EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF
APRIL 28, 2002
AMONG
ANTHEM, INC.,
AI SUB ACQUISITION CORP.
AND
TRIGON HEALTHCARE, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..........................................................1
1.1. THE MERGER............................................................1
1.2. CLOSING...............................................................2
1.3. EFFECTIVE TIME........................................................2
1.4. EFFECTS OF THE MERGER.................................................2
1.5. ARTICLES OF INCORPORATION.............................................2
1.6. BY-LAWS...............................................................2
1.7. OFFICERS AND DIRECTORS OF SURVIVING CORPORATION.......................2
1.8. EFFECT ON CAPITAL STOCK...............................................3
1.9. EXCHANGE AGENT........................................................3
1.10. COMPANY STOCK OPTIONS AND RESTRICTED STOCK............................3
1.11. CERTAIN ADJUSTMENTS...................................................4
ARTICLE II EXCHANGE OF CERTIFICATES...........................................5
2.1. EXCHANGE FUND.........................................................5
2.2. EXCHANGE PROCEDURES...................................................5
2.3. DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES......................6
2.4. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK...................6
2.5. NO FRACTIONAL SHARES OF PURCHASER COMMON STOCK........................6
2.6. TERMINATION OF EXCHANGE FUND..........................................7
2.7. NO LIABILITY..........................................................7
2.8. INVESTMENT OF THE EXCHANGE FUND.......................................7
2.9. LOST CERTIFICATES.....................................................7
2.10. WITHHOLDING RIGHTS....................................................7
2.11. FURTHER ASSURANCES....................................................8
2.12. STOCK TRANSFER BOOKS..................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................8
3.1. REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................8
3.2. REPRESENTATIONS AND WARRANTIES OF COMPANY............................15
3.3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND MERGER SUB.....................................................30
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.........................31
4.1. CONDUCT OF BUSINESS OF COMPANY PENDING THE MERGER....................31
4.2. CONDUCT OF BUSINESS OF PURCHASER PENDING THE MERGER..................34
4.3. OPERATIONAL MATTERS..................................................35
ARTICLE V ADDITIONAL AGREEMENTS..............................................36
5.1. PREPARATION OF FORM S-4 AND THE JOINT PROXY STATEMENT;
STOCKHOLDERS MEETINGS..............................................36
5.2. ACCOUNTANT'S LETTERS.................................................38
5.3. ACCESS TO INFORMATION................................................38
5.4. REASONABLE BEST EFFORTS..............................................39
5.5. NO SOLICITATION OF TRANSACTIONS......................................40
5.6. EMPLOYEE BENEFITS MATTERS............................................41
5.7. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE...............43
5.8. NOTIFICATION OF CERTAIN MATTERS......................................44
5.9. PUBLIC ANNOUNCEMENTS.................................................44
5.10. LISTING OF SHARES OF PURCHASER COMMON STOCK..........................44
PAGE
5.11. AFFILIATES...........................................................45
5.12. TRANSITION TEAM......................................................45
5.13. MANAGEMENT RESPONSIBILITIES..........................................45
5.14. TAX-FREE REORGANIZATION TREATMENT....................................45
5.15. REPRESENTATION ON PURCHASER BOARD....................................45
5.16. OTHER OBLIGATIONS....................................................46
ARTICLE VI CONDITIONS PRECEDENT..............................................46
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER...........46
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PURCHASER AND
MERGER SUB.........................................................47
6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY......................48
ARTICLE VII TERMINATION AND AMENDMENT........................................49
7.1. TERMINATION..........................................................49
7.2. EFFECT OF TERMINATION................................................51
7.3. FEES AND EXPENSES....................................................51
ARTICLE VIII GENERAL PROVISIONS..............................................53
8.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS...........53
8.2. NOTICES..............................................................53
8.3. INTERPRETATION.......................................................54
8.4. COUNTERPARTS.........................................................54
8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.......................54
8.6. GOVERNING LAW........................................................55
8.7. SEVERABILITY.........................................................55
8.8. AMENDMENT............................................................55
8.9. EXTENSION; WAIVER....................................................55
8.10. ASSIGNMENT...........................................................55
8.11. SUBMISSION TO JURISDICTION; WAIVERS..................................56
8.12. ENFORCEMENT..........................................................56
8.13. DEFINITIONS..........................................................56
AGREEMENT AND PLAN OF MERGER, dated as of April 28, 2002 (this
"Agreement"), among Anthem, Inc., an Indiana corporation ("Purchaser"), AI Sub
Acquisition Corp., an Indiana corporation and a direct wholly owned subsidiary
of Purchaser ("Merger Sub"), and Trigon Healthcare, Inc., a Virginia corporation
("Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Company and Purchaser
deem it advisable and in the best interests of each corporation and its
respective stockholders that Company and Purchaser engage in a business
combination in order to advance the long-term strategic business interests of
Company and Purchaser;
WHEREAS, the combination of Company and Purchaser shall be effected by
the terms of this Agreement through a merger as outlined below (the "Merger");
WHEREAS, in furtherance thereof, the respective Boards of Directors of
Company, Purchaser and Merger Sub have approved or adopted this Agreement,
pursuant to which Company will be merged with and into Merger Sub on the terms
and subject to the conditions set forth in this Agreement, with each share of
Class A common stock, $0.01 par value, of Company ("Company Common Stock")
issued and outstanding immediately prior to the Effective Time (as defined in
Section 1.3), other than Company Treasury Shares (as defined in Section 1.8(a))
and shares of Company Common Stock owned by Purchaser or Merger Sub, being
converted into (as such amount may be increased as set forth in Section 7.1(i)
hereof) the right to receive (i) $30.00 cash and (ii) 1.062 shares of common
stock, par value $0.01 per share, of Purchaser ("Purchaser Common Stock");
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the "Code") and that this Agreement shall constitute a plan of
reorganization within the meaning of Sections 354 and 361 of the Code; and
WHEREAS, as an inducement to and condition of Purchaser's willingness
to enter into this Agreement, Company and Purchaser have entered into the Stock
Option Agreement ("Option Agreement") in the form attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Virginia Stock Corporation Act
("VSCA") and the Indiana Business Corporation Law ("IBCL"), Company shall be
merged with and into Merger Sub at the Effective Time. Upon consummation of the
Merger, the separate corporate existence of Company shall cease and Merger Sub
shall continue as the surviving corporation (the "Surviving Corporation") and
shall change its name to Trigon Healthcare, Inc.
1.2. Closing. Subject to the terms and conditions hereof, the closing
of the Merger and the transactions contemplated by this Agreement (the
"Closing") will take place on the second Business Day after the satisfaction or
waiver (subject to applicable law) of the conditions set forth in Article VI
(other than any such conditions which by their terms cannot be satisfied until
the Closing Date, which shall be required to be so satisfied or waived (subject
to applicable law) on the Closing Date), unless another time or date is agreed
to in writing by the parties hereto (the actual time and date of the Closing
being referred to herein as the "Closing Date"). The Closing shall be held at
the offices of Baker & Daniels, 300 North Meridian Street, Suite 2700,
Indianapolis, Indiana, unless another place is agreed to in writing by the
parties hereto.
1.3. Effective Time. At the Closing, the parties shall file appropriate
articles of merger (the "Articles of Merger") in such form as is required by and
executed in accordance with the respective relevant provisions of the VSCA and
the IBCL. The Merger shall become effective at such time as the last to be filed
of the Articles of Merger are duly filed with the State Corporation Commission
of the Commonwealth of Virginia and the Secretary of State of the State of
Indiana or at such subsequent time as Purchaser and Company shall agree and as
shall be specified in the Articles of Merger (the date and time the Merger
becomes effective being the "Effective Time").
1.4. Effects of the Merger. At and after the Effective Time, the Merger
will have the effects set forth in the VSCA and the IBCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of Company and Merger Sub
shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of Company and Merger Sub shall be the debts, liabilities and duties of
the Surviving Corporation.
1.5. Articles of Incorporation. Except as contemplated by Section 1.1,
the articles of incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the articles of incorporation of the Surviving
Corporation, until thereafter changed or amended as provided therein or by
applicable law.
1.6. By-Laws. At the Effective Time and without any further action on
the part of Company and Merger Sub, the by-laws of Merger Sub shall be the
by-laws of the Surviving Corporation, until thereafter changed or amended or
repealed as provided therein or the articles of incorporation of the Surviving
Corporation and by applicable law.
1.7. Officers and Directors of Surviving Corporation. The officers of
Company as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their death, resignation or removal or
otherwise ceasing to be an officer or until their respective
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successors are duly elected and qualified, as the case may be. The directors of
Merger Sub as of the Effective Time shall serve as directors of the Surviving
Corporation until the earlier of their death, resignation or removal or
otherwise ceasing to be a director or until their respective successors are duly
elected and qualified.
1.8. Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock:
(a) All shares of Company Common Stock that are owned by Company
as treasury stock (the "Company Treasury Shares") or by Purchaser or
Merger Sub shall be canceled and retired and shall cease to exist and
no cash, Purchaser Common Stock or other consideration shall be
delivered in exchange therefor.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than the Company
Treasury Shares and shares of Company Common Stock owned by Purchaser
or Merger Sub), shall be converted at the Effective Time into the right
to receive (as such amounts may be increased as set forth in Section
7.1(i) hereof) (i) $30.00 in cash (the "Cash Consideration") and (ii)
1.062 shares (the "Exchange Ratio") of Purchaser Common Stock (the
"Merger Consideration"). Upon such conversion, all such shares of
Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and
each Company Certificate (as defined in Section 1.9) shall thereafter
represent the right to receive the Merger Consideration, cash for
fractional shares in accordance with Section 2.5 and any dividends or
other distributions pursuant to Section 2.3 upon the surrender of the
Company Certificate in accordance with the terms hereof.
(c) Each share of common stock, par value $0.01, of Merger Sub
(the "Merger Sub Common Stock") outstanding immediately prior to the
Effective Time shall remain outstanding and unchanged following the
Effective Time as shares of the Surviving Corporation.
1.9. Exchange Agent. Prior to the Effective Time, Purchaser shall
appoint an exchange agent (the "Exchange Agent") for the purpose of exchanging
certificates which immediately prior to the Effective Time evidenced shares of
Company Common Stock (the "Company Certificates") for the Merger Consideration.
1.10. Company Stock Options and Restricted Stock. Company and Purchaser
shall take all action reasonably necessary so that each employee or director
stock option exercisable for shares of Company Common Stock (the "Company Stock
Options") outstanding immediately prior to the Effective Time shall have vested
and become exercisable by the Effective Time and shall be converted
automatically at the Effective Time into an option to purchase a number of
shares of Purchaser Common Stock (a "Converted Option") equal to the product of
the number of shares of Company Common Stock subject to such Company Stock
Option multiplied by the Option Exchange Ratio (provided that any fractional
share resulting from such multiplication
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shall be rounded to the nearest whole share). The Option Exchange Ratio shall
mean the sum of (i) 1.062 (as such amount may be increased as set forth in
Section 7.1(i) hereof) and (ii) a fraction the numerator of which is 30 (as such
amount may be increased as set forth in Section 7.1(i) hereof) and the
denominator of which is the closing trading price of Purchaser Common Stock on
the NYSE, as reported in the Wall Street Journal, Eastern Edition (or such other
source as the parties shall agree in writing), on the Business Day prior to the
Effective Time. The terms and conditions of the Converted Option shall otherwise
remain the same as the terms and conditions of the Company Stock Option, except
that the exercise price per share of each Converted Option shall equal the
exercise price per share of such Company Stock Option divided by the Option
Exchange Ratio (provided that such exercise price shall be rounded to the
nearest whole cent). Notwithstanding the foregoing, each Company Stock Option
which is intended to be an "incentive stock option" (as defined under Section
422 of the Code) shall be adjusted in accordance with the requirements of
Section 424 of the Code. Purchaser shall, as of the Effective Time, assume the
obligations of Company under all plans and agreements pursuant to which a
Company Stock Option has been issued and shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Purchaser
Common Stock for delivery upon exercise of the Converted Options. Purchaser
shall use its reasonable best efforts to cause the registration of the shares of
Purchaser Common Stock subject to the Converted Options to become effective as
part of a registration statement on Form S-8, no later than the Effective Time;
and, thereafter, Purchaser shall file one or more registration statements on
appropriate forms with respect to shares of Purchaser Common Stock subject to
the Converted Options and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements,
including the current status of any related prospectus, for so long as the
Converted Options remain outstanding. Company and Purchaser shall take all such
steps within their control as may be required to cause the transactions
contemplated by this Section 1.10 and any other deemed dispositions of Company
equity securities (including derivative securities) or deemed acquisitions of
Purchaser equity securities (including derivative securities) in connection with
this Agreement by each individual who (i) is a director or officer of Company or
(ii) at the Effective Time will become a director or officer of Purchaser, to
become exempt from liability under Section 16(b) of the Exchange Act pursuant to
Rule 16b-3 thereunder. As soon as practicable after the Effective Time,
Purchaser shall deliver or cause to be delivered to each holder of Converted
Options an appropriate notice setting forth such holder's rights pursuant to any
stock option or similar plan of the Company (the "Company Stock Option Plans")
and agreements evidencing the grants of such Converted Options, after giving
effect to the transactions hereunder. All shares of restricted Company Common
Stock held by current or former employees or directors of Company immediately
prior to the Effective Time shall vest automatically at the Effective Time.
1.11. Certain Adjustments. If, between the date of this Agreement and
the Effective Time, the outstanding Purchaser Common Stock or Company Common
Stock shall have been changed into a different number of shares or different
class by reason of any reclassification, recapitalization, stock split,
split-up, combination or exchange of shares or a stock dividend or dividend
payable in any other securities shall be declared with a record date within such
period, or any similar event shall have occurred, the Merger Consideration and
the Option Exchange Ratio shall be appropriately adjusted to provide to the
holders of Company Common Stock and
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Company Stock Options the same economic effect as contemplated by this Agreement
prior to such event.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1. Exchange Fund. At or prior to the Effective Time, Purchaser shall
deposit with the Exchange Agent, in trust for the benefit of holders of shares
of Company Common Stock, (i) certificates representing the Purchaser Common
Stock issuable pursuant to Section 1.8 and (ii) cash sufficient to pay the cash
portion of the Merger Consideration. Purchaser agrees to make available to the
Exchange Agent from time to time as needed, additional cash sufficient to pay
cash in lieu of fractional shares pursuant to Section 2.5 and any dividends and
other distributions pursuant to Section 2.3. Any cash and certificates of
Purchaser Common Stock deposited with the Exchange Agent shall hereinafter be
referred to as the "Exchange Fund."
2.2. Exchange Procedures. Within five Business Days after the Effective
Time, the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of a Company Certificate (i) a letter of transmittal which shall specify
that delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of the Company Certificates to the
Exchange Agent, and which letter shall be in customary form and have such other
provisions as Purchaser may reasonably specify and (ii) instructions for
effecting the surrender of such Company Certificates in exchange for the Merger
Consideration. Upon surrender of a Company Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Company
Certificate shall be entitled to receive in exchange therefor (A) one or more
shares of Purchaser Common Stock (which shall be in uncertificated book-entry
form unless a physical certificate is requested) representing, in the aggregate,
the whole number of shares that such holder has the right to receive pursuant to
Sections 1.8 and (B) a check for the cash portion of the Merger Consideration
and for the cash that such holder has the right to receive pursuant to the
provisions of this Article II, including cash in lieu of any fractional shares
of Purchaser Common Stock pursuant to Section 2.5 and dividends and other
distributions pursuant to Section 2.3. No interest will be paid or will accrue
on any cash payable for the cash portion of the Merger Consideration or pursuant
to Section 2.3 or Section 2.5. In the event of a transfer of ownership of
Company Common Stock which is not registered in the transfer records of Company,
one or more shares of Purchaser Common Stock evidencing, in the aggregate, the
proper number of shares of Purchaser Common Stock and a check for the cash
portion of the Merger Consideration, the cash in lieu of any fractional shares
of Purchaser Common Stock pursuant to Section 2.5 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.3, may be
issued with respect to such Company Common Stock to such a transferee if the
Company Certificate representing such shares of Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
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2.3. Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made with respect to shares of Purchaser Common
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Company Certificate with respect to the shares of Purchaser
Common Stock that such holder would be entitled to receive upon surrender of
such Company Certificate until such holder shall surrender such Company
Certificate in accordance with Section 2.2. Subject to the effect of applicable
laws, following surrender of any such Company Certificate, there shall be paid
to such holder of shares of Purchaser Common Stock issuable in exchange
therefor, without interest, (a) promptly after the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date prior to such
surrender payable with respect to such shares of Purchaser Common Stock and (b)
at the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such shares of
Purchaser Common Stock.
