' service with the
Company and its Subsidiaries for purposes of eligibility, vesting, and
determination of the level of benefits (including, for purposes of vacation
and severance), but not for purposes of benefit accruals, under any benefit
plans made generally available to employees or officers or any class or level
of employees or officers maintained by Parent, the Surviving Corporation or
any of their respective Subsidiaries in which a Company Employee participates
to the same extent recognized by the Company immediately prior to the
Effective Time; provided, however, that such service shall not be recognized
to the extent that such recognition would result in a duplication of benefits
with respect to the same period of service.
(e) Parent shall, or shall cause the Surviving Corporation or
Parent's or the Surviving Corporation's Subsidiaries, as applicable, to, (i)
waive any preexisting condition limitations otherwise applicable to Company
Employees and their eligible dependents under any plan of Parent or any
Subsidiary of Parent that provides health benefits in which Company Employees
may be eligible to participate following the Closing to the extent such
conditions are covered under the analogous Company Employee Plan in which such
Company Employees participated immediately prior to the Effective Time, other
than any limitations that were in effect with respect to such employees as of
the Effective Time under the analogous Company Employee Plan, (ii) honor any
deductible, co-payment and out-of-pocket maximums incurred by the Company
Employees and their eligible dependents under the health plans in which they
participated immediately prior to the Effective Time during the portion of the
calendar year prior to the Effective Time in satisfying any deductibles,
co-payments or out-of-pocket maximums under health plans of Parent, the
Surviving Corporation or any of their respective Subsidiaries in which they
are eligible to participate after the Effective Time in the same plan year in
which such deductibles, co-payments or out-of-pocket maximums were incurred
and (iii) waive any waiting period limitation or evidence of insurability
requirement that would otherwise be applicable to a Company Employee and his
or her eligible dependents on or after the Effective Time, in each case to the
extent such Company Employee or eligible dependent had satisfied any similar
limitation or requirement under an analogous Company Employee Plan prior to
the Effective Time.
(f) (i) In the event that the Closing occurs prior to December 31,
2004, the Company shall pay to each Company Employee who is a participant in
respect of the 2004 calendar year (each, a "Bonus Eligible Employee") under
the Company's 2004 Compensation Management Program, the Company's Executive
Annual Incentive Plan, and/or the Company's Executive Management 2004 Interim
Performance Award Plan (such program and plans, collectively, the "Company
Bonus Plans") immediately prior to the Effective Time a pro rata portion of
such Bonus Eligible Employee's full 2004 bonus that he would have been paid in
respect of 2004 under the Company Bonus Plans, calculated by multiplying each
Bonus Eligible Employee's Bonus Amount (as defined below) by a fraction, the
numerator of which is the number of days that have elapsed in 2004 through and
including the Closing Date and the denominator of which is 365. "Bonus Amount"
shall be calculated by measuring the bonus that would have been paid under the
applicable Company Bonus Plan had the actual performance for calendar year
2004 been equal to the actual performance for the period from January 1, 2004
through the last day of the month immediately prior to the month in which the
Closing occurs, and extrapolating such actual performance through the end of
the calendar year 2004. For example, assuming that the Effective Time occurs
in November of 2004, each Bonus Eligible Employee's Bonus Amount would be
calculated by (A) measuring actual performance for the period from January 1,
2004 through October 31, 2004 (assume such actual performance amount equals
100, the "Actual Performance Amount"), (B) dividing the Actual Performance
Amount by the number of fully completed months in the year prior to the
Effective Time (10 in this example), with such quotient being referred to as
the "Monthly Average Actual Performance Amount," and (C) multiplying the
Monthly Average Actual Performance Amount by the total number of months in the
year (12); which in this example would result in an extrapolated performance
of 120 for calendar year 2004. The Bonus Amount would then equal the amount
that the Bonus Eligible Employee would have received for 2004 under the
applicable Company Bonus Plan had the Company's actual performance for 2004
equaled 120. The foregoing example is included for the sole purpose of setting
forth the methodology for calculating the Bonus Amount in the event that the
Closing occurs prior to December 31, 2004.
