<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 3, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
PROTECTIVE LIFE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6355 95-2492236
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of classification code number) identification
incorporation or organization) no.)
</TABLE>
PROTECTIVE LIFE CORPORATION C/O DEBORAH J. LONG, ESQ.
2801 HIGHWAY 280 SOUTH SENIOR VICE PRESIDENT, SECRETARY
BIRMINGHAM, ALABAMA 35223 AND GENERAL COUNSEL
(205) 879-9230 PROTECTIVE LIFE CORPORATION
(Address, including zip code, and 2801 HIGHWAY 280 SOUTH
telephone number, including area code, BIRMINGHAM, ALABAMA 35223
of registrant's principal executive (Name, address, including zip code,
offices) and telephone number, including area
code, of agent for service)
--------------------------
COPIES OF ALL COMMUNICATIONS TO:
PAUL S. BIRD, ESQ. DAVID K. MEYERCORD, ESQ.
DEBEVOISE & PLIMPTON STRASBURGER & PRICE, L.L.P.
875 THIRD AVENUE SUITE 4300
NEW YORK, NY 10022 901 MAIN STREET
(212) 909-6000 DALLAS, TEXAS 75202
(214) 651-4330
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger described in the enclosed Proxy Statement/Prospectus
have been satisfied or waived.
--------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration for the same
offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
3,600,000
Common Stock, par value $0.50 per share..... shares(1) Not Applicable $173,476,771 $18,446(2)
</TABLE>
(1) Includes rights to purchase Series A Junior Participating Cumulative
Preferred Stock of Protective Life Corporation. Prior to the occurrence of
certain events, the rights will not be exercisable or evidenced separately
from Protective Life's Common Stock. Protective Life's Common Stock trades
on the New York Stock Exchange (the "NYSE") under the symbol "PL".
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis of
the value of the 8,982,616 shares of United Dental Care, Inc. Common Stock
to be received by the Registrant or canceled pursuant to the acquisition of
United Dental Care, Inc. by the Registrant computed in accordance with Rule
457(c) on the basis of the average of the high and low prices reported on
the National Association of Securities Dealers Automated Quotation/National
Market System on July 31, 1998. Pursuant to Rule 457(b), the fee has been
reduced by $32,730.41 paid on April 24, 1998 upon the filing under the
Securities Exchange Act of 1934, as amended, of preliminary copies of United
Dental Care, Inc.'s proxy materials included herein.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
13601 PRESTON ROAD, SUITE 500 EAST
DALLAS, TEXAS 75240
(972-458-7474)
------------------------
August 7, 1998
To Our Stockholders:
You are cordially invited to attend a special meeting of stockholders of
United Dental Care, Inc., to be held at The Harvey Hotel Addison, 14315 Midway
Road, Dallas, Texas 75244, on September 10, 1998, at 9:30 a.m. local time. A
Notice of the Special Meeting, a proxy card for the shares you own, and a Proxy
Statement/Prospectus containing information about the matters to be acted upon
are enclosed. All holders of outstanding shares of United Dental's common stock
as of the close of business on July 21, 1998 are entitled to notice of and to
vote at the special meeting.
Your Board of Directors has approved an Agreement and Plan of Merger between
Protective Life Corporation and United Dental, whereby United Dental will merge
with and into a wholly-owned subsidiary of Protective. Consummation of the
merger is subject to, among other things, regulatory approvals and the adoption
and approval of the merger agreement and the merger by the stockholders of
United Dental voting at a special meeting of United Dental's stockholders.
Information concerning the special meeting, the merger and other matters
concerning United Dental and Protective is set forth in the accompanying Proxy
Statement/Prospectus. The full text of the merger agreement is included as Annex
A to the accompanying Proxy Statement/Prospectus. Given the importance of the
merger to United Dental and its stockholders, I urge you to read this material
carefully.
In the merger, each share of United Dental's common stock outstanding
immediately prior to the consummation of the merger (other than dissenting
shares), will be converted into the right to receive, subject to adjustment in
the circumstances described below, (i) 0.2893 shares of Protective's common
stock and (ii) $9.31 in cash. If the average trading price of Protective's
common stock during the 20 New York Stock Exchange trading days selected
randomly by lot from the 30 consecutive trading days ending on the trading day
which is five trading days prior to the consummation of the merger is less than
$27.50, Protective may adjust the merger consideration by (a) increasing the
cash consideration and/or (b) increasing the exchange ratio used to determine
the number of shares of Protective's common stock to be issued as common stock
consideration such that the sum of (A) the cash consideration (as adjusted) and
(B) the product of the exchange ratio (as adjusted) multiplied by the average
trading price of Protective's common stock during such 20 randomly selected days
is equal to or greater than $17.26. In such event, if Protective does not adjust
the merger consideration, your Board of Directors may terminate the merger
agreement. Protective may terminate the merger agreement if the average price of
Protective's common stock during such 20 day period is greater than $39.50 or
less than $27.50.
Assuming the price of Protective's common stock at the time of the closing
of the merger is equal to $38.69, the closing price on July 31, 1998, the value
of the per share merger consideration would be approximately $20.50 . However,
the actual value of the merger consideration may differ from this example since
the actual value will be dependent upon the market value of Protective's common
stock at the closing. Assuming that the exchange ratio is not adjusted, upon
consummation of the merger, United Dental's and Protective's current
stockholders will own approximately 4% and 96%, respectively, of Protective.
If you wish to obtain information regarding the value of the merger
consideration and the current market price of Protective's common stock prior to
casting your vote with respect to the adoption and
<PAGE>
approval of the merger agreement and the proposed merger, you should call D. F.
King & Co., Inc., the Proxy Solicitor/Information Agent for the merger, at (800)
207-3155.
Your Board of Directors and management have carefully considered the terms
and conditions of the proposed merger and have concluded that the merger is in
the best interests of United Dental and its stockholders. Accordingly, United
Dental's Board of Directors unanimously recommends that you vote "FOR" the
proposal for the adoption and approval of the merger agreement and the merger.
United Dental's Board of Directors reached this decision after careful
consideration of a number of factors more fully described in the accompanying
Proxy Statement/Prospectus. United Dental's Board of Directors has received the
written opinion dated March 10, 1998 of BT Alex. Brown Incorporated to the
effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the merger consideration to be received by the
holders of United Dental's common stock in the merger was fair from a financial
point of view to such holders. The full opinion of BT Alex. Brown is included as
Annex B to the accompanying Proxy Statement/Prospectus, and should be read
carefully in its entirety.
The affirmative votes of the holders of a majority of the aggregate number
of shares of United Dental's common stock issued and outstanding on July 21,
1998 are required to approve the merger agreement.
The consummation of the merger is expected to occur on, or as soon as
practicable following, the date of the special meeting of United Dental's
stockholders. However, the time period between the stockholder vote taken at the
special meeting and the consummation of the merger will depend upon the status
of certain state regulatory approvals which must be obtained prior to the
consummation of the merger. There is no way to predict how long it will take to
obtain all of the required regulatory approvals, however we expect to issue a
press release shortly before the special meeting to disclose the status of these
approvals.
In view of the importance of the action to be taken at the special meeting,
we urge you to read the enclosed material carefully and to complete, sign and
date the enclosed proxy card and return it promptly in the enclosed prepaid
envelope whether or not you plan to attend the special meeting. If you attend
the special meeting, you may vote your shares personally whether or not you have
previously submitted a proxy. Your prompt cooperation will be greatly
appreciated.
Sincerely,
[LOGO]
WILLIAM H. WILCOX
PRESIDENT
If you have questions or need assistance in voting your shares, you should
contact John W. McCarty, Senior Vice President, Chief Financial Officer,
Treasurer and Secretary of United Dental at (972) 855-5892.
2
<PAGE>
[LOGO]
13601 PRESTON ROAD, SUITE 500 EAST
DALLAS, TEXAS 75240
(972-458-7474)
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
------------------------
August 7, 1998
To the Stockholders of
UNITED DENTAL CARE, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of United
Dental Care, Inc., will be held at The Harvey Hotel Addison, 14315 Midway Road,
Dallas, Texas 75244, on September 10, 1998, at 9:30 a.m. local time, for the
following purposes, as more fully described in the accompanying Proxy
Statement/Prospectus:
(1) To consider and vote on a proposal for the adoption and approval of the
merger agreement, dated as of March 10, 1998, as amended as of March 17,
1998 and as of July 8, 1998, among Protective Life Corporation, PLC
Merger Subsidiary Corporation, and United Dental (a copy of the merger
agreement is attached as Appendix A to the accompanying Proxy Statement/
Prospectus). Pursuant to the merger agreement, United Dental will be
merged with and into PLC Merger Subsidiary, whereupon United Dental will
become a wholly-owned subsidiary of Protective.
- In the merger, each issued and outstanding share of United
Dental's common stock (other than dissenting shares) will be
converted into, exchanged for and represent the right to receive,
subject to adjustment in the circumstances described below, (i)
0.2893 shares of common stock of Protective's common stock and
(ii) $9.31 in cash.
- If the average trading price of Protective's common stock during
the 20 New York Stock Exchange trading days selected randomly by
lot from the 30 consecutive trading days ending on the trading day
which is five trading days prior to the consummation of the merger
is less than $27.50, Protective may adjust the merger
consideration by (a) increasing the cash consideration and/or (b)
increasing the exchange ratio used to determine the number of
shares of Protective's common stock to be issued as common stock
consideration such that the sum of (A) the cash consideration (as
adjusted) and (B) the product of the exchange ratio (as adjusted)
multiplied by the average trading price of Protective's common
stock during such 20 day period is equal to or greater than
$17.26.
1
<PAGE>
- Your Board of Directors may terminate the merger agreement if the
average price of Protective's common stock during the 20 randomly
selected days prior to the consummation of the merger is less than
$27.50 and Protective does not adjust the merger consideration so
that the merger consideration has a value of at least $17.26 per
share. Protective may terminate the merger agreement if the
average price of Protective's common stock during the 20 randomly
selected days prior to the consummation of the merger is greater
than $39.50 or less than $27.50.
(2) To transact such other business as may properly come before the special
meeting or any adjournment or adjournments thereof.
The affirmative votes of the holders of a majority of the aggregate number
of shares of United Dental's common stock issued and outstanding on July 21,
1998 are required to approve and adopt the merger agreement and the merger.
Only holders of record of shares of United Dental's common stock as of the
close of business on July 21, 1998 are entitled to notice of and to vote at the
special meeting. The list of United Dental stockholders entitled to vote at the
special meeting will be available for examination for ten days prior to the
special meeting at the principal executive offices of United Dental, 13601
Preston Road, Suite 500 East, Dallas, Texas 75240.
Holders of United Dental's common stock who object to the merger will be
entitled to dissenters' rights in accordance with the Delaware General
Corporation Law. A copy of the relevant provisions of the Delaware General
Corporation Law is included as Annex C to the enclosed Proxy
Statement/Prospectus.
The consummation of the merger is expected to occur on, or as soon as
practicable following, the date of the special meeting of United Dental's
stockholders. However, the time period between the stockholder vote taken at the
special meeting and the consummation of the merger will depend upon the status
of certain state regulatory approvals which must be obtained prior to
consummation of the merger. There is no way to predict how long it will take to
obtain all of the required regulatory approvals, however we expect to issue a
press release shortly before the special meeting to disclose the status of these
approvals.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ADDRESSED ENVELOPE ENCLOSED.
By Order of the Board of Directors,
[LOGO]
JOHN W. McCARTY
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER,
TREASURER AND SECRETARY
YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING PROXY STATEMENT
You are cordially invited to attend the special meeting in person. Even if
you plan to attend, please promptly mark, sign and date the enclosed form of
Proxy and mail it in the enclosed return envelope, which requires no postage if
mailed in the United States, so that your vote can be recorded.
2
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 3, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OF QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
UNITED DENTAL CARE, INC.
PROXY STATEMENT
---------------------
PROTECTIVE LIFE CORPORATION
PROSPECTUS
---------------------
This Proxy Statement and Prospectus relates to the proposed merger of United
Dental Care, Inc., with and into PLC Merger Subsidiary Corporation, a wholly
owned subsidiary of Protective Life Corporation, pursuant to an Agreement and
Plan of Merger, dated as of March 10, 1998, as amended as of March 17, 1998 and
as of July 8, 1998.
In the merger, United Dental will be merged with and into PLC Merger
Subsidiary, which will continue in existence as a wholly owned subsidiary of
Protective, and each share of United Dental's common stock issued and
outstanding immediately prior to the effective time of the merger (other than
dissenting shares) will be converted into, exchanged for and represent the right
to receive, subject to adjustment in the circumstances described below, (i)
0.2893 shares of Protective's common stock and (ii) $9.31 in cash.
If the average trading price of Protective's common stock during the 20 New
York Stock Exchange trading days selected randomly by lot from the 30
consecutive trading days ending on the trading day which is five trading days
prior to the consummation of the merger is less than $27.50, Protective may
adjust the merger consideration by (a) increasing the cash consideration and/or
(b) increasing the exchange ratio used to determine the number of shares of
Protective's common stock to be issued as common stock consideration such that
the sum of (A) the cash consideration (as adjusted) and (B) the product of the
exchange ratio (as adjusted) multiplied by the average trading price of
Protective's common stock during such 20 day period is equal to or greater than
$17.26. In such event, if Protective does not adjust the merger consideration
United Dental's Board of Directors may terminate the merger agreement.
Protective may terminate the merger agreement if the average price of
Protective's common stock during such 20 day period is greater than $39.50 or
less than $27.50.
If required by special tax counsel to Protective or United Dental in order
to give certain tax opinions required by the merger agreement, the exchange
ratio and the number of shares of Protective's common stock to be issued as
common stock consideration shall be increased (and the cash consideration
correspondingly decreased) so that, after giving effect to any cash paid in lieu
of fractional shares and any cash paid with respect to dissenting shares, the
common stock consideration constitutes not less than 45% by value of the total
consideration paid with respect to United Dental's common stock. In addition,
the merger agreement provides that if, after the date of the merger agreement
and on or prior to the effective time of the merger, the outstanding shares of
Protective's common stock shall be changed into a different number of shares by
reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period, or any similar event
shall occur, the exchange ratio and the $27.50 and $39.50 collar amounts based
upon the average trading price of Protective's common stock during the 20
randomly selected days prior to the consummation of the merger shall be adjusted
accordingly to provide to the holders of United Dental's common stock the same
economic result as contemplated by the merger agreement prior to such event;
provided, however, that no adjustment will be made for Protective's two-for-one
stock split in the form of a stock dividend paid on April 1, 1998.
On July 31, 1998, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus, the closing price of Protective's common stock,
as reported in THE WALL STREET JOURNAL, was $38.69 per share, and the closing
price of United Dental's common stock, as reported in THE WALL STREET JOURNAL,
was $19.13 per share. If the price of Protective's common stock at the time of
the closing of the merger were equal to the closing price on July 31, 1998, the
value of the per share merger consideration would be approximately $20.50 and
the estimated value of the aggregate merger consideration that would be issued
to United Dental's stockholders in the merger (including the holders of 641,800
options for which the value of the merger consideration exceeds the exercise
price) would be approximately $189 million. The actual value of the merger
consideration may differ from this example since the actual value will be
dependent upon the market value of Protective's common stock at the closing.
If you wish to obtain information regarding the value of the merger
consideration and the current market price of Protective's common stock prior to
casting your vote with respect to the adoption and approval of the merger
agreement and the proposed merger, you should call D. F. King & Co., Inc., the
Proxy Solicitor/Information Agent for the merger, at (800) 207-3155.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being sent to United Dental stockholders on or about August 7, 1998.
IN REVIEWING THIS PROXY STATEMENT/PROSPECTUS, UNITED DENTAL STOCKHOLDERS
SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER THE HEADING "RISK FACTORS"
ON PAGE 21.
---------------------
THE SHARES OF PROTECTIVE COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY STATE INSURANCE
DEPARTMENT, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR ANY STATE INSURANCE DEPARTMENT
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS AUGUST , 1998
<PAGE>
This Proxy Statement/Prospectus constitutes both the proxy statement of
United Dental relating to the solicitation of proxies by United Dental's Board
of Directors for use at a special meeting of United Dental stockholders to be
held on September 10, 1998 to approve the merger and the prospectus of
Protective included as part of a Registration Statement filed with the
Securities and Exchange Commission (the "Commission") with respect to the shares
of Protective's common stock (including the attached Protective Preferred Share
Purchase Rights) issuable in the merger to holders of United Dental's common
stock.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
PROTECTIVE OR UNITED DENTAL. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES
OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY IN
ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF PROTECTIVE OR UNITED
DENTAL SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS. HOWEVER, IF ANY
MATERIAL CHANGE OCCURS DURING THE PERIOD THAT THIS PROXY STATEMENT/PROSPECTUS IS
REQUIRED TO BE DELIVERED, THIS PROXY STATEMENT/PROSPECTUS WILL BE AMENDED AND
SUPPLEMENTED ACCORDINGLY. ALL INFORMATION REGARDING PROTECTIVE AND ITS
SUBSIDIARIES IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN SUPPLIED BY PROTECTIVE,
AND ALL INFORMATION REGARDING UNITED DENTAL AND ITS SUBSIDIARIES IN THIS PROXY
STATEMENT/PROSPECTUS HAS BEEN SUPPLIED BY UNITED DENTAL.
AVAILABLE INFORMATION
Protective and United Dental are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. Such reports, proxy and information statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and at the following Regional Offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can be obtained at prescribed rates by writing to the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission also maintains a Web Site at http://www.sec.gov that
contains reports and other information regarding registrants that file
electronically with the Commission. In addition, materials filed by Protective
may be inspected at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005 and materials filed by United Dental may be inspected
at the offices of Nasdaq, Reports Section, 1735 K Street N.W., Washington, D.C.
20006.
Protective has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Protective's common stock (including the attached
Protective Preferred Share Purchase Rights) to be issued pursuant to the merger
agreement. This Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. The
Registration Statement and any amendments thereto, including exhibits filed as a
part thereof, are available for inspection and copying as set forth above. Such
additional information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Proxy Statement/ Prospectus as to
the contents of any contract or other document referred to herein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Protective (File No.
1-12332) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
(1) Current Report on Form 8-K, dated July 28, 1998.
(2) Current Report on Form 8-K, dated April 23, 1998.
(3) Current Report on Form 8-K, dated March 11, 1998.
(4) Quarterly Report on Form 10-Q for the three-month period ended March
31, 1998.
(5) Annual Report on Form 10-K for the fiscal year ended December 31,
1997, as amended.
(6) Proxy Statement relating to Protective's 1998 meeting of
stockholders.
(7) The description of Protective's common stock contained in its
Registration Statement on Form 10, filed pursuant to Section 12 of the
Exchange Act on September 3, 1981, as amended by an amendment thereto filed
on Form 8 on October 27, 1981.
(8) The description of Protective's Rights to purchase Series A Junior
Participating Cumulative Preferred Stock contained in its Form 8-A, filed on
August 7, 1995.
(9) All documents subsequently filed by Protective pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the date of the final
adjournment of the Special Meeting.
The following documents filed with the Commission by United Dental (File No.
0-26688) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
(1) Current Report on Form 8-K, dated March 10, 1998.
(2) Quarterly Report on Form 10-Q for the three-month period ended March
31, 1998.
(3) Annual Report on Form 10-K for the fiscal year ended December 31,
1997, as amended.
(4) All documents subsequently filed by United Dental pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the final
adjournment of the Special Meeting.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/ Prospectus to the extent that a statement
contained herein or in any other subsequently filed document, which also is, or
is deemed to be, incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS RELATING
TO PROTECTIVE AND UNITED DENTAL WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS OTHER THAN
EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROXY STATEMENT/ PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF
SUCH PERSON. REQUESTS FOR SUCH DOCUMENTS RELATING TO PROTECTIVE SHOULD BE
DIRECTED TO PROTECTIVE LIFE CORPORATION, 2801 HIGHWAY 280 SOUTH, BIRMINGHAM,
ALABAMA 35223, DEBORAH J. LONG, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY, TELEPHONE NUMBER (205) 879-9230; AND REQUESTS FOR SUCH DOCUMENTS
RELATING TO UNITED DENTAL SHOULD BE DIRECTED TO UNITED DENTAL CARE, INC., 13601
PRESTON ROAD, SUITE 500 EAST, DALLAS, TEXAS 75240, ATTENTION: JOHN W. MCCARTY,
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY,
TELEPHONE NUMBER (972) 855-5892. TO ASSURE TIMELY DELIVERY OF SUCH DOCUMENTS,
REQUESTS FOR SUCH DOCUMENTS SHOULD BE MADE NO LATER THAN SEPTEMBER 2, 1998.
3
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TABLE OF CONTENTS
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AVAILABLE INFORMATION.................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................ 3
SUMMARY OF PROXY STATEMENT/PROSPECTUS.................................................. 6
The Companies........................................................................ 6
The Special Meeting.................................................................. 7
Special Factors...................................................................... 8
The Merger........................................................................... 11
SUMMARY HISTORICAL FINANCIAL DATA OF PROTECTIVE........................................ 18
SUMMARY HISTORICAL FINANCIAL DATA OF UNITED DENTAL..................................... 19
RISK FACTORS........................................................................... 21
Fixed Exchange Ratio; Value of Merger Consideration May Decrease..................... 21
Uncertainties in Integrating and Achieving Cost Savings.............................. 22
Effect Upon United Dental if Merger Not Consummated.................................. 22
Interests of Certain Persons in the Merger........................................... 22
Industry............................................................................. 23
THE SPECIAL MEETING.................................................................... 26
Date, Time and Place of the Special Meeting.......................................... 26
Voting Information for United Dental Stockholders.................................... 26
Solicitation of Proxies.............................................................. 27
Dissenters' Rights................................................................... 27
CERTAIN INFORMATION REGARDING PROTECTIVE............................................... 28
Protective Life Corporation.......................................................... 28
Strategy............................................................................. 28
Life Insurance....................................................................... 30
Specialty Insurance Products......................................................... 31
Retirement Savings and Investment Products........................................... 32
Corporate and Other.................................................................. 33
PLC Merger Subsidiary................................................................ 34
SELECTED HISTORICAL FINANCIAL DATA OF PROTECTIVE....................................... 35
CERTAIN INFORMATION REGARDING UNITED DENTAL............................................ 36
General.............................................................................. 36
Benefits Plans....................................................................... 36
Dentist Networks..................................................................... 37
Industry............................................................................. 37
SELECTED HISTORICAL FINANCIAL DATA OF UNITED DENTAL.................................... 38
SELECTED PRO FORMA DATA................................................................ 40
MARKET PRICE DATA AND DIVIDENDS........................................................ 41
THE PROPOSED MERGER.................................................................... 43
General.............................................................................. 43
Effective Time of the Merger......................................................... 43
Source of Cash Consideration......................................................... 43
Conversion of Shares................................................................. 44
Fractional Shares.................................................................... 46
Exchange of Certificates............................................................. 46
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Background of the Merger............................................................. 47
Recommendation of United Dental's Board of Directors and Factors Considered by United
Dental's Board of Directors........................................................ 50
Opinion of BT Alex. Brown Incorporated............................................... 53
Factors Considered by Protective's Board of Directors................................ 58
Interests of Certain Persons in the Merger........................................... 58
Plans for United Dental after the Merger............................................. 62
The Merger Agreement................................................................. 63
Accounting Treatment................................................................. 70
Regulatory Filings and Approvals..................................................... 70
State Anti-Takeover Statutes......................................................... 71
Operations After the Merger.......................................................... 71
Material U.S. Federal Income Tax Consequences of the Merger.......................... 72
Restrictions on Sales of Shares by Affiliates........................................ 74
Stock Exchange Listing............................................................... 74
Rights of Dissenting Stockholders.................................................... 75
COMPARISON OF STOCKHOLDER RIGHTS....................................................... 78
Authorized Capital Stock............................................................. 78
Preferred Share Purchase Rights ("Poison Pill" or "Stockholder Rights Plan")......... 78
Amendments to Certificate of Incorporation and Bylaws................................ 81
Nomination of Directors.............................................................. 82
Special Meetings of the Stockholders................................................. 83
Stockholder Action by Written Consent................................................ 83
Vote Required for Mergers; Sale of Assets; Supermajority Provisions.................. 84
SECURITY OWNERSHIP..................................................................... 86
Security Ownership of Certain Beneficial Owners of Protective's Common Stock......... 86
Security Ownership of Certain Beneficial Owners of United Dental's Common Stock...... 89
UNITED DENTAL STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING............................ 90
LEGAL MATTERS.......................................................................... 90
EXPERTS................................................................................ 90
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ANNEX A--... Agreement and Plan of Merger, dated as of March 10, 1998, as amended
(Composite Conformed Copy)
ANNEX B--... Opinion of BT Alex. Brown Incorporated
ANNEX C--... Excerpts from the Delaware General Corporation Law Relating to Dissenters'
Rights
ANNEX D--... Stockholder Agreement, dated as of March 10, 1998, between Protective and Jack
R. Anderson (Conformed Copy)
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SUMMARY OF PROXY STATEMENT/PROSPECTUS
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT/PROSPECTUS. IT IS NOT, AND IS NOT INTENDED TO BE, COMPLETE
IN ITSELF. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY, THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS, INCLUDING THE ANNEXES HERETO WHICH ARE A PART OF THIS
PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS ARE ENCOURAGED TO READ CAREFULLY ALL OF
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. ALL REFERENCES TO
THE PRICE OF, AND THE NUMBER OF OUTSTANDING SHARES OF, AND ALL CALCULATIONS
BASED ON THE PRICE OR NUMBER OF OUTSTANDING SHARES OF, PROTECTIVE'S COMMON STOCK
REFLECT THE TWO-FOR-ONE STOCK SPLIT OF PROTECTIVE'S COMMON STOCK IN THE FORM OF
A STOCK DIVIDEND, PAID ON APRIL 1, 1998. AS USED IN THIS PROXY
STATEMENT/PROSPECTUS, "PROTECTIVE" MEANS PROTECTIVE LIFE CORPORATION, "PLC
MERGER SUBSIDIARY" MEANS PLC MERGER SUBSIDIARY CORPORATION AND "UNITED DENTAL"
MEANS UNITED DENTAL CARE, INC.