2.4. No Further Ownership Rights in Company Common Stock. All shares of
Purchaser Common Stock issued and cash paid upon conversion of shares of Company
Common Stock in accordance with the terms of Article I and this Article II
(including any cash paid pursuant to Sections 2.3 or 2.5) shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock. Until surrendered as contemplated by this
Article II, each Company Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration (and any cash to be paid pursuant to Sections 2.3 or 2.5).
2.5. No Fractional Shares of Purchaser Common Stock.
(a) No certificates or scrip or shares of Purchaser Common Stock
representing fractional shares of Purchaser Common Stock or book-entry
credit of the same shall be issued upon the surrender for exchange of
Company Certificates and such fractional share interests will not
entitle the owner thereof to vote or to have any rights of a
stockholder of Purchaser or a holder of shares of Purchaser Common
Stock.
(b) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of
a share of Purchaser Common Stock (after taking into account all
Company Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to the product of
(i) such fractional part of a share of Purchaser Common Stock
multiplied by (ii) the closing price for a share of Purchaser Common
Stock on the New York Stock Exchange, Inc. ("NYSE") Composite
Transactions Tape on the date of the Effective Time or, if such date is
not a Business Day, the Business Day immediately before the date on
which the Effective Time occurs. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of
fractional interests, the Exchange Agent shall so notify Purchaser, and
Purchaser shall cause the Surviving Corporation to deposit such amount
with the Exchange Agent and shall cause the Exchange Agent to forward
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payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
2.6. Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Certificates twelve months
after the Effective Time shall be delivered to Purchaser or otherwise on the
instruction of Purchaser and any holders of the Company Certificates who have
not theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation and Purchaser for the Merger Consideration with respect to
the shares of Company Common Stock formerly represented thereby to which such
holders are entitled pursuant to Section 1.8 and Section 2.2, any cash in lieu
of fractional shares of Purchaser Common Stock to which such holders are
entitled pursuant to Section 2.5 and any dividends or distributions with respect
to shares of Purchaser Common Stock to which such holders are entitled pursuant
to Section 2.3.
2.7. No Liability. None of Purchaser, Merger Sub, Company, the
Surviving Corporation or the Exchange Agent shall be liable to any Person in
respect of any Merger Consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
2.8. Investment of the Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund as directed by Purchaser on a daily
basis. Any interest and other income resulting from such investments shall
promptly be paid to Purchaser.
2.9. Lost Certificates. If any Company Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Company Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Company
Certificate, the Exchange Agent will deliver in exchange for such lost, stolen
or destroyed Company Certificate the applicable Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby, any
cash in lieu of fractional shares of Purchaser Common Stock, and unpaid
dividends and distributions on shares of Purchaser Common Stock deliverable in
respect thereof, in each case, pursuant to this Agreement.
2.10. Withholding Rights. Each of the Surviving Corporation and
Purchaser shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or Purchaser, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Purchaser, as the case may
be, and such amounts shall be delivered by the Surviving Corporation or
Purchaser, as the case may be, to the applicable taxing authority.
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2.11. Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Company or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
Company or Merger Sub, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
2.12. Stock Transfer Books. The stock transfer books of Company shall
be closed immediately upon the Effective Time and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of Company. On or after the Effective Time, any Company Certificates
presented to the Exchange Agent or Purchaser for any reason shall be converted
into the Merger Consideration with respect to the shares of Company Common Stock
formerly represented thereby, any cash in lieu of fractional shares of Purchaser
Common Stock to which the holders thereof are entitled pursuant to Section 2.5
and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Company as follows:
(a) Organization, Standing and Power; Subsidiaries. Each of
Purchaser and each of its material Subsidiaries (as defined in Section
8.13) is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation
or organization, has the requisite power and authority to own, lease
and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect on Purchaser, and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to
qualify or to be in good standing would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
Purchaser. The copies of the articles of incorporation and by-laws of
Purchaser which were previously furnished or made available to Company
are true, complete and correct copies of such documents as in effect on
the date of this Agreement.
(b) Capital Structure. The authorized capital stock of Purchaser
consists of (i) 900,000,000 shares of Purchaser Common Stock of which
103,323,299 shares were issued and outstanding as of March 31, 2002 and
(ii) 100,000,000 shares of Preferred Stock, without par value, none of
which are outstanding. Since March 31, 2002 to the date of this
Agreement, there have been no issuances of shares of the capital stock
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of Purchaser or any other securities of Purchaser other than issuances
of shares pursuant to the demutualization of Purchaser's Subsidiary and
pursuant to options or rights outstanding as of March 31, 2002 under
the Benefit Plans (as defined in Section 8.13) of Purchaser. All issued
and outstanding shares of the capital stock of Purchaser are duly
authorized, validly issued, fully paid and nonassessable, and no class
of capital stock is entitled to (or has been issued in violation of)
preemptive rights. There were outstanding as of March 31, 2002 no
options, warrants or other rights to acquire capital stock from
Purchaser other than options, restricted stock and share equivalents
representing in the aggregate the right to purchase no more than
1,500,000 shares of Purchaser Common Stock and contracts included in
Purchaser's 6% Equity Security Units issued on November 2, 2001 to
purchase up to 6,394,000 shares of Purchaser Common Stock. All shares
of Purchaser Common Stock to be issued in connection with the Merger
and the other transactions contemplated hereby (including without
limitation all shares of Purchaser Common Stock to be issued upon
exercise of the Converted Options) will, when issued in accordance with
the terms hereof, have been duly authorized, validly issued, full paid
and non-assessable, free and clear of all Liens. Section 3.1(b) of the
Purchaser Disclosure Schedule delivered by Purchaser to Company prior
to the execution of this Agreement (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the
extent specified therein and any other representation and warranty to
which its relevance is reasonably apparent) (the "Purchaser Disclosure
Schedule") sets forth a complete and correct list, as of the date
hereof, of the number of shares of Purchaser Common Stock subject to
options or other rights to purchase or receive Purchaser Common Stock
granted under Benefit Plans of Purchaser. As of the date hereof, there
are no stockholder agreements, voting trusts or other agreements or
understandings to which Purchaser is a party or by which it is bound
relating to the voting of any shares of the capital stock of
Purchaser, other than proxies outstanding in connection with
Purchaser's annual meeting of stockholders to be held in May of 2002.
(c) Authority, No Conflicts.
(i) Purchaser has all requisite corporate power and authority
to enter into this Agreement and the Option Agreement and to
consummate the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the shares of
Purchaser Common Stock to be issued in the Merger (the "Share
Issuance") and upon the exercise of Converted Options, subject in
the case of the consummation of the Share Issuance to the Required
Purchaser Vote (as defined in Section 3.1(g)). The execution and
delivery of this Agreement and the Option Agreement and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the
part of Purchaser, subject in the case of the consummation of the
Share Issuance to the Required Purchaser Vote. This Agreement and
the Option Agreement have been duly executed and delivered by
Purchaser and, assuming that this Agreement and the Option
Agreement constitute the valid and binding agreements of Company,
constitute valid and binding agreements of Purchaser, enforceable
-9-
against it in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or
affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
(ii) The execution and delivery of this Agreement and the
Option Agreement by Purchaser does not or will not, as the case
may be, and the consummation by Purchaser of the Merger and the
other transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation or the loss of a material benefit
under, or the creation of a Lien on any assets (any such conflict,
violation, default, right of termination, amendment, cancellation
or acceleration, loss or creation, is hereinafter referred to as a
"Violation") pursuant to: (A) any provision of the articles of
incorporation or by-laws of Purchaser or any material Subsidiary
of Purchaser or (B) except as set forth in Section 3.1(c) of the
Purchaser Disclosure Schedule or as would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on Purchaser, and subject to obtaining or making
the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below, any
loan or credit agreement, note, mortgage, bond, indenture, lease,
benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Purchaser or any
material Subsidiary of Purchaser, or their respective properties
or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational,
national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or
commission or other authority thereof, or any quasi-governmental
or private body exercising any regulatory, taxing, importing or
other governmental or quasi-governmental authority (a
"Governmental Entity"), is required by or with respect to
Purchaser or any Subsidiary of Purchaser in connection with the
execution and delivery of this Agreement by Purchaser or Merger
Sub, the Option Agreement by Purchaser or the consummation of the
Merger and the other transactions contemplated hereby or thereby,
except for those required under or in relation to (A) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (B) state securities or "blue sky" laws (the
"Blue Sky Laws"), (C) the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities
Act"), (D) the Exchange Act; (E) the VSCA and the IBCL with
respect to the filing of the Articles of Merger, (F) rules and
regulations of the NYSE, (G) the Virginia State Corporation
Commission and the Indiana Department of Insurance and (H) such
consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make
-10-
or obtain would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Purchaser.
Consents, approvals, orders, authorizations, registrations,
declarations and filings required under or in relation to any of
the foregoing clauses (A) through (G) are hereinafter referred to
as "Necessary Consents."
(d) Reports and Financial Statements.
(i) Purchaser has filed or will file prior to Closing all
required registration statements, prospectuses, reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC since January 1, 2001 until the Closing
(collectively, including all exhibits thereto, the "Purchaser SEC
Reports"). No Subsidiary of Purchaser is required to file any
form, report, registration statement, prospectus or other
document with the SEC. None of the Purchaser SEC Reports, as of
their respective dates (and, if amended or superseded by a filing
prior to the date of this Agreement or the Closing Date, then on
the date of such filing), contained or will contain any untrue
statement of a material fact or omitted or will omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading. Each of the financial statements
(including the related notes) included in the Purchaser SEC
Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of
operations and cash flows of Purchaser and its Subsidiaries as of
the respective dates or for the respective periods set forth
therein, all in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the
periods involved except as otherwise noted therein, and subject,
in the case of the unaudited interim financial statements, to
normal and recurring adjustments that were not or are not
expected to be material in amount, and lack of footnote
disclosure. All of such Purchaser SEC Reports, as of their
respective dates (and as of the date of any amendment to the
respective Purchaser SEC Report), complied as to form in all
material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except (A) to the extent reflected in the balance sheet
of Purchaser included in the Purchaser SEC Reports last filed
prior to the date hereof, (B) as set forth in Section 3.1(d) of
the Purchaser Disclosure Schedule or (C) incurred in the ordinary
course of business since the date of the balance sheet referred to
in the preceding clause (A), Purchaser does not have any
liabilities or obligations of any nature, whether known or
unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, that have or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect
on Purchaser.
-11-
(e) Information Supplied.
(i) None of the information supplied or to be supplied by
Purchaser or Merger Sub for inclusion or incorporation by
reference in (A) the registration statement on Form S-4 to be
filed with the SEC by Purchaser in connection with the Share
Issuance, or any of the amendments or supplements thereto
(collectively, the "Form S-4") will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading, and (B) the joint proxy
statement for use relating to the approval by the stockholders of
Company of this Agreement and by the stockholders of Purchaser
approving the Share Issuance, or any of the amendments or
supplements thereto (collectively, the "Joint Proxy Statement")
will, on the date it is first mailed to Company stockholders and
Purchaser stockholders or at the time of the Company Stockholders
Meeting (as defined in Section 5.1(b)) and the Purchaser
Stockholders Meeting (as defined in Section 5.1(e)), contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The Form S-4 will comply as to
form in all material respects with the requirements of the
Exchange Act and the Securities Act and the rules and regulations
of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by Purchaser with
respect to statements made or incorporated by reference in the
Form S-4 or the Joint Proxy Statement based on information
supplied by Company.
(f) Board Approval. The Board of Directors of Purchaser, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "Purchaser Board
Approval"), has unanimously approved this Agreement and the Option
Agreement and the transactions contemplated hereby and thereby,
including the Merger.
(g) Vote Required. The affirmative vote of a majority of the
votes cast by the holders of Purchaser Common Stock at the Purchaser
Stockholders Meeting, provided that the total vote cast represents over
50% in interest of all securities entitled to vote, in favor of the
Share Issuance ("Required Purchaser Vote") is the only vote of the
holders of any class or series of Purchaser capital stock necessary to
consummate the transactions contemplated hereby.
(h) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in
connection with any of the transactions contemplated
-12-
by this Agreement, based upon arrangements made by or on behalf of
Purchaser, except Goldman, Sachs & Co. (the "Purchaser Financial
Advisor"), whose fees and expenses will be paid by Purchaser in
accordance with Purchaser's agreement with such firm.
(i) Company Stock. Neither Purchaser nor any of its Subsidiaries
(including Merger Sub) is, nor at any time during the last three years
has any of such been, an "interested shareholder" of Company as defined
in Article 14 of the VSCA. Neither Purchaser nor any of its
Subsidiaries (including Merger Sub) owns, (directly or indirectly,
beneficially or of record) and none of them is a party to any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, any shares of capital
stock of Company (other than as contemplated by this Agreement and the
Option Agreement).
(j) Litigation, Compliance with Laws.
(i) Except as disclosed in the Purchaser SEC Reports filed
prior to the date of this Agreement or as set forth in Section
3.1(j) of the Purchaser Disclosure Schedule, there is no suit,
action, investigation or proceeding pending or, to the knowledge
of Purchaser, threatened, against or affecting Purchaser or any
Subsidiary of Purchaser having, or which would reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on Purchaser, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Purchaser or any Subsidiary of Purchaser
having, or which reasonably would be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Purchaser.
(ii) Except as disclosed in the Purchaser SEC Reports filed
prior to the date of this Agreement and except as would not
reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Purchaser, Purchaser and its
Subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for
the operation of the businesses of Purchaser and its Subsidiaries,
taken as a whole (the "Purchaser Permits"). Purchaser and its
Subsidiaries are in compliance with the terms of the Purchaser
Permits, except where the failure to so comply would not
reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Purchaser. Except as disclosed in the
Purchaser SEC Reports filed prior to the date of this Agreement,
the businesses of Purchaser and its Subsidiaries are not being
conducted in violation of, and Purchaser has not received any
notices of violations with respect to, any law, ordinance or
regulation of any Governmental Entity, except for possible
violations which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Purchaser.
(iii) Purchaser is in compliance in all material respects
with all material rules and regulations of the BCBSA.
-13-
(k) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement and the Option Agreement or
the transactions contemplated hereby or thereby, since December 31,
2001 there has not been any change, circumstance or event which has
had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Purchaser.
(l) Opinion of Purchaser Financial Advisor. The Board of Directors
of Purchaser has received the opinion of Purchaser Financial Advisor,
dated the date of this Agreement, to the effect that, as of such date,
the Merger Consideration is fair, from a financial point of view, to
Purchaser, a copy of which opinion will promptly be made available to
Company after receipt by Purchaser.
(m) Taxes. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Purchaser, or as set forth in Section 3.1(m) of the Purchaser
Disclosure Schedule, Purchaser and each of its Subsidiaries (i) have
prepared in good faith and duly and timely filed (taking into account
any extension of time within which to file) all Tax Returns (as defined
below) required to be filed by any of them and all such filed Tax
Returns are complete and accurate in all material respects; (ii) have
paid all Taxes that are shown as due and payable on such filed Tax
Returns or that Purchaser or any of its Subsidiaries are obligated to
pay without the filing of a Tax Return; (iii) have paid all other
assessments received to date in respect of Taxes other than those being
contested in good faith for which provision has been made in accordance
with GAAP on the most recent balance sheet included in Purchaser's
Annual Report on Form 10-K for the year ended December 31, 2001; (iv)
have withheld from amounts owing to any employee, creditor or other
Person all Taxes required by law to be withheld and have paid over to
the proper governmental authority in a timely manner all such withheld
amounts to the extent due and payable; (v) have not waived any
applicable statute of limitations with respect to United States federal
or state income or franchise Taxes and have not otherwise agreed to any
extension of time with respect to a United States federal or state
income or franchise Tax assessment or deficiency; (vi) have never been
members of any consolidated group for United States federal income tax
purposes other than the consolidated group of which Purchaser is the
common parent; and (vii) are not parties to any tax sharing agreement
or arrangement other than with each other. Except as would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Purchaser, no liens for Taxes exist with
respect to any of the assets or properties of Purchaser or its
Subsidiaries, except for statutory liens for Taxes not yet due or
payable or that are being contested in good faith. Purchaser has made
available to Company true and correct copies of all material federal,
state and local Tax Returns filed by Purchaser and its Subsidiaries on
which the statute of limitations has not expired. None of Purchaser or
its Subsidiaries has been a party to a Section 355 transaction that
could give rise to a Tax liability pursuant to Section 355(e) of the
Code. Except as set forth in Section 3.1(m) of the Purchaser Disclosure
Schedule, there are not being conducted or threatened in writing any
material audits, examinations, investigations, litigation, or other
proceedings in respect of Taxes of Purchaser or any Subsidiary; and
none of Purchaser or its Subsidiaries has any material deferred gains
-14-
created by any other transaction, or has any material excess loss
accounts. Purchaser is not aware of any fact or circumstance that could
reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(n) Financing. Purchaser has provided to Company a copy of an
executed financing commitment letter related to this Agreement and the
transactions contemplated hereby. Purchaser will have available to it
on the Closing Date sufficient funds to enable it to consummate the
transactions contemplated by this Agreement.
