EXHIBIT 2.1
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
June 2, 1997
AMONG
HUMANA INC.
HUMNOV, INC.
AND
PHYSICIAN CORPORATION OF AMERICA
TABLE OF CONTENTS
Pages
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.2. EFFECTIVE DATE OF THE MERGER . . . . . . . . . . . . . . . . . .1
ARTICLE II THE SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . .2
SECTION 2.1. CERTIFICATE OF INCORPORATION . . . . . . . . . . . . . . . . . .2
SECTION 2.2. BY-LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 2.3. BOARD OF DIRECTORS; OFFICERS . . . . . . . . . . . . . . . . . .2
SECTION 2.4. EFFECTS OF MERGER. . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 3.1. MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . .2
SECTION 3.2. PAYMENT PROCEDURES.. . . . . . . . . . . . . . . . . . . . . . .3
SECTION 3.3. DISSENTING SHARES. . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 3.4. STOCK OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 3.5. STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . .7
SECTION 3.6. CLOSING OF THE COMPANY'S TRANSFER BOOKS. . . . . . . . . . . . .8
SECTION 3.7. ASSISTANCE IN CONSUMMATION OF THE MERGER . . . . . . . . . . . .8
SECTION 3.8. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 3.9. TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE IV REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . .9
SECTION 4.1. ORGANIZATION, STANDING AND POWER . . . . . . . . . . . . . . . .9
SECTION 4.2. CAPITAL STRUCTURE. . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 4.2A. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.3. AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.4. SEC DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.5. INFORMATION SUPPLIED . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.6. COMPLIANCE WITH APPLICABLE LAWS. . . . . . . . . . . . . . . . 14
SECTION 4.7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.8. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.9. LABOR AND EMPLOYMENT MATTERS . . . . . . . . . . . . . . . . . 17
SECTION 4.10. ABSENCE OF CERTAIN CHANGES. . . . . . . . . . . . . . . . . . 18
SECTION 4.11. MATERIAL CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.12. OFFICERS AND DIRECTORS AND EMPLOYEES. . . . . . . . . . . . . 23
SECTION 4.13. TITLE TO AND CONDITION OF PROPERTIES AND ASSETS . . . . . . . 23
SECTION 4.14. PATENTS, COPYRIGHTS, SERVICE MARKS AND TRADEMARKS . . . . . . 24
SECTION 4.15. EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . 25
SECTION 4.16. TRANSACTIONS WITH OFFICERS, DIRECTORS AND OTHERS. . . . . . . 28
SECTION 4.17. INSURANCE MATTERS-REINSURANCE AND COINSURANCE . . . . . . . . 29
SECTION 4.18. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.19. OPINION OF FINANCIAL ADVISOR. . . . . . . . . . . . . . . . . 32
SECTION 4.20. INVESTMENT COMPANY ACT. . . . . . . . . . . . . . . . . . . . 32
SECTION 4.21. VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.22. APPLICABILITY OF DGCL 203 . . . . . . . . . . . . . . . . . . 32
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SECTION 4.23. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.25. CHANGE OF CONTROL PAYMENTS. . . . . . . . . . . . . . . . . . 33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB . . . . . . . . 34
SECTION 5.1 ORGANIZATION; STANDING AND POWER. . . . . . . . . . . . . . . . 34
SECTION 5.2 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.3 INFORMATION SUPPLIED. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.4 INTERIM OPERATIONS OF SUB . . . . . . . . . . . . . . . . . . . 35
SECTION 5.5 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.6 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.7 OWNERSHIP OF COMPANY STOCK. . . . . . . . . . . . . . . . . . . 35
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER. . . . . . . . . . . . . 36
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. . . . . 36
SECTION 6.2. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER . . . . . . . 37
SECTION 6.3. CONDUCT OF BUSINESS OF SUB . . . . . . . . . . . . . . . . . . 38
ARTICLE VII ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.1. ACCESS AND INFORMATION . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.2. PROXY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.3. COMPANY STOCKHOLDER APPROVAL . . . . . . . . . . . . . . . . . 39
SECTION 7.4. EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.5. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.6. BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.7. PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.8. ALTERNATIVE PROPOSALS. . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.9. ADVICE OF CHANGES; SEC FILINGS . . . . . . . . . . . . . . . . 45
SECTION 7.10. FEE AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.11. AMENDMENT TO THE COMPANY RIGHTS AGREEMENT . . . . . . . . . . 45
SECTION 7.12. P&C COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.13. ASSUMPTION OF DEBT OBLIGATIONS. . . . . . . . . . . . . . . . 46
SECTION 7.14. ESCROW DEPOSIT.. . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VIII CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER . . 47
SECTION 8.2. CONDITION TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. . 48
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . 49
SECTION 9.1. TERMINATION BY MUTUAL CONSENT. . . . . . . . . . . . . . . . . 49
SECTION 9.2. TERMINATION BY EITHER PARENT OR THE COMPANY. . . . . . . . . . 49
SECTION 9.3. TERMINATION BY THE COMPANY . . . . . . . . . . . . . . . . . . 50
SECTION 9.4. TERMINATION BY PARENT. . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.5. EFFECT OF TERMINATION AND ABANDONMENT. . . . . . . . . . . . . 51
SECTION 9.6. EXTENSION; WAIVER. . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE X GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. . 53
SECTION 10.2. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.3. SPECIAL PERFORMANCE . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.4. ASSIGNMENT; BINDING EFFECT. . . . . . . . . . . . . . . . . . 54
SECTION 10.5. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.6. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.7. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.8. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 55
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SECTION 10.9. HEADINGS AND TABLE OF CONTENTS. . . . . . . . . . . . . . . . 56
SECTION 10.10. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.11. WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.12. INCORPORATION OF EXHIBITS. . . . . . . . . . . . . . . . . . 56
SECTION 10.13. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 56
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of June 2,
1997, by and among Humana Inc., a Delaware corporation ("Parent"), HUMNOV, Inc.,
a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and
Physician Corporation of America, a Delaware corporation (the "Company"):
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent and the Company each have
determined that it is in the best interests of their respective companies and
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection herewith.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. THE MERGER
. Upon the terms and subject to the conditions hereof, on the Effective
Date (as defined in Section 1.2), Sub shall be merged into the Company (the
"Merger") and the separate existence of Sub shall thereupon cease, and the
Company, as the corporation surviving the Merger (the "Surviving Corporation"),
shall by virtue of the Merger continue
its corporate existence under the laws of the State of Delaware.
Section 1.2. EFFECTIVE DATE OF THE MERGER
. The Merger shall become effective at the date and time (the "Effective
Date") when a properly executed Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware (the "Merger Filing"), which filing
shall be made as soon as practicable following fulfillment of the conditions set
forth in Article VIII hereof, or at such time thereafter as is provided in such
Certificate of Merger.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1. CERTIFICATE OF INCORPORATION
. Subject to Section 7.5, the Certificate of Incorporation of Sub shall be
the Certificate of Incorporation of the Surviving Corporation after the
Effective Date, and thereafter may be amended in accordance with its terms and
as provided by law and this Agreement.
Section 2.2. BY-LAWS
. The By-laws of Sub as in effect on the Effective Date shall be the
By-laws of the Surviving Corporation, and thereafter may be amended in
accordance with its terms and as provided by law and this Agreement.
Section 2.3. BOARD OF DIRECTORS; OFFICERS
. The directors of Sub immediately prior to the Effective Date shall be
the directors of the Surviving Corporation, and the officers of Sub immediately
prior to the Effective Date shall be the officers of the Surviving Corporation,
in each case until their respective successors are duly elected and qualified.
SECTION 2.4. EFFECTS OF MERGER
The Merger shall have the effects set forth in Section 259 of the Delaware
General CorporatioN Law (The "DGCL").
ARTICLE III
CONVERSION OF SHARES
Section 3.1. MERGER CONSIDERATION
. On the Effective Date, by virtue of the Merger and without any action on
the part of any holder of any Common Stock, par value $.01 per share, of the
Company ("Company Common Stock"):
(a) All shares of Company Common Stock which are held by the Company or
any Subsidiary of the Company, and any shares of Company Common Stock owned by
Parent, Sub or any other subsidiary of Parent, shall be canceled. As used in
this Agreement, "Subsidiary" means any significant corporation, partnership,
joint venture or other legal entity of which Parent or the Company, as the case
may be (either alone or through or together with any other Subsidiary), owns
directly or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
(b) Subject to Section 3.3, each remaining outstanding share of Company
Common Stock shall be converted into and represent the right to receive $7.00
(the "Merger Consideration") in accordance with Section 3.2.
(c) In the event of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares with respect to, or rights
issued in respect of, Company Common Stock after the date hereof, the Merger
Consideration shall be adjusted accordingly.
(d) Each issued and outstanding share of capital stock of Sub shall be
converted into and become one fully paid and nonassessable share of common stock
of the Surviving Corporation.
Section 3.2. PAYMENT PROCEDURES.
(a) Prior to the Effective Date, Parent shall select a Payment Agent,
which shall be Parent's Transfer Agent or such other person or persons
reasonably satisfactory to the Company, to act as Payment Agent for the Merger
(the "Payment Agent").
(b) As soon as practicable after the Effective Date (but in no event more
than five days thereafter), Parent shall instruct the Payment Agent to mail to
each holder of a certificate or certificates evidencing shares of Company Common
Stock (other than Dissenting Shares, as defined in Section 3.3) ("Certificates")
(i) a letter of transmittal (which shall include a Substitute Form W-9 and shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of such Certificates to the
Payment Agent) and (ii) instructions to effect the surrender of the Certificates
in exchange for the Merger Consideration. Each holder of Company Common Stock,
upon surrender to the Payment Agent of such holder's Certificates with the
letter of transmittal, duly executed, and such other customary documents as may
be required pursuant to such instructions, shall be paid the amount to which
such holder is entitled, pursuant to this Agreement, of cash as payment of the
Merger Consideration (without any interest accrued thereon). Until so
surrendered, each Certificate shall after the Effective Date represent for all
purposes only the right to receive the Merger Consideration. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such reasonable amount as the Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Paying Agent will deliver in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration payable in
respect thereof pursuant to this Agreement.
(c) At the closing of the transactions contemplated by this Agreement (the
"Closing"), Parent shall deposit in trust with the Payment Agent, for the
ratable benefit of the holders of Company Common Stock, the appropriate amount
of cash to which such holders are entitled pursuant to this Agreement for
payment of the Merger Consideration (the "Payment Fund"). The Payment Agent
shall, pursuant to irrevocable instructions, make the payments to the holders of
Company Common Stock as set forth in this Agreement.
(d) If any delivery of the Merger Consideration is to be made to a person
other than the registered holder of the Certificates surrendered in exchange
therefor, it shall be a condition to such delivery that the Certificate so
surrendered shall be properly endorsed or be otherwise in proper form for
transfer and that the person requesting such delivery shall (i) pay to the
Payment Agent any transfer or other taxes required as a result of delivery to a
person other than the registered holder or (ii) establish to the satisfaction of
the Payment Agent that such tax has been paid or is not payable.
(e) Any portion of the Payment Fund that remains undistributed to the
holders of Company Common Stock as of the first anniversary of the Effective
Date shall be delivered to Parent upon demand, and any holder of Company Common
Stock who has not theretofore complied with the exchange requirements of this
Section shall have no further claim upon the Payment Agent and shall thereafter
look only to Parent for payment of the Merger Consideration.
(f) If a Certificate has not been surrendered prior to the date on which
any receipt of Merger Consideration would otherwise escheat to or become the
property of any governmental agency, such Certificate shall, to the extent
permitted by applicable law, be deemed to be canceled and no money or other
property will be due to the holder thereof.