UNITED DENTAL STOCKHOLDERS SHOULD CONSIDER CAREFULLY THE INFORMATION SET
FORTH HEREIN UNDER THE HEADING "RISK FACTORS" IN ADDITION TO THE OTHER
INFORMATION PRESENTED HEREIN.
THE COMPANIES
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Protective Life Corporation
(page 28)..................... Protective Life Corporation, a Delaware corporation
incorporated in 1981, is a holding company whose
subsidiaries provide financial services through the
production, distribution, and administration of insurance
and investment products. Protective operates seven
divisions whose principal strategic focuses can be
grouped into three general categories: life insurance,
specialty insurance products and retirement savings and
investment products. Protective's Dental and Consumer
Benefits Division focuses on indemnity and managed-care
dental products. Protective also participates in a joint
venture which owns a life insurance company in Hong Kong.
Protective Life Insurance Company, founded in 1907, is
Protective's principal operating subsidiary. Protective
Life Insurance Company is currently assigned a rating of
A+ (Superior) by A.M. Best Company, Inc. (2nd highest
rating of 15), insurer financial strength ratings of AA
(Excellent) by Standard & Poor's (3rd highest rating of
18) and a rating of A1 by Moody's Investors Service (5th
highest rating of 15). The principal executive offices of
Protective are located at 2801 Highway 280 South,
Birmingham, Alabama, 35223, and its telephone number is
(205) 879-9230.
PLC Merger Subsidiary
Corporation (page 34)......... PLC Merger Subsidiary Corporation is a wholly owned
Subsidiary of Protective, organized under the laws of the
State of Delaware on March 4, 1998 to serve as a vehicle
for acquiring United Dental Care, Inc. The principal
executive offices of PLC Merger Subsidiary are located at
2801 Highway 280 South, Birmingham, Alabama, 35223, and
its telephone number is (205) 879-9230.
United Dental Care, Inc.
(page 36)..................... United Dental Care, Inc., a Delaware corporation
incorporated in 1989, is a managed dental benefits
company that is licensed to operate prepaid dental plans
in 29 states and, as of March 31, 1998, provided dental
coverage to approximately 1.8 million members. United
Dental offers a comprehensive range of dental
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plans capable of meeting the needs of employer groups of
all sizes as well as individuals. United Dental's prepaid
dentist networks, as of March 31, 1998, consisted of
approximately 71,000 general dentists and specialty
dentists providing a broad range of dental services.
United Dental sells its services through multiple
distribution channels, including independent brokers,
third-party arrangements including health maintenance
organizations and direct sales. The principal executive
offices of United Dental are located at 13601 Preston
Road, Suite 500 East, Dallas, Texas 75240, and its
telephone number is (972) 458-7474.
Trading Markets and Market Price
Data (page 41)................ Shares of United Dental's common stock are traded on the
Nasdaq National Market under the symbol "UDCI." Shares of
Protective's common stock are traded on the New York
Stock Exchange, under the symbol "PL." The closing price
of United Dental's common stock, as reported in THE WALL
STREET JOURNAL on March 10, 1998, the last full trading
day prior to the public announcement of the proposed
merger, was $16.94 per share. The closing price of
Protective's common stock, as reported in THE WALL STREET
JOURNAL on March 10, 1998, the last full trading day
prior to the public announcement of the proposed merger,
was $35.50 per share (as adjusted for the two-for-one
stock split on April 1, 1998). On July 31, 1998, the most
recent practicable date prior to the printing of this
Proxy Statement/Prospectus, the closing price of United
Dental's common stock, as reported in THE WALL STREET
JOURNAL, was $19.13 per share, and the closing price of
Protective's common stock, as reported in THE WALL STREET
JOURNAL, was $38.69 per share.
THE SPECIAL MEETING
Voting (page 26)................ At the special meeting, United Dental's stockholders will
vote on a proposal for the adoption and approval of the
merger agreement and the merger. Each share of common
stock is entitled to one vote. Delaware law requires that
a majority of all outstanding shares of United Dental's
common stock vote to adopt and approve the merger
agreement and approve the merger.
The record date for determining who is entitled to vote
at the special meeting has been set at July 21, 1998. On
the record date, there were 8,982,616 shares of United
Dental's common stock outstanding and entitled to vote
held by 188 stockholders of record.
Revocability of Proxy (page
27)........................... Any United Dental stockholder who executes and returns a
proxy may revoke such proxy at any time before it is
voted by:
- notifying in writing the Corporate Secretary of
United Dental at 13601 Preston Road, Suite 500,
Dallas, Texas 75240;
- granting a later dated proxy; or
- appearing in person and voting at the special
meeting.
Attendance at the special meeting will not in and of
itself constitute revocation of a proxy.
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SPECIAL FACTORS
Potential Benefits and
Detriments of the Merger to
United Dental's Stockholders
(page 50)..................... The potential benefits of the merger to United Dental
stockholders include, among other things, the following:
- providing greater stockholder value than United
Dental continuing as a separate entity;
- an increase in stockholder value through the
prospect of receiving a premium over the market price
of United Dental's common stock; and
- the opportunity as a continuing equity holder to
realize the potential growth in earnings resulting
from the combination and increased market presence
of the combined company as a leading provider of
dental health benefits.
The potential detriments of the merger to United Dental
stockholders include, among other things, the following:
- the benefits sought to be obtained by the merger
might not be obtained;
- the operating results of the combined companies
might not be equal to the sum of the historical
operating results of the companies on a stand
alone basis; and
- the risks of fluctuation in the value of the
merger consideration resulting from the exchange
being based on a fixed exchange ratio.
Certain executive officers and directors of United Dental
have interests in the merger that are in addition
to the interests of United Dental's stockholders
generally. See "Interests of Certain Persons in the
Merger" below.
Recommendation of United
Dental's Board of Directors
(page 50)..................... United Dental's Board of Directors unanimously approved
the merger and resolved to recommend that United Dental's
stockholders vote "FOR" adoption and approval of the
merger agreement and the merger. United Dental's Board of
Directors believes that the merger is in the best
interests of United Dental and its stockholders and that
the merger consideration is fair from a financial point
of view.
Factors Considered by United
Dental's Board of Directors
(page 51)..................... In reaching their decision to recommend the approval of
the merger and the adoption of the merger agreement,
United Dental's Board of Directors considered a number of
factors including the following:
- the financial condition, results of operations and
business of United Dental, on both a historical and
prospective
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basis, and the influence of current industry,
economic and market conditions;
- strategic alternatives available to United Dental,
none of which United Dental's Board of Directors
believed to be as favorable to United Dental's
stockholders as the merger;
- the prospect of United Dental's stockholders
receiving a premium over the market price of United
Dental's common stock;
- Protective's business, assets, management,
competitive position and prospects and the advantages
to United Dental of an alliance with a company
having the experience in the dental benefits
industry of Protective, its greater financial
resources and its existing distribution system
available to support the growth of the dental
benefits business; and
- the potential for growth in earnings resulting
from the combination and increased market presence of
the combined company as a leading provider of
dental health benefits.
Approval by Protective's Board
of Directors (page 57)........ Protective's Board of Directors has unanimously approved
the merger agreement and the consideration to be paid to
United Dental's stockholders in connection with the
merger. The merger does not require the approval of
Protective's stockholders.
Factors Considered by
Protective's Board of
Directors (page 57)........... In reaching their decision to approve the merger
agreement and the consideration to be paid to United
Dental's stockholders, Protective's Board of Directors
considered a number of factors including the following:
- Protective's desire to become a national provider
for pre-paid dental programs;
- the geographic and strategic fit of United
Dental's operations with Protective's existing dental
business; and
- the growth opportunities in the dental HMO
industry, the terms of the transaction, and
Protective's plans for United Dental after the
merger, including the potential reduction in
combined annual operating expenses of
approximately $12 million that Protective expects
will be realized after a three-year period
(primarily as the result of the elimination of
various redundancies and inefficiencies); however,
there can be no assurance that such expense
reductions, if any, will be achieved.
Opinion of BT Alex. Brown
Incorporated (page 52)........ BT Alex. Brown Incorporated delivered to United Dental's
Board of Directors a written opinion dated March 10,
1998, to the effect that, as of the date of such opinion
and based upon and subject to
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certain matters stated in such opinion, the merger
consideration was fair, from a financial point of view,
to the holders of United Dental's common stock. BT Alex.
Brown Incorporated's opinion is attached as Annex B to
this Proxy Statement/Prospectus and should be read
carefully in its entirety. The opinion of BT Alex. Brown
Incorporated is directed to United Dental's Board of
Directors, addresses only the fairness of the merger
consideration from a financial point of view, and does
not constitute a recommendation to any stockholder as to
how such stockholder should vote at the special meeting.
Security Ownership of Certain
Beneficial Owners of United
Dental's Common Stock
(page 89)..................... As of the record date, the directors and executive
officers of United Dental (10 persons) owned beneficially
an aggregate of 1,807,883 (which includes 778,500 shares
held by Citibank N.A and George E. Bello, trustees of two
independent trusts of which relatives of Mr. Anderson are
beneficiaries and 150,000 shares which Mr. Anderson
transferred to the Rose-Marie and Jack R. Anderson
Foundation on May 20, 1998) outstanding voting shares of
United Dental's common stock (constituting approximately
19.9% of the outstanding shares of United Dental's common
stock). These directors and executive officers have
advised United Dental that they presently intend to vote
or to direct the vote of all shares of United Dental's
common stock over which they have voting power "FOR"
adoption and approval of the merger agreement and the
merger. Protective does not own any shares of United
Dental's common stock and, to the knowledge of
Protective, no executive officer or director of
Protective owns any shares of United Dental's common
stock.
Interests of Certain Persons in
the Merger (page 58).......... Members of United Dental management and United Dental's
Board of Directors have certain interests in the merger
that are in addition to the interests of stockholders of
United Dental generally, including, in the case of one
director who is also an employee of United Dental,
interests in a contingent transaction bonus plan adopted
by United Dental's Board of Directors in connection with
the merger. United Dental's Board of Directors was aware
of these interests and considered them, among other
matters, in approving the merger agreement.
William H. Wilcox, United Dental's President and Chief
Executive Officer and a Director, John W. McCarty, United
Dental's Senior Vice President, Chief Financial Officer,
Treasurer and Secretary, and Peter R. Barnett, United
Dental's Senior Vice President and Chief Operations
Officer, hold 240,000, 75,000 and 40,000 stock options,
respectively, which are covered by a contingent
transaction bonus plan. In the event that the closing
price of Protective's common stock on the effective date
of the merger falls to $27.50, such executive officers of
United Dental would receive their maximum bonuses under
the plan of $336,000, $130,500 and $69,600, respectively,
representing the difference between the
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merger consideration payable with respect to the shares
subject to the stock options in such event ($17.26) and
$19.00 per share. United Dental's recently adopted
severance policy covers employees of United Dental up to
the position of Vice President, but does not cover any of
the executive officers or directors of United Dental.
Certain senior executives of United Dental previously
entered into employment agreements with United Dental
which contain severance provisions applicable in the
event of their involuntary termination by United Dental.
In addition, the Chairman of United Dental's Board of
Directors, Mr. Jack R. Anderson, has entered into a
stockholder agreement which is intended to ensure that
Mr. Anderson will vote for the merger and the merger
agreement. Pursuant to the stockholder agreement, Mr.
Anderson has agreed to vote (and use his best efforts to
cause Citibank N.A. and George E. Bello, trustees of two
independent trusts of which relatives of Mr. Anderson are
beneficiaries and which hold an aggregate of 778,500
shares of United Dental's common stock, to vote):
- for the merger, the adoption of the merger
agreement and the approval of the terms thereof; and
- against any transaction or amendment to United
Dental's Restated Certificate of Incorporation or
Bylaws which would impede the consummation of the
merger or the approval of the merger agreement.
As of July 31, 1998, Mr. Anderson beneficially owned 5.1%
of United Dental's common stock, and the two independent
trusts described above beneficially owned 8.7% of United
Dental's common stock, which in the aggregate represents
13.8% of United Dental's common stock.
On May 26, 1998 Mr. Anderson transferred 150,000 shares
of United Dental's common stock to the Rose-Marie and
Jack R. Anderson Foundation and the foundation is a party
to a stockholder agreement with substantially the same
terms as Mr. Anderson's.
THE MERGER
Effective Time of the Merger
(page 43)..................... The consummation of the merger will occur as soon as
practicable after United Dental's stockholders have
approved and adopted the merger agreement and the merger
at the special meeting and Protective has received all
requisite state regulatory approvals. There can be no
assurance that all state regulatory approvals will be
received by the time of the special meeting of United
Dental's stockholders and the time period between the
special meeting and the consummation of the merger will
depend upon the status of these regulatory approvals.
Conversion of Shares (page
44)........................... If the merger is completed, each share of United Dental's
common stock outstanding immediately prior to the
effective time of the merger (other than dissenting
shares) will be converted
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into, subject to adjustment in the circumstances
described below, (i) 0.2893 shares of Protective's common
stock and (ii) $9.31 in cash.
If the average trading price of Protective's common stock
during the 20 New York Stock Exchange trading days
selected randomly by lot from the 30 consecutive trading
days ending on the trading day that is five trading days
prior to the consummation of the merger is less than
$27.50, Protective may adjust the merger consideration by
(a) increasing the cash consideration and/or (b)
increasing the exchange ratio used to determine the
number of shares of Protective's common stock to be
issued as common stock consideration such that the sum of
(A) the cash consideration (as adjusted) and (B) the
product of the exchange ratio (as adjusted) multiplied by
the average trading price of Protective's common stock
during such 20 day period is equal to or greater than
$17.26.
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ILLUSTRATIVE VALUES OF PER SHARE MERGER CONSIDERATION
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PRICE FOR PROTECTIVE'S COMMON STOCK AT THE EFFECTIVE TIME OF THE
MERGER(1)
----------------------------------------------------------------
$25.50 $27.50 $29.50 $31.50 $33.50 $35.50
--------- --------- --------- --------- --------- ---------
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Exchange ratio............................................. 0.3118 0.2893 0.2893 0.2893 0.2893 0.2893
Value of Protective's common stock issued per share........ $ 7.95 $ 7.95 $ 8.53 $ 9.11 $ 9.69 $ 10.27
Cash paid per share........................................ $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31
Value of per share merger consideration.................... $ 17.26 $ 17.26 $ 17.84 $ 18.42 $ 19.00 $ 19.58
<CAPTION>
$37.50 $39.50 $41.50
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Exchange ratio............................................. 0.2893 0.2893 0.2893
Value of Protective's common stock issued per share........ $ 10.85 $ 11.43 $ 12.06
Cash paid per share........................................ $ 9.31 $ 9.31 $ 9.31
Value of per share merger consideration.................... $ 20.16 $ 20.74 $ 21.37
</TABLE>
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(1) The figures in the column beneath a price for Protective's common stock of
$25.50 assume that Protective has exercised its right to adjust the merger
consideration if the average trading price of its common stock is less than
$27.50 by increasing the exchange ratio, and the figures in the column
beneath a price for Protective's common stock of $41.50 assume that
Protective has not exercised its right to terminate the merger agreement.
There can be no assurance that if the average trading price of Protective's
common stock is less than $27.50 or greater than $39.50 that either
Protective or United Dental will not exercise its right to terminate the
merger agreement or that Protective will adjust the merger consideration in
the manner illustrated in the table.
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Tax Adjustment (page 44)........ If, after giving effect to any cash paid in lieu of
fractional shares and any cash expected to be paid with
respect to dissenting shares, the value of the common
stock portion of the merger consideration constitutes
less than 45% by value of the total merger consideration,
special tax counsel to Protective or United Dental may
require, as a condition to rendering their respective
opinions that the merger will qualify as a reorganization
for U.S. federal income tax purposes, that the number of
shares of Protective's common stock issued in the merger
be increased and the cash consideration correspondingly
decreased so that the common stock portion of the merger
consideration constitutes not less than 45% by value of
the total merger consideration. If the price of
Protective's common stock at the effective time of the
merger is equal to $27.50 per share (the bottom end of
the range), there are no dissenters to the merger and no
cash is paid in lieu of fractional shares, the percentage
of value of the merger consideration paid in Protective's
common stock would be 46.1% and no tax adjustment would
be required.
Source of Cash Consideration
(page 43)..................... Protective expects to finance approximately $60 million
of the cash portion of the consideration to be paid to
United Dental's
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stockholders from internally generated funds and to
finance approximately $25 million of the cash portion of
the consideration with borrowings under an existing
credit facility.
Fractional Shares (page 45)..... Fractional shares of Protective's common stock will not
be issued in the merger. Holders of United Dental's
common stock will be paid cash in lieu of such fractional
shares.
Conditions to the Merger (page
68)........................... There are a number of conditions that must be satisfied
before both Protective and United Dental are obligated to
complete the merger. The most important of these mutual
conditions are:
- the majority of all outstanding United Dental
shares vote for the adoption and approval of the
merger agreement and the merger;
- there can be no legal restraints or prohibitions
that prevent the completion of the merger;
- each parties' obligations under the merger
agreement must be performed in all material respects
and the parties' respective representations and
warranties must be true and correct in all
material respects;
- the receipt by each of United Dental and
Protective of an opinion from their respective
counsel that the merger will be treated as a
reorganization for federal income tax purposes and
that United Dental, Protective and PLC Merger
Subsidiary will each be a party to that
reorganization; and
- all governmental authorizations necessary for the
merger's completion must have been obtained.
United Dental and Protective may modify or waive any
condition to the consummation of the merger, provided
that no modification or waiver by United Dental which
requires stockholder approval will occur unless such
approval is obtained. In the event a modification or
waiver by United Dental is contemplated which requires
stockholder approval, a supplement to this Proxy
Statement/Prospectus will be distributed to stockholders
and proxies will be resolicited. Neither Protective nor
United Dental presently contemplates waiving or modifying
any of the foregoing conditions.
Other Takeover Proposals (page
66)........................... Prior to the consummation or termination of the merger
agreement, United Dental has agreed not to:
- solicit, initiate or encourage the submission of
any third party takeover proposal;
- enter into any agreement with respect to any third
party takeover proposal or give any approval that is
sufficient to render inapplicable to such third
party takeover proposal the provisions of Section
203 of the Delaware General Corporation Law; or
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- continue or participate in any discussions or
negotiations regarding, or furnish to any person any
information with respect to, or take any other
action to facilitate any inquiries or the making
of any proposal that constitutes, or may
reasonably be expected to lead to, any third party
takeover proposal; PROVIDED, HOWEVER, that under
certain circumstances, United Dental's Board of
Directors may cause United Dental, in response to
third party takeover proposals that are superior
to the merger to (x) furnish information with
respect to United Dental and (y) participate in
negotiations regarding such proposal.
In addition, pursuant to the merger agreement, neither
United Dental's Board of Directors nor any committee
thereof may:
- withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Protective, its
approval or recommendation of the merger agreement
or the merger; or
- approve or recommend, or propose to recommend, any
third party takeover proposals except for a third
party takeover proposal that is superior to the
merger and then only at or after the termination
of the merger agreement pursuant to its terms.
The restrictions described above may have the effect of
limiting other takeover proposals.
Termination (page 69)........... The merger agreement may be terminated and the merger
abandoned at any time prior to the effective time of the
merger by:
- the mutual consent of United Dental and
Protective;
- either Protective's Board of Directors or United
Dental's Board of Directors, if (a) the merger and
the merger agreement are not adopted and approved
by United Dental's stockholders, (b) the merger
has not been consummated by September 30, 1998 and
the time for consummating the merger has not been
extended to a later date, or (c) a law or final
court order prohibits the merger;
- either United Dental or Protective if the other
party has breached any representation or warranty
contained in the merger agreement which would have
or would be likely to have a material adverse
effect on the business, assets, liabilities,
results of operations or financial condition of
the other party;
- either United Dental or Protective if the other
party has breached any material covenant or agreement
in the merger agreement, which breach is not
curable or remains uncured for 30 days after
written notice of such breach is provided;
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
- United Dental if the average price of Protective's
common stock is below $27.50 per share during the 20
randomly selected days prior to the consummation
of the merger and Protective does not adjust the
merger consideration so that, in the aggregate,
its value is at least $17.26 a share; the factors
which United Dental's Board of Directors may
consider in deciding whether to exercise its
termination right described above include, among
other things, whether to obtain an updated
fairness opinion, whether to negotiate with
Protective to amend the merger agreement, whether
to seek Protective's agreement not to terminate
the merger agreement in order to permit United
Dental to resolicit its stockholders for approval
of the merger at an average trading price below
$27.50, the strategic alternatives then available
to United Dental and the other facts and
circumstances existing at such time, including,
without limitation, general market conditions.
- United Dental's Board of Directors exercising its
rights under the merger agreement to take action with
respect to a third party takeover proposal that is
superior to the merger;
- Protective if United Dental's Board of Directors
has withdrawn, or modified or changed in a manner
adverse to Protective or PLC Merger Subsidiary its
approval or recommendation of the merger agreement
or the merger or has recommended a third party
takeover proposal that is superior to the merger,
or has executed an agreement for a third party
takeover proposal that is superior to the merger
or other business combination with a person or
entity other than Protective or its affiliates;
and
- Protective if the average price of Protective's
common stock during the 20 randomly selected days
prior to the consummation of the merger is greater
than $39.50 or less than $27.50.
Termination Fees (page 67)...... United Dental is required to pay to Protective a
termination fee of $4,600,000 and to reimburse Protective
for expenses up to $2,000,000 if United Dental's Board of
Directors:
- withdraws or modifies in a manner adverse to
Protective or PLC Merger Subsidiary, its approval or
recommendation of the merger agreement or the
merger;
- approves or recommends any third party takeover
proposal that is superior to the merger;
- enters into any agreement with respect to a third
party takeover proposal that is superior to the
merger; or
- terminates the merger agreement when a third party
takeover proposal that is superior to the merger
is outstanding.
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
Regulatory Filings and Approvals
(page 70)..................... The consummation of the merger is subject to certain
regulatory approvals by both federal and state agencies.
Accounting Treatment (page
70)........................... The merger will be treated as a purchase by Protective
for accounting and financial reporting purposes.
Material U.S. Federal Income Tax
Consequences of the Merger
(page 72)..................... Consummation of the merger is conditioned upon the
receipt of opinions from Debevoise & Plimpton, special
counsel to Protective, and from Strasburger & Price,
L.L.P., special counsel to United Dental, substantially
to the effect that the merger will qualify as a
reorganization within the meaning of Section 368(a) of
the Internal Revenue Code. Such opinions will be based
upon facts, representations by management of the
companies and assumptions set forth in such opinions.
Neither Protective nor United Dental will waive the
condition that the opinion of such party's special tax
counsel be delivered. Accordingly, for U.S. federal
income tax purposes, the merger will not result in the
recognition of gain or loss by Protective, PLC Merger
Subsidiary or United Dental. Each stockholder of United
Dental will recognize gain for U.S. federal income tax
purposes in an amount equal to the lesser of the total
gain realized by such stockholder and the amount of cash
consideration received by such stockholder in the merger.
No rulings have been or will be requested from the
Internal Revenue Service with respect to any tax matters
relating to the merger. Notwithstanding the foregoing, in
the event that Protective or United Dental waives the
condition that the opinion of such party's special tax
counsel be delivered, United Dental and Protective will
amend this Proxy Statement/ Propectus and United Dental
will resolicit the holders of United Dental's common
stock.
Dissenters' Rights (page 74).... Any United Dental stockholder who does not wish to
exchange his or her shares of United Dental's common
stock for the merger consideration has the right under
Delaware law to have the "fair value" of his or her
shares determined by the Delaware Court of Chancery. This
"right of appraisal" is subject to a number of
restrictions and technical requirements. Generally, in
order to exercise appraisal rights:
- you must not vote in favor of the merger; and
- you must make a written demand for appraisal
before the vote on the merger.
Merely voting against the merger will not protect your
right of appraisal. Annex C to this Proxy
Statement/Prospectus contains the relevant excerpts from
the Delaware appraisal statute.