(ii) In the event that the Closing occurs on or after
December 31, 2004, the Company shall pay each Bonus Eligible Employee
the full bonus that he would have been paid in respect of 2004 under
the applicable Company Bonus Plan based on actual performance through
December 31, 2004 on the date such bonus is ordinarily paid by the
Company under such Company Bonus Plan or, if earlier, immediately
prior to the Effective Time.
(iii) In the event that the Closing occurs prior to January
1, 2005, a Bonus Eligible Employee who is in the employ of Parent or
any of its Subsidiaries on December 31, 2004 shall be paid a
supplemental bonus in an amount equal to the Bonus Amount multiplied
by a fraction where the numerator is 365 less the number of days
elapsed in 2004 prior to the Closing Date and the denominator is 365.
(iv) For purposes of calculating severance benefits under
the Severance Agreements, all references to the annual bonus earned
or received in the year prior to termination shall be calculated
using the Bonus Amount.
Section 6.8 Public Announcements. The initial press release with
respect to the Merger shall be a joint press release, to be agreed upon by
Parent and the Company. Thereafter, Parent and Merger Subsidiary, on the one
hand, and the Company, on the other hand, shall, to the extent feasible,
consult with each other before issuing, and provide each other reasonable
opportunity to review and comment upon, any press release or other public
statements with respect to the Merger and the other transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
Law, court process or by obligations pursuant to any listing agreement with
any national securities exchange or automated inter-dealer quotation system.
Section 6.9 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, as the case may be, any deeds, bills of sale, assignments,
assurances or other documents, or instruments, and to take any other actions
and do any other things, in the name and on behalf of the Company or Merger
Subsidiary, reasonably necessary to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and interest
in, to and under any of the rights, properties or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger and to otherwise accomplish the purpose and intent
of this Agreement and the transactions contemplated hereby.
Section 6.10 Notification of Certain Matters.
(a) The Company shall notify Parent, and Parent or Merger Subsidiary
shall notify the Company, of (a) any change or effect that has had, or would
reasonably be likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company, Parent or Merger Subsidiary, as applicable, (b)
any representation or warranty made by it contained herein becoming untrue or
inaccurate in any material respect and (c) the failure by it to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, in each case within three (3) Business Days of an
executive officer of such Person becoming aware of the occurrence of such
development. The parties' obligations under this Section 6.10 and the
disclosure of any matter in accordance with the provisions of this Section
6.10 shall not limit or otherwise affect the remedies available hereunder to
the party receiving such disclosure and shall not be deemed to cure any breach
or inaccuracy of any representation or warranty made herein.
(b) The Company shall give prompt written notice to Parent, and
Parent or Merger Subsidiary shall give prompt notice to the Company, of any
notice or other communication received after the date hereof from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated hereby.
Section 6.11 Indemnification; D&O Insurance.
(a) From and after the Effective Time, Parent shall cause the
Surviving Corporation to indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof or who becomes prior
to the Effective Time, a director or officer of the Company or any of its
Subsidiaries (the "Indemnified Parties") from and against all losses, claims,
damages, costs and expenses (including attorneys' fees and expenses),
liabilities, judgments and, subject to the proviso of this sentence,
settlement amounts that are paid or incurred in connection with any pending,
threatened or completed claim, action, suit, formal or informal proceeding,
formal or informal investigation or formal or informal inquiry (whether civil,
criminal, administrative or investigative and whether asserted or claimed
prior to, at or after the Effective Time) that is (i) based on, or arises out
of, the fact that such Indemnified Party is or was a director or officer of
the Company or any of its Subsidiaries or (ii) based on, or arising out of, or
pertaining hereto or the transactions contemplated hereby, in each case under
clause (i) or clause (ii) above, to the fullest extent a corporation is
permitted under applicable Law to indemnify its own directors or officers, as
the case may be; provided, however, that after the Effective Time the
Surviving Corporation may elect to provide officers of the Company and its
Subsidiaries with the same indemnification as Parent provides to officers of
its Subsidiaries with respect to any fact, matter, event or circumstance
arising after the Effective Time relating to the matters covered by clause (i)
above, such same indemnification to be provided with respect to such fact,
matter, event or circumstance in lieu of the indemnification set forth in this
Section 6.11; provided, further, that notwithstanding the foregoing proviso,
all Indemnified Parties shall continue to be indemnified following the
