Mid Atlantic Medical Services Inc. Contracts
Sample Business Contracts
Agreement and Plan of Merger - UnitedHealth Group Inc. and Mid Atlantic Medical Services Inc.
EXECUTION COPY
--------------
================================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of October 26, 2003
Among
UNITEDHEALTH GROUP INCORPORATED,
MU ACQUISITION LLC
And
MID ATLANTIC MEDICAL SERVICES, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I The Merger.....................................................1
Section 1.01. The Merger...............................................1
Section 1.02. Closing..................................................1
Section 1.03. Effective Time...........................................2
Section 1.04. Effects of the Merger....................................2
Section 1.05. Certificate of Formation; Operating Agreement............2
Section 1.06. Managers.................................................2
Section 1.07. Officers.................................................2
ARTICLE II Effect of the Merger on the Capital Stock of the
Constituent Entities; Exchange of Certificates;
Company Stock Options..........................................3
Section 2.01. Effect on Capital Stock..................................3
Section 2.02. Exchange of Certificates.................................4
Section 2.03. Company Stock Options....................................8
ARTICLE III Representations and Warranties of the Company..................9
Section 3.01. Organization, Standing and Corporate Power...............9
Section 3.02. Subsidiaries............................................10
Section 3.03. Capital Structure.......................................10
Section 3.04. Authority; Noncontravention.............................12
Section 3.05. Governmental Approvals..................................13
Section 3.06. Company SEC Documents; No Undisclosed Liabilities.......13
Section 3.07. Information Supplied....................................14
Section 3.08. Absence of Certain Changes or Events....................14
Section 3.09. Litigation..............................................15
Section 3.10. Contracts...............................................15
Section 3.11. Compliance with Laws....................................17
Section 3.12. Employee Benefit Plans..................................18
Section 3.13. Taxes...................................................20
Section 3.14. Brokers and Other Advisors..............................22
Section 3.15. Opinion of Financial Advisor............................22
Section 3.16. Statutory Financial Statements..........................22
Section 3.17. Reserves................................................23
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 3.18. SCT Agreement...........................................23
ARTICLE IV Representations and Warranties of Parent and Merger Sub.......23
Section 4.01. Organization, Standing and Corporate Power..............24
Section 4.02. Capital Structure.......................................24
Section 4.03. Authority; Noncontravention.............................25
Section 4.04. Governmental Approvals..................................26
Section 4.05. Parent SEC Documents....................................26
Section 4.06. Information Supplied....................................27
Section 4.07. Absence of Certain Changes or Events....................27
Section 4.08. Litigation..............................................27
Section 4.09. Compliance with Laws....................................28
Section 4.10. No Business Activities..................................28
Section 4.11. No Parent Vote Required.................................28
Section 4.12. Taxes...................................................28
ARTICLE V Covenants Relating to Conduct of Business.....................29
Section 5.01. Conduct of Business.....................................29
Section 5.02. No Solicitation by the Company..........................33
ARTICLE VI Additional Agreements.........................................36
Section 6.01. Preparation of the Form S-4 and the Proxy Statement;
Stockholder Meetings....................................36
Section 6.02. Access to Information; Confidentiality..................37
Section 6.03. Reasonable Efforts......................................38
Section 6.04. Indemnification, Exculpation and Insurance..............39
Section 6.05. Fees and Expenses.......................................39
Section 6.06. Public Announcements....................................40
Section 6.07. Affiliates..............................................40
Section 6.08. Stock Exchange Listing..................................40
Section 6.09. Reorganization Treatment................................40
Section 6.10. Stockholder Litigation..................................40
Section 6.11. Employee Matters........................................41
Section 6.12. Employment Agreements...................................42
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 6.13. Standstill Agreements, Confidentiality Agreements,
Anti-takeover Provisions................................42
Section 6.14. Issuance of Shares......................................42
ARTICLE VII Conditions Precedent..........................................42
Section 7.01. Conditions to Each Party's Obligation to Effect the
Merger..................................................42
Section 7.02. Conditions to Obligations of Parent and Merger Sub......43
Section 7.03. Conditions to Obligation of the Company.................44
Section 7.04. Frustration of Closing Conditions.......................45
ARTICLE VIII Termination, Amendment and Waiver.............................45
Section 8.01. Termination.............................................45
Section 8.02. Termination Fee.........................................46
Section 8.03. Effect of Termination...................................48
Section 8.04. Amendment...............................................48
Section 8.05. Extension; Waiver.......................................48
Section 8.06. Procedure for Termination or Amendment..................48
ARTICLE IX General Provisions............................................48
Section 9.01. Nonsurvival of Representations and Warranties...........48
Section 9.02. Notices.................................................48
Section 9.03. Definitions.............................................50
Section 9.04. Interpretation..........................................50
Section 9.05. Counterparts............................................51
Section 9.06. Entire Agreement; No Third-Party Beneficiaries..........51
Section 9.07. Governing Law...........................................51
Section 9.08. Assignment..............................................51
Section 9.09. Specific Enforcement; Consent to Jurisdiction...........52
Section 9.10. Severability............................................52
<PAGE>
TABLE OF DEFINED TERMS
SECTION
TERM
Adverse Recommendation Notice..........................................5.02(b)
Affected Employees.....................................................6.11(c)
Affiliate..............................................................9.03(a)
Agreement.............................................................Preamble
Certificate............................................................2.01(c)
Certificate of Merger...................................................1.03
Closing.................................................................1.02
Closing Date............................................................1.02
COBRA..................................................................3.12(h)
Code..................................................................Recitals
Company...............................................................Preamble
Company Adverse Recommendation Change..................................5.02(b)
Company By-laws.........................................................3.01
Company Certificate.....................................................3.01
Company Common Stock....................................................2.01
Company Disclosure Schedule..........................................Article III
Company Material Adverse Effect.........................................3.01
Company Plans..........................................................3.12(a)
Company Preferred Stock................................................3.03(a)
Company SEC Documents..................................................3.06(a)
Company Stock Options..................................................3.03(a)
Company Stock Plans....................................................3.03(a)
Company Stockholder Approval...........................................3.04(a)
Company Stockholders Meeting...........................................6.01(b)
Company Superior Proposal..............................................5.02(a)
Company Takeover Proposal..............................................5.02(a)
Confidentiality Agreement..............................................6.02(a)
Contract...............................................................3.04(b)
Delaware Law............................................................1.01
Effective Time..........................................................1.03
Employees..............................................................3.12(a)
Employment Agreements...................................................6.12
ERISA..................................................................3.12(a)
Exchange Act............................................................3.05
Exchange Agent.........................................................2.02(a)
Exchange Fund..........................................................2.02(a)
Exchange Ratio.........................................................2.01(c)
Filed Company SEC Documents.............................................3.08
Form S-4................................................................3.07
GAAP...................................................................3.06(a)
Governmental Authority..................................................3.05
HSR Act.................................................................3.05
IRS....................................................................3.13(c)
<PAGE>
TABLE OF DEFINED TERMS
(CONTINUED)
SECTION
TERM
Knowledge..............................................................9.03(b)
Laws....................................................................3.11
Liens...................................................................3.02
Merger................................................................Recitals
Merger Consideration...................................................2.01(c)
Merger Sub............................................................Preamble
Merger Sub Interests...................................................4.02(b)
Parent................................................................Preamble
Parent Common Stock....................................................2.01(c)
Parent Disclosure Schedule...........................................Article IV
Parent Material Adverse Effect..........................................4.01
Parent Preferred Stock.................................................4.02(a)
Parent SEC Documents....................................................4.05
Permits.................................................................3.11
person.................................................................9.03(c)
Provider...............................................................3.10(b)
Proxy Statement.........................................................3.07
Representatives........................................................5.02(a)
Restraints.............................................................7.01(d)
Sarbanes-Oxley.........................................................3.11(b)
SCT Agreement...........................................................3.18
SEC....................................................................3.06(a)
Securities Act..........................................................3.05
State Regulatory Filings................................................3.16
Subsidiary.............................................................9.03(e)
Surviving Entity........................................................1.01
Taxes..................................................................3.13(m)
Tax Returns............................................................3.13(m)
Termination Fee........................................................8.02(a)
Trust...................................................................3.18
Trustee.................................................................3.18
EXHIBITS
A.............................................Form of Rule 145 Affiliate Letter
B................................Form of Company Tax Representation Certificate
C.................................Form of Parent Tax Representation Certificate
D..................................................Form of Employment Agreement
E..............................................................Closing Consents
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 26, 2003, is among UnitedHealth Group Incorporated, a Minnesota
corporation ("Parent"), MU Acquisition LLC, a Delaware limited liability company
and a direct wholly owned subsidiary of Parent ("Merger Sub"), and Mid Atlantic
Medical Services, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent and the Company
and the Managing Member of Merger Sub have approved and declared advisable this
Agreement and the merger of the Company with and into Merger Sub (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement;
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 (the "Code"), and the rules and
regulations promulgated thereunder, and that this Agreement constitutes, and
hereby is adopted as, a plan of reorganization; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
The Merger
----------
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the General Corporation Law
and the Limited Liability Company Act of the State of Delaware (collectively,
"Delaware Law"), the Company shall be merged with and into Merger Sub at the
Effective Time. Following the Effective Time, the separate corporate existence
of the Company shall cease, and Merger Sub shall continue as the surviving
entity in the Merger (the "Surviving Entity") and shall succeed to and assume
all the rights and obligations of the Company in accordance with Delaware Law.
SECTION 1.02. CLOSING. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VII (other than those
conditions that by their terms are to be satisfied at the Closing, but subject
<PAGE>
to the satisfaction or waiver of those conditions at such time), at the offices
of Weil, Gotshal & Manges LLP, 1501 K Street, Suite 100, Washington, DC 20005,
unless another date or place is agreed to in writing by the parties hereto.
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall file a
certificate of merger (the "Certificate of Merger") executed in accordance with
the relevant provisions of Delaware Law and, as soon as practicable on or after
the Closing Date, shall make all other filings or recordings required under
Delaware Law. The Merger shall become effective at such time as the Certificate
of Merger is duly filed with the Secretary of State of the State of Delaware, or
at such other time as Parent and the Company shall agree and shall specify in
the Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Delaware Law.
SECTION 1.05. CERTIFICATE OF FORMATION; OPERATING AGREEMENT.
(a) The Certificate of Formation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of Formation
of the Surviving Entity until thereafter changed or amended as provided therein
or by Delaware Law or other applicable Law.
(b) The Operating Agreement of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Operating Agreement of the Surviving
Entity until thereafter changed or amended as provided therein or by applicable
Law; provided, however, that the Operating Agreement of the Surviving Entity
shall be amended as necessary to comply with the obligations of the Surviving
Entity set forth in Section 6.04 hereof.
SECTION 1.06. MANAGERS. The managers of Merger Sub immediately prior
to the Effective Time shall be the managers of the Surviving Entity until the
earlier of their resignation or removal or until their respective successors are
duly designated, as the case may be.
SECTION 1.07. OFFICERS. The officers of Merger Sub immediately prior
to the Effective Time shall be the officers of the Surviving Entity until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
2
<PAGE>
ARTICLE II
Effect of the Merger on the Capital Stock of the
------------------------------------------------
Constituent Entities; Exchange of Certificates; Company Stock Options
---------------------------------------------------------------------
SECTION 2.01. 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 common stock, par value $0.01 per share, of the Company ("Company
Common Stock") or any membership interests of Merger Sub:
(a) MEMBERSHIP INTERESTS OF MERGER SUB. The issued and outstanding
membership interests of Merger Sub shall remain outstanding and shall
constitute the only issued and outstanding equity interests of the
Surviving Entity.
(b) CANCELLATION OF TREASURY STOCK. Each share of Company Common Stock
that is owned by the Company (as treasury stock or otherwise),
automatically shall be canceled and retired and shall cease to exist, and
no shares of Parent Common Stock, cash or other consideration shall be
delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Section 2.01(d) and
Section 2.02(e), each issued and outstanding share of Company Common Stock
(other than shares to be canceled in accordance with Section 2.01(b), and
other than as provided in Section 2.02(k) with respect to shares as for
which appraisal rights have been perfected) shall be converted into the
right to receive:
(i) 0.82 (the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of common stock, par value $0.01 per share, of Parent
("Parent Common Stock") (the "Stock Consideration"); and
(ii) $18.00 in cash (the "Cash Consideration," and together with
the Stock Consideration, the "Merger Consideration").
As of the Effective Time, 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 holder of a certificate which immediately
prior to the Effective Time represented any such shares of Company Common Stock
(each, a "Certificate") shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration, any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(c) and
cash in lieu of any fractional share of Parent Common Stock to which such holder
is entitled pursuant to Section 2.02(e), in each case to be issued or paid in
consideration therefor upon surrender of such Certificate in accordance with
Section 2.02(b), without interest. Notwithstanding the foregoing, if between the
date of this Agreement and the Effective Time, the outstanding shares of Parent
Common Stock or Company Common Stock shall have been changed into a different
number of shares or a different class, by reason of the occurrence or record
3
<PAGE>
date of any stock dividend, subdivision, reclassification, recapitalization,
split, combination, exchange of shares or similar transaction, the Merger
Consideration shall be appropriately adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination, exchange of
shares or similar transaction.
(d) ADJUSTMENTS. In the event that the aggregate market value of the
Stock Consideration at the Effective Time will be less than 45% of the sum of
the Merger Consideration plus any cash paid pursuant to Sections 2.02(e) and
2.02(k), the Merger Consideration will be adjusted by reducing the amount of
Cash Consideration and by increasing by the same amount the amount of Stock
Consideration payable to each holder of Company Common Stock who would otherwise
have received Cash Consideration to the extent necessary so as to increase the
aggregate market value of the Stock Consideration to 45% of the sum of the
Merger Consideration plus any cash paid pursuant to Sections 2.02(e) and
2.02(k). For purposes of this paragraph (i), the "aggregate market value of the
Stock Consideration" will be determined based, as closely as reasonably
possible, on the actual Parent Common Stock price for the last trade prior to
the Effective Time or, if the Effective Time is after the close of regular
trading on the New York Stock Exchange, the mean between the highest and lowest
quoted selling price of Parent Common Stock on the New York Stock Exchange for
the date on which the Effective Time occurs and (ii) the Stock Consideration and
Cash Consideration transferred to the Trust, or to the holders of Company Common
Stock who acquire their stock from the Company or the Trust after the date
hereof, shall be disregarded.