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Comparison of Stockholder Rights
(page 77)..................... The differences between the rights of United Dental's
stockholders and the rights of Protective's stockholders
include:
- Protective's certificate of incorporation
specifically denies stockholders the ability to vote
by means of written consent. United Dental's
Bylaws specifically allow stockholders to vote by
written consent;
- Each share of Protective's common stock has
attached to it an associated right issued under
Protective's share purchase rights plan. United
Dental does not have a share purchase rights plan.
Protective's rights plan may ensure that
Protective's stockholders receive fair and equal
treatment in a proposed takeover of Protective and
may impede partial tender offers or other coercive
tactics to gain control of Protective. United
Dental has no such defense against unsolicited
third party takeover efforts;
- Protective's certificate of incorporation provides
that a special meeting of stockholders may be called
by a majority of the outstanding shares of
Protective's common stock. United Dental's bylaws
provide that a special meeting of stockholders may
be called by one-tenth of all of the shares
entitled to vote at such special meeting;
- While both Protective and United Dental are
subject to Delaware law which provides that a
business combination with an interested person
(generally a 15% stockholder) must be approved by
the board of directors and authorized by the
holders of at least 66 2/3% of a company's common
stock, Protective's certificate of incorporation
provides that a business combination with a
related person (generally a 20% stockholder) must
be approved by the holders of at least 80% of
Protective's common stock and the holders of at
least 67% of Protective's common stock not held by
such person.
- The affirmative vote of the holders of 67% of the
outstanding shares of Protective's common stock is
required to amend or repeal the provisions of
Protective's certificate of incorporation relating
to actions by directors by written consent,
special meetings of stockholders, and the
amendments to Protective's certificate of
incorporation. United Dental's certificate of
incorporation does not contain provisions
requiring the vote of such a supermajority and is
therefore governed by the provisions of the
Delaware General Corporation Law which require the
approval of a majority of the voting power of the
outstanding shares then entitled to vote.
</TABLE>
17
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF PROTECTIVE
The following summary consolidated financial information as of and for the
years ended December 31, 1997, 1996, 1995, 1994, and 1993 has been derived from
previously published audited consolidated financial statements of Protective,
prepared in accordance with generally accepted accounting principles, which have
been examined and reported upon by PricewaterhouseCoopers LLP, independent
accountants. The summary consolidated financial information at and for the
three-month periods ended on March 31, 1998 and 1997 has been derived from the
first quarter 1998 unaudited quarterly consolidated financial statements of
Protective. The consolidated financial information should be read in conjunction
with, and is qualified in its entirety by reference to, the consolidated
financial statements from which it has been derived and the accompanying notes
thereto incorporated by reference herein. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Protective's
Consolidated Financial Statements and accompanying notes thereto, which are
incorporated herein by reference to Protective's Quarterly Report on Form 10-Q
for the period ended March 31, 1998 and Protective's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Premiums and policy fees............. $ 149,358 $ 129,578 $ 522,335 $ 494,153 $ 432,576 $ 402,772 $ 370,758
Net investment income................ 157,626 130,330 591,376 517,483 475,924 417,825 362,130
Realized investment gains (losses)... 11 (418) 830 5,510 1,612 6,298 5,054
Other income......................... 13,518 4,762 32,784 20,857 11,768 21,553 21,695
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues..................... 320,513 264,252 1,147,325 1,038,003 921,880 848,448 759,637
Benefits and expenses................ 270,487 225,484 967,952 898,262 800,846 742,275 674,593
Income tax expense................... 17,009 13,181 60,987 47,512 41,152 33,976 28,475
Minority interest.................... 3,024 804 6,393 3,217 3,217 1,796 19
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................... $ 29,993 $ 24,783 $ 111,993 $ 89,012 $ 76,665 $ 70,401 $ 56,550
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA(1)
Net income per share--basic.......... $ .48 $ .40 $ 1.79 $ 1.47 $ 1.34 $ 1.28 $ 1.03
Average shares outstanding--basic.... 62,606,735 62,317,466 62,429,250 60,570,782 57,320,224 54,952,772 54,763,164
Net income per share--diluted........ $ .47 $ .40 $ 1.78 $ 1.46 $ 1.33 $ 1.27 $ 1.02
Average shares
outstanding--diluted............... 62,261,753 62,669,264 62,849,618 60,969,580 57,705,698 55,459,224 55,311,992
Cash dividends....................... $ .10 $ .09 $ .39 $ .35 $ .31 $ .275 $ .253
Stockholders' equity................. $ 12.72 $ 9.67 $ 12.30 $ 9.99 $ 9.15 $ 4.93 $ 6.59
Stockholders' equity excluding net
unrealized gains and losses on
investments........................ $ 11.72 $ 10.20 $ 11.30 $ 9.88 $ 8.15 $ 6.89 $ 5.87
BALANCE SHEET DATA
Total assets......................... $10,756,909 $8,317,012 $10,511,635 $8,263,205 $7,321,257 $6,130,284 $5,316,005
Long-term debt....................... $ 120,000 $ 195,000 $ 120,000 $ 168,200 $ 115,500 $ 98,000 $ 137,598
Total debt........................... $ 120,000 $ 195,000 $ 120,000 $ 181,000 $ 115,500 $ 98,000 $ 147,118
9% Cumulative Monthly Income
Preferred Securities, Series A..... $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 --
8.25% Trust Originated Preferred
Securities......................... $ 75,000 -- $ 75,000 -- -- -- --
6.5% FELINE PRIDES................... $ 115,000 -- $ 115,000 -- -- -- --
Stockholders' equity................. $ 785,432 $ 595,976 $ 758,197 $ 615,316 $ 526,557 $ 270,373 $ 360,733
Stockholders' equity excluding
unrealized gains and losses on
investments........................ $ 723,605 $ 628,328 $ 696,470 $ 608,628 $ 468,694 $ 377,905 $ 321,449
</TABLE>
- ------------------------------
(1) All periods have been restated to reflect two-for-one stock splits, each in
the form of a stock dividend, on June 1, 1995 and April 1, 1998.
18
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF UNITED DENTAL
The following summary consolidated financial information as of and for the
years ended December 31, 1997, 1996, 1995, 1994 and 1993 has been derived from
previously published audited consolidated financial statements of United Dental
prepared in accordance with generally accepted accounting principles which have
been examined and reported on by PricewaterhouseCoopers LLP, independent
accountants. The summary consolidated financial information at and for the
three-month periods ended on March 31, 1998 and 1997 has been derived from the
first quarter 1998 unaudited quarterly consolidated financial statements of
United Dental. The consolidated financial information should be read in
conjunction with, and is qualified in its entirety by reference to, the
consolidated financial statements from which it has been derived and the
accompanying notes thereto, incorporated by reference herein. See also
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and United Dental's Consolidated Financial Statements and
accompanying notes thereto each of which are incorporated herein by reference to
United Dental's Quarterly Report on Form 10-Q for the period ended March 31,
1998 and United Dental's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998 1997 1997(1) 1996(2) 1995(3) 1994(4)
--------- --------- --------- --------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Managed benefits.................................... $ 35,082 $ 37,957 $ 150,951 $ 96,786 $ 62,004 $ 31,683
Indemnity........................................... 6,752 5,640 18,187 15,143 16,622 5,514
Dental centers...................................... 1,445 1,251 4,857 820 -- --
Interest............................................ 144 175 704 899 603 178
--------- --------- --------- --------- ----------- -----------
Total revenues.................................... 43,423 45,023 174,699 113,648 79,229 37,375
Dental services expense:
Managed benefits.................................... 18,809 21,995 97,324 56,845 33,068 15,559
Indemnity........................................... 6,281 6,341 18,504 10,590 13,682 4,567
Dental centers...................................... 2,163 1,864 7,805 216 -- --
--------- --------- --------- --------- ----------- -----------
Total dental services expense..................... 27,253 30,200 123,633 67,651 46,750 20,126
Sales and marketing................................. 4,635 4,706 18,847 12,587 9,637 5,756
General and administrative.......................... 7,149 6,326 29,932 18,612 14,785 7,062
Depreciation and amortization....................... 1,363 1,136 5,050 2,267 1,190 541
Acquisition-related expenses........................ 0 0 -- -- -- 178
Interest expense.................................... 258 147 571 536 1,005 360
--------- --------- --------- --------- ----------- -----------
Total expenses.................................... 40,658 42,515 178,033 101,653 73,367 34,023
Income (loss) before provision for federal income
taxes, cumulative effect of a change in accounting
principle and extraordinary charge................ 2,765 2,508 (3,334) 11,995 5,862 3,352
Provision (benefit) for federal income taxes........ 1,248 1,056 (487) 4,438 2,131 1,256
--------- --------- --------- --------- ----------- -----------
Net income (loss) before cumulative effect of a
change in accounting principle and extraordinary
charge............................................ 1,517 1,452 (2,847) 7,557 3,731 2,096
Cumulative effect of a change in accounting
principle......................................... -- -- -- -- -- --
Extraordinary charge................................ -- -- -- -- 142 --
--------- --------- --------- --------- ----------- -----------
Net income (loss) before preferred dividends........ $ 1,517 1,452 $ (2,847) $ 7,557 $ 3,589 $ 2,096
--------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- ----------- -----------
PER SHARE AMOUNTS:
Net income (loss) before extraordinary charge
Basic............................................... $ 0.17 $ 0.16 $ (0.32) $ 1.04 $ 0.74 $ 0.51
Diluted............................................. $ 0.17 $ 0.16 $ (0.32) $ 1.00 $ 0.68 $ 0.44
Extraordinary charge per share, net of tax
Basic............................................... -- -- -- -- $ (0.03) --
Diluted............................................. -- -- -- -- $ (0.03) --
Net income (loss) per common share
Basic............................................... $ 0.17 $ 0.16 $ (0.32) $ 1.04 $ 0.71 $ 0.51
Diluted............................................. $ 0.17 $ 0.16 $ (0.32) $ 1.00 $ 0.66 $ 0.44
<CAPTION>
<S> <C>
1993
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Managed benefits.................................... $ 16,805
Indemnity........................................... --
Dental centers...................................... --
Interest............................................ 173
---------
Total revenues.................................... 16,978
Dental services expense:
Managed benefits.................................... 7,283
Indemnity........................................... --
Dental centers...................................... --
---------
Total dental services expense..................... 7,283
Sales and marketing................................. 3,025
General and administrative.......................... 3,632
Depreciation and amortization....................... 159
Acquisition-related expenses........................ --
Interest expense.................................... --
---------
Total expenses.................................... 14,099
Income (loss) before provision for federal income
taxes, cumulative effect of a change in accounting
principle and extraordinary charge................ 2,879
Provision (benefit) for federal income taxes........ 934
---------
Net income (loss) before cumulative effect of a
change in accounting principle and extraordinary
charge............................................ 1,945
Cumulative effect of a change in accounting
principle......................................... 44
Extraordinary charge................................ --
---------
Net income (loss) before preferred dividends........ $ 1,901
---------
---------
PER SHARE AMOUNTS:
Net income (loss) before extraordinary charge
Basic............................................... $ 0.52
Diluted............................................. $ 0.40
Extraordinary charge per share, net of tax
Basic............................................... --
Diluted............................................. --
Net income (loss) per common share
Basic............................................... $ 0.52
Diluted............................................. $ 0.40
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------------------------
1998 1997 1997(1) 1996(2) 1995(3) 1994(4)
--------- --------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Weighted average common shares outstanding (000s)
Basic............................................... 8,952 8,918 8,935 7,256 5,051 4,126
Diluted............................................. 9,106 9,159 8,935 7,543 5,449 4,717
Balance Sheet Data:
Working capital..................................... 5,600 20,242 3,288 25,420 30,892 1,365
Total assets........................................ 158,404 145,289 151,440 165,672 86,588 31,404
Total debt including current portion................ 16,127 3,843 9,384 28,948 15,182 14,558
Stockholders' Equity................................ 124,944 127,210 123,048 125,495 61,600 8,947
<CAPTION>
1993
---------
<S> <C>
Weighted average common shares outstanding (000s)
Basic............................................... 3,645
Diluted............................................. 4,662
Balance Sheet Data:
Working capital..................................... 3,907
Total assets........................................ 7,283
Total debt including current portion................ --
Stockholders' Equity................................ 6,730
</TABLE>
- ------------------------------
(1) Results of operations for United Dental Care, Inc., an Oklahoma corporation
("United") after December 31, 1996 and for International Dental Plans, Inc.
("IDP") after May 31, 1997 are included in historical results of operations
for the year ended December 31, 1997. See United Dental's Consolidated
Financial Statements and the Notes thereto.
(2) Results of operations for Associated Health Plans, Inc. ("AHP") after
January 31, 1996, Independent Dental Plans, Inc. ("Independent") and
Association Dental Plans, Inc. ("Association") after September 30, 1996 and
for Kansas City Dental Care, Inc. ("KCDC") and OraCare DPO, Inc. ("OraCare")
after October 31, 1996 are included in historical results of operations for
United Dental on a consolidated basis for the years ended December 31, 1997
and 1996. See United Dental's Consolidated Financial Statements and the
Notes thereto.
(3) Results of operations for US Dental Management, Inc. ("US Dental") after
October 31, 1995 are included in historical results of operations for United
Dental on a consolidated basis for the years ended December 31, 1997, 1996
and 1995. See United Dental's Consolidated Financial Statements and the
Notes thereto.
(4) Results of operations for International Dental Health, Inc. ("IDH") after
August 31, 1994 are included in historical results of operations for United
Dental on a consolidated basis for the years ended December 31, 1997, 1996,
1995 and 1994. See United Dental's Consolidated Financial Statements and the
Notes thereto.
20
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS, THE STOCKHOLDERS OF UNITED DENTAL SHOULD CONSIDER THE
FOLLOWING FACTORS IN DECIDING WHETHER TO APPROVE THE MERGER AGREEMENT AND THE
MERGER, WHEREBY UNITED DENTAL WILL BE MERGED WITH AND INTO PLC MERGER
SUBSIDIARY. THIS PROXY STATEMENT/ PROSPECTUS AND THE INFORMATION INCORPORATED
HEREIN BY REFERENCE INCLUDE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT REFLECT PROTECTIVE'S AND
UNITED DENTAL'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL
PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES, INCLUDING THOSE IDENTIFIED IN "RISK FACTORS," WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE
ANTICIPATED. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF WORDS
SUCH AS "EXPECT," "ESTIMATE," "PROJECT," "BUDGET," "FORECAST," "ANTICIPATED,"
"PLAN" AND SIMILAR EXPRESSIONS. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THEIR
DATES. NEITHER PROTECTIVE NOR UNITED DENTAL UNDERTAKES ANY OBLIGATION TO
PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF
NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. SEE "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--DISCLOSURE REGARDING
FORWARD-LOOKING STATEMENTS" INCORPORATED BY REFERENCE TO UNITED DENTAL'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND "SAFEHARBOR FOR
FORWARD-LOOKING STATEMENTS" INCLUDED AS EXHIBIT 99 TO PROTECTIVE'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
FIXED EXCHANGE RATIO; VALUE OF MERGER CONSIDERATION MAY DECREASE
Subject to certain adjustments under certain circumstances, each share of
United Dental's common stock will be converted at the effective time of the
merger (the "Effective Time") into the right to receive (i) 0.2893 (the
"Exchange Ratio") shares of Protective's common stock (together with the
attached preferred share purchase rights) (the "Common Stock Consideration") and
(ii) $9.31 in cash (the "Cash Consideration" and, together with the Common Stock
Consideration, the "Merger Consideration"). The Exchange Ratio is a fixed number
and, except under the circumstances described under "THE PROPOSED
MERGER--Conversion of Shares," will not be adjusted in the event of any
increases or decreases in the price of either United Dental's common stock or
Protective's common stock. The price of Protective's common stock at the
Effective Time may vary from its prices at the date of this Proxy
Statement/Prospectus or at the date of the special meeting of United Dental's
stockholders to be held on September 10, 1998 (the "Special Meeting"). Such
variations may be the result of changes in the business, operations or prospects
of United Dental or Protective, market assessments of the likelihood that the
merger will be consummated, the timing thereof and the prospects of the merger
and post-merger operations, regulatory considerations, general market and
economic conditions and other factors. In the event the price of Protective's
common stock decreases, the Merger Consideration received by United Dental's
stockholders may have a lower value than it does as of the date of this Proxy
Statement/ Prospectus and, in the event that the closing is delayed beyond the
Special Meeting, as of the date of the Special Meeting. Because the Effective
Time may occur at a date later than the Special Meeting, there can be no
assurance that the prices of United Dental's common stock or Protective's common
stock on the date of the Special Meeting will be indicative of their respective
prices at the Effective Time. The merger agreement provides that the Effective
Time will occur as soon as practicable following the closing, which the merger
agreement provides shall occur as soon as practicable following the Special
Meeting and the satisfaction or waiver of the other conditions set forth in the
merger agreement. The merger agreement also provides that at any time prior to
the Effective Time, the parties to the merger agreement may (a) extend the time
for the performance of any of the obligations or other acts of the other parties
thereto, (b) waive any inaccuracies in the representations and warranties
contained therein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained therein. However,
any waiver of a material condition to the merger by United Dental may require an
amendment to this Proxy Statement/Prospectus and, if required by applicable
statute or regulations, resolicitation of United Dental's stockholders,
resulting in further delay of the Effective Time and
21
<PAGE>
continued uncertainty regarding the value of the Merger Consideration until the
Effective Time. Stockholders of United Dental are urged to obtain current market
quotations for United Dental's common stock and Protective's common stock.
In the event that (i) the average trading price of Protective's common stock
during the 20 New York Stock Exchange trading days selected randomly by lot from
the 30 consecutive trading days ending on the trading day which is five trading
days prior to the Effective Time (the "Trading Average") is less than $27.50 and
(ii) neither Protective nor United Dental exercises its right to terminate the
merger agreement in such event and (iii) Protective does not adjust the Merger
Consideration upwards pursuant to the merger agreement, then the value of the
per share Merger Consideration received by United Dental's stockholders will be
less than $17.26 per share.
Each stockholder of United Dental will, as a result of the merger, recognize
gain for U.S. Federal income tax purposes in an amount equal to the lesser of
the total gain realized by such stockholder and the amount of Cash Consideration
received by such stockholder in the merger. In the event that the Trading
Average is less than $27.50 and Protective adjusts the Merger Consideration
upwards by increasing the Cash Consideration, the amount of gain that United
Dental's stockholders will be required to recognize for U.S. federal income tax
purposes may increase. For a discussion of the material U.S. federal income tax
consequences of the merger, see "THE PROPOSED MERGER--Material U.S. Federal
Income Tax Consequences of the Merger."
UNCERTAINTIES IN INTEGRATING AND ACHIEVING COST SAVINGS
The success of the merger will in part be dependent on the ability following
the merger to consolidate operations and to integrate systems and procedures and
thereby obtain business synergies and related cost savings. While the management
of Protective, with the assistance of the management of United Dental, intends
to work diligently to effectively integrate and rationalize the operations of
the two companies following the closing, there can be no assurance as to the
timing or extent to which cost savings and efficiencies will be achieved. In
addition, there can be no assurance that the benefits sought to be obtained by
the merger will be obtained or that the operating results of the combined
companies will equal or exceed the sum of the historical operating results of
the companies on a stand alone basis.
EFFECT UPON UNITED DENTAL IF MERGER NOT CONSUMMATED
If the merger is not consummated, United Dental will incur a cost in respect
of non-recurring items directly attributable to the merger, including fees for
investment bankers, accountants and attorneys, of approximately $2.0 million. In
addition, United Dental has and expects to continue to experience personnel
attrition during the period in which the merger is pending, due to the
anticipated consolidation of operations and staffing changes proposed by
Protective. Consequently, in the event that the merger is not consummated,
United Dental may temporarily be understaffed conducting its normal business
operations. If the Merger is not consummated, United Dental believes that it can
continue to operate profitably on a stand-alone basis, although there can be no
assurances as to actual results in such event.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain executive officers and directors of United Dental have interests in
the merger that are in addition to the interests of holders of United Dental's
common stock generally. United Dental's Board of Directors was aware of these
interests and considered them, among other matters, prior to approving the
merger agreement and the transactions contemplated thereby. See "THE PROPOSED
MERGER-- Interests of Certain Persons in the Merger."
22
<PAGE>
INDUSTRY
MATURE INDUSTRY; COMPETITION
Life and health insurance is a mature industry. In recent years, the
industry has experienced virtually no growth in life insurance sales, though the
aging population has increased the demand for retirement savings products.
Insurance is a highly competitive industry and Protective encounters significant
competition in all lines of business from other insurance companies, many of
which have greater financial resources than Protective, as well as competition
from other providers of financial services.
The life and health insurance industry is consolidating with larger, more
efficient organizations emerging from consolidation. Also, mutual insurance
companies are converting to stock ownership which will give them greater access
to capital markets.
Management believes that Protective's ability to compete is dependent upon,
among other things, its ability to attract and retain distribution channels to
market its insurance and investment products, its ability to develop competitive
and profitable products, its ability to maintain low unit costs, and its
maintenance of strong claims-paying and financial strength ratings from ratings
agencies.
Protective competes against other insurance companies and financial
institutions in the origination of commercial mortgage loans.
RATINGS
Ratings are an important factor in the competitive position of insurance
companies. Rating organizations periodically review the financial performance
and condition of insurers, including Protective's insurance subsidiaries. A
downgrade in the ratings of Protective's insurance subsidiaries could adversely
affect its ability to sell its products and its ability to compete for
attractive acquisition opportunities.
Rating organizations assign ratings based upon several factors. While most
of the considered factors relate to the rated company, some of the factors
relate to general economic conditions and circumstances outside the rated
company's control. For the past several years, rating downgrades in the industry
have exceeded upgrades.
POLICY CLAIMS FLUCTUATIONS
Protective's results of operations may fluctuate from year to year on
account of fluctuations in policy claims received by Protective.
LIQUIDITY AND INVESTMENT PORTFOLIO
Many of the products offered by Protective's insurance subsidiaries allow
policyholders and contract holders to withdraw their funds under defined
circumstances. Protective's insurance subsidiaries design products and configure
investment portfolios so as to provide and maintain sufficient liquidity to
support anticipated withdrawal demands and contract benefits and maturities.
Formal asset/liability management programs and procedures are used continuously
to monitor the relative duration of Protective's assets and liabilities. While
Protective's insurance subsidiaries own a significant amount of liquid assets,
many of their assets are relatively illiquid. Significant unanticipated
withdrawal or surrender activity could, under some circumstances, compel
Protective's insurance subsidiaries to dispose of illiquid assets on unfavorable
terms, which could have a material adverse effect on Protective.
INTEREST RATE FLUCTUATIONS
Sudden and/or significant changes in interest rates expose life insurance
companies to the risk of not earning anticipated spreads between the interest
rates earned on investments and the credited rates paid on outstanding policies.
Both rising and declining interest rates can negatively affect Protective's
spread
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income. For example, certain of Protective's insurance and investment products
guarantee a minimum credited rate. While Protective develops and maintains
asset/liability management programs and procedures designed to preserve spread
income in rising or falling interest rate environments, no assurance can be
given that sudden and/or significant changes in interest rates will not
materially affect such spreads.
Lower interest rates may result in lower sales of Protective's insurance and
investment products.
REGULATION AND TAXATION
Protective's insurance subsidiaries are subject to government regulation in
each of the states in which they conduct business. Such regulation is vested in
state agencies having broad administrative power over all aspects of the
insurance business, including premium rates, marketing practices, advertising,
policy forms and capital adequacy, and is concerned primarily with the
protection of policyholders rather than stockholders. Protective cannot predict
the form of any future regulatory initiatives.
Under the Code, income tax payable by policyholders on investment earnings
is deferred during the accumulation period of certain life insurance and annuity
products. This favorable tax treatment may give certain of Protective's products
a competitive advantage over other non-insurance products. Certain proposals
contained in President Clinton's Fiscal Year 1999 Budget would, if enacted,
adversely impact the tax treatment of variable annuity and certain other life
insurance products. To the extent that the Code is revised to reduce the
tax-deferred status of life insurance and annuity products, or to increase the
tax deferred status of competing products, all life insurance companies,
including Protective's subsidiaries, would be adversely affected with respect to
their ability to sell such products, and, depending on grandfathering
provisions, the surrenders of existing annuity contracts and life insurance
policies. Protective cannot predict what future initiatives the President or
Congress may propose which may affect Protective or whether or in what form any
such proposal would ultimately be enacted.
LITIGATION
A number of civil jury verdicts have been returned against insurers in the
jurisdictions in which Protective does business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents, and
other matters. Increasingly, these lawsuits have resulted in the award of
substantial judgments against the insurer that are disproportionate to the
actual damages, including material amounts of punitive damages. In some states
(including Alabama), juries have substantial discretion in awarding punitive
damages which creates the potential for unpredictable material adverse judgments
in any given punitive damages suit. Protective and its subsidiaries, like other
insurers, in the ordinary course of business are involved in such litigation.
The outcome of any such litigation cannot be predicted with certainty. In
addition, in some class action and other lawsuits involving insurers' sales
practices, insurers have made material settlement payments.
INVESTMENT RISKS
Protective's invested assets are subject to customary risks of credit
defaults and changes in market values. The value of Protective's commercial
mortgage portfolio depends in part on the creditworthiness of the tenants
occupying the properties which Protective has financed. Factors that may affect
the overall default rate on, and market value of, Protective's invested assets
include interest rate levels, financial market performance and general economic
conditions, as well as particular circumstances affecting the businesses of
individual borrowers and tenants.