(o) Accounting and Financial Matters. Since January 1, 2001,
Purchaser has not received written notice from the SEC or any other
Governmental Entity that any of its accounting policies or practices
are or may be the subject of any review, inquiry, investigation or
challenge by the SEC or other Governmental Entity other than comments
received from the staff of the SEC in connection with the initial
public offering of Purchaser Common Stock. Since January 1, 2001,
Purchaser's independent public accounting firm has not informed
Purchaser that it has any material questions, challenges or
disagreements regarding or pertaining to Purchaser's accounting
policies or practices. Since January 1, 2001, no officer or director of
Purchaser has received, or is entitled to receive, any material
compensation from any entity that has engaged in or is engaging in any
material transaction with the Purchaser or any of its Subsidiaries. Set
forth on Section 3.1(o) of the Purchaser Disclosure Schedule is a list
of all off-balance sheet special purpose entities and financing
arrangements of Purchasers and its Subsidiaries.
3.2. Representations and Warranties of Company. Company represents and
warrants to Purchaser as follows:
(a) Organization, Standing and Power; Subsidiaries.
(i) Each of Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation or
organization, has the requisite power and authority to own, lease
and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company, and is duly
qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in
such jurisdictions where the failure so to qualify or to be in
good standing would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Company. The copies of the articles of incorporation and by-laws
of Company and its material Subsidiaries which were previously
furnished or made available to Purchaser are true, complete and
correct copies of such documents as in effect on the date of this
Agreement.
-15-
(ii) Except as set forth in Section 3.2(a) of the Company
Disclosure Schedule delivered by Company to Purchaser prior to the
execution of this Agreement (each section of which qualifies the
correspondingly numbered representation and warranty or covenant
to the extent specified therein and any other representation and
warranty to which its relevance is reasonably apparent) (the
"Company Disclosure Schedule"), all the outstanding shares of
capital stock of, or other equity interests in, each Subsidiary
have been validly issued and are fully paid and nonassessable and
are owned directly or indirectly by Company, free and clear of all
Liens and free of any other restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). Except as explicitly set
forth in the Company SEC Reports (as defined in Section 3.2(d)) or
in Section 3.2(a) of the Company Disclosure Schedule, neither
Company nor any of its Subsidiaries directly or indirectly owns
any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation,
partnership, joint venture or other business association or
entity, that is or would reasonably be expected to be material to
Company and its Subsidiaries taken as a whole.
(b) Capital Structure.
(i) The authorized capital stock of Company consists of (A)
300,000,000 shares of Company Common Stock, of which 35,786,194
shares were outstanding (which amount includes all shares of
restricted Company Common Stock outstanding) as of the date
hereof, (B) 300,000,000 shares of Class B common stock, par value
$0.01 per share, of which no shares are outstanding, (C)
75,000,000 shares of Class C common stock par value $0.01 per
share, of which no shares are outstanding, and (D) 50,000,000
shares of Preferred Stock, without par value, none of which are
outstanding and 3,000,000 shares of which have been designated
Series A Junior Participating Preferred Stock and reserved for
issuance upon exercise of the rights (the "Company Rights")
distributed to the holders of Company Common Stock pursuant to the
Rights Agreement, dated as of July 16, 1997 (the "Company Rights
Agreement"), between Company and First Chicago Trust Company of
New York, as Rights Agent. All issued and outstanding shares of
the capital stock of Company are duly authorized, validly issued,
fully paid and nonassessable, and no capital stock is entitled to
(or was issued in violation of) preemptive rights. Other than
shares of Company Common Stock reserved for issuance under the
Option Agreement and 725,912 shares of Company Common Stock
reserved for issuance under the Company ESPP, there were
outstanding as of the date hereof no options, warrants or other
rights to acquire capital stock from Company other than the
Company Rights and Company Stock Options representing in the
aggregate the right to purchase no more than 3,522,415 shares of
Company Common Stock under the Company Stock Option Plans. Section
3.2(b) of the Company Disclosure Schedule sets forth a complete
and correct list of (x) as of March 31, 2002, the number of shares
of Company Common Stock subject to Company Stock Options
-16-
or other rights to purchase or receive Company Common Stock
granted under the Company Stock Option Plans or otherwise, and the
dates of grant, vesting dates, expiration dates, exercise prices
and holders of each such Company Stock Option, (y) as of March 31,
2002, the number of shares of restricted Company Common Stock
outstanding, and the dates of grant, vesting dates, expiration
dates and holders of each such share of restricted Company Common
Stock and (z) the total amount of deductions withheld for the pay
period ending April 15, 2002, with respect to purchases to be made
pursuant to the Company ESPP. The shares of Company Common Stock
issuable pursuant to the Option Agreement have been duly reserved
for issuance by Company, and upon any issuance of such shares of
Company Common Stock in accordance with the terms of the Option
Agreement or as set forth in Section 3.2(b) of the Company
Disclosure Schedule, such shares of Company Common Stock will be
duly authorized, validly issued, fully paid and nonassessable and
free and clear of any Lien, pledge, security interest, claim or
other encumbrance.
(ii) No bonds, debentures, notes or other indebtedness of
Company having the right to vote on any matters on which
stockholders may vote are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b),
as of the date of this Agreement, there are no securities,
options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Company or any
of its Subsidiaries is a party or by which any of them is bound
obligating Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares
of capital stock or other voting securities of Company or any of
its Subsidiaries or obligating Company or any of its Subsidiaries
to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. Except as contemplated by the Option Agreement or as
set forth in Section 3.2(b) of the Company Disclosure Schedule,
there are no outstanding obligations of Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Company or any of its Subsidiaries.
(c) Authority; No Conflicts.
(i) Company has all requisite corporate power and authority
to enter into this Agreement and the Option Agreement and to
consummate the transactions contemplated hereby and thereby,
subject to the approval of this Agreement by the Required Company
Vote (as defined in Section 3.2(h)). The execution and delivery of
this Agreement and the Option Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of
Company, subject to the approval of this Agreement by the Required
Company Vote. This Agreement and the Option Agreement have been
duly executed and delivered by
-17-
Company and, assuming that this Agreement and the Option Agreement
constitute the valid and binding agreements of Purchaser and, in
the case of this Agreement, Merger Sub, constitute valid and
binding agreements of Company, enforceable against it in
accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or
affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
(ii) The execution and delivery of this Agreement and the
Option Agreement by Company does not or will not, as the case may
be, and the consummation by Company of the Merger and the other
transactions contemplated hereby and thereby will not, conflict
with, or result in a Violation pursuant to: (A) any provision of
the articles of incorporation or by-laws of Company or any
Subsidiary of Company or (B) except as set forth in Section 3.2(c)
of the Company Disclosure Schedule or would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on Company, and subject to obtaining or making the
consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below, any
loan or credit agreement, note, mortgage, bond, indenture, lease,
benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Company or any
Subsidiary of Company or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required by or with respect to Company or any Subsidiary of
Company in connection with the execution and delivery of this
Agreement or the Option Agreement by Company or the consummation
of the Merger and the other transactions contemplated hereby and
thereby, except the Necessary Consents and such consents,
approvals, orders, authorizations, registrations, declarations and
filings the failure of which to make or obtain would not
reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Company.
(d) Reports and Financial Statements.
(i) Company has filed or will file prior to Closing all
required registration statements, prospectuses, reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC since January 1, 1999 until the Closing
(collectively, including all exhibits thereto, the "Company SEC
Reports"). No Subsidiary of Company is required to file any form,
report, registration statement or prospectus or other document
with the SEC. None of the Company SEC Reports, as of their
respective dates (and, if amended or
-18-
superseded by a filing prior to the date of this Agreement or the
Closing Date, then on the date of such filing), contained or will
contain any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in
the Company SEC Reports presents fairly, in all material respects,
the consolidated financial position and consolidated results of
operations and cash flows of Company and its Subsidiaries as of
the respective dates or for the respective periods set forth
therein, all in conformity with GAAP applied on a consistent basis
throughout the periods involved except as otherwise noted therein,
and subject, in the case of the unaudited interim financial
statements, to normal and recurring adjustments that were not or
are not expected to be material in amount, and lack of footnote
disclosure. All of such Company SEC Reports, as of their
respective dates (and as of the date of any amendment to the
respective Company SEC Report), complied as to form in all
material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except (A) to the extent reflected in the balance sheet
of Company included in the Company SEC Report last filed prior to
the date hereof, (B) as set forth in Section 3.2(d) of the Company
Disclosure Schedule or (C) incurred in the ordinary course of
business since the date of the balance sheet referred to in the
preceding clause (A), Company does not have any liabilities or
obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due,
that have or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company.
(e) Reserves. The loss reserves and other actuarial amounts of
Company and its Subsidiaries recorded in their respective financial
statements contained in the Company SEC Reports and all statutory
reports as of December 31, 2001, as of such date: (i) were determined
in accordance in all material respects with generally accepted
actuarial standards consistently applied (except as otherwise noted in
such financial statements), (ii) were fairly stated in all material
respects in accordance with sound actuarial principles, (iii) satisfied
all applicable Laws and the requirements of the BCBSA in all material
respects and have been computed on the basis of methodologies
consistent in all material respects with those used in computing the
corresponding reserves in the prior fiscal years, except as otherwise
noted in the financial statements and notes thereto included in the
Company SEC Reports or the statutory reports and related actuarial
opinions for the Company and its Subsidiaries for the 2001 fiscal year,
and (iv) include provisions for all actuarial reserves and related
items which ought to be established in accordance with applicable laws
and regulations and in accordance, in all material respects, with
prudent insurance practices generally followed in the insurance
industry. Company is not aware of any facts or circumstances which
would necessitate any material adverse change in the statutorily
required reserves or reserves above those reflected in the most recent
balance sheet (other than increases consistent with past
-19-
experience resulting from increases in enrollment with respect to
services provided by Company or its Subsidiaries). The capital and
surplus for each insurance and health maintenance organization
Subsidiary of Company is now, and immediately prior to the Closing will
be, not less than 200% of the authorized control level as defined in
NAIC Risk-Based Capital Guidelines required by applicable law.
(f) Information Supplied.
(i) None of the information supplied or to be supplied by
Company or any of its Subsidiaries for inclusion or incorporation
by reference in (A) the Form S-4 will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading, and (B) the Joint Proxy
Statement will, on the date it is first mailed to Company
stockholders and to Purchaser stockholders or at the time of the
Company Stockholders Meeting and the Purchaser Stockholders
Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the
Securities Act and the rules and regulations thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(f), no representation or warranty is made by Company with
respect to statements made or incorporated by reference in the
Form S-4 or the Joint Proxy Statement based on information
supplied by Purchaser or Merger Sub.
(g) Board Approval. The Board of Directors of Company, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "Company Board
Approval"), has unanimously (i) determined that this Agreement and the
Merger are advisable, fair to and in the best interests of Company and
its stockholders, and (ii) adopted this Agreement and approved the
Option Agreement and the transactions contemplated hereby and thereby.
The Board of Directors of Company has taken all actions necessary to
exempt Purchaser and Merger Sub from the threshold restrictions on
Company Common Stock ownership in Company's articles of incorporation
and to make any applicable Virginia corporate takeover statutes or
other similar statutes inapplicable to the transactions contemplated by
this Agreement and the Option Agreement, including the Merger.
(h) Vote Required. The affirmative vote of the holders of more
than 66-2/3% of the outstanding shares of Company Common Stock to
approve this Agreement (the "Required Company Vote") is the only vote
of the holders of any class or series of
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Company capital stock necessary to consummate the transactions
contemplated hereby and by the Option Agreement.
(i) Litigation, Compliance with Laws.
(i) Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement or as set forth in Section
3.2(i) of the Company Disclosure Schedule, there is no suit,
action, investigation or proceeding pending or, to the knowledge
of Company, threatened, against or affecting Company or any
Subsidiary of Company having, or which would reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on Company, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Company or any Subsidiary of Company having,
or which reasonably would be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company.
(ii) Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement and except as would not
reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Company or materially impair the
ability of Company to consummate the transactions contemplated by
the Option Agreement, Company and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities necessary for the operation of the
businesses of Company and its Subsidiaries, as conducted on the
date hereof, taken as a whole (the "Company Permits"). Company and
its Subsidiaries are in compliance with the terms of the Company
Permits, except where the failure to so comply would not
reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Company. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, the
businesses of Company and its Subsidiaries are not being conducted
in violation of, and Company has not received any notices of
violations with respect to, any law, ordinance or regulation of
any Governmental Entity, except for possible violations which
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company or materially
impair the ability of Company to consummate the transactions
contemplated by the Option Agreement.
(iii) Company is in compliance in all material respects with
all material rules and regulations of the BCBSA.
(j) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the Option Agreement or
the transactions contemplated hereby and thereby or as set forth in
Section 3.2(j) of the Company Disclosure Schedule, since December 31,
2001, Company and its Subsidiaries have conducted their business only
in the ordinary course and there has not been (i) any change,
circumstance or event which has had, or would reasonably be expected to
have,
-21-
individually or in the aggregate, a Material Adverse Effect on Company
or (ii) any action taken by Company or any of its Subsidiaries during
the period from December 31, 2001 through the date of this Agreement
that, if taken during the period from the date of this Agreement
through the Effective Time without the consent of Purchaser, would
constitute a breach of Section 4.1(c), (d), (e), (j)(only with respect
to the sixteen Company executives with executive continuity
agreements), (k) or (q).
(k) Environmental Matters. Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Company or as disclosed on Section 3.2(k) of the Company
Disclosure Schedule, (i) the operations of Company and its Subsidiaries
have been and are in compliance with all applicable Environmental Laws
and with all Environmental Permits, (ii) there are no pending or, to
the knowledge of Company, threatened, actions, suits, claims,
investigations or other proceedings under or pursuant to Environmental
Laws against Company or its Subsidiaries or, to the knowledge of
Company, involving any real property currently or formerly owned,
operated or leased by Company or its Subsidiaries, (iii) Company and
its Subsidiaries are not subject to any Environmental Liabilities and,
to the knowledge of Company, no facts, circumstances or conditions
relating to, arising from, associated with or attributable to any real
property currently or formerly owned, operated or leased by Company or
its Subsidiaries or operations thereon would reasonably be expected to
result in Environmental Liabilities, (iv) all real property owned and
all real property operated or leased by Company or its Subsidiaries is
free of Hazardous Materials in conditions and concentrations that would
reasonably be expected to have an adverse effect on human health or the
environment and none of Company or any of its Subsidiaries has disposed
of any Hazardous Materials on or about such premises, (v) no release,
discharge, spillage or disposal of any Hazardous Material and no soil,
water or air contamination by any Hazardous Material has occurred or is
occurring in, from or on such premises, and (vi) Company has made
available to Purchaser the most recent Environmental Report, dated
February 2002.
As used in this Agreement, "Environmental Laws" means any and all
laws, rules, orders, regulations, statutes, ordinances, guidelines,
codes, decrees, or other legally enforceable requirements (including,
without limitation, common law) of any international authority, foreign
government, the United States, or any state, local, municipal or other
Governmental Entity, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or of
human health, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
sections 9601 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. sections 1801 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. sections 6901 et seq., the Clean Water Act, 33 U.S.C.
sections 1251 et seq., the Clean Air Act, 42 U.S.C. sections 7401 et
seq., the Toxic Substances Control Act, 15 U.S.C. sections 2601 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.,
sections 136 et seq. and the Oil Pollution Act of 1990, 33 U.S.C.
sections 2701 et seq., as such laws have been amended or supplemented,
and the regulations promulgated pursuant thereto, and all analogous
state or local statutes. As
-22-
used in this Agreement, "Environmental Liabilities" with respect to any
person means any and all liabilities of or relating to such person or
any of its Subsidiaries (including any entity which is, in whole or in
part, a predecessor of such person or any of such Subsidiaries),
whether vested or unvested, contingent or fixed, actual or potential,
known or unknown, which (i) arise under applicable Environmental Laws
or with respect to Hazardous Materials, and (ii) relate to actions
occurring or conditions existing, on or prior to the Closing Date. As
used in this Agreement, "Environmental Permits" means any and all
permits, consents, licenses, approvals, registrations, notifications,
exemptions and any other authorization required under any applicable
Environmental Law. As used in this Agreement, "Environmental Report"
means any report, study, assessment, audit, or other similar document
that addresses any issue of noncompliance with, or liability under, any
Environmental Law that may affect Company or any of its Subsidiaries.
As used in this Agreement, "Hazardous Materials" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, pollutants, contaminants, radioactivity, and any other
substances of any kind, whether or not any such substance is defined as
hazardous or toxic under any Environmental Law, that is regulated
pursuant to or could give rise to liability under any applicable
Environmental Law.
