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OPTION AGREEMENT
OPTION AGREEMENT, dated as of October 5, 1999 by and between HealthPlan
Services Corporation, a Delaware corporation ("Grantor"), and UICI, a Delaware
corporation ("Acquiror").
WHEREAS, concurrently with the execution and delivery of this Agreement,
Grantor and Acquiror are entering into an Agreement and Plan of Merger, dated as
of the date hereof (the "Merger Agreement"), which provides, among other things,
upon the terms and subject to the conditions thereof, for the merger of Grantor
with and into a wholly-owned subsidiary of Acquiror (the "Merger"); and
WHEREAS, as a condition to Acquiror's willingness to enter into the
Merger Agreement, Acquiror has requested that Grantor agree, and Grantor has so
agreed, to grant to Acquiror an option with respect to certain shares of
Grantor's common stock, on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, to induce Acquiror to enter into the Merger Agreement,
and in consideration of the mutual covenants and agreements set forth herein and
in the Merger Agreement, the parties hereto agree as follows:
1. Grant of Option. Grantor hereby grants Acquiror an irrevocable
option (the "Grantor Option") to purchase up to 1,500,000 shares, subject to
adjustment as provided in Section 6 hereof (such shares being referred to herein
as the "Grantor Shares") of common stock, $.01 par value, of Grantor (the
"Grantor Common Stock") in the manner set forth below at a price (the "Exercise
Price") per Grantor share of $7.38 payable in cash.
2. Exercise of Option. The Grantor option may be exercised by
Acquiror, in whole or in part, at any time or from time to time after the Merger
Agreement is terminated and a termination fee is payable under circumstances
which would entitle Acquiror to the termination fee under Section 9.2(b)(i) or
9.2(b)(ii) of the Merger Agreement.
In the event Acquiror wishes to exercise the Grantor
Option, Acquiror shall deliver to Grantor a written notice (an "Exercise
Notice") specifying the total number of Grantor Shares it wishes to purchase.
Each closing of a purchase of Grantor Shares (a "Closing") shall occur at a
place, on a date and at a time designated by Acquiror in an Exercise Notice
delivered at least two business days prior to the date of the Closing. The
Grantor Option shall terminate upon the earlier of: (i) the Effective Time; or
(ii) two years following the first event that triggers the obligation of Grantor
to pay the termination fee under Section 9.2(b)(i) or 9.2(b)(ii) of the Merger
Agreement (or if, at the expiration of such two year period the Grantor Option
cannot be exercised by reason of any applicable judgment, decree, order, law or
regulation, 10 business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal). Notwithstanding
the foregoing, the Grantor Option may not be exercised if Acquiror is in
material breach of any of its representations or warranties, or in material
breach of any of its covenants or agreements, contained in this Agreement or in
the Merger Agreement. Upon the giving by Acquiror to Grantor of the Exercise
Notice and the tender of the applicable aggregate Exercise Price, Acquiror shall
be deemed to be the holder of record of the Grantor Shares issuable upon such
exercise, notwithstanding that the stock transfer books of Grantor shall then be
closed or that certificates representing such Grantor Shares shall not then be
actually delivered to Acquiror.
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3. Closing. At any Closing, (a) Grantor will deliver to Acquiror or
its designee a single certificate in definitive form representing the number of
Grantor Shares designated by Acquiror in its Exercise Notice, such certificate
to be registered in the name of Acquiror and to bear the legend set forth in
Section 7 and (b) Acquiror will deliver to Grantor the aggregate Exercise Price
for the Grantor Shares so designated and being purchased by wire transfer of
immediately available funds or certified check or bank check. Grantor shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue and
delivery of its stock certificates under this Agreement.