CONTINUING SUCCESS OF ACQUISITION STRATEGY
Protective has actively pursued a strategy of acquiring blocks of insurance
policies and small insurance companies. This acquisition strategy has increased
Protective's earnings in part by allowing Protective to position itself to
realize certain operating efficiencies associated with economies of scale. There
can be no
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<PAGE>
assurance, however, that suitable acquisitions, presenting opportunities for
continued growth and operating efficiencies, will continue to be available to
Protective, or that Protective will realize the anticipated financial results
from its acquisitions.
RELIANCE ON THE PERFORMANCE OF OTHERS
Protective has entered into various ventures involving other parties.
Examples include, but are not limited to: many of Protective's products are sold
through independent distribution channels; the Investment Products Division's
variable annuity deposits are invested in funds managed by four unaffiliated
investment managers; a portion of the sales in the Individual Life, Dental and
Consumer Benefits, and Financial Institutions Divisions comes from arrangements
with unrelated marketing organizations; and Protective has entered the Hong Kong
insurance market in a joint venture. Therefore Protective's results may be
affected by the performance of others.
YEAR 2000
Older computer hardware and software often denote the year using two digits
rather than four; for example, the year 1997 often is denoted by such hardware
and software as "97." It is probable that such hardware and software will
malfunction when calculations involving the year 2000 are attempted because the
hardware and/or software will interpret "00" as representing the year 1900
rather than the year 2000. This "Year 2000" issue potentially affects all
individuals and companies (including Protective, its customers, business
partners, suppliers, banks, custodians and administrators) who rely on computers
or devices containing computer chips.
Protective has developed and is implementing a Year 2000 transition plan
intended to identify and modify or replace primary hardware and/or software
systems on which it relies that have a Year 2000 issue. Protective is also
developing and implementing a plan to identify and modify or replace secondary
hardware and/or software systems on which it relies that have a Year 2000 issue.
Substantial resources are being devoted to this effort; however the costs to
develop and implement these plans are not expected to be material. Protective is
also confirming that its service providers are implementing plans to identify
and modify or replace their systems that have a Year 2000 issue.
Protective currently anticipates that its systems will be able to process
transactions dated beyond 1999 on or before December 31, 1999. There can be no
assurance, however, that Protective's efforts will be successful, that
interaction with other service providers with Year 2000 issues will not impair
Protective's operations, or that the Year 2000 issue will not otherwise
adversely affect Protective.
Protective has reviewed United Dental's computer software and hardware for
any issues that may occur as a result of the arrival of the year 2000 and
believes that none of United Dental's software or hardware will require a
material expenditure or effort in order to continue functioning properly beyond
the year 2000. However, there can be no assurance that such a material
expenditure or effort will not be required.
REINSURANCE
As is customary in the insurance industry, Protective's insurance
subsidiaries cede insurance to other insurance companies. However, the ceding
insurance company remains liable with respect to ceded insurance should any
reinsurer fail to meet the obligations assumed by it. Additionally, Protective
assumes policies of other insurers. Any regulatory or other development
affecting the ceding insurer could also have an adverse effect on Protective.
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<PAGE>
THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished by United Dental to its
stockholders in connection with the solicitation of proxies by and on behalf of
United Dental's Board of Directors for use at the Special Meeting. At the
Special Meeting, the holders of United Dental's common stock will be asked to
consider and vote upon a proposal for the adoption and approval of the merger
agreement and the merger. This Proxy Statement/Prospectus and the enclosed proxy
are first being sent to holders of United Dental's common stock on or about
August 7, 1998.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The Special Meeting of Stockholders will be held on September 10, 1998, at
9:30 a.m. local time, at The Harvey Hotel Addison, 14315 Midway Road, Dallas,
Texas 75244.
VOTING INFORMATION FOR UNITED DENTAL STOCKHOLDERS
The close of business on July 21, 1998 has been fixed by United Dental's
Board of Directors as the record date (the "Record Date") for determining
eligibility to receive notice of and to vote at the Special Meeting. As of the
Record Date, there were 8,982,616 shares of United Dental's common stock
outstanding, held of record by 188 persons.
At the Special Meeting, stockholders of United Dental will be asked to
consider and vote on the proposal to adopt and approve the merger agreement and
the merger. United Dental's Board of Directors has unanimously approved and
unanimously recommends that the stockholders vote "FOR" adoption and approval of
the merger agreement and the merger.
Each record holder of United Dental's common stock is entitled to one vote
for each share held on all matters submitted to a vote of stockholders. There is
no cumulative voting. The presence at the Special Meeting, either in person or
by proxy, of the holders of a majority of the shares of United Dental's common
stock issued and outstanding and entitled to vote thereat will constitute a
quorum for the transaction of business. Assuming the presence of a quorum, the
affirmative vote, either in person or by proxy, of the holders of a majority of
the shares of United Dental's common stock issued and outstanding on the Record
Date is required to adopt and approve the merger agreement and the merger.
Approval of any other matter properly considered and acted upon at the Special
Meeting requires the affirmative vote, either in person or by proxy, of at least
a majority of the issued and outstanding shares of United Dental's common stock
present in person or by proxy and entitled to vote at the Special Meeting.
Abstentions will be counted as shares that are present and entitled to vote for
purposes of determining the presence or absence of a quorum. Abstentions will
therefore have the same effect as votes against any proposal to be voted on at
the Special Meeting. Broker non-votes will be counted only for purposes of
determining the presence or absence of a quorum. Broker non-votes on the
proposal to adopt the merger agreement will have the same effect as votes
against such proposal. A "broker non-vote" refers to shares represented at the
Special Meeting in person or by proxy by a broker or nominee where such broker
or nominee (i) has not received voting instructions on a particular matter for
the beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have the discretionary voting power on such matter.
As of the Record Date, directors and executive officers of United Dental
owned beneficially an aggregate of 1,807,883 (which includes 778,500 shares held
by Citibank N.A. and George E. Bello, trustees of two independent trusts of
which relatives of Mr. Anderson are beneficiaries and 150,000 shares which Mr.
Anderson transferred to the Rose-Marie and Jack R. Anderson Foundation on May
20, 1998) outstanding voting shares of United Dental's common stock
(approximately 19.9%). These directors and executive officers have advised
United Dental that they presently intend to vote or to direct the vote of all
shares of United Dental's common stock over which they have voting power "FOR"
adoption and approval of the merger agreement and the merger.
Representatives of PricewaterhouseCoopers LLP are expected to (i) be present
at the Special Meeting, (ii) have the opportunity to make a statement if they
desire to do so, and (iii) be available to respond to appropriate questions at
the Special Meeting.
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SOLICITATION OF PROXIES
The accompanying proxy sent to United Dental stockholders is being solicited
by United Dental's Board of Directors. All proxies in the enclosed form of proxy
that are properly executed and received by United Dental prior to commencement
of voting at the Special Meeting will be voted at the Special Meeting in
accordance with the instructions thereon. IF A PROXY IS EXECUTED AND RETURNED
WITHOUT INDICATING ANY VOTING INSTRUCTIONS, THE SHARES OF UNITED DENTAL'S COMMON
STOCK REPRESENTED BY SUCH PROXY WILL BE VOTED "FOR" ADOPTION AND APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER. A stockholder may revoke a proxy at any time
before it is voted by filing with the Secretary of United Dental either an
instrument revoking the proxy or a duly executed proxy bearing a later date, or
by attending the Special Meeting and voting in person. Any such filing should be
sent to the United Dental Secretary at 13601 Preston Road, Suite 500 East,
Dallas, Texas 75240. Attendance at the Special Meeting will not by itself revoke
a proxy.
By returning a signed proxy card, a stockholder will be authorizing the
proxy holder to vote in his discretion regarding any procedural motions which
may come before the Special Meeting, unless such proxy card is appropriately
marked to withhold such discretionary authority. For example, this authority
could be used to adjourn the meeting if United Dental believes it is desirable
to do so. Adjournment or other procedural matters could be used to obtain more
time before a vote is taken in order to solicit additional proxies or to provide
additional information to stockholders. United Dental has no plans to adjourn
the Special Meeting at this time, but it intends to attempt to do so if it
believes doing so would promote stockholder interests. Neither votes against the
proposal to adopt and approve the merger agreement and the merger nor
abstentions will be used to vote in favor of adjournment to solicit additional
votes.
The management of United Dental does not know of any other matters, other
than those set forth herein, which may come before the Special Meeting. If any
other matters are properly presented to the Special Meeting for action, the
persons named in the applicable form of proxy will have discretion to vote on
such matters in accordance with their own judgment and applicable Commission
rules.
The expense of printing this Proxy Statement and the proxies solicited
hereby, and the expense of soliciting such proxies, will be borne by United
Dental. In addition to the use of the mails, proxies may be solicited by
officers and directors and regular employees of United Dental, without
additional remuneration, by personal interviews, telephone, facsimile or
otherwise. United Dental has retained D.F. King & Co., Inc., a proxy
solicitation firm, to act as Proxy Solicitor/Information Agent to assist with
soliciting and tabulating proxies for the Special Meeting at an estimated
expense of approximately $5,000, plus reasonable out-of-pocket expenses. United
Dental will request banking institutions, brokerage firms, custodians, trustees,
nominees and fiduciaries to forward proxy solicitation material to the
beneficial owners of United Dental's common stock held by such persons and
United Dental will reimburse reasonable forwarding expenses upon the request of
such record holders.
DISSENTERS' RIGHTS
Under Delaware law, the holders of United Dental's common stock are entitled
to appraisal rights if the merger is consummated, provided that certain
procedures are followed. Failure to take any necessary steps will result in a
termination or waiver of the rights of a stockholder to such appraisal. See "THE
PROPOSED MERGER--Rights of Dissenting Stockholders."
UNITED DENTAL'S BOARD OF DIRECTORS HAS DETERMINED THAT ADOPTION OF THE
MERGER AGREEMENT IS IN THE BEST INTERESTS OF UNITED DENTAL AND ITS STOCKHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF UNITED DENTAL VOTE IN FAVOR
OF THE MERGER.
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CERTAIN INFORMATION REGARDING PROTECTIVE
PROTECTIVE LIFE CORPORATION
Protective Life Corporation, a Delaware corporation incorporated in 1981, is
a holding company whose subsidiaries provide financial services through the
production, distribution, and administration of insurance and investment
products. Protective operates seven divisions whose principal strategic focuses
can be grouped into three general categories: life insurance, specialty
insurance products and retirement savings and investment products. Protective's
Dental and Consumer Benefits Divisions focuses on indemnity and managed-care
dental products. Protective also participates in a joint venture which owns a
life insurance company in Hong Kong. Protective Life Insurance Company, founded
in 1907, is Protective's principal operating subsidiary. Protective Life
Insurance Company is currently assigned a rating of A+ (Superior) by A.M. Best
Company, Inc. (2nd highest rating of 15), insurer financial strength ratings of
AA (Very Strong) by Standard & Poor's (3rd highest rating of 18) and A1 by
Moody's Investors Service, Inc. (5th highest rating of 15). Protective's
principal executive offices are located at 2801 Highway 280 South, Birmingham,
Alabama 35223 (Telephone: (205) 879-9230).
For the year ended December 31, 1997 and the three months ended March 31,
1998, Protective reported revenues of approximately $1.1 billion and $.3
billion, respectively, and net income of $112.0 million and $30.0 million,
respectively. At March 31, 1998, Protective had total assets of approximately
$10.8 billion and stockholders' equity of $785.4 million.
Over the five-year period ended December 31, 1997, Protective's total assets
have grown from $4.0 billion to approximately $10.5 billion. In the same
five-year period, Protective's net income has grown from $41.4 million to $112.0
million, a compound annual growth rate of 22.0% and its return on equity has
averaged 18.0%.
Protective's common stock is listed and traded on the New York Stock
Exchange under the symbol "PL." AmSouth Bank is the transfer agent, registrar
and dividend disbursing agent for Protective's common stock. Its address is 1900
Fifth Avenue North, Birmingham, Alabama 35288 (Telephone: (205) 560-7455).
RECENT DEVELOPMENTS
On July 28, 1998 Protective announced its earnings for the second quarter of
1998, net income for the second quarter of 1998 was $32.5 million, compared to
$27.5 million reported for the second quarter of 1997. Diluted net income was
$.52 per share in the second quarter of 1998 compared to $.43 per share in the
second quarter of 1997.
Net income for the first six months of 1998 was $62.5 million, compared to
$52.3 million reported for the first six months of 1997. Diluted net income was
$.99 per share in the first six months of 1998 compared to $.83 per share in the
first six months of 1997. At June 30, 1998, Protective's assets were $11.0
billion. Stockholders' equity excluding unrealized gains and losses on
investments was $12.14 per share at June 30, 1998.
STRATEGY
Protective operates seven divisions whose principal strategic focuses can be
grouped into three general categories: life insurance, specialty insurance
products and retirement savings and investment products.
Set forth below are the operating earnings (unaudited), realized investment
gains (losses) and related amortization of deferred policy acquisition costs
(unaudited), and income before income tax for each of Protective's Divisions and
a Corporate and Other segment, and unallocated realized investment gains
(losses) for the three month periods ended March 31, 1998 and March 31, 1997 and
each of the years ended December 31, 1997, 1996, 1995, 1994 and 1993.
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<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31,(1) MARCH 31, YEARS ENDED DECEMBER 31,
------------- ------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
------------- ------------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Income(2)(3)(4)
Life Insurance
Acquisitions................................ $ 11,474 $ 14,835 $ 55,638 $ 52,670 $ 48,490 $ 36,796 $ 27,415
Individual Life............................. 6,367 5,764 20,384 14,027 13,490 13,933 18,005
West Coast.................................. 4,458 -- 8,202 -- -- -- --
Speciality Insurance Products
Dental...................................... 3,302 3,718 16,259 5,138 10,060 10,139 8,501
Financial Institutions...................... 4,326 2,917 14,112 9,531 8,375 9,024 7,137
Retirement Savings and Investment Products
GIC......................................... 8,420 6,913 28,116 40,082 31,557 26,005 22,070
Investment Products......................... 2,977 3,166 11,347 9,624 6,352 120 (748)
Corporate and Other(2)........................ 3,995 729 15,022 2,070 (2,287) (581) (2,409)
------------- ------------- --------- --------- --------- --------- ---------
Total Operating Earnings.................... 45,319 38,042 169,080 133,142 116,037 95,436 79,971
------------- ------------- --------- --------- --------- --------- ---------
Realized Investment Gains (Losses)
Acquisitions................................ -- -- -- -- -- 532 --
Individual Life............................. -- -- -- 3,098 -- -- --
GIC......................................... (433) (724) (3,179) (7,963) (3,908) 3,000 1,175
Investment Products......................... (87) 145 589 3,858 4,937 (2,500) 2,003
Unallocated Realized Investment Gains
(Losses).................................. 531 161 3,420 6,517 583 5,266 1,876
Related Amortization of Deferred Policy
Acquisition Costs
Individual Life............................. -- -- -- (1,974) -- -- --
Investment Products......................... 43 (93) (373) (1,887) (1,565) 1,675 --
------------- ------------- --------- --------- --------- --------- ---------
Total Net................................... 54 (511) 457 1,649 47 7,973 5,054
------------- ------------- --------- --------- --------- --------- ---------
Income (Loss) Before Income Tax(3)(4)
Life Insurance
Acquisitions................................ 11,474 14,835 55,638 52,670 48,490 37,328 27,415
Individual Life............................. 6,367 5,764 20,384 15,151 13,490 13,933 18,005
West Coast.................................. 4,458 -- 8,202 -- -- -- --
Speciality Insurance Products
Dental...................................... 3,302 3,718 16,259 5,138 10,060 10,139 8,501
Financial Institutions...................... 4,326 2,917 14,112 9,531 8,375 9,024 7,137
Retirement Savings and Investment Products
GIC......................................... 7,987 6,189 24,937 32,119 27,649 29,005 23,245
Investment Products......................... 2,933 3,218 11,563 11,595 9,724 (705) 1,255
Corporate and Other (2)....................... 3,995 729 15,022 2,070 (2,287) (581) (2,409)
Unallocated Realized Investment Gains
(Losses).................................... 531 161 3,420 6,517 583 5,266 1,876
------------- ------------- --------- --------- --------- --------- ---------
Total Income before Income Tax.............. $ 45,373 $ 37,531 $ 169,537 $ 134,791 $ 116,084 $ 103,409 $ 85,025
------------- ------------- --------- --------- --------- --------- ---------
------------- ------------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------------
(1) The selected financial data for the period ended March 31, 1998 is
unaudited. The selected financial data for the years ended December 31,
1997, 1996, 1995, 1994 and 1993 have been derived from previously audited
consolidated financial statements of Protective.
(2) Income before Income Tax excluding realized investment gains and losses and
related amortization of deferred policy acquisition costs.
(3) Certain reclassifications have been made in the 1995, 1994 and 1993 results
relating to the allocation of corporate overhead to make period results
comparable to those of the subsequent periods. Such reclassifications had no
effect on previously reported consolidated net income, total assets or
stockholders' equity.
(4) Operating income and income before taxes for the Corporate and Other segment
have been reduced by pre-tax minority interest in income of consolidated
subsidiaries of $4,653 and $1,237 for the periods ended March 31, 1998 and
1997, respectively and $9,836 in 1997, $4,950 in 1996, $4,950 in 1995,
$2,764 in 1994, and $19 in 1993. Such minority interest in 1998, 1997, 1996,
1995 and 1994 arises from payments made on Monthly Income Preferred
Securities issued in 1994 and Trust Originated Preferred Securities and
FELINE PRIDES issued in 1997.
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LIFE INSURANCE
A strategic focus of Protective is to expand its life insurance operations
through internal growth and acquisitions. The Acquisitions, Individual Life, and
West Coast Divisions support this strategy.
ACQUISITIONS DIVISION
Protective is an active participant in the consolidation of the life and
health insurance industry. The Acquisitions Division focuses on acquiring,
converting, and servicing business acquired from other companies. These
acquisitions may be accomplished through acquisitions of companies or through
the assumption or reinsurance of life insurance and related policies.
Thirty-nine transactions have been closed by the Division since 1970, including
12 since 1989. Blocks of policies acquired through the Division are usually
administered as "closed" blocks; i.e., no new policies are sold. Therefore, the
amount of insurance in force for a particular acquisition is expected to decline
with time due to lapses and deaths of the insureds. However, in the case of the
most recent acquisition closed by the Division, West Coast Life Insurance
Company ("West Coast") which is discussed below, Protective has elected to
continue the marketing of new policies.
Protective believes that its highly focused and disciplined approach to the
acquisition process and its extensive experience in the assimilation,
conservation, and servicing of purchased business give it a significant
competitive advantage over many other companies that attempt to make similar
acquisitions. Protective expects acquisition opportunities to continue to be
available as the life and health industry continues to consolidate; however,
management believes that Protective may face increased competition for future
acquisitions.
Total revenues and income before income tax from the Acquisitions Division
are expected to decline with time unless new acquisitions are made. Therefore,
the Division's revenues and earnings may fluctuate from year to year depending
upon the level of acquisition activity.
In the second quarter of 1995, the Division coinsured a block of 28,000
policies. In January 1996, the Division coinsured a block of 38,000 policies. In
December 1996, the Division acquired Community National Assurance Company with
16,000 policies and coinsured a related block of 22,000 policies. In June 1997,
Protective acquired West Coast which is discussed below.
From time to time other of Protective's Divisions have acquired companies
and blocks of policies which are included in their respective results.
INDIVIDUAL LIFE DIVISION
The Individual Life Division markets universal life, variable universal life
and other life insurance products on a national basis through a network of
independent insurance agents. In addition, the Division has grown sales by
developing niche marketing strategies. The strategies include marketing
specialty products through insurance brokerage channels and traditional life
insurance products through regional stockbrokers and banks. The Division also
offers its products on a "private label" basis to other insurance companies and
their distribution systems. The Division has experienced increased sales even
though the life insurance industry is a mature industry.
The Division primarily utilizes a distribution system based on experienced
independent personal producing general agents who are recruited by regional
sales managers. At December 31, 1997, there were 37 regional sales managers
located throughout the United States. Approximately 51% of the Division's 1997
sales came from this distribution system. In addition, the Division distributes
insurance products in the life insurance brokerage market through a wholly-owned
subsidiary, Empire General Life Assurance Corporation, representing
approximately 39% of sales. The remaining 10% of 1997 sales came from
stockbrokers, banks, and private label arrangements.
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<PAGE>
The Division also includes ProEquities, Inc. ("PES"), an affiliated
securities broker-dealer. Through PES, members of the Division's field force who
are licensed to sell securities can sell stocks, bonds, mutual funds, and
investment products that may be manufactured or issued by companies other than
Protective.
WEST COAST DIVISION
On June 3, 1997, Protective acquired West Coast. Headquartered in San
Francisco, West Coast sells universal and traditional ordinary life products in
the life insurance brokerage market and in the "bank owned life insurance"
market.
Most acquisitions closed by the Acquisitions Division do not include the
acquisition of an active sales force. In transactions where some marketing
capacity was included, Protective either ceased future marketing efforts or
combined those efforts with another Division. In the West Coast case, Protective
elected to continue the marketing of new policies, operating the company as a
separate Division.
The West Coast Division primarily utilizes a distribution system comprised
of brokerage general agencies ("BGAs") with a network of independent life
agents. The BGAs provide varying levels of service to the independent agents
based on the size and structure of the individual BGA organizations. At December
31, 1997, the Division worked with 42 BGAs located throughout the United States.
SPECIALTY INSURANCE PRODUCTS
A second strategic focus of Protective is to participate in specialized
segments of the insurance industry that offer attractive growth opportunities.
The Dental and Consumer Benefits and Financial Institutions Divisions support
this strategy.
DENTAL AND CONSUMER BENEFITS DIVISION
The Division (formerly known as the Group Division) recently exited from the
traditional group major medical business, fulfilling the Division's strategy to
focus primarily on dental and related products. Accordingly, the Division was
renamed the Dental and Consumer Benefits ("Dental") Division.
The Dental Division's primary strategic emphasis is on indemnity and managed
care dental products. At December 31, 1997, the Division had approximately
527,000 members in its dental managed care programs, and approximately 1,157,000
members in all of its dental programs.
The Division was a pioneer in developing indemnity dental products for the
voluntary payroll deduction market. In 1995, the Division entered the dental
managed care segment when it acquired a dental managed care company which
transacts business under the trade name "DentiCare". The acquisition combined
DentiCare's high quality service and product capabilities with the Dental
Division's marketing strength and capacity to distribute dental products through
a much broader geographic distribution framework. The Division's strategy is to
promote a "dual choice" option by offering DentiCare's products through the
Division's existing indemnity dental distribution channels. The Division has
also developed an innovative system for prospecting and selling dental insurance
products by telephone.
The Division also plans to grow the dental business through acquisitions. In
1996, the Division extended the geographical reach of its dental managed care
operations into Oklahoma, Arkansas and Missouri and added approximately 38,000
new members through the acquisition of two related dental managed care plans
doing business in those states. In 1997, the Division acquired three similar
organizations: one with approximately 18,000 members in Wisconsin, a second with
approximately 14,000 members in Texas, and a third with approximately 57,000
members in Georgia.
The Division recently launched Dental Network Plans, which offers discounted
fee-for-service dental programs to individual consumers and groups where
enrolled consumers have access to a contracted network of dental providers who
have agreed to a discounted fee schedule.
31
<PAGE>
The Division also markets group life and disability coverages, and
administers an essentially closed block of individual cancer insurance policies.
FINANCIAL INSTITUTIONS DIVISION
The Financial Institutions Division specializes in marketing credit life and
disability insurance products through banks, consumer finance companies and
automobile dealers. The majority of these policies cover consumer loans made by
financial institutions located primarily in the southeastern United States and
automobile dealers throughout the United States. Therefore, the demand for
credit life and credit health insurance is related to the general level of loan
demand. The Division markets through employee field representatives, independent
brokers and wholly-owned subsidiaries. Protective believes it has been a
beneficiary of a "flight to quality," as financial institutions and automobile
dealers increasingly prefer to do business with insurers having quality
products, strong balance sheets and high-quality training and service
capabilities.
On September 30, 1997, the Division acquired the Western Diversified Group.
The Western Diversified Group markets credit insurance and related products
through automobile dealers primarily in the Midwestern United States. The
Western Diversified Group includes a small property and casualty insurer that
sells automobile extended warranty coverages, which the Division plans to market
nationally through its other distribution channels. In addition, on October 1,
1997, the Division acquired an unrelated closed block of credit policies.
RETIREMENT SAVINGS AND INVESTMENT PRODUCTS
A third strategic focus of Protective is to offer products that respond to
the shift in consumer preference to savings products brought about by
demographic trends as "baby-boomers" move into the saving stage of their life
cycle. The two Divisions that support this strategy are the Guaranteed
Investment Contracts and Investment Products Divisions.