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit
with The Bank of New York or such other bank or trust company as may be
designated by Parent, with the Company's prior written consent, which shall not
be unreasonably withheld or delayed (the "Exchange Agent"), for exchange in
accordance with this Article II, through the Exchange Agent, (i) certificates
representing the shares of Parent Common Stock issuable pursuant to Section
2.01(c) in exchange for outstanding shares of Company Common Stock, (ii) cash
sufficient to pay the Cash Consideration and (iii) from time to time as needed,
additional cash sufficient to pay cash in lieu of fractional shares pursuant to
Section 2.02(e) hereof and any dividends and other distributions pursuant to
Section 2.02(c) hereof (such shares of Parent Common Stock and Cash
Consideration, together with any dividends or other distributions with respect
thereto with a record date after the Effective Time and any cash payments in
lieu of any fractional shares of Parent Common Stock, being hereinafter referred
to as the "Exchange Fund").
(b) EXCHANGE PROCEDURES. As promptly as practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a Certificate whose shares of Company Common Stock were converted into
the right to receive the Merger Consideration pursuant to Section 2.01(c), (i) a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
4
<PAGE>
delivery of the Certificates to the Exchange Agent and which shall be in
customary form and shall have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in surrendering the Certificates in
exchange for certificates representing the Stock Consideration portion of the
Merger Consideration and cash representing the Cash Consideration portion of the
Merger Consideration, any dividends or other distributions to which holders of
Certificates are entitled pursuant to Section 2.02(c) and cash in lieu of any
fractional shares of Parent Common Stock to which such holders are entitled
pursuant to Section 2.02(e). Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with such letter of transmittal, duly completed and
validly executed, and such other documents as may be reasonably required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor (A) a certificate representing that number of whole shares of
Parent Common Stock that such holder has the right to receive pursuant to the
provisions of this Article II after taking into account all the shares of
Company Common Stock then held by such holder under all such Certificates so
surrendered and (B) a check for the cash that such holder is entitled to receive
pursuant to the provisions of this Article II, including for the Cash
Consideration portion of the Merger Consideration, any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(c) and
cash in lieu of any fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Company Common Stock that is not registered in the transfer records
of the Company, (w) a certificate representing the proper number of shares of
Parent Common Stock, (x) a check for the Cash Consideration portion of the
Merger Consideration, (y) any dividends or other distributions to which such
holder is entitled pursuant to Section 2.02(c) and (z) cash in lieu of any
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.02(e), may be issued to a person other than the person in
whose name the Certificate so surrendered is registered, if, upon presentation
to the Exchange Agent, such Certificate shall be properly endorsed or otherwise
be in proper form for transfer and the person requesting such issuance shall pay
any transfer or other taxes required by reason of the issuance of shares of
Parent Common Stock to a person other than the registered holder of such
Certificate or establish to the reasonable satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, any dividends or other distributions to
which the holder of such Certificate is entitled pursuant to Section 2.02(c) and
cash in lieu of any fractional share of Parent Common Stock to which such holder
is entitled pursuant to Section 2.02(e). No interest will be paid or will accrue
on the Merger Consideration or on any cash payable to holders of Certificates
pursuant to Section 2.02(c) or (e).
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the share of Parent Common Stock that the holder thereof has the
right to receive upon the surrender thereof, and no cash payment in lieu of any
5
<PAGE>
fractional shares of Parent Common Stock shall be paid to any such holder
pursuant to Section 2.02(e), in each case until the holder of such Certificate
shall surrender such Certificate in accordance with this Article II. Following
surrender of any Certificate, there shall be paid to the holder thereof (i) at
the time of such surrender, the amount of cash payable in lieu of any fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.02(e) and the amount of dividends or other distributions payable with
respect to such whole shares of Parent Common Stock with a record date after the
Effective Time and paid with respect to Parent Common Stock prior to such
surrender and (ii) 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 whole shares of Parent Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued and cash paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including any
dividends or other distributions paid pursuant to Section 2.02(c) and cash paid
in lieu of any fractional shares pursuant to Section 2.02(e)) shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to the
shares of Company Common Stock previously represented by such Certificates, and
at the close of business on the day on which the Effective Time occurs, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Entity of the shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. Subject to the last sentence of Section 2.02(f),
if, at any time after the Effective Time, Certificates are presented to the
Surviving Entity or the Exchange Agent for any reason, they shall be canceled
and exchanged as provided in this Article II.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividends or other distributions of Parent shall relate to
such fractional share interests and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a stockholder of
Parent.
(ii) In lieu of such fractional share interests, Parent shall pay to
each former holder of shares of Company Common Stock an amount in cash
equal to the product obtained by multiplying (A) the fractional share
interest to which such former holder (after taking into account all shares
of Company Common Stock held at the Effective Time by such holder) would
otherwise be entitled by (B) the per share closing price of Parent Common
Stock on the Closing Date (or, if such date is not a trading day, the
trading day immediately preceding the Closing Date) on the New York Stock
Exchange, Inc. Composite Transactions Tape (or, if not reported thereby, as
reported by any other authoritative source). 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 Parent
6
<PAGE>
and Parent shall cause the Surviving Entity to deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to
such holders of fractional interests subject to and in accordance with the
terms hereof.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
that remains undistributed to the holders of the Certificates for nine months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Certificates who have not theretofore complied with this Article II
shall thereafter look only to Parent for payment of their claim for the Merger
Consideration, any dividends or other distributions with respect to shares of
Parent Common Stock and cash in lieu of any fractional shares of Parent Common
Stock in accordance with this Article II. If any Certificate shall not have been
surrendered immediately prior to the date on which any Merger Consideration (and
all dividends or other distributions payable pursuant to Section 2.02(c) and all
cash payable in lieu of fractional shares pursuant to Section 2.02(e)) would
otherwise escheat to or become the property of any Governmental Authority, any
such Merger Consideration (and all dividends or other distributions payable
pursuant to Section 2.02(c) and all cash payable in lieu of fractional shares
pursuant to Section 2.02(e)) in respect thereof shall, to the extent permitted
by applicable Law, become the property of Parent, free and clear of all claims
or interest of any person previously entitled thereto.
(g) NO LIABILITY. None of Parent, Merger Sub, the Company or the
Exchange Agent shall be liable to any person in respect of any shares of Parent
Common Stock (or dividends or other distributions with respect thereto) or cash
in lieu of any fractional shares of Parent Common Stock or cash from the
Exchange Fund, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be the property
of, and shall be paid to, Parent. Any losses resulting from such investments
shall not in any way diminish Parent's and Merger Sub's obligation to pay the
full amount of the Merger Consideration.
(i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such reasonable amount as Parent
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration, any dividends or
other distributions to which the holder of such Certificate would be entitled
pursuant to Section 2.02(c) and cash in lieu of any fractional share of Parent
Common Stock to which such holder would be entitled pursuant to Section 2.02(e),
in each case in accordance with the terms of this Agreement.
7
<PAGE>
(j) WITHHOLDING RIGHTS. The Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable to any holder of shares of
Company Common Stock pursuant to this Agreement such amounts as may be required
to be deducted and withheld with respect to the making of such payment under the
Code and the rules and regulations promulgated thereunder, or under any
provision of state or foreign tax Law. To the extent that amounts are so
withheld and paid over to the appropriate taxing authority, such withheld
amounts shall be treated for the purposes of this Agreement as having been paid
to the former holder of the shares of Company Common Stock. Any such withholding
shall be applied first against the Cash Consideration to the full extent thereof
and then against the Stock Consideration. If withholding is required from shares
of Parent Common Stock, the Exchange Agent shall sell in the open market such
shares of Parent Common Stock on behalf of the former holder of Company Common
Stock as is necessary to satisfy such withholding obligation and shall pay such
cash proceeds to the appropriate taxing authority.
(k) DISSENTING SHARES. Notwithstanding Section 2.01(c), any shares of
Company Common Stock outstanding immediately prior to the Effective Time and
held by a person who has not voted in favor of the Merger or consented thereto
in writing and who has demanded appraisal for such shares in accordance with
Delaware Law (the "Dissenting Shares") shall not be converted into a right to
receive the Merger Consideration, unless such holder fails to perfect or
withdraws or otherwise loses its rights to appraisal or it is determined that
such holder does not have appraisal rights in accordance with Delaware Law. If,
after the Effective Time, such holder fails to perfect or withdraws or loses its
right to appraisal, or if it is determined that such holder does not have
appraisal rights, such shares shall be treated as if they had been converted as
of the Effective Time into the right to receive the Merger Consideration. The
Company shall give Parent and Merger Sub prompt notice of any demands received
by the Company for appraisal of shares, and Parent and Merger Sub shall have the
right to participate in all negotiations and proceedings with respect to such
demands except as required by applicable Law. The Company shall not, except with
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands, unless and to the extent required to do so
under applicable Law.
SECTION 2.03. COMPANY STOCK OPTIONS.
(a) During the thirty (30) day period prior to the Closing, each
holder of outstanding Company Stock Options (whether or not then vested or
exercisable by its terms) shall have the opportunity to exercise his or her
Company Stock Options upon payment of the exercise price in accordance with the
terms of the applicable Company Stock Plan, or, at the option of the Company, on
a net "cashless exercise" basis upon delivery to the Company of an exercise
agreement in a form mutually acceptable to Parent and the Company. Except for
vested options being exercised in accordance with the terms of the applicable
Company Stock Plan, such option exercises shall be deemed effective as of, and
conditioned upon, the occurrence of the Closing. All written communications
distributed generally to employees by or on behalf of the Company regarding such
exercises will be mutually acceptable to Parent and the Company. Each
8
<PAGE>
outstanding Company Stock Option which is not exercised prior to the Closing in
accordance with this Section 2.03 shall be cancelled upon the occurrence of the
Closing and no consideration shall be paid therefor.
(b) Effective on the Closing each of the Company Stock Plans,
including, without limitation, the SCT Agreement, shall be terminated in
accordance with their respective terms.
(c) In connection with the termination of the Company Stock Plans,
following the Effective Time, no holder of Company Stock Options or any
participant in or beneficiary of the Company Stock Plans or Trust, will have any
right to acquire or receive any equity securities of the Surviving Entity or any
Subsidiary thereof or any consideration other than as contemplated pursuant to
this Section 2.03; provided, however, that all proceeds remaining in the Trust
immediately after the Effective Time shall be applied, first to be returned to
the Company in an amount equal to the principal amount, plus any accrued
interest thereon, of the Loan (as defined in the SCT Agreement) that was
forgiven upon such termination, and second as provided in the SCT Agreement, to
satisfy obligations of the Company and its Subsidiaries under employee benefit
plans of the Company listed on Schedule A of the SCT Agreement.
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
Except as set forth in the disclosure schedule (with specific
reference to the Section or Subsection of this Agreement to which the
information stated in such disclosure relates; PROVIDED that any fact or
condition disclosed in any section of such disclosure schedule in such a way as
to make its relevance to a representation or representations made elsewhere in
this Agreement or information called for by another section of such disclosure
schedule reasonably apparent shall be deemed to be an exception to such
representation or representations or to be disclosed on such other section of
such disclosure schedule notwithstanding the omission of a reference or cross
reference thereto) delivered by the Company to Parent prior to the execution of
this Agreement (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Merger Sub as follows:
SECTION 3.01. ORGANIZATION, STANDING AND CORPORATE POWER. The Company
and each of its Subsidiaries is an entity duly organized, validly existing and
in good standing under the Laws of the jurisdiction in which it is formed and
has all requisite power and authority to carry on its business as now being
conducted. The Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed individually or
in the aggregate has not had and would not reasonably be expected to have a
Company Material Adverse Effect. For purposes of this Agreement, "Company
9
<PAGE>
Material Adverse Effect" shall mean any change, effect, event, occurrence or
state of facts that is materially adverse to the business, financial condition,
or results of operations of the Company and its Subsidiaries, taken as a whole,
other than any change, effect, event, occurrence or state of facts relating to
(a) the economy or the financial markets in general, (b) the industry in which
the Company and its Subsidiaries operate in general and not specifically
relating to the Company and its Subsidiaries, (c) the announcement of this
Agreement or the transactions contemplated hereby or the identity of Parent
(provided that the exclusion set forth in this clause (c) shall not apply to
Section 3.04(b) hereof), (d) any Company action prohibited by Section 5.01(a)
hereto that Parent does not consent to the Company taking; (e) changes in
applicable Laws or regulations after the date hereof, or (f) changes in GAAP or
regulatory accounting principles after the date hereof. The Company has made
available to Parent complete and correct copies of its Certificate of
Incorporation (the "Company Certificate") and By-laws (the "Company By-laws")
and the certificate of incorporation and by-laws (or comparable organizational
documents) of each of its Subsidiaries, in each case as amended to the date of
this Agreement. The Company has made available to Parent and its representatives
correct and complete copies of the minutes of all meetings of stockholders, the
Board of Directors and each committee of the Board of Directors of the Company
and each of its Subsidiaries held since December 31, 2000.
SECTION 3.02. SUBSIDIARIES. Section 3.02 of the Company Disclosure
Schedule lists all the Subsidiaries of the Company and, for each such
Subsidiary, the state of formation and each jurisdiction in which such
Subsidiary is qualified or licensed to do business. All the outstanding shares
of capital stock of, or other equity interests in, each such Subsidiary have
been validly issued and are fully paid and nonassessable and are owned directly
or indirectly by the Company free and clear of all pledges, claims, liens,
charges, encumbrances or security interests of any kind or nature whatsoever
(collectively, "Liens"), and free of any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other equity interests. Except for
the capital stock or other equity or voting interests of its Subsidiaries and
publicly traded securities held for investment which do not exceed 5% of the
outstanding securities of any entity, the Company does not own, directly or
indirectly, any capital stock or other equity or voting interests in any person.