4. Representations and Warranties and Covenants of Grantor. Grantor
represents and warrants to Acquiror that (a) Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by Grantor and the consummation by Grantor of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Grantor and no other corporate proceedings on the part of Grantor
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Grantor, constitutes a valid and binding obligation of Grantor and, assuming
this Agreement constitutes a valid and binding obligation of Acquiror, is
enforceable against Grantor in accordance with its terms, (e) Grantor has taken
all necessary corporate action to authorize and reserve for issuance and to
permit it to issue, upon exercise of the Grantor Option in accordance with its
terms, and at all times from the date hereof through the expiration of the
Grantor Option will have reserved, 1,500,000 authorized and unissued Grantor
Shares, such amount being subject to adjustment as provided in Section 6, all of
which, upon their issuance and delivery in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, (f) upon
delivery of the Grantor Shares to Acquiror upon the exercise of the Grantor
Option in accordance with its terms, Acquiror will acquire the Grantor Shares
free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever, (g) the execution and delivery of this
Agreement by Grantor does not, and the consummation by Grantor of the
transactions contemplated hereby will not, violate, conflict with, or result in
a breach of any provision of, or constitute a default (with or without notice or
lapse of time, or both) under, or result in the termination of, or accelerate
the performance required by, or result in 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") of Grantor pursuant to, (A) any
provision of the Certificate of Incorporation or bylaws of Grantor, (B) any
provisions of any material loan or credit agreement, note, mortgage, indenture,
lease, Grantor benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license or (C) any material judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Grantor or its
properties or assets, (h) the execution and delivery of this Agreement by
Grantor does not, and the performance of this Agreement by Grantor will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority, and (i) none of Grantor, any of its
affiliates or anyone acting on its or their behalf has issued, sold or offered
any security of Grantor to any person under circumstances that would cause the
issuance and sale of the Grantor Shares, as contemplated by this Agreement, to
be subject to the registration requirements of the Securities Act as in effect
on the date hereof and the issuance, sale and delivery of the Grantor Shares
hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof (and Grantor
shall not take any action which would cause the issuance, sale and delivery of
the Grantor Shares hereunder not to be exempt from such requirements). Grantor
agrees that any Grantor Shares issued to Acquiror upon the exercise of the
Grantor Option will be approved for listing on the New York Stock Exchange.
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5. Representations and Warranties of Acquiror. Acquiror represents
and warrants to Grantor that (a) Acquiror is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by Acquiror and the consummation by Acquiror of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Acquiror and no other corporate proceedings on the part of
Acquiror are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Acquiror and constitutes a valid and binding obligation of Acquiror, and,
assuming this Agreement constitutes a valid and binding obligation of Grantor,
is enforceable against Acquiror in accordance with its terms, and (d) Acquiror
is an Accredited Investor and any Grantor Shares acquired upon exercise of the
Grantor Option will be acquired for Acquiror's own account, for investment
purposes only and will not be, and the Grantor Option is not being, acquired by
Acquiror with a view to the public distribution thereof in violation of any
applicable provision of the Securities Act.
6. Adjustment Upon Changes in Capitalization. Without limitation to
any restriction on Grantor contained in this Agreement or in the Merger
Agreement, in the event of any change in Grantor Common Stock by reason of stock
dividends, splitups, mergers, (other than the Merger), recapitalizations,
combinations, exchange of shares or the like, the type and number of shares or
securities subject to the Grantor Option, and the purchase price per share
provided in Section 1, shall be adjusted appropriately to restore to Acquiror
its rights hereunder.
7. Restrictive Legends. Each certificate representing shares of
Grantor Common Stock issued to Acquiror hereunder, at a Closing, shall include a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE OPTION