(g) The Payment Agent may invest cash in the Payment Fund, as directed by
Parent, on a daily basis, provided that all such investments shall be in
obligations of or guaranteed by the United States of America with remaining
maturities not exceeding
180 days, in commercial paper obligations receiving the highest rating from
either Xxxxx'x Investors Services, Inc. or Standard & Poor's Corporation, or in
certificates of deposit or banker's acceptances of commercial banks with capital
exceeding $100 million (collectively, "Permitted Investments"). The maturities
of Permitted Investments shall be such as to permit the Payment Agent to make
prompt payment to former stockholders of the Company entitled thereto as
contemplated by this Section. Parent shall promptly replenish the Payment Fund
to the extent of any losses incurred as a result of Permitted Investments. Any
interest and other income resulting from such investments shall be paid to
Parent. If for any reason (including losses) the Payment Fund is inadequate to
pay the amounts to which holders of Company Common Stock shall be entitled under
this Agreement, Parent shall in any event be liable for payment thereof. The
Payment Fund shall not be used for any purpose not specifically provided for in
this Agreement.
Section 3.3. DISSENTING SHARES
. (a) Notwithstanding any other provision of this Agreement to the
contrary, shares of Company Common Stock that are outstanding immediately prior
to the Effective Date and which are held by holders who shall have not voted in
favor of the Merger or consented thereto in writing and who shall have demanded
properly in writing appraisal for such shares in accordance with Section 262 of
the DGCL and who shall not have withdrawn such demand or otherwise have
forfeited appraisal rights (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration. Such
holders shall be entitled to receive payment of the appraised value of such
shares, except that all Dissenting Shares held by holders who shall have failed
to perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares under such Section 262 shall thereupon be deemed to
have been converted into and to have become exchangeable, as of the Effective
Date, for the right to receive, without any interest thereon, the Merger
Consideration, upon
surrender of the Certificates evidencing such shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the Company and (ii) the
opportunity to participate and direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. The Company shall not, except
with the prior written consent of Parent, make any payment with respect to any
demands for appraisal, or offer to settle, or settle, any such demands.
Section 3.4. STOCK OPTIONS
. (a) All options (the "Options") to acquire shares of Company Common
Stock (whether vested or unvested), other than those set forth in paragraph (d)
below, shall be canceled as of the Effective Date. In consideration of such
cancellation, each holder of Options shall have only the right to receive from
the Company the payments (if any) as specified below:
(i) Each employee of the Company or any of its Subsidiaries employed
as of the Effective Date shall be entitled to receive the Cash Value (as such
term is defined in the form of Salary Continuation Agreement attached to
SCHEDULE 3.4 (the "Salary Continuation Agreement")) of each such canceled Option
under either of the following circumstances: (x) the employee is employed by
Parent or any of its Subsidiaries (including the Company) at the end of the
Initial Benefit Period specified in the Salary Continuation Agreement to which
the employee is a party or, if such employee is not a party to a Salary
Continuation Agreement, six months from the Effective Date (such employee's
Initial Benefit Period being deemed to be six months for purposes of computing
the Cash Value) or (y) the employee's employment is terminated under
circumstances resulting in a Termination Date (as such term is defined in the
Salary Continuation Agreement). The payment shall be made upon the earlier to
occur of clauses (x) and (y).
(ii) Each holder of an Option who was not an employee of the Company
or any of its Subsidiaries as of the Effective Date or was a non-employee
director of the Company shall have the right to receive a cash payment in the
amount (if any) equal to the number of shares of Company Common Stock subject to
each canceled Option multiplied by the difference (if positive) between the
exercise price per share of Company Common Stock covered by the canceled Option
and the Merger Consideration.
(b) As a condition to making any payment specified in clause (a) above,
each Option holder shall acknowledge in writing that all Options held by such
person have been canceled in consideration of the right to receive such payment
and, in the case of employees who are parties to the Salary Continuation
Agreement, in full satisfaction of all rights under paragraph 2(b)(iv) of such
employee's Salary Continuation Agreement.
(c) Prior to the Effective Date, the Company shall take such additional
actions as are necessary under applicable law and the applicable agreement and
the Company's option plans to ensure that each Option shall, from and after the
Effective Date, represent only the right to receive the payments specified in
clause (a) above.
(d) The Company shall take all actions necessary to vest all options held
by the University of Miami and The Xxxxxxx Memorial Foundation as contemplated
by Section 12.B(i) of the applicable Stock Option Agreement so that from and
after the Effective Date each such option represents the right to receive the
Merger Consideration.
Section 3.5. STOCKHOLDERS' MEETINGS
. The Company shall take all action necessary, in accordance with applicable
law and its Certificate of Incorporation and By-laws, to convene a special
meeting of the holders of Company Common Stock (the "Company Meeting") as
promptly as practicable for the purpose of considering and taking action upon
this Agreement. Subject to the exercise of its good faith judgment as to its
fiduciary duties to its
stockholders imposed by law, as advised by outside counsel, the Board of
Directors of the Company will recommend that holders of Company Common Stock
vote in favor of and approve the Merger and the adoption of the Agreement at the
Company Meeting. At the Company Meeting, all of the shares of Company Common
Stock then owned by Parent, Sub, or any other subsidiary of Parent, or with
respect to which Parent, Sub, or any other subsidiary of Parent holds the power
to direct the voting, will be voted in favor of approval of the Merger and
adoption of this Agreement.
Section 3.6. CLOSING OF THE COMPANY'S TRANSFER BOOKS
. At the Effective Date, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock shall be made
thereafter. In the event that, after the Effective Date, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
the Merger Consideration as provided in Sections 3.1(b) and 3.2.
Section 3.7. ASSISTANCE IN CONSUMMATION OF THE MERGER
. Each of Parent, Sub and the Company shall provide all reasonable
assistance to, and shall cooperate with, each other to bring about the
consummation of the Merger as soon as possible in accordance with the terms and
conditions of this Agreement. Parent shall cause Sub to perform all of its
obligations in connection with this Agreement.
Section 3.8. CLOSING
. The Closing shall take place (i) at the offices of Fried, Frank, Harris,
Xxxxxxx & Xxxxxxxx, Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 9:00 A.M.
local time on the day which is at least one business day after the day on which
the last of the conditions set forth in Article VIII (other than those that can
only be fulfilled on the Effective Date) is fulfilled or waived or (ii) at such
other time and place as Parent and the Company shall agree in writing.
Section 3.9. TRANSFER TAXES
. Parent and Company shall cooperate in the preparation, execution and
filing of all returns, applications or other documents regarding any real
property transfer, stamp, recording, documentary or other taxes and any other
fees and similar taxes which become payable in connection with the Merger other
than transfer or stamp taxes payable in respect of transfers pursuant to Section
3.2(d)(i) (collectively, "Transfer Taxes"). From and after the Effective Date,
Parent shall pay or cause to be paid, without deduction or withholding from any
amounts payable to the holders of Company Common Stock, all Transfer Taxes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Parent and Sub as follows:
Section 4.1. ORGANIZATION, STANDING AND POWER
. Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business, including
those subsidiaries engaged in the insurance business (the "Insurance
Subsidiaries"), as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification necessary
except when the failure to be so qualified would not have a Material Adverse
Effect on the Company. As used in this Agreement, "Material Adverse Effect"
means, when used with respect to Parent, Sub or the Company, as the case may be,
any change or effect, either individually or in the aggregate, that is or may be
materially adverse to the business, assets, liabilities, properties, condition
(financial or otherwise) or results of operations of all or any part of Parent
and its Subsidiaries taken as a whole,
Sub, or the Company and its Subsidiaries taken as a whole, as the case may be
(PROVIDED, HOWEVER, that in respect of the Company any such change or effect
relating to (i) PCA Property and Casualty Insurance Company, a Florida
corporation and a wholly-owned subsidiary of the Company ("P&C"), (ii) PCA
Solutions, Inc., a Florida corporation and a wholly-owned subsidiary of the
Company, or (iii) risk contracts between P&C or any of its Subsidiaries and the
Company's Florida HMOs regarding provision of health care services with respect
to worker's compensation as set forth on SCHEDULE 4.1, shall in each case be
excluded from such determination).
Section 4.2. CAPITAL STRUCTURE
. As of the date hereof, the authorized capital stock of the Company
consists of 200,000,000 shares of the Company Common Stock and 10,000,000 shares
of preferred stock, $1.00 par value ("Company Preferred Stock"). At the close
of business on May 30, 1997: (i) 38,837,657 shares of Company Common Stock
were outstanding, 5,314,108 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding stock options (3,119,950 shares of
which are subject to outstanding stock options) or pursuant to the Company's
option plans, (ii) no shares of Company Common Stock were reserved for issuance
upon exercise of the Company's rights (the "Company Rights") granted under the
Rights Agreement, dated January 13, 1995 (the "Company Rights Agreement"),
between the Company and the Rights Agent (as defined therein); (iii) no shares
of Company Common Stock were held by its wholly-owned Subsidiaries; (iv) no
shares of the Company Preferred Stock were outstanding; and (v) except as set
forth on SCHEDULE 4.2, no warrants, bonds, debentures, notes or other
indebtedness or other security having the right to vote (or convertible into or
exercisable for securities having the right to vote) on any matters on which
stockholders may vote ("Voting Debt") were issued or outstanding; since May 30,
1997 there has been no change in such share information except by reason of the
exercise of Options. All outstanding shares of the Company capital stock are
validly
issued, fully paid and nonassessable and not subject to preemptive rights. As
of the date of this Agreement, except for this Agreement, the Options and the
Company Rights, there are no options, warrants, calls, rights, or agreements to
which the Company or any Subsidiary of the Company is a party or by which it or
any such Subsidiary is bound obligating the Company or any Subsidiary of the
Company to issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of capital stock or any Voting Debt of the Company or of any Subsidiary
of the Company or obligating the Company or any Subsidiary of the Company to
grant, extend or enter into any such option, warrant, call, right or agreement.
Assuming compliance by Parent with Section 3.4 after the Effective Date, there
will be no option, warrant, call, right or agreement obligating the Company or
any Subsidiary of the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock or any Voting Debt of the Company
or any Subsidiary of the Company, or obligating the Company or any Subsidiary of
the Company to grant, extend or enter into any such option, warrant, call, right
or agreement.
Section 4.2A. SUBSIDIARIES
. The only Subsidiaries of the Company are disclosed in SCHEDULE 4.2A. Each
Significant Subsidiary (as such term is defined in Rule 1-02 of Regulation S-X
under the Securities Act of 1933, as amended (the "Securities Act") of the
Company has been named in the Company SEC Documents (as hereinafter defined).
SCHEDULE 4.2A contains, with respect to each Subsidiary of the Company, its name
and jurisdiction of incorporation and, with respect to each Subsidiary that is
not wholly owned, the number of issued and outstanding shares of capital stock
and the number of shares of capital stock owned by the Company or a Subsidiary.
All the outstanding shares of capital stock of each Subsidiary of the Company
are validly issued, fully paid and nonassessable, and those owned by the Company
or by a Subsidiary of the Company are owned free and clear of any security
interests, pledges, options, rights of first
refusal, liens, claims, encumbrances or any other limitation or restriction
(including a restriction on the right to vote or sell the same except as may be
provided as a matter of law). Except as set forth in SCHEDULE 4.2A, there are no
existing options, warrants, calls or other rights, agreements or commitments of
any character relating to the issued or unissued capital stock or other
securities of any of the Subsidiaries of the Company. Except as set forth in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 (the "1996 Form 10K") and as disclosed in SCHEDULE 4.2A, the Company does
not directly or indirectly own any interest in any other corporation,
partnership, joint venture or other business association or entity.
