EXECUTION COPY
Exhibit A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 28, 2002 (this "Option
Agreement"), between Anthem, Inc. an Indiana corporation ("Grantee"), and Trigon
Healthcare, Inc. a Virginia corporation ("Issuer").
RECITALS
A. Merger Agreement. Grantee and Issuer have entered into an Agreement
and Plan of Merger, dated as of April 28, 2002 (as amended, restated or
otherwise modified from time to time, the "Merger Agreement"), which agreement
was executed and delivered concurrently with the execution and delivery of this
Option Agreement, pursuant to which Issuer is to merge with and into a wholly
owned subsidiary of Grantee (the "Merger"); and
B. Option. As a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Grant of Option.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
an aggregate of 19.9% of the total fully paid and nonassessable shares
of the Class A common stock, par value $0.01 per share, of Issuer
("Common Stock") issued and outstanding at the close of business on
April 28, 2002, at a price per share equal to $84.25 (the "Option
Price"). The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to
adjustment as herein set forth; provided, however, that in no event
shall the number of shares for which this Option is exercisable (when
exercisable) exceed 19.9% of the issued and outstanding shares of
Common Stock. Issuer shall make proper provision so that each share of
Common Stock issued upon exercise of the Option shall be accompanied by
the applicable number of rights under the Company Rights Agreement (as
such term is defined in the Merger Agreement).
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Option Agreement and other than pursuant
to an event described in Section 5 hereof), the number of shares of
Common Stock subject to the Option shall be increased so that, after
such issuance, such number, together with any shares of Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares
of Common Stock then
Exhibit A
issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option.
2. Exercise.
(a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, if, but only if, a Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined); provided that the Holder
shall have sent written notice of such exercise (as provided in
subsection (d) of this Section 2) within ninety (90) days following
such Triggering Event (or such later period as provided in Section 10).
An Exercise Termination Event shall be the earliest to occur of the
following: (1) the Effective Time (as defined in the Merger Agreement)
of the Merger; (2) termination of the Merger Agreement in accordance
with the provisions thereof if such termination would not result in a
termination fee (or partial fee) being payable to Grantee pursuant to
the provisions of Section 7.3 of the Merger Agreement either upon such
termination or at any time thereafter; or (3) the passage of fifteen
(15) months (or such longer period as provided in Section 10) after
termination of the Merger Agreement if such termination results in a
termination fee (or partial fee) being payable to Grantee pursuant to
the provisions of Section 7.3 of the Merger Agreement either upon such
termination or at any time thereafter. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Triggering Event" shall mean the consummation of an
Alternative Transaction (as such term is defined in the Merger
Agreement) or the Company entering into a definitive agreement with
respect to an Alternative Transaction, in either case, following a
termination of the Merger Agreement, if such consummation of an
Alternative Transaction or entering into a definitive agreement with
respect to an Alternative Transaction results in a termination fee (or
partial fee) being due and payable to Grantee pursuant to the terms of
Section 7.3 of the Merger Agreement.
(c) Issuer shall notify Grantee in writing of the occurrence of
any Triggering Event promptly after it becomes aware of the occurrence
thereof, it being understood that the giving of such notice by Issuer
shall not be a condition to the right of the Holder to exercise the
Option.
(d) In the event the Holder is entitled to and wishes to exercise
the Option (or any portion thereof), it shall send to Issuer a written
notice (the date of which being herein referred to as the "Notice
Date") specifying (1) the total number of shares of Common Stock it
will purchase pursuant to such exercise and (2) a place and date not
earlier than three business days nor later than ten (10) business days
from the Notice Date for the closing of such purchase (the "Closing
Date"); provided, that if prior notification to, approval or consent of
the Blue Cross and Blue Shield Association ("BCBSA"), the Virginia
State Corporation Commission or any other regulatory or antitrust
agency is required in connection with such purchase, or to avoid or
prevent a conflict, violation,
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Exhibit A
default, right of termination, cancellation or loss with or of the
license granted under the Blue Cross License Agreement and the Blue
Shield License Agreement, each as amended through the date hereof, by
and between BCBSA and Issuer, the Holder shall promptly file the
required notice or application for approval or consent, shall promptly
notify Issuer of such filing and shall expeditiously process the same
and the Closing Date shall occur on the Business Day following the date
on which the later of the following occurs: (i) any required
notification periods have expired or been terminated and (ii) any such
approvals or consents have been obtained and any requisite waiting
period or periods shall have passed.