(l) Intellectual Property. Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Company or as disclosed on Section 3.2(l) of the Company
Disclosure Schedule, (a) Company and each of its Subsidiaries owns, or
is licensed to use (in each case, free and clear of any Liens), all
Intellectual Property used in or necessary for the conduct of its
business as currently conducted; (b) to the knowledge of Company, the
use of any Intellectual Property by Company and its Subsidiaries does
not infringe on or otherwise violate the rights of any Person and is in
accordance with any applicable license pursuant to which Company or any
Subsidiary acquired the right to use any Intellectual Property; (c) to
the knowledge of Company, no Person is challenging or infringing on or
otherwise violating any right of Company or any of its Subsidiaries
with respect to any Intellectual Property owned by or licensed to
Company or its Subsidiaries; and (d) neither Company nor any of its
Subsidiaries has received any written notice of any pending claim with
respect to any Intellectual Property used by Company and its
Subsidiaries and, to the knowledge of Company, no Intellectual Property
owned or licensed by Company or its Subsidiaries is being used or
enforced in a manner that would result in the abandonment, cancellation
or unenforceability of such Intellectual Property.
For purposes of this Agreement, "Intellectual Property" shall mean
trademarks, service marks, brand names, certification marks, trade
dress and other indications of origin, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and applications in
any jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without
limitation, divisions, continuations, continued prosecution
applications, continuations in part and renewal applications), and any
renewals,
-23-
extensions or reissues thereof, in any jurisdiction; know-how, trade
secrets and confidential information and rights in any jurisdiction to
limit the use or disclosure thereof by any person; writings and other
works, whether copyrightable or not, in any jurisdiction; registrations
or applications for registration of copyrights in any jurisdiction, and
any renewals or extensions thereof; and any similar intellectual
property or proprietary rights.
(m) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in
connection with any of the transactions contemplated by this Agreement,
based upon arrangements made by or on behalf of Company, except Bear
Stearns & Company, Inc. (the "Company Financial Advisor"), whose fees
and expenses will be paid by Company in accordance with Company's
agreements with such firm, copies of which have been provided to
Purchaser.
(n) Taxes. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company,
or as set forth in Section 3.2(n) of the Company Disclosure Schedule,
Company and each of its Subsidiaries (i) have prepared in good faith
and duly and timely filed (taking into account any extension of time
within which to file) all Tax Returns required to be filed by any of
them and all such filed Tax Returns are complete and accurate in all
material respects; (ii) have paid all Taxes that are shown as due and
payable on such filed Tax Returns or that Company or any of its
Subsidiaries are obligated to pay without the filing of a Tax Return;
(iii) have paid all other assessments received to date in respect of
Taxes other than those being contested in good faith for which
provision has been made in accordance with GAAP on the most recent
balance sheet included in Company's Annual Report on Form 10-K for the
year ended December 31, 2001; (iv) have withheld from amounts owing to
any employee, creditor or other Person all Taxes required by law to be
withheld and have paid over to the proper governmental authority in a
timely manner all such withheld amounts to the extent due and payable;
(v) have not waived any applicable statute of limitations with respect
to United States federal or state income or franchise Taxes and have
not otherwise agreed to any extension of time with respect to a United
States federal or state income or franchise Tax assessment or
deficiency; (vi) have never been members of any consolidated group for
United States federal income tax purposes other than the consolidated
group of which Company is the common parent; and (vii) are not parties
to any tax sharing agreement or arrangement other than with each other.
Except as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company, no liens for Taxes
exist with respect to any of the assets or properties of Company or its
Subsidiaries, except for statutory liens for Taxes not yet due or
payable or that are being contested in good faith. Company has made
available to Purchaser true and correct copies of all material federal,
state and local Tax Returns filed by Company and its Subsidiaries on
which the statute of limitations has not expired. None of Company or
its Subsidiaries has been a party to a Section 355 transaction that
could give rise to a Tax liability pursuant to Section 355(e) of the
Code. Except as set forth in Section 3.2(n) of the Company Disclosure
Schedule, there are not
-24-
being conducted or threatened in writing any material audits,
examinations, investigations, litigation, or other proceedings in
respect of Taxes of Company or any Subsidiary; and none of Company or
its Subsidiaries has any material deferred gains created by any other
transaction, or has any material excess loss accounts. Company is not
aware of any fact or circumstance that could reasonably be expected to
prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(o) Certain Contracts.
(i) Section 3.2(o)(i) of the Company Disclosure Schedule
lists, as of the date hereof, each of the following contracts,
agreements or arrangements to which Company or any of its
Subsidiaries is a party or by which it is bound: (i) any "material
contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K under the Exchange Act), (ii) the ten largest
provider and the ten largest customer contracts measured in terms
of payments to or receipts from Company and its Subsidiaries,
(iii) any contract that involves annual premiums, premium
equivalents or payments greater than $50 million and that, by its
terms, does not terminate within one year after the date of such
contract and is not cancelable during such period without penalty
or without payment (other than customer agreements that are not
terminable within one year solely as a result of Health Insurance
Portability and Accountability Act of 1996 ("HIPAA") or other
statutory or regulatory requirements), (iv) promissory notes,
loans, agreements, indentures, evidences of indebtedness or other
instruments providing for the lending of money, whether as
borrower, lender or guarantor in amounts greater than $5,000,000
(it being understood that trade payables, ordinary course
business funding mechanisms between Company and its customers and
providers, and guarantees of indebtedness by the Company and its
Subsidiaries to the Company and its Subsidiaries shall not be
considered indebtedness for purposes of this provision), (v) any
contract or other agreement expressly restricting the payment of
dividends or the repurchase of stock or other equity, (vi)
collective bargaining contracts, (vii) material joint venture,
partnership agreements or other similar agreements, (viii) any
contract for the pending acquisition, directly or indirectly (by
merger or otherwise), of any entity or business, if the
acquisition price (including the assumption of any debt or
liabilities) exceeds $10 million, (ix) any contract, agreement or
policy for reinsurance with a third party, (x) leases for real or
personal property involving any annual expense in excess of
$600,000 and not cancelable by Company (without premium or
penalty) within twelve months or (xi) any non-competition
agreement or any other agreement or arrangement that by its
express terms (x) materially limits or otherwise materially
restricts Company or any of its Subsidiaries or any successor
thereto or (y) would, after the Effective Time, materially limit
or otherwise materially restrict Purchaser or any of its
Subsidiaries (including the Surviving Corporation), in each case,
from engaging or competing in any line of business material to
Company and its affiliates (taken as a whole), the Purchaser and
its affiliates (taken as a whole), as
-25-
applicable, or in any geographic area material to the Company and
its Subsidiaries (taken as a whole) or to the Purchaser and its
Subsidiaries (taken as a whole), as applicable (other than
exclusivity provisions or arrangements with providers of
healthcare services) (collectively, the "Material Contracts").
(ii) Neither Company nor any of its Subsidiaries is, or has
received any written notice that any other party is, in default
(or would be in default but for the lapse of time or the giving of
notice or both) in any respect under any such Material Contract,
except for those defaults which would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect on Company.
(p) Employee Benefit Plans.
(i) Section 3.2(p) of the Company Disclosure Schedule
contains a true and complete list of each material Benefit Plan,
stock purchase, stock option, severance, employment, change in
control, fringe benefit, collective bargaining agreement, bonus,
incentive, deferred compensation, and all other material employee
benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA, whether formal or
informal, oral or written, legally binding or not under which any
employee or former employee of Company or any of its Subsidiaries
has any present or future right to benefits and under which
Company or any of its Subsidiaries has any present or future
liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Company
Plans"; provided, however, that for purposes of this Section
3.2(p), the terms Benefit Plans and Company Plans shall not
include any benefit plans, agreements, policies, programs or
arrangements sold or marketed by Company or its Subsidiaries.
(ii) With respect to each material Company Plan, Company has
delivered or made available to Purchaser a current, accurate and
complete copy (or, to the extent no such copy exists, an accurate
description) thereof and, to the extent applicable, (A) any
related trust agreement, annuity contract or other funding
instrument; (B) the most recent determination letter; (C) any
summary plan description and other written communications (or a
description of any oral communications) by Company or any of its
Subsidiaries to its employees concerning the extent of the
benefits provided under a Company Plan; and (D) for the most
recent year: (I) the Form 5500 and attached schedules; (II)
audited financial statements; (III) actuarial valuation reports;
and (IV) attorney responses to auditors' requests for information.
(iii) Except as would not reasonably be expected to have a
Material Adverse Effect on Company, (A) each Company Plan has been
established and administered in accordance with its terms, and in
material compliance with the applicable provisions of ERISA, the
Code and other applicable laws, rules and
-26-
regulations and if intended to be qualified within the meaning of
Section 401(a) of the Code is so qualified; (B) with respect to
any Company Plan, no actions, suits or claims (other than routine
claims for benefits in the ordinary course) are pending or
threatened; (C) neither Company nor any other party has engaged in
a prohibited transaction, as such term is defined under Section
4975 of the Code or Section 406 of ERISA, which would subject
Company, the Surviving Corporation or any of their Subsidiaries to
any taxes, penalties or other liabilities under Section 4975 of
the Code or Section 409 or 502(i) of ERISA and Company has no
other liability under the Code with respect to any Company Plan,
including liability under any other provision of Chapter 43 of the
Code; (D) no Company Plan provides for an increase in benefits on
or after the Closing Date; and (E) each Company Plan may be
amended or terminated without additional obligation or liability
as a result of such termination or amendment (other than those
obligations and liabilities which have accrued as of the time
immediately prior to such termination or amendment in accordance
with the terms of such Company Plan).
(iv) Except as disclosed in Section 3.2 (p)(iv) of the
Company Disclosure Schedule, neither Company nor any member of its
Controlled Group has ever maintained, sponsored, administered or
contributed to an employee benefit plan subject to Title IV of
ERISA, a multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA) or a welfare benefit plan that provides
coverage or benefits to former employees (other than benefit
continuation rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended).
(v) Except as disclosed in Section 3.2(p)(v) of the Company
Disclosure Schedule, no Company Plan exists which would reasonably
be expected to result in the payment to any employee of Company or
any of its Subsidiaries of any cash payment or other property or
rights or accelerate or provide any other rights or benefits to
any such employee as a result of the transactions contemplated by
this Agreement. Except as disclosed on Section 3.2(p) of the
Company Disclosure Schedule, there is no contract or agreement,
plan or arrangement by Company or its Subsidiaries covering any
person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by Company or
its Subsidiaries by reason of Section 280G of the Code or would
constitute compensation in excess of the limitation set forth in
Section 162(m) of the Code.
(vi) Except as would not reasonably be expected to have a
Material Adverse Effect on Company, all individuals who are or
have been eligible to participate in the Company Plans based upon
the eligibility provisions set forth therein or under applicable
law have been provided with a timely opportunity to participate.
-27-
(q) Labor Matters. (1) Neither Company nor any of its Subsidiaries
is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or
labor organization (other than contracts or other agreements or
understandings with labor unions or labor organizations in connection
with products and services offered and sold to such unions and
organizations by Company or its Subsidiaries); (2) except as would not
be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Company, neither Company nor any of its
Subsidiaries is the subject of any proceeding asserting that it or any
Subsidiary has committed an unfair labor practice or sex, age, race or
other discrimination or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment; (3) there are no
current or, to the knowledge of Company, threatened organizational
activities or demands for recognition by a labor organization seeking
to represent employees of Company or any Subsidiary, or labor strike
and no such activities have occurred during the past 24 months; (4)
except as would not be reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Company, no grievance,
arbitration, complaint or investigation relating to labor or employment
matters is pending or, to the knowledge of Company, threatened against
Company or any of its Subsidiaries; (5) except as would not be
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Company, Company and each Subsidiary is in compliance
with all applicable laws (domestic and foreign), agreements, contracts,
and policies relating to employment, employment practices, wages,
hours, and terms and conditions of employment; (6) Company has complied
in all material respects with its payment obligations to all employees
of Company and its Subsidiaries in respect of all wages, salaries,
commissions, bonuses, benefits and other compensation due and payable
to such employees under any Company policy, practice, agreement, plan,
program or any statute or other law; (7) Except as would not be
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect, Company is not liable for any severance pay or other
payments to any employee or former employee arising from the
termination of employment under any benefit or severance policy,
practice, agreement, plan, or program of Company, nor will Company have
any liability which exists or arises, or may be deemed to exist or
arise, under any applicable law or otherwise, as a result of or in
connection with the transactions contemplated hereunder or as a result
of the termination by Company of any persons employed by Company or any
of its Subsidiaries on or prior to the Effective Time of the Merger
except as required by Code Section 4980B; and (8) Company is in
compliance with its obligations pursuant to the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN") and part 6 and 7 of Title
I of ERISA, to the extent applicable, and all other employee
notification and bargaining obligations arising under any collective
bargaining agreement or statute.
(r) Affiliate Transactions. Except as disclosed in the Company
SEC Reports or as disclosed in Section 3.2(r) of the Company Disclosure
Schedule, there are no material (determined with respect to either
counterparty thereto) contracts, commitments, agreements, arrangements
or other transactions between Company or any of its Subsidiaries, on
the one hand, and any (i) officer or director of Company or any of its
Subsidiaries, (ii) record or beneficial owner of five percent or more
of the voting
-28-
securities of Company or (iii) affiliate (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) of any such officer,
director or beneficial owner, on the other hand.
(s) Statutory Financial Statements. Except as otherwise set forth
therein, the annual statements and the quarterly statements filed by
Company or any of its Subsidiaries with the Virginia State Corporation
Commission ("VSCC") for the years ended December 31, 1999, 2000 and
2001, and for each quarterly period ending after December 31, 2001 and
prior to the Closing Date (the "VSCC Filings") and the statutory
balance sheets and income statements included in such VSCC Filings
fairly present, or will fairly present, in all material respects the
statutory financial condition and results of operations of Company or
such Subsidiaries, as applicable, as of the date and for the periods
indicated therein and have been prepared, or will be prepared, in all
material respects, in accordance with applicable statutory accounting
principles consistently applied throughout the periods indicated,
except as may be reflected in the notes thereto, or the statutory
reports and related actuarial opinions for Company or its Subsidiaries
for the 2001 fiscal year, and subject to the absence of notes required
by statutory accounting principles and to normal year-end adjustments.
(t) Insurance. Company has provided or made available to
Purchaser true, correct and complete copies of its primary director and
officer and employee and officer insurance policies and will make
available to Purchaser, prior to the Closing Date, true and complete
copies of all material policies of insurance to which Company or its
Subsidiaries is a party or is a beneficiary or named insured. Company
and its Subsidiaries maintain insurance coverage with reputable
insurers in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses
similar to that of Company or its Subsidiaries (taking into account the
cost and availability of such insurance).
(u) Rights Agreement. The Rights Agreement has been amended so
that Purchaser and Merger Sub, with respect to the transactions
contemplated hereby and by the Option Agreement, are each exempt from
the definition of "Acquiring Person" contained in the Company Rights
Agreement, no "Stock Acquisition Date" or "Distribution Date" or
"Triggering Event" (as such terms are defined in the Company Rights
Agreement) will occur as a result of the execution and delivery of this
Agreement and the Option Agreement or the consummation of any of the
transactions contemplated hereby or thereby, including the Merger. The
Company Rights Agreement will expire immediately prior to the Effective
Time, and the Company Rights Agreement, as so amended, has not been
further amended or modified. Copies of all such amendments to the
Company Rights Agreement have been previously provided or made
available to Purchaser.
(v) No Dissenters' Rights. Company stockholders are not entitled
to any dissenters' or appraisal rights in connection with the Merger
under the VSCA or Company's articles of incorporation or by-laws.
-29-
(w) Opinion of Company Financial Advisor. The Board of Directors
of Company has received the opinion of the Company Financial Advisor,
dated the date of this Agreement, to the effect that, as of such date,
the Merger Consideration is fair, from a financial point of view, to
the holders of Company Common Stock, a copy of which opinion will
promptly be made available to Purchaser after receipt by Company.
(x) Accounting and Financial Matters. Since January 1, 2001,
Company has not received written notice from the SEC or any other
Governmental Entity that any of its accounting policies or practices
are or may be the subject of any review, inquiry, investigation or
challenge by the SEC or other Governmental Entity. Since January 1,
2001, Company's independent public accounting firm has not informed
Company that it has any material questions, challenges or disagreements
regarding or pertaining to Company's accounting policies or practices.
Since January 1, 2001, no officer or director of Company has received,
or is entitled to receive, any material compensation from any entity
that has engaged in or is engaging in any material transaction with the
Company or any of its Subsidiaries. Set forth on Section 3.2(x) of the
Company Disclosure Schedule is, among other things, a list of all
off-balance sheet special purpose entities and financing arrangements
of Company and its Subsidiaries.
3.3. Representations and Warranties of Purchaser and Merger Sub.
Purchaser and Merger Sub represent and warrant to Company as follows:
(a) Organization. Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of Indiana. Merger
Sub is a direct wholly-owned subsidiary of Purchaser.
(b) Corporate Authorization. Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance by Merger Sub of this Agreement and the
consummation by Merger Sub of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Merger Sub. Purchaser, in its capacity as sole stockholder of Merger
Sub, has approved this Agreement and the other transactions
contemplated hereby as required by the IBCL. This Agreement has been
duly executed and delivered by Merger Sub and, assuming that this
Agreement constitutes the valid and binding agreement of Company,
constitutes a valid and binding agreement of Merger Sub, enforceable
against it in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting creditors generally or
by general equity principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law) or by an implied
covenant of good faith and fair dealing.
(c) Non-Contravention. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions
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contemplated hereby do not and will not contravene or conflict with the
articles of incorporation or by-laws of Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any
activities other than in connection with the organization of Merger
Sub, the negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby. Merger Sub has no
Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Conduct of Business of Company Pending the Merger. Company
covenants and agrees that, during the period from the date hereof to the
Effective Time and except as otherwise agreed to in writing by Purchaser or as
expressly contemplated by this Agreement, the businesses of Company and its
Subsidiaries shall be conducted only in, and Company and its Subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice and in compliance with applicable laws; and
Company and its Subsidiaries, except as expressly contemplated by this
Agreement, shall each use its commercially reasonable efforts to preserve
substantially intact the business organization of Company and its Subsidiaries,
to keep available the services of the present officers, employees and
consultants of Company and its Subsidiaries and to preserve the present
relationships of Company and its Subsidiaries with such of the customers,
suppliers, licensors, licensees, or distributors with which Company or any of
its Subsidiaries has significant business relations. By way of amplification and
not limitation, without the prior written consent of Purchaser (which shall not
be unreasonably withheld or delayed) neither Company nor any of its Subsidiaries
shall, between the date of this Agreement and the Effective Time, except as set
forth in Section 4.1 of the Company Disclosure Schedule, directly or indirectly
do, or propose or commit to do, any of the following:
(a) Amend its articles of incorporation or by-laws or equivalent
organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of capital stock, or any other ownership interest
(including but not limited to stock appreciation rights or phantom
stock), of Company or any of its Subsidiaries, except for (i) the
issuance of securities issuable pursuant to options outstanding as of
the date hereof under the Option Agreement or any Benefit Plans of
Company (including the Company Employee Stock Purchase Plan ("Company
ESPP")) and (ii) grants of equity or equity-based awards in accordance
with Section 4.1(b) of the Company Disclosure Schedule.
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, other than
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dividends payable by a directly or indirectly wholly-owned Subsidiary
of Company to Company or another directly or indirectly wholly-owned
Subsidiary of Company;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock,
stock options or debt securities;
(e) Acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division or line of business;
(f) Modify its current investment policies or investment practices
in any material respect except to accommodate changes in applicable
law;
(g) Transfer, lease, mortgage, or otherwise dispose of or subject
to any Lien any of its assets, including capital stock of Subsidiaries,
with a fair market value in excess of $10 million individually or $25
million in the aggregate (except (i) by incurring Permitted Liens; (ii)
in the ordinary course of business consistent with past practice; and
(iii) equipment and property no longer used in the operation of
Company's or any Subsidiaries' business);
(h) (I) Repay or retire any indebtedness for borrowed money or
repurchase or redeem any debt securities, except (x) upon the maturity
date of such indebtedness or as otherwise required by the terms of such
indebtedness or securities or (y) as permitted by Section 5.16, (II)
incur any indebtedness for borrowed money or issue any debt securities
or (III) assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any
loans, advances or capital contributions to, or investments in, any
other person in excess of $5 million individually or $10 million in the
aggregate (it being understood that trade payables, ordinary course
business funding mechanisms between Company and its customers and
providers and guarantees of indebtedness by the Company and its
Subsidiaries to the Company and its Subsidiaries shall not be
considered indebtedness for purposes of this provision);
(i) Enter into or amend any Material Contract, any other contract
or agreement (with "other contract or agreement" being defined for
purposes of this subsection as a contract or agreement which involves
Company incurring a liability in excess of $10 million individually or
$25 million in the aggregate and which is not terminable by Company
without penalty upon one year or less notice (other than (x) contracts
or amendments issued or entered into in the ordinary course of business
with customers or providers of Company or its Subsidiaries, (y)
customer agreements that are not terminable within one year solely as a
result of HIPAA or other statutory or regulatory requirements or (z) as
required by law)) or, except for any agreement in the ordinary course
of business and that is not inconsistent with Section 5.16, agreement
with an affiliate of Company;
(j) Except (A) to the extent required under this Agreement or as
set forth on Section 4.1(j) of the Company Disclosure Schedule, (B)
pursuant to applicable law or (C) pursuant to existing obligations
under the Company Plans or collective bargaining
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agreements, increase the compensation or fringe benefits of any of its
directors, officers or employees, except for increases in salary or
wages of officers and employees of Company or its Subsidiaries in the
ordinary course of business in accordance with past practice, or grant
any severance or termination pay not currently required to be paid
under existing severance plans or enter into, or amend, any employment,
change-in-control or similar arrangement, consulting or severance
agreement or arrangement (except, other than with respect to the
sixteen Company executives with executive continuity agreements,
pursuant to separation agreements and severance agreements entered into
in the ordinary course of business consistent with past practice) with
any present or former director, officer or other employee of Company or
any of its Subsidiaries, or establish, adopt, enter into or amend or
terminate any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, welfare, severance or
other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees;
(k) Except as may be required as a result of a change in law or
in generally accepted accounting or actuarial principles, make any
material change to the accounting practices or principles or reserving
or underwriting practices or principles used by it;
(l) Knowingly take, or knowingly permit any of its Subsidiaries
to take, any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code;
(m) Settle or compromise any pending or threatened suit, action
or claim involving a payment by Company or its Subsidiaries in excess
of $1,000,0000 or agree to any settlement or compromise in respect
thereof, if such settlement or compromise would be reasonably likely to
be (i) a settlement or compromise which is the first settlement or
compromise effected by the Company or its Subsidiaries with regards to
any particular type of conduct or complaint or (ii) a settlement or
compromise which would be substantially different than prior
settlements of the Company or its Subsidiaries with regards to any
particular type of conduct or complaint, which in either the case of
(i) or (ii) would create an adverse precedent for claims, actions or
proceedings that would be material to Company and its Subsidiaries,
taken as whole;
(n) Adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of Company or
any of its Subsidiaries;
(o) Effectuate a "plant closing" or "mass layoff", as those terms
are defined in WARN, affecting in whole or in part any site of
employment, facility, operating unit or employee of Company or any of
its Subsidiaries;
(p) Fail to use reasonable commercial efforts to maintain in full
force and effect the existing insurance policies covering Company or
its Subsidiaries or their
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respective properties, assets and businesses or comparable replacement
policies to the extent available for a cost not exceeding 150% of the
current cost of such policy;
(q) Authorize or make capital expenditures other than aggregate
capital expenditures not to exceed an amount equal to the aggregate
capital expenditures contemplated to be made between the date of this
Agreement and the Closing in the capital expenditure plan previously
provided to Purchaser in writing plus $2 million;
(r) Expand its marketing efforts beyond those states in which its
products are offered as of the date of this Agreement;
(s) Make any material Tax election or settle or compromise any
material federal, state, local or foreign Tax liability, change any
method of Tax accounting in any material respect, enter into any
closing agreement relating to any material amount of Tax, or surrender
any right to claim a material Tax refund;
(t) (i)(x) Amend or alter any of the Company Stock Option Plans
or any award agreements thereunder or (y) waive any provision of such
plans or agreements or (z) exercise any discretionary right or take any
discretionary action under or in relation to such plans or agreements,
in any case, to provide that the Company shall be obligated or required
to pay optionholders any difference between the applicable exercise
price of such option and any other value (including any fair market
value of Company Common Stock or the Merger Consideration) (any such
payment, a "Cash-Out Payment") or (ii) make any Cash-Out Payment or
make any loan or guarantee to any optionholders to fund the exercise
price of any options (other than (I) prior to the approval of the
Company's stockholders of this Agreement at Company Stockholders
Meeting, aggregate Cash-Out Payments in respect of an immaterial
number of options and (II) share withholding upon the exercise of
options, for purposes of paying applicable withholding tax); or
(u) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections 4.1(a)
through 4.1(t).
4.2. Conduct of Business of Purchaser Pending the Merger. Purchaser
shall not, between the date of this Agreement and the Effective Time, except as
set forth in Section 4.2 of the Purchaser Disclosure Schedule or as may be
consented to beforehand in writing by Company (such consent not to be
unreasonably withheld or delayed), directly or indirectly do, or propose or
commit to do, any of the following:
(a) Amend its articles of incorporation or by-laws or equivalent
organizational documents in a manner adverse to Company or its
stockholders (as a group);
(b) Knowingly take, or knowingly permit any of its Subsidiaries to
take, any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code;
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(c) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of capital stock, or any other ownership interest
(including but not limited to stock appreciation rights or phantom
stock), of Purchaser or any of its Subsidiaries, except for (i) the
issuance of securities issuable pursuant to options outstanding as of
the date hereof under any Benefit Plans of Purchaser (including the
Purchaser Employee Stock Purchase Plan ("Purchaser ESPP")), (ii) grants
of equity or equity-based awards in the ordinary course of business and
the issuance of securities in settlement thereof, (iii) the issuance of
any securities as contemplated by Section 4.2 of Purchaser Disclosure
Schedule, (iv) any issuance of any shares of Purchaser Common Stock
related to the demutualization of Purchaser's Subsidiary and (v) the
issuance of any securities (other than those contemplated by clauses
(i) through (iv) above) in registered primary offerings or in
connection with business combinations up to a maximum aggregate value
of $100 million;
(d) Declare, set aside, make or pay any dividend or other
distribution (other than repurchases of Purchaser Common Stock),
payable in cash, stock, property or otherwise, with respect to any of
its capital stock;
(e) Adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of Purchaser;
(f) Merge or consolidate with, or acquire a material amount of
assets or capital stock of, any other person, if such merger,
consolidation or acquisition would reasonably be expected to materially
impair, materially delay or prevent consummation of the transactions
contemplated hereby, including the Merger; or
(g) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections 4.2(a)
through (f) or any action which would result in any of the conditions
set forth in Article VI not being satisfied or materially delay the
Closing.
4.3. Operational Matters. From the date of this Agreement until the
Effective Time, each of Purchaser and Company shall (a) confer on a regular and
frequent basis with the other and (b) report (to the extent permitted by law or
regulation or any applicable confidentiality agreement) on operational matters.
Company and Purchaser shall file all reports required to be filed by each of
them with the SEC (and all other Governmental Entities) between the date of this
Agreement and the Effective Time and each of Purchaser and Company shall (to the
extent any report, announcement and publication relates to this Agreement and
the Merger, and to the extent permitted by law or regulation or applicable
confidentiality agreement) deliver to the other party copies of all such
reports, announcements and publications promptly after the same are filed.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Preparation of Form S-4 and the Joint Proxy Statement;
Stockholders Meetings.
(a) Promptly following the date of this Agreement, Company and
Purchaser shall prepare and file with the SEC the Joint Proxy
Statement, and Purchaser shall prepare and file with the SEC the Form
S-4, in which the Joint Proxy Statement will be included as a
prospectus. Each of Company and Purchaser shall use its reasonable best
efforts to have the Form S-4 declared effective under the Securities
Act as promptly as practicable after such filing. Each of Company and
Purchaser will use its reasonable best efforts to cause the Joint Proxy
Statement to be mailed to its stockholders as promptly as practicable
after the Form S-4 is declared effective under the Securities Act.
Purchaser shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified)
required to be taken under any applicable state securities law in
connection with the Share Issuance, and Company shall furnish all
information concerning Company and the holders of Company Common Stock
and rights to acquire Company Common Stock pursuant to the Company
Stock Option Plans as may be reasonably required in connection with any
such action. Each of Purchaser and Company shall furnish all
information concerning itself to the other as may be reasonably
requested in connection with any such action and the preparation,
filing and distribution of the Form S-4 and the preparation, filing and
distribution of the Joint Proxy Statement. Company, Purchaser and
Merger Sub each agree to promptly correct any information provided by
it for use in the Form S-4 or the Joint Proxy Statement that shall have
become false or misleading.
(b) Company, acting through its Board of Directors, shall, subject
to and in accordance with its articles of incorporation and by-laws,
promptly and duly call, give notice of, convene and hold as soon as
practicable following the date upon which the Form S-4 becomes
effective a meeting of the holders of Company Common Stock (the
"Company Stockholders Meeting") for the purpose of voting to approve
this Agreement, and (i) except as otherwise provided in the following
sentence, recommend approval of this Agreement and include in the Joint
Proxy Statement such recommendation and (ii) use its reasonable best
efforts to solicit and obtain such approval. In the event that prior to
the approval of this Agreement by the Company's stockholders, the Board
of Directors of Company receives a Superior Proposal (as defined in
Section 8.13) and the Board of Directors of Company determines in good
faith by resolution duly adopted after consultation with its outside
counsel that the failure to take such action would reasonably be
expected to constitute a breach of its fiduciary duties under Virginia
law, the Board of Directors of Company may withdraw, amend or modify,
in a manner adverse to Purchaser, its recommendation, provided that
before withdrawing, amending or modifying its recommendation, it gives
Purchaser five business days' prior written notice of its intention to
do so and during such time, Company, if requested by Purchaser, shall
have engaged in good faith negotiations to amend this Agreement such
that the Board of Directors of Company may continue to recommend the
approval of this Agreement. The
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parties agree that nothing in this Section 5.1 shall in any way limit
or otherwise affect Purchaser's right to terminate this Agreement
pursuant to Section 7.1(c) at such time as the requirements of such
subsection have been met. Any such withdrawal, amendment or
modification of the recommendation shall not (x) change the adoption of
this Agreement or any other approval of the Board of Directors of
Company in any respect that would have the effect of causing the
threshold restrictions on Company Common Stock ownership in Company's
articles of incorporation, the Company Rights Agreement and any
Virginia corporate takeover statute or other similar statute to be
applicable to the transactions contemplated hereby, including the
Merger, or the transactions contemplated by the Option Agreement, or
(y) change the obligation of Company to present this Agreement for
approval at the Company Stockholders Meeting on the earliest
practicable date. At any such meeting following any withdrawal,
amendment or modification of Company's recommendation of this
Agreement, Company may submit this Agreement to its stockholders
without recommendation (although the adoption of this Agreement by the
Board of Directors of Company may not be rescinded or amended), in
which event the Board of Directors of Company may communicate the basis
for its lack of a recommendation to its stockholders in the Joint Proxy
Statement or an appropriate amendment or supplement thereto to the
extent required by law. Nothing contained in this Agreement shall
prohibit Company from taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange
Act or from making disclosure of the fact that a proposal for an
Alternative Transaction has been made, the identity of the party making
the proposal or the material terms of such proposal in the Form S-4 or
the Joint Proxy Statement, to the extent disclosure of such facts,
identity or terms is advisable under applicable law (and the disclosure
of such facts, by itself, shall not be deemed a withdrawal or adverse
modification or amendment of its approval or recommendation to
stockholders of the Merger).
(c) During the term of this Agreement, Company shall not take any
actions to exempt any Person other than Purchaser and Merger Sub from
the Company Rights Agreement, the threshold restrictions on Company
Common Stock ownership in Company's articles of incorporation, or make
any Virginia state takeover statute or similar statute inapplicable to
any Alternative Transaction unless, in any such case, the Board of
Directors of Company determines in good faith after consultation with
its outside counsel that failure to take such action would reasonably
be expected to constitute a breach of its fiduciary duties under
Virginia law.
(d) Company will cause its transfer agent to make stock transfer
records relating to Company available to the extent reasonably
necessary to effectuate the intent of this Agreement.
(e) Purchaser, acting through its Board of Directors, shall,
subject to and in accordance with its articles of incorporation and
by-laws, promptly and duly call, give notice of, convene and hold as
soon as practicable following the date on which the Form S-4 becomes
effective, a meeting of the holders of Purchaser Common Stock (the
"Purchaser Stockholders Meeting") for the purpose of voting to approve
the Share
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Issuance. Purchaser shall recommend such approval to its stockholders
and use its reasonable best efforts to solicit and obtain such
approval. The Board of Directors of Purchaser shall not withhold,
withdraw, amend or modify in any manner adverse to Company its
recommendation referred to in the preceding sentence (or announce
publicly its intention to do so). Nothing contained in this Agreement
shall prohibit Purchaser from making any factual disclosure regarding
this Agreement, the Option Agreement, the parties hereto, or any of the
transactions contemplated hereby or thereby, if such disclosure is
advisable under applicable law (and the disclosure of such information,
by itself, shall not be deemed a withdrawal or adverse modification or
amendment of its approval or recommendation to its stockholders of the
Share Issuance).
(f) Company and Purchaser shall endeavor to hold the Company
Stockholder Meeting and the Purchaser Stockholder Meeting as closely
together in time as practicable and, to the extent possible, on the
same date.
5.2. Accountant's Letters.
(a) Purchaser shall use its reasonable best efforts to cause to be
delivered to Company a letter from Purchaser's independent public
accountants, dated (i) the date on which the Form S-4 shall become
effective, and (ii) the Closing Date, addressed to Purchaser, in form
and substance reasonably satisfactory to Company and customary in scope
and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the
Form S-4.
(b) Company shall use its reasonable best efforts to cause to be
delivered to Purchaser a letter from Company's independent public
accountants, dated (i) the date on which the Form S-4 shall become
effective, and (ii) the Closing Date, addressed to Company and
Purchaser, in form and substance reasonably satisfactory to Purchaser
and customary in scope and substance for comfort letters delivered by
independent public accountants in connection with registration
statements similar to the Form S-4.
5.3. Access to Information. Upon reasonable notice, each party shall
(and shall cause its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of the other
party reasonable access during normal business hours, during the period prior to
the Effective Time, to such of its properties, books, contracts, commitments,
records, officers and employees as the other party may reasonably request and,
during such period, such party shall (and shall cause its Subsidiaries to)
furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of Federal or
state securities laws, as applicable (other than documents which such party is
not permitted to disclose under applicable law), and (b) consistent with its
legal obligations, all other information concerning it and its business,
properties and personnel as such other party may reasonably request; provided,
however, that either party may restrict the foregoing access to the extent that
any law, treaty, rule or regulation of any Governmental Entity applicable to
such party requires such party or its Subsidiaries to restrict access to any
properties or information (but only if such
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party shall have used commercially reasonable efforts to get any such
restriction waived). The parties will hold any such information which is
non-public in confidence to the extent required by, and in accordance with, the
provisions of the confidentiality agreement between Company and Purchaser (the
"Confidentiality Agreement"). Any investigation by Purchaser or Company shall
not affect the representations and warranties of Company or Purchaser, as the
case may be.
5.4. Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each
party will use its reasonable best efforts to prepare and file as
promptly as practicable all documentation to effect all necessary
applications, notices, petitions, filings, tax ruling requests and
other documents and to obtain as promptly as practicable all consents,
waivers, licenses, orders, registrations, approvals, permits, tax
rulings and authorizations necessary or advisable to be obtained from
any third party and/or any Governmental Entity in order to consummate
the Merger or any of the other transactions contemplated by this
Agreement or any transaction contemplated by the Option Agreement. Upon
the terms and subject to the conditions hereof, each party will use its
reasonable best efforts to take, or cause to be taken, all actions, to
do, or cause to be done, all things reasonably necessary to satisfy the
conditions to Closing set forth herein and to consummate the
transactions contemplated hereby.
(b) In furtherance and not in limitation of the foregoing, each
party hereto agrees to make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions
contemplated hereby and by the Option Agreement as promptly as
practicable after the date hereof and to supply as promptly as
practicable any additional information and documentary material that
may be requested pursuant to the HSR Act. Each of Purchaser and Company
shall cooperate in all respects with each other in connection with any
filing or submission and in connection with any investigation or other
inquiry under the HSR Act.
(c) In furtherance and not in limitation of the foregoing, the
parties agree that Purchaser shall make as promptly as practicable such
filings as are required in connection with this Agreement and the
transactions contemplated hereby on its behalf, including the "Form A"
regulatory filings to be made with the Virginia State Corporation
Commission and shall, in consultation with Company, coordinate the
conduct of any hearing or hearings before the Virginia State
Corporation Commission in connection with such filings. Company and
Purchaser will reasonably cooperate with regard to the content of the
filings referred to in the first sentence of this Section 5.4(c).
Company and Purchaser, as the case may be, shall submit all such
filings and hearing testimony, witness lists and other similar
materials relating to any hearing to the other for its review prior to
filing and shall incorporate the reasonable comments of the other
party.
(d) Nothing contained in this Section 5.4 shall be construed as
requiring Purchaser to agree to any conditions which would impose (i)
any limitations on Purchaser's ownership or operation of all or any
portion of its, any of its Subsidiaries', or
-39-
Company's (or any of its Subsidiaries') business or assets, or to
compel Purchaser or any of its Subsidiaries to dispose of or hold
separate all or any portion of its, any of its Subsidiaries' or
Company's or any of its Subsidiaries' business or assets, (ii) any
limitations on the ability of Purchaser to acquire or hold or to
exercise full rights of ownership of the Company Common Stock, (iii)
any obligations on Purchaser or any of its Subsidiaries or Company or
any of its Subsidiaries to maintain facilities, operations, places of
business, employment levels, products or businesses or (iv) any other
obligation, restriction, limitation, qualification or other conditions,
which, in the case of any of clauses (i) through (iv) above, would be
reasonably likely to have a material and adverse effect on Purchaser
and its Subsidiaries, taken as a whole, have a material and adverse
effect on Company and its Subsidiaries, taken as a whole, or materially
impair the long-term benefits sought to be derived from the Merger.
5.5. No Solicitation of Transactions. Company agrees that, during the
term of this Agreement, it shall not, and shall not authorize or permit any of
its Subsidiaries or any of its or its Subsidiaries' directors, officers,
employees, agents or representatives (including any investment banker, attorney
or accountant retained by it or any of its Subsidiaries), directly or
indirectly, to solicit, initiate, encourage or facilitate, or furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any Alternative Transaction (as defined in
Section 8.13), or negotiate, explore or otherwise engage in discussions with any
Person (other than Purchaser, Merger Sub or their respective directors,
officers, employees, agents and representatives) with respect to any Alternative
Transaction or enter into any agreement, arrangement or understanding requiring
it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement or the Option Agreement; provided
that, at any time prior to the approval of this Agreement by Company's
stockholders, Company may furnish information to, and negotiate or otherwise
engage in discussions with, any party who delivers a bona fide written proposal
for an Alternative Transaction which was not solicited or encouraged after the
date of this Agreement, if and so long as the Board of Directors of Company
determines in good faith by resolution duly adopted after consultation with its
outside legal counsel that the failure to provide such information or engage in
such negotiations or discussions is or would reasonably be expected to
constitute a breach of the directors' fiduciary duties under Virginia law and
determines in good faith that such a proposal is a Superior Proposal. Company
shall notify Purchaser promptly of such inquiries, proposals or offers received
by, or any such discussions or negotiations sought to be initiated or continued
with, any of its representatives, indicating the name of such Person and
providing to Purchaser a copy of such written proposal or offer for an
Alternative Transaction. Prior to providing any information or data to, or
entering into any negotiations or discussions with, any Person in connection
with a proposal or offer for an Alternative Transaction, Company shall (i) give
to Purchaser five business days' prior written notice of its intention to do so,
and during such time shall, if requested by Purchaser, engage in good faith
negotiations to amend this Agreement such that the Board of Directors of Company
will not be required to provide such information pursuant to its fiduciary
duties, and (ii) receive from such Person an executed confidentiality agreement
containing terms and provisions at least as restrictive as those contained in
the Confidentiality Agreement (which shall not preclude discussions or
negotiations relating to the proposal or offer from such Person). Company agrees
that it will keep Purchaser
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informed, on a prompt basis, of the status and terms of any such proposals or
offers and the status of any such discussions or negotiations and that it will
deliver to Purchaser copies of (or, if oral, summaries of) any changes to any
proposals or offers. Company agrees that it will immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
parties conducted prior to the date of this Agreement with respect to any
Alternative Transaction and will not waive any rights under any standstill or
confidentiality agreements entered into with such parties.
5.6. Employee Benefits Matters.
(a) Continuation and Comparability of Benefits. From the Effective
Time until December 31, 2003 (the "Benefits Continuation Period"), the
Surviving Corporation shall provide compensation and Benefits Plans to
the current and former employees of Company and its Subsidiaries (other
than those current and former employees whose terms and conditions of
employment are subject to a collective bargaining agreement) that are
in the aggregate no less favorable than those provided to the current
and former employees of the Company and its Subsidiaries as of the
Effective Date. On or prior to January 1, 2004, the Purchaser shall
have caused the compensation and Benefit Plans providing compensation
and benefits to the current and former employees of Purchaser (other
than current and former employees of the Surviving Corporation and its
Subsidiaries) on the one hand, and the current and former employees of
the Surviving Corporation and its Subsidiaries, on the other hand, to
be in the aggregate comparable for similarly situated current and
former employees.
(b) Pre-Existing Limitations; Service Credit. With respect to any
Benefit Plans in which any Company employees first become eligible to
participate, on or after the Effective Time, and which are plans that
the Company employees did not participate in prior to the Effective
Time (the "New Company Plans"), Purchaser shall: (A) waive all
pre-existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Company
employees under any health and welfare New Company Plans in which such
employees may be eligible to participate after the Effective Time, and
deductibles, coinsurance or maximum out-of-pocket payments made by
Company employees during the calendar year in which the Effective Time
occurs shall reduce the amount of deductibles, coinsurance and maximum
out-of-pocket payments under the New Company Plans; provided that such
Company employee and covered family members were enrolled in comparable
coverage under the Benefit Plans of Company on the Effective Time and
continuously thereafter until the effective time of coverage in the New
Company Plans, and (B) recognize service of the Company employees with
Company (or otherwise credited by Company) accrued prior to the
Effective Time for purposes of eligibility to participate and vesting
credit (and levels of benefits) in any New Company Plan in which such
employees may be eligible to participate after the Effective Time, to
the extent service is taken into account under the applicable New
Company Plan; provided, however, in no event shall any credit be given
to the extent it would result in the duplication of benefits for the
same period of service. Service with Company will also be recognized
under any New Company Plan that is a
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defined benefit pension plan with a benefit formula based upon final
average compensation, with an offset for any benefit payable for the
same period of service with Company under any defined benefit plan of
Company.
(c) Retention Agreements. Company and Purchaser have entered into
binding employment arrangements with the certain executives of Company
set forth on Exhibit B hereto.
(d) Company Plans. From and after the Effective Time, Purchaser
shall and shall cause its affiliates (including the Surviving
Corporation and its Subsidiaries) to honor all Company Plans in
accordance with their terms as in effect immediately before the
Effective Time, subject to any amendment or termination thereof that
may be permitted by such terms. Without limiting the generality of the
foregoing sentence, Purchaser shall cause the Company to continue (i)
its Retirement Program without modification through December 31, 2003
and shall maintain the defined benefit portion of such plan, without
modification, through October 1, 2003; and (ii) its annual and long
term incentive plans (the "Bonus Plans") in effect throughout the
Benefits Continuation Period; provided that (i) the Purchaser or
Company may modify the performance measures under the Bonus Plans to
reflect equitably and appropriately the transactions contemplated by
this Agreement subject to the consent of the CEO of the Company as of
the date hereof, which consent shall not be unreasonably withheld; (ii)
the target bonus as a percentage of base salary shall not be reduced
throughout the Benefits Continuation Period; and (iii) the Company
performance in respect of calculations made under the Bonus Pans for
2002 and 2003 calendar years shall be calculated without taking into
account any changes, expenses or costs associated with or arising as a
result of the transactions contemplated by the Agreement or any
non-recurring charges that would not reasonably be expected to have
been incurred had the transactions contemplated by this Agreement not
occurred, and Company may modify the Bonus Plans accordingly.
(e) Subsequent Disposition. If Purchaser disposes of Company or
any of its Subsidiaries or all or substantially all of their respective
assets during the Benefits Continuation Period, Purchaser shall require
the purchaser of Company, its Subsidiaries or their respective assets,
as the case may be, to expressly agree to assume and perform the
provisions of this Section 5.6 through the remainder of the Benefits
Continuation Period with respect to provision of compensation and
benefits.
(f) Employee Stock Purchase Plan. Company shall take all action to
the extent necessary (including amending the Company ESPP) such that
the Company ESPP will terminate immediately prior to the Effective Time
and all participants will automatically exercise their purchase rights
immediately prior to the termination of the plan. Purchaser shall take
all action to the extent necessary (including amending the Purchaser
ESPP) such that the employees of Company or its Subsidiaries prior to
the Effective Time who become employees of Purchaser or one of its
Subsidiaries after the Effective Time shall be eligible to participate
in the Purchaser ESPP as soon as practicable after the Effective Time.
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5.7. Directors' and Officers' Indemnification and Insurance.
(a) The Surviving Corporation shall, and Purchaser shall cause the
Surviving Corporation to, (i) indemnify and hold harmless, and provide
advancement of expenses to, all past and present (as of the Effective
Time) directors, officers and employees of Company and its Subsidiaries
(the "Indemnified Persons") to the same extent such persons are
indemnified or have the right to advancement of expenses as of the date
of this Agreement by Company pursuant to Company's articles of
incorporation, by-laws and indemnification agreements, if any, in
existence on the date hereof with any current or former directors,
officers and employees of Company and its Subsidiaries (but in any
event to the fullest extent permitted by law) for acts or omissions
occurring at or prior to the Effective Time (including for acts or
omissions occurring in connection with the approval of this Agreement
and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby), and (ii) purchase as of the Effective
Time a tail policy to the current policy of directors' and officers'
liability insurance and fiduciary liability insurance maintained by
Company which tail policy shall be effective for a period from the
Effective Time through and including the date six years after the
Closing Date with respect to claims arising from facts or events that
occurred on or before the Effective Time, and which tail policy shall
contain substantially the same coverage and amounts, and contain terms
and conditions no less advantageous, in the aggregate, as that coverage
currently provided by such current policy; provided, however, that in
no event shall the Surviving Corporation be required to expend, for the
entire tail policy, in excess of 400% of the annual premium currently
paid by Company for its current policy of directors' and officers'
liability insurance and fiduciary liability insurance; and, provided,
further, that if the premium of such insurance coverage exceeds such
amount, the Surviving Corporation after consultation with Company shall
be obligated to obtain a policy with the greatest coverage available
for a cost not exceeding such amount.
(b) To the extent permitted by the IBCL, the articles of
incorporation and by-laws of the Surviving Corporation shall contain
provisions with respect to indemnification, advancement of expenses and
exculpation from liability at least as favorable to the Indemnified
Persons as those set forth in the current articles of incorporation and
by-laws of Company, and for a period of six years from the Effective
Time, those provisions shall not be repealed or amended or otherwise
modified in any manner that would adversely affect the rights
thereunder as of the Effective Time of the Indemnified Persons, except
to the extent, if any, that such modification is required after the
Effective Time by applicable law.
(c) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at
or after the Effective Time) is made against any Indemnified Persons on
or prior to the sixth anniversary of the Effective Time, the provisions
of this Section 5.7 shall continue in effect until the final
disposition of such claim, action, suit, proceeding or investigation.
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(d) The covenants contained in this Section 5.7 are intended to be
for the benefit of, and shall be enforceable by, each of the
Indemnified Persons and their respective heirs and legal
representatives and shall not be deemed exclusive of any other rights
to which an Indemnified Persons is entitled, whether pursuant to law,
contract or otherwise.
(e) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers or conveys all
or substantially all of its properties and assets to any Person, then,
and in each such case, proper provision shall be made so that the
successors or assigns of the Surviving Corporation, as the case may be,
shall succeed to the obligations set forth in this Section 5.7.
5.8. Notification of Certain Matters. Company shall use reasonable
commercial efforts to give prompt notice to Purchaser, and Purchaser shall use
reasonable commercial efforts to give prompt notice to Company, to the extent
that either acquires actual knowledge of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be reasonably likely
to cause any representation or warranty contained in this Agreement to be untrue
or inaccurate and (ii) any failure of Company, Purchaser or Merger Sub, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.8 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
5.9. Public Announcements. Purchaser and Company shall develop a joint
communications plan and each party shall (i) ensure that all press releases and
other public statements with respect to this Agreement, the Option Agreement and
the transactions contemplated hereby or thereby shall be consistent with such
joint communications plan, and (ii) unless otherwise required by applicable law
or by obligations pursuant to any listing agreement with or rules of any
securities exchange, consult with each other a reasonable time before issuing
any press release or otherwise making any public statement, and mutually agree
upon any such press release or public statement, with respect to this Agreement,
the Option Agreement or the transactions contemplated hereby and thereby. In
addition to the foregoing, except to the extent disclosed in the Joint Proxy
Statement in accordance with the provisions of Section 5.1, neither Purchaser
nor Company shall issue any press release or otherwise make any public statement
or disclosure concerning the other party or the other party's business,
financial condition or results of operations without the consent of the other
party.
5.10. Listing of Shares of Purchaser Common Stock. Prior to the Closing
Date, Purchaser shall use its reasonable best efforts to cause the shares of
Purchaser Common Stock to be issued in the Merger to be approved for listing on
the NYSE, subject to official notice of issuance.
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5.11. Affiliates. Promptly after execution and delivery of this
Agreement, Company shall deliver to Purchaser a letter identifying all persons
who, in the opinion of Company, may be deemed as of the date hereof "affiliates"
of Company for purposes of Rule 145 under the Securities Act, and such list
shall be updated as necessary to reflect changes from the date thereof. Company
shall use reasonable efforts to cause each person identified on such list to
deliver to Purchaser not less than 30 days prior to the Effective Time, a
written agreement substantially in the form attached as Exhibit C hereto (an
"Affiliate Agreement").
5.12. Transition Team. Promptly following execution of this Agreement,
the parties shall establish a transition planning team (the "Transition Team")
comprised of an equal number of representatives of Company and Purchaser. The
Transition Team shall be responsible for facilitating a transition and
integration planning process to ensure the successful combination of the
operations of Company with those of Purchaser. The Transition Team shall be
responsible for developing, and monitoring the development of, and deliverables
due under, an action plan for the combination of the businesses. The Transition
Team shall also meet regularly to review the financial performance of Company
and its affiliates and at such meetings Company shall advise the Transition Team
of the status of achieving Company's then current operating plan (as has been
presented to Purchaser).
5.13. Management Responsibilities; Headquarters. At the Effective Time,
the Chairman and Chief Executive Officer of Company shall be named the President
of the Southeast Region of Purchaser with the responsibility for Purchaser's
health benefits operations in the Southeast Region and shall be based in
Richmond, Virginia and shall report directly to the Chief Executive Officer of
Purchaser. The headquarters and the principal executive offices of the Southeast
Region of Purchaser, and of Trigon Blue Cross and Blue Shield, shall be in
Richmond, Virginia.
5.14. Tax-Free Reorganization Treatment. The parties hereto shall use
their commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code and shall not
knowingly take or fail to take any action which action or failure to act would
prevent (a) the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code or (b) the receipt of the opinions of Tax
counsel in such form and upon such matters as described in Section 6.2(c) and
Section 6.3(c). Unless required by law, each of Purchaser, Merger Sub, and
Company shall not file any Tax Return or take any position inconsistent with the
treatment of the Merger as a reorganization described in Section 368(a) of the
Code. Prior to the Effective Time, the parties shall use their commercially
reasonable efforts to obtain the opinions of tax counsel in such form and upon
such matters as described in Section 6.2(c) and Section 6.3(c).
5.15. Representation on Purchaser Board. Immediately after the
Effective Time, Purchaser shall appoint three of Company's current directors
(none of whom shall be an employee of Company) to the Board of Directors of
Purchaser. Such directors shall be appointed to each of the three classes of the
Board of Directors of Purchaser such that their terms of office expire at the
annual meeting of stockholders of Purchaser in 2003, 2004 and 2005,
respectively.
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It is the current intention of the parties that each such director shall be
nominated for election upon the expiration of his or her term of office.
5.16. Other Obligations. From and after the date hereof, Company (i)
shall use commercially reasonable efforts to meet the goal of repurchasing, by
the Closing Date, in accordance with prudent business practices, for cash all
commercial paper issued by Company or any of its Subsidiaries (whether
outstanding as of the date hereof or issued hereafter) and (ii) shall, in
accordance with prudent business practices, pursue as a goal the existence of
cash and/or cash equivalents at Closing in an aggregate amount in accordance
with disclosures made to rating agencies prior to the date hereof with respect
to the transactions contemplated hereby. The parties acknowledge that
contingencies may arise and facts may change, including the value of Company's
investment portfolio, such that Company may, in its reasonable judgment, vary
from the foregoing as appropriate; provided that Company consult and cooperate
with Purchaser in good faith prior to any such variance.
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of Company, Purchaser and Merger Sub to effect the Merger
are subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) No Injunctions or Restraints, Illegality. (i) No Governmental
Entity or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, judgment, injunction or other
order (whether temporary, preliminary or permanent), in any case which
is in effect and which prevents or prohibits consummation of the
Merger; and (ii) no Governmental Entity shall have instituted any
action or proceeding (which remains pending at what would otherwise be
the Closing Date) before any United States court or other Governmental
Entity of competent jurisdiction seeking to enjoin, restrain or
otherwise prohibit consummation of the transactions contemplated by
this Agreement.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(c) NYSE Listing. The shares of Purchaser Common Stock to be
issued in the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(d) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Form S-4 shall have been issued by
the SEC and no proceedings for that purpose shall have been initiated
or threatened by the SEC.
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(e) Company Stockholder Approval. This Agreement shall have been
approved by the Required Company Vote at the Company Stockholders
Meeting.
(f) Purchaser Stockholder Approval. The Share Issuance shall have
been approved by the Required Purchaser Vote at the Purchaser
Stockholders Meeting.
(g) Required Governmental Consents. The Necessary Consents shall
have been obtained, and shall be in full force and effect.
(h) BCBSA. Any required approval of the BCBSA shall have been
obtained, so that the right of the Company's Subsidiaries to use the
Blue Cross and Blue Shield name in Company's Subsidiaries licensed
service area shall remain in full force and effect after the Merger.
6.2. Additional Conditions to Obligations of Purchaser and Merger Sub.
The obligations of Purchaser and Merger Sub to effect the Merger are subject to
the satisfaction or waiver by Purchaser, on or prior to the Closing Date, of the
following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Company set forth in the last sentence of Section
3.2(a)(i), Section 3.2(b), Section 3.2(c)(i), Section 3.2(c)(ii)(A),
Section 3.2(g), Section 3.2(h), Section 3.2(j)(ii) (but only with
respect to the actions contemplated by Section 4.1(c)), Section
3.2(o)(xi), Section 3.2(u), Section 3.2(v) and Section 3.2(w) of this
Agreement shall, in the aggregate, be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (except to the extent that
such representations and warranties speak as of another date); and (ii)
the representations and warranties of Company (other than those set
forth in clause (i) above) (in each case, read without any materiality,
material or Material Adverse Effect qualifications) shall be true and
correct as of the date of this Agreement and as of the Closing Date
(except to the extent that such representations and warranties speak as
of another date), other than such failures to be true and correct that
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company. Purchaser shall have
received a certificate of the chief executive officer and the chief
financial officer of Company to such effect.
(b) Performance of Obligations of Company. Company shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or
prior to the Closing Date. Purchaser shall have received a certificate
of the chief executive officer and the chief financial officer of
Company to such effect.
(c) Tax Opinion. Purchaser shall have received from Baker &
Daniels, counsel to Purchaser, on the Closing Date, a written opinion
dated such date, based on customary representations of Company and
Purchaser that counsel to Purchaser deems relevant, to the effect that
(i) the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and
(ii) Company,
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Purchaser and Merger Sub will each be a party to the reorganization
within the meaning of Section 368(b) of the Code.
(d) Necessary Consents. None of the Necessary Consents shall
contain any terms or conditions that would have any of the effects
specified in clauses (i) through (iv) of Section 5.4(d).
(e) Accountant's Letter. Purchaser shall have received, in form
and substance reasonably satisfactory to Purchaser, from Company's
independent public accountants the "comfort" letter described in
Section 5.2(b).
6.3. Additional Conditions to Obligations of Company. The obligations
of Company to effect the Merger are subject to the satisfaction of, or waiver by
Company, on or prior to the Closing Date of the following additional conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Purchaser and Merger Sub set forth in the last sentence
of Section 3.1(a), Section 3.1(b), Section 3.1(c)(i), Section
3.1(c)(ii)(A), Section 3.1(f), Section 3.1(h), Section 3.1(l), Section
3.1(n), Section 3.3(b), and Section 3.3(c) of this Agreement shall, in
the aggregate, be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except to the extent that such representations
and warranties speak as of another date); and (ii) the representations
and warranties of Purchaser and Merger Sub (other than those set forth
in clause (i) above) (in each case, read without any materiality,
material or Material Adverse Effect qualifications) shall be true and
correct as of the date of this Agreement and as of the Closing Date
(except to the extent that such representations and warranties speak as
of another date), other than such failures to be true and correct that
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Purchaser. Company shall have
received a certificate of the chief executive officer and the chief
financial officer of Purchaser to such effect.
(b) Performance of Obligations of Purchaser and Merger Sub.
Purchaser and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required to be
performed by them under this Agreement at or prior to the Closing Date.
Company shall have received a certificate of the chief executive
officer and the chief financial officer of Purchaser to such effect.
(c) Tax Opinion. Company shall have received from McGuireWoods
LLP, counsel to Company, on the Closing Date, a written opinion dated
such date, based on customary representations of Company and Purchaser
that counsel to Company deems relevant, to the effect that (i) the
Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; and
(ii) Company, Purchaser and Merger Sub will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
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(d) Accountant's Letter. Company shall have received from
Purchaser's independent public accountants the "comfort" letter
described in Section 5.2(b).
(e) Termination of Walkaway Right. Either (a) the Determination
Date shall have occurred and, as of the Determination Date, Company
shall have no right to terminate the Agreement pursuant to Section
7.1(i) or (b) the Determination Date shall have occurred and any right
which Company had as of the Determination Date to terminate this
Agreement pursuant to Section 7.1(i) shall have terminated, lapsed,
been withdrawn or been eliminated pursuant to a Purchaser election
pursuant to Section 7.1(i).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Closing Date,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of Company or Purchaser:
(a) By mutual written consent of Purchaser and Company;
(b) By either Purchaser or Company, if the Merger shall not have
been consummated on or before the date that is 9 months after the date
of this Agreement (other than due principally to the failure of the
party seeking to terminate this Agreement to perform any obligations
under this Agreement required to be performed at or prior to the
Effective Time);
(c) By Purchaser, if (i) the Board of Directors of Company shall
withdraw, amend or modify its recommendation that its stockholders
approve this Agreement in a manner adverse to Purchaser or (ii) the
Board of Directors of Company adopts or recommends any Alternative
Transaction.
(d) By Purchaser, if any required approval of the stockholders of
Company of this Agreement shall not have been obtained by reason of the
failure to obtain the Required Company Vote at the Company Stockholders
Meeting or at any adjournment thereof;
(e) By Purchaser or Company, if any required approval of the
stockholders of Purchaser of the Share Issuance shall not have been
obtained by reason of the failure to obtain the Required Purchaser Vote
at the Purchaser Stockholders Meeting or at any adjournment thereof;
(f) By Purchaser or Company, if any court or other governmental
body of competent jurisdiction shall have issued a final order, decree
or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or
other action is or shall have become final and nonappealable;
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(g) By Company, if (i) prior to the Closing Date there shall have
been a breach or inaccuracy of any representation, warranty, covenant
or agreement on the part of Purchaser or Merger Sub contained in this
Agreement, which breach would (A) give rise to the failure of a
condition set forth in Section 6.3 and (B) is incapable of being cured
prior to the Closing Date by Purchaser or is not cured within 45 days
of notice of such breach, or (ii) any of the conditions set forth in
Section 6.1 (other than 6.1(e)) shall have become incapable of
fulfillment;
(h) By Purchaser, if (i) prior to the Closing Date there shall
have been a breach or inaccuracy of any representation, warranty,
covenant or agreement on the part of Company contained in this
Agreement, which breach would (A) give rise to the failure of a
condition set forth in Section 6.2 and (B) is incapable of being cured
prior to the Closing Date by Company or is not cured within 45 days of
notice of such breach or (ii) any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment; and
(i) By Company, at any time during the five Business Day period
commencing the day after the Determination Date, if both of the
following conditions are satisfied:
(1) the Average Purchaser Price on the Determination Date of
shares of Purchaser Common Stock shall be less than $55.00;
and
(2) (i) the number obtained by dividing the Average Purchaser
Price on the Determination Date by $70.70 (such number being
referred to herein as the "Purchaser Common Stock Ratio")
shall be less than (ii) the number obtained by dividing the
Index Price on the Determination Date by the Index Price on
April 26, 2002, and subtracting 0.15 from the quotient in this
clause (2) (ii)(such number being referred to herein as the
"Index Ratio");
subject, however, to the following sentences of this Section 7.1(i). If
Company elects to exercise its termination right pursuant to the
immediately preceding sentence, it shall give prompt written notice to
Purchaser; provided, that such notice of election to terminate may be
withdrawn at any time within the aforementioned five Business Day
period. During the five Business Day period commencing with its receipt
of such notice, Purchaser shall have the option of either (I) adjusting
the Exchange Ratio to equal a number equal to a quotient (rounded to
the nearest one-thousandth), the numerator of which is the product of
$55.00 and the Exchange Ratio (as then in effect) and the denominator
of which is the Average Purchaser Price, (II) increasing the Cash
Consideration by an amount (the "Top-Up Amount") equal to the product
of (x) the Average Purchaser Price and (y) the positive difference
between (A) the adjusted Exchange Ratio determined by performing (for
purposes of this clause (II) only) the calculation set forth in the
preceding clause (I) and (B) 1.062 or (III) increasing each of the Cash
Consideration and adjusting the Exchange Ratio as Purchaser may
determine, so long as the sum of (i) the amount of the increase of the
Cash Consideration and (ii) the
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value of the product of (x) the Average Purchaser Price and (y) the
Exchange Ratio as adjusted pursuant to this clause (III) minus 1.062,
is equal to the Top-Up Amount; provided, that Purchaser shall not be
entitled to elect to increase the Cash Consideration pursuant to
clauses (II) or (III) unless the parties agree (each acting reasonably
and in good faith) that the transaction, as adjusted pursuant to this
Section 7.1(i), qualifies as a "reorganization" within the meaning of
Section 368 of the Code. If Purchaser makes an election contemplated by
the preceding sentence, within such five Business Day period, it shall
give prompt written notice to Company of such election and the revised
Exchange Ratio or the amount of the increase in the Cash Consideration,
or both, as applicable, whereupon no termination shall be deemed to
have occurred pursuant to this Section 7.1(i) and this Agreement shall
remain in effect in accordance with its terms (except as the Exchange
Ratio or the Cash Consideration, as applicable, shall have been so
modified), and any references in this Agreement to "Exchange Ratio" or
"Cash Consideration", as applicable shall thereafter be deemed to refer
to the Exchange Ratio or Cash Consideration, as applicable, as adjusted
pursuant to this Section 7.1(i).
7.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, the obligations of the parties under this
Agreement shall terminate, except for the obligations in the confidentiality
provisions of Section 5.3, and all of the provisions of this Section 7.2,
Section 7.3 and Section 8.1, and there shall be no liability on the part of any
party hereto; provided, however, that no party hereto shall be relieved or
released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement. The termination of this Agreement shall not
affect the Option Agreement other than pursuant to its terms, which shall remain
in full force and effect.
7.3. Fees and Expenses.
(a) If this Agreement is terminated pursuant to:
(i) (x) Section 7.1(c)(i) in a case where (i) the Board of
Directors of Company was aware of the existence of a bona fide
proposed Alternative Transaction or the intention to propose a
bona fide Alternative Transaction and (ii) such proposed
Alternative Transaction or intention had not been withdrawn prior
to the taking of the actions set forth in Section 7.1(c)(i) and
(except as provided for below in this Section 7.3(a)) at the time
of such termination by Purchaser or (y) Section 7.1(c)(ii);
(ii) Section 7.1(d), if prior to the Company Stockholders
Meeting there has been a public announcement of a bona fide
proposed Alternative Transaction (and such proposed Alternative
Transaction had not been publicly withdrawn at least two Business
Days prior to the time of such meeting); or
(iii) Section 7.1(h)(i), based on a material breach by
Company of Section 5.1(b), Section 5.1(c) or Section 5.5, in a
case where (x) the Board of Directors of Company was aware of the
existence of a bona fide proposed Alternative Transaction or the
intention to propose a bona fide Alternative Transaction and (y)
such proposed
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Alternative Transaction or intention had not been withdrawn prior
to such breach,
then, (x) in the case of a termination contemplated by Section
7.3(a)(i) (so long as (a) such termination occurs by the end of the
first Business Day following the day on which Purchaser receives
written notice from Company in accordance with Section 8.2 of the
actions by the Board of Directors of Company contemplated by Section
7.1(c)(i) or (c)(ii) and (b) the proposed Alternative Transaction or
intention had not been withdrawn prior to the time of such termination
by Purchaser), (I) Company shall pay to Purchaser within one Business
Day following termination of this Agreement, a fee, in cash, of
$94,605,750.00 and (II) if Company within 12 months after such
termination either consummates an Alternative Transaction or enters
into a definitive agreement with respect to an Alternative Transaction,
Company shall pay to Purchaser $94,605,750.00 simultaneously with such
consummation or entering into such definitive agreement, as the case
may be, and (y) in the case of a termination pursuant to any of Section
7.3(a)(i) (but (a) after the end of the first Business Day following
the day on which Purchaser receives written notice from Company in
accordance with Section 8.2 of the actions by the Board of Directors of
Company contemplated by Section 7.1(c)(i) or (c)(ii) or (b) in a case
in which the proposed Alternative Transaction or intention had been
withdrawn prior to the time of such termination by Purchaser), Section
7.3(a)(ii) or Section 7.3(a)(iii), if Company within 12 months after
such termination either consummates an Alternative Transaction or
enters into a definitive agreement with respect to an Alternative
Transaction, Company shall pay to Purchaser $189,211,500.00
simultaneously with such consummation or entering into such definitive
agreement, as the case may be.