Section 4.3. AUTHORITY
. The Company has all requisite corporate power and authority to enter
into this Agreement and subject to approval of this Agreement and the Merger by
the stockholders of the Company, to consummate the transactions contemplated
hereby. 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, subject to such approval of this
Agreement by the stockholders of the Company. This Agreement has been duly
executed and delivered by the Company and, subject to such approval of this
Agreement by the stockholders of the Company, constitutes a valid and binding
obligation of the Company enforceable against it in accordance with its terms.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest or other encumbrance on assets (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation"), pursuant to any provision of the
Certificate of Incorporation or By-laws of the Company or any
Subsidiary of the Company or ,except as set forth on SCHEDULE 4.3 hereto,
result in any Violation of any loan or credit agreement, note, mortgage,
indenture, lease, Designated Plan (as hereinafter defined) or other
agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any Subsidiary of the Company or their
respective properties or assets which Violation would have a Material Adverse
Effect on the Company. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity"), is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company, or the consummation by the Company
of the transactions contemplated hereby, the failure to obtain which would
have a Material Adverse Effect on the Company, except for (i) the filing of a
premerger notification report by the Company under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
filing with the Securities and Exchange Commission (the "SEC") of (x) a proxy
statement (the "Proxy Statement") in definitive form relating to the Company
Meeting and (y) such reports under Sections 13(a), 13(d) and 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required in connection with this Agreement and the transactions contemplated
hereby, (iii) the filing of the Merger Filing and appropriate documents with
the relevant authorities of other states in which the Company is qualified to
do business, (iv) such filings, authorizations, riders and approvals (the
"State Approvals") as may be required by foreign, state or local governmental
authorities including those in connection with the Company's insurance
business and those required by the federal Health Maintenance Organization
Act of 1973 and the rules and regulations thereunder (the "Federal HMO Act"),
the applicable provisions of the Florida, Texas and Puerto Rico laws
regulating health maintenanc
e organizations and prepaid health clinics, and the rules and regulations
thereunder (the "HMO Act"), the applicable provisions of the Florida, Texas
and Puerto Rico Insurance Code and the rules and regulations thereunder
relating to the regulation of domestic insurers, third-party benefits
administrators and to Insurance Holding Company Systems in the State of
Florida (collectively the "Insurance Laws"), the applicable provisions of
Title XVIII of the Social Security Act and the regulations promulgated
thereunder (the "Medicare Laws"), the applicable provisions of Title XIX of
the Social Security Act and the regulations promulgated thereunder and the
Florida and Texas laws and regulations implementing the Medicaid Program (the
"Medicaid Laws"), the Puerto Rico Healthcare Reform Act and the regulations
promulgated thereunder, the applicable provisions of Florida, Texas and
Puerto Rico laws regulating home health agencies and pharmacies and the
regulations promulgated thereunder and the applicable provisions of the Drug
Enforcement Administration laws and regulations regulating controlled
substances (the "Facility Licensing Laws"), and the applicable provisions of
Florida, Texas and Puerto Rico laws respecting certificates of need and the
regulations promulgated thereunder (the "CON Laws") and (v) such filings,
authorizations, orders and approvals (the "State Takeover Approvals") as may
be required by state takeover laws.
Section 4.4. SEC DOCUMENTS
. The Company has delivered or made available to Parent a true and
complete copy of each material report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since January 1,
1992 (as such documents have since the time of their filing been amended, the
"Company SEC Documents") which are all the documents (other than preliminary
material) that the Company has been required to file with the SEC since such
date. As of their respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Documents and at the time of its filing none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Documents comply as to form 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 generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q) and fairly present in
all material respects (subject, in the case of the unaudited statements, to
normal, recurring audit adjustments) the consolidated financial position of
the Company and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
Section 4.5. INFORMATION SUPPLIED
. None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the Proxy Statement will, at the date
mailed to stockholders of the Company and at the time of the Company Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 4.6. COMPLIANCE WITH APPLICABLE LAWS
. Except as set forth on SCHEDULE 4.6, the businesses of the Company and
each of its Subsidiaries have been and are being conducted in compliance in all
material respects with all applicable laws, rules, ordinances, regulations,
licenses, judgments, orders or decrees of federal, state, local and foreign
governmental authorities, except for possible violations which individually or
in the aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a Material Adverse Effect on the Company. The Company and
each of its Subsidiaries hold all certificates of authority, franchises, grants,
permits, licenses, easements, consents, certificates, variances, exemptions,
orders and approvals from all Governmental Entities (collectively, "Company
Permits") which are necessary to own, lease and operate the assets and
properties they currently own, lease and operate and to conduct their respective
businesses and operations in the manner heretofore conducted and as proposed to
be
conducted, except for those Company Permits the absence of which would not have
a Material Adverse Effect on the Company. SCHEDULE 4.6 contains a list of all
Company Permits the violation of which would have a Material Adverse Effect on
the Company, including the jurisdictions in which the Company or one or more of
its Subsidiaries holds a license or are otherwise authorized to conduct
insurance business and the types or lines of insurance which the Company or one
or more of its Subsidiaries is permitted to write in such jurisdictions. Except
as set forth on SCHEDULE 4.6, no notice has been received and, after due inquiry
of management, no investigation or review is pending or, to the Company's
knowledge, threatened by any Governmental Entity with regard to (i) any alleged
violation by the Company or any of its Subsidiaries of any law, rule,
regulation, ordinance, Company Permit, judgment, order or decree or (ii) any
alleged failure to have or any violation of any Company Permit, which violation
or failure would have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries nor to the Company's knowledge any of its or
their respective executive officers, directors or employees (in their capacities
as such) has engaged in any activity constituting fraud or abuse under the laws
relating to health care, insurance or the regulation of professional
corporations.
Section 4.7. FINANCIAL STATEMENTS
. (i) The Company has delivered to Parent complete and correct
copies of (i) the consolidated balance sheets of the Company and each of its
then-existing Subsidiaries as at December 31, 1996, 1995, 1994, 1993, 1992,
and the related audited consolidated statements of operations,
stockholders' equity/(deficit) and cash flows, for the fiscal years ended on
dates, together with all footnotes and (ii) the unaudited consolidated
interim financial statements for the Company and each of its Subsidiaries as
at, and for the fiscal periods ended on March 31, 1997 and each subsequent
quarterly reporting date. All of such financial statements fairly present or
when delivered will fairly present (subject, in the case of unaudited interim
financial statements, to normal, recurring adjustments which are not expected to
be, individually or in the aggregate, materially adverse to the Company and its
Subsidiaries taken as a whole), in all material respects, the financial
position, results of operations and cash flows of the Company and each of its
Subsidiaries as at the respective dates of such balance sheets and for each of
the respective periods then ended, in conformity with (A) GAAP and (B) in the
case of each of the Insurance Subsidiaries, statutory or other accounting
practices prescribed or permitted by the insurance regulatory authorities in the
States of Florida and Texas or in Puerto Rico, as appropriate, in each case
applied on a basis consistent throughout the reported periods.
(ii) Except as set forth on SCHEDULE 4.7, neither such financial
statements nor the financial statements of the Company included in the
Company SEC Documents (A) contain or when delivered will contain, as the case
may be, any item of extraordinary or non-recurring income or expense (except
as specified therein), (B) reflect or when delivered will reflect, as the
case may be, uncollectible accounts receivable without a reserve fairly
stated for uncollectible amounts, and (C) reflect or when delivered will
reflect, as the case may be, any write-off or revaluation of assets (except
as specified therein). As at the respective dates of the balance sheets
included in all such financial statements, there was no liability,
indebtedness or obligation of any nature or in any amount that should
properly be reflected or provided for in financial statements prepared in
conformity with GAAP or statutory accounting practices prescribed or
permitted by the applicable insurance regulatory authorities, whichever is
appropriate, applied on a basis consistent with that for prior periods, which
was not fully reflected in such financial statements.
(iii) Except as set forth on SCHEDULE 4.7, the reserves recorded in
the accounting records of each of the Insurance Subsidiaries other than P&C
for insurance policy benefits, losses, claims and expenses and any other
reserves are reasonable and
adequate and were prepared in accordance with the statutory or other accounting
practices prescribed or permitted by the applicable insurance regulatory
authorities and of all the jurisdictions in which the Insurance Subsidiaries are
licensed to transact an insurance business and make good and sufficient
provisions for all insurance obligations of the Company and its Subsidiaries.
Such reserves have been opined upon as reasonable and adequate as of December
31, 1996, by Towers Xxxxxx Integrated Health Systems Consulting, a duly
qualified actuarial firm that, as of the date of its report, was a member in
good standing in the American Academy of Actuaries. The unpaid loss and loss
adjustment expense liabilities of P&C as of December 31, 1996, has been opined
upon as reasonable by Xxxxxxx X. Xxxxxx, Incorporated ("Xxxxxx"), a duly
qualified actuarial firm, the opining actuary of which is a member in good
standing in the American Academy of Actuaries.
Section 4.8. LITIGATION
. Except (x) as set forth on SCHEDULE 4.8, (y) as disclosed in the Company
SEC Documents and (z) for actions and suits arising in the ordinary course of
the business, none of which is reasonably expected to have a Material Adverse
Effect on the Company, there is no action, suit, proceeding or investigation,
either at law or in equity, at or before any commission or other administrative
authority in any domestic or foreign jurisdiction, of any kind now pending or,
to the Company's knowledge, threatened, involving the Company, any of its
Subsidiaries or any of the respective properties or assets of the Company or any
Subsidiary of the Company that (A) if asserted is reasonably expected to have a
Material Adverse Effect on the Company, (B) questions the validity of this
Agreement or (C) seeks to delay, prohibit or restrict in any manner the Merger
or any action taken or to be taken by the Company or any of its Subsidiaries
under this Agreement. Except as set forth on SCHEDULE 4.8, none of the Company
nor any of its Subsidiaries, nor any of their respective properties or assets,
is subject to any continuing order of, consent decree, settlement agreement or
other similar written
agreement (other than agreements related to the settlement of insurance claims
in the ordinary course of business), continuing investigation (other than
regularly scheduled audits) by any court, Governmental Entity, or any judicial,
administrative or arbitral judgment, order, writ, decree, injunction, restraint,
or award of any court, Governmental Entity or arbitrator, including without
limitation cease-and-desist or other orders. Neither the Company nor any of its
Subsidiaries has agreed to, or is bound by, any extension or waiver of the
statute of limitations relating to any pending or potential action, suit, claim,
proceeding or investigation involving the Company or any of its Subsidiaries
(other than extensions or waivers in connection with the settlement of
insurance claims in the ordinary course of business).
Section 4.9. LABOR AND EMPLOYMENT MATTERS
. Neither the Company nor any of its Subsidiaries has employees who are
represented by a labor union or organization, no labor union or organization has
been certified or recognized as a representative of any such employees, and
neither the Company nor any of its Subsidiaries is a party to or has any
obligation under any collective bargaining agreement or other contract or
agreement with any labor union or organization. There are no pending or, to the
Company's knowledge, threatened, representation campaigns, elections or
proceedings or questions concerning union representation involving any employees
of either the Company or any of its Subsidiaries. Neither the Company nor any
of its Subsidiaries has any knowledge of any activities or efforts of any labor
union or organization (or representatives thereof) to organize any of its
employees, any demands for recognition or collective bargaining, any strikes,
slowdowns, work stoppages or lock-outs of any kind, or threats thereof, by or
with respect to any employees of the Company or any of its Subsidiaries, and no
such activities, efforts, demands, strikes, slowdowns, work stoppages or
lock-outs occurred during a three-year period preceding the date hereof.
Neither the Company nor any of its Subsidiaries has engaged in, admitted
committing, or been held in any administrative
or judicial proceeding to have committed any unfair labor practice under the
National Labor Relations Act, as amended. Except as set forth on SCHEDULE 4.09,
neither the Company nor any of its Subsidiaries is involved in any industrial or
trade dispute or any dispute or negotiation regarding a claim of material
importance with any labor union or organization concerning its employees, and
there are no controversies, claims, demands or grievances of material importance
pending or, so far as the Company is aware, threatened, between the Company or
any of its Subsidiaries and any of their respective employees.