SECTION 3.03. CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and 1,000,000 shares of preferred
stock, par value $0.01 per share ("Company Preferred Stock"). At the close of
business on September 30, 2003, (i) 67,772,502 shares of Company Common Stock
were issued and 47,760,422 shares of Company Common Stock were outstanding, (ii)
20,012,080 shares of Company Common Stock were held by the Company in its
treasury, (iii) 7,608,120 shares of Company Common Stock were reserved for
issuance pursuant to the Company's 1989 Non-Qualified Stock Option Plan, 1990
Non-Qualified Stock Option Plan, 1991 Non-Qualified Stock Option Plan, 1992
Non-Qualified Stock Option Plan, 1994 Non-Qualified Stock Option Plan, 1995
Non-Qualified Stock Option Plan, 1996 Non-Qualified Stock Option Plan, 1998
10
<PAGE>
Non-Qualified Stock Option Plan, 1999 Non-Qualified Stock Option Plan, 2000
Non-Qualified Stock Option Plan, 2001 Non-Qualified Stock Option Plan, 2002
Non-Qualified Stock Option Plan, 2003 Non-Qualified Stock Option Plan, any
non-employee director stock option plan and any other plan or arrangement under
which compensatory stock options were granted (collectively, the "Company Stock
Plans") (of which 6,412,486 shares of Company Common Stock were subject to
outstanding options to purchase shares of Company Common Stock granted under the
Company Stock Plans ("Company Stock Options")), (iv) 389,217 shares of Company
Common Stock were "Available Shares" (as defined in the SCT Agreement) and
7,915,335 shares of Company Common Stock were held in the "Suspense Account" (as
defined in the SCT Agreement) pursuant to the Trust and (v) no shares of Company
Preferred Stock were issued or outstanding.
(b) The Company has delivered to Parent a correct and complete list,
as of September 30, 2003, of all outstanding Company Stock Options or other
rights to purchase or receive shares of Company Common Stock granted under the
Company Stock Plans or otherwise, the number of shares of Company Common Stock
subject thereto, expiration dates and exercise prices thereof. Except as set
forth above in this Section 3.03, at the close of business on September 30,
2003, no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. Except as set forth above in this
Section 3.03, there are no outstanding stock appreciation rights, rights to
receive shares of Company Common Stock on a deferred basis or other rights that
are linked to the value of Company Common Stock granted under the Company Stock
Plans or otherwise. All outstanding shares of capital stock of the Company are,
and all shares which may be issued pursuant to the Company Stock Plans will be,
when issued in accordance with the terms thereof, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
(c) Except as set forth above in this Section 3.03, there are no
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of the Company may vote. Except as
set forth above in this Section 3.03, (i) there are not issued, reserved for
issuance or outstanding (A) any securities of the Company or any of its
Subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company or any of its Subsidiaries or
(B) any warrants, calls, options or other rights to acquire from the Company or
any of its Subsidiaries, or any obligation of the Company or any of its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or voting
securities of the Company or any of its Subsidiaries and (ii) there are not any
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Neither the Company
nor any of its Subsidiaries is a party to any voting agreement with respect to
the voting of any such securities.
11
<PAGE>
SECTION 3.04. AUTHORITY; NONCONTRAVENTION.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to receipt of Company stockholder
approval (the "Company Stockholder Approval"), to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate action on
the part of the Company, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby, subject, in the case of the Merger, to receipt
of the Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by each of the other parties hereto, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms (subject to applicable bankruptcy, solvency, fraudulent transfer,
reorganization, moratorium and other Laws affecting creditors' rights generally
from time to time in effect and by general principles of equity). As of the date
hereof, the Board of Directors of the Company, at a meeting duly called and held
at which all the directors of the Company were present in person or by
telephone, duly and unanimously adopted resolutions (i) approving and declaring
advisable this Agreement, the Merger and the other transactions contemplated by
this Agreement, (ii) directing that the adoption of this Agreement be submitted
to a vote at a meeting of the stockholders of the Company and (iii) recommending
that the stockholders of the Company adopt this Agreement.
(b) The execution and delivery of this Agreement do not, and the
consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of the Company or any of its Subsidiaries under, (i)
the Company Certificate or the Company By-laws or the comparable organizational
documents of any of its Subsidiaries, (ii) any loan or credit agreement, bond,
debenture, note, mortgage, indenture, lease or other contract, agreement,
obligation, commitment, arrangement, understanding, instrument, permit or
license (each, a "Contract"), to which the Company or any of its Subsidiaries is
a party or any of their respective properties or other assets is subject or
(iii) subject to the governmental filings and other matters referred to in
Section 3.05, any Law applicable to the Company or any of its Subsidiaries or
their respective properties or other assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, breaches, defaults, rights,
losses or Liens that individually or in the aggregate (A) have not had and would
not reasonably be expected to have a Company Material Adverse Effect, (B) would
not reasonably be expected to impair in any material respect the ability of the
Company to perform its obligations hereunder and (C) would not reasonably be
expected to prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
12
<PAGE>
SECTION 3.05. GOVERNMENTAL APPROVALS. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental self-regulatory agency, commission or authority (each, a
"Governmental Authority") is required by or with respect to the Company or any
of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the Merger or the
other transactions contemplated by this Agreement, except for those required
under or in relation to (a) the premerger notification and report form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (b) the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"); (c) the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), (d) the Certificate of Merger to be filed with the Secretary of
State of the State of Delaware and appropriate documents to be filed with the
relevant authorities of other states in which the Company is qualified to do
business, (e) any appropriate filings with and approvals of the New York Stock
Exchange, (f) applicable state insurance and department of health approvals; (g)
state securities or "blue sky" laws and (h) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made individually or in the aggregate would not
reasonably be expected to (x) have a Company Material Adverse Effect, (y) impair
in any material respect the ability of the Company to perform its obligations
hereunder or (z) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement. The consents, approvals, orders,
authorizations, registrations, declarations and filings set forth in (a) through
(g) above or listed in Section 3.05 of the Company Disclosure Schedule are
referred to herein as "Necessary Consents."
SECTION 3.06. COMPANY SEC DOCUMENTS; NO UNDISCLOSED LIABILITIES.
(a) The Company has filed all reports, schedules, forms, statements
and other documents (including exhibits and other information incorporated
therein) with the Securities and Exchange Commission (the "SEC") required to be
filed by the Company since December 31, 2000 (such documents, the "Company SEC
Documents"). No Subsidiary of the Company is required to file, or files, any
form, report or other document with the SEC. As of their respective dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act, or the Exchange Act, as the case may be, applicable to such
Company SEC Documents, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, unless
such information contained in any Company SEC Document has been corrected by a
later-filed Company SEC Document. The financial statements of the Company
included in the Company SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
13
<PAGE>
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to the absence of footnote
disclosure and to normal and recurring year-end audit adjustments).
(b) Except (i) as set forth in the financial statements included in
the Company's most recent Annual Report on Form 10-K or subsequent Quarterly
Reports on Form 10-Q filed by the Company and publicly available prior to the
date of this Agreement and (ii) as incurred in the ordinary course of business,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that individually or in the aggregate have had or would reasonably be expected
to have a Company Material Adverse Effect.
SECTION 3.07. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by the Company specifically for inclusion or incorporation by
reference in (a) the registration statement on Form S-4 to be filed with the SEC
by Parent in connection with the issuance of shares of Parent Common Stock in
the Merger (as amended or supplemented from time to time, 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 and 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,
in light of the circumstances under which they are made, not misleading or (b)
the proxy statement relating to the Company Stockholders Meeting (together with
any amendments thereof or supplements thereto, in each case in the form or forms
mailed to the Company's stockholders, the "Proxy Statement") will, at the date
it is first mailed to the stockholders of the Company and at the time of the
Company 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 are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act. Notwithstanding the
foregoing, no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Form S-4 or the Proxy
Statement based on information supplied by Parent or Merger Sub specifically for
inclusion or incorporation by reference in the Form S-4 of the Proxy Statement.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the most recent audited financial statements included in the Company SEC
Documents filed by the Company and publicly available prior to the date of this
Agreement (the "Filed Company SEC Documents"), except (a) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby to Parent, Merger Sub and the Company's financial and legal advisors or
(b) as disclosed in the Filed Company SEC Documents there has not been any
change, effect, event, occurrence or state of facts that individually or in the
14
<PAGE>
aggregate has had or would reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.09. LITIGATION. There is no suit, action or proceeding
pending or, to the Knowledge of the Company, threatened against the Company or
any of its Subsidiaries that individually or in the aggregate has had or would
reasonably be expected to have a Company Material Adverse Effect or prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Authority or arbitrator outstanding against, or, to the
Knowledge of the Company, investigation by any Governmental Authority involving,
the Company or any of its Subsidiaries that individually or in the aggregate has
had or would reasonably be expected to have a Company Material Adverse Effect or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
SECTION 3.10. CONTRACTS.
(a) Neither the Company nor any of its Subsidiaries is a party to, and
none of their respective properties or other assets is subject to, any Contract
that is of a nature required to be filed as an exhibit to a report or filing
under the Securities Act or the Exchange Act, other than any Contract that is
filed as an exhibit to the Filed Company SEC Documents.
(b) Except for Contracts filed in unredacted form as exhibits to the
Filed Company SEC Documents, Section 3.10(b) of the Company Disclosure Schedule
sets forth a correct and complete list as of the date of this Agreement, and the
Company has made available to Parent correct and complete copies (including all
amendments thereto), of:
(i) all Contracts (other than Contracts of the category required to be
disclosed in either clause (ix) or clause (x) of this Section 3.10(b),
regardless of value) of the Company or any of its Subsidiaries having an
aggregate value per Contract, or involving payments by or to the Company or
any of its Subsidiaries, of more than $500,000 on an annual basis;
(ii) all Contracts to which the Company or any of its Subsidiaries is
a party, or by which the Company, any of its Subsidiaries or any of its
Affiliates is bound, that contain a covenant restricting the ability of the
Company or any of its Subsidiaries (or which, following the consummation of
the Merger, would restrict the ability of Parent or any of its
Subsidiaries, including the Surviving Entity and its Subsidiaries) to
compete in any business or with any person or in any geographic area;
(iii) all Contracts (other than Contracts entered into in the ordinary
course of business with all providers of health care, including, but not
limited to, physicians, facilities and ancillary providers (each a
"Provider")) of the Company or any of its Subsidiaries with any Affiliate
of the Company (other than any of its Subsidiaries);
15
<PAGE>
(iv) all Contracts to which the Company or any of its Subsidiaries is
a party granting any license to intellectual property (other than trade and
service marks) and any other license (other than real estate) having an
aggregate value per license, or involving payments to the Company or any of
its Subsidiaries, of more than $500,000 on an annual basis;
(v) all confidentiality agreements (other than in the ordinary course
of business), agreements by the Company not to acquire assets or securities
of a third party or agreements by a third party not to acquire assets or
securities of the Company;
(vi) any Contract having an aggregate value per Contract, or involving
payments by or to the Company or any of its Subsidiaries, of more than
$500,000 on an annual basis that requires consent of or notice to a third
party in the event of or with respect to the Merger, including in order to
avoid termination of or loss of benefit under any such Contract;
(vii) all joint venture, partnership or other similar agreements
involving co-investment with a third party to which the Company or any of
its Subsidiaries is a party;
(viii) except as set forth in Section 3.03, all Contracts pursuant to
which any indebtedness of the Company or any of its Subsidiaries is
outstanding or may be incurred and all guarantees of or by the Company or
any of its Subsidiaries of any indebtedness of any other person (other than
the Company or any of its Subsidiaries) (except for such indebtedness or
guarantees the aggregate principal amount of which does not exceed $500,000
on an annual basis and excluding trade payables arising in the ordinary
course of business);
(ix) the 25 largest Provider and the ten largest customer Contracts
measured in terms of payments to or receipts from the Company and its
Subsidiaries in the aggregate during the calendar year ending December 31,
2002;
(x) any Contract (other than a Contract with a Provider) that involves
(1) annual premiums or payments of greater than $500,000 or annual
administrative services fees or similar payments of greater than $500,000
and (2) 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 the Health Insurance Portability and
Accountability Act and the regulations promulgated thereunder (including 45
C.F.R. parts 160, 162, and 164) or other statutory or regulatory
requirements); and
16
<PAGE>
(xi) any Contract, agreement or policy for reinsurance.
(c) None of the Company or any of its Subsidiaries is, or has received
written notice or has Knowledge that any other party to any of its Contracts is,
in violation or breach of or default (with or without notice or lapse of time or
both) under, or has waived or failed to enforce any rights or benefits under,
any Contract to which it is a party or any of its properties or other assets is
subject, and, to the Knowledge of the Company, there has occurred no event
giving to others any right of termination, amendment or cancellation of (with or
without notice or lapse of time or both) any such Contract except, in each case
for violations, breaches, defaults, waivers or failures to enforce rights or
benefits that individually or in the aggregate have not had and would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.11. COMPLIANCE WITH LAWS.
(a) The Company and each of its Subsidiaries is in compliance with all
statutes, laws, ordinances, rules, regulations, judgments, orders and decrees of
any Governmental Authority (collectively, "Laws") applicable to it, its
properties or other assets or its business or operations, except for instances
of noncompliance or possible noncompliance that individually or in the aggregate
have not had and would not reasonably be expected to have a Company Material
Adverse Effect. None of the Company or any of its Subsidiaries has received,
since December 31, 2001, a notice or other communication alleging or relating to
a possible material violation of any Laws applicable to its businesses or
operations. The Company and its Subsidiaries have in effect all material
permits, licenses, variances, exemptions, authorizations, operating
certificates, franchises, orders and approvals of all Governmental Authorities
(collectively, "Permits") necessary to carry on their businesses as now
conducted, and there has occurred no violation of, default (with or without
notice or lapse of time or both) under, or event giving to others any right of
termination, amendment or cancellation of, with or without notice or lapse of
time or both, any Permit, except for violations, defaults or events that
individually or in the aggregate have not had and would not reasonably be
expected to have a Company Material Adverse Effect. There is no event which has
occurred that, to the Knowledge of the Company, would reasonably be expected to
result in the revocation, cancellation, non-renewal or adverse modification of
any such Permit that individually or in the aggregate would reasonably be
expected to cause a Company Material Adverse Effect. The Merger, in and of
itself, would not cause the revocation or cancellation of any such Permit that
individually or in the aggregate would reasonably be expected to have a Company
Material Adverse Effect.