GUARANTEED INVESTMENT CONTRACTS DIVISION
Protective entered the Guaranteed Investment Contracts ("GIC") business in
1989. The GIC Division markets GICs to 401(k) and other qualified retirement
savings plans. GICs are generally contracts which specify a return on deposits
for a specified period and often provide flexibility for withdrawals, in keeping
with the benefits provided by the plan. The Division also offers related
products, including guaranteed funding agreements offered to the trustees of
municipal bond proceeds, floating rate contracts offered to bank trust
departments, and long-term annuity contracts offered to fund certain state
obligations. The Division's emphasis is on a consistent and disciplined approach
to product pricing and asset/liability management, careful underwriting of early
withdrawal risks and maintaining low distribution and administration costs.
Most GIC contracts written by Protective have maturities of three to five
years. Prior to 1993, few GIC contracts were maturing because the contracts were
newly written. Therefore, GIC account balances grew at a significant rate.
Beginning in 1993, GIC contracts began to mature as contemplated when the
contracts were sold. Hence, the rate of growth in GIC deposits has decreased as
the amount of maturing contracts has increased.
INVESTMENT PRODUCTS DIVISION
The Investment Products Division manufactures, sells, and supports fixed and
variable annuity products. These products are primarily sold through
stockbrokers, but are also sold through financial institutions and the
Individual Life Division's sales force. The demand for annuity products is
related to the general level of interest rates and performance of the equity
markets.
32
<PAGE>
Since 1990, the Division has offered modified guaranteed annuity products
which guarantee an interest rate for a fixed period. Because contract values are
"market-value adjusted" upon surrender prior to maturity, these products afford
Protective a measure of protection from changes in interest rates. In 1992, the
Division ceased most new sales of single premium deferred annuities. In 1994,
the Division introduced a variable annuity product which offers the policyholder
the opportunity to invest in various investment accounts.
Variable annuity products represent approximately 49% of the Division's
account balances at December 31, 1997 and 64% of the Division's 1997 sales.
CORPORATE AND OTHER
Protective has an additional business segment referred to as Corporate and
Other. The Corporate and Other segment primarily consists of net investment
income and expenses not attributable to the Divisions described above (including
net investment income on capital and interest on substantially all debt). This
segment also includes earnings from various investment-related transactions and
the operations of several small subsidiaries. The earnings of this segment may
fluctuate from year to year.
In 1994, Protective entered into a joint venture arrangement to enter the
Hong Kong insurance market. Protective owns a 50% interest in a Hong Kong
insurer which commenced business in early 1995. Management believes that this
joint venture will position Protective to market life insurance in mainland
China when that opportunity unfolds. Protective continues to investigate other
possible opportunities in Asia.
INVESTMENT PORTFOLIO
The types of assets in which Protective may invest are influenced by state
laws which prescribe qualified investment assets. Within the parameters of these
laws, Protective's investment portfolio is actively managed to support the
liabilities of Protective's lines of business, giving consideration to such
factors as liquidity needs, investment quality, investment return, matching of
assets and liabilities and the composition of the portfolio by asset type and
credit exposure. The following table shows the composition of Protective's
invested assets at March 31, 1998:
<TABLE>
<CAPTION>
PERCENT OF
ASSET TOTAL
VALUE INVESTMENTS
--------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Fixed Maturities:
Bonds:
Mortgage-backed securities..................................... $2,936,159 36.2%
United States Government and government agencies and
authorities.................................................. 80,192 1.0
States, municipalities, and political subdivisions............. 28,174 0.3
Public utilities............................................... 503,980 6.2
Convertibles and bonds with warrants attached.................. 544 --
All other Corporate bonds...................................... 2,740,781 33.8
Redeemable preferred stocks...................................... 6,024 0.1
--------- -----
Total fixed maturities......................................... 6,297,854 77.6
--------- -----
Equity securities:
Common stocks--industrial, miscellaneous, and all other.......... 4,605 0.1
Nonredeemable preferred stocks................................... 8,525 0.1
--------- -----
Total equity securities........................................ 13,130 0.2
Mortgage loans on real estate...................................... 1,367,866 16.8
Investment real estate............................................. 13,319 0.2
Policy loans....................................................... 192,961 2.3
Other long-term investments........................................ 62,796 0.8
Short-term investments............................................. 169,267 2.1
--------- -----
Total investments.................................................. $8,117,193 100.0%
--------- -----
--------- -----
</TABLE>
33
<PAGE>
In its mortgage-backed securities portfolio, Protective has focused on
sequential, planned amortization class and targeted amortization class
securities, which tend to be less volatile than other classes of mortgage-backed
securities.
In its mortgage loan portfolio, Protective has, for approximately 25 years,
specialized in originating small loans (the average size of loans made during
1997 was $3.0 million) to finance shopping centers, typically in smaller
communities anchored by one or more strong regional or national retail stores.
On a cumulative basis, Protective has had no significant loss of principal on
its commercial mortgage loan portfolio in over 20 years. As of March 31, 1998,
1.5% of the commercial loan portfolio was classified as 90 days past due,
foreclosed or restructured, which Protective believes to be well below the life
insurance industry average.
PLC MERGER SUBSIDIARY
PLC Merger Subsidiary is a wholly owned subsidiary of Protective, organized
under the laws of the State of Delaware on March 4, 1998 to serve as a vehicle
for acquiring United Dental. As of the date of this Proxy Statement/Prospectus,
PLC Merger Subsidiary has no assets and does not conduct any operations.
34
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF PROTECTIVE
The following selected consolidated financial information as of and for the
years ended December 31, 1997, 1996, 1995, 1994 and 1993 has been derived from
previously published audited consolidated financial statements of Protective,
prepared in accordance with generally accepted accounting principles, which have
been examined and reported upon by PricewaterhouseCoopers LLP, independent
accountants. The selected consolidated financial information at and for the
three-month periods ended on March 31, 1998 and 1997 has been derived from the
first quarter 1998 unaudited quarterly consolidated financial statements of
Protective. The consolidated financial information should be read in conjunction
with, and is qualified in its entirety by reference to, the consolidated
financial statements from which it has been derived and the accompanying notes
thereto incorporated by reference herein. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Protective Life's
Consolidated Financial Statements and accompanying notes thereto, each of which
is incorporated herein by reference to Protective's Quarterly Report for the
period ended March 31, 1998 and Protective's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31, YEAR ENDED DECEMBER 31,
------------- ------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------- ------------- ---------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Premiums and policy fees.......... $ 149,358 $ 129,578 $ 522,335 $ 494,153 $ 432,576 $ 402,772 $ 370,758
Net investment income............. 157,626 130,330 591,376 517,483 475,924 417,825 362,130
Realized investment gains
(losses)........................ 11 (418) 830 5,510 1,612 6,298 5,054
Other income...................... 13,518 4,762 32,784 20,857 11,768 21,553 21,695
------------- ------------- ---------- --------- --------- --------- ---------
Total revenues.................... 320,513 264,252 1,147,325 1,038,003 921,880 848,448 759,637
Benefits and expenses............. 270,487 225,484 967,952 898,262 800,846 742,275 674,593
Income tax expense................ 17,009 13,181 60,987 47,512 41,152 33,976 28,475
Minority interest................. 3,024 804 6,393 3,217 3,217 1,796 19
------------- ------------- ---------- --------- --------- --------- ---------
Net income........................ $ 29,993 $ 24,783 $ 111,993 $ 89,012 $ 76,665 $ 70,401 $ 56,550
------------- ------------- ---------- --------- --------- --------- ---------
------------- ------------- ---------- --------- --------- --------- ---------
PER SHARE DATA(1)
Net income per share--basic....... $ .48 $ .40 $ 1.79 $ 1.47 $ 1.34 $ 1.28 $ 1.03
Average shares
outstanding--basic.............. 62,606,735 62,317,466 62,429,250 60,570,782 57,320,224 54,952,772 54,763,164
Net income per share--diluted..... .47 .40 $ 1.78 $ 1.46 $ 1.33 $ 1.27 $ 1.02
Average shares
outstanding--diluted............ 62,261,753 62,669,264 62,849,618 60,969,580 57,705,698 55,459,224 55,311,992
Cash dividends.................... $ .10 $ .09 $ .39 $ .35 $ .31 $ .275 $ .253
Stockholders' equity.............. $ 12.72 $ 9.67 $ 12.30 $ 9.99 $ 9.15 $ 4.93 $ 6.59
Stockholders' equity excluding net
unrealized gains and losses
on investments.................. $ 11.72 $ 10.20 $ 11.30 $ 9.88 $ 8.15 $ 6.89 $ 5.87
BALANCE SHEET DATA
Total assets...................... $10,756,909 $ 8,317,012 $10,511,635 $8,263,205 $7,321,257 $6,130,284 $5,316,005
Long-term debt.................... $ 120,000 $ 195,000 $ 120,000 $ 168,200 $ 115,500 $ 98,000 $ 137,598
Total debt........................ $ 120,000 $ 195,000 $ 120,000 $ 181,000 $ 115,500 $ 98,000 $ 147,118
9% Cumulative Monthly Income
Preferred Securities, Series
A............................... $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ --
8.25% Trust Originated Preferred
Securities...................... $ 75,000 $ -- $ 75,000 $ -- $ -- $ -- $ --
6.5% FELINE PRIDES................ $ 115,000 $ -- $ 115,000 $ -- $ -- $ -- $ --
Stockholders' equity.............. $ 785,432 $ 595,976 $ 758,197 $ 615,316 $ 526,557 $ 270,373 $ 360,733
Stockholders' equity excluding
unrealized gains and losses on
investments..................... $ 723,605 $ 628,328 $ 696,470 $ 608,628 $ 468,694 $ 377,905 $ 321,449
</TABLE>
- ------------------------------
(1) All periods have been restated to reflect two-for-one stock splits, each in
the form of a stock dividend on June 1, 1995 and April 1, 1998.
35
<PAGE>
CERTAIN INFORMATION REGARDING UNITED DENTAL
GENERAL
United Dental is a managed dental benefits company that is licensed to
operate prepaid dental plans in 29 states and, as of March 31, 1998, provided
dental coverage to approximately 1.8 million members. United Dental offers a
comprehensive range of dental plans capable of meeting the needs of employer
groups of all sizes as well as individuals. United Dental's prepaid dentist
networks, as of March 31, 1998, consisted of approximately 71,000 general
dentists and specialty dentists providing a broad range of dental services.
United Dental sells its services through multiple distribution channels,
including independent brokers, third-party arrangements with HMOs and direct
sales. In 1996, United Dental entered into agreements to acquire five managed
dental benefits companies and one dental referral plan company, all six
companies having approximately 500,000 members in the aggregate. All the
acquisitions were completed as of mid-1997.
Managed dental benefits plans are usually offered as an alternative to
traditional dental indemnity insurance, although United Dental has the
capability of offering dual choice plans that provide both prepaid and indemnity
plans. Industry sources report that prepaid dental plans are typically priced
20% or more below comparable indemnity plans. Prepaid dental plans are offered
by employers to employees, frequently on a voluntary participation basis with
all or part of the premium being paid by the employee. At the time of
enrollment, participating employees and dependents become members of the prepaid
dental plan and, under most of United Dental's plans, each member is entitled to
select his or her own dentist from the dentist network. United Dental pays the
network dentist a fixed monthly amount, or capitation payment, for each member
who selected that dentist, regardless of the services rendered in any particular
month. In addition, the dentist is paid a separate fee, or copayment, by the
member at the time of service for many of the dental services covered under the
plan. Under the prepaid dental plans of United Dental, the vast majority of all
covered dental services are provided through these capitation arrangements, in
which United Dental bears little financial risk for either utilization levels or
cost of services. Many of United Dental's prepaid plans have a specialty care
benefit which pays the dentist on a fee-for-service basis and is controlled by a
specialty referral process.
RECENT DEVELOPMENTS
On July 31, 1998 United Dental announced earnings for the second quarter of
1998. Net income for the second quarter was $1.7 million compared to a net loss
of $4.4 million reported for the second quarter of 1997. Diluted net income was
$0.18 per share in the second quarter of 1998 compared to a net loss of $0.49
per share in the second quarter of 1997.
Net income for the first six months of 1998 was $3.2 million compared to a
net loss of $3.0 million for the first six months of 1997. Diluted net income
was $0.35 per share in the first six months of 1998 compared to a net loss of
$0.33 per share in the first six months of 1997. At June 30, 1998, United Dental
had assets of $159.4 million and stockholders' equity of $126.6 milion.
BENEFITS PLANS
United Dental offers a full spectrum of managed dental plans ("Plans")
through numerous subsidiaries licensed in specific states. The Plans range from
lower coverage, higher co-payment plans with low premiums to higher coverage,
low co-payment plans with higher premiums. Under each of United Dental's Plans,
a premium is paid to United Dental for the type of coverage selected, making the
employee and each participating dependent a member of the Plan. Premium payments
are made by the employer or by the employee (usually by payroll deduction) with
respect to employer offered Plans or by the member directly. A significant
portion of United Dental's revenues are derived from Plans in which the member
pays the entire premium amount.
Dual choice plans offered by United Dental allow an employee to select the
most suitable type of coverage at the beginning of the contract year by offering
each employee the choice of a prepaid Plan utilizing United Dental's dentist
network or traditional indemnity insurance coverage utilizing any dentist, but
usually at higher premiums and with lower coverage than the prepaid plan
alternative. United Dental also offers customized plans and services through
contractual arrangements with medical HMOs. Under these arrangements, United
Dental often provides only preventive and diagnostic dental benefits but may
also provide more comprehensive coverages, in each case either on a
"private-label" basis or directly through United Dental's Plans. In addition,
United Dental has developed a point of service plan that provides members of
United Dental's prepaid dental plans the option of receiving dental services
from dentists outside United Dental's dentist network on an indemnity basis. The
point of service plan allows
36
<PAGE>
the member to select the dentist of the member's choice each time services are
obtained. United Dental also offers a dental referral plan which contracts with
the dentists to provide dental services to referral plan members at certain
scheduled fee-for-service rates. No capitation payments are made to dentists.
Members of the referral plan pay a fixed fee per month for the member's ability
to access United Dental's referral plan network. United Dental bears no
financial risk or responsibility for dental services provided to members in
conjunction with its referral product.
United Dental sells its Plans primarily to employers through independent
agents, brokers and benefit consultants. United Dental employs a group sales
force of approximately 50 persons. The sales force primarily works with agents,
brokers and consultants to gain new contracts with employer groups.
Additionally, the sales force makes direct sales to medium and large employers
who do not use benefits advisors. Approximately three-fourths of United Dental's
membership is the result of sales through brokers who receive commissions based
on premiums received by United Dental from such sales.
DENTIST NETWORKS
United Dental designs its Plans and capitation programs to create dentist
networks of general and specialty dentists that United Dental believes provide
the quality of care and convenience needed to attract and retain members.
Typically, United Dental seeks established, private practice dentists who have
capacity in their practice to see at least 200 of United Dental's members as new
patients. Upon determining that a dentist meets United Dental's requirements for
participation in its dental network, United Dental offers the dentist a provider
contract setting forth the capitation payment, copayments, limitations and
exclusions and other terms and conditions applicable to the specific Plans in
which such dentist will participate. The capitation amounts payable to dentists
under such contracts vary from market to market. Provider contracts are
typically non-exclusive and permit United Dental or the dentist to terminate the
contract with 90 days prior written notice. Additionally, United Dental requires
that its network dentists maintain malpractice insurance and satisfy quality
service standards. United Dental periodically reviews its general and specialty
dentists for continued compliance with United Dental's requirements for
participation in its dentist network.
INDUSTRY
Increasing concern with the costs of health care, including dental care, has
resulted in a greater willingness by employers and consumers to consider managed
health care delivery systems. Health maintenance organizations, preferred
provider organizations and other forms of managed health care plans for general
medical services have not customarily devoted the resources to develop specialty
managed delivery systems and frequently subcontract with companies providing
single specialty managed delivery systems such as United Dental's prepaid dental
plans. A prepaid dental plan pays a fixed monthly capitation payment to the
network dentist who provides dental services as needed at either no cost to the
member or at reduced fees (copayments) paid by the member. Consequently, the
risk of high utilization is shifted to the dentist, although, generally, the
dentist receives copayments for many covered services that are often greater
than the direct costs of the dentist, reducing financial risk. The capitation
method rewards efficient providers who stress routine, preventive care and
control their fixed expenses. In comparison, under the traditional
fee-for-service payment system, the risk of utilization is borne by the insurer
or the consumer, with little incentive to the dentist to be an efficient
provider.
In addition, some prepaid dental plans provide for specialty care at fixed
copayments by the member. Unlike medical care, the majority of dental care is
provided by general dentists with some specialty care provided by endodontists
(specialists in root canal therapy), orthodontists (specialists in tooth
movement), oral surgeons (specialists in extractions), pedodontists (specialists
in dentistry for children) and periodontists (specialists in gum-related
treatment). Companies such as United Dental that arrange for specialty care at
fixed copayments are further able to manage the costs and utilization of dental
services through specialty referral authorization programs and discounted fee
arrangements with specialty dentists. Medium to large employers increasingly
expect comprehensive dental care, including specialty care, from prepaid dental
plans, at stipulated copayments comparable to the type of coverage provided by a
general medical plan.
The managed dental industry is highly competitive. United Dental's
competitors include (i) large insurance companies with the capability to offer
both managed dental benefits and traditional dental indemnity insurance, (ii)
health maintenance organizations that also offer dental benefits, (iii)
self-funded employer programs, (iv) dental preferred provider organizations, (v)
discounted, fee-for-service membership plans and (vi) other local or regional
companies offering prepaid dental plans.
37
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF UNITED DENTAL
The following selected consolidated financial information for the years
ended December 31, 1997, 1996, 1995, 1994 and 1993, has been derived from
previously published audited consolidated financial statements of United Dental
prepared in accordance with generally accepted accounting principles, which have
been examined and reported on by PricewaterhouseCoopers LLP, independent
accountants. The selected consolidated financial information at and for the
three-month periods ended on March 31, 1998 and 1997 has been derived from the
first quarter 1998 unaudited quarterly consolidated financial statements of
United Dental. The consolidated financial information should be read in
conjunction with, and is qualified in its entirety by reference to, the
consolidated financial statements from which it has been derived and the
accompanying notes thereto incorporated by reference herein. See also,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and United Dental's Consolidated Financial Statements and
accompanying notes thereto, each of which is incorporated herein by reference to
United Dental's Quarterly Report on Form 10-Q for the period ended March 31,
1998 and United Dental's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31, YEAR ENDED DECEMBER 31,
------------- ------------- ----------------------------------------------
1998 1997 1997(1) 1996(2) 1995(3) 1994(4)
------------- ------------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Managed benefits............................. $ 35,082 $ 37,957 $ 150,951 $ 96,786 $ 62,004 $ 31,683
Indemnity.................................... 6,752 5,640 18,187 15,143 16,622 5,514
Dental centers............................... 1,445 1,251 4,857 820 -- --
Interest..................................... 144 175 704 899 603 178
------------- ------------- --------- --------- ----------- -----------
Total revenues............................. 43,423 45,023 174,699 113,648 79,229 37,375
Dental services expense:
Managed benefits............................. 18,809 21,995 97,324 56,845 33,068 15,559
Indemnity.................................... 6,281 6,341 18,504 10,590 13,682 4,567
Dental centers............................... 2,163 1,864 7,805 216 -- --
------------- ------------- --------- --------- ----------- -----------
Total dental services expense.............. 27,253 30,200 123,633 67,651 46,750 20,126
Sales and marketing.......................... 4,635 4,706 18,847 12,587 9,637 5,756
General and administrative................... 7,149 6,326 29,932 18,612 14,785 7,062
Depreciation and amortization................ 1,363 1,136 5,050 2,267 1,190 541
Acquisition-related expenses................. 0 0 -- -- -- 178
Interest expense............................. 258 147 571 536 1,005 360
------------- ------------- --------- --------- ----------- -----------
Total expenses............................. 40,658 42,515 178,033 101,653 73,367 34,023
------------- ------------- --------- --------- ----------- -----------
Income (loss) before provision for federal
income taxes, cumulative effect of a change
in accounting principle and extraordinary
charge..................................... 2,765 2,508 (3,334) 11,995 5,862 3,352
Provision (benefit) for federal income
taxes...................................... 1,248 1,056 (487) 4,438 2,131 1,256
------------- ------------- --------- --------- ----------- -----------
Net income (loss) before cumulative effect of
a change in accounting principle and
extraordinary charge....................... 1,517 1,452 (2,847) 7,557 3,731 2,096
Cumulative effect of a change in accounting
principle.................................. -- -- -- -- -- --
Extraordinary charge......................... -- -- -- -- 142 --
------------- ------------- --------- --------- ----------- -----------
Net income (loss) before preferred
dividends.................................. $ 1,517 1,452 $ (2,847) $ 7,557 $ 3,589 $ 2,096
------------- ------------- --------- --------- ----------- -----------
------------- ------------- --------- --------- ----------- -----------
<CAPTION>
1993
---------
<S> <C>
Statement of Operations Data:
Revenues:
Managed benefits............................. $ 16,805
Indemnity.................................... --
Dental centers............................... --
Interest..................................... 173
---------
Total revenues............................. 16,978
Dental services expense:
Managed benefits............................. 7,283
Indemnity.................................... --
Dental centers............................... --
---------
Total dental services expense.............. 7,283
Sales and marketing.......................... 3,025
General and administrative................... 3,632
Depreciation and amortization................ 159
Acquisition-related expenses................. --
Interest expense............................. --
---------
Total expenses............................. 14,099
---------
Income (loss) before provision for federal
income taxes, cumulative effect of a change
in accounting principle and extraordinary
charge..................................... 2,879
Provision (benefit) for federal income
taxes...................................... 934
---------
Net income (loss) before cumulative effect of
a change in accounting principle and
extraordinary charge....................... 1,945
Cumulative effect of a change in accounting
principle.................................. 44
Extraordinary charge......................... --
---------
Net income (loss) before preferred
dividends.................................. $ 1,901
---------
---------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31, YEAR ENDED DECEMBER 31,
------------- ------------- ----------------------------------------------
1998 1997 1997(1) 1996(2) 1995(3) 1994(4)
------------- ------------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Per Share Amounts:
Net income (loss) before extraordinary charge
Basic........................................ $ 0.17 $ 0.16 $ (0.32) $ 1.04 $ 0.74 $ 0.51
Diluted...................................... $ 0.17 $ 0.16 $ (0.32) $ 1.00 $ 0.68 $ 0.44
Extraordinary charge per share, net of tax
Basic........................................ $ -- $ -- -- -- $ (0.03) --
Diluted...................................... $ -- $ -- -- -- $ (0.03) --
Net income (loss) per common share
Basic........................................ $ 0.17 $ 0.16 $ (0.32) $ 1.04 $ 0.71 $ 0.51
Diluted...................................... $ 0.17 $ 0.16 $ (0.32) $ 1.00 $ 0.66 $ 0.44
Weighted average common shares outstanding
Basic........................................ 8,952 8,918 8,935 7,256 5,051 4,126
Diluted...................................... 9,106 9,159 8,935 7,543 5,449 4,717
Balance Sheet Data:
Working capital.............................. $ 5,600 $ 20,242 $ 3,288 $ 25,420 $ 30,892 $ 1,365
Total assets............................... 158,404 145,289 151,440 16,567 86,588 31,404
Total debt including current portion....... 16,127 3,843 9,384 28,948 15,182 14,558
Stockholders' equity......................... 124,944 127,210 123,048 125,495 61,600 8,947
<CAPTION>
1993
---------
<S> <C>
Per Share Amounts:
Net income (loss) before extraordinary charge
Basic........................................ $ 0.52
Diluted...................................... $ 0.40
Extraordinary charge per share, net of tax
Basic........................................ --
Diluted...................................... --
Net income (loss) per common share
Basic........................................ $ 0.52
Diluted...................................... $ 0.40
Weighted average common shares outstanding
Basic........................................ 3,645
Diluted...................................... 4,662
Balance Sheet Data:
Working capital.............................. $ 3,907
Total assets............................... 7,283
Total debt including current portion....... --
Stockholders' equity......................... 6,730
</TABLE>
- ------------------------------
(1) Results of operations for United after December 31, 1996 and for IDP after
May 31, 1997 are included in historical results of operations for the year
ended December 31, 1997. See United Dental's Consolidated Financial
Statements and the Notes thereto.
(2) Results of operations for AHP after January 31, 1996, Independent and
Association after September 30, 1996 and for KCDC and OraCare after October
31, 1996 are included in historical results of operations for United Dental
on a consolidated basis for the years ended December 31, 1997 and 1996. See
United Dental's Consolidated Financial Statements and the Notes thereto.
(3) Results of operations for US Dental after October 31, 1995 are included in
historical results of operations for United Dental on a consolidated basis
for the years ended December 31, 1997, 1996 and 1995. See United Dental's
Consolidated Financial Statements and the Notes thereto.
(4) Results of operations for IDH after August 31, 1994 are included in
historical results of operations for United Dental on a consolidated basis
for the years ended December 31, 1997, 1996, 1995 and 1994. See United
Dental's Consolidated Financial Statements and the Notes thereto.