Section 4.10. ABSENCE OF CERTAIN CHANGES
. Since December 31, 1996 and except (A) as set forth on SCHEDULE 4.10,
(B) for the execution and delivery of this Agreement and changes in its
properties or business attributable to the transactions contemplated by this
Agreement, (C) as disclosed in the Company's financial statements or in the
Company SEC Reports previously delivered or made available to Parent and (D)
sales and purchases of investment securities in the ordinary course, neither the
Company nor any of its Subsidiaries:
(i) had any change in its financial condition or businesses,
assets or liabilities, other than changes which have not had, individually or
in the aggregate, a Material Adverse Effect on the Company;
(ii) suffered any damage, destruction or loss of physical property
(not adequately covered by insurance) that, individually or in the aggregate,
has had a Material Adverse Effect on the Company;
(iii) issued, sold or otherwise disposed of, or, redeemed, purchased
or otherwise acquired, or agreed to issue, sell or otherwise dispose of,
redeem, purchase or otherwise acquire, any capital stock or any other
security of the Company or any of its Subsidiaries or granted or agreed to
grant any option warrant or other right to subscribe for or to purchase any
capital stock or any other security of the Company or any of its Subsidiaries;
(iv) incurred or agreed to incur any material indebtedness for
borrowed money;
(v) paid or obligated itself to pay in excess of $500,000 in the
aggregate for any fixed assets;
(vi) intentionally omitted;
(vii) sold, transferred, leased or otherwise disposed of, or agreed
to sell, transfer, lease or otherwise dispose of, (A) any properties or
assets to any director or officer of the Company or of any Subsidiary of the
Company or any member of the family or any other affiliate of any of the
foregoing or (B) any properties or assets having a fair market value of
$250,000 or agreed to sell, transfer, lease or otherwise dispose of, any
assets (other than securities) having a fair market value at the time of
sale, transfer or disposition of $250,000;
(viii) mortgaged, pledged or subjected to any material charge,
lien, claim or encumbrance, or agreed to mortgage, pledge or subject to any
material charge, lien, claim or encumbrance any of its material properties or
assets;
(ix) declared, set aside or paid any dividend or made any distribution
(whether in cash, property or stock) with respect to any of its capital stock;
(x) (A) increased, or agreed to increase, the compensation or bonuses
or special compensation of any kind of any of its directors, officers or
employees (other than insurance agents or independent contractors) over the rate
being paid to them on December 31, 1996, as set forth in Schedule 4.10, other
than normal merit and cost-of-living increases pursuant to customary
arrangements consistently followed, or (B) paid any bonus or similar
compensation to any director, officer or employee of the Company or any
Subsidiary of the Company in excess of $100,000, or (C) entered into any
employment, consulting or severance agreement or arrangement with any director,
officer or employee (other than any agent or independent contractor) or adopted
or increased any benefit under any insurance, pension or other employee benefit
plan,
payment or arrangement made to, for or with any director, officer or employee
(other than any agent or independent contractor);
(xi) has terminated, or been notified in writing of the likely
termination of, a material contract with a hospital or other provider, a
self-insured employer, a union or other association, a government agency or a
national insurance carrier or any other material contract regarding managed care
services or insurance services;
(xii) neither the Company nor any of its Subsidiaries has entered
into a contract or arrangement with an individual or entity (including a network
of health care providers) providing for the rendering of professional health
care services by such person as an employee of or contractor to the Company
(other than a provider of in-patient care) under which, during the last 12
months, the Company was obligated or became committed to pay in excess of
$500,000 or under which, during the next 12 months, the Company is reasonably
expected to pay or to become obligated to pay in excess of $500,000, except for
such contracts that are terminable by the Company upon 90 days (or less) advance
notice without penalty;
(xiii) except as otherwise required or provided for in this
Agreement and except in the ordinary course of business, made or permitted
any material amendment or termination of any material contract, lease,
concession, franchise, license, indenture, instrument, mortgage, note, loan
or credit agreement or other obligation to which it is a party;
(xiv) had any resignation or termination of employment of any of
its key officers or employees, or become aware of any impending or threatened
termination of employment, that would, individually or in the aggregate, have
a Material Adverse Effect on the Company;
(xv) had any labor trouble or concerted work stoppage or knows of any
impending or threatened labor trouble or concerted work stoppage;
(xvi) canceled, or agreed to cancel, any debts or claims over
$500,000 in
the aggregate or $250,000 individually other than in the ordinary course of
business;
(xvii) made any material change in its accounting methods or
practices with respect to its condition, operations, business, properties,
assets or liabilities;
(xviii) entered into any material transaction not in the ordinary
course of its business;
(xix) made any charitable or political contribution or pledge in
excess of $100,000 in the aggregate;
(xx) agreed or committed to do, or authorized or approved any
action looking to, any of the foregoing;
(xxi) paid aggregate commissions to insurance agents and
independent contractors for policies issued in 1996 and with normal anniversary
dates of January 1, 1997 or subsequent thereto in excess of 15% of direct
premiums written or;
(xxii) made any material cash payments to insurance agents,
independent contractors or brokers marketing the Company's products other than
pursuant to a producer profit share agreement.
Section 4.11. MATERIAL CONTRACTS
. Except as set forth in SCHEDULE 4.11, neither the Company nor any of its
Subsidiaries is a party to any written or oral:
(i) employment or consulting contract or other contract for
services involving a payment of more than $250,000 annually and that is not
terminable without cost upon thirty (30) days' prior written notice;
(ii) material lease, franchise or concession providing for a
payment by any person of more than $500,000 annually and that is not
terminable without cost upon thirty (30) days' prior written notice;
(iii) loan agreement, mortgage, indenture, promissory note,
financing lease or other instrument relating to any debt (in excess of
$250,000 and which, in the aggregate, do not amount to more than $1,000,000);
(iv) contract of purchase or sale involving more than $500,000
and that is not in the ordinary course of business;
(v) partnership, joint venture, material license or similar
agreement;
(vi) stand-by letter of credit, guarantee or performance bond;
(vii) contract restricting the ability of any person from freely
engaging in any business or competing anywhere in the world;
(viii) contract with an employer, a union or other association, a
governmental agency or any other party regarding the provision of insurance or
managed care services that has a term greater than one year and has an annual
premium in any one year exceeding $1,000,000;
(ix) contract or arrangement with an institution for the provision of
in-patient or out-patient hospital or surgical services under which, during
1996, the Company was required to pay or, during 1997, the Company anticipates
that it will be required to pay, in excess of $1,000,000, except for such
contracts that are terminable by the Company upon 90 days (or less) advance
notice without penalty;
(x) contract or arrangement with a physician or group of physicians
under which, during 1996, the Company was required to pay or, during 1997, the
Company anticipates that it will be required to pay, in excess of $1,000,000,
except for such contracts that are terminable by the Company upon 90 days (or
less) advance notice without penalty;
(xi) contract or any arrangement pursuant to which the Company and
the Subsidiaries are provided medical malpractice insurance; or
(xii) medical services agreement which provides for the
contracting party to receive a percentage of premium revenues from the Company
or a Subsidiary in exchange for the provider providing for all medical services
to any group of insureds of the Company or any of its Subsidiaries; or
(xiii) other material contract or commitment not made in the
ordinary
course of business.
Each contract or other agreement listed on SCHEDULE 4.11 is in full
force and effect and is valid and enforceable by the Company or a Subsidiary of
the Company, as the case may be, in accordance with its terms. Except as set
forth on SCHEDULE 4.11, neither the Company nor any of its Subsidiaries is in
default in the observance or the performance of any term or obligation to be
performed by it under any contract listed on SCHEDULE 4.11 except for such
defaults the effect of which singly or in the aggregate would not have a
Material Adverse Effect on the Company. To the knowledge of the Company without
investigation, no other person is in default in the observance or the
performance of any term or obligation to be performed by it under any material
contract listed on SCHEDULE 4.11. There is currently no outstanding bid or
contract proposal by the Company or any of its Subsidiaries which, if accepted
or entered into, might reasonably be expected to result in a material loss to
either the Company or any of its Subsidiaries. The Company has delivered or
made available to Parent copies of all contracts listed in SCHEDULE 4.11.
Section 4.12. OFFICERS AND DIRECTORS AND EMPLOYEES
. The Company's 1996 Form 10-K, as modified by SCHEDULE 4.12, sets forth a
list of:
(i) The names of all directors and officers of the Company and each
of its Subsidiaries;
(ii) The name and current annual rate of compensation (including
bonuses and other forms of compensation) paid by the Company and its
Subsidiaries to each of its respective officers, directors and employees whose
annual rate of base compensation exceeded $100,000 for the year ended December
31, 1996; and
(iii) The names of all persons who have written employment,
consulting or severance agreements or arrangements with the Company or any of
its Subsidiaries if such agreement or arrangement provides for payment to such
persons resulting from
such person's resignation, from a change-in-control of the Company or any of its
Subsidiaries or from a change in such person's responsibilities following a
change-in-control; complete and correct copies of such agreements have been
provided to Parent.
Section 4.13. TITLE TO AND CONDITION OF PROPERTIES AND ASSETS
. (i) The Company and its Subsidiaries have good and defensible
title to, or valid leasehold interests in, their respective properties and
assets, whether owned or leased, including, without limitation, (i) those used
in their respective businesses, and (ii) those reflected in the consolidated
balance sheet of the Company as of December 31, 1996 most recently delivered to
Parent (except as since sold or otherwise disposed of in the ordinary course of
business and except for minor defects in title, easements, restrictive covenants
and similar encumbrances or impediments that, individually or in the aggregate,
do not and will not materially interfere with the ability of the Company and its
Subsidiaries to use their properties or to conduct their businesses as currently
conducted), in each case subject to no mortgage, pledge, conditional sales
contract, lien, security interest, right of possession in favor of any third
party, claim or other encumbrance (collectively "Liens"), except for (w) the
lien of current Taxes (as hereinafter defined) not yet due and payable, (x) with
respect to leased property, the provisions of such leases, (y) Liens granted to
the Company's lenders under that certain Revolving Credit Agreement (the "Credit
Facility") between the Company and Citibank, N.A. dated October 27, 1994, as
amended and (z) liens, that, individually or in the aggregate, do not and will
not materially interfere with the ability of the Company or any of its
Subsidiaries to conduct business as currently conducted. Except as described on
SCHEDULE 4.13, subsequent to December 31, 1996, neither the Company nor any of
its Subsidiaries has sold or disposed of any of their respective properties or
assets or obligated themselves to do so except in the ordinary course of
business. The facilities,
machinery, furniture, office and other equipment of the Company and each of its
Subsidiaries that are used in their respective businesses are in good operating
condition and repair, subject to the ordinary wear and tear of those businesses.
(ii) All of the real property owned or leased by the Company or any of
its Subsidiaries has been maintained by the Company in compliance with all
federal, state and local environmental protection, occupational, health and
safety or similar laws, ordinances, restrictions, licenses and regulations,
except where the failure to so maintain the property would not have a Material
Adverse Effect on the Company.
Section 4.14. PATENTS, COPYRIGHTS, SERVICE MARKS AND TRADEMARKS
. Neither the Company nor any of its Subsidiaries own or licenses any
patent, copyright, service xxxx, trademark or other intellectual property right,
other than such patents, copyrights, service marks, trademarks and other
intellectual property rights as are described in SCHEDULE 4.14, except for such
intellectual property rights the loss of which singly or in the aggregate would
not have a Material Adverse Effect on the Company. Except as set forth on
SCHEDULE 4.14 and other than such as would have a Material Adverse Effect on the
Company: (i) the Company and its Subsidiaries own or license all patents,
copyrights, service marks, trademarks and other intellectual property rights
that are necessary to the conduct of their respective businesses, (ii) all names
under which the Company or any of its Subsidiaries currently conducts business
are set forth in SCHEDULE 4.14, (iii) no claim has been made, and to the
Company's knowledge no basis for any such claim exists, that the Company or any
of its Subsidiaries has infringed any patent, copyright, service xxxx, trademark
or other intellectual property right of any other person and (iv) no claim has
been made, and to the Company's knowledge no basis for any such claim exists,
that any person has infringed on any patent, copyright, service xxxx, trademark
or other intellectual property right of the Company or any of its Subsidiaries.