(b) The Company and each of its officers and directors are in
compliance with, and have complied, in all material respects with (A) the
applicable provisions of the Sarbanes-Oxley Act of 2002 and the related rules
and regulations promulgated under such act or the Exchange Act
("Sarbanes-Oxley") and (B) the applicable listing and corporate governance rules
and regulations of the New York Stock Exchange. The Company has previously
disclosed to Parent any of the information required to be disclosed by the
Company and certain of its officers to the Company's Board of Directors or any
17
<PAGE>
committee thereof pursuant to the certification requirements contained in Form
10-K and Form l0-Q under the Exchange Act.
SECTION 3.12. EMPLOYEE BENEFIT PLANS.
(a) Section 3.12(a) of the Company Disclosure Schedule sets forth a
correct and complete list of: (i) all "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other employee benefit plans, programs, agreements,
policies, arrangements or payroll practices, including bonus plans, employment,
consulting or other compensation agreements, collective bargaining agreements,
incentive, equity or equity-based compensation, or deferred compensation
arrangements, change in control, termination or severance plans or arrangements,
stock purchase, severance pay, sick leave, vacation pay, salary continuation for
disability, hospitalization, medical insurance, life insurance and scholarship
plans and programs maintained by the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries contributed or is obligated to
contribute thereunder for current or former employees of the Company or any of
its Subsidiaries (the "Employees") (collectively, the "Company Plans").
(b) Correct and complete copies of the following documents, with
respect to each of the Company Plans (other than a Multiemployer Plan), have
been delivered to Parent by the Company, to the extent applicable: (i) any
plans, all amendments and attachments thereto and related trust documents,
insurance contracts or other funding arrangements, and amendments thereto; (ii)
the most recent Forms 5500 and all schedules thereto and the most recent
actuarial report, if any; (iii) the most recent IRS determination letter; (iv)
summary plan descriptions; and (v) written communications to employees generally
and relating to the SCT Agreement, except, in the case of communications
relating to the SCT Agreement, as individually or in the aggregate would not
reasonably be expected to have a Company Material Adverse Effect.
(c) The Company Plans have been maintained in accordance with their
terms and with all provisions of ERISA, the Code and other applicable Laws, and
neither the Company (or any of its Subsidiaries) nor any "party in interest" or
"disqualified person" with respect to the Company Plans has engaged in a
non-exempt "prohibited transaction" within the meaning of Section 4975 of the
Code or Section 406 of ERISA, except as individually or in the aggregate have
not had and would not reasonably be expected to have a Company Material Adverse
Effect. No fiduciary has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment of
the assets of any Company Plan, except as individually or in the aggregate have
not had and would not reasonably be expected to have a Company Material Adverse
Effect.
(d) The Company Plans intended to qualify under Section 401 of the
Code are so qualified and any trusts intended to be exempt from Federal income
taxation under Section 501 of the Code are so exempt, except as individually or
18
<PAGE>
in the aggregate have not had and would not reasonably be expected to have a
Company Material Adverse Effect.
(e) None of the Company, its Subsidiaries or any trade or business
(whether or not incorporated) that is treated as a single employer, with any of
them under Section 414(b), (c), (m) or (o) of the Code has any current or
contingent liability with respect to (i) a plan subject to Title IV or Section
302 of ERISA or Section 412 or 4971 of the Code or (ii) any "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA). Each Company Plan that is intended
to meet the requirements for tax-favored treatment under Subchapter B of Chapter
1 of Subtitle A of the Code meets such requirements, with such exceptions that
individually or in the aggregate have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(f) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Plans (including workers compensation) or by Law (without regard to
any waivers granted under Section 412 of the Code), to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any valid extension).
(g) There are no pending actions, claims or lawsuits that have been
asserted or instituted against the Company Plans, the assets of any of the
trusts under the Company Plans or the sponsor or administrator of any of the
Company Plans, or against any fiduciary of the Company Plans with respect to the
operation of any of the Company Plans (other than routine benefit claims), nor
does the Company have any Knowledge of facts that could form the basis for any
such action, claim or lawsuit, other than such actions, claims or lawsuits that
individually or in the aggregate have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(h) None of the Company Plans provides for post-employment life or
health insurance, benefits or coverage for any participant or any beneficiary of
a participant, except as may be required under the Consolidate Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and at the expense of the
participant or the participant's beneficiary. Each of the Company and any ERISA
Affiliate which maintains a "group health plan" within the meaning Section
5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder, except where the failure to comply
individually or in the aggregate has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(i) Except as specifically provided in this Agreement, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any Employee, (ii) increase any benefits otherwise payable under any Company
Plan, (iii) result in the acceleration of the time of payment or vesting of any
19
<PAGE>
such benefits under any Company Plan or (iv) result in any obligation to fund
any trust or other arrangement with respect to compensation or benefits under a
Company Plan.
(j) Neither the Company nor any of its Subsidiaries has a contract,
plan or commitment, whether legally binding or not, to create any additional
Company Plan or to modify any existing Company Plan, except as required by
applicable Law or tax qualification requirement.
(k) Any individual who performs services for the Company or any of its
Subsidiaries (other than through a contract with an organization other than such
individual) and who is not treated as an employee of the Company or any of its
Subsidiaries for Federal income tax purposes by the Company or any of its
Subsidiaries is not an employee for such purposes, except as individually or in
the aggregate, together with any breach or breaches of Section 3.12(c) hereof
(without regard to any materiality or Company Material Adverse Effect qualifiers
therein), has not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(l) Neither the Company nor any of its Subsidiaries is a party to any
contract, agreement or other arrangement which provides for the payment of any
amount which would not be deductible by reason of Section 162(m) (to the extent
not properly reflected on the Company's applicable tax returns) or Section 280G
of the Code.
SECTION 3.13. TAXES.
(a) The Company and each of its Subsidiaries has timely filed, or has
caused to be timely filed on its behalf (taking into account any extension of
time within which to file), all material tax returns required to be filed by it,
and all such filed tax returns are correct and complete in all material
respects. All taxes shown to be due on such tax returns, and all material taxes
otherwise required to be paid by the Company or any of its Subsidiaries, have
been timely paid.
(b) The most recent financial statements contained in the Filed
Company SEC Documents reflect an adequate reserve for all material taxes payable
by the Company and its Subsidiaries for all taxable periods and portion thereof
through the date covered by such financial statements. No material deficiency
with respect to taxes has been proposed, asserted or assessed against the
Company or any of its Subsidiaries that has not been paid in full or fully
resolved in favor of the taxpayer.
(c) The Federal income tax returns of the Company and each of its
Subsidiaries have been examined by and settled with the Internal Revenue Service
(the "IRS") (or, to the Knowledge of the Company, the applicable statute of
limitations has expired) for all years through 1999. All material assessments
for taxes due with respect to such completed and settled examinations or any
concluded litigation have been fully paid.
20
<PAGE>
(d) Neither the Company nor any of its Subsidiaries has any obligation
under any agreement (either with any person or any taxing authority) with
respect to material taxes.
(e) Neither the Company nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code since the
effective date of Section 355(e) of the Code.
(f) Since 1996, neither the Company nor any of its Subsidiaries has
been a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code, other than the affiliated group of which the Company
is the common parent.
(g) No audit or other administrative or court proceedings are pending
with any taxing authority with respect to any federal, state or local income or
other material taxes of the Company or any of its Subsidiaries, and no written
notice thereof has been received by the Company or any of its Subsidiaries. No
issue has been raised by any taxing authority in any presently pending tax audit
that could be material and adverse to the Company or any of its Subsidiaries for
any period after the Effective Time. Neither the Company nor any of its
Subsidiaries has any outstanding agreements, waivers or arrangements extending
the statutory period of limitations applicable to any claim for, or the period
for the collection or assessment of, any federal, state or local income or other
material taxes.
(h) No written claim that could give rise to material taxes has been
made within the previous five years by a taxing authority in a jurisdiction
where the Company or any of its Subsidiaries does not file tax returns that the
Company or any of its Subsidiaries is or may be subject to taxation in that
jurisdiction.
(i) The Company has made available to Parent correct and complete
copies of (i) all income and franchise tax returns of the Company and its
Subsidiaries for the preceding three taxable years and (ii) any audit report
issued within the last three years (or otherwise with respect to any audit or
proceeding in progress) relating to income or franchise taxes of the Company or
any of its Subsidiaries.
(j) No Liens for taxes exist with respect to any properties or other
assets of the Company or any of its Subsidiaries, except for Liens for taxes not
yet due.
(k) All material taxes required to be withheld by the Company or any
of its Subsidiaries have been withheld and have been or will be duly and timely
paid to the proper taxing authority.
(l) Neither the Company nor any of its Subsidiaries has taken any
action, has failed to take any action or has any Knowledge of any fact or
circumstance that would reasonably be likely to prevent the Merger from
21
<PAGE>
qualifying as a reorganization under Section 368 of the Code.
(m) For purposes of this Agreement, (i) "taxes" shall mean taxes of
any kind (including those measured by or referred to as income, franchise, gross
receipts, sales, use, ad valorem, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added,
property, windfall profits, customs, duties or similar fees, assessments or
charges of any kind whatsoever) together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto, domestic or foreign and shall include any transferee or
successor liability in respect of taxes (whether by contract or otherwise) and
any several liability in respect of any tax as a result of being a member of any
affiliated, consolidated, combined, unitary or similar group and (ii) "tax
returns" shall mean any return, report, claim for refund, estimate, information
return or statement or other similar document relating to or required to be
filed with any taxing authority with respect to taxes, including any schedule or
attachment thereto, and including any amendment thereof.
SECTION 3.14. BROKERS AND OTHER ADVISORS. No broker, investment
banker, financial advisor or other person, other than Lehman Brothers and
Houlihan Lokey Howard & Zukin, the fees and expenses of which will be paid by
the Company in accordance with the Company's agreements with such firm (copies
of which have been made available to Parent), is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission, or the
reimbursement of expenses, in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company or
its Subsidiaries.
SECTION 3.15. OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of each of Lehman Brothers and Houlihan Lokey Howard & Zukin each
dated the date hereof and in customary form to the effect that, as of such date,
the Merger Consideration is fair from a financial point of view to the holders
of shares of Company Common Stock, copies of which opinions will be delivered to
Parent as soon as practicable after the date of this Agreement.
SECTION 3.16. STATUTORY FINANCIAL STATEMENTS. Except as otherwise set
forth therein, the annual statements and the quarterly statements filed by the
Company or any of its Subsidiaries with the Governmental Authorities listed in
Section 3.16 of the Company Disclosure Schedule for the years ended December 31,
2001 and 2002, and for each quarterly period ending after December 31, 2002 (the
"State Regulatory Filings") and the statutory balance sheets and income
statements included in such State Regulatory Filings fairly present in all
material respects the statutory financial condition and results of operations of
the Company or such Subsidiaries, as applicable, as of the date and for the
periods indicated therein and have been prepared in accordance with applicable
statutory accounting principles consistently applied throughout the periods
indicated, except as may be reflected in the notes thereto and subject to the
absence of notes required by statutory accounting principles and to normal
year-end adjustments.
22
<PAGE>
SECTION 3.17. RESERVES. The loss reserves and other actuarial amounts
of the Company and each of its Subsidiaries recorded in their respective
financial statements contained in the Company's SEC Documents and the State
Regulatory Filings (i) were determined in all material respects in accordance
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 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 and (iv) include
provisions for all actuarial reserves and related items which ought to be
established in accordance with applicable Laws. To the Knowledge of the Company
there are no facts or circumstances which would necessitate, in the good faith
application of prudent reserving practices and policies, 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
experience resulting from increases in enrollment with respect to services
provided by the Company or its Subsidiaries). The Risk Based Capital - Company
Action Level of the Company and each of its Subsidiaries (excluding Optimum
Choice of the Carolinas, Inc.) as defined in NAIC Risk Based Capital Guidelines
and as required by applicable Law is now and immediately prior to Closing will
be not less than the risk based capital of the Company or such Subsidiary
(excluding Optimum Choice of the Carolinas, Inc.) as of June 30, 2003 as set
forth in the applicable State Regulatory Filing, reduced, in the case of any
Subsidiary, by any duly authorized dividends paid by such Subsidiary to the
Company.
SECTION 3.18. SCT AGREEMENT. Correct and complete copies of the
Amended and Restated Mid Atlantic Medical Services, Inc. Stock Compensation
Trust Agreement, by and between the Company and The Bank of New York (the
"Trustee"), dated August 4, 2000 (the "SCT Agreement"), all amendments and
allonges thereto and all promissory notes issued pursuant thereto have been made
available to Parent by the Company. The SCT Agreement constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms and, to the Knowledge of the Company, the SCT
Agreement constitutes a legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms, in each case,
subject to the terms of the trust created pursuant to the terms of the SCT
Agreement (the "Trust") with respect to applicable bankruptcy, solvency,
fraudulent transfer, reorganization, moratorium and other Laws affecting
creditors' rights generally from time to time in effect and by general
principles equity. The Trust distributes assets in respect of the Company's
employee benefit plans set forth in Section 3.18 of the Company Disclosure
Schedule.