(e) At the closing referred to in subsection (d) of this Section
2, the Holder shall (1) pay to Issuer the aggregate purchase price for
the shares of Common Stock purchased pursuant to the exercise of the
Option in cash and (2) present and surrender this Agreement to Issuer
at its principal executive offices, provided that the failure or
refusal of the Issuer to accept the purchase price or accept surrender
of this Agreement shall not preclude the Holder from exercising the
Option.
(f) At such closing, simultaneously with the delivery of
immediately available funds satisfying the criteria specified in
subsection (e) of this Section 2, (1) Issuer shall deliver to the
Holder a certificate or certificates representing the number of shares
of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable
hereunder and (2) Grantee shall deliver to Issuer a letter agreeing
that Grantee shall not offer to sell or otherwise dispose of such
shares of Common Stock in violation of applicable federal and state
securities laws or the provisions of this Agreement.
(g) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially
as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor."
It is understood and agreed that: (1) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act")
in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Holder shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel, in form and substance reasonably satisfactory to
Issuer, to the effect that such legend is not required for purposes of
the 1933 Act; (2) the reference to the provisions of
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Exhibit A
this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have
been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of
such reference in the opinion of counsel to the Holder, in form and
substance reasonably satisfactory to the Issuer; and (3) the legend
shall be removed in its entirety if the conditions in the preceding
clauses (1) and (2) are both satisfied. In addition, such certificates
shall bear any other legend as may be required by law.
(h) Upon the giving by the Holder to Issuer of the written notice
of exercise of the Option provided for under subsection (d) of this
Section 2 and the tender of the applicable purchase price, the Holder
shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may
be payable in connection with the preparation, issue and delivery of
stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Covenants of Issuer. Issuer agrees: (1) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
then-outstanding options, warrants, convertible securities and other rights to
purchase Common Stock; (2) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (3) promptly to take all action as may from time to time be
reasonably required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder, (y) in the event, under any
applicable Virginia or other state insurance law prior approval of or notice to
any state regulatory authority is necessary before the Option may be exercised,
and (z) in the event approval or consent of the BCBSA is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to such state regulatory
authorities as they may require) in order to permit the Holder to exercise the
Option and Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and (4) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. Exchange. This Option Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Option Agreement at the principal office of Issuer, for
other Option Agreements providing for Options of different denominations
entitling the holder thereof to purchase, on the same terms and subject to the
same conditions as are set forth herein, in the aggregate the same
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Exhibit A
number of shares of Common Stock purchasable hereunder. The terms "Option
Agreement" and "Option" as used herein include any Option Agreements and related
Options for which this Option Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Option Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Option Agreement, if mutilated,
Issuer will execute and deliver a new Option Agreement of like tenor and date.
Any such new Option Agreement executed and delivered shall constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. Certain Adjustments. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the Option pursuant
to Section 1 of this Option Agreement, the number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5. In the
event of any change in Common Stock by reason of a stock dividend, stock split,
split-up, recapitalization, stock combination, exchange of shares or similar
transaction, the type and number of shares or securities subject to the Option,
and the Option Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction, so that
Grantee shall receive, upon exercise of the Option, the same number and class of
shares or other securities or property that Grantee would have received in
respect of Common Stock if the Option had been exercised immediately prior to
such event, or the record date therefor, as applicable. If any additional shares
of Common Stock are issued after the date of this Option Agreement (other than
pursuant to an event described in the first sentence of this Section 5 or upon
exercise of the Option), the number of shares of Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
6. Registration Rights. Upon the occurrence of a Triggering Event
Issuer shall, at the request of Grantee delivered within twelve (12) months (or
such later period as provided in Section 10) of such Triggering Event (whether
on its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a registration statement under the 1933 Act
covering any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
any shares of Common Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition requested by
Grantee. Issuer will use its reasonable best efforts to cause such registration
statement promptly to become effective and then to remain effective for such
period not in excess of 180 days from the day such registration statement first
becomes effective or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Grantee shall have the right to
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Exhibit A
demand two such registrations. The Issuer shall bear the costs of such
registrations (including, but not limited to, Issuer's attorneys' fees, printing
costs and filing fees, except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's counsel related
thereto). The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering by Issuer of shares
of Common Stock, and if in the good faith judgment of the managing underwriter
or managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 33% of the total number
of shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable thereafter as
to which no reduction pursuant to this Section 6 shall be permitted or occur and
the Holder shall thereafter be entitled to one additional registration and the
twelve (12) month period referred to in the first sentence of this section shall
be increased to eighteen (18) months. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall the number of registrations that Issuer is obligated to effect
be increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Option Agreement.