Section 4.15. EMPLOYEE BENEFIT PLANS
(a) LIST OF PLANS. SCHEDULE 4.15 includes a complete and accurate
list of all employee benefit plans ("Plans"), as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
material benefit arrangements that are not Plans ("Benefit Arrangements"),
including, but not limited to any (A) employment or consulting agreements, (B)
incentive bonus or deferred bonus arrangements, (C) arrangements providing
termination allowance, severance or similar benefits, (D) equity compensation
plan, (E) deferred compensation plans, (F) cafeteria plans, (G) employee
assistance programs, (H) bonus programs, (I) scholarship programs, (J) vacation
policies, and (K) stock option plans that are currently in effect or were
maintained within three years of the Effective Date, or have been approved
before the Effective Date but are not yet effective, for the benefit of
directors, officers, employers or former employees (or their beneficiaries) of
the Company or a Controlled Company ("Designated Plans"). For purposes of this
Section 4.15, "Controlled Company" shall mean any entity that, together with the
Company as of the relevant determination date under ERISA, is or was required to
be treated as a single employer under Section 414 of the Internal Revenue Code
of 1986, as amended (the "Code") and any reference to the Company in this
Section 4.15 shall also include a reference to a Controlled Company.
(b) NO TITLE IV PLANS OR VEBAS. Neither the Company nor any entity
(whether or not incorporated) that was at any time during the six years before
the Effective Date treated as a single employer together with the Company under
Section 414 of the Code has ever maintained, had any obligation to contribute to
or incurred any liability with respect to a pension plan that is or was subject
to the provisions of Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any entity (whether or not incorporated) that was at any time during
the six years before the Effective Date treated as a single employer together
with the Company under Section 414 of the Code
has ever maintained, had an obligation to contribute to, or incurred any
liability with respect to a multiemployer pension plan as defined in Section
3(37) of ERISA. During six years before the Effective Date, the Company has not
maintained, had an obligation to contribute to or incurred any liability with
respect to a voluntary employees beneficiary association that is or was intended
to satisfy the requirements of Section 501(c)(9) of the Code.
(c) DISCLOSED PLANS. With respect to each Designated Plan, the
Company has delivered to Parent, as applicable, true and complete copies of (A)
all written documents comprising such Plan or each Benefit Arrangement
(including amendments and individual agreements relating thereto), (B) the
trust, group annuity contract or other document that provides for the funding of
the Designated Plan or the payment of Designated Plan benefits, (C) the three
most recent annual Form 5500, 990 and 1041 reports (including all schedules
thereto) filed with respect to the Designated Plan, (D) the most recent
actuarial report, valuation statement or other financial statement, (E) the most
recent Internal Revenue Service ("IRS") determination letter and all rulings or
determinations requested from the IRS after the date of that determination
letter, (F) the summary plan description currently in effect and all material
modifications thereto, and (G) all other correspondence from the IRS or
Department of Labor received that relate to one or more of the Designated Plans
with respect to any matter, audit or inquiry that is still pending. All
information provided by the Company and its Subsidiaries to the individuals who
prepared any such financial statements was true, correct and complete in all
material respects. Each financial or other report delivered to Parent pursuant
hereto is accurate in all material respects, and there has been no material
adverse change in the financial status of any Designated Plan since the date of
the most recent report provided with respect thereto.
(d) COMPLIANCE WITH LAW. Except as set forth in SCHEDULE 4.15, the
Company has operated, and has caused its appointees and nominees to operate,
each
Designated Plan in a manner which is in compliance with the terms thereof and
with all applicable law, regulations and administrative agency rulings and
requirements applicable thereto, except the violation of which would not have a
Material Adverse Effect on the Company. Except as otherwise disclosed in
SCHEDULE 4.15, with respect to each Designated Plan that is a Plan (A) the Plan
is in compliance with ERISA in all material respects, including but not limited
to all reporting and disclosure requirements of Part 1 of Subtitle B of Title I
of ERISA, (B) the appropriate Form 5500 has been timely filed, for each year of
its existence, (C) there has been no transaction described in sections 406 or
407 of ERISA or section 4975 of the Code relating to the Plan unless exempt
under section 408 of ERISA or section 4975 of the Code, as applicable, and (D)
the bonding requirements of section 412 of ERISA have been satisfied.
(e) CONTRIBUTIONS. Full payment has been made of all amounts which
the Company or a Controlled Company is required, under applicable law or under
any Designated Plan or any agreement related to any Designated Plan to which the
Company or a Controlled Company is a party, to have paid as contributions
thereto as of the last day of the most recent fiscal year of each Designated
Plan ended prior to the date hereof. Benefits under all Designated Plans are as
represented in the governing instruments provided pursuant to (i) above, and
have not been increased subsequent to the date as of which documents have been
provided.
(f) TAX QUALIFICATION. Each Designated Plan, as amended to date,
that is intended to be qualified under Section 401(a) and 501(a) of the Code has
been determined to be so qualified by the IRS, has been submitted to the IRS for
a determination with respect to such qualified status or the remedial amendment
period established under Section 402(b) of the Code with respect to the
Designated Plan will not have expired prior to the Effective Date. Except as
disclosed on SCHEDULE 4.15, no facts have occurred which if known by the IRS
could cause disqualification of any such Plan.
(g) TAX OR CIVIL LIABILITY. Neither the Company nor a Controlled
Company has participated in, or is aware of, any conduct that could result in
the imposition upon the Company of any excise tax under Sections 4971 through
4980B of the Code or civil liability under Section 502(i) of ERISA with respect
to any Designated Plan.
(h) CLAIMS LIABILITY. There is no action, claim or demand of any
kind (other than routine claims for benefits) that has been brought or, to the
Company's knowledge, threatened against, or relating to, any Designated Plan,
and the Company has no knowledge of any pending investigation or administrative
review by any Governmental Entity relating to any Designated Plan.
(i) RETIREE WELFARE COVERAGE. Except as set forth in SCHEDULE 4.15,
no Designated Plan provides any health, life or other welfare coverage to
employees of the Company or a Controlled Company beyond termination of their
employment with the Company or a Controlled Company by reason of retirement or
otherwise, other than coverage as may be required under Section 4980B of the
Code or Part 6 of ERISA, or under the continuation of coverage provisions of the
laws of any state or locality.
(j) NO EXCESS PARACHUTE PAYMENTS. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
transactions contemplated by this Agreement by any employee, officer or director
of the Company or a Controlled Company who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or Designated Plan currently in effect would be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
Section 4.16. TRANSACTIONS WITH OFFICERS, DIRECTORS AND OTHERS
. Except as set forth on SCHEDULE 4.16, no director, officer or
affiliate of the Company, or any member of the immediate family or any other
affiliate of any of the
foregoing, is a party to business arrangements or relationships of any kind with
the Company or its Subsidiaries in which the amount involved exceeds $60,000,
or, to the knowledge of the Company, owns or has an ownership interest in any
corporation (in excess of 5% of any publicly traded corporation) or other entity
that is a party to, or in any property which is the subject of any such business
arrangements.
Section 4.17. INSURANCE MATTERS-REINSURANCE AND COINSURANCE
. SCHEDULE 4.17 contains a list of all reinsurance or coinsurance treaties
or agreements to which the Company or any of its Subsidiaries is a party. All
such treaties or agreements as set forth in such Schedule are valid, binding and
in full force and effect in accordance with their terms (except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by the principles governing the availability of equitable
remedies); and neither the Company nor its Insurance Subsidiaries nor, to the
Company's knowledge, any other party thereto is in default as to any provision
thereof, except for such defaults the effect of which singly or in the aggregate
would not have a Material Adverse Effect on the Company, and none of such
agreements contains any provision (A) providing that any other party thereto may
terminate such agreement or declare a default or seek damages thereunder by
reason of the transactions contemplated by this Agreement or (B) which would be
altered or otherwise become applicable by reason of such transactions. The
Company does not know of any facts or events that could cause the financial
condition of any party to any such agreement to be impaired to such an extent
that a default thereunder may be reasonably anticipated.
Section 4.18. TAXES
(a) DEFINITIONS. For purposes of this Agreement:
(i) "Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes of a
particular Tax.
(ii) "Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, premium, capital, sales, use,
ad valorem, value added, franchise, withholding, payroll, employment,
disability, workers' compensation, excise, property, alternative or add-on
minimum, environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
(iii) "Taxing Authority" means any governmental agency,
board, bureau, body, department or authority of any United States federal, state
or local jurisdiction, or any foreign jurisdiction, having or purported to
exercise jurisdiction with respect to any Tax.
(b) TAX REPRESENTATIONS. Except as set forth in SCHEDULE 4.18:
(i) All Returns required to have been filed on or before the
date hereof by or with respect to the Company or any of its Subsidiaries or any
affiliated, combined, consolidated, unitary or similar group of which the
Company or its Subsidiaries is or was a member (a "Relevant Group") with any
Taxing Authority have been duly and timely filed, and each such Return correctly
and completely reports all material information required to be reported thereon.
All Taxes of the Company or its Subsidiaries or any member of a Relevant Group
(whether or not shown on any Return) with respect to any period ending on or
before the date hereof have been paid or are duly reserved for in the financial
statements of the Company and its Subsidiaries for such period.
(ii) Neither the Company nor any of its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to any Tax assessment or deficiency.
(iii) the Company is not currently under audit by any Taxing
Authority with respect to any material Return. The Company's consolidated
federal income tax returns have been audited through December 31, 1992. No
claim is pending by any Taxing Authority in a jurisdiction in which the Company
or any of its Subsidiaries does not file Returns, that it is subject to Taxation
in that jurisdiction.
(iv) Other than agreements among the Company and its
Subsidiaries, neither the Company nor any of its Subsidiaries is a party to any
tax allocation or tax sharing agreement.
(v) Neither the Company nor any of its Subsidiaries is a
"consenting corporation" within the meaning of Section 341(f)(1) of the Code or
comparable provisions of any state statute, and none of the assets of the
Company or its Subsidiaries is subject to any election under Section 341(f) of
the Code or comparable provisions of any state statutes.
(vi) Neither the Company nor any of its Subsidiaries has received
or requested any ruling of a Taxing Authority relating to Taxes or entered into
any material written or legally binding agreement with a Taxing Authority
relating to Taxes.
(vii) Neither the Company nor any of its Subsidiaries (1) has
or is projected to have a material amount includable in its income for the
current taxable year under Section 951 of the Code, (2) has been a passive
foreign investment company within the meaning of Section 1296 of the Code, and
neither the Company nor any of its Subsidiaries is a shareholder, directly or
indirectly in any passive foreign investment company, or (3) has a material
unrecaptured overall foreign loss within the meaning of Section 940(f) of the
Code.
(viii) Neither the Company nor any of its Subsidiaries is, or
at any time has been, subject to (1) the dual consolidated loss provisions of
Section 1503(d) of the Code, (2) the overall foreign loss provisions of
Section 904(f) of the Code, or (3) the recharacterization provisions of
Section 952(c)(2) of the Code.
(ix) None of the assets of the Company or any of its
Subsidiaries constitutes tax-exempt bond financed property or tax-exempt use
property, within the meaning of Section 168 of the Code. Neither the Company
nor any of its Subsidiaries is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(3) of the Internal Revenue Code
as in effect prior to the Tax Reform Act of 1986, or to any "long-term
contract" within the meaning of Section 460 of the Code.
(x) Neither the Company nor any of its Subsidiaries has any
material (1) deferred gain or loss arising out of any deferred intercompany
transaction or (2) income which will be reportable in a period ending after
the Closing which is attributable to a transaction occurring in, or a change
in accounting method made for, a period ending on or prior to the Closing.
(xi) Neither the Company nor any of its Subsidiaries is a
party to any written, oral or implied agreement or obligation to provide any
"covered employee," as defined in Section 162(m)(3) of the Code, with
remuneration in excess of $1 million, that would be disallowed as a deduction
for Federal income tax purposes pursuant to Section 162(m) of the Code.
Section 4.19. OPINION OF FINANCIAL ADVISOR
. The Company has received the opinion of Bear, Xxxxxxx & Co. dated the
date hereof, to the effect that the Merger Consideration is fair, from a
financial point of view, to the stockholders of the Company. The Company has
delivered a true and complete copy of this opinion to Parent.