ARTICLE IV
Representations and Warranties of Parent and Merger Sub
-------------------------------------------------------
Except as set forth in the disclosure schedule (with specific
reference to the Section or Subsection of this Agreement to which the
information stated in such disclosure relates; provided that, any fact or
23
<PAGE>
condition disclosed in any section of such disclosure schedule in such a way as
to make its relevance to a representation or representations made elsewhere in
this Agreement or information called for by another section of such disclosure
schedule reasonably apparent shall be deemed to be an exception to such
representation or representations or to be disclosed on such other section of
such disclosure schedule notwithstanding the omission of a reference or cross
reference thereto) delivered by Parent to the Company prior to the execution of
this Agreement (the "Parent Disclosure Schedule"), Parent and Merger Sub
represent and warrant to the Company as follows:
SECTION 4.01. ORGANIZATION, STANDING AND CORPORATE POWER. Each of
Parent, its Subsidiaries and Merger Sub is an entity duly organized, validly
existing and in good standing under the Laws of the jurisdiction in which it is
formed and has all requisite power and authority to carry on its business as now
being conducted. Parent, its Subsidiaries and Merger Sub is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed individually or
in the aggregate has not had and would not reasonably be expected to have a
Parent Material Adverse Effect. For purposes of this Agreement, "Parent Material
Adverse Effect" shall mean any change, effect, event, occurrence or state of
facts that is materially adverse to the business, financial condition or results
of operations of Parent and its Subsidiaries, taken as a whole, other than any
change, effect, event, occurrence or state of facts relating to (a) the economy
or the financial markets in general, (b) the industry in which Parent and its
Subsidiaries operate in general and not specifically relating to Parent and its
Subsidiaries, (c) the announcement of this Agreement or the transactions
contemplated hereby or the identity of the Company (PROVIDED, that the exclusion
set forth in this clause (c) shall not apply to Section 4.03(b)), (d) changes in
applicable Law or regulations after the date hereof (PROVIDED, that the
exclusion set forth in this clause (d) shall not apply to consents, orders or
decrees in the case of the last sentence of Section 6.03 or the consents
referred to in Section 7.02(f)) or (e) changes in GAAP or regulatory accounting
principles after the date hereof. Parent has made available to the Company
complete and correct copies of its Certificate of Incorporation (the "Parent
Articles") and By-laws (the "Parent By-laws") and the Articles of incorporation
and by-laws or comparable organizational documents) of each of its Subsidiaries
and Merger Sub, in each case as amended to the date of this Agreement.
SECTION 4.02. CAPITAL STRUCTURE.
(a) The authorized capital stock of Parent consists of 1,500,000,000
shares of Parent Common Stock and 10,000,000 shares of preferred stock, par
value $0.001 per share ("Parent Preferred Stock"). At the close of business on
September 30, 2003, (i) 589,645,080 shares of Parent Common Stock were issued
and outstanding, (ii) no shares of Parent Common Stock were held by Parent in
its treasury, (iii) 137,986,873 shares of Parent Common Stock were reserved for
issuance pursuant to the 2002 Stock Incentive Plan, as amended, the 1987
Supplemental Stock Option Plan and the 1993 Qualified Employee Stock Purchase
24
<PAGE>
Plan, as amended (collectively, the "Parent Stock Plans") (of which 85,925,216
shares of Parent Common Stock were subject to outstanding options to purchase
shares of Parent Common Stock granted under the Parent Stock Plans ) and (iv) no
shares of Parent Preferred Stock were issued or outstanding. Except as set forth
above in this Section 4.02(a), at the close of business on September 30, 2003,
no shares of capital stock or other voting securities of the Parent were issued,
reserved for issuance or outstanding. All outstanding shares of capital stock of
Parent are, and all shares which may be issued (including shares of Parent
Common Stock to be issued in accordance with this Agreement) will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth above in this Section 4.02(a),
there are no bonds, debentures, notes or other indebtedness of Parent having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of Parent may vote.
(b) The authorized equity interests of Merger Sub consists of 100
membership interests ("Merger Sub Interests"). All of the issued and outstanding
Merger Sub Interests are owned by Parent. Merger Sub does not have issued or
outstanding any options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating Merger Sub to issue,
transfer or sell any Merger Sub Interests to any person, other than Parent.
Section 4.03. Authority; Noncontravention.
(a) Each of Parent and Merger Sub has all requisite organizational
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or other
organizational action on the part of Parent and Merger Sub and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub
and, assuming the due authorization, execution and delivery by the other party
hereto, constitutes a legal, valid and binding obligation of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its terms
(subject to applicable bankruptcy, solvency, fraudulent transfer,
reorganization, moratorium and other Laws affecting creditors' rights generally
from time to time in effect and by general principles of equity).
(b) The execution and delivery of this Agreement do not, and the
consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of Parent, any of its Subsidiaries or Merger Sub
under (i) the Parent Certificate or Parent By-laws or the comparable
25
<PAGE>
organizational documents of any of its Subsidiaries or Merger Sub, (ii) any
Contract to which Parent, any of its Subsidiaries or Merger Sub is a party or
any of their respective properties or other assets is subject or (iii) subject
to the governmental filings and other matters referred to in Section 4.04
hereof, any Law applicable to Parent, any of its Subsidiaries or Merger Sub or
their respective properties or other assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, breaches, defaults, rights,
losses or Liens that individually or in the aggregate (A) have not had and would
not reasonably be expected to have a Parent Material Adverse Effect, (B) would
not reasonably be expected to impair in any material respect the ability of
Parent or Merger Sub to perform its obligations under this Agreement and (C)
would not reasonably be expected to prevent or materially delay the consummation
of any of the transactions contemplated by this Agreement.
SECTION 4.04. GOVERNMENTAL APPROVALS. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Authority is required by or with respect to
Parent, any of its Subsidiaries or Merger Sub in connection with the execution
and delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the Merger or the other transactions contemplated by
this Agreement, except for (a) Necessary Consents and (b) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate would
not reasonably be expected to (x) have a Parent Material Adverse Effect, (y)
impair in any material respect the ability of Parent or Merger Sub to perform
its obligations under this Agreement or (z) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
SECTION 4.05. PARENT SEC DOCUMENTS. (a) Parent has filed all reports,
schedules, forms, statements and other documents (including exhibits and other
information incorporated therein) with the SEC required to be filed by Parent
since December 31, 2000 (such documents, the "Parent SEC Documents"). No
Subsidiary of Parent is required to file, or files, any form, report or other
document with the SEC. As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, applicable to such Parent SEC Documents,
and none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, unless such
information contained in any Parent SEC Document has been corrected by a
later-filed Parent SEC Document. The financial statements of Parent included in
the Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
financial position of Parent and its consolidated Subsidiaries as of the dates
26
<PAGE>
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to the absence
of footnote disclosure and to normal and recurring year-end audit adjustments).
(b) Except (i) as set forth in the financial statements included in
Parent's most recent Annual Report on Form 10-K or subsequent Quarterly Reports
on Form 10-Q filed by Parent and publicly available prior to the date of this
Agreement and (ii) as incurred in the ordinary course of business, neither
Parent nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that individually or
in the aggregate have had or would reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 4.06. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by Parent or Merger Sub specifically 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 and 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, in light of the circumstances under
which they are made, not misleading or (b) the Proxy Statement will, at the date
it is first mailed to the stockholders of the Company and at the time of the
Company 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 are made, not misleading. The Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable. Notwithstanding the foregoing, no representation or warranty
is made by Parent or Merger Sub with respect to statements made or incorporated
by reference in the Form S-4 or the Proxy Statement based on information
supplied by the Company specifically for inclusion or incorporation by reference
in the Form S-4 or the Proxy Statement.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the most recent audited financial statements included in the Parent SEC
Documents filed by Parent and publicly available prior to the date of this
Agreement, except (a) for liabilities incurred in connection with this Agreement
or the transactions contemplated hereby to the Company or (b) as disclosed in
the Parent SEC Documents filed by Parent and publicly available prior to the
date of this Agreement, there has not been any change, effect, event, occurrence
or state of facts that individually or in the aggregate has had or would
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.08. LITIGATION. There is no suit, action or proceeding
pending or, to the Knowledge of Parent, threatened against Parent or any of its
Subsidiaries that individually or in the aggregate has had or would reasonably
be expected to have a Parent Material Adverse Effect or prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
Governmental Authority or arbitrator outstanding against, or, to the Knowledge
of Parent, investigation by any Governmental Authority involving, Parent or any
27
<PAGE>
of its Subsidiaries that individually or in the aggregate has had or would
reasonably be expected to have a Parent Material Adverse Effect or prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement.
SECTION 4.09. COMPLIANCE WITH LAWS.
(a) Parent and each of its Subsidiaries is in compliance with all Laws
applicable to it, its properties or other assets or its business or operations,
except for instances of noncompliance or possible noncompliance that
individually or in the aggregate has not had or would not reasonably be expected
to have a Parent Material Adverse Effect. None of Parent or any of its
Subsidiaries has received, since December 31, 2001, a notice or other
communication alleging or relating to a possible material violation of any Laws
applicable to its businesses or operations. Parent and its Subsidiaries have in
effect all material Permits necessary to carry on their businesses as now
conducted, and there has occurred no violation of, default (with or without
notice or lapse of time or both) under, or event giving to others any right of
termination, amendment or cancellation of, with or without notice or lapse of
time or both, any Permit, except for violations, defaults or events that
individually or in the aggregate have not had and would not reasonably be
expected to have a Parent Material Adverse Effect. There is no event which has
occurred that, to the Knowledge of Parent, would reasonably be expected to
result in the revocation, cancellation, non-renewal or adverse modification of
any such Permit that individually or in the aggregate would reasonably be
expected to cause a Parent Material Adverse Effect. The Merger, in and of
itself, would not cause the revocation or cancellation of any such Permit that
individually or in the aggregate would reasonably be expected to have a Parent
Material Adverse Effect.
(b) Parent and each of its officers and directors are in compliance
with, and have complied, in all material respects with (A) the applicable
provisions of Sarbanes-Oxley and (B) the applicable listing and corporate
governance rules and regulations of the New York Stock Exchange. Parent has
previously disclosed to the Company any of the information required to be
disclosed by Parent and certain of its officers to Parent's Board of Directors
or any committee thereof pursuant to the certification requirements contained in
Form 10-K and Form l0-Q under the Exchange Act.
SECTION 4.10. 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.
SECTION 4.11. NO PARENT VOTE REQUIRED. No vote or other action of the
stockholders of Parent is required by Law, the Parent Certificate or the Parent
By-laws or otherwise in order for Parent and Merger Sub to consummate the Merger
and the transactions contemplated hereby.
28
<PAGE>
SECTION 4.12. TAXES.
(a) Neither Parent nor any of its Subsidiaries has taken any action,
has failed to take any action or has Knowledge of any fact or circumstance that
would reasonably be likely to prevent the Merger from qualifying as a
reorganization under Section 368 of the Code.
(b) Merger Sub is a Delaware limited liability company all of the
membership interests of which are owned by Parent and as to which Parent has not
elected to treat as a corporation for federal income tax purposes.
ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 5.01. CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS BY THE COMPANY. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
each of its Subsidiaries to, carry on its business in the ordinary course
consistent with past practice and comply with all applicable Laws in all
material respects, and, to the extent consistent therewith, use its reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current officers, employees and consultants and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it with the intention that its goodwill and
ongoing business shall not be materially impaired at the Effective Time. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as provided in Section 5.01(a) of
the Company Disclosure Schedule and except as expressly contemplated by this
Agreement, the Company shall not, and shall not permit any of its Subsidiaries
to, without Parent's prior written consent, which shall not be unreasonably
withheld or delayed (provided that in the case of any issuance, delivery or sale
of shares of capital stock proposed by the Company in accordance with Section
5.01(a)(ii), Parent's consent may be withheld or delayed in its sole discretion
if such issuance, delivery or sale would reasonably be likely to require an
additional issuance of shares by Parent in accordance with Section 2.01(d)
hereof):
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of
its capital stock, other than dividends or distributions by a direct or
indirect wholly owned Subsidiary of the Company to its parent, (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of its capital stock or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
29
<PAGE>
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities, or any "phantom" stock, "phantom" stock rights, stock
appreciation rights or stock based performance units (other than (A) the
issuance of shares of Company Common Stock upon the exercise of Company
Stock Options outstanding on the date hereof or granted after the date
hereof in accordance with clause (B) below, in either case in accordance
with their terms on the date hereof (or on the date of grant, if later),
(B) the grant of options to employees hired within one year prior to, or
anytime after, the date hereof to acquire shares of Company Common Stock in
accordance with the Company's ordinary course of business consistent with
past practice);
(iii) amend the Company Certificate or the Company By-laws or the
comparable charter or organizational documents of any of its Subsidiaries;
(iv) directly or indirectly acquire (A) by merging or consolidating
with, or by purchasing all of or a substantial equity interest in, or by
any other manner, any division, business or equity interest of any person
or (B) any assets forming part of such a division or business that have a
purchase price in excess of $1,000,000 individually or $2,000,000 in the
aggregate;
(v) sell, lease, license, mortgage, sell and leaseback or otherwise
encumber or subject to any Lien or otherwise dispose of any of its
properties or other assets with a fair market value in excess of $2,000,000
individually or $5,000,000 in the aggregate to a third party (except (A) by
incurring Permitted Liens, (B) with respect to properties or other assets
no longer used in the operation of the Company's business and/or (C) in the
ordinary course of business);
(vi) make any unbudgeted capital expenditure or expenditures which (A)
involves the purchase of any real property or (B) is in excess of
$2,000,000 individually or $5,000,000 in the aggregate, except for any such
capital expenditures provided for in the 2003 Capital Expenditure Plan
(authorizing approximately $22,100,000 of capital expenditures) and the
2004 Capital Expenditure Plan (providing for approximately $22,000,000 in
capital expenditures ratably over the 2004 calendar year) provided to
Parent prior to the date hereof;
(vii) (A) repurchase or prepay any indebtedness for borrowed money
except as required by the terms of such indebtedness, (B) incur any
indebtedness for borrowed money or guarantee any such indebtedness of
another person or issue or sell any debt securities or options, warrants,
calls or other rights to acquire any debt securities of the Company or any
of its Subsidiaries, guarantee any debt securities of another person, enter
30
<PAGE>
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing or (C) make any loans, advances or
capital contributions to, or investments in, any other person in excess of
$250,000 in the aggregate, other than (1) any loan or advance to any
physician or physicians group up to $150,000 in the aggregate, (2) any
working capital advance to any Provider pursuant to COMAR Section
10.37.10.26B and (3) in the Company or in or to any direct or indirect
Subsidiary of the Company;
(viii) (A) pay, discharge, settle or satisfy any claims (including
claims of stockholders), liabilities or obligations (whether absolute,
accrued, asserted or unasserted, contingent or otherwise) (1) in excess of
$2,000,000 individually and $5,000,000 in the aggregate, other than in the
ordinary course of business consistent with past practice or (2) involving
any material limitation on the conduct of the business of the Company or
its Subsidiaries or (B) waive or release any right of the Company or any of
its Subsidiaries with a value in excess of $250,000;
(ix) enter into, modify, amend or terminate (A) any Contract which if
so entered into, modified, amended or terminated would reasonably be
expected to (1) have a Company Material Adverse Effect, (2) impair in any
material respect the ability of the Company to perform its obligations
under this Agreement or (3) prevent or materially delay the consummation of
any of the transactions contemplated by this Agreement, (B) any other
Contract that involves the Company or any of its Subsidiaries incurring a
liability in excess of $2,000,000 individually or $5,000,000 in the
aggregate and that is not terminable by the Company without penalty with
one year or less notice (excluding contracts or amendments entered into or
made in the ordinary course of business with customers or Providers of the
Company or its Subsidiaries), (C) any Contract by which the Company or any
of its Subsidiaries grants any license to intellectual property (other than
trade or service marks) or (D) any Contract that contains a covenant
restricting the ability of the Company or any of its Subsidiaries (or
which, following the consummation of the Merger, would restrict the ability
of Parent or any of its Subsidiaries, including the Surviving Entity and
its Subsidiaries) to compete in any business or with any person or in any
geographic area;
(x) enter into any Contract which if in effect as of the date hereof
would be required to be disclosed pursuant to Section 3.10(b) hereof (other
than Contracts required to be disclosed pursuant to Section 3.10(b)(v)) to
the extent consummation of the transactions contemplated by this Agreement
or compliance by the Company with the provisions of this Agreement would
reasonably be expected to conflict with, or result in a violation or breach
of, or default (with or without notice or lapse of time or both) under, or
give rise to a right of, or result in, termination, cancellation or
31
<PAGE>
acceleration of any obligation or to a loss of a benefit under, or result
in the creation of any Lien in or upon any of the properties or other
assets of the Company or any of its Subsidiaries under, or give rise to any
increased, additional, accelerated or guaranteed right or entitlement of
any third party under, or result in any material alteration of, any
provision of such Contract;
(xi) except as required to comply with applicable Law or any Contract,
or pursuant to the terms of any Company Plan existing on the date of this
Agreement (including any bonus payments for the Company's 2003 fiscal year
under the bonus plans set forth in Section 6.11 of the Company Disclosure
Schedule), (A) increase in any manner the compensation or fringe benefits
of, or pay any bonus to, any current or former director, officer, employee
or consultant of the Company or any of its Subsidiaries other than
increases and bonuses consistent with past practice, (B) pay to any current
or former director, officer, employee or consultant of the Company or any
of its Subsidiaries any benefit not provided for under any Contract or
Company Plan other than the payment of cash compensation in the ordinary
course of business consistent with past practice, (C) grant any awards
under any Company Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units
or restricted stock or the removal of existing restrictions in any Contract
or Company Plan or awards made thereunder), other than in the ordinary
course of business to employees hired within one year prior to, or anytime
after, the date hereof, (D) take any action to fund or in any other way
secure the payment of compensation or benefits under any Contract or
Company Plan, (E) take any action to accelerate the vesting or payment of
any compensation or benefit under any Contract or Company Plan, (F)
materially change any actuarial or other assumption used to calculate
funding obligations with respect to any Company Plan or change the manner
in which contributions to any Company Plan are made or the basis on which
such contributions are determined or (G) adopt any new employee benefit
plan or arrangement or amend, modify or terminate any existing Company
Plan, in each case for the benefit of any current or former director,
officer, employee or consultant of the Company or any of its Subsidiaries,
other than required by applicable Law or tax qualification requirement;
(xii) adopt or enter into any collective bargaining agreement or other
labor union contract applicable to the employees of the Company or any of
its Subsidiaries;
(xiii) fail to use reasonable efforts to maintain existing insurance
policies or comparable replacement policies to the extent available for a
reasonable cost;
(xiv) change its fiscal year, revalue any of its material assets, or
make any changes in financial, actuarial, statutory or tax accounting
methods, principles or practices, except in each case as required by GAAP
or applicable Law;
(xv) make any material tax election or settle or compromise any
material tax liability, or agree to an extension of a statute of
limitations with respect to material taxes; or
32
<PAGE>
(xvi) authorize any of, or commit, propose or agree to take any of,
the foregoing actions.
(b) CONDUCT OF BUSINESS BY PARENT. During the period from the date of
this Agreement to the Effective Time, Parent shall not (i) amend the Parent
Certificate or the Parent By-laws in a manner materially adverse to the
Company's stockholders or (ii) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property) in respect of,
any of its capital stock, other than (A) dividends or distributions by a direct
or indirect wholly owned Subsidiary of Parent to its parent or (B) regular cash
dividends paid in the ordinary course of business consistent with past practice.
(c) OTHER ACTIONS. Except as otherwise contemplated or permitted by
this Agreement, the Company and Parent shall not, and shall not permit any of
their respective Subsidiaries to, take any action that would reasonably be
expected to, result in (i) any of the representations and warranties of such
party set forth in this Agreement that are qualified by materiality, Company
Material Adverse Effect or Parent Material Adverse Effect, as the case may be,
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
to the Merger set forth in Article VII not being satisfied.
(d) ADVICE OF CHANGES; FILINGS. The Company and Parent shall as
promptly as practicable advise the other party orally and in writing of (i) any
representation or warranty made by it (and, in the case of Parent, made by
Merger Sub) contained in this Agreement that is qualified as to materiality,
Company Material Adverse Effect or Parent Material Adverse Effect, as the case
may be, becoming untrue or inaccurate in any respect or any such representation
or warranty that is not so qualified becoming untrue or inaccurate in any
material respect or (ii) the failure of it (and, in the case of Parent, of
Merger Sub) to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement. The Company and Parent shall promptly provide the other copies
of all filings made by such party with any Governmental Authority in connection
with this Agreement and the transactions contemplated hereby.
SECTION 5.02. NO SOLICITATION BY THE COMPANY.
(a) The Company shall not, nor shall it authorize or permit any of its
Subsidiaries, any of its or their respective directors, officers or employees or
any investment banker, financial advisor, attorney, accountant or other advisor,
agent or representative retained by the Company or any Subsidiary in connection
with the transactions contemplated by this Agreement (collectively,
"Representatives") to, directly or indirectly through another person, (i)
solicit, initiate, cause, knowingly encourage, or knowingly facilitate, any
33
<PAGE>
inquiries or the making of any proposal that constitutes or is reasonably likely
to lead to a Company Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Company Takeover Proposal, or furnish to any person
any information in connection with or in furtherance of any Company Takeover
Proposal. Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any Representative of the
Company or any of its Subsidiaries shall be a breach of this Section 5.02(a) by
the Company. The Company shall, and shall cause its Subsidiaries and instruct
its Representatives to, immediately cease and cause to be terminated all
existing discussions or negotiations with any person conducted heretofore with
respect to any Company Takeover Proposal and request the prompt return or
destruction of all confidential information previously furnished.
Notwithstanding the foregoing, at any time prior to obtaining the Company
Stockholder Approval (and in no event after obtaining such Company Stockholder
Approval), in response to an unsolicited bona fide written Company Takeover
Proposal made after the date hereof that the Board of Directors of the Company
determines in good faith constitutes or is reasonably likely to constitute a
Company Superior Proposal, the Company may, if its Board of Directors determines
in good faith (after consultation with outside counsel) that it is necessary to
do so in order to comply with its fiduciary duties to the stockholders of the
Company under applicable Law, and subject to compliance with Section 5.02(c) and
after giving Parent two Business Days written notice of such determination, (A)
furnish information with respect to the Company and its Subsidiaries to the
person making such Company Takeover Proposal (and its Representatives) pursuant
to a customary confidentiality agreement not less restrictive of such person
than the Confidentiality Agreement, provided that all such information (to the
extent that such information has not been previously provided to Parent) is
provided to Parent prior to or substantially concurrent with the time it is
provided to such person, and (B) participate in discussions or negotiations with
the person making such Company Takeover Proposal (and its Representatives)
regarding such Company Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal" shall mean
any inquiry, proposal or offer, whether or not conditional and whether or not
withdrawn, (a) for a merger, consolidation, dissolution, recapitalization or
other business combination involving the Company, (b) for the issuance of 20% or
more of the equity securities of the Company as consideration for the assets or
securities of another person or (c) to acquire in any manner, directly or
indirectly, 20% or more of the equity securities of the Company or assets
(including equity securities of any Subsidiary of the Company) that represent
20% or more of the total consolidated assets of the Company, other than the
transactions contemplated by this Agreement.
For purposes of this Agreement, "Company Superior Proposal" shall mean
any bona fide written offer made by a third party, that if consummated would
result in such person (or its shareholders) owning, directly or indirectly,
greater than 50% of the shares of Company Common Stock then outstanding (or of
the surviving entity in a merger or the direct or indirect parent of the
surviving entity in a merger) or all or substantially all of the total
consolidated assets of the Company (i) on terms which the Board of Directors of
the Company determines in good faith (after consultation with outside counsel
34
<PAGE>
and a financial advisor of nationally recognized reputation and in light of all
relevant circumstances, including, without limitation, all the terms and
conditions of such proposal and this Agreement) to be more favorable to the
stockholders of the Company from a financial point of view than the transactions
contemplated by this Agreement and (ii) which is reasonably likely to be
completed, taking into account any financing and approval requirements and all
other financial, legal, regulatory and other aspects of such proposal.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) (A) withdraw (or modify in a manner adverse to Parent), or
propose to withdraw (or modify in a manner adverse to Parent), the approval,
recommendation or declaration of advisability by such Board of Directors or any
such committee thereof of this Agreement or the Merger or (B) recommend, adopt
or approve, or propose publicly to recommend, adopt or approve, any Company
Takeover Proposal (any action described in this clause (i) being referred to as
a "Company Adverse Recommendation Change") or (ii) approve or recommend, or
propose to approve or recommend, or allow the Company or any of its Subsidiaries
to execute or enter into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or other similar
agreement constituting or related to, any Company Takeover Proposal (other than
a confidentiality agreement pursuant to Section 5.02(a)). Notwithstanding the
foregoing, the Board of Directors of the Company may make a Company Adverse
Recommendation Change if such Board of Directors determines in good faith (after
consultation with outside counsel) that it is necessary to do so in order to
comply with its fiduciary duties to the stockholders of the Company under
applicable Law; provided, however, that no Company Adverse Recommendation Change
may be made in response to a Company Superior Proposal until after the fifth
business day following Parent's receipt of written notice from the Company (an
"Adverse Recommendation Notice") advising Parent that the Board of Directors of
the Company intends to make such Company Adverse Recommendation Change and
containing all information required by Section 5.02(c), together with copies of
any written offer or proposal in respect of such Company Superior Proposal (it
being understood and agreed that any amendment to the financial terms or other
material terms of such Company Superior Proposal shall require a new Adverse
Recommendation Notice and a new five (5) business day period). In determining
whether to make a Company Adverse Recommendation Change in response to a Company
Superior Proposal, the Board of Directors of the Company shall take into account
any changes to the terms of this Agreement proposed by Parent (in response to an
Adverse Recommendation Notice or otherwise) in determining whether such third
party Company Takeover Proposal still constitutes a Company Superior Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.02, the Company shall promptly advise
Parent orally and in writing of any request for information or other inquiry
that the Company reasonably believes could lead to any Company Takeover Proposal
or of any Company Takeover Proposal, the terms and conditions of any such
request, Company Takeover Proposal or inquiry (including any changes thereto)
35
<PAGE>
and the identity of the person making any such request, Company Takeover
Proposal or inquiry. The Company shall promptly keep Parent fully informed of
the status and details (including any change to the terms thereof) of any such
request, Company Takeover Proposal or inquiry.
(d) Nothing contained in this Section 5.02 shall prohibit the Company
from (i) taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange
Act or (ii) making any required disclosure to the stockholders of the Company
if, in the good faith judgment of the Board of Directors of the Company (after
consultation with outside counsel), failure to so disclose would be inconsistent
with its obligations under applicable Law.
ARTICLE VI
Additional Agreements
---------------------
SECTION 6.01. PREPARATION OF THE FORM S-4 AND THE PROXY STATEMENT;
STOCKHOLDER MEETINGS.