7. Repurchase.
(a) At any time after the occurrence of a Triggering Event (1) at
the written request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10),
Issuer (or any successor thereto) shall repurchase the Option from the
Holder at a price (the "Option Repurchase Price") equal to the amount
by which (A) the market/offer price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this Option
may then be exercised and (2) at the written request of any present or
former Holder who at the time owns Option Shares (each, the "Owner"),
delivered prior to an Exercise Termination Event (or such later period
as provided in Section 10), Issuer (or any successor thereto) shall
repurchase such number of Option Shares from the Owner as the Owner
shall designate at a price
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Exhibit A
(the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term
"market/offer price" shall mean the highest of (i) the price per share
of Common Stock at which a tender or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event
of a sale of all or any substantial part of Issuer's assets, the sum of
the net price paid in such sale for such assets and the current market
value of the remaining net assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or
the Owner, as the case may be, and reasonably acceptable to Issuer,
divided by the number of shares of Common Stock of Issuer outstanding
at the time of such sale. In determining the market/offer price, the
value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or
Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer,
at its principal office, a copy of this Option Agreement or
certificates for Option Shares, as applicable, accompanied by a written
notice or notices stating that the Holder or the Owner, as the case may
be, elects to require Issuer to repurchase this Option and/or the
Option Shares in accordance with the provisions of this Section 7. The
Holder and the Owner, as the case may be, shall also represent and
warrant that it has sole record and beneficial ownership of such Option
Shares and that such Option Shares are then free and clear of all
liens. As promptly as practicable, and in any event within five (5)
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices
relating thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder
and/or the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that it is
no longer prohibited from delivering, within five (5) business days
after the date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Holder and/or the Owner,
as
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Exhibit A
appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes
to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option and/or the
Option Shares whether in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (1) deliver to the
Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price and/or the Option Share Repurchase Price that Issuer
is not prohibited from delivering; and (2) deliver, as appropriate,
either (A) to the Holder, a new Option Agreement evidencing the right
of the Holder to purchase that number of shares of Common Stock
obtained by multiplying the number of shares of Common Stock for which
the surrendered Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of
which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the
Option Repurchase Price, and/or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the
notice by Issuer described in the first sentence of this subsection
(c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Holder
shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
8. Substitute Option.
(a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (1) to consolidate with or merge
into any person, other than Grantee or a Subsidiary (as defined in the
Merger Agreement) of Grantee ("Grantee Subsidiary"), or engage in a
plan of exchange with any person, other than Grantee or a Grantee
Subsidiary and Issuer shall not be the continuing or surviving
corporation of such consolidation or merger or the acquirer in such
plan of exchange, (2) to permit any person, other than Grantee or a
Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a
plan of exchange and Issuer shall be the continuing or surviving or
acquiring corporation, but, in connection with such merger or plan of
exchange, the then outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of Common
Stock shall after such merger or plan of exchange represent less than
50% of the outstanding voting shares and share equivalents of the
merged or acquiring company, or (3) to sell or otherwise transfer all
or substantially all of its or any Issuer Subsidiary's assets, in one
transaction or in a series of related transactions, to any person,
other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option (the "Substitute Option"),
at the election of
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Exhibit A
the Holder, of either (x) the Acquiring Corporation (as hereinafter
defined) or (y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (A) the continuing or
surviving person of a consolidation or merger with Issuer (if
other than Issuer), (B) the acquiring person in a plan of exchange
in which Issuer is acquired, (C) the Issuer in a merger or plan of
exchange in which Issuer is the continuing or surviving or
acquiring person and (D) the transferee of all or a substantial
part of Issuer's assets (or the assets of any Issuer Subsidiary).