Section 4.20. INVESTMENT COMPANY ACT
. Neither the Company nor any of its Subsidiaries is an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
Section 4.21. VOTE REQUIRED
. The affirmative vote of a majority of the votes that holders of the
outstanding
shares of the Company Common Stock are entitled to cast is the only vote of the
holders of any class or series of the Company capital stock or Voting Debt
necessary to approve this Agreement and the transactions contemplated hereby.
Section 4.22. APPLICABILITY OF DGCL 203
. Assuming the accuracy of the representations contained in Section 5.7,
the provisions of Section 203 of the DGCL will not apply to this Agreement or
any of the transactions contemplated hereby.
Section 4.23. ENVIRONMENTAL MATTERS
(a) No notice, notification, demand, request for information,
citation, summons, complaint or order has been received, no complaint has been
filed, no penalty has been assessed and no investigation is pending or has been
threatened (each, an "Action") by any Governmental Entity or other party with
respect to any (i) alleged violation by the Company or any of its Subsidiaries
of any Environmental Law, (ii) alleged failure by the Company or any such
Subsidiary to have any environmental permit, certificate, license, approval,
registration or authorization required in connection with the conduct of its
business or (iii) Regulated Activity, in each case where such Action has had, or
would have, a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries has any material
Environmental Liabilities and there has been no release of Hazardous Substances
into the environment or violation of any Environmental Law by the Company or any
such Subsidiary or with respect to any of their respective properties which has
had, or would reasonably be expected to have a Material Adverse Effect on the
Company.
(c) For the purposes of this Agreement, the following terms have the
following meanings:
"Environmental Laws" shall mean any and all Federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees,
codes, injunctions and governmental restrictions relating to human health, the
environment or to emissions, discharges or releases of Hazardous Substances into
the environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances or the clean-up or other remediation thereof.
"Environmental Liabilities" shall mean all liabilities which
(i) arise under or relate to Environmental Laws and (ii) relate to Regulated
Activities occurring or conditions existing on or prior to the Effective Date.
"Hazardous Substances" shall mean any pollutants, contaminants,
toxic, radioactive, caustic or otherwise hazardous substance or waste, including
petroleum, its derivatives, by-products and other hydrocarbons, or any substance
having any constituent elements displaying any of the foregoing characteristics
that is regulated under or by any applicable Environmental Law.
"Regulated Activity" shall mean any generation, treatment,
storage, recycling, transportation, disposal or release of any Hazardous
Substances.
Section 4.24. ACCREDITATION'S. Except as set forth in SCHEDULE 4.24, none
of the Company or its Subsidiaries has been denied or failed to obtain any
accreditation by any health maintenance organization or insurance accreditation
agency from who the Company sought accreditation.
Section 4.25. CHANGE OF CONTROL PAYMENTS
. Except as set forth on Schedule 4.25, no broker, investment banker,
officer, employee or other person will be entitled to any payment upon the
consummation of the Merger (including payments which are not required to be made
unless an event subsequent to the consummation of the Merger occurs) based upon
arrangements made by or on behalf of the Company or any of its Subsidiaries.
This provision is intended to include, without limitation, broker fees,
investment banker fees, consultant fees, severance payments and fees payable
under non-competition and other
contractual provisions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 5.1 ORGANIZATION; STANDING AND POWER
. Each of Parent and Sub is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation or
organization and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership of leasing of its
properties makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on Parent.
Section 5.2 AUTHORITY
. Parent and Sub have all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. 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 Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and constitutes a valid and binding
obligation of Parent and Sub enforceable against each in accordance with its
terms. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any Violation pursuant to any provision of the Articles of
Incorporation or Bylaws of Parent and Sub, except (i) as set forth on SCHEDULE
5.2 or (ii) result in any Violation of any loan or credit agreement, note,
mortgage, indenture, lease, Designated Plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance,
rule or regulation applicable to Parent or any Subsidiary of Parent or their
respective properties or assets, which Violation would have a Material Adverse
Effect on Parent. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Parent and Sub or the consummation
by Parent and Sub of the transactions contemplated hereby, the failure to obtain
which would have a Material Adverse Effect on Parent, except for (i) the filing
of a premerger notification report by Parent under the HSR Act, (ii) the filing
with the SEC as may be required by the Securities Act or Exchange Act in
connection with this Agreement and the transactions contemplated hereby, (iii)
the filing of the Merger Filing with the Secretary of State of the State of
Delaware and (iv) the State Approvals and State Takeover Approvals.
Section 5.3 INFORMATION SUPPLIED
. None of the information supplied or to be supplied by Parent or Sub for
inclusion or incorporation by reference in the Proxy Statement will, at the date
mailed to stockholders of the Company and at the time of the Company Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
Section 5.4 INTERIM OPERATIONS OF SUB
. Sub was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
Section 5.5 FINANCING
. Parent has on hand or available through committed bank facilities all of
the funds necessary to consummate the Merger and the transactions contemplated
hereby on a timely basis and to pay any and all related fees and expenses.
Section 5.6 BROKERS
. No broker, investment banker or other person, other than Xxxxxx
Xxxxxxx & Co., the fees and expenses of which will be paid by Parent, is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub.
Section 5.7 OWNERSHIP OF COMPANY STOCK
. As of the date hereof, Parent beneficially owns approximately 1,050,000
shares of Company Common Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
. Prior to the Effective Date, unless Parent shall otherwise agree in
writing:
(a) Except as set forth in SCHEDULE 6.1(a), the Company shall, and shall
cause its Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted, and shall, and shall cause its Subsidiaries to, use their best
efforts to preserve intact their present business organizations and preserve
their relationships with customers, suppliers and others having business
dealings with them. The Company shall, and shall cause its Subsidiaries to, (a)
maintain insurance coverages and its books, accounts and records in the usual
manner consistent with prior practices, (b) comply in all material respects with
all laws, ordinances and regulations of Governmental Entities applicable to the
Company and its subsidiaries, (c) maintain and keep its properties and equipment
in good repair, working order and condition, ordinary wear and tear excepted,
and (d) perform in all material respects its obligations under all material
contracts and commitments to which it is a party or by which it is bound;
(b) Except as set forth in SCHEDULE 6.1(b) and except as required by this
Agreement, the Company shall not and shall not propose to (i) sell or pledge or
agree to sell or pledge any capital stock owned by it in any of its
subsidiaries, (ii) amend its Certificate of Incorporation or By-laws, (iii)
split, combine or reclassify its outstanding capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of the Company, or declare, set aside
or pay any dividend or other distribution payable in cash, stock or property, or
(iv) directly or indirectly redeem, purchase or otherwise acquire or agree to
redeem, purchase or otherwise acquire any shares of Company capital stock;
(c) The Company shall not, nor shall it permit any of its Subsidiaries to,
(i) issue, deliver or sell or agree to issue, deliver or sell any additional
shares of, or rights of any kind to acquire any shares of, its capital stock of
any class, any indebtedness having the right to vote on which the Company's
stockholders may vote or any option, rights or warrants to acquire, or
securities convertible into, shares of capital stock other than issuances of
Company Common Stock pursuant to employment agreements as in effect on the date
hereof, the exercise of stock options outstanding on the date hereof or granted
prior to the Effective Date, (ii) acquire, lease or dispose or agree to acquire,
lease or dispose of any capital assets or any other assets other than in the
ordinary course of business, (iii) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others, or encumber or grant a security
interest in any asset or make any loans, advances or capital contribution to, or
investments in, any other person, other than to the Company in any wholly owned
Subsidiaries of the Company or enter into any other transaction other than in
each case in the ordinary course of business consistent with past practice, (iv)
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof,
or (v) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
(d) Except as disclosed in SCHEDULE 6.1(d), the Company shall not, nor
shall it permit any of its Subsidiaries to, except as required to comply with
applicable law and except as provided in Section 3.4 hereof, (i) enter into any
new (or amend any existing) Company Benefit Plan or any new (or amend any
existing) employment, severance or consulting agreement, (ii) grant any general
increase in the compensation of directors, officers or employees (including any
such increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or (iii) grant any increase in the compensation payable or to become
payable to any director, officer or employee, except in any of the foregoing
cases in accordance with pre-existing contractual provisions or, in the case of
clause (iii), increases for employees in the ordinary course of business
consistent with past practice.
(e) The Company shall not, nor shall it permit any of its Subsidiaries to,
make any investments in non-investment grade securities exceeding $100,000 in
the aggregate;
Section 6.2. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER
. Prior to the Effective Date, unless the Company shall otherwise agree in
writing or except as otherwise required by this Agreement, Parent shall, and
shall cause its Subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted except where the failure to so act would not adversely
affect Parent's ability to pay the aggregate Merger Consideration payable to the
Company's stockholders.
Section 6.3. CONDUCT OF BUSINESS OF SUB
. During the period from the date of this Agreement to the Effective Date,
Sub shall not engage in any activities of any nature except as provided in or
contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1. ACCESS AND INFORMATION
. The Company and its Subsidiaries shall afford to Parent and to Parent's
accountants, counsel, financial advisers and other representatives reasonable
access during normal business hours (and at such other times as the parties may
mutually agree) throughout the period prior to the Effective Date to all of its
properties, books, contracts, commitments, records and personnel and, during
such period, the Company shall furnish promptly to Parent (i) a copy of each
report, schedule and other document filed or received by it pursuant to the
requirements of federal or state securities laws, and (ii) all other information
concerning its business, properties and personnel as Parent may reasonably
request. Each of the Company and Parent shall hold, and shall cause their
respective employees and agents to hold, in confidence all such information in
accordance with the terms of the Confidentiality Agreement dated May 1, 1996
between Parent and the Company, as amended on April 15, 1997 (the
"Confidentiality Agreement").
Section 7.2. PROXY STATEMENT
. Parent and the Company shall cooperate and promptly prepare, and the
Company shall file with the SEC as soon as practicable, the Proxy Statement,
which shall comply as to form in all material respects with the applicable
provisions of the Exchange Act and the rules and regulations thereunder. The
Company shall use all reasonable efforts, and Parent will cooperate with the
Company, to have the Proxy Statement cleared by the SEC as promptly as
practicable. The Company shall, as promptly as practicable, provide copies of
any written comments received from the SEC with respect to the Proxy Statement
to Parent and advise Parent of any oral comments with respect to the Proxy
Statement received from the SEC. Parent agrees that none of
the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in the Proxy Statement and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
Company Meeting, will contain an 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. The Company agrees that none of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement and each amendment or supplement thereto, at the time of mailing
thereof and at the time of the Company Meeting, will contain an 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. For purposes of the
foregoing, it is understood and agreed that information concerning or related to
Parent will be deemed to have been supplied by Parent and information concerning
or related to the Company and the Company Meeting shall be deemed to have been
supplied by the Company. The Company will provide Parent with a reasonable
opportunity to review and comment on any amendment or supplement to the Proxy
Statement prior to filing such with the SEC, and will provide Parent with a copy
of all such filings made with the SEC. No amendment or supplement to the
information supplied by Parent for inclusion in the Proxy Statement shall be
made without the approval of Parent, which approval shall not be unreasonably
withheld or delayed.
Section 7.3. COMPANY STOCKHOLDER APPROVAL
. The Company will use its best efforts to obtain the necessary approvals by
its stockholders of the Merger, this Agreement and the transactions contemplated
hereby.