(a) As soon as practicable following the date of this Agreement, the
Company shall prepare and file with the SEC the Proxy Statement and the Company
and Parent shall prepare and Parent shall file with the SEC the Form S-4, in
which the Proxy Statement will be included as a prospectus. Each of the Company
and Parent shall use its reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing
and keep the Form S-4 effective for so long as necessary to consummate the
Merger. The Company shall use its reasonable efforts to cause the Proxy
Statement to be mailed to the stockholders of the Company as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Parent shall also take any action required to be taken under any applicable
state securities Laws in connection with the issuance of shares of Parent Common
Stock in the Merger, and the Company shall furnish all information concerning
the Company and the holders of shares of Company Common Stock as may be
reasonably requested by Parent in connection with any such action. No filing of,
or amendment or supplement to, the Form S-4 will be made by Parent, and no
filing of, or amendment or supplement to the Proxy Statement will made by the
Company, without providing the other party and its counsel a reasonable
opportunity to review and comment thereon. If at any time prior to the Effective
Time any information relating to the Company or Parent, or any of their
respective Affiliates, directors or officers, should be discovered by the
Company or Parent which should be set forth in an amendment or supplement to
either the Form S-4 or the Proxy Statement, so that either such document would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be promptly filed with
the SEC and, to the extent required by Law, disseminated to the stockholders of
36
<PAGE>
the Company. The parties shall notify each other promptly of the receipt of any
comments from the SEC or the staff of the SEC and of any request by the SEC or
the staff of the SEC for amendments or supplements to the Proxy Statement or the
Form S-4 or for additional information and shall supply each other with copies
of (i) all correspondence between it or any of its Representatives, on the one
hand, and the SEC or the staff of the SEC, on the other hand, with respect to
the Proxy Statement, the Form S-4 or the Merger and (ii) all orders of the SEC
relating to the Form S-4.
(b) The Company shall, as soon as practicable following the date of
this Agreement, establish a record date for, and promptly after the Form S-4 is
declared effective, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Company Stockholders Meeting") solely for the purpose of
obtaining the Company Stockholder Approval. Subject to Section 5.02(b), the
Company shall, through its Board of Directors, recommend to its stockholders
adoption of this Agreement. Without limiting the generality of the foregoing,
the Company's obligations pursuant to the first sentence of this Section 6.01(b)
shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of any Company Takeover Proposal or
(ii) any Company Adverse Recommendation Change.
SECTION 6.02. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Subject to
applicable Laws each party shall afford to the others, and the others' officers,
employees, accountants, counsel, financial advisors and other Representatives,
reasonable access during normal business hours during the period prior to the
Effective Time or the termination of this Agreement to all its and its
Subsidiaries' properties, books, contracts, commitments, personnel and records
and, during such period, each party shall furnish promptly to the others (a) a
copy of each report, schedule, registration statement and other document filed
by such party during such period pursuant to the requirements of Federal or
state securities Laws and (b) consistent with its legal obligations all other
information concerning such party and its Subsidiaries' business, properties and
personnel as the other party may reasonably request. Except for disclosures
expressly permitted by the terms of the confidentiality agreement, dated as of
March 10, 2003, between Parent and the Company (as it may be amended from time
to time, the "Confidentiality Agreement"), each party shall hold, and shall
cause its officers, employees, accountants, counsel, financial advisors and
other Representatives to hold, all information received from the other party,
directly or indirectly, in confidence in accordance with the Confidentiality
Agreement. No investigation pursuant to this Section 6.02 or information
provided or received by any party hereto pursuant to this Agreement will affect
any of the representations or warranties of the parties hereto contained in this
Agreement or the conditions hereunder to the obligations of the parties hereto.
(b) Notwithstanding anything to the contrary set forth herein or in
any other agreement to which the parties hereto are parties or by which they are
bound (including, without limitation, the Confidentiality Agreement), commencing
on the Release Date (as defined below), the obligations of confidentiality
contained herein and therein, as they relate to the transactions contemplated
herein, shall not apply to the tax structure or tax treatment of the
37
<PAGE>
transactions contemplated herein, and each party hereto (and any employee,
representative, or agent of any party hereto) may disclose after the Release
Date to any and all persons, without limitation of any kind, the tax structure
and tax treatment of the transactions contemplated herein; provided, however,
that such disclosure shall not include the name (or other identifying
information not relevant to the tax structure or tax treatment) of any person
and shall not include information for which nondisclosure is reasonably
necessary in order to comply with applicable securities laws. For purposes of
this agreement, "Release Date" means the date that is the earlier of (a) the
date of the public announcement of discussions relating to the transactions
contemplated herein, (b) the date of the public announcement of the transactions
contemplated herein or (c) the date of the execution of an agreement (with or
without conditions) to enter into the transactions contemplated herein.
SECTION 6.03. REASONABLE EFFORTS. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using reasonable efforts to accomplish
the following: (a) the taking of all acts necessary to cause the conditions to
Closing to be satisfied as promptly as practicable, (b) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Authorities and the making of all necessary registrations and
filings (including filings with Governmental Authorities, if any) and the taking
of all steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by any Governmental Authority, (c) the obtaining
of all necessary consents, approvals or waivers from third parties and (d) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In connection with and without limiting the first sentence of this
Section 6.03, each of the Company and its Board of Directors and Parent and its
Board of Directors shall (i) take all action reasonably necessary to ensure that
no state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement, the Merger or any of the other transactions
contemplated by this Agreement and (ii) if any state takeover statute or similar
statute becomes applicable to this Agreement, the Merger or any of the other
transactions contemplated by this Agreement, take all action reasonably
necessary to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Merger and the other transactions
contemplated by this Agreement. Nothing in this Agreement shall be deemed to
require Parent to (A) agree to, or proffer to, divest or hold separate any
assets or any portion of any business of Parent or any of its Subsidiaries or,
assuming the consummation of the Merger, the Company or any of its Subsidiaries,
(B) not compete in any geographic area or line of business or (C) restrict the
manner in which, or whether, Parent, the Company, the Surviving Entity or any of
their respective Affiliates may carry on business in any part of the world,
38
<PAGE>
which, in the case of any of clauses (A) through (C) above, would reasonably be
likely to have a Parent Material Adverse Effect, a Company Material Adverse
Effect or materially impair the long-term benefits sought to be derived from the
Merger.
SECTION 6.04. INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) All rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time now existing in
favor of the current or former directors, officers and employees of the Company
and its Subsidiaries (the "Indemnified Parties") as provided in the Company
Certificate or the Company By-laws (in each case, as in effect on the date
hereof) shall be assumed by the Surviving Entity in the Merger, without further
action, as of the Effective Time and shall survive the Merger and shall continue
in full force and effect in accordance with their terms. The Parent shall
indemnify and hold harmless, and provide advancement of expenses to the
Indemnified Parties to the same extent such persons are indemnified or have the
right to advancement of expenses as of the date hereof by the Company pursuant
to the Company Certificate and the Company By-laws.
(b) For six years after the Effective Time, Parent shall maintain in
effect the Company's current directors' and officers' liability insurance in
respect of 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 consummation of the transactions contemplated hereby)
covering the Indemnified Parties currently covered by the Company's directors'
and officers' liability insurance policy (a correct and complete copy of which
has been heretofore made available to Parent), on terms with respect to such
coverage and amount no less favorable than those of such policy in effect on the
date hereof; provided, however, that Parent may substitute therefor policies of
Parent containing terms with respect to coverage and amount no less favorable to
such Indemnified Parties; provided further, however, that in satisfying its
obligation under this Section 6.04(b) Parent shall not be obligated to pay
aggregate premiums in excess of 300% of the amount paid by the Company in its
last full fiscal year (which premiums are hereby represented and warranted by
the Company to be approximately $2,500,000), it being understood and agreed that
Parent shall nevertheless be obligated to provide such coverage as may be
obtained for such 300% amount.
(c) The covenants contained in this Section 6.04 are intended to be
for the benefit of, and shall be enforceable by, each of the Indemnified Parties
and their respective heirs and legal representatives, and shall not be deemed
exclusive of any other rights to which an Indemnified Party is entitled, whether
pursuant to Law, contract or otherwise.
SECTION 6.05. FEES AND EXPENSES. All fees and expenses incurred in
connection with this Agreement, the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated, except that each of the
Company and Parent shall bear and pay one-half of (a) the costs and expenses
39
<PAGE>
incurred in connection with filing, printing and mailing the Form S-4 and (b)
the filing fees for the premerger notification and report forms under the HSR
Act.
SECTION 6.06. PUBLIC ANNOUNCEMENTS. Parent and the Company shall
consult with each other before issuing, and give each other the opportunity to
review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
Law, court process or by obligations pursuant to any listing agreement with any
national securities exchange or national securities quotation system. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
SECTION 6.07. AFFILIATES. Prior to the Effective Time the Company
shall deliver to Parent a letter identifying all persons who will be at the time
this Agreement is submitted for adoption by the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act
and applicable SEC rules and regulations. The Company shall use its reasonable
efforts to cause each such person to deliver to Parent at least 10 days prior to
the Closing Date a written agreement substantially in the form attached as
Exhibit A.
SECTION 6.08. STOCK EXCHANGE LISTING. Parent shall use its reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger to
be approved for listing on the New York Stock Exchange, subject to official
notice of issuance, prior to the Closing Date.
SECTION 6.09. REORGANIZATION TREATMENT. The Company, Parent and Merger
Sub shall execute and deliver to each of Dewey Ballantine LLP, special counsel
to the Company, and Weil, Gotshal & Manges LLP, counsel to Parent and Merger
Sub, certificates substantially in the forms attached hereto at Exhibits B and C
at such time or times as reasonably requested by each such law firm in
connection with its delivery of the opinion referred to in Section 7.02(e) or
7.03(c), as the case may be. Prior to the Effective Time, none of the Company,
Parent or Merger Sub shall take or cause to be taken any action which would
cause to be untrue any of the representations in such certificates. The parties
intend the Merger to qualify as a reorganization under Section 368(a) of the
Code and the parties will take the position for all tax purposes that the Merger
so qualifies unless a contrary position is required by a final determination
within the meaning of Section 1313 of the Code.
SECTION 6.10. STOCKHOLDER LITIGATION. The Company shall promptly
advise Parent orally and in writing of any stockholder litigation against the
Company and/or its directors relating to the transactions contemplated by this
Agreement and shall keep Parent fully informed regarding any such stockholder
litigation. The Company shall give Parent the opportunity to consult with the
Company regarding the defense or settlement of any such stockholder litigation,
40
<PAGE>
shall give due consideration to Parent's advice with respect to such stockholder
litigation and shall not settle any such litigation prior to such consultation
and consideration.
SECTION 6.11. EMPLOYEE MATTERS.
(a) Parent agrees to honor, or cause the Surviving Entity to honor,
from and after the Effective Time any bonus payments for the Company's 2003
fiscal year under the bonus plans set forth in Section 6.11 of the Company
Disclosure Schedule in accordance with their terms as in effect immediately
before the Effective Time.
(b) As soon as practicable after the Effective Time, Parent shall
cause the Surviving Entity to provide each individual who, as of the Effective
Time, is an employee of the Company or any of its Subsidiaries, with
compensation and benefits that are comparable in the aggregate to the
compensation and benefits that are provided to similarly situated employees of
Parent.
(c) With respect to any benefit plan, program, arrangement (including
any "employee benefit plan" (as defined in Section 3(3) of ERISA) and any
vacation program), Parent shall, and shall cause the Surviving Entity to,
recognize the service with the Company and its Subsidiaries prior to the
Effective Time of employees of the Company and its Subsidiaries who continue
their employment after the Effective Time (the "Affected Employees") for
purposes of such plan or program.
(d) Prior to the Effective Time, the Company shall take all such steps
as may be required to cause the transactions contemplated by Section 2.03 and
any other dispositions of Company equity securities (including derivative
securities) in connection with this Agreement or the transactions contemplated
hereby by each individual who is a director or officer of the Company, to be
exempt under Rule 16b-3 promulgated under the Exchange Act, such steps to be
taken in accordance with the interpretive letter, dated January 12, 1999, issued
by the SEC with respect to such matters.
(e) With respect to any welfare plan in which employees of the Company
and its Subsidiaries are eligible to participate after the Effective Time,
Parent shall, and shall cause the Surviving Entity to, (i) waive all limitations
as to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to such employees to the
extent such conditions were satisfied under the welfare plans of the Company and
its Subsidiaries prior to the Effective Time, and (ii) provide each such
employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any analogous deductible or out-of-pocket
requirements to the extent applicable under any such plan.
(f) Prior to the Effective Time, the Company shall terminate its
defined contribution 401(k) plan. Parent agrees to provide, or cause the
Surviving Entity to provide, that the Affected Employees are eligible to
participate in a defined contribution 401(k) plan immediately following the
Effective Time and that such defined contribution plan shall accept "eligible
41
<PAGE>
rollover distributions" for Affected Employees from the Company's defined
contribution 401(k) plan.
SECTION 6.12. EMPLOYMENT AGREEMENTS. The Company will use its best
efforts to procure the agreement of each of the employees named on Section 6.12
of the Company Disclosure Schedule to enter into employment agreements with the
Company (the "Employment Agreements") to be effective as of the Effective Time
and substantially in the form set forth on Exhibit D hereto. For purposes of
this Section 6.12, it is understood that "best efforts" shall not constitute a
guaranty that any particular individual or any number of individuals will agree
to enter into an Employment Agreement. No provisions of the Employment
Agreements or any other employment agreements between the Company or any of its
Subsidiaries and their respective employees will be amended without the prior
written consent of Parent, which consent may be withheld in the sole discretion
of Parent.
SECTION 6.13. STANDSTILL AGREEMENTS, CONFIDENTIALITY AGREEMENTS,
ANTI-TAKEOVER PROVISIONS. During the period from the date of this Agreement
through the Effective Time, the Company will not terminate, amend, modify or
waive any provision of any agreement required to be disclosed pursuant to
Section 3.10(b)(v) hereof to which it or any of its Subsidiaries is a party,
other than the Confidentiality Agreement pursuant to its terms or by written
agreement of the parties thereto. During such period, the Company shall enforce,
to the fullest extent permitted under applicable Law, the provisions of any such
agreement, including by obtaining injunctions to prevent any material breaches
of such agreements and to enforce specifically the material terms and provisions
thereof in any court of the United States of America or of any state having
jurisdiction. In addition, the Company will not approve a Company Takeover
Proposal or Company Superior Proposal for purposes of Section 203 of Delaware
Law.
SECTION 6.14. ISSUANCE OF SHARES. All shares of Company Common Stock
to be issued pursuant to exercises of Company Stock Options after the date
hereof shall be issued by the Trust and the Company will not issue any shares of
Company Common Stock under the Company Stock Plans or the Company Stock Options.