Effective Time under the terms set forth in this Section 6.11 with respect to
the matters covered by clause (ii) above. Without limiting the foregoing, in
the event that any such claim, action, suit, proceeding, investigation or
inquiry is brought against any Indemnified Party (whether prior to or after
the Effective Time), (A) the Surviving Corporation shall have the right to
assume the defense thereof with legal counsel of Parent's choosing and neither
Parent nor the Surviving Corporation shall be liable to such Indemnified Party
for any legal expenses of other counsel or any expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof; provided,
however, that such Indemnified Party may employ counsel of its own choosing,
and Parent shall cause the Surviving Corporation to pay such Indemnified Party
for reasonable legal expenses of such counsel, if under applicable standards
of professional conduct the counsel selected by Parent may be reasonably
determined by counsel consulted by such Indemnified Party, to have a conflict
representing the Surviving Corporation and the Indemnified Party in the
conduct of the defense of an action, and (B) the Surviving Corporation shall
not be liable for any settlement of any claim effected without its written
consent (which consent shall not be unreasonably withheld, delayed or
conditioned). Any Indemnified Party wishing to obtain indemnification under
this Section 6.11(a), upon learning of any claim, action, suit, proceeding,
investigation or inquiry, shall promptly notify Parent thereof; provided,
however, the failure of any Indemnified Party to give such notice shall not
waive any rights of the Indemnified Party under this Section 6.11 except to
the extent that the rights of the Surviving Corporation or Parent are actually
materially prejudiced thereby). In the event the Surviving Corporation does
not assume the defense of an action in accordance with this Section 6.11(a),
(w) the Indemnified Parties as a group seeking indemnification with respect to
the same or a substantially related matter may retain only one law firm with
respect to such matter except to the extent that under applicable standards of
professional conduct, such counsel would have a conflict representing such
Indemnified Party and any other Indemnified Party or Indemnified Parties, (x)
Parent shall cause the Surviving Corporation to pay all expenses of the
disposition of any such claim, action, suit, proceeding, investigation or
inquiry to each Indemnified Party to the full extent permitted by applicable
Law promptly after statements therefor are received and otherwise advance to
such Indemnified Party upon request reimbursement of documented expenses
reasonably incurred, in either case to the extent not prohibited by the WBCL;
provided, however, that the person to whom expenses are advanced provides an
undertaking if required by applicable Law to repay such advance if it is
ultimately determined that such person is not entitled to indemnification, (y)
Parent shall cause the Surviving Corporation to pay all reasonable fees and
expenses of such counsel for the Indemnified Parties and all costs and
expenses of the Indemnified Parties in connection with seeking and obtaining
indemnification from the Surviving Corporation, from time to time, in each
case within three (3) Business Days of the receipt by Parent of a statement
from such counsel for the Indemnified Parties and (z) Parent shall cause the
Surviving Corporation to use reasonable best efforts to assist in the defense
of any such matter. In the event of any dispute as to whether an Indemnified
Party's conduct complies with the standards set forth under applicable Law and
as applicable, the Company Organizational Documents and the Company Subsidiary
Organizational Documents, a determination shall be made by independent counsel
reasonably acceptable to the Surviving Corporation and the Indemnified Party.
Without limiting the foregoing, to the extent that any Indemnified Party is,
by reason of the fact that such Indemnified Party is or was a director or
officer of the Company or any of its Subsidiaries, a witness in any claim,
action, suit, proceeding, investigation or inquiry to which such Indemnified
Party is not a party, such Indemnified Party shall be indemnified and held
harmless against all costs and expenses in connection therewith.
(b) The Surviving Corporation shall not enter into any settlement of
any claim in which the Surviving Corporation is jointly liable with an
Indemnified Party (or would be if joined in such claim) unless such settlement
provides for a full and final release of all claims asserted against such
Indemnified Party.
(c) Except to the extent required by Applicable Law, neither Parent
nor the Surviving Corporation shall take any action so as to amend, modify,
limit or repeal the provisions for indemnification of Indemnified Parties
contained in the certificates or articles of incorporation or bylaws (or other
comparable organizational documents) of the Surviving Corporation and its
Subsidiaries (which as of the Effective Time shall be no less favorable to
such individuals than those maintained by the Company and its Subsidiaries on
the date hereof) in such a manner as would adversely affect the rights of any
Indemnified Party to be indemnified by such corporations in respect of their
serving in such capacities prior to the Effective Time. The Surviving
Corporation shall honor all of its indemnification obligations existing as of
the Effective Time.