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one (1) year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger or
sale; provided that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a
share of common stock issued by the person merging into Issuer or
by any company which controls or is controlled by such person, as
the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of
the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same
form as this Option Agreement, which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by twice the number of shares of Common Stock for which the
Option was exercisable immediately prior to the event described in the
first sentence of Section 8(a), divided by the Average Price (the
"Number of Substitute Shares"). The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to (I)
the Average Price minus (II) quotient of (x) the product of (i) the
Assigned Value minus the Option Price multiplied by (ii) the number of
shares of Common Stock for which the Option was exercisable immediately
prior to the event described in the first sentence of Section 8(a) and
(y) the Number of Substitute Shares.
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Exhibit A
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the sum (the "Substitute Option Sum") of (i) the Number of
Substitute Shares and (ii) the number of shares of Substitute Common
Stock that the Grantee would hold if all shares of Common Stock
previously obtained by Grantee through exercise of the Option were
converted in any transaction contemplated by Section 8(a), exceed 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise
of the Substitute Option. In the event that the Substitute Option Sum
would exceed 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise but for this clause (e), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall make a cash payment to
Holder equal to the excess of (1) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over (2) the
value of the Substitute Option after giving effect to the limitation in
this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assume in writing
all the obligations of Issuer hereunder.
9. Repurchase of Substitute Option.
(a) At the written request of the holder of the Substitute Option
(the "Substitute Option Holder") made prior to an Exercise Termination
Event, the Substitute Option Issuer shall repurchase the Substitute
Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (1) the Highest
Closing Price (as hereinafter defined) exceeds (2) the exercise price
of the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be
exercised, and at the written request made prior to an Exercise
Termination Event of any present or former Substitute Option Holder
(each, the "Substitute Share Owner") who at the time owns shares of
Substitute Common Stock issued upon total or partial exercise of the
Substitute Option ("Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute
Share Repurchase Price") equal to the Highest Closing Price multiplied
by the number of Substitute Shares to be so repurchased. The term
"Highest Closing Price" shall mean the highest closing price for shares
of Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares,
as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise its respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of
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Exhibit A
this Option Agreement) and/or certificates for Substitute Shares
accompanied by a written notice or notices stating that the Substitute
Option Holder or the Substitute Share Owner, as the case may be, elects
to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable and in any event within
five (5) business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option Issuer
shall deliver or cause to be delivered to the Substitute Option Holder
the Substitute Option Repurchase Price and/or to the Substitute Share
Owner the Substitute Share Repurchase Price therefor or the portion
thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Substitute Option and/or
the Substitute Shares in part or in full, the Substitute Option Issuer
shall immediately so notify the Substitute Option Holder and/or the
Substitute Share Owner and thereafter deliver or cause to be delivered,
from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute
Option Repurchase Price and/or the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering, within
five (5) business days after the date on which the Substitute Option
Issuer is no longer so prohibited; provided, however, that if the
Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall use its
reasonable best efforts to receive all required regulatory and legal
approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder and/or Substitute Share Owner
may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of such prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (1) deliver to the Substitute Option Holder or Substitute
Share Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price that the
Substitute Option Issuer is not prohibited from delivering; and (2)
deliver, as appropriate, either (A) to the Substitute Option Holder, a
new Substitute Option evidencing the right of the Substitute Option
Holder to purchase that number of shares of Substitute Common Stock
obtained by multiplying the number of shares of Substitute Common Stock
for which the surrendered Substitute Option was exercisable at the time
of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion
thereof theretofore delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price, and/or
(B) to the Substitute Share Owner, a certificate for the Substitute
Option Shares it is then so
-11-
Exhibit A
prohibited from repurchasing. If an Exercise Termination Event shall
have occurred prior to the date of the notice by the Substitute Option
Issuer described in the first sentence of this subsection (c), or shall
be scheduled to occur at any time before the expiration of a period
ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute
Option until the expiration of such 30-day period.