ARTICLE VII
Conditions Precedent
--------------------
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Company Stockholder Approval shall have
been obtained.
(b) STOCK EXCHANGE LISTING. The shares of Parent Common Stock issuable
to the stockholders of the Company as contemplated by this Agreement shall
42
<PAGE>
have been approved for listing on the New York Stock Exchange, subject to
official notice of issuance.
(c) ANTITRUST. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act or any other applicable
competition, merger control, antitrust or similar Law shall have been
terminated or shall have expired.
(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other judgment or order issued by
any court of competent jurisdiction or other statute, law, rule, legal
restraint or prohibition (collectively, "Restraints") shall be in effect
preventing the consummation of the Merger.
(e) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(f) CLOSING CONSENTS. The consents listed on Exhibit E hereto shall
have been obtained and shall be in full force and effect.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to effect the Merger are further subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as though made on the
Closing Date (without regard to materiality or Company Material Adverse
Effect qualifiers contained therein), except to the extent such
representations and warranties expressly relate to an earlier date, in
which case as of such earlier date, except where the failure of the
representations and warranties to be true and correct individually or in
the aggregate, has not had and would not reasonably be expected to have a
Company Material Adverse Effect. Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer and the
chief financial officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to
such effect.
(c) NO LITIGATION. There shall not be pending or threatened any suit,
action or proceeding by any Governmental Authority (i) challenging the
acquisition by Parent or Merger Sub of any shares of Company Common Stock,
43
<PAGE>
seeking to restrain or prohibit the consummation of the Merger, seeking to
place limitations on the ownership of shares of Company Common Stock (or
shares of capital stock of the Surviving Entity) by Parent or Merger Sub,
(ii) seeking to prohibit or limit the ownership or operation by the Company
or any of its Subsidiaries or by Parent or any of its Subsidiaries of any
portion of any business or of any assets of the Company and its
Subsidiaries or Parent and its Subsidiaries or to compel the Company or any
of its Subsidiaries or Parent or any of its Subsidiaries to divest or hold
separate any portion of any business or of any assets of the Company and
its Subsidiaries or Parent and its Subsidiaries, as a result of the Merger
or (iii) seeking to obtain from the Company, Parent or Merger Sub any
damages, which, in the case of clauses (ii) and (iii) above, would
reasonably be likely to have a Parent Material Adverse Effect, have a
Company Material Adverse Effect, or materially impair the long-term
benefits sought to be derived from the Merger.
(d) RESTRAINT. No Restraint that would reasonably be expected to
result, directly or indirectly, in any of the effects referred to in
Section 7.02(c) shall be in effect.
(e) TAX OPINION. Parent shall have received from Weil, Gotshal &
Manges LLP, counsel to the Parent, on the Closing Date, an opinion in form
and substance reasonably satisfactory to Parent and dated as of the Closing
Date, to the effect that the Merger will qualify for United States Federal
income tax purposes as a "reorganization" within the meaning of Section
368(a) of the Code. In rendering such opinion, Weil, Gotshal & Manges LLP
may rely upon customary assumptions and the representations and covenants
contained in the certificates of the Company, Parent and Merger Sub
referred to in Section 6.09.
(f) CLOSING CONSENTS. The consents listed on Exhibit E hereto shall
have been obtained and shall be in full force and effect, without any
conditions which would reasonably be likely to have a Parent Material
Adverse Effect, have a Company Material Adverse Effect, or materially
impair the long-term benefits sought to be derived from the Merger.
SECTION 7.03. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation
of the Company to effect the Merger is further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as
though made on the Closing Date (without regard to materiality or Parent
Material Adverse Effect qualifiers contained therein), except to the extent
such representations and warranties expressly relate to an earlier date, in
which case as of such earlier date, except where the failure of the
representations and warranties to be true and correct individually or in
the aggregate, has not had and would not reasonably be expected to have a
44
<PAGE>
Parent Material Adverse Effect. The Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent to
such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUB. Parent and
Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an executive officer of Parent to such effect.
(c) TAX OPINION. The Company shall have received from Dewey Ballantine
LLP, special counsel to the Company, on the Closing Date, an opinion in
form and substance reasonably satisfactory to the Company and dated as of
the Closing Date, to the effect that the Merger will qualify for United
States Federal income tax purposes as a "reorganization" within the meaning
of Section 368(a) of the Code. In rendering such opinion, Dewey Ballantine
LLP may rely upon customary assumptions and representations and covenants
contained in the certificates of the Company, Parent and Merger Sub
referred to in Section 6.09.
SECTION 7.04. FRUSTRATION OF CLOSING CONDITIONS. None of the Company,
Parent or Merger Sub may rely on the failure of any condition set forth in
Section 7.01, 7.02 or 7.03, as the case may be, to be satisfied if such failure
was caused by such party's failure to use its reasonable efforts to consummate
the Merger and the other transactions contemplated by this Agreement, as
required by and subject to Section 6.03.
ARTICLE VIII
Termination, Amendment and Waiver
---------------------------------
SECTION 8.01. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after receipt of the Company
Stockholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated on or
before July 31, 2004; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 8.01(b)(i) shall not
be available to any party whose action or failure to act has been
a principal cause of or resulted in the failure of the Merger to
be consummated on or before such date;
45
<PAGE>
(ii) if any Restraint having the effect of granting or
implementing any relief referred to in Section 7.02(c) shall be
in effect and shall have become final and nonappealable;
(iii) if the Company Stockholder Approval shall not have been
obtained at the Company Stockholders Meeting duly convened
therefor or at any adjournment or postponement thereof;
(c) by Parent, if the Company shall have breached or failed to perform
any of its representations, warranties, covenants or agreements set forth
in this Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 7.02(a) or (b) and (B)
is incapable of being cured, or is not cured, by the Company within 30
calendar days following receipt of written notice from Parent of such
breach or failure to perform;
(d) by the Company, if Parent shall have breached or failed to perform
any of its representations, warranties, covenants or agreements set forth
in this Agreement, which breach or failure to perform (i) would give rise
to the failure of a condition set forth in Section 7.03(a) or (b) and (ii)
is incapable of being cured, or is not cured, by Parent within 30 calendar
days following receipt of written notice from the Company of such breach or
failure to perform; or
(e) by Parent, within 45 days of the date on which (i) a Company
Adverse Recommendation Change shall have occurred or (ii) the Board of
Directors of the Company or any committee thereof shall have failed to
publicly confirm its recommendation and declaration of advisability of this
Agreement and the Merger within three (3) business days after a written
request by Parent that it do so.
SECTION 8.02. TERMINATION FEE.
(a) In the event that
(i) this Agreement is terminated by either Parent or the
Company pursuant to Section 8.01(b)(i), and (A) a vote to obtain the
Company Stockholder Approval has not been held, (B) the failure to
hold such vote was not due to circumstances beyond the control of the
Company, including Parent's breach of its obligations contained in
this Agreement or any Restraint which had the effect of delaying the
Company Stockholders Meeting past July 31, 2004, despite the Company's
reasonable efforts to remove the Restraint and hold the meeting in a
timely manner and (C) within 12 months after such termination the
Company shall have reached a definitive agreement to consummate, or
shall have consummated, a Company Takeover Proposal;
46
<PAGE>
(ii) this Agreement is terminated by either Parent or the Company
pursuant to Section 8.01(b)(iii) and (A) Parent shall not have been
entitled to terminate this Agreement pursuant to Section 8.01(e), (B)
after the date of this Agreement a Company Takeover Proposal shall
have been made or communicated to the Company or shall have been made
directly to the stockholders of the Company generally and (C) within
12 months after such termination the Company shall have reached a
definitive agreement to consummate, or shall have consummated, a
Company Takeover Proposal;
(iii) this Agreement is terminated by Parent pursuant to Section
8.01(c) and (A) the Company's breach or failure triggering such
termination shall have been willful, (B) after the date of this
Agreement a Company Takeover Proposal shall have been made or
communicated to the Company or shall have been made directly to the
stockholders of the Company generally and (C) within 12 months after
such termination the Company shall have reached a definitive agreement
to consummate, or shall have consummated, a Company Takeover Proposal;
or
(iv) this Agreement is terminated by Parent pursuant to Section
8.01(e),
then the Company shall (x) in the case of a Termination Fee payable pursuant to
clause (i), (ii) or (iii) of this Section 8.02(a), upon the earlier of the date
of such definitive agreement and such consummation of a Company Takeover
Proposal or (y) in the case of a Termination Fee payable pursuant to clause (iv)
of this Section 8.02(a), on the date of such termination, pay Parent a fee equal
to $116,388,089 (the "Termination Fee") by wire transfer of same-day funds. In
the case of a Termination Fee payable pursuant to clause (iii) of this Section
8.02(a), the parties agree that the Termination Fee shall be the appropriate
measure of liquidated damages, and shall be the total damages and sole and
exclusive remedy of Parent and Merger Sub relating to the willful breach or
failure which triggered the payment of the Termination Fee.
(b) The Company acknowledges and agrees that the agreements contained
in Section 8.02(a) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement. If the Company fails promptly to pay the amount due pursuant to
Section 8.02(a), and, in order to obtain such payment, Parent commences a suit
that results in a judgment against the Company for the Termination Fee, the
Company shall pay to Parent its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) incurred in connection with such suit,
together with interest on the amount of the Termination Fee from the date such
payment was required to be made until the date of payment at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
47
<PAGE>
SECTION 8.03. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Merger Sub or the Company, other than the
provisions of the penultimate sentence of Section 6.02(a), Sections 6.05 and
8.02, this Section 8.03 and Article IX, which provisions shall survive such
termination; provided that nothing herein shall relieve any party from any
liability for any willful breach hereof, subject to the final sentence of
Section 8.02(a).
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties
hereto at any time before or after receipt of the Company Stockholder Approval;
provided, however, that after such approval has been obtained, there shall be
made no amendment that by Law requires further approval by the stockholders of
the Company without such approval having been obtained. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 8.05. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso to the first sentence of Section
8.04, waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing 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 such
rights.
SECTION 8.06. PROCEDURE FOR TERMINATION OR AMENDMENT. A termination of
this Agreement pursuant to Section 8.01 or an amendment of this Agreement
pursuant to Section 8.04 shall, in order to be effective, require, in the case
of Parent or the Company, action by its Board of Directors or, with respect to
any amendment of this Agreement pursuant to Section 8.04, the duly authorized
committee or other designee of its Board of Directors to the extent permitted by
Law.
ARTICLE IX
General Provisions
------------------
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 9.02. NOTICES. Except for notices that are specifically
required by the terms of this Agreement to be delivered orally, all notices,
requests, claims, demands and other communications hereunder shall be in writing
48
<PAGE>
and shall be deemed given if delivered personally, facsimiled (which is
confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
if to Parent or Merger Sub, to:
UnitedHealth Group Incorporated
9900 Bren Road East
Minnetonka, Minnesota 55343
Facsimile No.: 952-936-0044
Attention: General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile No.: 212-310-8007
Attention: Thomas A. Roberts
Marita A. Makinen
if to the Company, to:
Mid Atlantic Medical Services, Inc.
4 Taft Court
Rockville, MD 20850
Facsimile No.: 301-838-5689
Attention: General Counsel
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Facsimile No.: 212-259-6333
Attention: Frederick W. Kanner
M. Adel Aslani-Far
with a copy to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Second Floor
Washington, DC 20036-1800
49
<PAGE>
Facsimile No.: 202-778-9100
Attention: Alan J. Berkeley
Thomas F. Cooney, III
SECTION 9.03. DEFINITIONS. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "Knowledge" of any person that is not an individual means, (i)
with respect to the Company regarding any matter in question , the actual
knowledge of the employees of the Company and its Subsidiaries listed in
Section 9.03(b) of the Company Disclosure Schedule and (ii) with respect to
Parent regarding any matter in question, the actual knowledge of the
employees of Parent and its Subsidiaries listed in Section 9.03(b) of the
Parent Disclosure Schedule.;
(c) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(d) "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 that, in the
aggregate, are not material in amount and that do not, in any case,
materially detract from the value of the property subject thereto;
(e) a "Subsidiary" of any person means another person, an amount of
the voting securities, other voting rights or voting partnership interests
of which is sufficient to elect at least a majority of its board of
directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person.
SECTION 9.04. INTERPRETATION. When a reference is made in this
Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be
to an Article of, a Section of, or an 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 words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
50
<PAGE>
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns. The
parties have participated jointly in the negotiating and drafting of this
Agreement. In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
SECTION 9.05. 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 parties.
SECTION 9.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, including the Company Disclosure Schedule and the Parent Disclosure
Schedule, and the Confidentiality Agreement (a) constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and the
Confidentiality Agreement and (b) except for the provisions of Section 6.04, are
not intended to confer upon any person other than the parties any rights,
benefits or remedies.
SECTION 9.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless of
the Laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.08. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of Law or otherwise by any of the parties without the prior
written consent of the other parties 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 (and, if so requested by the Company, will assign to a
wholly owned corporate subsidiary of Parent) any of or all its rights, interests
and obligations under this Agreement to any direct, wholly owned Subsidiary of
Parent, but no such assignment shall relieve Merger Sub of any of its
obligations hereunder (except in the case of any such request). 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.
51
<PAGE>
SECTION 9.09. SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION. The
parties agree that irreparable damage would occur and that the parties would not
have any adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in any state court in the State of
Delaware, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any Federal court located in the
State of Delaware or of any state court located in the State of Delaware in the
event any dispute arises out of this Agreement or the transactions contemplated
by this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
the transactions contemplated by this Agreement in any court other than a
Federal court located in the State of Delaware or a state court located in the
State of Delaware.
SECTION 9.10. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. 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 to the fullest
extent permitted by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
52
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
UNITEDHEALTH GROUP INCORPORATED
By:__________________________________
Name:
Title:
MU ACQUISITION LLC
By:__________________________________
Name:
Title:
MID ATLANTIC MEDICAL SERVICES, INC.
By:__________________________________
Name:
Title:
53