(d) For a period of six (6) years after the Effective Time, Parent
shall cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that Parent
may substitute therefor "tail" or other policies with reputable and
financially sound carriers of at least the same coverage and amounts
containing terms and conditions that are no less advantageous in the
aggregate) with respect to claims arising from or related to facts or events
that occurred at or before the Effective Time; provided, however, that Parent
shall not be obligated to make annual premium payments for such insurance to
the extent such premiums exceed 300% of the annual premiums paid as of the
date hereof by the Company for such insurance (such 300% amount, the "Maximum
Premium"). If such insurance coverage can only be obtained at an annual
premium in excess of the Maximum Premium, Parent shall obtain and maintain one
or more policies with the greatest coverage available for an annual premium
equal to the Maximum Premium.
(e) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and each party
entitled to insurance coverage under Section 6.11(d), respectively, and his or
her heirs and legal representatives, and shall be in addition to, and shall
not impair, any other rights an Indemnified Party may have under the Company
Organizational Documents or the Company Subsidiary Organizational Documents,
as applicable, or the comparable organization documents of the Surviving
Corporation or any of its Subsidiaries, under applicable Law or otherwise.
Parent shall ensure that the Surviving Corporation complies with all of its
obligations under this Section 6.11.
(f) In the event that Parent or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into
any other Person and is not the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or conveys all or
substantially all its properties and assets to any Person, then, and in each
such case, Parent shall cause proper provisions to be made so that the
successors and assigns of Parent or the Surviving Corporation, as the case may
be, assume the obligations set forth in this Section 6.11. The obligations of
Parent and the Surviving Corporation under this Section 6.11 shall not be
terminated or modified in such a manner as to adversely affect any indemnitee
to whom this Section 6.11 applies without the express written consent of such
affected indemnitee (it being expressly agreed that the indemnitees to whom
this Section 6.11 applies shall be Third Party beneficiaries of this Section
6.11).
Section 6.12 Undertakings of Parent. Parent shall perform, or cause
to be performed, when due, all obligations of Merger Subsidiary under this
Agreement.
Section 6.13 FIRPTA Matters. At the Closing, (a) the Company shall
deliver to Parent a statement (in such form as may be reasonably requested by
counsel to Parent) conforming to the requirements of Section 1.897 -
2(h)(1)(i) of the United States Treasury Regulations, and (b) the Company
shall deliver to the IRS the notification required under Xxxxxxx 0.000 -
0(x)(0) xx xxx Xxxxxx Xxxxxx Treasury Regulations.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of the Company, Parent and Merger Subsidiary
to effect the Merger is subject to the satisfaction or waiver on or prior to
the Closing Date of the following conditions:
(a) Company Shareholder Approval. The Company Shareholder Approval
shall have been obtained.
(b) Antitrust. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act or any other applicable
competition, merger control, antitrust or similar Law shall have been
terminated or shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other judgment, order or decree issued
by any court of competent jurisdiction or other statute, Law, rule, legal
restraint or prohibition (collectively, "Restraints") shall be in effect
preventing the consummation of the Merger; provided, however, that prior to
asserting this condition, each of the parties shall have used its reasonable
best efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any such injunction or other order that may be
entered.
Section 7.2 Conditions to Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to effect the
Merger are further subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein (except solely with respect to the
second sentence of Section 4.6 which is addressed below) shall be true and
correct as of the date hereof and as of the Closing Date as though made on the
Closing Date (without regard to materiality or Material Adverse Effect
qualifiers contained therein), except (i) to the extent such representations
and warranties expressly speak as of an earlier date, in which case as of such
earlier date and (ii) where the failure of the representations and warranties
to be true and correct individually or in the aggregate, has not had a
Material Adverse Effect on the Company. The representation and warranty of the
Company contained in the second sentence of Section 4.6 shall be true and
correct as of the date hereof and as of the Closing Date as though made on the
Closing Date. Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer or chief financial officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all covenants, agreements and obligations
required to be performed by it under this Agreement at or prior to the
Effective Time. Parent shall have received a certificate signed on behalf of
the Company by the chief executive officer or chief financial officer of the
Company on its behalf to such effect.