10. Extension of Periods Under Certain Circumstances. The periods for
exercise of certain rights under Sections 2, 6, 7, and 9 (and the expiration
date of this Option under Section 2) shall be extended for up to a maximum of
six months in any given case: (1) to the extent necessary to obtain all
regulatory or other approvals (including of the BCBSA) for the exercise of such
rights (for so long as the Holder, Owner, Substitute Option Holder or Substitute
Share Owner, as the case may be, is using commercially reasonable efforts to
obtain such regulatory or other approvals), and for the expiration of all
statutory waiting periods; (2) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise; and (3) when there
exists an injunction, order or judgment that prohibits or delays exercise of
such right.
11. Representations and Warranties.
(a) Issuer hereby represents and warrants to Grantee as follows:
(1) Issuer has the requisite corporate power and authority to
execute and deliver this Option Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Option Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer ("Issuer Board") prior to the date
hereof and no other corporate proceedings on the part of Issuer
are necessary to authorize this Option Agreement or to consummate
the transactions so contemplated. This Option Agreement has been
duly and validly executed and delivered by Issuer.
(2) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Option
Agreement in accordance with its terms will have reserved for
issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and
security interests and not subject to any preemptive rights.
(b) Grantee hereby represents and warrants to Issuer as follows:
Grantee has the requisite corporate power and authority to execute and
deliver this Option Agreement
-12-
Exhibit A
and to perform its obligations hereunder. The execution and delivery of
this Option Agreement by the Grantee and the performance of its
obligations hereunder by the Grantee have been duly and validly
authorized by the Board of Directors of Grantee and no other corporate
proceedings on the part of the Grantee are necessary to authorize this
Option Agreement or for Grantee to perform its obligations hereunder.
This Option Agreement has been duly and validly executed and delivered
by Grantee.
(c) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed or except in a transaction registered
or exempt from registration under the 1933 Act.
12. Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Triggering Event shall have occurred, Grantee,
subject to the express provisions hereof, may assign in whole or in part its
rights and obligations hereunder; provided, however, that until the date fifteen
(15) days following the later of the date on which the BCBSA, the Virginia State
Corporation Commission or other regulatory authority has approved an application
by Grantee to acquire the shares of Common Stock subject to the Option, Grantee
may not assign its rights under the Option except in (1) a widely dispersed
public distribution, (2) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of Issuer, (3) an
assignment to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's behalf
or (4) any other manner approved by the BCBSA, the Virginia State Corporation
Commission or other regulatory authority.
13. Filings, Etc. Each of Grantee and Issuer will use its reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Option Agreement, including, without
limitation, applying to the BCBSA and the Virginia State Corporation Commission
for approval to acquire the shares issuable hereunder.
14. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Option Agreement by either
party hereto and that the obligations of the parties hereto shall be enforceable
by either party hereto through injunctive or other equitable relief. In
connection therewith, both parties waive the posting of any bond or similar
requirement.
15. Maximum Profit.
(a) Notwithstanding any other provision herein or of the Merger
Agreement, in no event shall Grantee's Total Profit (as defined in
Section 15(c)) exceed $189,211,500.00 (the "Maximum Profit"), and, if
the Total Profit would otherwise exceed such amount, Grantee, at its
sole election, shall either (1) reduce the number of shares
-13-
Exhibit A
subject to the Option (and any Substitute Option), (2) deliver to
Issuer, or Substitute Issuer, as the case may be, for cancellation
shares of Common Stock or Substitute Common Stock, as the case may be,
previously purchased by Grantee valued at fair market value at the time
of delivery, (3) pay cash to Issuer, or Substitute Issuer, as the case
may be, (4) increase or otherwise adjust the Option Price or Substitute
Option Price (or any portion thereof), (5) reduce the amount of the
Option Repurchase Price or Substitute Option Repurchase Price, or (6)
undertake any combination of the foregoing, so that Grantee's actually
realized Total Profit shall not exceed the Maximum Profit after taking
into account the foregoing actions.