AGREEMENT, DATED AS OF OCTOBER 5, 1999, A COPY OF WHICH MAY BE OBTAINED
FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Acquiror shall have
delivered to the other party a copy of a letter from the staff of the Securities
and Exchange Commission, or an opinion of counsel, in form and substance
satisfactory to the other party, to the effect that such legend is not required
for purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and in
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
8. Registration Statement.
(a) If at any time or times after the Option has become
exercisable Grantor determines to file with the Securities and Exchange
Commission a registration statement covering any Grantor Common Stock (other
than Grantor Common Stock issuable to officers and employees pursuant to an
employee benefit plan registered on Form S-8), Grantor shall notify Acquiror, at
least 15 days prior to the
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filing of such proposed registration statement. If Acquiror requests Grantor in
writing, within 10 days of the receipt of notification from Grantor, to include
in such registration statement any Grantor Shares then held by Acquiror, then,
Grantor shall use its best efforts to include those Grantor Shares in the
registration statement, to have the registration declared effective and to keep
such registration current for a period of not less than 180 days. If Acquiror
decides not to (or is precluded from including) all of its Grantor Shares in any
registration statement thereafter filed by Grantor, Acquiror will nevertheless
continue to have the right under this Section 8(a) to include its Grantor Shares
in a future registration of Grantor.
(b) At any time, Acquiror may demand registration
under the Securities Act of all or part of the Grantor Shares then held by
Acquiror. Acquiror shall be limited to one demand under this Section 8(b) and
such demand shall be made by written notice to Grantor, which notice shall
specify the number of Grantor Shares requested to be registered. Upon receipt of
a written demand for registration under this Section 8(b), the Company shall use
its best efforts to register such Grantor Shares, to have the registration
statement declared effective and to keep such registration current for a period
of not less than 180 days.
(c) A registration effected under this Section 8 shall be
effected at Grantor's expense, except for underwriting discounts and commissions
and the fees and the expenses of counsel to Acquiror, and Grantor shall provide
to the underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to indemnify each
other and the underwriters, if any, in the customary manner, (ii) if applicable,
to enter into an underwriting agreement in form and substance customary for
transactions of such type with the underwriters participating in such offering
and (iii) to take all further actions which shall be reasonably necessary to
effect such registration and sale (including, if the underwriters, if any, deem
it necessary, participating in road-show presentations).
9. Binding Effect; No Assignment; No Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as
expressly provided for in this Agreement, neither this Agreement nor the rights
or the obligations of either party hereto are assignable, except by operation of
law, or with the written consent of the other party. Nothing contained in this
Agreement, expressed or implied, is intended to confer upon any person other
than the parties hereto and their respective permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement.
10. Specific Performance. The parties recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
11. Entire Agreement. This Agreement and the Merger Agreement
(including the exhibits and schedules thereto) constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof and
thereof.
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12. Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision and the economic
effects thereof. If for any reason any such court or regulatory agency
determines that Acquiror is not permitted to acquire, the full number of shares
of Grantor Common Stock provided in Section 1 hereof (as the same may be
adjusted), it is the express intention of Grantor to allow Acquiror to acquire
or to require Grantor to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
14. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if (i) delivered personally, or (ii) sent
by reputable overnight courier service, or (iii) telecopied (which is
confirmed), or (iv) five days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
A. If to Grantor, to:
HealthPlan Services Corporation
0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
and a copy to:
Fowler, White, Gillen, Boggs, Xxxxxxxxx & Banker, P.A.
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
B. If to Acquirer, to:
UICI
0000 XxXxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopier No.: (000) 000-0000
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with a copy to:
Xxxxxxx, Carton & Xxxxxxx
Quaker Tower
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Telecopier No.: (000) 000-0000
15. Governing Law; Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware applicable
to agreements made and to be performed entirely within such State and without
regard to its choice of law principles. Each of the parties hereto (a) consents
to submit itself to the personal jurisdiction of any federal court located in
the State of Delaware or any Delaware state court in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Delaware or a Delaware state court.
16. Interpretation. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of
which, taken together, shall constitute one and the same instrument.
18. Expenses. Except as otherwise expressly provided herein or in
the Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
19. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
20. Replacement of Grantor Option. Upon receipt by Grantor of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, Grantor will execute and deliver a new Agreement
of like tenor and date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
HEALTHPLAN SERVICES CORPORATION
By: /s/ XXXXX X. XXXXXX, XX.
-----------------------------------------
Name: Xxxxx X. Xxxxxx, Xx.
Title: Chairman and Chief Executive Officer
UICI
By: /s/ XXXXXXX X. XXXX
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive Officer