39
<PAGE>
SELECTED PRO FORMA DATA
The following table presents the consolidated net income, stockholders'
equity, and cash dividends per share of Protective and United Dental on an
actual basis, on an unaudited pro forma basis for Protective, and on an
unaudited equivalent pro forma basis for United Dental. The actual data for the
three months ending March 31, 1998 for Protective and United Dental is
unaudited. The actual data for the year ended December 31, 1997 for Protective
and United Dental was derived from their respective audited financial
statements. Additional pro forma financial information, including a statement of
income and balance sheet, is not presented since the merger does not fall within
the definition of a "significant business" for Protective as defined in Rule
1-02 of Regulation S-X.
The Protective pro forma net income per share was derived by combining
Protective's actual results with those of United Dental, giving effect to the
merger as if it had occurred on January 1, 1998 and January 1, 1997. For
purposes of preparing the pro forma data, the aggregate value of the Merger
Consideration is assumed to equal approximately $180 million which was derived
using the closing price of Protective's common stock of $35.50 per share, as
reported in The Wall Street Journal on March 10, 1998 (adjusted for the
two-for-one stock split on April 1, 1998), the last full trading day prior to
the public announcement of the merger. The merger is accounted for as a
purchase. Pro forma adjustments for the three months ended March 31, 1998 were:
(i) to reflect $1.0 million, net of income tax, of lost investment income and/or
interest expense incurred to fund the Cash Consideration; and (ii) to reflect
additional amortization of goodwill of $0.4 million. Pro forma adjustments for
the year ended December 31, 1997 were: (i) to reflect $4.1 million, net of
income tax, of lost investment income and/or interest expense incurred to fund
the Cash Consideration; and (ii) to reflect additional amortization of goodwill
of $1.6 million. No pro forma adjustment was made for the reduction in combined
annual operating expenses of approximately $12 million which Protective expects
to be fully realized after a three-year period. The Protective pro forma
stockholders' equity per share were derived by combining Protective's actual
results with those of United Dental, giving effect to the merger as if it had
occurred on March 31, 1998 and December 31, 1997.
The United Dental equivalent pro forma data are based only on the 0.2893
shares of Protective's common stock that United Dental stockholders will receive
for each share of United Dental's common stock. In addition to Protective's
common stock, United Dental stockholders will receive $9.31 in cash per share of
United Dental's common stock. The United Dental equivalent pro forma data was
derived by multiplying the Protective pro forma data by 0.2893, the Exchange
Ratio.
The information set forth below should be read in conjunction with the
respective audited consolidated financial statements and notes thereto of
Protective and United Dental incorporated herein by reference. The unaudited pro
forma information is not necessarily indicative of what Protective's
consolidated financial results would have been had the merger been consummated
at the assumed dates, nor is it necessarily indicative of Protective's
consolidated financial results that may be expected for any future period.
<TABLE>
<CAPTION>
UNITED DENTAL(1)
PROTECTIVE --------------------------
------------------------ UNAUDITED
UNAUDITED EQUIVALENT
ACTUAL PRO FORMA ACTUAL(1) PRO FORMA
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Three Months ended March 31, 1998:
Per Share Data (Unaudited):
Net income per share--basic......................................... $ 0.48 $ 0.46 $ 0.17 $ 0.13
Net income per share--diluted....................................... 0.47 0.46 0.17 0.13
Stockholders' equity per share...................................... 12.72 13.66 13.91 3.95
Cash dividends per share............................................ 0.10 0.10 -- 0.03
Year ended December 31, 1997:
Per Share Data:
Net income (loss) per share--basic.................................. $ 1.79 $ 1.59 $ (0.32) $ 0.46
Net income (loss) per share--diluted................................ 1.78 1.58 (0.32) 0.46
Stockholders' equity per share...................................... 12.30 13.26 13.76 3.84
Cash dividends per share............................................ 0.39 0.39 -- 0.11
</TABLE>
- ------------------------
(1) United Dental's earnings per share reflects $10.1 million and $4.5 million
of charges recognized in the second and third quarters of 1997,
respectively, for uncollectible premiums, losses incurred on its Arizona
Medicaid contracts, additional dental reserves for traditional indemnity and
point-of-service plans and certain administrative costs incurred in
reviewing the aforementioned items.
40
<PAGE>
MARKET PRICE DATA AND DIVIDENDS
On September 22, 1995, United Dental's common stock began trading on the
Nasdaq National Market tier of the Nasdaq Stock Market under the symbol "UDCI."
Protective's common stock has traded on the New York Stock Exchange under the
symbol "PL" since October 4, 1993.
The following table sets forth the range of quarterly high and low closing
sale prices on the Nasdaq Stock Market and the New York Stock Exchange for
United Dental's and Protective's common stock, respectively, for the periods
indicated.
<TABLE>
<CAPTION>
UNITED DENTAL(1) PROTECTIVE(2)
----------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
HIGH LOW DIVIDEND(3) HIGH LOW
--------- --------- ------------- --------- ---------
1993
First Quarter.................................................... -- -- -- $ 8.38 $ 6.88
Second Quarter................................................... -- -- -- 9.25 7.69
Third Quarter.................................................... -- -- -- 12.63 8.63
Fourth Quarter................................................... -- -- -- 13.09 10.47
1994
First Quarter.................................................... -- -- -- 11.44 10.22
Second Quarter................................................... -- -- -- 11.56 9.56
Third Quarter.................................................... -- -- -- 11.03 10.00
Fourth Quarter................................................... -- -- -- 12.16 9.97
1995
First Quarter.................................................... -- -- -- 12.13 10.72
Second Quarter................................................... -- -- -- 13.75 10.82
Third Quarter(4)................................................. $ 30.00 $ 27.75 -- 14.82 13.69
Fourth Quarter................................................... 41.25 29.50 -- 15.63 13.44
1996
First Quarter.................................................... 43.75 34.25 -- 18.25 15.25
Second Quarter................................................... 44.25 37.25 -- 19.19 16.56
Third Quarter.................................................... 45.75 32.75 -- 18.88 15.69
Fourth Quarter................................................... 36.25 25.00 -- 20.81 17.25
1997
First Quarter.................................................... 30.63 27.00 -- 22.31 18.81
Second Quarter................................................... 28.13 14.38 -- 25.38 20.31
Third Quarter.................................................... 18.38 14.38 -- 26.75 23.81
Fourth Quarter................................................... 15.50 10.63 -- 32.63 25.06
1998
First Quarter.................................................... 18.50 10.69 -- 36.50 28.94
Second Quarter................................................... 19.28 17.63 -- 38.38 31.75
Third Quarter (through July 31, 1998)............................ 20.25 18.75 -- 40.88 36.69
<CAPTION>
<S> <C>
DIVIDEND
-----------
1993
First Quarter.................................................... $ .058
Second Quarter................................................... .065
Third Quarter.................................................... .065
Fourth Quarter................................................... .065
1994
First Quarter.................................................... .065
Second Quarter................................................... .07
Third Quarter.................................................... .07
Fourth Quarter................................................... .07
1995
First Quarter.................................................... .07
Second Quarter................................................... .08
Third Quarter(4)................................................. .08
Fourth Quarter................................................... .08
1996
First Quarter.................................................... .08
Second Quarter................................................... .09
Third Quarter.................................................... .09
Fourth Quarter................................................... .09
1997
First Quarter.................................................... .09
Second Quarter................................................... .10
Third Quarter.................................................... .10
Fourth Quarter................................................... .10
1998
First Quarter.................................................... .10
Second Quarter................................................... .11
Third Quarter (through July 31, 1998)............................ .11(5)
</TABLE>
- ------------------------------
(1) United Dental's common stock has only been listed on the Nasdaq Exchange
since the date of United Dental's initial public offering on September 21,
1995.
(2) Prices for periods prior to April 1, 1998 have been restated to reflect
two-for-one stock splits on June 1, 1995 and April 1, 1998.
(3) United Dental has not paid or declared any cash dividends on its common
stock since its inception.
(4) From September 22, 1995.
(5) Payable on September 1, 1998, to holders of record on August 14, 1998.
The last reported sale price per share of United Dental's common stock, as
reported in THE WALL STREET JOURNAL on July 31, 1998, was $19.13. As of July 31,
1998, United Dental had 8,982,616 shares of common stock outstanding. As of July
31, 1998, United Dental estimates that there were approximately 1,900 owners of
United Dental's common stock, including 188 holders of record.
United Dental has not paid or declared any cash dividends on its common
stock since its inception. United Dental currently intends to retain all future
earnings for use in the expansion and operation of its business. In addition,
future borrowings may limit United Dental's ability to pay cash dividends. Any
payments of cash dividends in the future will depend upon the financial
condition, capital requirements and earnings of United Dental, limitations on
dividend payments by subsidiaries of United Dental under applicable state laws
and such other factors as the board of directors of United Dental may deem
relevant.
The last reported sale price per share of Protective's common stock as
reported in THE WALL STREET JOURNAL on July 31, 1998 was $38.69. As of July 31,
1998, Protective had 61,774,852 shares of common stock
41
<PAGE>
outstanding. As of July 31, 1998 Protective estimates that there were
approximately 15,000 owners of Protective's common stock, including 1,973
holders of record and approximately 13,000 persons or entities that hold
Protective's common stock in nominee name. Any payments of cash dividends in the
future will depend upon the financial condition, capital requirements and
earnings of Protective, limitations on dividend payments by subsidiaries of
Protective under applicable state laws and such other factors as Protective's
Board of Directors may deem relevant.
Protective has paid cash dividends on Protective's common stock in each year
since 1926 and each quarter since 1934. The regular dividend has been increased
in each of the last 8 years. On February 2, 1998, Protective declared a
quarterly cash dividend on Protective's common stock of $.10 per share (adjusted
for Protective's two-for-one stock split effective on April 1, 1998) for the
first quarter of 1998. Future payment of dividends on Protective's common stock
will depend on earnings, financial condition, capital requirements and other
relevant factors. Because Protective is a holding company, its capacity to pay
dividends is limited by the ability of its subsidiaries to pay dividends. Since
many of Protective's subsidiaries are insurance companies subject to regulatory
control by various state insurance departments, the ability of such subsidiaries
to pay dividends to Protective without prior regulatory approval is limited by
applicable laws and regulations. At December 31, 1997, the amount of dividends
available to Protective from subsidiaries during 1997 not limited by such
restrictions was $154 million.
42
<PAGE>
THE PROPOSED MERGER
GENERAL
The following is a brief summary of all material terms of the merger. This
summary does not purport to be complete and is qualified in its entirety by
reference to the merger agreement, a copy of which is included in this Proxy
Statement/Prospectus as Annex A and is incorporated herein by reference. A
description of the relative rights, privileges and preferences of United
Dental's common stock on the one hand, and Protective's common stock, on the
other, including certain material differences between the rights of holders of
such stock is set forth under "COMPARISON OF STOCKHOLDER RIGHTS." The closing
price of United Dental's common stock on March 10, 1998, the last full New York
Stock Exchange trading day (a "Trading Day") prior to the public announcement of
the merger, as reported in THE WALL STREET JOURNAL, was $16.94 per share. The
closing price of Protective's common stock on March 10, 1998, the last full
trading day prior to the public announcement of the merger, as reported in THE
WALL STREET JOURNAL, was $35.50 per share (as adjusted for Protective's
two-for-one stock split on April 1, 1998). The closing price of United Dental's
common stock on July 31, 1998 as reported in THE WALL STREET JOURNAL, was $19.13
per share. The closing price of Protective's common stock on July 31, 1998, as
reported in THE WALL STREET JOURNAL, was $38.69 per share.
Based on 8,982,616 million shares of United Dental's common stock
outstanding as of July 31, 1998 and assuming the price per share of Protective's
common stock at the time of consummation of the merger is equal to $38.69, the
closing price of Protective's common stock on July 31, 1998 as reported in THE
WALL STREET JOURNAL, the estimated value of the aggregate merger consideration
that will be paid to United Dental's stockholders in the merger (including the
holders of 641,800 options for which the value of the Merger Consideration
exceeds the exercise price) will be approximately $189 million. The actual value
of the merger consideration may differ from this example since the actual value
will be dependent upon the market value of Protective's common stock as of the
consummation of the merger. Based on these numbers of shares of United Dental's
common stock and options, upon consummation of the merger, United Dental's and
Protective's current stockholders will own approximately 4% and 96%,
respectively, of Protective's common stock.
UNITED DENTAL'S STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
PROTECTIVE'S COMMON STOCK.
EFFECTIVE TIME OF THE MERGER
The closing will take place on, or as promptly as practicable following, the
date of the adoption and approval of the merger agreement and the merger by
United Dental's stockholders at the Special Meeting and the satisfaction or
waiver of the other conditions to each party's obligation to consummate the
merger. The merger will become effective when a properly executed Certificate of
Merger meeting the requirements of Section 251 of the Delaware General
Corporation Law is filed with the Secretary of State of the State of Delaware
which filing will be made as soon as practicable after the closing. There can be
no assurance that all regulatory approvals will be received by the time of the
special meeting of United Dental's stockholders. There is no way to predict how
long it will take to obtain all of the required regulatory approvals; however,
Protective and United Dental expect to issue a joint press release shortly
before the special meeting to disclose the status of these approvals.
SOURCE OF CASH CONSIDERATION
Protective expects to finance approximately $60 million of the cash portion
of the consideration to be paid to United Dental's stockholders from internally
generated funds and approximately $25 million of the cash portion will be
financed with borrowing under an existing credit facility.
43
<PAGE>
CONVERSION OF SHARES
Each share of United Dental's common stock outstanding immediately prior to
the Effective Time (other than dissenting shares) will be converted into,
subject to adjustment in the circumstances described below, (i) 0.2893 shares of
Protective's common stock (together with the attached Protective Preferred Share
Purchase Rights (as defined under "COMPARISON OF STOCKHOLDER RIGHTS--Preferred
Share Purchase Rights")) and (ii) $9.31 in cash. If the average price (the
"Trading Average") of Protective's common stock as reported in THE WALL STREET
JOURNAL, during 20 Trading Days selected by the Exchange Agent randomly by lot
from the 30 consecutive Trading days ending on (and including) the Trading Day
which is five Trading days prior to the Effective Time (such period, the
"Measurement Period") is less than $27.50 (the "Top Up Event"), Protective will
have the right (but not the obligation), following the occurrence of the Top Up
Event (the "Top Up Right"), to adjust the Merger Consideration by (a) increasing
the Cash Consideration and/or (b) increasing the Exchange Ratio such that the
sum of (A) the Cash Consideration (as adjusted) and (B) the product of the
Exchange Ratio (as adjusted) multiplied by the Trading Average is equal to or
greater than $17.26.
Under the merger agreement, United Dental's Board of Directors has the
right, but not the obligation, to terminate the merger agreement if, (i) the
Trading Average is less than $27.50 and (ii) Protective shall have failed to
provide written notice to United Dental no later than 5:00 p.m. (New York time)
on the second Trading Day following the Measurement Period of Protective's
intent to exercise the Top Up Right on or prior to the Effective Time. In
addition, pursuant to the merger agreement, Protective's Board of Directors may
terminate the merger agreement and abandon the merger if the Trading Average is
greater than $39.50 or less than $27.50 (or such other amount as is required to
adjust for an Adjustment Event). For a further discussion of United Dental's
right to terminate the merger agreement, see "--The Merger
Agreement--Termination."
If required by special tax counsel to Protective or United Dental in order
to give certain tax opinions required by the merger agreement, the Exchange
Ratio and the number of shares of Protective's common stock to be issued as
Common Stock Consideration shall be increased (and the Cash Consideration
correspondingly decreased) so that, after giving effect to any cash paid in lieu
of fractional shares and any cash paid with respect to Dissenting Shares, the
Common Stock Consideration shall constitute not less than 45% by value of the
total consideration paid with respect to United Dental's common stock. If the
price of Protective's common stock at the Effective Time of the merger is equal
to $27.50 per share (the bottom end of the range), there are no dissenters to
the merger and no cash is paid in lieu of fractional shares, the percentage of
value of the Merger Consideration paid in Protective's common stock would be
46.1% and no tax adjustment would be required.
The tables below illustrate the potential operation of the tax adjustment
mechanism at various assumed per share values for Protective's common stock.
Tables 1 and 2 assume that Protective exercises the Top Up Right by increasing
the Exchange Ratio in cases where the price of Protective's common stock is less
than $27.50 and that no cash is paid in lieu of fractional shares. Table 1
assumes there are no dissenters to the merger. In the case of Table 1, no tax
adjustment is required because the percentage by value of the Common Stock
Consideration paid by Protective (as adjusted under the Top Up Right) at each
share price is in excess of 45% of the total Merger Consideration. Table 2
assumes 5% of the United Dental stockholders exercise their right to dissent and
receive cash per share equal to the per share Merger Consideration. In the case
of Table 2, the tax adjustment mechanism operates to increase the per share
Common Stock Consideration (and decrease the per share cash consideration) in
certain cases. THE TABLES ARE SET FORTH FOR PURPOSES OF ILLUSTRATION ONLY AND
ARE BASED ON THE ASSUMPTIONS DESCRIBED IN THIS PARAGRAPH AND IN THE TABLES. THE
ACTUAL AMOUNTS OF COMMON STOCK CONSIDERATION AND CASH CONSIDERATION TO BE
RECEIVED BY A UNITED DENTAL STOCKHOLDERS MAY DIFFER BASED ON THE STATE OF FACTS
EXISTING AT THE EFFECTIVE TIME.
44
<PAGE>
TABLE 1
ILLUSTRATION OF POTENTIAL EFFECT OF TAX ADJUSTMENT ON PER SHARE MERGER
CONSIDERATION
ASSUMING NO DISSENTERS
<TABLE>
<CAPTION>
PRICE OF PROTECTIVE'S COMMON STOCK AT THE EFFECTIVE TIME OF THE
MERGER
----------------------------------------------------------------
$23.50 $25.50 $27.50 $31.50 $35.50 $39.50
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BEFORE TAX ADJUSTMENT
Value of Protective Common Stock Issued per Share.............. $ 7.95(1) $ 7.95(1) $ 7.95 $ 9.11 $ 10.27 $ 11.43
Cash Paid Per Share............................................ $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31
Value of Per Share Merger Consideration........................ $ 17.26 $ 17.26 $ 17.26 $ 18.42 $ 19.58 $ 20.74
AFTER TAX ADJUSTMENT(2)
Value of Protective Common Stock Issued per Share.............. $ 7.95 $ 7.95 $ 7.95 $ 9.11 $ 10.27 $ 11.43
Cash Paid Per Share............................................ $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31
Value of Per Share Merger Consideration........................ $ 17.26 $ 17.26 $ 17.26 $ 18.42 $ 19.58 $ 20.74
</TABLE>
- ------------------------------
(1) Assumes that Protective has exercised the Top Up Right by increasing the
Exchange Ratio and that the Effective Time Price of Protective's common
stock is equal to the Trading Average.
(2) Due to Protective's exercise of its Top Up Right, there would be no tax
adjustment under these circumstances, because the percentage by value of the
Common Stock Consideration paid by Protective at each share price is greater
than 45% of the total Merger Consideration.
TABLE 2
ILLUSTRATION OF POTENTIAL EFFECT OF TAX ADJUSTMENT ON PER SHARE MERGER
CONSIDERATION
ASSUMING 5% DISSENTERS
<TABLE>
<CAPTION>
PRICE OF PROTECTIVE'S COMMON STOCK AT THE EFFECTIVE TIME OF THE
MERGER
----------------------------------------------------------------
$23.50 $25.50 $27.50 $31.50 $35.50 $39.50
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BEFORE TAX ADJUSTMENT
Value of Protective Common Stock Issued per Share.............. $ 7.95(1) $ 7.95(1) $ 7.95 $ 9.11 $ 10.27 $ 11.43
Cash Paid Per Share............................................ $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31
Value of Per Share Merger Consideration........................ $ 17.26 $ 17.26 $ 17.26 $ 18.42 $ 19.58 $ 20.74
AFTER TAX ADJUSTMENT
Value of Protective Common Stock Issued per Share.............. $ 8.17 $ 8.17 $ 8.17 $ 9.11 $ 10.27 $ 11.43
Cash Paid Per Share............................................ $ 9.09 $ 9.09 $ 9.09 $ 9.31 $ 9.31 $ 9.31
Value of Per Share Merger Consideration........................ $ 17.26 $ 17.26 $ 17.26 $ 18.42 $ 19.58 $ 20.74
</TABLE>
- ------------------------------
(1) Assumes that Protective has exercised the Top Up Right by increasing the
Exchange Ratio and that the Effective Time Price of Protective's common
stock is equal to the Trading Average.
The merger agreement provides that if, after the date of the merger
agreement and on or prior to the Effective Time of the merger, the outstanding
shares of Protective's common stock shall be changed into a different number of
shares by reason of any Adjustment Event, the Exchange Ratio and the $27.50 and
$39.50 collar amounts based upon the Trading Average shall be adjusted
accordingly to provide the holder of United Dental's common stock the same
economic result as contemplated by the merger agreement prior to such Adjustment
Event; provided, however, that no adjustment will be made for Protective's two-
for-one stock split in the form of a stock dividend paid on April 1, 1998.
Pursuant to the merger agreement, each stock option to acquire shares of
United Dental's common stock (each a "United Dental Stock Option") and warrants
to acquire shares of United Dental's common stock (each a "United Dental
Warrant") issued and outstanding which is not exercisable immediately prior to
the Effective Time shall become exercisable and each such United Dental Stock
Option and such United Dental Warrant (other than those United Dental Stock
Options and United Dental Warrants for which exercise notices have been
delivered and with respect to which the exercise price has been paid) shall be
canceled, and each holder of such a United Dental Stock Option or United Dental
Warrant will be entitled to receive, for each share of United Dental's common
stock subject to each such United Dental Stock Option or United Dental Warrant,
an amount of Protective's common stock and cash equal in the
45
<PAGE>
aggregate to the excess, if any, of the Merger Consideration over the per share
exercise price of such United Dental Stock Option or United Dental Warrant,
without interest (the "Spread Amount"). The portion of such Spread Amount equal
to the product of (i) such Spread Amount multiplied by (ii) the percentage of
the Merger Consideration payable in Protective's common stock shall be paid in
Protective's common stock, and the remainder of the Spread Amount shall be paid
in cash. As of July 31, 1998, the holders of the United Dental Stock Options had
the right to acquire 806,800 shares, in the aggregate, of United Dental's common
stock pursuant to the United Dental Stock Options, 601,800 of which have an
exercise price of $19.00 or less. As of July 31, 1998, United Dental had an
outstanding United Dental Warrant to acquire 40,000 shares of United Dental's
common stock, with an exercise price of $6.00 per share. The amounts described
in this paragraph shall be subject to all applicable tax withholding, which
shall be deducted from the portion of the Spread Amount payable in cash.
Beneficial holders of United Dental's common stock who do not own their
shares of record should consult with the record holder of such shares with
regard to the receipt of the consideration to be received upon the exchange of
their United Dental's common stock certificates in the merger.
ILLUSTRATIVE VALUES OF PER SHARE MERGER CONSIDERATION
<TABLE>
<CAPTION>
PRICE FOR PROTECTIVE LIFE'S COMMON STOCK AT THE EFFECTIVE TIME
---------------------------------------------------------------------------
$25.50 $27.50 $29.50 $31.50 $33.50 $35.50 $37.50
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Exchange ratio..................................... 0.3118 0.2893 0.2893 0.2893 0.2893 0.2893 0.2893
Value of Protective's common stock issued per
share............................................ $ 7.95 $ 7.95 $ 8.53 $ 9.11 $ 9.69 $ 10.27 $ 10.85
Cash paid per share................................ $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31 $ 9.31
Value of per share merger consideration............ $ 17.26 $ 17.26 $ 17.84 $ 18.42 $ 19.00 $ 19.58 $ 20.16
<CAPTION>
$39.50 $41.50
--------- ---------
<S> <C> <C>
Exchange ratio..................................... 0.2893 0.2893
Value of Protective's common stock issued per
share............................................ $ 11.43 $ 12.06
Cash paid per share................................ $ 9.31 $ 9.31
Value of per share merger consideration............ $ 20.74 $ 21.37
</TABLE>
- ------------------------
(1) The figures in the column beneath a price for Protective's common stock of
$25.50 assume that Protective has exercised its Top Up Right by increasing
the Exchange Ratio, and the figures in the column beneath a price for
Protective's common stock of $41.50 assume that Protective has not exercised
its right to terminate the merger agreement. There can be no assurance that
if the Trading Average of Protective's common stock is less than $27.50 or
greater than $39.50 that either Protective or United Dental will not
exercise its right to terminate the merger agreement or that Protective will
adjust the Merger Consideration in the manner illustrated in the table.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Protective's
common stock will be issued in the merger, and such fractional interests will
not entitle the owners thereof to any rights as a stockholder of Protective. In
lieu of a fractional interest in a share of Protective's common stock, each
holder of United Dental's common stock exchanged for Protective's common stock
and each holder of a United Dental Stock Option or United Dental Warrant
canceled pursuant to the merger agreement who would otherwise have been entitled
to receive a fraction of a share of Protective's common stock shall receive cash
(without interest) in an amount equal to the product of such fractional interest
multiplied by the closing sales price, regular way, per share rounded to four
decimal points, of Protective's common stock as reported in THE WALL STREET
JOURNAL, for the Trading Day on which the merger is consummated (the "Effective
Time Price").