(b) Notwithstanding any other provision of this Option Agreement,
the Option (and any Substitute Option) may not be exercised for a
number of shares as would, as of the date of exercise, result in a
Notional Total Profit (as defined in Section 15(d)) of more than the
Maximum Profit and, if exercise of the Option (and any Substitute
Option) would otherwise result in the Notional Total Profit exceeding
such amount, Grantee, in its discretion, may take any of the actions
specified in Section 15(a) so that the Notional Total Profit shall not
exceed the Maximum Profit; provided, that nothing in this sentence
shall restrict any subsequent exercise of the Option (and any
Substitute Option) which at such time complies with this sentence.
(c) For purposes of this Option Agreement, the term "Total Profit"
shall mean the aggregate amount (before taxes) of the following: (1)
the excess of (A) the net cash amounts or fair market value of any
property received by Grantee pursuant to the sale of Option Shares (or
any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, after payment of applicable
brokerage or sales commissions and discounts, if any, over (B)
Grantee's aggregate purchase price for such Option Shares (or other
securities), plus (2) all amounts received by Grantee, a Holder or an
Owner (including a Substitute Option Holder or Substitute Share Owner)
upon the repurchase of the Option and/or any Option Shares by Issuer
pursuant to Section 7 (or upon the repurchase of the Substitute Option
and/or the Substitute Shares by Issuer pursuant to Section 9) (net in
the case of Option Shares or Substitute Option Shares of the Owner's or
Substitute Share Owner's aggregate purchase price therefor), plus (3)
all equivalent amounts with respect to the Substitute Option and any
other amounts paid pursuant to Sections 8(e) and 9, if any, plus (4)
the amount of any termination fee paid or due and payable under the
terms of the Merger Agreement (unless such termination fee is payable
and has not been paid by Issuer in breach of the Merger Agreement or
due to written waiver of such termination fee by Grantee) to Grantee
pursuant to Section 7.3 of the Merger Agreement, minus (5) all amounts
of cash previously paid to Issuer pursuant to Section 15(a)(3) and the
value of all Option Shares (or other securities) previously delivered
to Issuer for cancellation pursuant to Section 15(a)(2), which value
shall be as set forth in clause (2) of Section 15(a).
-14-
Exhibit A
(d) For purposes of this Option Agreement, the term "Notional
Total Profit" with respect to any number of shares of Common Stock or
Substitute Common Stock, as applicable, as to which Grantee may propose
to exercise the Option or Substitute Option, as applicable, shall be
the Total Profit, determined as of the date of such proposed exercise
assuming (1) that the Option were exercised on such date for such
number of shares, (2) that such shares, together with all other Option
Shares held by Grantee and its affiliates as of such date, were sold
for cash at the closing market price for the Common Stock as of the
close of business on the preceding trading day (less customary
brokerage commissions) and (3) the effect of any adjustments made by or
to be made by Grantee pursuant to Section 15(a). For purposes of this
Section 15, the term Grantee will include all Holders and transactions
by any affiliate transferee of Grantee in respect of the Option or
Option Shares transferred to it shall be treated as if made by Grantee.
16. Severability. If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in Section l(a)
hereof (as adjusted pursuant to Section l(b) or Section 5 hereof), it is the
express intention of Issuer to allow the Holder to acquire or to require Issuer
to repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
17. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by fax, telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana applicable to
contracts made and to be performed entirely in that State (except to the extent
that Virginia law applies to the internal and corporate affairs of Issuer).
19. Counterparts. This Option Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
20. Expenses. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
-15-
Exhibit A
21. Entire Agreement; Third-Party Rights. Except as otherwise expressly
provided herein or in the Merger Agreement, this Option Agreement contains the
entire agreement between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions of this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assignees. Nothing in this Option
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors except as assignees,
any rights, remedies, obligations or liabilities under or by reason of this
Option Agreement, except as expressly provided herein.
22. Capitalized Terms. Capitalized terms used in this Option Agreement
and not defined herein shall have the meanings assigned thereto in the Merger
Agreement.
-16-
Exhibit A
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
TRIGON HEALTHCARE, INC.
By____________________________________
ANTHEM, INC.
By____________________________________
Option Agreement Signature Page