(b) Except as otherwise specifically provided herein, each party
shall bear its own Expenses in connection with this Agreement and the
transactions contemplated hereby, except that each Purchaser and
Company shall bear and pay one-half of the costs and expenses incurred
in connection with the filing, printing and mailing of the Form S-4 and
the Joint Proxy Statement; provided, however, that if Company
withdraws, amends or modifies its recommendation with respect to this
Agreement or the Merger, Purchaser shall not be responsible for any
costs or expenses related to any materials sent or delivered to
Company's stockholders in respect thereof. As used in this Agreement,
"Expenses" includes all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates)
incurred by a party or on its behalf in connection with or related to
the authorization, preparation, negotiation, execution and performance
of this Agreement and the transactions contemplated hereby, including
the preparation, printing, filing and mailing of the Form S-4 and the
Joint Proxy Statement and the solicitation of stockholder approvals and
all other matters related to the transactions contemplated hereby.
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ARTICLE VIII
GENERAL PROVISIONS
8.1. Non-Survival of Representations, Warranties and Agreements. None
of the representations, warranties, covenants and other agreements in this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time or the termination of this Agreement, as the case may be, except
(a) for those covenants and agreements contained herein that by their terms
apply or are to be performed in whole or in part after the Effective Time
(including the terms of this Article VIII) and (b) for the confidentiality
provisions of Section 5.3 and all of the provisions of Section 7.2, Section 7.3
and Section 8.1, which shall survive termination.
8.2. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy upon confirmation of receipt, (b) on the
first Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Purchaser or Merger Sub, to
Anthem, Inc.
120 Monument Circle
Indianapolis, IN 46204
Attention: David R. Frick, General Counsel
with a copy to
Sullivan & Cromwell
125 Broad Street
New York,. NY 10004
Attention: Stephen M. Kotran, Esq.
and
Baker & Daniels
300 N. Meridian Street
Suite 2700
Indianapolis, IN 46240
Attention: James A. Aschleman, Esq.
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(b) if to Company, to
Trigon Healthcare, Inc.
2015 Staples Mill Road
Richmond, VA 23230
Attention: Thomas R. Byrd
with a copy to
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Edward D. Herlihy, Esq.
and
McGuireWoods LLP
One James Center
901 East Cary Street
Richmond, VA 23219-4030
Attention: R. Gordon Smith, Esq.
8.3. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The parties have participated jointly in the negotiating and
drafting of this Agreement and the Option Agreement. In the event of an
ambiguity or a question of intent or interpretation arises, this Agreement and
the Option Agreement shall each be construed as if drafted jointly by the
parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement or the Option Agreement.
8.4. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5. Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement, including the schedules hereto, the Option
Agreement and the Confidentiality Agreement constitute the entire
agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof and thereof.
-54-
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement; provided, however, that Sections 1.10 and 5.7 may be
enforced against Purchaser or the Surviving Corporation, as the case
may be, by the Persons identified or described therein.
8.6. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Indiana (except to the extent that
Virginia law applies to the internal and corporate affairs of Company).
8.7. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8. Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Company and the stockholders of Purchaser, but, after any
such approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.9. Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
8.10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void, except that Merger Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct wholly owned Subsidiary of
Purchaser without the consent of
-55-
Company, but no such assignment shall relieve Merger Sub of any of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.11. Submission to Jurisdiction; Waivers. Each of Purchaser and
Company irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns shall be
brought and determined in the Courts of the State of Indiana and each of
Purchaser and Company hereby irrevocably submits with regard to any such action
or proceeding for itself and in respect to its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of
Purchaser and Company hereby irrevocably waives, and agrees not to assert, by
way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by applicable law, that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
8.12. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.13. Definitions. As used in this Agreement.
(a) "Alternative Transaction" means any of the following events:
(i) the acquisition of Company by merger, consolidation, share
exchange, business combination, reorganization, recapitalization,
liquidation, dissolution or other similar transaction (any of the
above, a "Business Combination Transaction") by any person other than
the Purchaser, Merger Sub or any affiliate thereof (a "Third Party"),
(ii) Company's acquisition of a Third Person in a Business Combination
Transaction in which the shareholders of the Third Party immediately
prior to consummation of such Business Combination Transaction will own
more than 50% of the Company's outstanding capital stock immediately
following such Business Combination Transaction or (iii) the
acquisition by a Third Party of 20% or more of the outstanding shares
of Company Common Stock or of 20% or more of the assets of Company and
its Subsidiaries taken as a whole, in a single transaction or a series
of related transactions.
(b) "Average Purchaser Price" means the average (rounded to the
nearest thousandth) of the closing trading prices of Purchaser Common
Stock on the NYSE, as
-56-
reported in the Wall Street Journal, Eastern Edition (or such other
source as the parties shall agree in writing), for the 20 full trading
days ending on, and including, the Determination Date.
(c) "BCBSA" means the Blue Cross Blue Shield Association.
(d) "Benefit Plans" means, with respect to any Person, each
employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, stay
agreement or bonus, change in control and severance plan, program,
arrangement and contract) in effect on the date of this Agreement or
disclosed on the Company Disclosure Schedule or the Purchaser
Disclosure Schedule, as the case may be, to which such Person or its
Subsidiary is a party, which is maintained or contributed to by such
Person, or with respect to which such Person could incur material
liability under Section 4069, 4201 or 4212(c) of ERISA.
(e) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(f) "Business Day" means any day on which banks are not required
or authorized to close in the City of New York.
(g) "Controlled Group" means any trade or business (whether or not
incorporated) under common control with Company within the meaning of
Sections 414(b), (c), (m) or (o) of the Code.
(h) "Determination Date" means the Business Day on which the last
of the following occurs: (i) the condition set forth in Section 6.1(e)
is satisfied, (ii) the condition set forth in Section 6.1(f) is
satisfied, (iii) the condition set forth in Section 6.1(h) is
satisfied, and (iv) the last of the Necessary Consents is obtained (on
terms that satisfy Section 6.2(d)).
(i) "good standing" means, when used with respect to the status of
any corporation domiciled or doing business in a particular state, that
such corporation has filed its most recent required annual report and
(i) if a domestic corporation, has not filed articles of dissolution,
and (ii) if a foreign corporation, has not applied for a certificate of
withdrawal and is not the subject of a proceeding to revoke its
certificate of authority.
(j) "Index Group" means the group of each of the health benefits
companies listed below, the common stock of all of which shall continue
to be publicly traded and as to which there shall not have been, on or
after April 26, 2002, and before the Determination Date, an
announcement of a proposal for the acquisition or sale of such company,
or an announcement that such company is considering such a transaction.
In
-57-
the event that the common stock of any such company ceases to be
publicly traded or any such announcement is made with respect to any
such company, such company will be removed from the Index Group, and
the weights (which have been determined based on the number of
outstanding shares of common stock) redistributed proportionately for
purposes of determining the Index Price. The relevant health benefits
companies and the weights attributed to them are as follows:
Company Weighting
------- ---------
Aetna 8.5%
CIGNA 19.4%
Coventry 2.1%
First Health Group 3.8%
Health Net 4.5%
Humana 3.4%
Mid Atlantic Medical Services 2.2%
Oxford Health Plans 5.2%
PacifiCare Health Systems 1.1%
United Health Group 36.4%
Wellpoint Health Networks 13.4%
If any company belonging to the Index Group or Purchaser declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the date
hereof and the Determination Date, the prices for the common stock of
such company or Purchaser shall be appropriately adjusted for the
purposes of applying Section 7.1(i).
(k) "Index Price" on a given date means the weighted average
(weighted in accordance with the factors listed above) of the closing
prices of the companies composing the Index Group.
(l) "Liens" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), other
charge or security interest; or any preference, priority or other
agreement or preferential arrangement of any kind or
-58-
nature whatsoever (including, without limitation, any conditional sale
or other title retention agreement, or any capital lease having
substantially the same economic effect as any of the foregoing).
(m) "Material Adverse Effect" means, with respect to Purchaser or
Company, as the case may be, (x) any effect that is materially adverse
to the business, assets, operations or condition (financial or
otherwise) of Purchaser and its Subsidiaries, taken as a whole, or
Company and its Subsidiaries, taken as a whole, respectively, other
than any effect relating to (A) the United States or global economy or
securities markets in general, (B) the announcement of this Agreement
or the transactions contemplated hereby or the identity of Purchaser,
(C) changes in applicable law or regulations or in GAAP or regulatory
accounting principles or (D) general changes in the health benefits
business, provided, that with respect to each of clauses (A), (C) and
(D) that such effect is not materially more adverse with respect to the
Company and its Subsidiaries, taken as a whole, or Purchaser and its
Subsidiaries, taken as a whole, as the case may be, than the effect on
comparable health benefits businesses generally, and (y) any effect
that materially impairs, materially delays or prevents consummation of
the transactions contemplated hereby, including the Merger.
(n) "the other party" means, with respect to Company, Purchaser
and means, with respect to Purchaser, Company.
(o) "Permitted Liens" means (i) any liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings,
(ii) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other similar liens, (iii) pledges or deposits in connection with
workers' compensation, unemployment insurance, and other social
security legislation and (iv) easements, rights-of-way, restrictions
and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and
which do not in any case materially detract from the value of the
property subject thereto.
(p) "Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
(q) "SEC" means the Securities and Exchange Commission.
(r) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or
unincorporated, (i) of which such party or any other Subsidiary of such
party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interests in such
partnership) or (ii) at least a majority of the securities or other
interests of which having by their terms ordinary voting power to elect
a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or
-59-
controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(s) "Superior Proposal" means a bona fide written proposal made by
a Person other than Purchaser, Merger Sub or an affiliate thereof (i)
which is for a merger, consolidation, share exchange, business
combination, reorganization, recapitalization, liquidation, dissolution
or other similar transaction involving, or any purchase or acquisition
of, (A) more than fifty percent (50%) of the voting power of Company's
capital stock or (B) all or substantially all of the consolidated
assets of Company and its Subsidiaries and (ii) which is otherwise on
terms which Company's Board of Directors determines in good faith (A)
would result in a transaction that, if consummated, is more favorable
to Company's stockholders, from a long-term financial point of view,
than the Merger or, if applicable, any proposal by the Purchaser to
amend the terms of this Agreement (based on the written advice of a
nationally recognized investment banking firm) taking into account all
the terms and conditions of such proposal and this Agreement and the
relative impact of the Merger and such other proposed transaction on
the other Persons whose interests the Board of Directors of Company may
consider under Virginia law (to the extent they may do so), and (B) is
reasonably capable of being completed on the terms proposed, taking
into account all financial, regulatory, legal and other aspects of such
proposal; provided, however, that no proposal shall be deemed to be a
Superior Proposal if any financing required to consummate the proposal
is not committed.
(t) "Tax" (including, with correlative meaning, the terms "Taxes"
and "Taxable") means all federal, state, local and foreign income,
profits, premium, franchise, gross receipts, environmental, customs
duty, capital stock, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or
governmental levies of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts
or filing requirements and any interest in respect of such penalties
and additions.
(u) "Tax Return" means all returns and reports (including
elections, declarations, disclosures, schedules, estimates, information
returns, claims for refund, and amended returns) relating to Taxes.
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IN WITNESS WHEREOF, Purchaser, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ANTHEM, INC.
By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
AI SUB ACQUISITION CORP.
By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
TRIGON HEALTHCARE, INC.
By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Merger Agreement Signature Page
EXECUTION COPY
Exhibit B
EXECUTIVES WITH RETENTION AGREEMENTS PURSUANT TO 5.6(C)
Thomas R. Byrd
Thomas G. Snead, Jr.
EXECUTION COPY
Exhibit C
Form of Trigon Healthcare, Inc. Affiliate Letter
April 28, 2002
Anthem, Inc.
120 Monument Circle
Indianapolis, IN 46204
Ladies and Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be
an "affiliate" of Trigon Healthcare, Inc., a Virginia corporation (the
"Company"), as that term is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act").
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
April 28, 2002 (as it may be amended, supplemented or modified from time to
time, the "Merger Agreement"), among Anthem, Inc., an Indiana corporation
("Purchaser"), AI Sub Acquisition Corp., an Indiana corporation ("Merger Sub"),
and the Company, the Company will be merged with and into Merger Sub (the
"Merger"). Capitalized terms used herein but not defined shall have the
respective meanings ascribed to such terms in the Merger Agreement.
In consideration of the agreements contained herein, Purchaser's
reliance on this letter in connection with the consummation of the Merger and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, I hereby represent, warrant and agree that I will not
make any sale, transfer or other disposition of any shares of Purchaser Common
Stock received by me pursuant to the Merger in violation of the Securities Act
or the Rules and Regulations.
I have been advised that the issuance of the shares of Purchaser Common
Stock pursuant to the Merger will have been registered with the Commission under
the Securities Act on a Registration Statement on Form S-4. I have also been
advised, however, that since I may be deemed to be an affiliate of the Company
at the time the Merger is submitted for a vote of the stockholders of the
Company, the Purchaser
Common Stock received by me may be disposed by me only (i) pursuant to an
effective registration under the Securities Act, (ii) in conformity with the
volume and other limitations of Rule 145 promulgated by the Commission under the
Securities Act, (iii) in reliance upon an exemption from registration that is
available under the Securities Act or (iv) after receipt of an opinion of
counsel reasonably acceptable to Purchaser, or under a no-action or
interpretative letter obtained from the Commission, stating that, such sale,
transfer or other disposition will not violate or is otherwise exempt from
registration under the Securities Act.
I also understand that instructions will be given to Purchaser's
transfer agent with respect to the Purchaser Common Stock to be received by me
pursuant to the Merger and that there will be placed on the certificates
representing such shares of Purchaser Common Stock, or any substitutes therefor,
a legend stating in substance as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IN COMPLIANCE WITH THE REQUIREMENTS OF RULE 145 OR PURSUANT TO A
REGISTRATION STATEMENT UNDER THAT ACT OR AN EXEMPTION FROM SUCH
REGISTRATION."
It is understood and agreed that the legend set forth above shall be
removed upon surrender of certificates bearing such legend by delivery of
substitute certificates without such legend if (i) one year shall have elapsed
from the date that I received Purchaser Common Stock in the Merger and the
provisions of Rule 145(d)(2) are then applicable to me, (ii) two years shall
have elapsed from the date that I received Purchaser Common Stock in the Merger
and the provisions of Rule 145(d)(3) are then applicable to me, or (iii) I have
delivered to Purchaser an opinion of counsel, in form and substance reasonably
satisfactory to Purchaser, or a no-action or interpretative letter obtained from
the Commission, to the effect that such legend is not required for purposes of
the Securities Act..
I further understand and agree that Purchaser is under no obligation to
register the sale, transfer or other disposition of Purchaser Common Stock by me
or on my behalf under the Securities Act or to take any other action necessary
in order to make compliance with an exemption from such registration available.
Neither execution of this letter nor any provisions set forth herein
should be construed as an admission on my part that I am an "affiliate" of the
Company as described in the first paragraph of this letter, or a waiver of any
right I may have to object to any claim that I am such an affiliate on or after
the date of this letter.
By Purchaser's acceptance of this letter, Purchaser hereby agrees with
me that, for a period of two years after the Effective Time (as defined in the
Merger Agreement), it shall use its reasonable efforts to (i) file, on a timely
basis, all reports and data required to be filed with the Commission by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and (ii) furnish to me upon request a written statement as to
whether Purchaser has complied with such reporting requirements during the 12
months preceding any proposed sale of Purchaser Common Stock by me under Rule
145.
This letter agreement constitutes the complete understanding between
Purchaser and me concerning the subject matter hereof. Any notice required to be
sent to either party hereunder shall be sent by registered or certified mail,
return receipt requested, using the addresses set forth herein or such other
address as shall be furnished in writing by the parties. This letter agreement
shall be governed by and construed and interpreted in accordance with, the laws
of the State of Indiana.
If you are in agreement with the foregoing, please so indicate by
signing below and returning a copy of this letter to me, at which time this
letter shall become a binding agreement between us.
Very truly yours,
-----------------------
Name:
Accepted this ____ day
of __________, 2002 by
ANTHEM, INC.
By:_______________________
Name:_____________________
Title:____________________