(c) No Litigation. There shall not be pending any suit, action or
proceeding by any Governmental Authority (i) challenging the acquisition by
Parent or Merger Subsidiary of any shares of Company Common Stock, seeking to
restrain or prohibit the consummation of the Merger or the transactions
contemplated hereby, seeking to place material limitations on the ownership of
shares of Company Common Stock (or shares of capital stock of the Surviving
Corporation) by Parent or Merger Subsidiary, (ii) seeking to prohibit or limit
the ownership or operation by the Company or any of its Subsidiaries or by
Parent or any of its Subsidiaries of any portion of any business or of any
assets of the Company and its Subsidiaries or Parent and its Subsidiaries,
(iii) seeking to obtain from the Company, Parent or Merger Subsidiary any
damages, which in the case of clauses (ii) and (iii) above would have,
individually or in the aggregate, a Material Adverse Effect on either the
Company or Parent.
(d) Restraint. No Restraint that would result, directly or
indirectly, in any of the effects referred to in Section 7.2(c) shall be in
effect.
(e) Regulatory Matters. The authorizations, consents, orders, permits
or approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any Governmental Authority (other than the
expiration of the applicable waiting period under the HSR Act that is
addressed in Section 7.1(b)) that are set forth in Section 4.3(b) of the
Company Disclosure Letter and Section 5.3(b) of the Parent Disclosure Letter
(all of the foregoing, "Governmental Consents") and which are necessary for
the consummation of the transactions contemplated hereby shall have been
filed, have occurred or have been obtained (all such Governmental Consents
being referred to as the "Company Requisite Regulatory Approvals") and all
such Company Requisite Regulatory Approvals shall be in full force and effect
without any conditions, restrictions or requirements, which (if implemented),
would have, individually or in the aggregate, a Regulatory Material Adverse
Effect.
Section 7.3 Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of each of Parent and Merger Subsidiary contained herein shall be
true and correct as of the date hereof and as of the Closing Date as though
made on the Closing Date (without regard to materiality or Material Adverse
Effect qualifiers contained therein), except (i) to the extent such
representations and warranties expressly speak as of an earlier date, in which
case as of such earlier date and (ii) where the failure of the representations
and warranties to be true and correct individually or in the aggregate, has
not had a Material Adverse Effect on the Company; provided, however, that the
truth and correctness of Section 5.11 shall not be subject to any materiality
or Material Adverse Effect qualifier. The Company shall have received a
certificate signed on behalf of each of Parent and Merger Subsidiary by the
chief executive officer or chief financial officer of Parent and Merger
Subsidiary on their behalf to such effect.
(b) Performance of Obligations of Parent and Merger Subsidiary.
Parent and Merger Subsidiary shall have each performed in all material
respects all covenants, agreements and obligations required to be performed by
it under this Agreement at or prior to the Effective Time. The Company shall
have received a certificate signed on behalf of each of Parent and Merger
Subsidiary by the chief executive officer or chief financial officer of Parent
and Merger Subsidiary on their behalf to such effect.
(c) Regulatory Matters. The Governmental Consents which are necessary
for the consummation of the transactions contemplated hereby shall have been
filed, have occurred or have been obtained (all such Governmental Consents
being referred to as the "Parent Requisite Regulatory Approvals") and all such
Parent Requisite Regulatory Approvals shall be in full force and effect.
Section 7.4 Frustration of Closing Conditions. None of the Company,
Parent or Merger Subsidiary may rely, either as a basis for not consummating
the Merger or terminating this Agreement and abandoning the Merger, on the
failure of any condition set forth in Sections 7.1, 7.2 or 7.3, as the case
may be, to be satisfied if such failure was caused by such party's breach of
any provision of this Agreement or failure to use its reasonable best efforts
to consummate the Merger and the other transactions contemplated hereby, as
required by and subject to Section 6.6.