Section 7.4. EMPLOYEE MATTERS
. (a) The employees of the Company and each Subsidiary as of the Effective
Date shall continue employment with the Surviving Corporation and the
Subsidiaries,
respectively, in the same positions and at the same level of wages and/or salary
and without having incurred a termination of employment or separation from
service; PROVIDED, HOWEVER, that the foregoing shall not constitute any
commitment, contract, understanding or guarantee (express or implied) on the
part of the Surviving Corporation of a post-Effective Date employment
relationship of any term or duration or on any terms other than those the
Surviving Corporation may establish. Employment of any of the employees by the
Surviving Corporation shall be "at will" and may be terminated by the Surviving
Corporation at any time for any reason (subject to any legally binding
agreement, or any applicable laws or any arrangement or commitment); PROVIDED,
FURTHER, that no provision of this Agreement shall create any third-party
beneficiary with respect to any employee (or dependent thereof) of the Company
or any of its Subsidiaries in respect of continued employment or resumed
employment. As of the Effective Date, the Surviving Corporation shall be the
sponsor of the Company's option plans immediately prior to the Effective Date,
and Parent shall cause the Surviving Corporation and the Subsidiaries to satisfy
all obligations and liabilities under such option plans. Until at least
December 31, 1997, Parent shall maintain employee benefits and programs for
officers and employees of the Company and its Subsidiaries that are no less
favorable in the aggregate than those being provided to such officers and
employees on the date hereof (it being understood that Parent will not be
obligated to continue any one or more employee benefits or programs). To the
extent any employee benefit plan, program or policy of the Parent or its
affiliates is made available to the employees of the Surviving Corporation or
its Subsidiaries, (i) service with the Company and its Subsidiaries by any
employee prior to the Effective Date shall be credited for eligibility and
vesting purposes under such plan, program or policy, but not for benefit accrual
purposes, and (ii) with respect to any welfare benefit plans to which such
employees may become eligible, Parent shall cause such plans to provide credit
for any co-payments or deductibles by such employees and waive all pre-existing
condition exclusions and waiting periods, other than limitations or waiting
periods that have not been satisfied under any welfare plans maintained by the
Company and the Subsidiaries for their employees prior to the Effective Date.
Parent shall honor or cause to be honored all severance and employment
agreements with the Company's officers and employees to the extent disclosed in
the Schedules to this Agreement.
Section 7.5. INDEMNIFICATION
. (a) From and after the Effective Date, Parent shall indemnify, defend
and hold harmless the officers, directors and employees of the Company and its
subsidiaries who were such at any time prior to the Effective Date (the
"Indemnified Parties") from and against all losses, expenses, claims, damages or
liabilities arising out of the transactions contemplated by this Agreement to
the fullest extent permitted or required under applicable law, including without
limitation the advancement of expenses. Parent agrees that all rights to
indemnification existing in favor of those persons provided for in the
Company's Certificate of Incorporation or By-Laws, as in effect as of the date
hereof, with respect to matters occurring through the Effective Date, shall
survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Date. Parent agrees to cause the
Surviving Corporation to maintain in effect for not less than six years after
the Effective Date the current policies of directors' and officers' liability
insurance maintained by the Company with respect to matters occurring on or
prior to the Effective Date; PROVIDED, HOWEVER, that the Surviving Corporation
may substitute therefor policies of at least the same coverage (with carriers
comparable to the Company's existing carriers) containing terms and conditions
which are no less advantageous to the Indemnified Parties; PROVIDED, FURTHER,
that Parent shall not be required in order to maintain or procure such coverage
to pay an annual premium in excess of 150% of the current annual premium paid by
the Company for its existing coverage (the "Cap"); and PROVIDED, FURTHER, that
if equivalent coverage cannot be obtained, or can be obtained only by paying an
annual premium in excess of the Cap,
Parent shall only be required to obtain as much coverage as can be obtained by
paying an annual premium equal to the Cap.
(b) Any Indemnified Party will promptly notify the Parent and the
Surviving Corporation of any claim, action, suit, proceeding or investigation
for which such party may seek indemnification under this Section; PROVIDED,
HOWEVER, that the failure to furnish any such notice shall not relieve Parent or
the Surviving Corporation from any indemnification obligation under this Section
except to the extent Parent or the Surviving Corporation is materially
prejudiced thereby. In the event of any such claim, action, suit, proceeding,
or investigation, (x) Parent or the Parent and Surviving Corporation will have
the right to assume the defense thereof, and Parent and the Surviving
Corporation will not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred thereafter
by such Indemnified Parties in connection with the defense thereof, except that
all Indemnified Parties (as a group) will have the right to retain one separate
counsel, reasonably acceptable to such Indemnified Party and Parent, at the
expense of the indemnifying party if the named parties to any such proceeding
include both the Indemnified Party and the Surviving Corporation and the
representation of such parties by the same counsel would be inappropriate due to
a conflict of interest between them, (y) the Indemnified Parties will cooperate
in the defense of any such matter, and (z) the Surviving Corporation will not be
liable for any settlement effected without its prior written consent.
Section 7.6. BEST EFFORTS
. Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger, and the other transactions contemplated by this
Agreement, including (a) promptly making their respective filings
and thereafter making any other required submission under the HSR Act, (b)
diligently opposing any objections to, appeals from or petitions to reconsider
or reopen any such approval by persons not a party to this Agreement, (c) the
obtaining of all necessary actions or non-actions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by any Governmental Entity, (d)
the obtaining of all necessary consents, approvals or waivers from third
parties, (e) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (f) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that the Company and Parent shall not be under any
obligation to take any action to the extent that their respective Board of
Directors shall conclude in good faith, after consultation with their respective
outside counsel, that such action could be inconsistent with such Board of
Director's fiduciary obligations under applicable law and, PROVIDED FURTHER,
that in satisfying their obligations set forth above neither Parent nor Sub
shall be obligated to dispose or to agree to dispose any assets of either Parent
or the Company or their respective Subsidiaries, nor shall Parent or Sub be
required to agree to any conditions as a prerequisite to obtaining any such
approvals (other than any conditions that are ministerial in nature or are
customary for transactions of a similar nature).
Section 7.7. PUBLIC ANNOUNCEMENTS
. Parent and Sub, on the one hand, and the Company, on the other hand,
will consult with each other before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange.
Section 7.8. ALTERNATIVE PROPOSALS
. Prior to the Effective Date, the Company agrees: (a) that neither it
nor any of its Subsidiaries shall, and it shall direct and use its best efforts
to cause its officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its stockholders) with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of, the Company or any of its
Subsidiaries (any such proposal or offer being hereinafter referred to as an
"Alternative Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Alternative Proposal, or release any third party from any
obligations under any existing standstill agreement or arrangement relating to
any Alternative Proposal, or otherwise facilitate any effort or attempt to make
or implement an Alternative Proposal; (b) that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing, and it
will take the necessary steps to inform the individuals or entities referred to
above of the obligations undertaken in this Section 7.8; and (c) that it will
notify Parent immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, it; PROVIDED, HOWEVER, that
nothing contained in this Section 7.8 shall prohibit the Board of Directors of
the Company from furnishing information to any person or entity that makes an
Alternative Proposal, if, and only to the extent that, (A) the Board of
Directors of the Company determines in good faith after consultation with
outside counsel that such action is required for the Board of Directors to
comply with its fiduciary duties to stockholders imposed by law, (B) the
Alternative Proposal is a Superior Proposal, (C) the Company provides Parent
with a true and complete copy of such proposal as soon as practicable after the
receipt thereof, and (D) to the extent applicable, complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Alternative Proposal.
Nothing in this Section 7.8 shall (x) permit the Company to terminate this
Agreement (except as specifically provided in Article IX hereof), (y) permit the
Company to have discussions, negotiations or to enter into any agreement with
respect to an Alternative Proposal during the term of this Agreement (it being
agreed that during the term of this Agreement, the Company shall not enter into
any discussion, negotiation or agreement with any person that provides for, or
in any way facilitates, an Alternative Proposal (other than a confidentiality
agreement in customary form)), or (z) affect any other obligation of the Company
under this Agreement. As used in this Agreement, a "Superior Proposal" means a
bona fide written offer to acquire the Company pursuant to a merger,
consolidation, share exchange, purchase of a substantial portion of assets,
business combinations or other similar transaction (which offer shall not be
subject to any conditions that are more onerous to the Company than the
conditions to Parent and Sub's obligations to consummate the Merger; provided,
however, that such offer may be subject to confirmatory due diligence to be
effected within a five (5) business day period): (i) that the Board of Directors
of the Company determines, in good faith after consultation with a nationally
recognized investment banking firm which provided a written opinion to such
effect, provides a higher value per share to the stockholders of the Company
than the Merger Consideration after taking into account, among other things, the
reasonable likelihood the Effective Date will occur as compared to when the
closing of such Alternative Proposal will occur; (ii) that is not subject to any
financing condition (and the offeror has on hand funds available or committed
financing to consummate the offer and the transactions contemplated; thereby);
(iii) does not have any condition to closing or rights to terminate more onerous
to the Company than the provisions set forth in Articles VIII or IX hereof; and
(iv) does not involve any substantive legal impediments that are reasonably
likely to prevent such Alternative Proposal from closing.
Section 7.9. ADVICE OF CHANGES; SEC FILINGS
. The Company shall confer on a regular basis with Parent on operational
matters. Parent and the Company shall promptly advise each other orally and in
writing of (i) any change or event that has had, or could reasonably be expected
to have, a Material Adverse Effect on Parent or the Company, as the case may
be, (ii) any litigation or governmental complaints, investigation or hearings
(or communication indicating that the same may be contemplated), or (iii) the
breach in any material respect of any representation or warranty contained
herein. The Company and Parent shall promptly provide each other (or their
respective counsel) copies of all filings made by such party with the Commission
or any other Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
Section 7.10. FEE AND EXPENSES
. Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses, except as
provided in Section 9.5.
Section 7.11. AMENDMENT TO THE COMPANY RIGHTS AGREEMENT
. The Company, in accordance with the terms and provisions of the Company
Rights Agreement and as promptly as practicable on or after the date hereof,
shall amend the Company Rights Agreement so as to exclude the Merger and the
transaction contemplated by this Agreement from the Company Rights Agreement.
Section 7.12. P&C COMMITMENTS
. (a) Parent and Sub shall (i) on and following the Effective Date,
perform or discharge all obligations of the Company not previously performed and
discharged pursuant to those certain agreements by and between the Company and
Center Reinsurance Company of New York set forth on SCHEDULE 7.12 hereto (the
"Centre Re Agreements") or (ii) in lieu of such performance or discharge, shall
enter into an alternative arrangement satisfactory to the State of Florida, ex
rel, The Department of Insurance (the "Department").
(b) At the Closing, Parent agrees to perform one of the following actions: (x)
to make (i) a capital contribution to P&C of an amount equal to the statutory
deficit of P&C as of the Closing and (ii) to commit to make additional
contributions, from time to time, in order to remove any statutory deficits
thereafter incurred by P&C; (y) to pay the closing premium required, and cause
PCA and it's subsidiaries to perform all of their obligations, under the terms
of the Centre Re Agreements; or (z) to enter into such other arrangements as the
Department, in its sole discretion, determines is acceptable.
Section 7.13. ASSUMPTION OF DEBT OBLIGATIONS
. Sub shall assume or repay all debt obligations of the Company on the
Effective Date.
Section 7.14. ESCROW DEPOSIT.
(a) Simultaneously with the execution of this Agreement, Parent made a $15
million payment (the "Escrow Deposit") into an escrow account established by the
Department for the benefit of P&C, the terms of which account are set forth in
Schedule 7.14. In consideration of making such payment, the Company hereby
grants Parent the right (the "Option") to purchase for $0.01 per share a number
of shares of Company Common Stock equal to $15 million divided by 70% of the
average closing prices of the Company Common Stock for the five trading days
immediately prior to the exercise of the Option (as such prices are reported by
the NASD National Market System or such other principal trading market on which
the Company Common Stock then trades). Parent's right to exercise the Option is
subject to (a) the termination of this Agreement (the "Termination"), (b) the
Escrow Deposit not having been returned to Parent and (c) the obtaining by
Parent of all required governmental and regulatory approvals for such purchase
of Company Common Stock. The Option is exercisable in whole upon 90 days prior
written notice to the Company, provided that the Option may be exercised from
time to time in part to the extent Parent is unable to acquire all of the
remaining shares of Company Common Stock subject to the Option by reason of
governmental or
regulatory approvals. Parent's right to give notice of exercise of the Option
shall expire upon the later of (i) six months following the Termination or (ii)
30 days after receipt of all required governmental or regulatory approvals.