EXCHANGE OF CERTIFICATES
Upon surrender of each certificate representing shares of United Dental's
common stock and a duly executed letter of transmittal, with respect to all of
the shares of United Dental's common stock owned by such holder, Protective
shall use its best efforts to cause the Exchange Agent to, within three business
days of receipt of such certificates and transmittal letter, pay to the holder
of such certificate the Merger Consideration (and cash in lieu of fractional
shares) and such certificate will thereafter be canceled. Until so surrendered
and exchanged, each such certificate that prior to the Effective Time
represented shares of United Dental's common stock (other than certificates
representing dissenting shares and shares of United Dental that are owned by
United Dental as treasury stock) shall represent solely the right to receive the
46
<PAGE>
Merger Consideration (and cash in lieu of fractional shares). No interest shall
be paid or accrue on the Merger Consideration.
After the Effective Time, there will be no transfers on the stock transfer
books of the Surviving Corporation of any shares of United Dental's common
stock. If, after the Effective Time, certificates formerly representing shares
of United Dental's common stock are presented to the Exchange Agent or PLC
Merger Subsidiary, as the case may be, they will be canceled and (subject to
applicable abandoned property, escheat and similar laws and, in the case of
dissenting shares, subject to applicable law) exchanged for Merger Consideration
(and cash in lieu of fractional shares), as provided above.
No dividends or other distributions declared or made after the Effective
Time with respect to shares of Protective's common stock shall be paid to the
holder of any unsurrendered certificate with respect to the shares of
Protective's common stock such holder is entitled to receive, and no cash
payment in lieu of fractional shares will be paid, until the holder of such
certificate surrenders such certificate in accordance with the provisions of the
merger agreement.
At the Effective Time, all shares of United Dental's common stock that are
owned by United Dental as treasury stock and any shares of United Dental's
common stock owned by Protective, PLC Merger Subsidiary or any other direct or
indirect wholly owned subsidiary of Protective (other than such shares, if any,
of United Dental's common stock as may be held in a Protective Subsidiary
separate account or mutual fund) will be canceled and retired and will cease to
exist, and no payment or other consideration will be made in respect thereof.
BACKGROUND OF THE MERGER
The terms of the merger agreement are the result of arm's-length
negotiations between representatives of Protective and United Dental. The
following is a brief discussion of the background of those negotiations.
Members of Protective's management had been introduced to Mr. Jack R.
Anderson, the Chairman of United Dental's Board of Directors in 1993 in
connection with a prior transaction in which Protective sold a business to an
entity with which Mr. Anderson was affiliated.
At a luncheon meeting in June 1997 between Mr. Jack R. Anderson, Chairman of
United Dental's Board of Directors, and Mr. Drayton Nabers, Jr., Chairman of
Protective's Board of Directors, Mr. Nabers discussed with Mr. Anderson the
possibility of a business combination involving Protective and United Dental. At
that time, United Dental was not considering alternative strategies to
continuing as a stand-alone business, and there was no further communication
between United Dental and Protective until December 1997.
In December 1997, there were a number of discussions between Mr. Anderson
and Mr. William H. Wilcox, the President of United Dental, and between Mr.
Anderson and other members of United Dental's Board of Directors regarding the
advisability of actively exploring strategic alternatives for the future of
United Dental. As a result of such discussions, it was decided that United
Dental should explore strategic alternatives for United Dental, including a
business combination with another company. As a result, Mr. Anderson met with
Mr. Nabers on December 23, 1997 at the offices of Protective in Birmingham,
Alabama and indicated that United Dental would be willing to consider a
strategic transaction between United Dental and Protective.
In December 1997 and January 1998, Mr. Anderson and Mr. Wilcox also had
discussions with the management of other companies engaged in the dental
benefits industry regarding the possibility of a strategic transaction involving
United Dental. Such companies included a large medical insurance company with
managed dental benefits operations (similar to Protective), a managed dental
benefits company of similar size to United Dental, a smaller managed dental
benefits company and Protective. Those discussions led to preliminary due
diligence by only Protective. Following such discussions and after
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learning of Protective's offer to United Dental, the other large company
declined to make an offer to United Dental. The preliminary discussions with the
similarly sized company and the smaller company related to a combination of
either of such companies with United Dental and a simultaneous leveraged buy-out
by a group that would have included Mr. Anderson and possibly other members of
United Dental's Board of Directors and the Board of Directors of the other
company. Such preliminary discussions indicated that the consideration to the
United Dental stockholders would have been in the range of $18.00 to $18.50 per
share of United Dental common stock. However, none of such discussions resulted
in a definitive offer to United Dental.
On January 6, 1998 and March 5, 1998, Protective and United Dental executed
confidentiality agreements.
On January 23, 1998, United Dental's Board of Directors held a regularly
scheduled meeting at which United Dental's Board of Directors reviewed a summary
of the various discussions that had been held with third parties concerning a
possible sale or other form of strategic transaction and discussed the options
for a strategic transaction which appeared available to United Dental. United
Dental's Board of Directors authorized management to continue discussions
regarding a strategic transaction with Protective.
On January 27, 1998, Protective executed an engagement letter with A.G.
Edwards and Sons, Inc. ("A.G. Edwards"). On January 28 and 29, 1998,
representatives of Protective began a due diligence investigation of United
Dental in Dallas, Texas.
At its regularly scheduled meeting on February 3, 1998, Protective's Board
of Directors reviewed the results of its management's preliminary due diligence
investigation of United Dental and authorized management to pursue negotiations
with United Dental, subject to Protective's Board of Directors's approval of the
final terms and structure of the transaction.
On February 18, 1998, Mr. Anderson and Mr. Nabers had a telephone
conversation in which Mr. Nabers discussed the possibility of a merger of United
Dental with and into a subsidiary of Protective involving consideration
consisting of cash and Protective's common stock having an aggregate value of
$18.50 per share.
On February 20, 1998, all of the directors of United Dental participated in
a regularly scheduled meeting of the Executive Committee of United Dental's
Board of Directors and discussed the status of negotiations with Protective.
After consideration of the proposed transaction and other possible alternative
strategic transactions, including the leveraged buy-out, United Dental's Board
of Directors instructed Mr. Anderson to inform Protective that the proposed
merger consideration of $18.50 a share was too low. Mr. Anderson communicated
that response by telephone to Mr. Danny L. Bentley, a Senior Vice President of
Protective, on the same day.
On February 24, 1998, Protective submitted a letter to United Dental
indicating its interest in acquiring all of the outstanding shares of United
Dental's common stock at a price of $19.00 per share, comprised of a combination
of $9.31 in cash and the balance in Protective's common stock based on a fixed
exchange ratio to be determined at the time a definitive merger agreement was
executed. The Protective letter also included a request that Mr. Anderson agree
to a stockholder voting agreement in connection with the proposed transaction.
Upon receipt of the letter from Protective, Mr. Wilcox held discussions with the
members of United Dental's Board of Directors regarding the proposed
transaction. Following such discussions, Mr. Wilcox informed Mr. Bentley that
United Dental was interested in exploring a merger on the proposed terms,
subject to United Dental's Board of Directors's approval of the final terms and
structure of the transaction.
On February 28, 1998, Mr. Wilcox forwarded to United Dental's Board of
Directors the Protective letter outlining the terms of the proposed transaction,
drafts of a proposed merger agreement and stockholder agreement, information
concerning Protective, and additional information regarding the
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establishment of an exchange ratio for the transaction. The proposed stockholder
agreement provided for Mr. Anderson's agreement to vote his shares of United
Dental's common stock in favor of the merger.
On March 2, 1998, United Dental's Board of Directors held a special meeting
of the Board by conference telephone call in which all members of the Board of
Directors participated. At that meeting, Mr. Wilcox reviewed the discussions
with Protective and Protective's offer. Mr. Anderson and Mr. Wilcox reviewed the
other alternatives that had been considered relating to a strategic transaction
involving United Dental, all of which were at a price lower than Protective's
offer. Based on such discussions, the Board of Directors considered that the
Protective offer constituted the best strategic transaction for United Dental
among such alternatives. See "--Recommendations of United Dental's Board of
Directors and Factors Considered by United Dental's Board of Directors." The
Board of Directors determined that United Dental should seriously consider
Protective's offer, authorized Mr. Wilcox to negotiate the terms of a definitive
merger agreement and retain an investment banking firm for the purposes of
evaluating the fairness, from a financial point of view, of the consideration
payable to holders of United Dental's common stock in the transaction.
On March 2, 1998, Mr. Wilcox communicated the decision of United Dental's
Board of Directors to Mr. John D. Johns, the President of Protective.
On March 2, 1998, Protective's Board of Directors met at a regularly
scheduled meeting and, together with members of management and outside financial
advisors, reviewed in detail a potential transaction involving the merger of
United Dental with a wholly-owned subsidiary of Protective. At that meeting,
representatives of A.G. Edwards, Protective's financial advisors, made a
presentation regarding the financial terms of the proposed transaction to
Protective's Board of Directors. At such meeting, Protective's Board of
Directors unanimously approved the proposed merger with United Dental at a price
of approximately $19.00 per share in cash and Protective's common stock, the
proposed terms of the merger agreement and the issuance of Protective's common
stock in connection with the transaction.
On March 3 and 4, 1998, representatives of Protective conducted additional
due diligence on United Dental in Dallas.
On March 4, 1998, United Dental engaged BT Alex. Brown Incorporated ("BT
Alex. Brown") as its financial advisor for the purposes of rendering an opinion
as to the fairness, from a financial point of view, of the consideration payable
to holders of United Dental's common stock in the proposed transaction with
Protective.
On March 4 and 5, 1998, Mr. Wilcox participated in negotiations with respect
to the proposed terms of the merger agreement with representatives of
Protective, including Mr. Johns and Mr. Bentley, at the Protective offices in
Birmingham, Alabama. Legal counsel for United Dental and Protective also
participated in the negotiations. Among other items discussed in such
negotiations, the parties negotiated the terms of the exchange ratio for the
stock consideration in the transaction and certain market prices of Protective's
common stock at which the parties would have the right to terminate the
transaction.
Prior to the opening of the market on March 6, 1998, United Dental issued a
press release announcing the existence of discussions concerning a possible
transaction involving a third party.
During the period of March 6-9, 1998, Mr. Wilcox advised each member of
United Dental's Board of Directors individually of the progress of the
negotiations with Protective. On March 7, 1998, the members of United Dental's
Board of Directors were forwarded a summary of the proposed transaction terms,
current draft of the merger agreement and stockholder agreement and related
schedules and agreements. On March 6, 1998, representatives of BT Alex. Brown
commenced a due diligence investigation of Protective at its headquarters in
Birmingham.
On March 10, 1998, United Dental's Board of Directors held a meeting by
telephone conference call. All members of United Dental's Board of Directors
participated in the meeting. At the meeting, United
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Dental's Board of Directors reviewed the terms of the proposed merger agreement
and an analysis by United Dental management of the proposed transaction.
Representatives of BT Alex. Brown then reviewed with United Dental's Board of
Directors the financial analyses performed by BT Alex. Brown in connection with
its evaluation of the Merger Consideration and rendered to United Dental's Board
of Directors its oral opinion (subsequently confirmed by delivery of a written
opinion, dated March 10, 1998) to the effect that, as of such date and based
upon and subject to certain matters stated in such opinion, the Merger
Consideration to be received by the holders of United Dental's common stock
pursuant to the merger agreement was fair to such holders from a financial point
of view. United Dental's Board of Directors became concerned that if the
Effective Time Price were below $33.50, which was the price prevailing at the
time the merger agreement was executed, United Dental Employee Option Holders
would be significantly disadvantaged as compared to United Dental's stockholders
because the number of shares of Protective's common stock delivered to each such
United Dental Employee Option Holder in respect of each United Dental share
would be declining or eliminated completely if the Merger Consideration were to
fall below the exercise price of the Covered Option. This would mean that such
United Dental Employee Option Holder would either receive no value for their
Covered Options or would not have the same economic opportunity as stockholders
to recoup the lost value if the price of Protective's common stock were to
increase thereafter. It was therefore determined that to treat such United
Dental Employee Option Holders fairly, as compared to United Dental's
stockholders, would require an additional cash payment if the Effective Time
Price were less than $33.50. After review and discussion, United Dental's Board
of Directors (with all members participating in the vote except as to the
contingent bonus plan) unanimously approved the merger agreement, subject to
confirmation by Protective of proposed changes to certain terms of the merger
agreement, a proposed severance policy for United Dental employees and, in
response to the concern described above with respect to United Dental Employee
Option Holders, a contingent bonus plan proposed for United Dental Employee
Option Holders, including Mr. Wilcox who is the chief executive officer and a
director of United Dental. Mr. Wilcox is the only director of United Dental who
may benefit from such plan and he did not participate in the vote on that plan.
See "--Interests of Certain Persons in the Merger--Contingent Transaction Bonus
Plan." At the March 10 meeting, United Dental's Board of Directors also
unanimously approved the terms of the proposed stockholder agreement between Mr.
Anderson and Protective Life. United Dental's Board of Directors did not appoint
a special committee to consider the merger agreement or the stockholder
agreement because with a majority of its members being outside directors, United
Dental's Board of Directors did not believe that a special committee was
necessary under applicable law.
On March 10, 1998, A.G. Edwards rendered to Protective's Board of Directors
its written opinion that the Merger Consideration was fair to Protective from a
financial point of view.
The merger agreement was finalized during the evening of March 10, 1998 and
executed by the parties as of that date. A press release announcing execution of
the definitive agreement between United Dental and Protective was issued prior
to the opening of the market on March 11, 1998.
RECOMMENDATION OF UNITED DENTAL'S BOARD OF DIRECTORS AND FACTORS CONSIDERED BY
UNITED DENTAL'S BOARD OF DIRECTORS
United Dental undertook consideration of a strategic transaction to
determine whether a business combination with a third party would provide
greater stockholder value than United Dental continuing as a separate entity. As
a result of that review, the Board of Directors ultimately determined that the
transaction with Protective presents the United Dental stockholders with the
ability to retain a continuing interest in an entity that will enable them to
realize additional value for their investment beyond that which would be
realized if United Dental were sold and United Dental's stockholders retained no
continuing equity interest or if United Dental continued as a separate entity.
United Dental's Board of Directors believes that the merger is in the best
interests of the stockholders of United Dental and United Dental's Board of
Directors has unanimously recommended that the United
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Dental stockholders vote "FOR" adoption and approval of the merger agreement and
the merger. In making its determination, United Dental's Board of Directors
considered the following factors, without limitation and without assigning
relative weights thereto, and concluded that each of such factors weighed in
favor of the merger:
A. Information with respect to the financial condition, results of
operations and business of United Dental, on both a historical and a
prospective basis, and the influence of current industry, economic and
market conditions (which United Dental's Board of Directors analyzed in
its consideration of United Dental's strategic alternative of continuing
on a stand-alone basis);
B. Strategic alternatives (including continuing the United Dental business
in its present configuration on a stand-alone basis without significant
changes), none of which United Dental's Board of Directors believed to be
as favorable to the holders of the shares of United Dental's common stock
as the merger;
C. The recognition by United Dental's management of the difficulties and
risks inherent in attempting to enhance stockholder value over the
long-term through internal processes due to increasing competitive
pressures in the dental care industry to which a larger, better
capitalized company with stronger ratings (such as Protective) would be
better able to respond;
D. Protective's business, assets, management, competitive position and
prospects and the advantages to United Dental of an alliance with a
company having the experience in the dental benefits industry of
Protective, its greater financial resources, its existing distribution
system available to support the growth of the dental benefits business
and its expertise in the indemnity insurance component of the dental
benefits business;
E. The potential for growth in earnings resulting from the combination and
increased market presence of the combined company as a leading provider
of dental health benefits which United Dental believes will benefit the
combined company's marketing efforts and its ability to attract
additional acquisition prospects;
F. The opportunity for all United Dental stockholders to maintain an
ownership stake in the combined entity and realize the potential
long-term benefits of the merger;
G. The regulatory approvals required to consummate the merger and the
likelihood of Protective receiving all such approvals;
H. Historical market prices and trading information with respect to United
Dental's common stock and Protective's common stock, with United Dental's
Board of Directors concluding that the relative stability of Protective's
common stock, combined with the premium described below, weighed in favor
of the merger;
I. Based on the market price of United Dental's common stock and
Protective's common stock at the close of business on March 4, 1998, the
prospect that United Dental stockholders would receive a premium of 38%
over the closing bid price of United Dental's common stock of $14.06 on
March 4, 1998;
J. The opinion received by United Dental's Board of Directors from BT Alex.
Brown on March 10, 1998 to the effect that, as of such date and based
upon and subject to certain matters stated in such opinion, the Merger
Consideration to be received by the holders of United Dental's common
stock pursuant to the merger agreement was fair to such holders from a
financial point of view and the financial analyses conducted by BT Alex.
Brown in reaching its opinion, as described under "--Opinion of BT Alex.
Brown Incorporated";
K. The likelihood that the Protective transaction would be completed;
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L. The terms and conditions of the merger agreement, which were negotiated
and believed to be fair by United Dental's Board of Directors; and
M. The partially tax-free nature (for U.S. federal income tax purposes) of
the merger. As discussed in "THE PROPOSED MERGER--Material U.S. Federal
Income Tax Consequences of the Merger" below, no gain or loss will be
recognized by United Dental stockholders on the exchange of their shares
in the merger to the extent that they receive shares of Protective's
common stock.
In its deliberations concerning the merger, United Dental's Board of
Directors also considered various adverse considerations and risk factors
including, among others, (i) the risk that the operating results of the combined
entity might not be equal to the sum of the historical operating results of the
two entities on a stand alone basis; (ii) the risk that other benefits sought to
be obtained by the merger will not be obtained; (iii) the percentage of
ownership reduction to United Dental's stockholders resulting from the exchange;
(iv) the interests of certain members of United Dental's management and
directors in the merger (see "--Interests of Certain Persons in the Merger");
and (v) the risk to United Dental's stockholders resulting from the exchange
being based on a fixed exchange ratio. Because the exchange ratio is fixed and
will not increase or decrease as a result of fluctuations in the market price of
Protective's common stock, the specific value of the Merger Consideration to be
paid by Protective in the merger will depend on the market price of Protective's
common stock on the closing date. In the event the market price of Protective's
common stock decreases or increases prior to the closing date, the market value
of Protective's common stock to be issued to United Dental's stockholders in the
merger will correspondingly decrease or increase. See "RISK FACTORS--Fixed
Exchange Ratio; Value of Merger Consideration May Decrease." The market price of
Protective's common stock as of the date of the signing of the merger agreement
and as of a recent date is set forth herein under "SUMMARY--Trading Markets and
Market Price Data." United Dental's Board of Directors determined that such
adverse considerations and risk factors did not outweigh the positive
considerations and potential benefits of the merger listed in the preceding
paragraph.
United Dental's Board of Directors also took into account that certain
members of management had certain interests in the merger in addition to the
interests of United Dental's stockholders generally. These interests arise from,
among other things, stock options previously granted to such persons, employment
agreements which included severance provisions, the contingent transaction bonus
plan and provisions of the merger agreement providing for the continuation of
certain indemnification rights and benefit plans. United Dental's Board of
Directors believed that such payments and inducements to management (i) acted to
align the interests of management with those of United Dental in negotiating and
effectuating the merger, (ii) provided the necessary incentives for the key
members of United Dental's management team to continue with United Dental
through the closing date and for a period of time after the merger is
consummated and (iii) after consultation with its accounting and legal advisors
were reasonable and consistent with industry standards. See "--Interests of
Certain Persons in the Merger."
In its deliberations concerning the merger, United Dental's Board of
Directors also considered the terms and conditions of the stockholder agreement
with Mr. Anderson, who is on the Board of Directors of United Dental, and the
terms and conditions of the merger agreement relating to the circumstances under
which United Dental would be able to terminate the merger agreement in the event
of a bona fide, superior proposal. United Dental's Board of Directors took into
account that the stockholder agreement related primarily to Mr. Anderson's
agreement to vote (and to use his best efforts to cause George E. Bello ("Mr.
Bello") and Citibank, N.A., trustees of two independent trusts of which
relatives of Mr. Anderson are beneficiaries and which hold an aggregate of
778,500 shares of United Dental's common stock to vote) for the approval of the
merger and did not confer any additional benefits upon Mr. Anderson likely to
cause a conflict of interest. In addition, since the stockholder agreement
contained the same non-solicitation provisions as are in the merger agreement,
and the stockholder agreement would terminate upon any termination of the merger
agreement, United Dental's Board of Directors did not believe that the
stockholder agreement would impede another bona fide, superior proposal. United
Dental's Board of
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Directors also considered the termination fee payable by United Dental in
connection with any termination of the merger agreement related to a takeover
proposal as a condition to entering into the merger agreement, which was
requested by Protective as a condition to entering into the merger agreement.
However, United Dental's Board of Directors did not believe that the termination
fee would impede another bona fide, superior proposal and it believed such fee
was consistent with fees payable in similar transactions.
Based on this analysis, United Dental's Board of Directors unanimously
determined that the merger was fair to, and in the best interests of, United
Dental's stockholders and approved and adopted the merger agreement and
unanimously recommended that United Dental stockholders vote their shares of
United Dental's common stock in favor of approval of the merger and the merger
agreement. The members of United Dental's Board of Directors evaluated the
factors listed above in light of their knowledge of the business operations of
United Dental and their business judgment. The foregoing discussion of the
information and factors considered by United Dental's Board of Directors is not
intended to be exhaustive, but does include all the material factors considered
by United Dental's Board of Directors, and such information and factors were
considered collectively by United Dental's Board of Directors in connection with
its review of the merger agreement and the proposed transactions. In view of the
variety of factors considered in connection with its evaluation of the merger,
United Dental's Board of Directors did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of United
Dental's Board of Directors may have given different weights to different
factors.
OPINION OF BT ALEX. BROWN INCORPORATED
United Dental engaged BT Alex. Brown to render an opinion to United Dental's
Board of Directors as to the fairness of the Merger Consideration from a
financial point of view to the holders of United Dental's common stock. On March
10, 1998, at a meeting of United Dental's Board of Directors held to evaluate
the proposed merger, BT Alex. Brown rendered to United Dental's Board of
Directors an oral opinion (which opinion was subsequently confirmed by delivery
of a written opinion dated March 10, 1998) to the effect that, as of such date
and based upon and subject to certain matters stated in such opinion, the Merger
Consideration was fair from a financial point of view to the holders of United
Dental's common stock.
The full text of the written opinion of BT Alex. Brown, dated March 10,
1998, which sets forth the assumptions made, matters considered and limitations
of the review undertaken, is attached as Annex B to this Proxy
Statement/Prospectus and is incorporated herein by reference. BT Alex. Brown has
consented to the inclusion of its opinion letter to United Dental's Board of
Directors as Annex B hereto. In giving such consent, BT Alex. Brown does not
admit that it comes within the category of persons whose consent is required
under Section 7 of the Securities Act, or the rules and regulations of the
Commission thereunder, nor does it thereby admit that it is an expert with
respect to any part of this Proxy Statement/Prospectus within the meaning of the
term "experts" as used in the Securities Act, or the rules and regulations of
the Commission thereunder. BT ALEX. BROWN'S OPINION IS DIRECTED TO UNITED
DENTAL'S BOARD OF DIRECTORS, ADDRESSES ONLY THE FAIRNESS OF THE MERGER
CONSIDERATION FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE
SPECIAL MEETING. The summary of the opinion of BT Alex. Brown in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion.
In connection with its opinion, BT Alex. Brown reviewed certain publicly
available financial information and other information concerning United Dental
and Protective and certain internal analyses and other information furnished to
BT Alex. Brown by United Dental and Protective. BT Alex. Brown also held
discussions with members of the senior management of United Dental and
Protective regarding the business and prospects of United Dental and Protective
and the joint prospects of a combined company. In addition, BT Alex. Brown (i)
reviewed the reported prices and trading activity for United Dental's
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common stock and Protective's common stock, (ii) compared certain financial and
stock market information for United Dental and Protective with similar
information for certain other publicly traded companies, (iii) reviewed the
financial terms of certain recent business combinations which BT Alex. Brown
deemed comparable in whole or in part, (iv) reviewed the terms of the merger
agreement, and (v) performed such other studies and analyses and considered such
other factors as BT Alex. Brown deemed appropriate.
As described in its opinion, BT Alex. Brown assumed and relied upon, without
independent verification, the accuracy, completeness and fairness of the
information furnished to or otherwise reviewed by or discussed with BT Alex.
Brown for purposes of its opinion. With respect to the information relating to
the prospects of United Dental, Protective and the combined company, BT Alex.
Brown assumed that such information reflected the best currently available
judgments and estimates of the management of United Dental and Protective as to
the likely future financial performance of their respective companies and of the
combined company. BT Alex. Brown did not make, nor was it provided with, an
independent evaluation or appraisal of the assets or liabilities of United
Dental or Protective. BT Alex. Brown's opinion does not constitute an opinion as
to the price at which Protective's common stock will actually trade at any time.