ARTICLE VIII
TERMINATION AND EXPENSES
Section 8.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (except as
provided below, notwithstanding any approval of this Agreement by the
shareholders of the Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent,
(i) if the Merger has not been consummated as of March 31,
2005 (the "End Date"); provided, however, that if (x) the Merger has
not been consummated by such date by reason of non-satisfaction of
any of the conditions set forth in Section 7.1(b), 7.2(e) or 7.3(c),
or the failure to obtain clearance of the Proxy Statement from the
SEC by February 28, 2005, then such date shall automatically be
extended to June 30, 2005 (which shall then be the "End Date");
provided, further, that at the End Date, the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any
party whose action or failure to fulfill in any material respect any
obligation under this Agreement has caused or resulted in the failure
of the Merger to be consummated on or before the End Date; or
(ii) if the Company Shareholder Approval shall not have been
obtained by reason of the failure to obtain the required vote at the
Company Shareholder Meeting or any adjournment thereof;
(c) by either the Company or Parent, if there shall be any Law that
makes consummation of the Merger illegal or otherwise prohibited or if any
Restraint enjoining Parent, Merger Subsidiary or the Company from consummating
the Merger is entered and such Restraint shall become final and nonappealable;
provided, however, that the right to terminate this Agreement under this
Section 8.1(c) is not available to a party that has not fulfilled its
obligations under Section 6.6;
(d) by Parent, if the Board of Directors of the Company or any
committee thereof, shall have made a Company Change in Recommendation, whether
or not permitted by the terms hereof;
(e) by the Company if, prior to receipt of the Company Shareholder
Approval, the Company receives a Superior Proposal, resolves to accept such
Superior Proposal, and shall have given Parent four (4) Business Days' prior
written notice of its intention to terminate pursuant to that provision; or
(f) by either Parent or the Company, if there shall have been a
breach by the other of any of its representations, warranties, covenants or
obligations contained herein, which breach would result in the failure to
satisfy one or more of the conditions set forth in Section 7.2(a) (in the case
of a breach by the Company), or Section 7.3(a) (in the case of a breach by
Parent), and in any such case such breach shall be incapable of being cured
or, if capable of being cured, shall not have been cured within thirty (30)
calendar days after written notice thereof shall have been received by the
party alleged to be in breach.
The party desiring to terminate this Agreement pursuant to clause (b), (c),
(d), (e) or (f) of this Section 8.1 shall give written notice of such
termination to the other party in accordance with Section 9.4, specifying the
provision hereof pursuant to which such termination is effected.
Section 8.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 8.1, this Agreement shall become void and of no effect
with no liability or further obligation on the part of any party hereto,
except (i) as set forth in Section 8.3, (ii) that this Section 8.2, Section
6.3(b), Article IX and the agreements contained in the Confidentiality
Agreement (to the extent set forth therein), shall survive the termination
hereof and (iii) that no such termination shall relieve any party of any
liability or damages resulting from any willful breach by that party of its
covenants under this Agreement to be performed on or prior to the Closing Date
or, in the case of Parent, for a breach of Section 5.11.
Section 8.3 Fees and Expenses.
(a) (i) Other than as specifically provided in this Section 8.3 or as
required by Health Care Laws, the Company shall pay all filing, printing,
mailing and related fees and expenses of Parent (but excluding legal,
accounting, consulting, advisory and other professional fees and expenses),
whether or not the Merger is consummated, related to: (A) Forms A, Forms E and
similar insurance regulatory filings; (B) HSR Act filings; and (C) the Proxy
Statement; provided, however, that in no event shall the Company be required
to pay in excess of $650,000 in the aggregate in respect of all such fees and
expenses (it being understood that in the event that such fees and expenses
exceed $650,000, such excess shall be paid by the party incurring such fees
and expenses), and (ii) if this Agreement is terminated by Parent or the
Company pursuant to Section 8.1(b)(ii) and prior to the time of termination of
this Agreement an Acquisition Proposal shall have been disclosed, announced,
commenced, submitted or made, then (without limiting the obligation of the
Company to pay any Termination Fee, the Company shall make a nonrefundable
cash payment to Parent at the time specified in Section 8.1(b)(ii) for the
reasonably documented direct fees and expenses it has incurred in negotiating
and performing this Agreement in an aggregate amount not to exceed $4,000,000
(any such amount actually paid to Parent shall be referred to as the "Paid
Expenses").