(b) The Company represents and warrants to Parent that the shares of
Common Stock issuable upon exercise of the Option shall be validly issued, fully
paid and non-assessable.
(c) In lieu of issuing any shares of Company Common Stock subject to the
Option, the Company may, prior to the exercise of any part of the Option,
cancel the Option by paying to the Company the sum of $15 million plus interest
from the date of execution of this Agreement to the date of payment at a rate
per annum of 10%.
(d) Upon the issuance of any shares of Company Common Stock, the Company
shall file a registration statement with the Securities and Exchange Commission
(the "Commission") covering such shares of Company Common Stock and any other
shares of Company Common Stock to be issued thereafter pursuant to the Option.
The Company shall use its best efforts to cause the Commission to declare the
registration statement effective and cause the registration statement to remain
effective for two years thereafter. The Company will assist Parent in effecting
an underwritten offering, upon customary terms and conditions, with respect to
such shares of Company Common Stock with an underwriter of national standing
selected by Parent.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the holders of the Company
Common Stock.
(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order by any federal
or state court in the United States of competent jurisdiction which prevents the
consummation of the Merger shall have been issued and remain in effect (each
party agreeing to use its best efforts to have any such injunction lifted).
(d) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Merger and any other documents required to be filed after the Effective
Date and except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a Material
Adverse Effect on the business of Parent and the Company (and their respective
Subsidiaries) following the Effective Date.
(e) All consents, authorizations, orders and approvals required under
federal or state statutes regulating managed care, health maintenance
organizations or insurance organizations required in connection with the
execution, delivery and performance of this Agreement shall have been obtained,
except where the failure to have obtained any such consent, authorization, order
or approval, would not have a material affect on the ability of the Company and
its Subsidiaries to continue to conduct their respective businesses.
Section 8.2. CONDITION TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Date of the condition, unless waived by
the Company, that Parent and Sub shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the
Effective Date, and the representations and warranties of Parent and Sub
contained in this Agreement shall be true and correct when made and on and as of
the Effective Date as if made on and as of such date (except to the extent they
relate to a particular date), except where the failure of such representations
and warranties to be true and accurate when considered in the aggregate (without
giving effect to any limitation as to "materiality" or material adverse effect
set forth therein) would not have a Material Adverse Effect on Parent.
Section 8.3. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER.
The obligations of Parent and Sub to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the condition, unless
waived by Parent, that (i) the Company shall have performed in all material
respects its agreements contained in this Agreement required to be performed on
or prior to the Effective Date, (ii) the representations and warranties of the
Company contained in this Agreement shall be true and correct when made and on
and as of the Effective Date as if made on and as of such date (except to the
extent they relate to a particular date), except where the failure of such
representation and warranties to be true and accurate when considered in the
aggregate (without giving effect to any limitation as to "materiality" or
material adverse effect set forth therein) would not have a Material Adverse
Effect on the Company and (iii) the Department shall have entered into the
Consent Order included in SCHEDULE 8.3 and such Consent Order shall remain in
full force and effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. TERMINATION BY MUTUAL CONSENT
. This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Date, before or after the approval of this Agreement
by the stockholders of the Company, by the mutual consent of Parent and the
Company.
Section 9.2. TERMINATION BY EITHER PARENT OR THE COMPANY
. This Agreement may be terminated and the Merger may be abandoned by
action of the Board of Directors of either Parent or the Company if (a) the
Merger shall not have been consummated by October 31, 1997, or (b) the approval
of the Company's stockholders required by Section 3.5 shall not have been
obtained at the Company Meeting or at any adjournment or postponement thereof,
or (c) a United States federal or state court of competent jurisdiction or
United States federal or state governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause (c) shall have
used best efforts to remove such injunction, order or decree; and provided, in
the case of a termination pursuant to clause (a) above, that the terminating
party shall not have breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the failure
to consummate the Merger.
Section 9.3. TERMINATION BY THE COMPANY
. This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Date, before or after the adoption and approval by
the stockholders of the Company referred to in Section 3.5, by action of the
Board of Directors of the Company, if:
(a) There is a Superior Proposal and: (i) the Board of Directors of the
Company determines in good faith after consultation with the Company's outside
counsel that the failure to approve such offer would not be consistent with the
fiduciary duties to stockholders of the Board of Directors of the Company; (ii)
five business days shall have elapsed after delivery to Parent of a written
notice by the Company informing Parent that the Board of Directors of the
Company has determined that a Superior
Proposal has been made and during such five business-day period the Company
shall have fully cooperated with Parent in good faith with the intent of
enabling Parent to agree to a modification of the terms and conditions of this
Agreement (including the Merger Consideration) so that the Alternative Proposal
would not constitute a Superior Proposal as compared to the terms and conditions
of this Agreement as proposed to be modified by Parent (the "Modified
Agreement"); and (iii) at the end of such five business-day period, the Board of
Directors of the Company shall continue to determine in good faith (after
consultation with a nationally recognized investment banking firm which provided
a written opinion to such effect) that such Alternative Proposal continues to
constitute a Superior Proposal as compared to the Modified Agreement; PROVIDED,
HOWEVER, that the right to terminate this Agreement pursuant to this clause
shall not be available (A) if the Company has breached in any material respect
its obligations under Section 7.8, or (B) if, prior to or concurrently with any
purported termination pursuant to this clause, the Company shall not have paid
the fee contemplated by Section 9.5;
(b) There has been a breach by Parent or Sub of any representation or
warranty contained herein that would have a material adverse effect on Parent's
or Sub's ability to perform its obligations under this Agreement and which
breach has not been cured within five (5) business days following receipt by
Parent or Sub of notice of the breach;
(c) There has been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of Parent, which breach is not curable
or, if curable, is not cured within 30 days after written notice of such breach
is given by the Company to Parent.
Section 9.4. TERMINATION BY PARENT
. This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Date, by action of the Board of Directors of Parent,
if:
(a) The Board of Directors of the Company shall have withdrawn or modified
in a manner adverse to Parent its approval or recommendation of this Agreement
or the Merger or shall have recommended an Alternative Proposal to the Company
stockholders;
(b) There has been a breach by the Company of any representation or
warranty contained herein which has had, or would be reasonably expected to
have, a Material Adverse Effect on the Company and which breach has not been
cured within five (5) business days following receipt by the Company of notice
of such breach; or
(c) There has been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of the Company, which breach is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by Parent to the Company.
Section 9.5. EFFECT OF TERMINATION AND ABANDONMENT
. (a) In the event that (i) (x) any person shall have made an Alternative
Proposal and thereafter this Agreement is terminated either by the Company
pursuant to Section 9.3(a) or by either party pursuant to Section 9.2(b) or (y)
the Board of Directors of the Company shall have withdrawn or modified in a
manner adverse to Parent its approval or recommendation of this Agreement or the
Merger or shall have recommended an Alternative Proposal to the Company
stockholders and Parent shall have terminated this Agreement pursuant to Section
9.4(a), then the Company shall promptly, but in no event later than two days
after such termination, pay Parent a fee of $17 million, plus documented
out-of-pocket expenses incurred by Parent in connection with the transactions
completed hereby not to exceed $ 1.5 million (collectively, the "Payment") or
(z) this Agreement is terminated for any reason other than those set forth in
clauses (x) or (y) above (other than pursuant to Section 9.3(b) or (c)), and if
within 12 months thereafter any Alternative Proposal shall have been
consummated, then the Company shall promptly, but in no event later than two
days after consummation of any such transaction, pay Parent the lessor of (i)
the Payment and (ii)(a) 3.5% of the sum of the
following: (A) the consideration paid to the Company stockholders pursuant to
such Alternative Proposal, (B) the principal amount of any debt outstanding on
the date such Alternative Proposal is consummated, and (C) the amount paid or
agreed to be paid to the Department in connection with the matters contemplated
by the Forebearance Agreement or any amendments or supplements thereto plus (b)
documented out-of-pocket expenses incurred by Parent in connection with the
transactions contemplated hereby not to exceed $1.5 million; PROVIDED, HOWEVER,
that no payment shall be made to Parent under clause (z) above if the Agreement
is terminated pursuant to Section 9.2(a) and, at the time of the termination,
the only condition to closing not satisfied was the condition set forth in
Section 8.1(b), 8.1(c), 8.1(d) or 8.1(e)(or any combination thereof). Any
amount payable hereunder shall be payable by wire transfer of same day funds.
The Company acknowledges that the agreements contained in this Section 9.5(a)
are an integral part of the transactions contemplated in this Agreement, and
that, without these agreements, Parent and Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 9.5(a), and, in order to obtain such payment, Parent or
Sub commences a suit which results in a judgment against the Company for the fee
set forth in this Section 9.5(a), the Company shall pay to Parent its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the rate of 12% per annum.
(b) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article IX, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
9.5 and Sections 7.10 and 7.14 and except for the provisions of Sections 10.3,
10.4, 10.5, 10.7, 10.9, 10.10 and 10.13. Moreover, in the event of termination
of this Agreement pursuant to Sections 9.2, 9.3 and 9.4, nothing herein shall
prejudice the ability of the non-breaching party from seeking damages from any
other party for any breach of this Agreement, including
without limitation, attorneys' fees and the right to pursue any remedy at law or
in equity.
Section 9.6. EXTENSION; WAIVER
. At any time prior to the Effective Date, any party hereto, by action
taken by its Board of Directors, may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
. All representations and warranties set forth in this Agreement shall
terminate at the Effective Date. All covenants and agreements set forth in this
Agreement shall survive in accordance with their terms.
Section 10.2. NOTICES
. This All notices or other communications under this Agreement shall be
in writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by cable, telegram, telex or other standard form
of telecommunications, or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to the Company:
0000 Xxxx Xxxxxx Xxxxx
Xxxxx, XX 00000
(000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Chief Financial Officer
With a copy to:
Fulbright & Xxxxxxxx, L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
(000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Xx.
If to Parent or Sub:
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
(000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Senior Vice President and General Counsel
With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
(000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 10.3. SPECIAL PERFORMANCE
. The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or
any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
Section 10.4. ASSIGNMENT; BINDING EFFECT
. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement; provided that the Indemnified Parties shall be third-party
beneficiaries of Parent's agreement contained in Section 7.5 hereof.
Section 10.5. ENTIRE AGREEMENT
. This Agreement, the Exhibits, the Schedules, the Confidentiality
Agreement and any documents delivered by the parties in connection herewith and
therewith constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto; PROVIDED, HOWEVER, that the provisions
of paragraph 8 of the Confidentiality Agreement shall have no further force or
effect. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.
Section 10.6. AMENDMENT
. This Agreement may be amended by the parties hereto, by action taken by
their respective Boards of Directors, at any time before or after approval of
matters presented in connection with the Merger by the stockholders of the
Company, but after any such stockholder approval, no amendment shall be made
which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto and the Departments shall be a third party
beneficiary of Parent and Sub's obligations under Sections 7.12 and 7.13 hereto.
Section 10.7. GOVERNING LAW
. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to its rules of conflict of laws.
Section 10.8. COUNTERPARTS
. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
Section 10.9. HEADINGS AND TABLE OF CONTENTS
. Headings of the Articles and Sections of this Agreement and the Table of
Contents are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 10.10. INTERPRETATION
. In this Agreement, unless the context otherwise requires, words
describing the singular number shall include the plural and vice versa, and
words denoting any gender shall include all genders and words denoting natural
persons shall include corporations and partnerships and vice versa.
Section 10.11. WAIVERS
. At any time prior to the Effective Date, the parties hereto, by or
pursuant to action taken by their respective Boards of Directors, may (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any
documents delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party. Except as provided in
this Agreement, no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision
hereunder shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
Section 10.12. INCORPORATION OF EXHIBITS
. The SCHEDULE and all Exhibits attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
Section 10.13. SEVERABILITY
. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Amended
and Restated Agreement to be signed by their respective officers thereunder
duly authorized all as of the date first written above.
HUMANA INC.
By:
Title:
HUMNOV, INC.
____________________________
By:
Title:
PHYSICIAN CORPORATION OF AMERICA
____________________________
By:
Title:
