Exhibit 2.1
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Execution Copy
AGREEMENT AND PLAN OF MERGER
DATED AS OF
APRIL 28, 2002
AMONG
ANTHEM, INC.,
AI SUB ACQUISITION CORP.
AND
TRIGON HEALTHCARE, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER........................................................1
1.1. THE MERGER...........................................................1
1.2. CLOSING..............................................................2
1.3. EFFECTIVE TIME.......................................................2
1.4. EFFECTS OF THE MERGER................................................2
1.5. ARTICLES OF INCORPORATION............................................2
1.6. BY-LAWS..............................................................2
1.7. OFFICERS AND DIRECTORS OF SURVIVING CORPORATION......................2
1.8. EFFECT ON CAPITAL STOCK..............................................3
1.9. EXCHANGE AGENT.......................................................3
1.10. COMPANY STOCK OPTIONS AND RESTRICTED STOCK..........................3
1.11. CERTAIN ADJUSTMENTS.................................................4
ARTICLE II EXCHANGE OF CERTIFICATES.........................................5
2.1. EXCHANGE FUND........................................................5
2.2. EXCHANGE PROCEDURES..................................................5
2.3. DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.....................6
2.4. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK..................6
2.5. NO FRACTIONAL SHARES OF PURCHASER COMMON STOCK.......................6
2.6. TERMINATION OF EXCHANGE FUND.........................................7
2.7. NO LIABILITY.........................................................7
2.8. INVESTMENT OF THE EXCHANGE FUND......................................7
2.9. LOST CERTIFICATES....................................................7
2.10. WITHHOLDING RIGHTS..................................................7
2.11. FURTHER ASSURANCES..................................................8
2.12. STOCK TRANSFER BOOKS................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................8
3.1. REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................8
3.2. REPRESENTATIONS AND WARRANTIES OF COMPANY...........................15
3.3. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB..........30
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.......................31
4.1. CONDUCT OF BUSINESS OF COMPANY PENDING THE MERGER...................31
4.2. CONDUCT OF BUSINESS OF PURCHASER PENDING THE MERGER.................34
4.3. OPERATIONAL MATTERS.................................................35
ARTICLE V ADDITIONAL AGREEMENTS............................................36
5.1. PREPARATION OF FORM S-4 AND THE JOINT PROXY STATEMENT;
STOCKHOLDERS MEETINGS.............................................36
5.2. ACCOUNTANT'S LETTERS................................................38
5.3. ACCESS TO INFORMATION...............................................38
5.4. REASONABLE BEST EFFORTS.............................................39
5.5. NO SOLICITATION OF TRANSACTIONS.....................................40
5.6. EMPLOYEE BENEFITS MATTERS...........................................41
5.7. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE..............43
5.8. NOTIFICATION OF CERTAIN MATTERS.....................................44
5.9. PUBLIC ANNOUNCEMENTS................................................44
5.10. LISTING OF SHARES OF PURCHASER COMMON STOCK........................44
PAGE
5.11. AFFILIATES.........................................................45
5.12. TRANSITION TEAM....................................................45
5.13. MANAGEMENT RESPONSIBILITIES........................................45
5.14. TAX-FREE REORGANIZATION TREATMENT..................................45
5.15. REPRESENTATION ON PURCHASER BOARD..................................45
5.16. OTHER OBLIGATIONS..................................................46
ARTICLE VI CONDITIONS PRECEDENT............................................46
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER..........46
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PURCHASER AND MERGER SUB....47
6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY.....................48
ARTICLE VII TERMINATION AND AMENDMENT......................................49
7.1. TERMINATION.........................................................49
7.2. EFFECT OF TERMINATION...............................................51
7.3. FEES AND EXPENSES...................................................51
ARTICLE VIII GENERAL PROVISIONS............................................53
8.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS..........53
8.2. NOTICES.............................................................53
8.3. INTERPRETATION......................................................54
8.4. COUNTERPARTS........................................................54
8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES......................54
8.6. GOVERNING LAW.......................................................55
8.7. SEVERABILITY........................................................55
8.8. AMENDMENT...........................................................55
8.9. EXTENSION; WAIVER...................................................55
8.10. ASSIGNMENT.........................................................55
8.11. SUBMISSION TO JURISDICTION; WAIVERS................................56
8.12. ENFORCEMENT........................................................56
8.13. DEFINITIONS........................................................56
AGREEMENT AND PLAN OF MERGER, dated as of April 28, 2002 (this
"AGREEMENT"), among Anthem, Inc., an Indiana corporation ("PURCHASER"), AI Sub
Acquisition Corp., an Indiana corporation and a direct wholly owned subsidiary
of Purchaser ("MERGER SUB"), and Trigon Healthcare, Inc., a Virginia corporation
("COMPANY").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Company and Purchaser deem
it advisable and in the best interests of each corporation and its respective
stockholders that Company and Purchaser engage in a business combination in
order to advance the long-term strategic business interests of Company and
Purchaser;
WHEREAS, the combination of Company and Purchaser shall be effected by the
terms of this Agreement through a merger as outlined below (the "MERGER");
WHEREAS, in furtherance thereof, the respective Boards of Directors of
Company, Purchaser and Merger Sub have approved or adopted this Agreement,
pursuant to which Company will be merged with and into Merger Sub on the terms
and subject to the conditions set forth in this Agreement, with each share of
Class A common stock, $0.01 par value, of Company ("COMPANY COMMON STOCK")
issued and outstanding immediately prior to the Effective Time (as defined in
Section 1.3), other than Company Treasury Shares (as defined in Section 1.8(a))
and shares of Company Common Stock owned by Purchaser or Merger Sub, being
converted into (as such amount may be increased as set forth in Section 7.1(i)
hereof) the right to receive (i) $30.00 cash and (ii) 1.062 shares of common
stock, par value $0.01 per share, of Purchaser ("PURCHASER COMMON STOCK");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the "CODE") and that this Agreement shall constitute a plan of
reorganization within the meaning of Sections 354 and 361 of the Code; and
WHEREAS, as an inducement to and condition of Purchaser's willingness to
enter into this Agreement, Company and Purchaser have entered into the Stock
Option Agreement ("OPTION AGREEMENT") in the form attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1. THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Virginia Stock Corporation Act
("VSCA") and the
Indiana Business Corporation Law ("IBCL"), Company shall be merged with
and into Merger Sub at the Effective Time. Upon consummation of the Merger, the
separate corporate existence of Company shall cease and Merger Sub shall
continue as the surviving corporation (the "SURVIVING CORPORATION") and shall
change its name to Trigon Healthcare, Inc.
1.2. CLOSING. Subject to the terms and conditions hereof, the closing of
the Merger and the transactions contemplated by this Agreement (the "CLOSING")
will take place on the second Business Day after the satisfaction or waiver
(subject to applicable law) of the conditions set forth in Article VI (other
than any such conditions which by their terms cannot be satisfied until the
Closing Date, which shall be required to be so satisfied or waived (subject to
applicable law) on the Closing Date), unless another time or date is agreed to
in writing by the parties hereto (the actual time and date of the Closing being
referred to herein as the "CLOSING DATE"). The Closing shall be held at the
offices of Xxxxx & Xxxxxxx, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxxx,
Xxxxxxx, unless another place is agreed to in writing by the parties hereto.
1.3. EFFECTIVE TIME. At the Closing, the parties shall file appropriate
articles of merger (the "ARTICLES OF MERGER") in such form as is required by and
executed in accordance with the respective relevant provisions of the VSCA and
the IBCL. The Merger shall become effective at such time as the last to be filed
of the Articles of Merger are duly filed with the State Corporation Commission
of the Commonwealth of Virginia and the Secretary of State of the State of
Indiana or at such subsequent time as Purchaser and Company shall agree and as
shall be specified in the Articles of Merger (the date and time the Merger
becomes effective being the "EFFECTIVE TIME").
1.4. EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
will have the effects set forth in the VSCA and the IBCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of Company and Merger Sub
shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of Company and Merger Sub shall be the debts, liabilities and duties of
the Surviving Corporation.
1.5. ARTICLES OF INCORPORATION. Except as contemplated by Section 1.1, the
articles of incorporation of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the Surviving
Corporation, until thereafter changed or amended as provided therein or by
applicable law.
1.6. BY-LAWS. At the Effective Time and without any further action on the
part of Company and Merger Sub, the by-laws of Merger Sub shall be the by-laws
of the Surviving Corporation, until thereafter changed or amended or repealed as
provided therein or the articles of incorporation of the Surviving Corporation
and by applicable law.
1.7. OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The officers of
Company as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their death, resignation or removal or
otherwise ceasing to be an officer or until their respective
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successors are duly elected and qualified, as the case may be. The directors of
Merger Sub as of the Effective Time shall serve as directors of the Surviving
Corporation until the earlier of their death, resignation or removal or
otherwise ceasing to be a director or until their respective successors are duly
elected and qualified.
1.8. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock:
(a) All shares of Company Common Stock that are owned by Company as
treasury stock (the "COMPANY TREASURY SHARES") or by Purchaser or Merger
Sub shall be canceled and retired and shall cease to exist and no cash,
Purchaser Common Stock or other consideration shall be delivered in
exchange therefor.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than the Company Treasury
Shares and shares of Company Common Stock owned by Purchaser or Merger
Sub), shall be converted at the Effective Time into the right to receive
(as such amounts may be increased as set forth in Section 7.1(i) hereof)
(i) $30.00 in cash (the "CASH CONSIDERATION") and (ii) 1.062 shares (the
"EXCHANGE RATIO") of Purchaser Common Stock (the "MERGER CONSIDERATION").
Upon such conversion, all such shares of Company Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each Company Certificate (as defined in Section
1.9) shall thereafter represent the right to receive the Merger
Consideration, cash for fractional shares in accordance with Section 2.5
and any dividends or other distributions pursuant to Section 2.3 upon the
surrender of the Company Certificate in accordance with the terms hereof.
(c) Each share of common stock, par value $0.01, of Merger Sub (the
"MERGER SUB COMMON STOCK") outstanding immediately prior to the Effective
Time shall remain outstanding and unchanged following the Effective Time as
shares of the Surviving Corporation.
1.9. EXCHANGE AGENT. Prior to the Effective Time, Purchaser shall appoint
an exchange agent (the "EXCHANGE AGENT") for the purpose of exchanging
certificates which immediately prior to the Effective Time evidenced shares of
Company Common Stock (the "COMPANY CERTIFICATES") for the Merger Consideration.
1.10. COMPANY STOCK OPTIONS AND RESTRICTED STOCK. Company and Purchaser
shall take all action reasonably necessary so that each employee or director
stock option exercisable for shares of Company Common Stock (the "COMPANY STOCK
OPTIONS") outstanding immediately prior to the Effective Time shall have vested
and become exercisable by the Effective Time and shall be converted
automatically at the Effective Time into an option to purchase a number of
shares of Purchaser Common Stock (a "CONVERTED OPTION") equal to the product of
the number of shares of Company Common Stock subject to such Company Stock
Option multiplied by the Option Exchange Ratio (provided that any fractional
share resulting from such multiplication
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shall be rounded to the nearest whole share). The Option Exchange Ratio shall
mean the sum of (i) 1.062 (as such amount may be increased as set forth in
Section 7.1(i) hereof) and (ii) a fraction the numerator of which is 30 (as such
amount may be increased as set forth in Section 7.1(i) hereof) and the
denominator of which is the closing trading price of Purchaser Common Stock on
the NYSE, as reported in the Wall Street Journal, Eastern Edition (or such other
source as the parties shall agree in writing), on the Business Day prior to the
Effective Time. The terms and conditions of the Converted Option shall otherwise
remain the same as the terms and conditions of the Company Stock Option, except
that the exercise price per share of each Converted Option shall equal the
exercise price per share of such Company Stock Option divided by the Option
Exchange Ratio (provided that such exercise price shall be rounded to the
nearest whole cent). Notwithstanding the foregoing, each Company Stock Option
which is intended to be an "incentive stock option" (as defined under Section
422 of the Code) shall be adjusted in accordance with the requirements of
Section 424 of the Code. Purchaser shall, as of the Effective Time, assume the
obligations of Company under all plans and agreements pursuant to which a
Company Stock Option has been issued and shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Purchaser
Common Stock for delivery upon exercise of the Converted Options. Purchaser
shall use its reasonable best efforts to cause the registration of the shares of
Purchaser Common Stock subject to the Converted Options to become effective as
part of a registration statement on Form S-8, no later than the Effective Time;
and, thereafter, Purchaser shall file one or more registration statements on
appropriate forms with respect to shares of Purchaser Common Stock subject to
the Converted Options and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements,
including the current status of any related prospectus, for so long as the
Converted Options remain outstanding. Company and Purchaser shall take all such
steps within their control as may be required to cause the transactions
contemplated by this Section 1.10 and any other deemed dispositions of Company
equity securities (including derivative securities) or deemed acquisitions of
Purchaser equity securities (including derivative securities) in connection with
this Agreement by each individual who (i) is a director or officer of Company or
(ii) at the Effective Time will become a director or officer of Purchaser, to
become exempt from liability under Section 16(b) of the Exchange Act pursuant to
Rule 16b-3 thereunder. As soon as practicable after the Effective Time,
Purchaser shall deliver or cause to be delivered to each holder of Converted
Options an appropriate notice setting forth such holder's rights pursuant to any
stock option or similar plan of the Company (the "COMPANY STOCK OPTION PLANS")
and agreements evidencing the grants of such Converted Options, after giving
effect to the transactions hereunder. All shares of restricted Company Common
Stock held by current or former employees or directors of Company immediately
prior to the Effective Time shall vest automatically at the Effective Time.
1.11. CERTAIN ADJUSTMENTS. If, between the date of this Agreement and the
Effective Time, the outstanding Purchaser Common Stock or Company Common Stock
shall have been changed into a different number of shares or different class by
reason of any reclassification, recapitalization, stock split, split-up,
combination or exchange of shares or a stock dividend or dividend payable in any
other securities shall be declared with a record date within such period, or any
similar event shall have occurred, the Merger Consideration and the Option
Exchange Ratio shall be appropriately adjusted to provide to the holders of
Company Common Stock and
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Company Stock Options the same economic effect as contemplated by this Agreement
prior to such event.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1. EXCHANGE FUND. At or prior to the Effective Time, Purchaser shall
deposit with the Exchange Agent, in trust for the benefit of holders of shares
of Company Common Stock, (i) certificates representing the Purchaser Common
Stock issuable pursuant to Section 1.8 and (ii) cash sufficient to pay the cash
portion of the Merger Consideration. Purchaser agrees to make available to the
Exchange Agent from time to time as needed, additional cash sufficient to pay
cash in lieu of fractional shares pursuant to Section 2.5 and any dividends and
other distributions pursuant to Section 2.3. Any cash and certificates of
Purchaser Common Stock deposited with the Exchange Agent shall hereinafter be
referred to as the "EXCHANGE FUND."
2.2. EXCHANGE PROCEDURES. Within five Business Days after the Effective
Time, the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of a Company Certificate (i) a letter of transmittal which shall specify
that delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of the Company Certificates to the
Exchange Agent, and which letter shall be in customary form and have such other
provisions as Purchaser may reasonably specify and (ii) instructions for
effecting the surrender of such Company Certificates in exchange for the Merger
Consideration. Upon surrender of a Company Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Company
Certificate shall be entitled to receive in exchange therefor (A) one or more
shares of Purchaser Common Stock (which shall be in uncertificated book-entry
form unless a physical certificate is requested) representing, in the aggregate,
the whole number of shares that such holder has the right to receive pursuant to
Sections 1.8 and (B) a check for the cash portion of the Merger Consideration
and for the cash that such holder has the right to receive pursuant to the
provisions of this Article II, including cash in lieu of any fractional shares
of Purchaser Common Stock pursuant to Section 2.5 and dividends and other
distributions pursuant to Section 2.3. No interest will be paid or will accrue
on any cash payable for the cash portion of the Merger Consideration or pursuant
to Section 2.3 or Section 2.5. In the event of a transfer of ownership of
Company Common Stock which is not registered in the transfer records of Company,
one or more shares of Purchaser Common Stock evidencing, in the aggregate, the
proper number of shares of Purchaser Common Stock and a check for the cash
portion of the Merger Consideration, the cash in lieu of any fractional shares
of Purchaser Common Stock pursuant to Section 2.5 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.3, may be
issued with respect to such Company Common Stock to such a transferee if the
Company Certificate representing such shares of Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
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2.3. DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made with respect to shares of Purchaser Common
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Company Certificate with respect to the shares of Purchaser
Common Stock that such holder would be entitled to receive upon surrender of
such Company Certificate until such holder shall surrender such Company
Certificate in accordance with Section 2.2. Subject to the effect of applicable
laws, following surrender of any such Company Certificate, there shall be paid
to such holder of shares of Purchaser Common Stock issuable in exchange
therefor, without interest, (a) promptly after the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date prior to such
surrender payable with respect to such shares of Purchaser Common Stock and (b)
at the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such shares of
Purchaser Common Stock.
2.4. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Purchaser Common Stock issued and cash paid upon conversion of shares of Company
Common Stock in accordance with the terms of Article I and this Article II
(including any cash paid pursuant to Sections 2.3 or 2.5) shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock. Until surrendered as contemplated by this
Article II, each Company Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration (and any cash to be paid pursuant to Sections 2.3 or 2.5).
2.5. NO FRACTIONAL SHARES OF PURCHASER COMMON STOCK.
(a) No certificates or scrip or shares of Purchaser Common Stock
representing fractional shares of Purchaser Common Stock or book-entry
credit of the same shall be issued upon the surrender for exchange of
Company Certificates and such fractional share interests will not entitle
the owner thereof to vote or to have any rights of a stockholder of
Purchaser or a holder of shares of Purchaser Common Stock.
(b) Notwithstanding any other provision of this Agreement, each holder
of shares of Company Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of
Purchaser Common Stock (after taking into account all Company Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to the product of (i) such fractional part of
a share of Purchaser Common Stock multiplied by (ii) the closing price for
a share of Purchaser Common Stock on the New York Stock Exchange, Inc.
("NYSE") Composite Transactions Tape on the date of the Effective Time or,
if such date is not a Business Day, the Business Day immediately before the
date on which the Effective Time occurs. As promptly as practicable after
the determination of the amount of cash, if any, to be paid to holders of
fractional interests, the Exchange Agent shall so notify Purchaser, and
Purchaser shall cause the Surviving Corporation to deposit such amount with
the Exchange Agent and shall cause the Exchange Agent to forward
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payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
2.6. TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Certificates twelve months after
the Effective Time shall be delivered to Purchaser or otherwise on the
instruction of Purchaser and any holders of the Company Certificates who have
not theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation and Purchaser for the Merger Consideration with respect to
the shares of Company Common Stock formerly represented thereby to which such
holders are entitled pursuant to Section 1.8 and Section 2.2, any cash in lieu
of fractional shares of Purchaser Common Stock to which such holders are
entitled pursuant to Section 2.5 and any dividends or distributions with respect
to shares of Purchaser Common Stock to which such holders are entitled pursuant
to Section 2.3.
2.7. NO LIABILITY. None of Purchaser, Merger Sub, Company, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any Merger Consideration from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.8. INVESTMENT OF THE EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Purchaser on a daily basis.
Any interest and other income resulting from such investments shall promptly be
paid to Purchaser.
2.9. LOST CERTIFICATES. If any Company Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Company 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 Company
Certificate, the Exchange Agent will deliver in exchange for such lost, stolen
or destroyed Company Certificate the applicable Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby, any
cash in lieu of fractional shares of Purchaser Common Stock, and unpaid
dividends and distributions on shares of Purchaser Common Stock deliverable in
respect thereof, in each case, pursuant to this Agreement.
2.10. WITHHOLDING RIGHTS. Each of the Surviving Corporation and Purchaser
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or Purchaser, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Purchaser, as the case may
be, and such amounts shall be delivered by the Surviving Corporation or
Purchaser, as the case may be, to the applicable taxing authority.
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2.11. FURTHER ASSURANCES. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Company or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
Company or Merger Sub, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
2.12. STOCK TRANSFER BOOKS. The stock transfer books of Company shall be
closed immediately upon the Effective Time and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of Company. On or after the Effective Time, any Company Certificates
presented to the Exchange Agent or Purchaser for any reason shall be converted
into the Merger Consideration with respect to the shares of Company Common Stock
formerly represented thereby, any cash in lieu of fractional shares of Purchaser
Common Stock to which the holders thereof are entitled pursuant to Section 2.5
and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Company as follows:
(a) ORGANIZATION, STANDING AND POWER; SUBSIDIARIES. Each of Purchaser
and each of its material Subsidiaries (as defined in Section 8.13) is a
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation or organization, has
the requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power and authority would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Purchaser, 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, other than in such jurisdictions where
the failure so to qualify or to be in good standing would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Purchaser. The copies of the articles of incorporation and
by-laws of Purchaser which were previously furnished or made available to
Company are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
(b) CAPITAL STRUCTURE. The authorized capital stock of Purchaser
consists of (i) 900,000,000 shares of Purchaser Common Stock of which
103,323,299 shares were issued and outstanding as of March 31, 2002 and
(ii) 100,000,000 shares of Preferred Stock, without par value, none of
which are outstanding. Since March 31, 2002 to the date of this Agreement,
there have been no issuances of shares of the capital stock of
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Purchaser or any other securities of Purchaser other than issuances of
shares pursuant to the demutualization of Purchaser's Subsidiary and
pursuant to options or rights outstanding as of March 31, 2002 under the
Benefit Plans (as defined in Section 8.13) of Purchaser. All issued and
outstanding shares of the capital stock of Purchaser are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock
is entitled to (or has been issued in violation of) preemptive rights.
There were outstanding as of March 31, 2002 no options, warrants or other
rights to acquire capital stock from Purchaser other than options,
restricted stock and share equivalents representing in the aggregate the
right to purchase no more than 1,500,000 shares of Purchaser Common Stock
and contracts included in Purchaser's 6% Equity Security Units issued on
November 2, 2001 to purchase up to 6,394,000 shares of Purchaser Common
Stock. All shares of Purchaser Common Stock to be issued in connection with
the Merger and the other transactions contemplated hereby (including
without limitation all shares of Purchaser Common Stock to be issued upon
exercise of the Converted Options) will, when issued in accordance with the
terms hereof, have been duly authorized, validly issued, full paid and
non-assessable, free and clear of all Liens. Section 3.1(b) of the
Purchaser Disclosure Schedule delivered by Purchaser to Company prior to
the execution of this Agreement (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the
extent specified therein and any other representation and warranty to which
its relevance is reasonably apparent) (the "PURCHASER DISCLOSURE SCHEDULE")
sets forth a complete and correct list, as of the date hereof, of the
number of shares of Purchaser Common Stock subject to options or other
rights to purchase or receive Purchaser Common Stock granted under Benefit
Plans of Purchaser. As of the date hereof, there are no stockholder
agreements, voting trusts or other agreements or understandings to which
Purchaser is a party or by which it is bound relating to the voting of any
shares of the capital stock of Purchaser, other than proxies outstanding in
connection with Purchaser's annual meeting of stockholders to be held in
May of 2002.
(c) AUTHORITY, NO CONFLICTS.
(i) Purchaser has all requisite corporate power and authority to
enter into this Agreement and the Option Agreement and to consummate
the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the shares of Purchaser Common Stock to be
issued in the Merger (the "SHARE ISSUANCE") and upon the exercise of
Converted Options, subject in the case of the consummation of the
Share Issuance to the Required Purchaser Vote (as defined in Section
3.1(g)). The execution and delivery of this Agreement and the Option
Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate
action on the part of Purchaser, subject in the case of the
consummation of the Share Issuance to the Required Purchaser Vote.
This Agreement and the Option Agreement have been duly executed and
delivered by Purchaser and, assuming that this Agreement and the
Option Agreement constitute the valid and binding agreements of
Company, constitute valid and binding agreements of Purchaser,
enforceable
-9-
against it in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or
at law) or by an implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement and the Option
Agreement by Purchaser does not or will not, as the case may be, and
the consummation by Purchaser of the Merger and the other transactions
contemplated hereby and thereby will not, conflict with, or result in
any violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation or the loss
of a material benefit under, or the creation of a Lien on any assets
(any such conflict, violation, default, right of termination,
amendment, cancellation or acceleration, loss or creation, is
hereinafter referred to as a "VIOLATION") pursuant to: (A) any
provision of the articles of incorporation or by-laws of Purchaser or
any material Subsidiary of Purchaser or (B) except as set forth in
Section 3.1(c) of the Purchaser Disclosure Schedule or as would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Purchaser, and subject to obtaining or
making the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below, any
loan or credit agreement, note, mortgage, bond, indenture, lease,
benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Purchaser or any material
Subsidiary of Purchaser, or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national,
state, municipal, local or foreign government, any instrumentality,
subdivision, court, administrative agency or commission or other
authority thereof, or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (a "GOVERNMENTAL ENTITY"), is required by
or with respect to Purchaser or any Subsidiary of Purchaser in
connection with the execution and delivery of this Agreement by
Purchaser or Merger Sub, the Option Agreement by Purchaser or the
consummation of the Merger and the other transactions contemplated
hereby or thereby, except for those required under or in relation to
(A) the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (B) state securities or "blue sky" laws (the
"BLUE SKY LAWS"), (C) the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "SECURITIES ACT"),
(D) the Exchange Act; (E) the VSCA and the IBCL with respect to the
filing of the Articles of Merger, (F) rules and regulations of the
NYSE, (G) the Virginia State Corporation Commission and the Indiana
Department of Insurance and (H) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make
-10-
or obtain would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Purchaser. Consents,
approvals, orders, authorizations, registrations, declarations and
filings required under or in relation to any of the foregoing clauses
(A) through (G) are hereinafter referred to as "NECESSARY CONSENTS."
(d) REPORTS AND FINANCIAL STATEMENTS.
(i) Purchaser has filed or will file prior to Closing all
required registration statements, prospectuses, reports, schedules,
forms, statements and other documents required to be filed by it with
the SEC since January 1, 2001 until the Closing (collectively,
including all exhibits thereto, the "PURCHASER SEC REPORTS"). No
Subsidiary of Purchaser is required to file any form, report,
registration statement, prospectus or other document with the SEC.
None of the Purchaser SEC Reports, as of their respective dates (and,
if amended or superseded by a filing prior to the date of this
Agreement or the Closing Date, then on the date of such filing),
contained or will contain any untrue statement of a material fact or
omitted or will 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. Each of the
financial statements (including the related notes) included in the
Purchaser SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of operations
and cash flows of Purchaser and its Subsidiaries as of the respective
dates or for the respective periods set forth therein, all in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved except
as otherwise noted therein, and subject, in the case of the unaudited
interim financial statements, to normal and recurring adjustments that
were not or are not expected to be material in amount, and lack of
footnote disclosure. All of such Purchaser SEC Reports, as of their
respective dates (and as of the date of any amendment to the
respective Purchaser SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations promulgated thereunder.
(ii) Except (A) to the extent reflected in the balance sheet of
Purchaser included in the Purchaser SEC Reports last filed prior to
the date hereof, (B) as set forth in Section 3.1(d) of the Purchaser
Disclosure Schedule or (C) incurred in the ordinary course of business
since the date of the balance sheet referred to in the preceding
clause (A), Purchaser does not have any liabilities or obligations of
any nature, whether known or unknown, absolute, accrued, contingent or
otherwise and whether due or to become due, that have or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Purchaser.
-11-
(e) INFORMATION SUPPLIED.
(i) None of the information supplied or to be supplied by
Purchaser or Merger Sub for inclusion or incorporation by reference in
(A) the registration statement on Form S-4 to be filed with the SEC by
Purchaser in connection with the Share Issuance, or any of the
amendments or supplements thereto (collectively, the "FORM S-4") will,
at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B) the
joint proxy statement for use relating to the approval by the
stockholders of Company of this Agreement and by the stockholders of
Purchaser approving the Share Issuance, or any of the amendments or
supplements thereto (collectively, the "JOINT PROXY STATEMENT") will,
on the date it is first mailed to Company stockholders and Purchaser
stockholders or at the time of the Company Stockholders Meeting (as
defined in Section 5.1(b)) and the Purchaser Stockholders Meeting (as
defined in Section 5.1(e)), contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Form S-4
will comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by Purchaser with
respect to statements made or incorporated by reference in the Form
S-4 or the Joint Proxy Statement based on information supplied by
Company.
(f) BOARD APPROVAL. The Board of Directors of Purchaser, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "PURCHASER BOARD
APPROVAL"), has unanimously approved this Agreement and the Option
Agreement and the transactions contemplated hereby and thereby, including
the Merger.
(g) VOTE REQUIRED. The affirmative vote of a majority of the votes
cast by the holders of Purchaser Common Stock at the Purchaser Stockholders
Meeting, provided that the total vote cast represents over 50% in interest
of all securities entitled to vote, in favor of the Share Issuance
("REQUIRED PURCHASER VOTE") is the only vote of the holders of any class or
series of Purchaser capital stock necessary to consummate the transactions
contemplated hereby.
(h) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any
of the transactions contemplated
-12-
by this Agreement, based upon arrangements made by or on behalf of
Purchaser, except Xxxxxxx, Xxxxx & Co. (the "PURCHASER FINANCIAL ADVISOR"),
whose fees and expenses will be paid by Purchaser in accordance with
Purchaser's agreement with such firm.
(i) COMPANY STOCK. Neither Purchaser nor any of its Subsidiaries
(including Merger Sub) is, nor at any time during the last three years has
any of such been, an "INTERESTED SHAREHOLDER" of Company as defined in
Article 14 of the VSCA. Neither Purchaser nor any of its Subsidiaries
(including Merger Sub) owns, (directly or indirectly, beneficially or of
record) and none of them is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing
of, in each case, any shares of capital stock of Company (other than as
contemplated by this Agreement and the Option Agreement).
(j) LITIGATION, COMPLIANCE WITH LAWS.
(i) Except as disclosed in the Purchaser SEC Reports filed prior
to the date of this Agreement or as set forth in Section 3.1(j) of the
Purchaser Disclosure Schedule, there is no suit, action, investigation
or proceeding pending or, to the knowledge of Purchaser, threatened,
against or affecting Purchaser or any Subsidiary of Purchaser having,
or which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Purchaser, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against Purchaser or any Subsidiary of
Purchaser having, or which reasonably would be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Purchaser.
(ii) Except as disclosed in the Purchaser SEC Reports filed prior
to the date of this Agreement and except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Purchaser, Purchaser and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the operation of the businesses of
Purchaser and its Subsidiaries, taken as a whole (the "PURCHASER
PERMITS"). Purchaser and its Subsidiaries are in compliance with the
terms of the Purchaser Permits, except where the failure to so comply
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Purchaser. Except as disclosed
in the Purchaser SEC Reports filed prior to the date of this
Agreement, the businesses of Purchaser and its Subsidiaries are not
being conducted in violation of, and Purchaser has not received any
notices of violations with respect to, any law, ordinance or
regulation of any Governmental Entity, except for possible violations
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Purchaser.
(iii) Purchaser is in compliance in all material respects with
all material rules and regulations of the BCBSA.
-13-
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities
incurred in connection with this Agreement and the Option Agreement or the
transactions contemplated hereby or thereby, since December 31, 2001 there
has not been any change, circumstance or event which has had, or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Purchaser.
(l) OPINION OF PURCHASER FINANCIAL ADVISOR. The Board of Directors of
Purchaser has received the opinion of Purchaser Financial Advisor, dated
the date of this Agreement, to the effect that, as of such date, the Merger
Consideration is fair, from a financial point of view, to Purchaser, a copy
of which opinion will promptly be made available to Company after receipt
by Purchaser.
(m) TAXES. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Purchaser,
or as set forth in Section 3.1(m) of the Purchaser Disclosure Schedule,
Purchaser and each of its Subsidiaries (i) have prepared in good faith and
duly and timely filed (taking into account any extension of time within
which to file) all Tax Returns (as defined below) required to be filed by
any of them and all such filed Tax Returns are complete and accurate in all
material respects; (ii) have paid all Taxes that are shown as due and
payable on such filed Tax Returns or that Purchaser or any of its
Subsidiaries are obligated to pay without the filing of a Tax Return; (iii)
have paid all other assessments received to date in respect of Taxes other
than those being contested in good faith for which provision has been made
in accordance with GAAP on the most recent balance sheet included in
Purchaser's Annual Report on Form 10-K for the year ended December 31,
2001; (iv) have withheld from amounts owing to any employee, creditor or
other Person all Taxes required by law to be withheld and have paid over to
the proper governmental authority in a timely manner all such withheld
amounts to the extent due and payable; (v) have not waived any applicable
statute of limitations with respect to United States federal or state
income or franchise Taxes and have not otherwise agreed to any extension of
time with respect to a United States federal or state income or franchise
Tax assessment or deficiency; (vi) have never been members of any
consolidated group for United States federal income tax purposes other than
the consolidated group of which Purchaser is the common parent; and (vii)
are not parties to any tax sharing agreement or arrangement other than with
each other. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Purchaser,
no liens for Taxes exist with respect to any of the assets or properties of
Purchaser or its Subsidiaries, except for statutory liens for Taxes not yet
due or payable or that are being contested in good faith. Purchaser has
made available to Company true and correct copies of all material federal,
state and local Tax Returns filed by Purchaser and its Subsidiaries on
which the statute of limitations has not expired. None of Purchaser or its
Subsidiaries has been a party to a Section 355 transaction that could give
rise to a Tax liability pursuant to Section 355(e) of the Code. Except as
set forth in Section 3.1(m) of the Purchaser Disclosure Schedule, there are
not being conducted or threatened in writing any material audits,
examinations, investigations, litigation, or other proceedings in respect
of Taxes of Purchaser or any Subsidiary; and none of Purchaser or its
Subsidiaries has any material deferred gains
-14-
created by any other transaction, or has any material excess loss accounts.
Purchaser is not aware of any fact or circumstance that could reasonably be
expected to prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
(n) FINANCING. Purchaser has provided to Company a copy of an executed
financing commitment letter related to this Agreement and the transactions
contemplated hereby. Purchaser will have available to it on the Closing
Date sufficient funds to enable it to consummate the transactions
contemplated by this Agreement.
(o) ACCOUNTING AND FINANCIAL MATTERS. Since January 1, 2001, Purchaser
has not received written notice from the SEC or any other Governmental
Entity that any of its accounting policies or practices are or may be the
subject of any review, inquiry, investigation or challenge by the SEC or
other Governmental Entity other than comments received from the staff of
the SEC in connection with the initial public offering of Purchaser Common
Stock. Since January 1, 2001, Purchaser's independent public accounting
firm has not informed Purchaser that it has any material questions,
challenges or disagreements regarding or pertaining to Purchaser's
accounting policies or practices. Since January 1, 2001, no officer or
director of Purchaser has received, or is entitled to receive, any material
compensation from any entity that has engaged in or is engaging in any
material transaction with the Purchaser or any of its Subsidiaries. Set
forth on Section 3.1(o) of the Purchaser Disclosure Schedule is a list of
all off-balance sheet special purpose entities and financing arrangements
of Purchasers and its Subsidiaries.
3.2. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company represents and
warrants to Purchaser as follows:
(a) ORGANIZATION, STANDING AND POWER; SUBSIDIARIES.
(i) Each of Company and each of its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation or organization, has
the requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good standing or
to have such power and authority would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
Company, 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, other
than in such jurisdictions where the failure so to qualify or to be in
good standing would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Company. The copies
of the articles of incorporation and by-laws of Company and its
material Subsidiaries which were previously furnished or made
available to Purchaser are true, complete and correct copies of such
documents as in effect on the date of this Agreement.
-15-
(ii) Except as set forth in Section 3.2(a) of the Company
Disclosure Schedule delivered by Company to Purchaser prior to the
execution of this Agreement (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to
the extent specified therein and any other representation and warranty
to which its relevance is reasonably apparent) (the "COMPANY
DISCLOSURE SCHEDULE"), all the outstanding shares of capital stock of,
or other equity interests in, each Subsidiary have been validly issued
and are fully paid and nonassessable and are owned directly or
indirectly by Company, free and clear of all Liens and free of any
other restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other ownership
interests). Except as explicitly set forth in the Company SEC Reports
(as defined in Section 3.2(d)) or in Section 3.2(a) of the Company
Disclosure Schedule, neither Company nor any of its Subsidiaries
directly or indirectly owns any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association
or entity, that is or would reasonably be expected to be material to
Company and its Subsidiaries taken as a whole.
(b) CAPITAL STRUCTURE.
(i) The authorized capital stock of Company consists of (A)
300,000,000 shares of Company Common Stock, of which 35,786,194 shares
were outstanding (which amount includes all shares of restricted
Company Common Stock outstanding) as of the date hereof, (B)
300,000,000 shares of Class B common stock, par value $0.01 per share,
of which no shares are outstanding, (C) 75,000,000 shares of Class C
common stock par value $0.01 per share, of which no shares are
outstanding, and (D) 50,000,000 shares of Preferred Stock, without par
value, none of which are outstanding and 3,000,000 shares of which
have been designated Series A Junior Participating Preferred Stock and
reserved for issuance upon exercise of the rights (the "COMPANY
RIGHTS") distributed to the holders of Company Common Stock pursuant
to the Rights Agreement, dated as of July 16, 1997 (the "COMPANY
RIGHTS AGREEMENT"), between Company and First Chicago Trust Company of
New York, as Rights Agent. All issued and outstanding shares of the
capital stock of Company are duly authorized, validly issued, fully
paid and nonassessable, and no capital stock is entitled to (or was
issued in violation of) preemptive rights. Other than shares of
Company Common Stock reserved for issuance under the Option Agreement
and 725,912 shares of Company Common Stock reserved for issuance under
the Company ESPP, there were outstanding as of the date hereof no
options, warrants or other rights to acquire capital stock from
Company other than the Company Rights and Company Stock Options
representing in the aggregate the right to purchase no more than
3,522,415 shares of Company Common Stock under the Company Stock
Option Plans. Section 3.2(b) of the Company Disclosure Schedule sets
forth a complete and correct list of (x) as of March 31, 2002, the
number of shares of Company Common Stock subject to Company Stock
Options
-16-
or other rights to purchase or receive Company Common Stock granted
under the Company Stock Option Plans or otherwise, and the dates of
grant, vesting dates, expiration dates, exercise prices and holders of
each such Company Stock Option, (y) as of March 31, 2002, the number
of shares of restricted Company Common Stock outstanding, and the
dates of grant, vesting dates, expiration dates and holders of each
such share of restricted Company Common Stock and (z) the total amount
of deductions withheld for the pay period ending April 15, 2002, with
respect to purchases to be made pursuant to the Company ESPP. The
shares of Company Common Stock issuable pursuant to the Option
Agreement have been duly reserved for issuance by Company, and upon
any issuance of such shares of Company Common Stock in accordance with
the terms of the Option Agreement or as set forth in Section 3.2(b) of
the Company Disclosure Schedule, such shares of Company Common Stock
will be duly authorized, validly issued, fully paid and nonassessable
and free and clear of any Lien, pledge, security interest, claim or
other encumbrance.
(ii) No bonds, debentures, notes or other indebtedness of Company
having the right to vote on any matters on which stockholders may vote
are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b), as of
the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Company or any of its Subsidiaries
is a party or by which any of them is bound obligating Company or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of Company or any of its Subsidiaries or obligating Company
or any of its Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. Except as contemplated by the Option
Agreement or as set forth in Section 3.2(b) of the Company Disclosure
Schedule, there are no outstanding obligations of Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Company or any of its Subsidiaries.
(c) AUTHORITY; NO CONFLICTS.
(i) Company has all requisite corporate power and authority to
enter into this Agreement and the Option Agreement and to consummate
the transactions contemplated hereby and thereby, subject to the
approval of this Agreement by the Required Company Vote (as defined in
Section 3.2(h)). The execution and delivery of this Agreement and the
Option Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
corporate action on the part of Company, subject to the approval of
this Agreement by the Required Company Vote. This Agreement and the
Option Agreement have been duly executed and delivered by
-17-
Company and, assuming that this Agreement and the Option Agreement
constitute the valid and binding agreements of Purchaser and, in the
case of this Agreement, Merger Sub, constitute valid and binding
agreements of Company, enforceable against it in accordance with their
respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
(ii) The execution and delivery of this Agreement and the Option
Agreement by Company does not or will not, as the case may be, and the
consummation by Company of the Merger and the other transactions
contemplated hereby and thereby will not, conflict with, or result in
a Violation pursuant to: (A) any provision of the articles of
incorporation or by-laws of Company or any Subsidiary of Company or
(B) except as set forth in Section 3.2(c) of the Company Disclosure
Schedule or would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company, and subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii)
below, any loan or credit agreement, note, mortgage, bond, indenture,
lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Company or
any Subsidiary of Company or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Company or any Subsidiary of Company in
connection with the execution and delivery of this Agreement or the
Option Agreement by Company or the consummation of the Merger and the
other transactions contemplated hereby and thereby, except the
Necessary Consents and such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make or obtain would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Company.
(d) REPORTS AND FINANCIAL STATEMENTS.
(i) Company has filed or will file prior to Closing all required
registration statements, prospectuses, reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
since January 1, 1999 until the Closing (collectively, including all
exhibits thereto, the "COMPANY SEC REPORTS"). No Subsidiary of Company
is required to file any form, report, registration statement or
prospectus or other document with the SEC. None of the Company SEC
Reports, as of their respective dates (and, if amended or
-18-
superseded by a filing prior to the date of this Agreement or the
Closing Date, then on the date of such filing), contained or will
contain any untrue statement of a material fact or omitted or will
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. Each of the
financial statements (including the related notes) included in the
Company SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of operations
and cash flows of Company and its Subsidiaries as of the respective
dates or for the respective periods set forth therein, all in
conformity with GAAP applied on a consistent basis throughout the
periods involved except as otherwise noted therein, and subject, in
the case of the unaudited interim financial statements, to normal and
recurring adjustments that were not or are not expected to be material
in amount, and lack of footnote disclosure. All of such Company SEC
Reports, as of their respective dates (and as of the date of any
amendment to the respective Company SEC Report), complied as to form
in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except (A) to the extent reflected in the balance sheet of
Company included in the Company SEC Report last filed prior to the
date hereof, (B) as set forth in Section 3.2(d) of the Company
Disclosure Schedule or (C) incurred in the ordinary course of business
since the date of the balance sheet referred to in the preceding
clause (A), Company does not have any liabilities or obligations of
any nature, whether known or unknown, absolute, accrued, contingent or
otherwise and whether due or to become due, that have or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company.
(e) RESERVES. The loss reserves and other actuarial amounts of Company
and its Subsidiaries recorded in their respective financial statements
contained in the Company SEC Reports and all statutory reports as of
December 31, 2001, as of such date: (i) were determined in accordance in
all material respects with generally accepted actuarial standards
consistently applied (except as otherwise noted in such financial
statements), (ii) were fairly stated in all material respects in accordance
with sound actuarial principles, (iii) satisfied all applicable Laws and
the requirements of the BCBSA in all material respects and have been
computed on the basis of methodologies consistent in all material respects
with those used in computing the corresponding reserves in the prior fiscal
years, except as otherwise noted in the financial statements and notes
thereto included in the Company SEC Reports or the statutory reports and
related actuarial opinions for the Company and its Subsidiaries for the
2001 fiscal year, and (iv) include provisions for all actuarial reserves
and related items which ought to be established in accordance with
applicable laws and regulations and in accordance, in all material
respects, with prudent insurance practices generally followed in the
insurance industry. Company is not aware of any facts or circumstances
which would necessitate any material adverse change in the statutorily
required reserves or reserves above those reflected in the most recent
balance sheet (other than increases consistent with past
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experience resulting from increases in enrollment with respect to services
provided by Company or its Subsidiaries). The capital and surplus for each
insurance and health maintenance organization Subsidiary of Company is now,
and immediately prior to the Closing will be, not less than 200% of the
authorized control level as defined in NAIC Risk-Based Capital Guidelines
required by applicable law.
(f) INFORMATION SUPPLIED.
(i) None of the information supplied or to be supplied by Company
or any of its Subsidiaries for inclusion or incorporation by reference
in (A) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) the Joint Proxy Statement will, on the
date it is first mailed to Company stockholders and to Purchaser
stockholders or at the time of the Company Stockholders Meeting and
the Purchaser Stockholders 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 were made, not misleading. The
Joint Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and
the rules and regulations thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(f), no representation or warranty is made by Company with respect
to statements made or incorporated by reference in the Form S-4 or the
Joint Proxy Statement based on information supplied by Purchaser or
Merger Sub.
(g) BOARD APPROVAL. The Board of Directors of Company, by resolutions
duly adopted at a meeting duly called and held and not subsequently
rescinded or modified in any way (the "COMPANY BOARD APPROVAL"), has
unanimously (i) determined that this Agreement and the Merger are
advisable, fair to and in the best interests of Company and its
stockholders, and (ii) adopted this Agreement and approved the Option
Agreement and the transactions contemplated hereby and thereby. The Board
of Directors of Company has taken all actions necessary to exempt Purchaser
and Merger Sub from the threshold restrictions on Company Common Stock
ownership in Company's articles of incorporation and to make any applicable
Virginia corporate takeover statutes or other similar statutes inapplicable
to the transactions contemplated by this Agreement and the Option
Agreement, including the Merger.
(h) VOTE REQUIRED. The affirmative vote of the holders of more than
66-2/3 % of the outstanding shares of Company Common Stock to approve this
Agreement (the "REQUIRED COMPANY VOTE") is the only vote of the holders of
any class or series of
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Company capital stock necessary to consummate the transactions contemplated
hereby and by the Option Agreement.
(i) LITIGATION, COMPLIANCE WITH LAWS.
(i) Except as disclosed in the Company SEC Reports filed prior to
the date of this Agreement or as set forth in Section 3.2(i) of the
Company Disclosure Schedule, there is no suit, action, investigation
or proceeding pending or, to the knowledge of Company, threatened,
against or affecting Company or any Subsidiary of Company having, or
which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against Company or any Subsidiary of Company
having, or which reasonably would be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company.
(ii) Except as disclosed in the Company SEC Reports filed prior
to the date of this Agreement and except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Company or materially impair the ability of Company to
consummate the transactions contemplated by the Option Agreement,
Company and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities
necessary for the operation of the businesses of Company and its
Subsidiaries, as conducted on the date hereof, taken as a whole (the
"COMPANY PERMITS"). Company and its Subsidiaries are in compliance
with the terms of the Company Permits, except where the failure to so
comply would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company. Except as
disclosed in the Company SEC Reports filed prior to the date of this
Agreement, the businesses of Company and its Subsidiaries are not
being conducted in violation of, and Company has not received any
notices of violations with respect to, any law, ordinance or
regulation of any Governmental Entity, except for possible violations
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company or materially impair
the ability of Company to consummate the transactions contemplated by
the Option Agreement.
(iii) Company is in compliance in all material respects with all
material rules and regulations of the BCBSA.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities
incurred in connection with this Agreement or the Option Agreement or the
transactions contemplated hereby and thereby or as set forth in Section
3.2(j) of the Company Disclosure Schedule, since December 31, 2001, Company
and its Subsidiaries have conducted their business only in the ordinary
course and there has not been (i) any change, circumstance or event which
has had, or would reasonably be expected to have,
-21-
individually or in the aggregate, a Material Adverse Effect on Company or
(ii) any action taken by Company or any of its Subsidiaries during the
period from December 31, 2001 through the date of this Agreement that, if
taken during the period from the date of this Agreement through the
Effective Time without the consent of Purchaser, would constitute a breach
of Section 4.1(c), (d), (e), (j) (only with respect to the sixteen Company
executives with executive continuity agreements), (k) or (q).
(k) ENVIRONMENTAL MATTERS. Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
Company or as disclosed on Section 3.2(k) of the Company Disclosure
Schedule, (i) the operations of Company and its Subsidiaries have been and
are in compliance with all applicable Environmental Laws and with all
Environmental Permits, (ii) there are no pending or, to the knowledge of
Company, threatened, actions, suits, claims, investigations or other
proceedings under or pursuant to Environmental Laws against Company or its
Subsidiaries or, to the knowledge of Company, involving any real property
currently or formerly owned, operated or leased by Company or its
Subsidiaries, (iii) Company and its Subsidiaries are not subject to any
Environmental Liabilities and, to the knowledge of Company, no facts,
circumstances or conditions relating to, arising from, associated with or
attributable to any real property currently or formerly owned, operated or
leased by Company or its Subsidiaries or operations thereon would
reasonably be expected to result in Environmental Liabilities, (iv) all
real property owned and all real property operated or leased by Company or
its Subsidiaries is free of Hazardous Materials in conditions and
concentrations that would reasonably be expected to have an adverse effect
on human health or the environment and none of Company or any of its
Subsidiaries has disposed of any Hazardous Materials on or about such
premises, (v) no release, discharge, spillage or disposal of any Hazardous
Material and no soil, water or air contamination by any Hazardous Material
has occurred or is occurring in, from or on such premises, and (vi) Company
has made available to Purchaser the most recent Environmental Report, dated
February 2002.
As used in this Agreement, "ENVIRONMENTAL LAWS" means any and all
laws, rules, orders, regulations, statutes, ordinances, guidelines, codes,
decrees, or other legally enforceable requirements (including, without
limitation, common law) of any international authority, foreign government,
the United States, or any state, local, municipal or other Governmental
Entity, regulating, relating to or imposing liability or standards of
conduct concerning protection of the environment or of human health,
including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. sections 9601 et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. sections 1801 et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. sections 6901 et
seq., the Clean Water Act, 33 U.S.C. sections 1251 et seq., the Clean Air
Act, 42 U.S.C. sections 7401 et seq., the Toxic Substances Control Act, 15
U.S.C. sections 2601 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C., sections 136 et seq. and the Oil Pollution Act
of 1990, 33 U.S.C. sections 2701 et seq., as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto, and all
analogous state or local statutes. As
-22-
used in this Agreement, "Environmental Liabilities" with respect to any
person means any and all liabilities of or relating to such person or any
of its Subsidiaries (including any entity which is, in whole or in part, a
predecessor of such person or any of such Subsidiaries), whether vested or
unvested, contingent or fixed, actual or potential, known or unknown, which
(i) arise under applicable Environmental Laws or with respect to Hazardous
Materials, and (ii) relate to actions occurring or conditions existing, on
or prior to the Closing Date. As used in this Agreement, "ENVIRONMENTAL
PERMITS" means any and all permits, consents, licenses, approvals,
registrations, notifications, exemptions and any other authorization
required under any applicable Environmental Law. As used in this Agreement,
"Environmental Report" means any report, study, assessment, audit, or other
similar document that addresses any issue of noncompliance with, or
liability under, any Environmental Law that may affect Company or any of
its Subsidiaries. As used in this Agreement, "HAZARDOUS MATERIALS" means
any gasoline or petroleum (including crude oil or any fraction thereof) or
petroleum products, polychlorinated biphenyls, urea-formaldehyde
insulation, asbestos, pollutants, contaminants, radioactivity, and any
other substances of any kind, whether or not any such substance is defined
as hazardous or toxic under any Environmental Law, that is regulated
pursuant to or could give rise to liability under any applicable
Environmental Law.
(l) INTELLECTUAL PROPERTY. Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
Company or as disclosed on Section 3.2(l) of the Company Disclosure
Schedule, (a) Company and each of its Subsidiaries owns, or is licensed to
use (in each case, free and clear of any Liens), all Intellectual Property
used in or necessary for the conduct of its business as currently
conducted; (b) to the knowledge of Company, the use of any Intellectual
Property by Company and its Subsidiaries does not infringe on or otherwise
violate the rights of any Person and is in accordance with any applicable
license pursuant to which Company or any Subsidiary acquired the right to
use any Intellectual Property; (c) to the knowledge of Company, no Person
is challenging or infringing on or otherwise violating any right of Company
or any of its Subsidiaries with respect to any Intellectual Property owned
by or licensed to Company or its Subsidiaries; and (d) neither Company nor
any of its Subsidiaries has received any written notice of any pending
claim with respect to any Intellectual Property used by Company and its
Subsidiaries and, to the knowledge of Company, no Intellectual Property
owned or licensed by Company or its Subsidiaries is being used or enforced
in a manner that would result in the abandonment, cancellation or
unenforceability of such Intellectual Property.
For purposes of this Agreement, "INTELLECTUAL PROPERTY" shall mean
trademarks, service marks, brand names, certification marks, trade dress
and other indications of origin, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without
limitation, divisions, continuations, continued prosecution applications,
continuations in part and renewal applications), and any renewals,
-23-
extensions or reissues thereof, in any jurisdiction; know-how, trade
secrets and confidential information and rights in any jurisdiction to
limit the use or disclosure thereof by any person; writings and other
works, whether copyrightable or not, in any jurisdiction; registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; and any similar intellectual property or
proprietary rights.
(m) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any
of the transactions contemplated by this Agreement, based upon arrangements
made by or on behalf of Company, except Bear Xxxxxxx & Company, Inc. (the
"COMPANY FINANCIAL ADVISOR"), whose fees and expenses will be paid by
Company in accordance with Company's agreements with such firm, copies of
which have been provided to Purchaser.
(n) TAXES. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company, or
as set forth in Section 3.2(n) of the Company Disclosure Schedule, Company
and each of its Subsidiaries (i) have prepared in good faith and duly and
timely filed (taking into account any extension of time within which to
file) all Tax Returns required to be filed by any of them and all such
filed Tax Returns are complete and accurate in all material respects; (ii)
have paid all Taxes that are shown as due and payable on such filed Tax
Returns or that Company or any of its Subsidiaries are obligated to pay
without the filing of a Tax Return; (iii) have paid all other assessments
received to date in respect of Taxes other than those being contested in
good faith for which provision has been made in accordance with GAAP on the
most recent balance sheet included in Company's Annual Report on Form 10-K
for the year ended December 31, 2001; (iv) have withheld from amounts owing
to any employee, creditor or other Person all Taxes required by law to be
withheld and have paid over to the proper governmental authority in a
timely manner all such withheld amounts to the extent due and payable; (v)
have not waived any applicable statute of limitations with respect to
United States federal or state income or franchise Taxes and have not
otherwise agreed to any extension of time with respect to a United States
federal or state income or franchise Tax assessment or deficiency; (vi)
have never been members of any consolidated group for United States federal
income tax purposes other than the consolidated group of which Company is
the common parent; and (vii) are not parties to any tax sharing agreement
or arrangement other than with each other. Except as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on Company, no liens for Taxes exist with respect to any of the
assets or properties of Company or its Subsidiaries, except for statutory
liens for Taxes not yet due or payable or that are being contested in good
faith. Company has made available to Purchaser true and correct copies of
all material federal, state and local Tax Returns filed by Company and its
Subsidiaries on which the statute of limitations has not expired. None of
Company or its Subsidiaries has been a party to a Section 355 transaction
that could give rise to a Tax liability pursuant to Section 355(e) of the
Code. Except as set forth in Section 3.2(n) of the Company Disclosure
Schedule, there are not
-24-
being conducted or threatened in writing any material audits, examinations,
investigations, litigation, or other proceedings in respect of Taxes of
Company or any Subsidiary; and none of Company or its Subsidiaries has any
material deferred gains created by any other transaction, or has any
material excess loss accounts. Company is not aware of any fact or
circumstance that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(o) CERTAIN CONTRACTS.
(i) Section 3.2(o)(i) of the Company Disclosure Schedule lists,
as of the date hereof, each of the following contracts, agreements or
arrangements to which Company or any of its Subsidiaries is a party or
by which it is bound: (i) any "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K under the Exchange Act),
(ii) the ten largest provider and the ten largest customer contracts
measured in terms of payments to or receipts from Company and its
Subsidiaries, (iii) any contract that involves annual premiums,
premium equivalents or payments greater than $50 million and that, by
its terms, does not terminate within one year after the date of such
contract and is not cancelable during such period without penalty or
without payment (other than customer agreements that are not
terminable within one year solely as a result of Health Insurance
Portability and Accountability Act of 1996 ("HIPAA") or other
statutory or regulatory requirements), (iv) promissory notes, loans,
agreements, indentures, evidences of indebtedness or other instruments
providing for the lending of money, whether as borrower, lender or
guarantor in amounts greater than $5,000,000 (it being understood that
trade payables, ordinary course business funding mechanisms between
Company and its customers and providers, and guarantees of
indebtedness by the Company and its Subsidiaries to the Company and
its Subsidiaries shall not be considered indebtedness for purposes of
this provision), (v) any contract or other agreement expressly
restricting the payment of dividends or the repurchase of stock or
other equity, (vi) collective bargaining contracts, (vii) material
joint venture, partnership agreements or other similar agreements,
(viii) any contract for the pending acquisition, directly or
indirectly (by merger or otherwise), of any entity or business, if the
acquisition price (including the assumption of any debt or
liabilities) exceeds $10 million, (ix) any contract, agreement or
policy for reinsurance with a third party, (x) leases for real or
personal property involving any annual expense in excess of $600,000
and not cancelable by Company (without premium or penalty) within
twelve months or (xi) any non-competition agreement or any other
agreement or arrangement that by its express terms (x) materially
limits or otherwise materially restricts Company or any of its
Subsidiaries or any successor thereto or (y) would, after the
Effective Time, materially limit or otherwise materially restrict
Purchaser or any of its Subsidiaries (including the Surviving
Corporation), in each case, from engaging or competing in any line of
business material to Company and its affiliates (taken as a whole),
the Purchaser and its affiliates (taken as a whole), as
-25-
applicable, or in any geographic area material to the Company and its
Subsidiaries (taken as a whole) or to the Purchaser and its
Subsidiaries (taken as a whole), as applicable (other than exclusivity
provisions or arrangements with providers of healthcare services)
(collectively, the "MATERIAL CONTRACTS").
(ii) Neither Company nor any of its Subsidiaries is, or has
received any written notice that any other party is, in default (or
would be in default but for the lapse of time or the giving of notice
or both) in any respect under any such Material Contract, except for
those defaults which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Company.
(p) EMPLOYEE BENEFIT PLANS.
(i) Section 3.2(p) of the Company Disclosure Schedule contains a
true and complete list of each material Benefit Plan, stock purchase,
stock option, severance, employment, change in control, fringe
benefit, collective bargaining agreement, bonus, incentive, deferred
compensation, and all other material employee benefit plans,
agreements, programs, policies or other arrangements, whether or not
subject to ERISA, whether formal or informal, oral or written, legally
binding or not under which any employee or former employee of Company
or any of its Subsidiaries has any present or future right to benefits
and under which Company or any of its Subsidiaries has any present or
future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "COMPANY PLANS";
provided, however, that for purposes of this Section 3.2(p), the terms
Benefit Plans and Company Plans shall not include any benefit plans,
agreements, policies, programs or arrangements sold or marketed by
Company or its Subsidiaries.
(ii) With respect to each material Company Plan, Company has
delivered or made available to Purchaser a current, accurate and
complete copy (or, to the extent no such copy exists, an accurate
description) thereof and, to the extent applicable, (A) any related
trust agreement, annuity contract or other funding instrument; (B) the
most recent determination letter; (C) any summary plan description and
other written communications (or a description of any oral
communications) by Company or any of its Subsidiaries to its employees
concerning the extent of the benefits provided under a Company Plan;
and (D) for the most recent year: (I) the Form 5500 and attached
schedules; (II) audited financial statements; (III) actuarial
valuation reports; and (IV) attorney responses to auditors' requests
for information.
(iii) Except as would not reasonably be expected to have a
Material Adverse Effect on Company, (A) each Company Plan has been
established and administered in accordance with its terms, and in
material compliance with the applicable provisions of ERISA, the Code
and other applicable laws, rules and
-26-
regulations and if intended to be qualified within the meaning of
Section 401(a) of the Code is so qualified; (B) with respect to any
Company Plan, no actions, suits or claims (other than routine claims
for benefits in the ordinary course) are pending or threatened; (C)
neither Company nor any other party has engaged in a prohibited
transaction, as such term is defined under Section 4975 of the Code or
Section 406 of ERISA, which would subject Company, the Surviving
Corporation or any of their Subsidiaries to any taxes, penalties or
other liabilities under Section 4975 of the Code or Section 409 or
502(i) of ERISA and Company has no other liability under the Code with
respect to any Company Plan, including liability under any other
provision of Chapter 43 of the Code; (D) no Company Plan provides for
an increase in benefits on or after the Closing Date; and (E) each
Company Plan may be amended or terminated without additional
obligation or liability as a result of such termination or amendment
(other than those obligations and liabilities which have accrued as of
the time immediately prior to such termination or amendment in
accordance with the terms of such Company Plan).
(iv) Except as disclosed in Section 3.2 (p)(iv) of the Company
Disclosure Schedule, neither Company nor any member of its Controlled
Group has ever maintained, sponsored, administered or contributed to
an employee benefit plan subject to Title IV of ERISA, a multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) or a welfare
benefit plan that provides coverage or benefits to former employees
(other than benefit continuation rights under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended).
(v) Except as disclosed in Section 3.2(p)(v) of the Company
Disclosure Schedule, no Company Plan exists which would reasonably be
expected to result in the payment to any employee of Company or any of
its Subsidiaries of any cash payment or other property or rights or
accelerate or provide any other rights or benefits to any such
employee as a result of the transactions contemplated by this
Agreement. Except as disclosed on Section 3.2(p) of the Company
Disclosure Schedule, there is no contract or agreement, plan or
arrangement by Company or its Subsidiaries covering any person that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible by Company or its Subsidiaries by
reason of Section 280G of the Code or would constitute compensation in
excess of the limitation set forth in Section 162(m) of the Code.
(vi) Except as would not reasonably be expected to have a
Material Adverse Effect on Company, all individuals who are or have
been eligible to participate in the Company Plans based upon the
eligibility provisions set forth therein or under applicable law have
been provided with a timely opportunity to participate.
-27-
(q) LABOR MATTERS. (1) Neither Company nor any of its Subsidiaries is
a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization
(other than contracts or other agreements or understandings with labor
unions or labor organizations in connection with products and services
offered and sold to such unions and organizations by Company or its
Subsidiaries); (2) except as would not be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Company,
neither Company nor any of its Subsidiaries is the subject of any
proceeding asserting that it or any Subsidiary has committed an unfair
labor practice or sex, age, race or other discrimination or seeking to
compel it to bargain with any labor organization as to wages or conditions
of employment; (3) there are no current or, to the knowledge of Company,
threatened organizational activities or demands for recognition by a labor
organization seeking to represent employees of Company or any Subsidiary,
or labor strike and no such activities have occurred during the past 24
months; (4) except as would not be reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Company, no grievance,
arbitration, complaint or investigation relating to labor or employment
matters is pending or, to the knowledge of Company, threatened against
Company or any of its Subsidiaries; (5) except as would not be reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on Company, Company and each Subsidiary is in compliance with all
applicable laws (domestic and foreign), agreements, contracts, and policies
relating to employment, employment practices, wages, hours, and terms and
conditions of employment; (6) Company has complied in all material respects
with its payment obligations to all employees of Company and its
Subsidiaries in respect of all wages, salaries, commissions, bonuses,
benefits and other compensation due and payable to such employees under any
Company policy, practice, agreement, plan, program or any statute or other
law; (7) Except as would not be reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect, Company is not liable for any
severance pay or other payments to any employee or former employee arising
from the termination of employment under any benefit or severance policy,
practice, agreement, plan, or program of Company, nor will Company have any
liability which exists or arises, or may be deemed to exist or arise, under
any applicable law or otherwise, as a result of or in connection with the
transactions contemplated hereunder or as a result of the termination by
Company of any persons employed by Company or any of its Subsidiaries on or
prior to the Effective Time of the Merger except as required by Code
Section 4980B; and (8) Company is in compliance with its obligations
pursuant to the Worker Adjustment and Retraining Notification Act of 1988
("WARN") and part 6 and 7 of Title I of ERISA, to the extent applicable,
and all ---- other employee notification and bargaining obligations arising
under any collective bargaining agreement or statute.
(r) AFFILIATE TRANSACTIONS. Except as disclosed in the Company SEC
Reports or as disclosed in Section 3.2(r) of the Company Disclosure
Schedule, there are no material (determined with respect to either
counterparty thereto) contracts, commitments, agreements, arrangements or
other transactions between Company or any of its Subsidiaries, on the one
hand, and any (i) officer or director of Company or any of its
Subsidiaries, (ii) record or beneficial owner of five percent or more of
the voting
-28-
securities of Company or (iii) affiliate (as such term is defined in Rule
12b-2 promulgated under the Exchange Act) of any such officer, director or
beneficial owner, on the other hand.
(s) STATUTORY FINANCIAL STATEMENTS. Except as otherwise set forth
therein, the annual statements and the quarterly statements filed by
Company or any of its Subsidiaries with the Virginia State Corporation
Commission ("VSCC") for the years ended December 31, 1999, 2000 and 2001,
and for each quarterly period ending after December 31, 2001 and prior to
the Closing Date (the "VSCC FILINGS") and the statutory balance sheets and
income statements included in such VSCC Filings fairly present, or will
fairly present, in all material respects the statutory financial condition
and results of operations of Company or such Subsidiaries, as applicable,
as of the date and for the periods indicated therein and have been
prepared, or will be prepared, in all material respects, in accordance with
applicable statutory accounting principles consistently applied throughout
the periods indicated, except as may be reflected in the notes thereto, or
the statutory reports and related actuarial opinions for Company or its
Subsidiaries for the 2001 fiscal year, and subject to the absence of notes
required by statutory accounting principles and to normal year-end
adjustments.
(t) INSURANCE. Company has provided or made available to Purchaser
true, correct and complete copies of its primary director and officer and
employee and officer insurance policies and will make available to
Purchaser, prior to the Closing Date, true and complete copies of all
material policies of insurance to which Company or its Subsidiaries is a
party or is a beneficiary or named insured. Company and its Subsidiaries
maintain insurance coverage with reputable insurers in such amounts and
covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to that of Company or its
Subsidiaries (taking into account the cost and availability of such
insurance).
(u) RIGHTS AGREEMENT. The Rights Agreement has been amended so that
Purchaser and Merger Sub, with respect to the transactions contemplated
hereby and by the Option Agreement, are each exempt from the definition of
"ACQUIRING PERSON" contained in the Company Rights Agreement, no "STOCK
ACQUISITION DATE" or "DISTRIBUTION DATE" or "TRIGGERING EVENT" (as such
terms are defined in the Company Rights Agreement) will occur as a result
of the execution and delivery of this Agreement and the Option Agreement or
the consummation of any of the transactions contemplated hereby or thereby,
including the Merger. The Company Rights Agreement will expire immediately
prior to the Effective Time, and the Company Rights Agreement, as so
amended, has not been further amended or modified. Copies of all such
amendments to the Company Rights Agreement have been previously provided or
made available to Purchaser.
(v) NO DISSENTERS' RIGHTS. Company stockholders are not entitled to
any dissenters' or appraisal rights in connection with the Merger under the
VSCA or Company's articles of incorporation or by-laws.
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(w) OPINION OF COMPANY FINANCIAL ADVISOR. The Board of Directors of
Company has received the opinion of the Company Financial Advisor, dated
the date of this Agreement, to the effect that, as of such date, the Merger
Consideration is fair, from a financial point of view, to the holders of
Company Common Stock, a copy of which opinion will promptly be made
available to Purchaser after receipt by Company.
(x) ACCOUNTING AND FINANCIAL MATTERS. Since January 1, 2001, Company
has not received written notice from the SEC or any other Governmental
Entity that any of its accounting policies or practices are or may be the
subject of any review, inquiry, investigation or challenge by the SEC or
other Governmental Entity. Since January 1, 2001, Company's independent
public accounting firm has not informed Company that it has any material
questions, challenges or disagreements regarding or pertaining to Company's
accounting policies or practices. Since January 1, 2001, no officer or
director of Company has received, or is entitled to receive, any material
compensation from any entity that has engaged in or is engaging in any
material transaction with the Company or any of its Subsidiaries. Set forth
on Section 3.2(x) of the Company Disclosure Schedule is, among other
things, a list of all off-balance sheet special purpose entities and
financing arrangements of Company and its Subsidiaries.
3.3. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB. Purchaser
and Merger Sub represent and warrant to Company as follows:
(a) ORGANIZATION. Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of Indiana. Merger Sub
is a direct wholly-owned subsidiary of Purchaser.
(b) CORPORATE AUTHORIZATION. Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
by Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub. Purchaser, in its capacity as
sole stockholder of Merger Sub, has approved this Agreement and the other
transactions contemplated hereby as required by the IBCL. This Agreement
has been duly executed and delivered by Merger Sub and, assuming that this
Agreement constitutes the valid and binding agreement of Company,
constitutes a valid and binding agreement of Merger Sub, enforceable
against it in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors generally or by general
equity principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
(c) NON-CONTRAVENTION. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions
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contemplated hereby do not and will not contravene or conflict with the
articles of incorporation or by-laws of Merger Sub.
(d) NO BUSINESS ACTIVITIES. Merger Sub has not conducted any
activities other than in connection with the organization of Merger Sub,
the negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. Merger Sub has no Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. CONDUCT OF BUSINESS OF COMPANY PENDING THE MERGER. Company covenants
and agrees that, during the period from the date hereof to the Effective Time
and except as otherwise agreed to in writing by Purchaser or as expressly
contemplated by this Agreement, the businesses of Company and its Subsidiaries
shall be conducted only in, and Company and its Subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice and in compliance with applicable laws; and Company and its
Subsidiaries, except as expressly contemplated by this Agreement, shall each use
its commercially reasonable efforts to preserve substantially intact the
business organization of Company and its Subsidiaries, to keep available the
services of the present officers, employees and consultants of Company and its
Subsidiaries and to preserve the present relationships of Company and its
Subsidiaries with such of the customers, suppliers, licensors, licensees, or
distributors with which Company or any of its Subsidiaries has significant
business relations. By way of amplification and not limitation, without the
prior written consent of Purchaser (which shall not be unreasonably withheld or
delayed) neither Company nor any of its Subsidiaries shall, between the date of
this Agreement and the Effective Time, except as set forth in Section 4.1 of the
Company Disclosure Schedule, directly or indirectly do, or propose or commit to
do, any of the following:
(a) Amend its articles of incorporation or by-laws or equivalent
organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or authorize
or commit to the issuance, sale, pledge, disposition or encumbrance of, any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including but not limited to stock
appreciation rights or phantom stock), of Company or any of its
Subsidiaries, except for (i) the issuance of securities issuable pursuant
to options outstanding as of the date hereof under the Option Agreement or
any Benefit Plans of Company (including the Company Employee Stock Purchase
Plan ("COMPANY ESPP")) and (ii) grants of equity or equity-based awards in
accordance with Section 4.1(b) of the Company Disclosure Schedule.
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, other than
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dividends payable by a directly or indirectly wholly-owned Subsidiary of
Company to Company or another directly or indirectly wholly-owned
Subsidiary of Company;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock, stock
options or debt securities;
(e) Acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division or line of business;
(f) Modify its current investment policies or investment practices in
any material respect except to accommodate changes in applicable law;
(g) Transfer, lease, mortgage, or otherwise dispose of or subject to
any Lien any of its assets, including capital stock of Subsidiaries, with a
fair market value in excess of $10 million individually or $25 million in
the aggregate (except (i) by incurring Permitted Liens; (ii) in the
ordinary course of business consistent with past practice; and (iii)
equipment and property no longer used in the operation of Company's or any
Subsidiaries' business);
(h) (I) Repay or retire any indebtedness for borrowed money or
repurchase or redeem any debt securities, except (x) upon the maturity date
of such indebtedness or as otherwise required by the terms of such
indebtedness or securities or (y) as permitted by Section 5.16, (II) incur
any indebtedness for borrowed money or issue any debt securities or (III)
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans, advances
or capital contributions to, or investments in, any other person in excess
of $5 million individually or $10 million in the aggregate (it being
understood that trade payables, ordinary course business funding mechanisms
between Company and its customers and providers and guarantees of
indebtedness by the Company and its Subsidiaries to the Company and its
Subsidiaries shall not be considered indebtedness for purposes of this
provision);
(i) Enter into or amend any Material Contract, any other contract or
agreement (with "other contract or agreement" being defined for purposes of
this subsection as a contract or agreement which involves Company incurring
a liability in excess of $10 million individually or $25 million in the
aggregate and which is not terminable by Company without penalty upon one
year or less notice (other than (x) contracts or amendments issued or
entered into in the ordinary course of business with customers or providers
of Company or its Subsidiaries, (y) customer agreements that are not
terminable within one year solely as a result of HIPAA or other statutory
or regulatory requirements or (z) as required by law)) or, except for any
agreement in the ordinary course of business and that is not inconsistent
with Section 5.16, agreement with an affiliate of Company;
(j) Except (A) to the extent required under this Agreement or as set
forth on Section 4.1(j) of the Company Disclosure Schedule, (B) pursuant to
applicable law or (C) pursuant to existing obligations under the Company
Plans or collective bargaining
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agreements, increase the compensation or fringe benefits of any of its
directors, officers or employees, except for increases in salary or wages
of officers and employees of Company or its Subsidiaries in the ordinary
course of business in accordance with past practice, or grant any severance
or termination pay not currently required to be paid under existing
severance plans or enter into, or amend, any employment, change-in-control
or similar arrangement, consulting or severance agreement or arrangement
(except, other than with respect to the sixteen Company executives with
executive continuity agreements, pursuant to separation agreements and
severance agreements entered into in the ordinary course of business
consistent with past practice) with any present or former director, officer
or other employee of Company or any of its Subsidiaries, or establish,
adopt, enter into or amend or terminate any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
welfare, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(k) Except as may be required as a result of a change in law or in
generally accepted accounting or actuarial principles, make any material
change to the accounting practices or principles or reserving or
underwriting practices or principles used by it;
(l) Knowingly take, or knowingly permit any of its Subsidiaries to
take, any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code;
(m) Settle or compromise any pending or threatened suit, action or
claim involving a payment by Company or its Subsidiaries in excess of
$1,000,0000 or agree to any settlement or compromise in respect thereof, if
such settlement or compromise would be reasonably likely to be (i) a
settlement or compromise which is the first settlement or compromise
effected by the Company or its Subsidiaries with regards to any particular
type of conduct or complaint or (ii) a settlement or compromise which would
be substantially different than prior settlements of the Company or its
Subsidiaries with regards to any particular type of conduct or complaint,
which in either the case of (i) or (ii) would create an adverse precedent
for claims, actions or proceedings that would be material to Company and
its Subsidiaries, taken as whole;
(n) Adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of Company or any
of its Subsidiaries;
(o) Effectuate a "PLANT CLOSING" or "MASS LAYOFF", as those terms are
defined in WARN, affecting in whole or in part any site of employment,
facility, operating unit or employee of Company or any of its Subsidiaries;
(p) Fail to use reasonable commercial efforts to maintain in full
force and effect the existing insurance policies covering Company or its
Subsidiaries or their
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respective properties, assets and businesses or comparable replacement
policies to the extent available for a cost not exceeding 150% of the
current cost of such policy;
(q) Authorize or make capital expenditures other than aggregate
capital expenditures not to exceed an amount equal to the aggregate capital
expenditures contemplated to be made between the date of this Agreement and
the Closing in the capital expenditure plan previously provided to
Purchaser in writing plus $2 million;
(r) Expand its marketing efforts beyond those states in which its
products are offered as of the date of this Agreement;
(s) Make any material Tax election or settle or compromise any
material federal, state, local or foreign Tax liability, change any method
of Tax accounting in any material respect, enter into any closing agreement
relating to any material amount of Tax, or surrender any right to claim a
material Tax refund;
(t) (i)(x) Amend or alter any of the Company Stock Option Plans or any
award agreements thereunder or (y) waive any provision of such plans or
agreements or (z) exercise any discretionary right or take any
discretionary action under or in relation to such plans or agreements, in
any case, to provide that the Company shall be obligated or required to pay
optionholders any difference between the applicable exercise price of such
option and any other value (including any fair market value of Company
Common Stock or the Merger Consideration) (any such payment, a "CASH-OUT
PAYMENT") or (ii) make any Cash-Out Payment or make any loan or guarantee
to any optionholders to fund the exercise price of any options (other than
(I) prior to the approval of the Company's stockholders of this Agreement
at Company Stockholders Meeting, aggregate Cash-Out Payments in respect of
an immaterial number of options and (II) share withholding upon the
exercise of options, for purposes of paying applicable withholding tax); or
(u) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.1(a) through 4.1(t).
4.2. CONDUCT OF BUSINESS OF PURCHASER PENDING THE MERGER. Purchaser shall
not, between the date of this Agreement and the Effective Time, except as set
forth in Section 4.2 of the Purchaser Disclosure Schedule or as may be consented
to beforehand in writing by Company (such consent not to be unreasonably
withheld or delayed), directly or indirectly do, or propose or commit to do, any
of the following:
(a) Amend its articles of incorporation or by-laws or equivalent
organizational documents in a manner adverse to Company or its stockholders
(as a group);
(b) Knowingly take, or knowingly permit any of its Subsidiaries to
take, any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code;
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(c) Issue, deliver, sell, pledge, dispose of or encumber, or authorize
or commit to the issuance, sale, pledge, disposition or encumbrance of, any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including but not limited to stock
appreciation rights or phantom stock), of Purchaser or any of its
Subsidiaries, except for (i) the issuance of securities issuable pursuant
to options outstanding as of the date hereof under any Benefit Plans of
Purchaser (including the Purchaser Employee Stock Purchase Plan ("PURCHASER
ESPP")), (ii) grants of equity or equity-based awards in the ordinary
course of business and the issuance of securities in settlement thereof,
(iii) the issuance of any securities as contemplated by Section 4.2 of
Purchaser Disclosure Schedule, (iv) any issuance of any shares of Purchaser
Common Stock related to the demutualization of Purchaser's Subsidiary and
(v) the issuance of any securities (other than those contemplated by
clauses (i) through (iv) above) in registered primary offerings or in
connection with business combinations up to a maximum aggregate value of
$100 million;
(d) Declare, set aside, make or pay any dividend or other distribution
(other than repurchases of Purchaser Common Stock), payable in cash, stock,
property or otherwise, with respect to any of its capital stock;
(e) Adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of Purchaser;
(f) Merge or consolidate with, or acquire a material amount of assets
or capital stock of, any other person, if such merger, consolidation or
acquisition would reasonably be expected to materially impair, materially
delay or prevent consummation of the transactions contemplated hereby,
including the Merger; or
(g) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.2(a) through (f) or
any action which would result in any of the conditions set forth in Article
VI not being satisfied or materially delay the Closing.
4.3. OPERATIONAL MATTERS. From the date of this Agreement until the
Effective Time, each of Purchaser and Company shall (a) confer on a regular and
frequent basis with the other and (b) report (to the extent permitted by law or
regulation or any applicable confidentiality agreement) on operational matters.
Company and Purchaser shall file all reports required to be filed by each of
them with the SEC (and all other Governmental Entities) between the date of this
Agreement and the Effective Time and each of Purchaser and Company shall (to the
extent any report, announcement and publication relates to this Agreement and
the Merger, and to the extent permitted by law or regulation or applicable
confidentiality agreement) deliver to the other party copies of all such
reports, announcements and publications promptly after the same are filed.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1. PREPARATION OF FORM S-4 AND THE JOINT PROXY STATEMENT; STOCKHOLDERS
MEETINGS.
(a) Promptly following the date of this Agreement, Company and
Purchaser shall prepare and file with the SEC the Joint Proxy Statement,
and Purchaser shall prepare and file with the SEC the Form S-4, in which
the Joint Proxy Statement will be included as a prospectus. Each of Company
and Purchaser shall use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable
after such filing. Each of Company and Purchaser will use its reasonable
best efforts to cause the Joint Proxy Statement to be mailed to its
stockholders as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Purchaser shall also take any action
(other than qualifying to do business in any jurisdiction in which it is
not now so qualified) required to be taken under any applicable state
securities law in connection with the Share Issuance, and Company shall
furnish all information concerning Company and the holders of Company
Common Stock and rights to acquire Company Common Stock pursuant to the
Company Stock Option Plans as may be reasonably required in connection with
any such action. Each of Purchaser and Company shall furnish all
information concerning itself to the other as may be reasonably requested
in connection with any such action and the preparation, filing and
distribution of the Form S-4 and the preparation, filing and distribution
of the Joint Proxy Statement. Company, Purchaser and Merger Sub each agree
to promptly correct any information provided by it for use in the Form S-4
or the Joint Proxy Statement that shall have become false or misleading.
(b) Company, acting through its Board of Directors, shall, subject to
and in accordance with its articles of incorporation and by-laws, promptly
and duly call, give notice of, convene and hold as soon as practicable
following the date upon which the Form S-4 becomes effective a meeting of
the holders of Company Common Stock (the "COMPANY STOCKHOLDERS MEETING")
for the purpose of voting to approve this Agreement, and (i) except as
otherwise provided in the following sentence, recommend approval of this
Agreement and include in the Joint Proxy Statement such recommendation and
(ii) use its reasonable best efforts to solicit and obtain such approval.
In the event that prior to the approval of this Agreement by the Company's
stockholders, the Board of Directors of Company receives a Superior
Proposal (as defined in Section 8.13) and the Board of Directors of Company
determines in good faith by resolution duly adopted after consultation with
its outside counsel that the failure to take such action would reasonably
be expected to constitute a breach of its fiduciary duties under Virginia
law, the Board of Directors of Company may withdraw, amend or modify, in a
manner adverse to Purchaser, its recommendation, PROVIDED that before
withdrawing, amending or modifying its recommendation, it gives Purchaser
five business days' prior written notice of its intention to do so and
during such time, Company, if requested by Purchaser, shall have engaged in
good faith negotiations to amend this Agreement such that the Board of
Directors of Company may continue to recommend the approval of this
Agreement. The
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parties agree that nothing in this Section 5.1 shall in any way limit or
otherwise affect Purchaser's right to terminate this Agreement pursuant to
Section 7.1(c) at such time as the requirements of such subsection have
been met. Any such withdrawal, amendment or modification of the
recommendation shall not (x) change the adoption of this Agreement or any
other approval of the Board of Directors of Company in any respect that
would have the effect of causing the threshold restrictions on Company
Common Stock ownership in Company's articles of incorporation, the Company
Rights Agreement and any Virginia corporate takeover statute or other
similar statute to be applicable to the transactions contemplated hereby,
including the Merger, or the transactions contemplated by the Option
Agreement, or (y) change the obligation of Company to present this
Agreement for approval at the Company Stockholders Meeting on the earliest
practicable date. At any such meeting following any withdrawal, amendment
or modification of Company's recommendation of this Agreement, Company may
submit this Agreement to its stockholders without recommendation (although
the adoption of this Agreement by the Board of Directors of Company may not
be rescinded or amended), in which event the Board of Directors of Company
may communicate the basis for its lack of a recommendation to its
stockholders in the Joint Proxy Statement or an appropriate amendment or
supplement thereto to the extent required by law. Nothing contained in this
Agreement shall prohibit Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making disclosure of the fact that a proposal for an
Alternative Transaction has been made, the identity of the party making the
proposal or the material terms of such proposal in the Form S-4 or the
Joint Proxy Statement, to the extent disclosure of such facts, identity or
terms is advisable under applicable law (and the disclosure of such facts,
by itself, shall not be deemed a withdrawal or adverse modification or
amendment of its approval or recommendation to stockholders of the Merger).
(c) During the term of this Agreement, Company shall not take any
actions to exempt any Person other than Purchaser and Merger Sub from the
Company Rights Agreement, the threshold restrictions on Company Common
Stock ownership in Company's articles of incorporation, or make any
Virginia state takeover statute or similar statute inapplicable to any
Alternative Transaction unless, in any such case, the Board of Directors of
Company determines in good faith after consultation with its outside
counsel that failure to take such action would reasonably be expected to
constitute a breach of its fiduciary duties under Virginia law.
(d) Company will cause its transfer agent to make stock transfer
records relating to Company available to the extent reasonably necessary to
effectuate the intent of this Agreement.
(e) Purchaser, acting through its Board of Directors, shall, subject
to and in accordance with its articles of incorporation and by-laws,
promptly and duly call, give notice of, convene and hold as soon as
practicable following the date on which the Form S-4 becomes effective, a
meeting of the holders of Purchaser Common Stock (the "PURCHASER
STOCKHOLDERS MEETING") for the purpose of voting to approve the Share
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Issuance. Purchaser shall recommend such approval to its stockholders and
use its reasonable best efforts to solicit and obtain such approval. The
Board of Directors of Purchaser shall not withhold, withdraw, amend or
modify in any manner adverse to Company its recommendation referred to in
the preceding sentence (or announce publicly its intention to do so).
Nothing contained in this Agreement shall prohibit Purchaser from making
any factual disclosure regarding this Agreement, the Option Agreement, the
parties hereto, or any of the transactions contemplated hereby or thereby,
if such disclosure is advisable under applicable law (and the disclosure of
such information, by itself, shall not be deemed a withdrawal or adverse
modification or amendment of its approval or recommendation to its
stockholders of the Share Issuance).
(f) Company and Purchaser shall endeavor to hold the Company
Stockholder Meeting and the Purchaser Stockholder Meeting as closely
together in time as practicable and, to the extent possible, on the same
date.
5.2. ACCOUNTANT'S LETTERS.
(a) Purchaser shall use its reasonable best efforts to cause to be
delivered to Company a letter from Purchaser's independent public
accountants, dated (i) the date on which the Form S-4 shall become
effective, and (ii) the Closing Date, addressed to Purchaser, in form and
substance reasonably satisfactory to Company and customary in scope and
substance for comfort letters delivered by independent public accountants
in connection with registration statements similar to the Form S-4.
(b) Company shall use its reasonable best efforts to cause to be
delivered to Purchaser a letter from Company's independent public
accountants, dated (i) the date on which the Form S-4 shall become
effective, and (ii) the Closing Date, addressed to Company and Purchaser,
in form and substance reasonably satisfactory to Purchaser and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form
S-4.
5.3. ACCESS TO INFORMATION. Upon reasonable notice, each party shall (and
shall cause its Subsidiaries to) afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of the other party
reasonable access during normal business hours, during the period prior to the
Effective Time, to such of its properties, books, contracts, commitments,
records, officers and employees as the other party may reasonably request and,
during such period, such party shall (and shall cause its Subsidiaries to)
furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of Federal or
state securities laws, as applicable (other than documents which such party is
not permitted to disclose under applicable law), and (b) consistent with its
legal obligations, all other information concerning it and its business,
properties and personnel as such other party may reasonably request; provided,
however, that either party may restrict the foregoing access to the extent that
any law, treaty, rule or regulation of any Governmental Entity applicable to
such party requires such party or its Subsidiaries to restrict access to any
properties or information (but only if such
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party shall have used commercially reasonable efforts to get any such
restriction waived). The parties will hold any such information which is
non-public in confidence to the extent required by, and in accordance with, the
provisions of the confidentiality agreement between Company and Purchaser (the
"CONFIDENTIALITY AGREEMENT"). Any investigation by Purchaser or Company shall
not affect the representations and warranties of Company or Purchaser, as the
case may be.
5.4. REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each party
will use its reasonable best efforts to prepare and file as promptly as
practicable all documentation to effect all necessary applications,
notices, petitions, filings, tax ruling requests and other documents and to
obtain as promptly as practicable all consents, waivers, licenses, orders,
registrations, approvals, permits, tax rulings and authorizations necessary
or advisable to be obtained from any third party and/or any Governmental
Entity in order to consummate the Merger or any of the other transactions
contemplated by this Agreement or any transaction contemplated by the
Option Agreement. Upon the terms and subject to the conditions hereof, each
party will use its reasonable best efforts to take, or cause to be taken,
all actions, to do, or cause to be done, all things reasonably necessary to
satisfy the conditions to Closing set forth herein and to consummate the
transactions contemplated hereby.
(b) In furtherance and not in limitation of the foregoing, each party
hereto agrees to make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the transactions contemplated
hereby and by the Option Agreement as promptly as practicable after the
date hereof and to supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to the
HSR Act. Each of Purchaser and Company shall cooperate in all respects with
each other in connection with any filing or submission and in connection
with any investigation or other inquiry under the HSR Act.
(c) In furtherance and not in limitation of the foregoing, the parties
agree that Purchaser shall make as promptly as practicable such filings as
are required in connection with this Agreement and the transactions
contemplated hereby on its behalf, including the "Form A" regulatory
filings to be made with the Virginia State Corporation Commission and
shall, in consultation with Company, coordinate the conduct of any hearing
or hearings before the Virginia State Corporation Commission in connection
with such filings. Company and Purchaser will reasonably cooperate with
regard to the content of the filings referred to in the first sentence of
this Section 5.4(c). Company and Purchaser, as the case may be, shall
submit all such filings and hearing testimony, witness lists and other
similar materials relating to any hearing to the other for its review prior
to filing and shall incorporate the reasonable comments of the other party.
(d) Nothing contained in this Section 5.4 shall be construed as
requiring Purchaser to agree to any conditions which would impose (i) any
limitations on Purchaser's ownership or operation of all or any portion of
its, any of its Subsidiaries', or
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Company's (or any of its Subsidiaries') business or assets, or to compel
Purchaser or any of its Subsidiaries to dispose of or hold separate all or
any portion of its, any of its Subsidiaries' or Company's or any of its
Subsidiaries' business or assets, (ii) any limitations on the ability of
Purchaser to acquire or hold or to exercise full rights of ownership of the
Company Common Stock, (iii) any obligations on Purchaser or any of its
Subsidiaries or Company or any of its Subsidiaries to maintain facilities,
operations, places of business, employment levels, products or businesses
or (iv) any other obligation, restriction, limitation, qualification or
other conditions, which, in the case of any of clauses (i) through (iv)
above, would be reasonably likely to have a material and adverse effect on
Purchaser and its Subsidiaries, taken as a whole, have a material and
adverse effect on Company and its Subsidiaries, taken as a whole, or
materially impair the long-term benefits sought to be derived from the
Merger.
5.5. NO SOLICITATION OF TRANSACTIONS. Company agrees that, during the term
of this Agreement, it shall not, and shall not authorize or permit any of its
Subsidiaries or any of its or its Subsidiaries' directors, officers, employees,
agents or representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries), directly or indirectly,
to solicit, initiate, encourage or facilitate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any proposal with
respect to any Alternative Transaction (as defined in Section 8.13), or
negotiate, explore or otherwise engage in discussions with any Person (other
than Purchaser, Merger Sub or their respective directors, officers, employees,
agents and representatives) with respect to any Alternative Transaction or enter
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement or the Option Agreement; PROVIDED that, at any
time prior to the approval of this Agreement by Company's stockholders, Company
may furnish information to, and negotiate or otherwise engage in discussions
with, any party who delivers a bona fide written proposal for an Alternative
Transaction which was not solicited or encouraged after the date of this
Agreement, if and so long as the Board of Directors of Company determines in
good faith by resolution duly adopted after consultation with its outside legal
counsel that the failure to provide such information or engage in such
negotiations or discussions is or would reasonably be expected to constitute a
breach of the directors' fiduciary duties under Virginia law and determines in
good faith that such a proposal is a Superior Proposal. Company shall notify
Purchaser promptly of such inquiries, proposals or offers received by, or any
such discussions or negotiations sought to be initiated or continued with, any
of its representatives, indicating the name of such Person and providing to
Purchaser a copy of such written proposal or offer for an Alternative
Transaction. Prior to providing any information or data to, or entering into any
negotiations or discussions with, any Person in connection with a proposal or
offer for an Alternative Transaction, Company shall (i) give to Purchaser five
business days' prior written notice of its intention to do so, and during such
time shall, if requested by Purchaser, engage in good faith negotiations to
amend this Agreement such that the Board of Directors of Company will not be
required to provide such information pursuant to its fiduciary duties, and (ii)
receive from such Person an executed confidentiality agreement containing terms
and provisions at least as restrictive as those contained in the Confidentiality
Agreement (which shall not preclude discussions or negotiations relating to the
proposal or offer from such Person). Company agrees that it will keep Purchaser
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informed, on a prompt basis, of the status and terms of any such proposals or
offers and the status of any such discussions or negotiations and that it will
deliver to Purchaser copies of (or, if oral, summaries of) any changes to any
proposals or offers. Company agrees that it will immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
parties conducted prior to the date of this Agreement with respect to any
Alternative Transaction and will not waive any rights under any standstill or
confidentiality agreements entered into with such parties.
5.6. EMPLOYEE BENEFITS MATTERS.
(a) CONTINUATION AND COMPARABILITY OF BENEFITS. From the Effective
Time until December 31, 2003 (the "Benefits Continuation Period"), the
Surviving Corporation shall provide compensation and Benefits Plans to the
current and former employees of Company and its Subsidiaries (other than
those current and former employees whose terms and conditions of employment
are subject to a collective bargaining agreement) that are in the aggregate
no less favorable than those provided to the current and former employees
of the Company and its Subsidiaries as of the Effective Date. On or prior
to January 1, 2004, the Purchaser shall have caused the compensation and
Benefit Plans providing compensation and benefits to the current and former
employees of Purchaser (other than current and former employees of the
Surviving Corporation and its Subsidiaries) on the one hand, and the
current and former employees of the Surviving Corporation and its
Subsidiaries, on the other hand, to be in the aggregate comparable for
similarly situated current and former employees.
(b) PRE-EXISTING LIMITATIONS; SERVICE CREDIT. With respect to any
Benefit Plans in which any Company employees first become eligible to
participate, on or after the Effective Time, and which are plans that the
Company employees did not participate in prior to the Effective Time (the
"NEW COMPANY PLANS"), Purchaser shall: (A) waive all pre-existing
conditions, exclusions and waiting periods with respect to participation
and coverage requirements applicable to the Company employees under any
health and welfare New Company Plans in which such employees may be
eligible to participate after the Effective Time, and deductibles,
coinsurance or maximum out-of-pocket payments made by Company employees
during the calendar year in which the Effective Time occurs shall reduce
the amount of deductibles, coinsurance and maximum out-of-pocket payments
under the New Company Plans; provided that such Company employee and
covered family members were enrolled in comparable coverage under the
Benefit Plans of Company on the Effective Time and continuously thereafter
until the effective time of coverage in the New Company Plans, and (B)
recognize service of the Company employees with Company (or otherwise
credited by Company) accrued prior to the Effective Time for purposes of
eligibility to participate and vesting credit (and levels of benefits) in
any New Company Plan in which such employees may be eligible to participate
after the Effective Time, to the extent service is taken into account under
the applicable New Company Plan; provided, however, in no event shall any
credit be given to the extent it would result in the duplication of
benefits for the same period of service. Service with Company will also be
recognized under any New Company Plan that is a
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defined benefit pension plan with a benefit formula based upon final
average compensation, with an offset for any benefit payable for the same
period of service with Company under any defined benefit plan of Company.
(c) RETENTION AGREEMENTS. Company and Purchaser have entered into
binding employment arrangements with the certain executives of Company set
forth on Exhibit B hereto.
(d) COMPANY PLANS. From and after the Effective Time, Purchaser shall
and shall cause its affiliates (including the Surviving Corporation and its
Subsidiaries) to honor all Company Plans in accordance with their terms as
in effect immediately before the Effective Time, subject to any amendment
or termination thereof that may be permitted by such terms. Without
limiting the generality of the foregoing sentence, Purchaser shall cause
the Company to continue (i) its Retirement Program without modification
through December 31, 2003 and shall maintain the defined benefit portion of
such plan, without modification, through October 1, 2003; and (ii) its
annual and long term incentive plans (the "BONUS PLANS") in effect
throughout the Benefits Continuation Period; PROVIDED that (i) the
Purchaser or Company may modify the performance measures under the Bonus
Plans to reflect equitably and appropriately the transactions contemplated
by this Agreement subject to the consent of the CEO of the Company as of
the date hereof, which consent shall not be unreasonably withheld; (ii) the
target bonus as a percentage of base salary shall not be reduced throughout
the Benefits Continuation Period; and (iii) the Company performance in
respect of calculations made under the Bonus Pans for 2002 and 2003
calendar years shall be calculated without taking into account any changes,
expenses or costs associated with or arising as a result of the
transactions contemplated by the Agreement or any non-recurring charges
that would not reasonably be expected to have been incurred had the
transactions contemplated by this Agreement not occurred, and Company may
modify the Bonus Plans accordingly.
(e) SUBSEQUENT DISPOSITION. If Purchaser disposes of Company or any of
its Subsidiaries or all or substantially all of their respective assets
during the Benefits Continuation Period, Purchaser shall require the
purchaser of Company, its Subsidiaries or their respective assets, as the
case may be, to expressly agree to assume and perform the provisions of
this Section 5.6 through the remainder of the Benefits Continuation Period
with respect to provision of compensation and benefits.
(f) EMPLOYEE STOCK PURCHASE PLAN. Company shall take all action to the
extent necessary (including amending the Company ESPP) such that the
Company ESPP will terminate immediately prior to the Effective Time and all
participants will automatically exercise their purchase rights immediately
prior to the termination of the plan. Purchaser shall take all action to
the extent necessary (including amending the Purchaser ESPP) such that the
employees of Company or its Subsidiaries prior to the Effective Time who
become employees of Purchaser or one of its Subsidiaries after the
Effective Time shall be eligible to participate in the Purchaser ESPP as
soon as practicable after the Effective Time.
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5.7. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Surviving Corporation shall, and Purchaser shall cause the
Surviving Corporation to, (i) indemnify and hold harmless, and provide
advancement of expenses to, all past and present (as of the Effective Time)
directors, officers and employees of Company and its Subsidiaries (the
"INDEMNIFIED PERSONS") to the same extent such persons are indemnified or
have the right to advancement of expenses as of the date of this Agreement
by Company pursuant to Company's articles of incorporation, by-laws and
indemnification agreements, if any, in existence on the date hereof with
any current or former directors, officers and employees of Company and its
Subsidiaries (but in any event to the fullest extent permitted by law) for
acts or omissions occurring at or prior to the Effective Time (including
for acts or omissions occurring in connection with the approval of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby), and (ii) purchase as of the Effective
Time a tail policy to the current policy of directors' and officers'
liability insurance and fiduciary liability insurance maintained by Company
which tail policy shall be effective for a period from the Effective Time
through and including the date six years after the Closing Date with
respect to claims arising from facts or events that occurred on or before
the Effective Time, and which tail policy shall contain substantially the
same coverage and amounts, and contain terms and conditions no less
advantageous, in the aggregate, as that coverage currently provided by such
current policy; provided, however, that in no event shall the Surviving
Corporation be required to expend, for the entire tail policy, in excess of
400% of the annual premium currently paid by Company for its current policy
of directors' and officers' liability insurance and fiduciary liability
insurance; and, provided, further, that if the premium of such insurance
coverage exceeds such amount, the Surviving Corporation after consultation
with Company shall be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding such amount.
(b) To the extent permitted by the IBCL, the articles of incorporation
and by-laws of the Surviving Corporation shall contain provisions with
respect to indemnification, advancement of expenses and exculpation from
liability at least as favorable to the Indemnified Persons as those set
forth in the current articles of incorporation and by-laws of Company, and
for a period of six years from the Effective Time, those provisions shall
not be repealed or amended or otherwise modified in any manner that would
adversely affect the rights thereunder as of the Effective Time of the
Indemnified Persons, except to the extent, if any, that such modification
is required after the Effective Time by applicable law.
(c) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at or
after the Effective Time) is made against any Indemnified Persons on or
prior to the sixth anniversary of the Effective Time, the provisions of
this Section 5.7 shall continue in effect until the final disposition of
such claim, action, suit, proceeding or investigation.
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(d) The covenants contained in this Section 5.7 are intended to be for
the benefit of, and shall be enforceable by, each of the Indemnified
Persons and their respective heirs and legal representatives and shall not
be deemed exclusive of any other rights to which an Indemnified Persons is
entitled, whether pursuant to law, contract or otherwise.
(e) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such
case, proper provision shall be made so that the successors or assigns of
the Surviving Corporation, as the case may be, shall succeed to the
obligations set forth in this Section 5.7.
5.8. NOTIFICATION OF CERTAIN MATTERS. Company shall use reasonable
commercial efforts to give prompt notice to Purchaser, and Purchaser shall use
reasonable commercial efforts to give prompt notice to Company, to the extent
that either acquires actual knowledge of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be reasonably likely
to cause any representation or warranty contained in this Agreement to be untrue
or inaccurate and (ii) any failure of Company, Purchaser or Merger Sub, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.8 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
5.9. PUBLIC ANNOUNCEMENTS. Purchaser and Company shall develop a joint
communications plan and each party shall (i) ensure that all press releases and
other public statements with respect to this Agreement, the Option Agreement and
the transactions contemplated hereby or thereby shall be consistent with such
joint communications plan, and (ii) unless otherwise required by applicable law
or by obligations pursuant to any listing agreement with or rules of any
securities exchange, consult with each other a reasonable time before issuing
any press release or otherwise making any public statement, and mutually agree
upon any such press release or public statement, with respect to this Agreement,
the Option Agreement or the transactions contemplated hereby and thereby. In
addition to the foregoing, except to the extent disclosed in the Joint Proxy
Statement in accordance with the provisions of Section 5.1, neither Purchaser
nor Company shall issue any press release or otherwise make any public statement
or disclosure concerning the other party or the other party's business,
financial condition or results of operations without the consent of the other
party.
5.10. LISTING OF SHARES OF PURCHASER COMMON STOCK. Prior to the Closing
Date, Purchaser shall use its reasonable best efforts to cause the shares of
Purchaser Common Stock to be issued in the Merger to be approved for listing on
the NYSE, subject to official notice of issuance.
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5.11. AFFILIATES. Promptly after execution and delivery of this Agreement,
Company shall deliver to Purchaser a letter identifying all persons who, in the
opinion of Company, may be deemed as of the date hereof "affiliates" of Company
for purposes of Rule 145 under the Securities Act, and such list shall be
updated as necessary to reflect changes from the date thereof. Company shall use
reasonable efforts to cause each person identified on such list to deliver to
Purchaser not less than 30 days prior to the Effective Time, a written agreement
substantially in the form attached as Exhibit C hereto (an "AFFILIATE
AGREEMENT").
5.12. TRANSITION TEAM. Promptly following execution of this Agreement, the
parties shall establish a transition planning team (the "TRANSITION TEAM")
comprised of an equal number of representatives of Company and Purchaser. The
Transition Team shall be responsible for facilitating a transition and
integration planning process to ensure the successful combination of the
operations of Company with those of Purchaser. The Transition Team shall be
responsible for developing, and monitoring the development of, and deliverables
due under, an action plan for the combination of the businesses. The Transition
Team shall also meet regularly to review the financial performance of Company
and its affiliates and at such meetings Company shall advise the Transition Team
of the status of achieving Company's then current operating plan (as has been
presented to Purchaser).
5.13. MANAGEMENT RESPONSIBILITIES; HEADQUARTERS. At the Effective Time, the
Chairman and Chief Executive Officer of Company shall be named the President of
the Southeast Region of Purchaser with the responsibility for Purchaser's health
benefits operations in the Southeast Region and shall be based in Richmond,
Virginia and shall report directly to the Chief Executive Officer of Purchaser.
The headquarters and the principal executive offices of the Southeast Region of
Purchaser, and of Trigon Blue Cross and Blue Shield, shall be in Richmond,
Virginia.
5.14. TAX-FREE REORGANIZATION TREATMENT. The parties hereto shall use their
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code and shall not
knowingly take or fail to take any action which action or failure to act would
prevent (a) the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code or (b) the receipt of the opinions of Tax
counsel in such form and upon such matters as described in Section 6.2(c) and
Section 6.3(c). Unless required by law, each of Purchaser, Merger Sub, and
Company shall not file any Tax Return or take any position inconsistent with the
treatment of the Merger as a reorganization described in Section 368(a) of the
Code. Prior to the Effective Time, the parties shall use their commercially
reasonable efforts to obtain the opinions of tax counsel in such form and upon
such matters as described in Section 6.2(c) and Section 6.3(c).
5.15. REPRESENTATION ON PURCHASER BOARD. Immediately after the Effective
Time, Purchaser shall appoint three of Company's current directors (none of whom
shall be an employee of Company) to the Board of Directors of Purchaser. Such
directors shall be appointed to each of the three classes of the Board of
Directors of Purchaser such that their terms of office expire at the annual
meeting of stockholders of Purchaser in 2003, 2004 and 2005, respectively.
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It is the current intention of the parties that each such director shall be
nominated for election upon the expiration of his or her term of office.
5.16. OTHER OBLIGATIONS. From and after the date hereof, Company (i) shall
use commercially reasonable efforts to meet the goal of repurchasing, by the
Closing Date, in accordance with prudent business practices, for cash all
commercial paper issued by Company or any of its Subsidiaries (whether
outstanding as of the date hereof or issued hereafter) and (ii) shall, in
accordance with prudent business practices, pursue as a goal the existence of
cash and/or cash equivalents at Closing in an aggregate amount in accordance
with disclosures made to rating agencies prior to the date hereof with respect
to the transactions contemplated hereby. The parties acknowledge that
contingencies may arise and facts may change, including the value of Company's
investment portfolio, such that Company may, in its reasonable judgment, vary
from the foregoing as appropriate; PROVIDED that Company consult and cooperate
with Purchaser in good faith prior to any such variance.
ARTICLE VI
CONDITIONS PRECEDENT
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of Company, Purchaser and Merger Sub to effect the Merger
are subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) No Injunctions or Restraints, Illegality. (i) No Governmental
Entity or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, judgment, injunction or other order
(whether temporary, preliminary or permanent), in any case which is in
effect and which prevents or prohibits consummation of the Merger; and (ii)
no Governmental Entity shall have instituted any action or proceeding
(which remains pending at what would otherwise be the Closing Date) before
any United States court or other Governmental Entity of competent
jurisdiction seeking to enjoin, restrain or otherwise prohibit consummation
of the transactions contemplated by this Agreement.
(b) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) NYSE Listing. The shares of Purchaser Common Stock to be issued in
the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(d) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Form S-4 shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
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(e) Company Stockholder Approval. This Agreement shall have been
approved by the Required Company Vote at the Company Stockholders Meeting.
(f) Purchaser Stockholder Approval. The Share Issuance shall have been
approved by the Required Purchaser Vote at the Purchaser Stockholders
Meeting.
(g) Required Governmental Consents. The Necessary Consents shall have
been obtained, and shall be in full force and effect.
(h) BCBSA. Any required approval of the BCBSA shall have been
obtained, so that the right of the Company's Subsidiaries to use the Blue
Cross and Blue Shield name in Company's Subsidiaries licensed service area
shall remain in full force and effect after the Merger.
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PURCHASER AND MERGER SUB. The
obligations of Purchaser and Merger Sub to effect the Merger are subject to the
satisfaction or waiver by Purchaser, on or prior to the Closing Date, of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) The representations and
warranties of Company set forth in the last sentence of Section 3.2(a)(i),
Section 3.2(b), Section 3.2(c)(i), Section 3.2(c)(ii)(A), Section 3.2(g),
Section 3.2(h), Section 3.2(j)(ii) (but only with respect to the actions
contemplated by Section 4.1(c)), Section 3.2(o)(xi), Section 3.2(u),
Section 3.2(v) and Section 3.2(w) of this Agreement shall, in the
aggregate, be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent that such representations and warranties
speak as of another date); and (ii) the representations and warranties of
Company (other than those set forth in clause (i) above) (in each case,
read without any materiality, material or Material Adverse Effect
qualifications) shall be true and correct as of the date of this Agreement
and as of the Closing Date (except to the extent that such representations
and warranties speak as of another date), other than such failures to be
true and correct that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
Purchaser shall have received a certificate of the chief executive officer
and the chief financial officer of Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF COMPANY. Company shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior
to the Closing Date. Purchaser shall have received a certificate of the
chief executive officer and the chief financial officer of Company to such
effect.
(c) TAX OPINION. Purchaser shall have received from Xxxxx & Xxxxxxx,
counsel to Purchaser, on the Closing Date, a written opinion dated such
date, based on customary representations of Company and Purchaser that
counsel to Purchaser deems relevant, to the effect that (i) the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and (ii) Company,
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Purchaser and Merger Sub will each be a party to the reorganization within
the meaning of Section 368(b) of the Code.
(d) NECESSARY CONSENTS. None of the Necessary Consents shall contain
any terms or conditions that would have any of the effects specified in
clauses (i) through (iv) of Section 5.4(d).
(e) ACCOUNTANT'S LETTER. Purchaser shall have received, in form and
substance reasonably satisfactory to Purchaser, from Company's independent
public accountants the "comfort" letter described in Section 5.2(b).
6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of
Company to effect the Merger are subject to the satisfaction of, or waiver by
Company, on or prior to the Closing Date of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) The representations and
warranties of Purchaser and Merger Sub set forth in the last sentence of
Section 3.1(a), Section 3.1(b), Section 3.1(c)(i), Section 3.1(c)(ii)(A),
Section 3.1(f), Section 3.1(h), Section 3.1(l), Section 3.1(n), Section
3.3(b), and Section 3.3(c) of this Agreement shall, in the aggregate, be
true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date
(except to the extent that such representations and warranties speak as of
another date); and (ii) the representations and warranties of Purchaser and
Merger Sub (other than those set forth in clause (i) above) (in each case,
read without any materiality, material or Material Adverse Effect
qualifications) shall be true and correct as of the date of this Agreement
and as of the Closing Date (except to the extent that such representations
and warranties speak as of another date), other than such failures to be
true and correct that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Purchaser.
Company shall have received a certificate of the chief executive officer
and the chief financial officer of Purchaser to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PURCHASER AND MERGER SUB. Purchaser
and Merger Sub shall have performed or complied in all material respects
with all agreements and covenants required to be performed by them under
this Agreement at or prior to the Closing Date. Company shall have received
a certificate of the chief executive officer and the chief financial
officer of Purchaser to such effect.
(c) TAX OPINION. Company shall have received from McGuireWoods LLP,
counsel to Company, on the Closing Date, a written opinion dated such date,
based on customary representations of Company and Purchaser that counsel to
Company deems relevant, to the effect that (i) the Merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code; and (ii) Company, Purchaser and Merger Sub will
each be a party to the reorganization within the meaning of Section 368(b)
of the Code.
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(d) ACCOUNTANT'S LETTER. Company shall have received from Purchaser's
independent public accountants the "comfort" letter described in Section
5.2(b).
(e) TERMINATION OF WALKAWAY RIGHT. Either (a) the Determination Date
shall have occurred and, as of the Determination Date, Company shall have
no right to terminate the Agreement pursuant to Section 7.1(i) or (b) the
Determination Date shall have occurred and any right which Company had as
of the Determination Date to terminate this Agreement pursuant to Section
7.1(i) shall have terminated, lapsed, been withdrawn or been eliminated
pursuant to a Purchaser election pursuant to Section 7.1(i).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Closing Date,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of Company or Purchaser:
(a) By mutual written consent of Purchaser and Company;
(b) By either Purchaser or Company, if the Merger shall not have been
consummated on or before the date that is 9 months after the date of this
Agreement (other than due principally to the failure of the party seeking
to terminate this Agreement to perform any obligations under this Agreement
required to be performed at or prior to the Effective Time);
(c) By Purchaser, if (i) the Board of Directors of Company shall
withdraw, amend or modify its recommendation that its stockholders approve
this Agreement in a manner adverse to Purchaser or (ii) the Board of
Directors of Company adopts or recommends any Alternative Transaction.
(d) By Purchaser, if any required approval of the stockholders of
Company of this Agreement shall not have been obtained by reason of the
failure to obtain the Required Company Vote at the Company Stockholders
Meeting or at any adjournment thereof;
(e) By Purchaser or Company, if any required approval of the
stockholders of Purchaser of the Share Issuance shall not have been
obtained by reason of the failure to obtain the Required Purchaser Vote at
the Purchaser Stockholders Meeting or at any adjournment thereof;
(f) By Purchaser or Company, if any court or other governmental body
of competent jurisdiction shall have issued a final order, decree or ruling
or taken any other final action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action is or
shall have become final and nonappealable;
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(g) By Company, if (i) prior to the Closing Date there shall have been
a breach or inaccuracy of any representation, warranty, covenant or
agreement on the part of Purchaser or Merger Sub contained in this
Agreement, which breach would (A) give rise to the failure of a condition
set forth in Section 6.3 and (B) is incapable of being cured prior to the
Closing Date by Purchaser or is not cured within 45 days of notice of such
breach, or (ii) any of the conditions set forth in Section 6.1 (other than
6.1(e)) shall have become incapable of fulfillment;
(h) By Purchaser, if (i) prior to the Closing Date there shall have
been a breach or inaccuracy of any representation, warranty, covenant or
agreement on the part of Company contained in this Agreement, which breach
would (A) give rise to the failure of a condition set forth in Section 6.2
and (B) is incapable of being cured prior to the Closing Date by Company or
is not cured within 45 days of notice of such breach or (ii) any of the
conditions set forth in Section 6.1 shall have become incapable of
fulfillment; and
(i) By Company, at any time during the five Business Day period
commencing the day after the Determination Date, if both of the following
conditions are satisfied:
(1) the Average Purchaser Price on the Determination Date of shares of
Purchaser Common Stock shall be less than $55.00; and
(2) (i) the number obtained by dividing the Average Purchaser Price on
the Determination Date by $70.70 (such number being referred to herein
as the "PURCHASER COMMON STOCK RATIO") shall be less than (ii) the
number obtained by dividing the Index Price on the Determination Date
by the Index Price on April 26, 2002, and subtracting 0.15 from the
quotient in this clause (2)(ii) (such number being referred to herein
as the "INDEX RATIO");
SUBJECT, HOWEVER, to the following sentences of this Section 7.1(i). If
Company elects to exercise its termination right pursuant to the
immediately preceding sentence, it shall give prompt written notice to
Purchaser; PROVIDED, that such notice of election to terminate may be
withdrawn at any time within the aforementioned five Business Day period.
During the five Business Day period commencing with its receipt of such
notice, Purchaser shall have the option of either (I) adjusting the
Exchange Ratio to equal a number equal to a quotient (rounded to the
nearest one-thousandth), the numerator of which is the product of $55.00
and the Exchange Ratio (as then in effect) and the denominator of which is
the Average Purchaser Price, (II) increasing the Cash Consideration by an
amount (the "TOP-UP AMOUNT") equal to the product of (x) the Average
Purchaser Price and (y) the positive difference between (A) the adjusted
Exchange Ratio determined by performing (for purposes of this clause (II)
only) the calculation set forth in the preceding clause (I) and (B) 1.062
or (III) increasing each of the Cash Consideration and adjusting the
Exchange Ratio as Purchaser may determine, so long as the sum of (i) the
amount of the increase of the Cash Consideration and (ii) the
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value of the product of (x) the Average Purchaser Price and (y) the
Exchange Ratio as adjusted pursuant to this clause (III) MINUS 1.062, is
equal to the Top-Up Amount; PROVIDED, that Purchaser shall not be entitled
to elect to increase the Cash Consideration pursuant to clauses (II) or
(III) unless the parties agree (each acting reasonably and in good faith)
that the transaction, as adjusted pursuant to this Section 7.1(i),
qualifies as a "reorganization" within the meaning of Section 368 of the
Code. If Purchaser makes an election contemplated by the preceding
sentence, within such five Business Day period, it shall give prompt
written notice to Company of such election and the revised Exchange Ratio
or the amount of the increase in the Cash Consideration, or both, as
applicable, whereupon no termination shall be deemed to have occurred
pursuant to this Section 7.1(i) and this Agreement shall remain in effect
in accordance with its terms (except as the Exchange Ratio or the Cash
Consideration, as applicable, shall have been so modified), and any
references in this Agreement to "Exchange Ratio" or "Cash Consideration",
as applicable shall thereafter be deemed to refer to the Exchange Ratio or
Cash Consideration, as applicable, as adjusted pursuant to this Section
7.1(i).
7.2. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1, the obligations of the parties under this
Agreement shall terminate, except for the obligations in the confidentiality
provisions of Section 5.3, and all of the provisions of this Section 7.2,
Section 7.3 and Section 8.1, and there shall be no liability on the part of any
party hereto; provided, however, that no party hereto shall be relieved or
released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement. The termination of this Agreement shall not
affect the Option Agreement other than pursuant to its terms, which shall remain
in full force and effect.
7.3. FEES AND EXPENSES.
(a) If this Agreement is terminated pursuant to:
(i) (x) Section 7.1(c)(i) in a case where (i) the Board of
Directors of Company was aware of the existence of a bona fide
proposed Alternative Transaction or the intention to propose a bona
fide Alternative Transaction and (ii) such proposed Alternative
Transaction or intention had not been withdrawn prior to the taking of
the actions set forth in Section 7.1(c)(i) and (except as provided for
below in this Section 7.3(a)) at the time of such termination by
Purchaser or (y) Section 7.1(c)(ii);
(ii) Section 7.1(d), if prior to the Company Stockholders Meeting
there has been a public announcement of a bona fide proposed
Alternative Transaction (and such proposed Alternative Transaction had
not been publicly withdrawn at least two Business Days prior to the
time of such meeting); or
(iii) Section 7.1(h)(i), based on a material breach by Company of
Section 5.1(b), Section 5.1(c) or Section 5.5, in a case where (x) the
Board of Directors of Company was aware of the existence of a bona
fide proposed
-51-
Alternative Transaction or the intention to propose a bona fide
Alternative Transaction and (y) such proposed Alternative Transaction
or intention had not been withdrawn prior to such breach,
then, (x) in the case of a termination contemplated by Section 7.3(a)(i)
(so long as (a) such termination occurs by the end of the first Business
Day following the day on which Purchaser receives written notice from
Company in accordance with Section 8.2 of the actions by the Board of
Directors of Company contemplated by Section 7.1(c)(i) or (c)(ii) and (b)
the proposed Alternative Transaction or intention had not been withdrawn
prior to the time of such termination by Purchaser), (I) Company shall pay
to Purchaser within one Business Day following termination of this
Agreement, a fee, in cash, of $94,605,750.00 and (II) if Company within 12
months after such termination either consummates an Alternative Transaction
or enters into a definitive agreement with respect to an Alternative
Transaction, Company shall pay to Purchaser $94,605,750.00 simultaneously
with such consummation or entering into such definitive agreement, as the
case may be, and (y) in the case of a termination pursuant to any of
Section 7.3(a)(i) (but (a) after the end of the first Business Day
following the day on which Purchaser receives written notice from Company
in accordance with Section 8.2 of the actions by the Board of Directors of
Company contemplated by Section 7.1(c)(i) or (c)(ii) or (b) in a case in
which the proposed Alternative Transaction or intention had been withdrawn
prior to the time of such termination by Purchaser), Section 7.3(a)(ii) or
Section 7.3(a)(iii), if Company within 12 months after such termination
either consummates an Alternative Transaction or enters into a definitive
agreement with respect to an Alternative Transaction, Company shall pay to
Purchaser $189,211,500.00 simultaneously with such consummation or entering
into such definitive agreement, as the case may be.
(b) Except as otherwise specifically provided herein, each party shall
bear its own Expenses in connection with this Agreement and the
transactions contemplated hereby, except that each Purchaser and Company
shall bear and pay one-half of the costs and expenses incurred in
connection with the filing, printing and mailing of the Form S-4 and the
Joint Proxy Statement; provided, however, that if Company withdraws, amends
or modifies its recommendation with respect to this Agreement or the
Merger, Purchaser shall not be responsible for any costs or expenses
related to any materials sent or delivered to Company's stockholders in
respect thereof. As used in this Agreement, "Expenses" includes all
out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on
its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the
transactions contemplated hereby, including the preparation, printing,
filing and mailing of the Form S-4 and the Joint Proxy Statement and the
solicitation of stockholder approvals and all other matters related to the
transactions contemplated hereby.
-52-
ARTICLE VIII
GENERAL PROVISIONS
8.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and other agreements in this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time or the termination of this Agreement, as the case may be, except
(a) for those covenants and agreements contained herein that by their terms
apply or are to be performed in whole or in part after the Effective Time
(including the terms of this Article VIII) and (b) for the confidentiality
provisions of Section 5.3 and all of the provisions of Section 7.2, Section 7.3
and Section 8.1, which shall survive termination.
8.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy upon confirmation of receipt, (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Purchaser or Merger Sub, to
Anthem, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, General Counsel
with a copy to
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
and
Xxxxx & Xxxxxxx
000 X. Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
-53-
(b) if to Company, to
Trigon Healthcare, Inc.
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
with a copy to
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
and
McGuireWoods LLP
One Xxxxx Center
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attention: R. Xxxxxx Xxxxx, Esq.
8.3. INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. 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 parties have participated jointly in the negotiating and
drafting of this Agreement and the Option Agreement. In the event of an
ambiguity or a question of intent or interpretation arises, this Agreement and
the Option Agreement shall each be construed as if drafted jointly by the
parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement or the Option Agreement.
8.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement, including the schedules hereto, the Option
Agreement and the Confidentiality Agreement constitute the entire agreement
and supersede all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and
thereof.
-54-
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement; provided, however, that Sections 1.10 and 5.7 may be enforced
against Purchaser or the Surviving Corporation, as the case may be, by the
Persons identified or described therein.
8.6. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Indiana (except to the extent that
Virginia law applies to the internal and corporate affairs of Company).
8.7. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8. AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Company and the stockholders of Purchaser, but, after any
such approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.9. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (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 document delivered pursuant hereto or (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 only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
8.10. ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party, and any attempt to make any such assignment
without such consent shall be null and void, except that Merger Sub may assign,
in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to any direct wholly owned Subsidiary of Purchaser without
the consent of
-55-
Company, but no such assignment shall relieve Merger Sub of any of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.11. SUBMISSION TO JURISDICTION; WAIVERS. Each of Purchaser and Company
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns shall be brought
and determined in the Courts of the State of Indiana and each of Purchaser and
Company hereby irrevocably submits with regard to any such action or proceeding
for itself and in respect to its property, generally and unconditionally, to the
exclusive jurisdiction of the aforesaid courts. Each of Purchaser and Company
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
8.12. ENFORCEMENT. The parties 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. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.13. DEFINITIONS. As used in this Agreement.
(a) "ALTERNATIVE TRANSACTION" means any of the following events: (i)
the acquisition of Company by merger, consolidation, share exchange,
business combination, reorganization, recapitalization, liquidation,
dissolution or other similar transaction (any of the above, a "BUSINESS
COMBINATION TRANSACTION") by any person other than the Purchaser, Merger
Sub or any affiliate thereof (a "THIRD PARTY"), (ii) Company's acquisition
of a Third Person in a Business Combination Transaction in which the
shareholders of the Third Party immediately prior to consummation of such
Business Combination Transaction will own more than 50% of the Company's
outstanding capital stock immediately following such Business Combination
Transaction or (iii) the acquisition by a Third Party of 20% or more of the
outstanding shares of Company Common Stock or of 20% or more of the assets
of Company and its Subsidiaries taken as a whole, in a single transaction
or a series of related transactions.
(b) "AVERAGE PURCHASER PRICE" means the average (rounded to the
nearest thousandth) of the closing trading prices of Purchaser Common Stock
on the NYSE, as
-56-
reported in the Wall Street Journal, Eastern Edition (or such other source
as the parties shall agree in writing), for the 20 full trading days ending
on, and including, the Determination Date.
(c) "BCBSA" means the Blue Cross Blue Shield Association.
(d) "BENEFIT PLANS" means, with respect to any Person, each employee
benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
any bonus, deferred compensation, stock bonus, stock purchase, restricted
stock, stock option, employment, termination, stay agreement or bonus,
change in control and severance plan, program, arrangement and contract) in
effect on the date of this Agreement or disclosed on the Company Disclosure
Schedule or the Purchaser Disclosure Schedule, as the case may be, to which
such Person or its Subsidiary is a party, which is maintained or
contributed to by such Person, or with respect to which such Person could
incur material liability under Section 4069, 4201 or 4212(c) of ERISA.
(e) "BOARD OF DIRECTORS" means the Board of Directors of any specified
Person and any committees thereof.
(f) "BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of New York.
(g) "CONTROLLED GROUP" means any trade or business (whether or not
incorporated) under common control with Company within the meaning of
Sections 414(b), (c), (m) or (o) of the Code.
(h) "DETERMINATION DATE" means the Business Day on which the last of
the following occurs: (i) the condition set forth in Section 6.1(e) is
satisfied, (ii) the condition set forth in Section 6.1(f) is satisfied,
(iii) the condition set forth in Section 6.1(h) is satisfied, and (iv) the
last of the Necessary Consents is obtained (on terms that satisfy Section
6.2(d)).
(i) "GOOD STANDING" means, when used with respect to the status of any
corporation domiciled or doing business in a particular state, that such
corporation has filed its most recent required annual report and (i) if a
domestic corporation, has not filed articles of dissolution, and (ii) if a
foreign corporation, has not applied for a certificate of withdrawal and is
not the subject of a proceeding to revoke its certificate of authority.
(j) "INDEX GROUP" means the group of each of the health benefits
companies listed below, the common stock of all of which shall continue to
be publicly traded and as to which there shall not have been, on or after
April 26, 2002, and before the Determination Date, an announcement of a
proposal for the acquisition or sale of such company, or an announcement
that such company is considering such a transaction. In
-57-
the event that the common stock of any such company ceases to be publicly
traded or any such announcement is made with respect to any such company,
such company will be removed from the Index Group, and the weights (which
have been determined based on the number of outstanding shares of common
stock) redistributed proportionately for purposes of determining the Index
Price. The relevant health benefits companies and the weights attributed to
them are as follows:
---------------------------------------------------------------------------
COMPANY WEIGHTING
---------------------------------------------------------------------------
Aetna 8.5%
---------------------------------------------------------------------------
CIGNA 19.4%
---------------------------------------------------------------------------
Coventry 2.1%
---------------------------------------------------------------------------
First Health Group 3.8%
---------------------------------------------------------------------------
Health Net 4.5%
---------------------------------------------------------------------------
Humana 3.4%
---------------------------------------------------------------------------
Mid Atlantic Medical Services 2.2%
---------------------------------------------------------------------------
Oxford Health Plans 5.2%
---------------------------------------------------------------------------
PacifiCare Health Systems 1.1%
---------------------------------------------------------------------------
United Health Group 36.4%
---------------------------------------------------------------------------
Wellpoint Health Networks 13.4%
---------------------------------------------------------------------------
If any company belonging to the Index Group or Purchaser declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the date
hereof and the Determination Date, the prices for the common stock of such
company or Purchaser shall be appropriately adjusted for the purposes of
applying Section 7.1(i).
(k) "INDEX PRICE" on a given date means the weighted average (weighted
in accordance with the factors listed above) of the closing prices of the
companies composing the Index Group.
(l) "LIENS" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), other charge
or security interest; or any preference, priority or other agreement or
preferential arrangement of any kind or
-58-
nature whatsoever (including, without limitation, any conditional sale or
other title retention agreement, or any capital lease having substantially
the same economic effect as any of the foregoing).
(m) "MATERIAL ADVERSE EFFECT" means, with respect to Purchaser or
Company, as the case may be, (x) any effect that is materially adverse to
the business, assets, operations or condition (financial or otherwise) of
Purchaser and its Subsidiaries, taken as a whole, or Company and its
Subsidiaries, taken as a whole, respectively, other than any effect
relating to (A) the United States or global economy or securities markets
in general, (B) the announcement of this Agreement or the transactions
contemplated hereby or the identity of Purchaser, (C) changes in applicable
law or regulations or in GAAP or regulatory accounting principles or (D)
general changes in the health benefits business, PROVIDED, that with
respect to each of clauses (A), (C) and (D) that such effect is not
materially more adverse with respect to the Company and its Subsidiaries,
taken as a whole, or Purchaser and its Subsidiaries, taken as a whole, as
the case may be, than the effect on comparable health benefits businesses
generally, and (y) any effect that materially impairs, materially delays or
prevents consummation of the transactions contemplated hereby, including
the Merger.
(n) "THE OTHER PARTY" means, with respect to Company, Purchaser and
means, with respect to Purchaser, Company.
(o) "PERMITTED LIENS" means (i) any liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings, (ii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
similar liens, (iii) pledges or deposits in connection with workers'
compensation, unemployment insurance, and other social security legislation
and (iv) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto.
(p) "PERSON" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
(q) "SEC" means the Securities and Exchange Commission.
(r) "SUBSIDIARY" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority
of the voting interests in such partnership) or (ii) at least a majority of
the securities or other interests of which having by their terms ordinary
voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned
-59-
or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(s) "SUPERIOR PROPOSAL" means a bona fide written proposal made by a
Person other than Purchaser, Merger Sub or an affiliate thereof (i) which
is for a merger, consolidation, share exchange, business combination,
reorganization, recapitalization, liquidation, dissolution or other similar
transaction involving, or any purchase or acquisition of, (A) more than
fifty percent (50%) of the voting power of Company's capital stock or (B)
all or substantially all of the consolidated assets of Company and its
Subsidiaries and (ii) which is otherwise on terms which Company's Board of
Directors determines in good faith (A) would result in a transaction that,
if consummated, is more favorable to Company's stockholders, from a
long-term financial point of view, than the Merger or, if applicable, any
proposal by the Purchaser to amend the terms of this Agreement (based on
the written advice of a nationally recognized investment banking firm)
taking into account all the terms and conditions of such proposal and this
Agreement and the relative impact of the Merger and such other proposed
transaction on the other Persons whose interests the Board of Directors of
Company may consider under Virginia law (to the extent they may do so), and
(B) is reasonably capable of being completed on the terms proposed, taking
into account all financial, regulatory, legal and other aspects of such
proposal; provided, however, that no proposal shall be deemed to be a
Superior Proposal if any financing required to consummate the proposal is
not committed.
(t) "TAX" (including, with correlative meaning, the terms "TAXES" and
"TAXABLE") means all federal, state, local and foreign income, profits,
premium, franchise, gross receipts, environmental, customs duty, capital
stock, severance, stamp, payroll, sales, employment, unemployment,
disability, use, property, withholding, excise, production, value added,
occupancy and other taxes, duties or governmental levies of any nature
whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts or filing requirements and any interest in
respect of such penalties and additions.
(u) "TAX RETURN" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates, information returns,
claims for refund, and amended returns) relating to Taxes.
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IN WITNESS WHEREOF, Purchaser, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ANTHEM, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxxx
------------------------------
Title: President and Chief Executive
------------------------------
Officer
------------------------------
AI SUB ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxxx
------------------------------
Title: President and Chief Executive
------------------------------
Officer
------------------------------
TRIGON HEALTHCARE, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
-------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
------------------------------
Title: Chairman & Chief Executive
------------------------------
Officer
------------------------------
Merger Agreement Signature Page
EXECUTION COPY
--------------
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 28, 2002 (this "OPTION
AGREEMENT"), between Anthem, Inc. an Indiana corporation ("GRANTEE"), and
Trigon Healthcare, Inc. a Virginia corporation ("ISSUER").
RECITALS
A. MERGER AGREEMENT. Grantee and Issuer have entered into an Agreement
and Plan of Merger, dated as of April 28, 2002 (as amended, restated or
otherwise modified from time to time, the "MERGER AGREEMENT"), which agreement
was executed and delivered concurrently with the execution and delivery of this
Option Agreement, pursuant to which Issuer is to merge with and into a wholly
owned subsidiary of Grantee (the "MERGER"); and
B. OPTION. As a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. GRANT OF OPTION.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "OPTION") to purchase, subject to the terms hereof, up to an
aggregate of 19.9% of the total fully paid and nonassessable shares of the
Class A common stock, par value $0.01 per share, of Issuer ("COMMON STOCK")
issued and outstanding at the close of business on April 28, 2002, at a
price per share equal to $84.25 (the "OPTION PRICE"). The number of shares
of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth; PROVIDED,
HOWEVER, that in no event shall the number of shares for which this Option
is exercisable (when exercisable) exceed 19.9% of the issued and
outstanding shares of Common Stock. Issuer shall make proper provision so
that each share of Common Stock issued upon exercise of the Option shall be
accompanied by the applicable number of rights under the Company Rights
Agreement (as such term is defined in the Merger Agreement).
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Option Agreement and other than pursuant to an event
described in Section 5 hereof), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance, such
number, together with any shares of Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Common Stock then
EXHIBIT A
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option.
2. EXERCISE.
(a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, a Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination
Event (as hereinafter defined); PROVIDED that the Holder shall have sent
written notice of such exercise (as provided in subsection (d) of this
Section 2) within ninety (90) days following such Triggering Event (or such
later period as provided in Section 10). An Exercise Termination Event
shall be the earliest to occur of the following: (1) the Effective Time (as
defined in the Merger Agreement) of the Merger; (2) termination of the
Merger Agreement in accordance with the provisions thereof if such
termination would not result in a termination fee (or partial fee) being
payable to Grantee pursuant to the provisions of Section 7.3 of the Merger
Agreement either upon such termination or at any time thereafter; or (3)
the passage of fifteen (15) months (or such longer period as provided in
Section 10) after termination of the Merger Agreement if such termination
results in a termination fee (or partial fee) being payable to Grantee
pursuant to the provisions of Section 7.3 of the Merger Agreement either
upon such termination or at any time thereafter. The term "HOLDER" shall
mean the holder or holders of the Option.
(b) The term "TRIGGERING EVENT" shall mean the consummation of an
Alternative Transaction (as such term is defined in the Merger Agreement)
or the Company entering into a definitive agreement with respect to an
Alternative Transaction, in either case, following a termination of the
Merger Agreement, if such consummation of an Alternative Transaction or
entering into a definitive agreement with respect to an Alternative
Transaction results in a termination fee (or partial fee) being due and
payable to Grantee pursuant to the terms of Section 7.3 of the Merger
Agreement.
(c) Issuer shall notify Grantee in writing of the occurrence of any
Triggering Event promptly after it becomes aware of the occurrence thereof,
it being understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(d) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice
(the date of which being herein referred to as the "NOTICE DATE")
specifying (1) the total number of shares of Common Stock it will purchase
pursuant to such exercise and (2) a place and date not earlier than three
business days nor later than ten (10) business days from the Notice Date
for the closing of such purchase (the "CLOSING DATE"); PROVIDED, that if
prior notification to, approval or consent of the Blue Cross and Blue
Shield Association ("BCBSA"), the Virginia State Corporation Commission or
any other regulatory or antitrust agency is required in connection with
such purchase, or to avoid or prevent a conflict, violation,
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EXHIBIT A
default, right of termination, cancellation or loss with or of the license
granted under the Blue Cross License Agreement and the Blue Shield License
Agreement, each as amended through the date hereof, by and between BCBSA
and Issuer, the Holder shall promptly file the required notice or
application for approval or consent, shall promptly notify Issuer of such
filing and shall expeditiously process the same and the Closing Date shall
occur on the Business Day following the date on which the later of the
following occurs: (i) any required notification periods have expired or
been terminated and (ii) any such approvals or consents have been obtained
and any requisite waiting period or periods shall have passed.
(e) At the closing referred to in subsection (d) of this Section 2,
the Holder shall (1) pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
cash and (2) present and surrender this Agreement to Issuer at its
principal executive offices, PROVIDED that the failure or refusal of the
Issuer to accept the purchase price or accept surrender of this Agreement
shall not preclude the Holder from exercising the Option.
(f) At such closing, simultaneously with the delivery of immediately
available funds satisfying the criteria specified in subsection (e) of this
Section 2, (1) Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock purchased by
the Holder and, if the Option should be exercised in part only, a new
Option evidencing the rights of the Holder thereof to purchase the balance
of the shares purchasable hereunder and (2) Grantee shall deliver to Issuer
a letter agreeing that Grantee shall not offer to sell or otherwise dispose
of such shares of Common Stock in violation of applicable federal and state
securities laws or the provisions of this Agreement.
(g) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under
the Securities Act of 1933, as amended. A copy of such agreement is
on file at the principal office of Issuer and will be provided to
the holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (1) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 ACT") in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy
of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect that such
legend is not required for purposes of the 1933 Act; (2) the reference to
the provisions of
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EXHIBIT A
this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference in
the opinion of counsel to the Holder, in form and substance reasonably
satisfactory to the Issuer; and (3) the legend shall be removed in its
entirety if the conditions in the preceding clauses (1) and (2) are both
satisfied. In addition, such certificates shall bear any other legend as
may be required by law.
(h) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (d) of this Section 2
and the tender of the applicable purchase price, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 2 in the name
of the Holder or its assignee, transferee or designee.
3. COVENANTS OF ISSUER. Issuer agrees: (1) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
then-outstanding options, warrants, convertible securities and other rights to
purchase Common Stock; (2) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (3) promptly to take all action as may from time to time be
reasonably required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder, (y) in the event, under any
applicable Virginia or other state insurance law prior approval of or notice to
any state regulatory authority is necessary before the Option may be exercised,
and (z) in the event approval or consent of the BCBSA is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to such state regulatory
authorities as they may require) in order to permit the Holder to exercise the
Option and Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and (4) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. EXCHANGE. This Option Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Option Agreement at the principal office of Issuer, for
other Option Agreements providing for Options of different denominations
entitling the holder thereof to purchase, on the same terms and subject to the
same conditions as are set forth herein, in the aggregate the same
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EXHIBIT A
number of shares of Common Stock purchasable hereunder. The terms "OPTION
Agreement" and "OPTION" as used herein include any Option Agreements and related
Options for which this Option Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Option Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Option Agreement, if mutilated,
Issuer will execute and deliver a new Option Agreement of like tenor and date.
Any such new Option Agreement executed and delivered shall constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. CERTAIN ADJUSTMENTS. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the Option pursuant
to Section 1 of this Option Agreement, the number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5. In the
event of any change in Common Stock by reason of a stock dividend, stock split,
split-up, recapitalization, stock combination, exchange of shares or similar
transaction, the type and number of shares or securities subject to the Option,
and the Option Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction, so that
Grantee shall receive, upon exercise of the Option, the same number and class of
shares or other securities or property that Grantee would have received in
respect of Common Stock if the Option had been exercised immediately prior to
such event, or the record date therefor, as applicable. If any additional shares
of Common Stock are issued after the date of this Option Agreement (other than
pursuant to an event described in the first sentence of this Section 5 or upon
exercise of the Option), the number of shares of Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
6. REGISTRATION RIGHTS. Upon the occurrence of a Triggering Event
Issuer shall, at the request of Grantee delivered within twelve (12) months (or
such later period as provided in Section 10) of such Triggering Event (whether
on its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a registration statement under the 1933 Act
covering any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
any shares of Common Stock issued upon total or partial exercise of this Option
("OPTION SHARES") in accordance with any plan of disposition requested by
Grantee. Issuer will use its reasonable best efforts to cause such registration
statement promptly to become effective and then to remain effective for such
period not in excess of 180 days from the day such registration statement first
becomes effective or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Grantee shall have the right to
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EXHIBIT A
demand two such registrations. The Issuer shall bear the costs of such
registrations (including, but not limited to, Issuer's attorneys' fees, printing
costs and filing fees, except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's counsel related
thereto). The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering by Issuer of shares
of Common Stock, and if in the good faith judgment of the managing underwriter
or managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; PROVIDED, HOWEVER, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 33% of the total number
of shares to be sold by the Holder and Issuer in the aggregate; and PROVIDED
FURTHER, HOWEVER, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable thereafter as
to which no reduction pursuant to this Section 6 shall be permitted or occur and
the Holder shall thereafter be entitled to one additional registration and the
twelve (12) month period referred to in the first sentence of this section shall
be increased to eighteen (18) months. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall the number of registrations that Issuer is obligated to effect
be increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Option Agreement.
7. REPURCHASE.
(a) At any time after the occurrence of a Triggering Event (1) at the
written request of the Holder, delivered prior to an Exercise Termination
Event (or such later period as provided in Section 10), Issuer (or any
successor thereto) shall repurchase the Option from the Holder at a price
(the "OPTION REPURCHASE PRICE") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be
exercised and (2) at the written request of any present or former Holder
who at the time owns Option Shares (each, the "OWNER"), delivered prior to
an Exercise Termination Event (or such later period as provided in Section
10), Issuer (or any successor thereto) shall repurchase such number of
Option Shares from the Owner as the Owner shall designate at a price
-6-
EXHIBIT A
(the "OPTION SHARE REPURCHASE PRICE") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term
"MARKET/OFFER PRICE" shall mean the highest of (i) the price per share of
Common Stock at which a tender or exchange offer therefor has been made,
(ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding
the date the Holder gives notice of the required repurchase of this Option
or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or any substantial
part of Issuer's assets, the sum of the net price paid in such sale for
such assets and the current market value of the remaining net assets of
Issuer as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to Issuer, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by
the Holder or Owner, as the case may be, and reasonably acceptable to
Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, a copy of this Option Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or notices
stating that the Holder or the Owner, as the case may be, elects to require
Issuer to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. The Holder and the Owner, as the
case may be, shall also represent and warrant that it has sole record and
beneficial ownership of such Option Shares and that such Option Shares are
then free and clear of all liens. As promptly as practicable, and in any
event within five (5) business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of such
notice or notices relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Issuer
is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as
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EXHIBIT A
appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five (5) business days after the date on which Issuer is
no longer so prohibited; PROVIDED, HOWEVER, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in
whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (1) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price and/or the Option
Share Repurchase Price that Issuer is not prohibited from delivering; and
(2) deliver, as appropriate, either (A) to the Holder, a new Option
Agreement evidencing the right of the Holder to purchase that number of
shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Option Agreement was exercisable at
the time of delivery of the notice of repurchase by a fraction, the
numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the
Option Repurchase Price, and/or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by
Issuer described in the first sentence of this subsection (c), or shall be
scheduled to occur at any time before the expiration of a period ending on
the thirtieth day after such date, the Holder shall nonetheless have the
right to exercise the Option until the expiration of such 30-day period.
8. SUBSTITUTE OPTION.
(a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (1) to consolidate with or merge into any
person, other than Grantee or a Subsidiary (as defined in the Merger
Agreement) of Grantee ("Grantee Subsidiary"), or engage in a plan of
exchange with any person, other than Grantee or a Grantee Subsidiary and
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquirer in such plan of exchange, (2) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge
into Issuer or be acquired by Issuer in a plan of exchange and Issuer shall
be the continuing or surviving or acquiring corporation, but, in connection
with such merger or plan of exchange, the then outstanding shares of Common
Stock shall be changed into or exchanged for stock or other securities of
any other person or cash or any other property or the then outstanding
shares of Common Stock shall after such merger or plan of exchange
represent less than 50% of the outstanding voting shares and share
equivalents of the merged or acquiring company, or (3) to sell or otherwise
transfer all or substantially all of its or any Issuer Subsidiary's assets,
in one transaction or in a series of related transactions, to any person,
other than Grantee or a Grantee Subsidiary, then, and in each such case,
the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and
upon the terms and conditions set forth herein, be converted into, or
exchanged for, an option (the "SUBSTITUTE OPTION"), at the election of
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EXHIBIT A
the Holder, of either (x) the Acquiring Corporation (as hereinafter
defined) or (y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "ACQUIRING CORPORATION" shall mean (A) the continuing or
surviving person of a consolidation or merger with Issuer (if other
than Issuer), (B) the acquiring person in a plan of exchange in which
Issuer is acquired, (C) the Issuer in a merger or plan of exchange in
which Issuer is the continuing or surviving or acquiring person and
(D) the transferee of all or a substantial part of Issuer's assets (or
the assets of any Issuer Subsidiary).
(2) "SUBSTITUTE COMMON STOCK" shall mean the common stock issued
by the issuer of the Substitute Option.
(3) "ASSIGNED VALUE" shall mean the market/offer price, as
defined in Section 7.
(4) "AVERAGE PRICE" shall mean the average closing price of a
share of the Substitute Common Stock for one (1) year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale;
PROVIDED that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
PROVIDED that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Option Agreement, which agreement shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by twice the number of shares of Common Stock for which the
Option was exercisable immediately prior to the event described in the
first sentence of Section 8(a), divided by the Average Price (the "NUMBER
OF SUBSTITUTE SHARES"). The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to (I) the Average
Price minus (II) quotient of (x) the product of (i) the Assigned Value
minus the Option Price multiplied by (ii) the number of shares of Common
Stock for which the Option was exercisable immediately prior to the event
described in the first sentence of Section 8(a) and (y) the Number of
Substitute Shares.
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EXHIBIT A
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the sum (the "SUBSTITUTE OPTION SUM") of (i) the Number of Substitute
Shares and (ii) the number of shares of Substitute Common Stock that the
Grantee would hold if all shares of Common Stock previously obtained by
Grantee through exercise of the Option were converted in any transaction
contemplated by Section 8(a), exceed 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option Sum would exceed 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise but for this clause
(e), the issuer of the Substitute Option (the "SUBSTITUTE OPTION ISSUER")
shall make a cash payment to Holder equal to the excess of (1) the value of
the Substitute Option without giving effect to the limitation in this
clause (e) over (2) the value of the Substitute Option after giving effect
to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) At the written request of the holder of the Substitute Option (the
"SUBSTITUTE OPTION HOLDER") made prior to an Exercise Termination Event,
the Substitute Option Issuer shall repurchase the Substitute Option from
the Substitute Option Holder at a price (the "SUBSTITUTE OPTION REPURCHASE
PRICE") equal to the amount by which (1) the Highest Closing Price (as
hereinafter defined) exceeds (2) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for
which the Substitute Option may then be exercised, and at the written
request made prior to an Exercise Termination Event of any present or
former Substitute Option Holder (each, the "SUBSTITUTE SHARE OWNER") who at
the time owns shares of Substitute Common Stock issued upon total or
partial exercise of the Substitute Option ("SUBSTITUTE SHARES"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "SUBSTITUTE SHARE REPURCHASE PRICE") equal to the Highest Closing
Price multiplied by the number of Substitute Shares to be so repurchased.
The term "HIGHEST CLOSING PRICE" shall mean the highest closing price for
shares of Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner
gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of
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EXHIBIT A
this Option Agreement) and/or certificates for Substitute Shares
accompanied by a written notice or notices stating that the Substitute
Option Holder or the Substitute Share Owner, as the case may be, elects to
require the Substitute Option Issuer to repurchase the Substitute Option
and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five (5)
business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice
or notices relating thereto, the Substitute Option Issuer shall deliver or
cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute
Shares in part or in full, the Substitute Option Issuer shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate,
the portion of the Substitute Option Repurchase Price and/or the Substitute
Share Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five (5) business days after the date on which the
Substitute Option Issuer is no longer so prohibited; PROVIDED, HOWEVER,
that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively,
in full (and the Substitute Option Issuer shall use its reasonable best
efforts to receive all required regulatory and legal approvals as promptly
as practicable in order to accomplish such repurchase), the Substitute
Option Holder and/or Substitute Share Owner may revoke its notice of
repurchase of the Substitute Option or the Substitute Shares either in
whole or to the extent of such prohibition, whereupon, in the latter case,
the Substitute Option Issuer shall promptly (1) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of
the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering;
and (2) deliver, as appropriate, either (A) to the Substitute Option
Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of Substitute Common Stock
obtained by multiplying the number of shares of Substitute Common Stock for
which the surrendered Substitute Option was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which
is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator
of which is the Substitute Option Repurchase Price, and/or (B) to the
Substitute Share Owner, a certificate for the Substitute Option Shares it
is then so
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EXHIBIT A
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by the Substitute Option Issuer
described in the first sentence of this subsection (c), or shall be
scheduled to occur at any time before the expiration of a period ending on
the thirtieth day after such date, the Substitute Option Holder shall
nevertheless have the right to exercise the Substitute Option until the
expiration of such 30-day period.
10. EXTENSION OF PERIODS UNDER CERTAIN CIRCUMSTANCES. The periods for
exercise of certain rights under Sections 2, 6, 7, and 9 (and the
expiration date of this Option under Section 2) shall be extended for up to
a maximum of six months in any given case: (1) to the extent necessary to
obtain all regulatory or other approvals (including of the BCBSA) for the
exercise of such rights (for so long as the Holder, Owner, Substitute
Option Holder or Substitute Share Owner, as the case may be, is using
commercially reasonable efforts to obtain such regulatory or other
approvals), and for the expiration of all statutory waiting periods; (2) to
the extent necessary to avoid liability under Section 16(b) of the 1934 Act
by reason of such exercise; and (3) when there exists an injunction, order
or judgment that prohibits or delays exercise of such right.
11. REPRESENTATIONS AND WARRANTIES.
(a) Issuer hereby represents and warrants to Grantee as follows:
(1) Issuer has the requisite corporate power and authority to
execute and deliver this Option Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Option Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors
of Issuer ("Issuer Board") prior to the date hereof and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Option Agreement or to consummate the transactions so
contemplated. This Option Agreement has been duly and validly executed
and delivered by Issuer.
(2) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Option Agreement in accordance
with its terms will have reserved for issuance upon the exercise of
the Option, that number of shares of Common Stock equal to the maximum
number of shares of Common Stock at any time and from time to time
issuable hereunder, and all such shares, upon issuance pursuant to the
Option, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any
preemptive rights.
(b) Grantee hereby represents and warrants to Issuer as follows:
Grantee has the requisite corporate power and authority to execute and
deliver this Option Agreement
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EXHIBIT A
and to perform its obligations hereunder. The execution and delivery of
this Option Agreement by the Grantee and the performance of its obligations
hereunder by the Grantee have been duly and validly authorized by the Board
of Directors of Grantee and no other corporate proceedings on the part of
the Grantee are necessary to authorize this Option Agreement or for Grantee
to perform its obligations hereunder. This Option Agreement has been duly
and validly executed and delivered by Grantee.
(c) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed or except in a transaction registered or
exempt from registration under the 1933 Act.
12. ASSIGNMENT. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Triggering Event shall have occurred, Grantee,
subject to the express provisions hereof, may assign in whole or in part its
rights and obligations hereunder; PROVIDED, HOWEVER, that until the date fifteen
(15) days following the later of the date on which the BCBSA, the Virginia State
Corporation Commission or other regulatory authority has approved an application
by Grantee to acquire the shares of Common Stock subject to the Option, Grantee
may not assign its rights under the Option except in (1) a widely dispersed
public distribution, (2) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of Issuer, (3) an
assignment to a single party (E.G., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's behalf
or (4) any other manner approved by the BCBSA, the Virginia State Corporation
Commission or other regulatory authority.
13. FILINGS, ETC. Each of Grantee and Issuer will use its reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Option Agreement, including, without
limitation, applying to the BCBSA and the Virginia State Corporation Commission
for approval to acquire the shares issuable hereunder.
14. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Option Agreement by either
party hereto and that the obligations of the parties hereto shall be enforceable
by either party hereto through injunctive or other equitable relief. In
connection therewith, both parties waive the posting of any bond or similar
requirement.
15. MAXIMUM PROFIT.
(a) Notwithstanding any other provision herein or of the Merger
Agreement, in no event shall Grantee's Total Profit (as defined in Section
15(c)) exceed $189,211,500.00 (the "MAXIMUM PROFIT"), and, if the Total
Profit would otherwise exceed such amount, Grantee, at its sole election,
shall either (1) reduce the number of shares
-13-
EXHIBIT A
subject to the Option (and any Substitute Option), (2) deliver to Issuer,
or Substitute Issuer, as the case may be, for cancellation shares of Common
Stock or Substitute Common Stock, as the case may be, previously purchased
by Grantee valued at fair market value at the time of delivery, (3) pay
cash to Issuer, or Substitute Issuer, as the case may be, (4) increase or
otherwise adjust the Option Price or Substitute Option Price (or any
portion thereof), (5) reduce the amount of the Option Repurchase Price or
Substitute Option Repurchase Price, or (6) undertake any combination of the
foregoing, so that Grantee's actually realized Total Profit shall not
exceed the Maximum Profit after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Option Agreement, the
Option (and any Substitute Option) may not be exercised for a number of
shares as would, as of the date of exercise, result in a Notional Total
Profit (as defined in Section 15(d)) of more than the Maximum Profit and,
if exercise of the Option (and any Substitute Option) would otherwise
result in the Notional Total Profit exceeding such amount, Grantee, in its
discretion, may take any of the actions specified in Section 15(a) so that
the Notional Total Profit shall not exceed the Maximum Profit; PROVIDED,
that nothing in this sentence shall restrict any subsequent exercise of the
Option (and any Substitute Option) which at such time complies with this
sentence.
(c) For purposes of this Option Agreement, the term "TOTAL PROFIT"
shall mean the aggregate amount (before taxes) of the following: (1) the
excess of (A) the net cash amounts or fair market value of any property
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, after payment of applicable brokerage or sales
commissions and discounts, if any, over (B) Grantee's aggregate purchase
price for such Option Shares (or other securities), plus (2) all amounts
received by Grantee, a Holder or an Owner (including a Substitute Option
Holder or Substitute Share Owner) upon the repurchase of the Option and/or
any Option Shares by Issuer pursuant to Section 7 (or upon the repurchase
of the Substitute Option and/or the Substitute Shares by Issuer pursuant to
Section 9) (net in the case of Option Shares or Substitute Option Shares of
the Owner's or Substitute Share Owner's aggregate purchase price therefor),
plus (3) all equivalent amounts with respect to the Substitute Option and
any other amounts paid pursuant to Sections 8(e) and 9, if any, plus (4)
the amount of any termination fee paid or due and payable under the terms
of the Merger Agreement (unless such termination fee is payable and has not
been paid by Issuer in breach of the Merger Agreement or due to written
waiver of such termination fee by Grantee) to Grantee pursuant to Section
7.3 of the Merger Agreement, minus (5) all amounts of cash previously paid
to Issuer pursuant to Section 15(a)(3) and the value of all Option Shares
(or other securities) previously delivered to Issuer for cancellation
pursuant to Section 15(a)(2), which value shall be as set forth in clause
(2) of Section 15(a).
-14-
EXHIBIT A
(d) For purposes of this Option Agreement, the term "NOTIONAL TOTAL
PROFIT" with respect to any number of shares of Common Stock or Substitute
Common Stock, as applicable, as to which Grantee may propose to exercise
the Option or Substitute Option, as applicable, shall be the Total Profit,
determined as of the date of such proposed exercise assuming (1) that the
Option were exercised on such date for such number of shares, (2) that such
shares, together with all other Option Shares held by Grantee and its
affiliates as of such date, were sold for cash at the closing market price
for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions) and (3) the effect of any
adjustments made by or to be made by Grantee pursuant to Section 15(a). For
purposes of this Section 15, the term Grantee will include all Holders and
transactions by any affiliate transferee of Grantee in respect of the
Option or Option Shares transferred to it shall be treated as if made by
Grantee.
16. SEVERABILITY. If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in Section l(a)
hereof (as adjusted pursuant to Section l(b) or Section 5 hereof), it is the
express intention of Issuer to allow the Holder to acquire or to require Issuer
to repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
17. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by fax, telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. GOVERNING LAW. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana applicable to
contracts made and to be performed entirely in that State (except to the extent
that Virginia law applies to the internal and corporate affairs of Issuer).
19. COUNTERPARTS. This Option Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
20. EXPENSES. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
-15-
EXHIBIT A
21. ENTIRE AGREEMENT; THIRD-PARTY RIGHTS. Except as otherwise
expressly provided herein or in the Merger Agreement, this Option Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assignees. Nothing
in this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
22. CAPITALIZED TERMS. Capitalized terms used in this Option Agreement
and not defined herein shall have the meanings assigned thereto in the Merger
Agreement.
-15-
EXHIBIT A
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
TRIGON HEALTHCARE, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
-------------------------------------
Xxxxxx X. Xxxxx, Xx.
Chairman & Chief Executive Office
ANTHEM, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxxx
President and Chief Executive Officer
Option Agreement Signature Page
EXECUTION COPY
--------------
EXHIBIT B
EXECUTIVES WITH RETENTION AGREEMENTS PURSUANT TO 5.6(C)
-------------------------------------------------------
Xxxxxx X. Xxxx
Xxxxxx Xxxxx
EXECUTION COPY
--------------
EXHIBIT C
Form of Trigon Healthcare, Inc. Affiliate Letter
April 28, 2002
Anthem, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Ladies and Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be
an "affiliate" of Trigon Healthcare, Inc., a Virginia corporation (the
"COMPANY"), as that term is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations (the "RULES AND REGULATIONS") of the
Securities and Exchange Commission (the "COMMISSION") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
April 28, 2002 (as it may be amended, supplemented or modified from time to
time, the "MERGER AGREEMENT"), among Anthem, Inc., an Indiana corporation
("PURCHASER"), AI Sub Acquisition Corp., an Indiana corporation ("MERGER SUB"),
and the Company, the Company will be merged with and into Merger Sub (the
"MERGER"). Capitalized terms used herein but not defined shall have the
respective meanings ascribed to such terms in the Merger Agreement.
In consideration of the agreements contained herein, Purchaser's
reliance on this letter in connection with the consummation of the Merger and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, I hereby represent, warrant and agree that I will not
make any sale, transfer or other disposition of any shares of Purchaser Common
Stock received by me pursuant to the Merger in violation of the Securities Act
or the Rules and Regulations.
I have been advised that the issuance of the shares of Purchaser
Common Stock pursuant to the Merger will have been registered with the
Commission under the Securities Act on a Registration Statement on Form S-4. I
have also been advised, however, that since I may be deemed to be an affiliate
of the Company at the time the Merger is submitted for a vote of the
stockholders of the Company, the Purchaser
Common Stock received by me may be disposed by me only (i) pursuant to an
effective registration under the Securities Act, (ii) in conformity with the
volume and other limitations of Rule 145 promulgated by the Commission under the
Securities Act, (iii) in reliance upon an exemption from registration that is
available under the Securities Act or (iv) after receipt of an opinion of
counsel reasonably acceptable to Purchaser, or under a no-action or
interpretative letter obtained from the Commission, stating that, such sale,
transfer or other disposition will not violate or is otherwise exempt from
registration under the Securities Act.
I also understand that instructions will be given to Purchaser's
transfer agent with respect to the Purchaser Common Stock to be received by me
pursuant to the Merger and that there will be placed on the certificates
representing such shares of Purchaser Common Stock, or any substitutes therefor,
a legend stating in substance as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IN COMPLIANCE WITH THE REQUIREMENTS OF RULE 145 OR
PURSUANT TO A REGISTRATION STATEMENT UNDER THAT ACT OR AN EXEMPTION
FROM SUCH REGISTRATION."
It is understood and agreed that the legend set forth above shall be
removed upon surrender of certificates bearing such legend by delivery of
substitute certificates without such legend if (i) one year shall have elapsed
from the date that I received Purchaser Common Stock in the Merger and the
provisions of Rule 145(d)(2) are then applicable to me, (ii) two years shall
have elapsed from the date that I received Purchaser Common Stock in the Merger
and the provisions of Rule 145(d)(3) are then applicable to me, or (iii) I have
delivered to Purchaser an opinion of counsel, in form and substance reasonably
satisfactory to Purchaser, or a no-action or interpretative letter obtained from
the Commission, to the effect that such legend is not required for purposes of
the Securities Act.
I further understand and agree that Purchaser is under no obligation
to register the sale, transfer or other disposition of Purchaser Common Stock by
me or on my behalf under the Securities Act or to take any other action
necessary in order to make compliance with an exemption from such registration
available.
Neither execution of this letter nor any provisions set forth herein
should be construed as an admission on my part that I am an "affiliate" of the
Company as described in the first paragraph of this letter, or a waiver of any
right I may have to object to any claim that I am such an affiliate on or after
the date of this letter.
By Anthem's acceptance of this letter, Anthem hereby agrees with me
that, for a period of two years after the Effective Time (as defined in the
Merger Agreement), it shall use its reasonable efforts to (i) file, on a timely
basis, all reports and data required to be filed with the Commission by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and (ii) furnish to me upon request a written statement as to
whether Anthem has complied with such reporting requirements during the 12
months preceding any proposed sale of Purchaser Common Stock by me under Rule
145.
This letter agreement constitutes the complete understanding between
Purchaser and me concerning the subject matter hereof. Any notice required to be
sent to either party hereunder shall be sent by registered or certified mail,
return receipt requested, using the addresses set forth herein or such other
address as shall be furnished in writing by the parties. This letter agreement
shall be governed by and construed and interpreted in accordance with, the laws
of the State of Indiana.
If you are in agreement with the foregoing, please so indicate by
signing below and returning a copy of this letter to me, at which time this
letter shall become a binding agreement between us.
Very truly yours,
_______________________
Name:
Accepted this ____ day
of __________, 2002 by
ANTHEM, INC.
By:_______________________
Name:_____________________
Title:____________________