(b) If this Agreement is terminated pursuant to Section 8.1(d) or
Section 8.1(e), Parent would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty and, in order to
compensate Parent for such damages the Company shall pay to Parent the amount
of $17,475,000 by wire transfer in immediately available funds to an account
designated in writing by Parent as liquidated damages (the "Termination Fee");
provided, however, that the amount of the Termination Fee that may become
payable to Parent shall be reduced by the amount of any Paid Expenses. The
Termination Fee payable pursuant to this Section 8.3(b) shall be due and
payable by the Company no later than two (2) Business Days after such
termination.
(c) If (i) after the date hereof, any Person publicly announces an
Acquisition Proposal that has not been withdrawn, (ii) this Agreement is
terminated by either the Company or Parent pursuant to Section 8.1(b)(ii) and
at such time of termination Parent is not in breach of any of its
representations, warranties and covenants contained herein and (iii) within
nine (9) months after the date of this Agreement the Company enters into a
definitive agreement to consummate, or consummates, the transactions
contemplated by such Acquisition Proposal, then, if such Acquisition Proposal
is consummated, the Company shall pay to Parent the Termination Fee within two
(2) Business Days after the date of consummation of such Acquisition Proposal.
Solely for the purposes of this Section 8.3(c), the term "Acquisition
Proposal" shall have the meaning assigned to such term in Section 6.4(e)(i),
except that all references to "15%" shall be changed to "50%."
(d) Notwithstanding anything herein to the contrary, absent a willful
breach of the provisions hereof by the Company, (i) Section 8.3(b) shall be
the sole and exclusive remedy of Parent and Merger Subsidiary for a
termination of this Agreement under Section 8.1(d) or Section 8.1(e), and (ii)
Section 8.3(c) shall be the sole and exclusive remedy of Parent and Merger
Subsidiary for a termination of this Agreement under Section 8.1(b)(ii).
ARTICLE IX
MISCELLANEOUS
Section 9.1 Non-Survival of Representations and Warranties and
Agreements. The representations, warranties and agreements herein and in any
certificate delivered in connection herewith, including any rights arising out
of any breach of such representations, warranties and agreements, shall
terminate at the Effective Time, except for those agreements contained herein
(including Section 6.11) that by their terms apply or are to be performed in
whole or in part after the Effective Time and the provisions in this Article
IX.
Section 9.2 Representations and Warranties. Each of Parent and Merger
Subsidiary acknowledges and agrees that neither the Company nor any of its
Representatives has made any representation or warranty to Parent or Merger
Subsidiary, except as specifically set forth in Article IV of this Agreement.
Without limiting the generality of the foregoing, no such Person has made any
representation or warranty to Parent or Merger Subsidiary with respect to: (a)
any information or materials made available by or on behalf of the Company or
any of its Subsidiaries, JPMorgan or IntraLinks, Inc., or any Representative
of any of them, in connection with the transactions contemplated by this
Agreement; or (b) any financial or operational projection or forecast relating
to the Company or any of its Subsidiaries.
Section 9.3 Amendments; No Waivers.
(a) Any provision hereof (including the Company Disclosure Letter,
the Parent Disclosure Letter) may be amended or waived prior to the Effective
Time at any time prior to or after the receipt of the Company Shareholder
Approval, if, and only if, such amendment or waiver is in writing and signed,
in the case of an amendment, by the Company, Parent and Merger Subsidiary, or
in the case of a waiver, by the party against whom the waiver is to be
effective; provided, however, that after the receipt of Company Shareholder
Approval, if any such amendment or waiver shall by Law or in accordance with
the rules and regulations of the applicable national securities exchange
require further approval of the shareholders of the Company, the effectiveness
of such amendment or waiver shall be subject to the approval of the
shareholders of the Company.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. Subject to Section
8.3(d), the rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Law.
Section 9.4 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given upon receipt when
delivered in Person, by facsimile (receipt confirmed) or by overnight courier
or registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Merger Subsidiary, to:
PacifiCare Health Systems, Inc.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Executive Vice President, General
Counsel and Secretary
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx Godward LLP
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
American Medical Security Group, Inc.
0000 XXX Xxxxxxxxx
Xxxxx Xxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Senior Vice President of Corporate
Affairs, General Counsel and Secretary
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Section 9.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto, except that Merger Subsidiary
may transfer or assign in whole to a wholly-owned Subsidiary of Parent its
rights under this Agreement, but any such transfer or assignment will not
relieve Merger Subsidiary of its obligations hereunder.
Section 9.6 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be construed in accordance with
and governed by the Laws of the State of Delaware (without regard to
principles of conflicts of Laws), except that the Merger shall be construed in
accordance with and governed by the Laws of the State of Wisconsin.
Section 9.7 Consent to Jurisdiction. Each of the parties hereto: (a)
irrevocably consents to submit itself to the personal jurisdiction of any
state or federal court of competent jurisdiction located in Wilmington,
Delaware, for the purpose of any action or proceeding arising out of this
Agreement or any of the transactions contemplated hereby, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it will not
bring any action relating hereto or any of the transactions contemplated
hereby in any court other than a state or federal court of competent
jurisdiction located in Wilmington, Delaware.
Section 9.8 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING UNDER THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.9 Counterparts; Effectiveness. This Agreement may be
executed in one or more counterparts, each of which together shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
Section 9.10 Entire Agreement. This Agreement (including the Company
Disclosure Letter, the Parent Disclosure Letter) and the Confidentiality
Agreement constitute the entire agreement among the parties with respect to
the subject matter of this Agreement and supersede and cancel all prior
agreements, negotiations, correspondence, undertakings, understandings and
communications of the parties, oral and written, with respect to the subject
matter hereof and thereof.
Section 9.11 Third Party Beneficiaries. Except as expressly provided
herein, this Agreement is for the sole benefit of the parties and their
permitted successors and assigns and nothing herein expressed or implied will
give or be construed to give any Person, other than the parties and such
permitted successors and assigns, any legal or equitable rights hereunder;
provided, however, that the parties hereto specifically acknowledge and agree
that the provisions of Section 6.11 hereof are intended to be for the benefit
of, and shall be enforceable by, all current or former directors or officers
of the Company and its Subsidiaries (in all of their capacities) affected
thereby. All references herein to the enforceability of agreements with Third
Parties, the existence or non-existence of Third-Party rights, the absence of
breaches or defaults by Third Parties, or similar matters or statements, are
intended only to allocate rights and risks among the parties hereto and were
not intended to be admissions against interests, give rise to any inference or
proof of accuracy, be admissible against any party hereto by any Person who is
not a party hereto, or give rise to any claim or benefit to any Person who is
not a party hereto.
Section 9.12 Severability. If any term, provision, covenant or
restriction hereof is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions hereof shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent
possible.
Section 9.13 Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder, without bond or other security being
required, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section 9.14 Construction.
(a) The article and section headings contained herein are solely for
the purpose of reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of this Agreement.
As used herein, (i) unless otherwise specified herein, the term "affiliate,"
with respect to any person, shall mean and include any person controlling,
controlled by or under common control with such person, (ii) the term
"including" shall mean "including, without limitation", (iii) words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires,
(iv) the words "hereof," "herein," and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole (including the Company Disclosure Letter and the Parent Disclosure
Letter) and not to any particular provision of this Agreement, and article,
section and paragraph references are to the articles, sections and paragraphs
of this Agreement, and references to schedules are to the Company Disclosure
Letter and the Parent Disclosure Letter, as applicable, unless otherwise
specified, (v) the words "date hereof" shall mean September 15, 2004, (vi) the
word "or" shall not be exclusive and (vii) any of Parent, Merger Subsidiary
and the Company will be referred to herein individually as a "party" and
collectively as "parties" (except where the context otherwise requires).
(b) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
(c) Any reference to any federal, state, local or non-United States
Law shall be deemed also to refer to all rules and regulations promulgated
thereunder and any predecessor or successor Law, rules and regulations, in
each case as amended or as otherwise modified from time to time, unless the
context otherwise requires.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
AMERICAN MEDICAL SECURITY GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman of the Board of
Directors, President and
Chief Executive Officer
PACIFICARE HEALTH SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman of the Board of
Directors and Chief
Executive Officer
ASHLAND ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and Chief
Executive Officer