BT Alex. Brown was retained by United Dental's Board of Directors as financial
advisor solely for the purposes of rendering an opinion and, accordingly, BT
Alex. Brown was not requested to, and did not, participate in the negotiation or
structuring of the merger, nor was BT Alex. Brown authorized to, and did not,
solicit third party indications of interest with respect to the acquisition of
all or a part of United Dental. BT Alex. Brown's opinion was based on market,
economic and other conditions as they existed and could be evaluated as of the
date of its opinion. Although BT Alex. Brown evaluated the Merger Consideration
from a financial point of view, the type and amount of consideration payable in
the merger was determined through negotiation between United Dental and
Protective. No other limitations were imposed by United Dental's Board of
Directors upon BT Alex. Brown with respect to the investigations made or the
procedures followed by it in rendering its opinion.
The following is a summary of the material analyses and factors considered
by BT Alex. Brown in connection with its opinion to United Dental's Board of
Directors dated March 10, 1998:
ANALYSIS OF SELECTED PUBLIC COMPANIES. BT Alex. Brown compared certain
financial and stock market information for the following selected publicly held
companies in the managed care and specialty managed care industries: CompDent
Corporation; Coventry Corporation; First Commonwealth, Inc.; Horizon Health
Corporation; Maxicare Health Plans, Inc.; Mid-Atlantic Medical Services, Inc.;
PMR Corporation; Safeguard Health Enterprises, Inc.; Sierra Health Services,
Inc.; and United Wisconsin Services, Inc. (collectively, the "United Dental
Selected Companies"). BT Alex. Brown calculated equity market values as a
multiple of latest 12 months and estimated calendar years 1998 and 1999 net
income, and adjusted market values (equity market value, plus total debt, less
excess cash and equivalents) as multiples of revenues, earnings before interest,
taxes, depreciation and amortization ("EBITDA") and earnings before interest and
taxes ("EBIT") for the latest 12 months. All multiples were based on closing
stock prices on March 6, 1998. Net income estimates for the United Dental
Selected Companies and United Dental were based on analyst estimates as reported
by I/B/E/S, a market research database. This analysis indicated a range for the
United Dental Selected Companies of equity market value multiples of latest 12
months and estimated calendar 1998 and 1999 net income of 11.1x to 29.8x (with a
mean of 19.0x), 7.9x to 24.0x (with a mean of 15.4x) and 5.7x to 17.3x (with a
mean of 12.1x), respectively, and adjusted equity market value multiples of
latest 12 months revenues, EBITDA and EBIT of 0.lx to 1.7x (with a mean of
0.8x), 5.8x to 9.8x (with a mean of 7.9x), and 7.7x to 14.6x (with a mean of
9.8x), respectively. Applying these implied equity and adjusted equity market
value multiples for the Selected Transactions to corresponding financial data
for United Dental resulted in a mean equity reference range for United Dental of
approximately $6.36 to $19.55 per share, as compared to the equity value implied
by the Merger Consideration of approximately $19.43 per share based on the
closing price for Protective's common stock on March 6, 1998.
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BT Alex. Brown also compared certain financial and stock market information
for Protective and the following selected publicly held companies in the
insurance industry: Allmerica Financial Corporation; American Heritage Life
Investment Corp.; FBL Financial Group, Inc.; Hartford Life, Inc.; Horace Mann
Educators Corporation; Kansas City Life Insurance Company; Liberty Corporation;
Nationwide Financial Services, Inc.; Penncorp Financial Group, Inc.; and
ReliaStar Financial Corporation (collectively, the "Protective Selected
Companies"). BT Alex. Brown calculated equity market values as multiples of
latest 12 months net operating earnings, estimated calendar 1998 and 1999 net
income and latest available book value. All multiples were based on closing
stock prices on March 6, 1998. Net income estimates for the Protective Selected
Companies and Protective were based on I/B/E/S estimates. This analysis
indicated a range for the Protective Selected Companies of equity market value
multiples of latest 12 months net operating earnings, estimated calendar 1998
and 1999 net income and latest available book value of 9.9x to 23.2x (with a
mean of 18.2x), 12.6x to 18.2x (with a mean of 16.0x), 10.5x to 15.6x (with a
mean of 14.3x) and 1.1x to 3.2x (with a mean of 2.0x), respectively. Based on
the closing price of Protective's common stock on March 6, 1998, the equity
market value multiples of latest 12 months net operating earnings, estimated
calendar 1998 and 1999 net income and latest available book value for Protective
was 20.4x, 17.6x, 15.6x and 3.0x, respectively.
ANALYSIS OF RECENT MERGERS AND ACQUISITIONS. BT Alex. Brown reviewed the
purchase price and implied transaction multiples in the following selected
merger and acquisition transactions (with purchase accounting) effected in the
managed care and specialty managed care industries (acquiror/target): Humana,
Inc./Physicians Corporation of America; Foundation Health Systems,
Inc./Physicians Health Services, Inc.; Columbia/HCA Healthcare Corporation/Value
Health, Inc.; CIGNA Corporation/Healthsource, Inc.; PacifiCare Health Systems
Inc./FHP International Corporation; Humana, Inc./EMPHESYS Financial Group, Inc.;
Humana, Inc./CareNetwork, Inc.; United Healthcare Corporation/GenCare Health
Systems, Inc.; and FHP International Corporation/TakeCare, Inc. (the "Selected
Transactions"). All multiples were based on publicly available information at
the time of announcement of such transaction. This analysis indicated a range of
(i) implied equity market value multiples for the Selected Transactions of
latest 12 months and one-year forward net income of 10.4x to 40.1x (with a mean
of 28.3x) and 9.4x to 42.1x (with a mean of 21.8x), respectively, and (ii)
implied adjusted equity market value multiples for the Selected Transactions of
latest 12 months revenues, EBITDA and EBIT of 0.3x to 2.3x (with a mean of
0.9x), 5.8x to 30.0x (with a mean of 16.5x) and 6.9x to 29.9x (with a mean of
18.2x), respectively. Applying these implied equity and adjusted equity market
value multiples for the Selected Transactions to corresponding financial data
for United Dental resulted in a mean equity reference range for United Dental of
approximately $6.36 to $19.55 per share, as compared to the equity value implied
by the Merger Consideration of approximately $19.43 per share based on the
closing price for Protective's common stock on March 6, 1998.
PREMIUM ANALYSIS. BT Alex. Brown analyzed, among other things, the (i)
premiums paid in approximately 63 change of control transactions having
transaction values of between $150 and $250 million effected since January 1,
1994, which indicated a range of premiums, based on the target company's stock
price one day and one month prior to public announcement of the transaction, of
approximately (19.0)% to 120.0% (with a mean of 32.1%) and (6.8)% to 150.0%
(with a mean of 43.7%), respectively, (ii) premiums paid in approximately 16
change of control transactions with transaction of values between $150 million
and $250 million involving health care companies, which indicated a range of
premiums, based on the target company's stock price one day and one month prior
to public announcement of the transaction, of approximately (19.0)% to 75.7%
(with a mean of 19.4%) and (6.8)% to 111.6% (with a mean of 34.0)%,
respectively, and (iii) premiums paid in approximately nine managed care and
specialty managed care transactions, which indicated a range of premiums, based
on the target company's stock price one day and one month prior to public
announcement of the transaction, of approximately 1.2% to 132.2% (with a mean of
33.6%) and 12.3% to 119.6% (with a mean of 50.3%), respectively. The premiums
payable in the merger based on the closing price of United Dental's common stock
one day and one month prior to public announcement of the merger were
approximately 15.1% and 56.2%, respectively. Applying
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a range of mean premiums for the above transactions of 19.4% to 50.3% to the
closing price of United Dental Common Stock one day and one month prior to
public announcement of the merger resulted in an equity reference range for
United Dental of approximately $16.66 to $22.55 per share, as compared to the
equity value implied by the Merger Consideration of approximately $19.43 per
share based on the closing price of Protective's common stock on March 6, 1998.
DISCOUNTED CASH FLOW ANALYSES. BT Alex. Brown performed a discounted cash
flow analysis of United Dental to estimate the present value of the stand-alone,
unlevered, after-tax free cash flows that United Dental could generate over the
fiscal years 1998 through 2002, based on internal estimates of the management of
United Dental. The stand-alone discounted cash flow analysis of United Dental
was determined by (i) adding (x) the present value of the projected free cash
flows of United Dental over the fiscal years 1998 through 2002 and (y) the
present value of the estimated terminal values of United Dental in fiscal year
2002 and (ii) subtracting the current net debt of United Dental. The range of
estimated terminal values for United Dental was calculated by applying terminal
value multiples ranging from 6.0x to 10.0x to the projected fiscal year 2002
EBITDA of United Dental. The cash flows and terminal values of United Dental
were discounted to present value using discount rates ranging from 14% to 18%.
This analysis yielded an equity reference range for United Dental's common stock
of approximately $14.70 to $24.20 per share, as compared to the equity value
implied by the Merger Consideration of approximately $19.43 per share based on a
closing stock price of Protective's common stock on March 6, 1998.
BT Alex. Brown also performed a discounted cash flow analysis of Protective
on a stand-alone basis (the "Stand-Alone Analysis") and after giving effect to
the merger to calculate the implied value of the Merger Consideration on a pro
forma basis (the "Pro Forma Analysis"), based on internal estimates of the
management of Protective. In such analysis, BT Alex. Brown calculated the net
present value of the annual dividends payable to common equity holders and the
terminal value of the common equity of Protective and the combined company as of
December 31, 2002, calculated as a multiple of latest available book value and
latest 12 months net income. For purposes of such analysis, BT Alex. Brown
utilized discount rates of 11.0% to 15.0%, multiples of latest available book
value of 2.5x to 3.0x for the Stand-Alone Analysis and 2.25x to 2.75x for the
Pro Forma Analysis, and multiples of latest 12 months net income of 18.0x to
20.0x for both the Stand-Alone Analysis and the Pro Forma Analysis. The
Stand-Alone Analysis indicated an equity reference range for Protective's common
stock of approximately $59.63 to $83.47 per share, as compared to the closing
price of Protective's common stock on March 6, 1998 of $69.94 per share. The Pro
Forma Analysis indicated an implied reference range for the Merger Consideration
on a pro forma basis of approximately $19.78 to $24.26 per share, as compared to
the value implied by the Merger Consideration of approximately $19.43 per share.
PRO FORMA MERGER ANALYSIS. BT Alex. Brown analyzed the pro forma effects of
the merger on the earnings per share (the "EPS") of Protective in calendar years
1998 and 1999 based on internal estimates of the management of United Dental and
Protective, both before and after giving effect to potential synergies and other
cost savings anticipated by the management of United Dental and Protective to
result from the merger. This analysis indicated that the merger could be
dilutive to Protective's EPS in each of the calendar years analyzed before
giving effect to potential synergies and other costs savings anticipated by the
management of United Dental and Protective to result from the merger and
accretive to Protective's EPS in each of the calendar years analyzed assuming
approximately $2.1 million and $1.9 million or more of such synergies and cost
savings were achieved in calendar years 1998 and 1999, respectively. The actual
operating or financial results achieved by the pro forma combined company may
vary from projected results and variations may be material as a result of
business and operational risks, the timing and amount of synergies, the costs
associated with achieving such synergies and other factors.
OTHER FACTORS. In rendering its opinion, BT Alex. Brown also reviewed and
considered, among other things: (i) historical and projected financial data for
United Dental and Protective, (ii) historical market prices and trading volumes
for United Dental's common stock; (iii) the relationship between movements in
United Dental's common stock, movements in the common stock of selected dental
health management
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organization companies and selected non-dental specialty managed care companies
and movements in the S&P 500 Index; (iv) the relationship between movements in
Protective's common stock, movements in the common stock of selected insurance
companies and movements in the S&P 500 Index; and (v) selected analysts' reports
on United Dental and Protective, including EPS and growth rate estimates of such
analysts for United Dental and Protective.
The summary set forth above does not purport to be a complete description of
the opinion of BT Alex. Brown to United Dental's Board of Directors or the
financial analyses performed and factors considered by BT Alex. Brown in
connection with its opinion. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most appropriate and
relevant methods of financial analyses and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. BT Alex. Brown believes that its analyses
and the summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or selecting
portions of the above summary, without considering all factors and analyses,
could create a misleading or incomplete view of the processes underlying such
analyses and opinion. In performing its analyses, BT Alex. Brown made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of United Dental and Protective. No company, transaction or business
used in such analyses as a comparison is identical to United Dental, Protective
or the proposed merger, nor is an evaluation of the results of such analyses
entirely mathematical; rather, such analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in such analyses and the ranges of valuations resulting from any
particular analysis are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. BT Alex. Brown's
opinion and financial analyses were only one of many factors considered by
United Dental's Board of Directors in its evaluation of the proposed merger and
should not be viewed as determinative of the views of United Dental's Board of
Directors or management with respect to the Merger Consideration or the merger.
BT Alex. Brown is an internationally recognized investment banking firm and,
as a customary part of its investment banking business, is engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private placements and valuations for
estate, corporate and other purposes. United Dental selected BT Alex. Brown
based on BT Alex. Brown's reputation, expertise and familiarity with United
Dental and its business. BT Alex. Brown previously has provided investment
banking services to United Dental and Protective in connection with matters
unrelated to the proposed merger, for which services BT Alex. Brown has received
compensation. BT Alex. Brown maintains a market in United Dental's common stock
and regularly publishes research reports regarding the managed care and
specialty managed care industries and the businesses and securities of United
Dental and other publicly owned companies in such industry. In the ordinary
course of business, BT Alex. Brown may actively trade the securities of United
Dental and Protective for its own account and the account of customers and,
accordingly, may at any time hold a long or short position in securities of
United Dental and Protective.
Pursuant to the terms of BT Alex. Brown's engagement, United Dental has
agreed to pay BT Alex. Brown an opinion fee of $350,000, which fee was payable
upon delivery of BT Alex. Brown's opinion. In addition, United Dental has agreed
to reimburse BT Alex. Brown for its reasonable out-of-pocket expenses, including
fees and disbursements of counsel, and to indemnify BT Alex. Brown and certain
related parties against certain liabilities, including certain liabilities under
the federal securities laws, relating to, or arising out of, its engagement.
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FACTORS CONSIDERED BY PROTECTIVE'S BOARD OF DIRECTORS
Protective recognizes that the dental health care industry is in a state of
consolidation and that Protective must be in a position to take advantage of
opportunities for growth in the dental HMO industry.
After a review of its initial due diligence regarding United Dental's
business and operations, financial condition and growth prospects (both on a
stand-alone basis and in combination with Protective), as well as opportunities
for marketing and administrative synergies, Protective's management determined
that, in light of other transactions and trends within the industry, the
contemplated transaction was in the best interests of Protective. In connection
with its due diligence investigation, Protective reviewed United Dental's unit
costs and expenses generally and compared these to Protective's. As a result of
this comparison, Protective expects to achieve a reduction in combined annual
operating expenses of approximately $12 million over a three-year period. The
potential sources of expense reductions in the combined enterprise primarily
relate to the elimination of various redundances and inefficiencies identified
by Protective. There can be no assurance that such expense reductions, if any,
will be achieved.
At a regularly scheduled meeting, Protective's management and its outside
financial advisors presented the contemplated transaction to Protective's Board
of Directors. The presentation included a review of growth opportunities in the
dental HMO industry, the terms of the transaction, and Protective's plans for
United Dental after the merger. In reaching its conclusion to approve the
merger, Protective's Board of Directors determined that the merger is consistent
with and in furtherance of the long-term business strategy of Protective to
become a national provider of dental benefit programs. Protective's Board of
Directors believes that the acquisition of United Dental will be an excellent
geographic and strategic fit with Protective's existing dental business. See
"Plans for United Dental After the Merger."
In reaching its determination, Protective's Board of Directors, having
received an opinion from A.G. Edwards that the merger was fair to Protective
from a financial point of view, unanimously approved the merger agreement and
the issuance of Protective's common stock in connection with the merger. The
merger does not require the approval of Protective's stockholders.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL
Certain directors and executive officers of United Dental have interests in
the merger that are in addition to the interests of United Dental and its
stockholders generally. United Dental's Board of Directors was aware of these
interests and considered them, among other matters, in approving the merger
agreement.
INDEMNIFICATION OF UNITED DENTAL DIRECTORS AND OFFICERS
The merger agreement provides that (a) all rights to indemnification (and
rights to advancement of expenses) existing in favor of the present or former
directors, officers, employees, fiduciaries and agents of United Dental or any
subsidiaries of United Dental (collectively, the "Indemnified Parties") as
provided in United Dental's Certificate of Incorporation or United Dental's
Bylaws or the certificate or articles of incorporation, Bylaws or similar
organizational documents of any of the United Dental Subsidiaries as in effect
as of the date hereof or pursuant to the terms of any indemnification agreements
entered into between United Dental and any of the Indemnified Parties with
respect to matters occurring on or prior to the Effective Time including,
without limitation, the transactions contemplated by the merger agreement shall
survive the merger and shall continue in full force and effect (without
modification or amendment, except as required by applicable law or except to
make changes permitted by law that would enlarge the Indemnified Parties' right
of indemnification), to the fullest extent and for the maximum term permitted by
law, and shall be enforceable by the Indemnified Parties against PLC Merger
Subsidiary and Protective and (b) to the extent that an Indemnified Party is not
indemnified or held harmless pursuant to subsection (a) above, Protective has
agreed, for a period of six years after the Effective Time, that PLC Merger
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Subsidiary shall, subject to the terms set forth in the merger agreement,
indemnify and hold harmless, to the fullest extent permitted under applicable
law (and PLC Merger Subsidiary shall also advance expenses as incurred to the
fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification), each
Indemnified Party against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the transactions contemplated by the merger agreement.
In the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until final disposition of any and all such claims.
OPTION SETTLEMENT AND CANCELLATION AGREEMENTS/WARRANT SETTLEMENT AGREEMENT
United Dental has entered into several Option Settlement and Cancellation
Agreements, each dated as of March 10, 1998 (the "Option Settlement
Agreements"), with certain holders (the "1989 Option Holders") of certain United
Dental Stock Options issued under the United Dental Care, Inc. Amended and
Restated 1989 Key Employee Stock Option Plan (the "1989 Plan"). United Dental
entered into such agreements at the request of Protective for the purpose of
treating such options similarly in the merger to the other United Dental Stock
Options rather than having such options remain outstanding after the merger.
Pursuant to the Option Settlement Agreements, (i) each of the United Dental
Stock Options held by the 1989 Option Holders that is in the money will be
terminated in exchange for a payment in cash and stock equal to (1) the excess
of the per share Merger Consideration payable under the merger agreement over
the per share exercise price of such option, times (2) the number of shares
subject to such option, and (ii) each of the United Dental Stock Options held by
the 1989 Option Holders that is not in the money will expire without payment.
With respect to all other United Dental Stock Options, see "THE PROPOSED
MERGER--Conversion of Shares" for a description of the acceleration of the
exercisability thereof. In addition, at the request of Protective, United Dental
has entered into the Warrant Settlement Agreement, dated as of March 10, 1998
(the "Warrant Settlement Agreement"), with Mark E. Pape. Pursuant to the Warrant
Settlement Agreement, Mr. Pape's United Dental Warrants will be terminated in
exchange for payment in cash and stock equal to (1) the excess of the per share
Merger Consideration payable under the merger agreement over the per share
exercise price of such warrant, times (2) the number of shares subject to such
warrant. See "THE PROPOSED MERGER--Conversion of Shares."
Dr. Barnett executed an Option Settlement and Cancellation Agreement with
respect to his outstanding United Dental Stock Options. The executive officers
of United Dental, who include Mr. Wilcox (who is also a director), Mr. McCarty
and Dr. Barnett, hold 240,000, 75,000 and 40,000 United Dental Stock Options
with exercise prices less than $22.00 per share, respectively. Each of the
outside directors of United Dental hold 12,000 United Dental Stock Options,
except for James Ken Newman and William H. Longfield who each hold 16,000 United
Dental Stock Options. Each of the options held by officers and directors of
United Dental will be canceled in the merger in exchange for Protective's common
stock and cash equal in the aggregate to the excess, if any, of the Merger
Consideration over the per share exercise price of such United Dental Stock
Options. See "THE PROPOSED MERGER--Conversion of Shares."
THE STOCKHOLDER AGREEMENT
The stockholder agreement described below is intended to ensure that Mr.
Anderson will vote for the merger and the merger agreement and that he is not,
nor is he causing any of his agents or representatives, to solicit or seek other
transactions which would impede or supersede the transaction between United
Dental and Protective. Although Mr. Anderson has agreed to use his best efforts
to cause Citibank N.A. and Mr. Bello, trustees of two independent trusts of
which relatives of Mr. Anderson are beneficiaries and which hold an aggregate of
778,500 shares of United Dental's common stock, to vote with him with respect to
the shares held by the two independent trusts, he has no ability to control the
manner in which either
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Citibank N.A. or Mr. Bello vote with respect to the merger, merger agreement, or
any related transaction. A copy of the stockholder agreement appears as Annex D
to this Proxy Statement/Prospectus and is incorporated herein by reference. Such
summary is qualified in its entirety by reference to this stockholder agreement.
Pursuant to the Stockholder Agreement, dated as of March 10, 1998 (the
"Stockholder Agreement"), Mr. Jack R. Anderson, the Chairman of the United
Dental Board, who as of July 31, 1998 beneficially owned 5.1% of United Dental's
common stock, has agreed to vote (and to use his best efforts to cause Citibank
N.A. and Mr. Bello to vote with respect to the shares held by the two
independent trusts, which beneficially owned 8.7% of United Dental's common
stock as of July 31, 1998): (i) in favor of the merger and the merger agreement
and (ii) against (a) any merger or merger agreement (other than the merger and
merger agreement discussed in this Proxy/Prospectus) certain types of corporate
reorganizations of United Dental or any amendment of United Dental's Certificate
of Incorporation or Bylaws which would impede the merger or the merger
agreement. Mr. Anderson has also agreed except as provided in subsection (ii)
above, not to (and to use his best efforts to cause Citibank N.A. and Mr. Bello
not to with respect to the shares held by the two independent trusts) (a)
transfer United Dental common stock or enter into any contract of agreement with
respect to the transfer of such shares, other than pursuant to the terms of the
merger or (b) enter into any voting arrangement in connection with any Takeover
Proposal. Notwithstanding the foregoing, Mr. Anderson may, for estate planning
purposes, transfer certain shares of United Dental common stock; provided, that
the transferee become a party to the Stockholder Agreement. Mr. Anderson has
also agreed that, during the term of the Stockholder Agreement, neither he nor
any of his agents or representatives will solicit any Takeover Proposal or enter
into any arrangements which may reasonably be expected to lead to any Takeover
Proposal.
On May 20, 1998 Mr. Anderson transferred 150,000 shares to the Rose-Marie
and Jack R. Anderson Foundation, and the foundation has become a party to a
stockholder agreement with substantially the same terms as Mr. Anderson's.
CONTINGENT BONUS PLAN
Following the execution of the merger agreement, United Dental's Board of
Directors (with Mr. Wilcox abstaining from the discussion and vote) unanimously
adopted the "contingent bonus plan" for all employee holders (the "United Dental
Employee Option Holders") of United Dental Stock Options having a per share
exercise price of less than $19.00 ("Covered Options"). If the bonus awards
under the plan are triggered (based upon the price of Protective's common stock
being below $33.50, as described below), United Dental will provide the
contingent bonuses to the United Dental Employee Option Holders so that such
employees will each receive consideration from the merger and the bonus that
will be equal in total to what they would have received if the value of the
Merger Consideration was $19.00 (as if the price of Protective's common stock
was $33.50). In the merger, Covered Options will be canceled in exchange for a
payment per share in stock and cash equal to the excess of the Merger
Consideration over the per share exercise price of each such Covered Option. The
portion of such payment which is to be made in Protective's common stock is to
bear the same ratio to the total payment as the Common Stock Consideration bears
to the total Merger Consideration. United Dental's Board of Directors became
concerned that if the Effective Time Price were below $33.50, which was the
price prevailing at the time the merger agreement was executed, United Dental
Employee Option Holders would be significantly disadvantaged as compared to
United Dental's stockholders because the number of shares of Protective's common
stock delivered to each such United Dental Employee Option Holder in respect of
each United Dental share would be declining, or eliminated completely if the
Merger Consideration were to fall below the exercise price of the Covered
Option. This would mean that such United Dental Employee Option Holder would
either receive no value for their Covered Options or not have the same economic
opportunity as stockholders to recoup the lost value if the price of
Protective's common stock were to increase thereafter. It was therefore
determined that to treat such United Dental Employee Option Holders fairly as
compared to United Dental's stockholders would require an additional cash
payment, if
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the Effective Time Price were less than $33.50. Under such bonus plan, if the
Effective Time Price is less than $33.50 (or such other amount as is required to
adjust for an Adjustment Event), United Dental shall pay to each United Dental
Employee Option Holder an amount in cash equal to (x) the amount, if any, by
which the value of the Merger Consideration (calculated using the Effective Time
Price for Protective's common stock) is less than $19.00 multiplied by (y) the
number of shares subject to Covered Options held by such United Dental Employee
Option Holder, provided, that the aggregate payment to all United Dental
Employee Option Holders shall not exceed $805,800. The amounts payable pursuant
to such plan are subject to all applicable tax withholding requirements. No
member of United Dental's Board of Directors (other than Mr. Wilcox)
participates in the contingent bonus plan. Mr. Wilcox, Mr. McCarty and Dr.
Barnett hold 240,000, 75,000 and 40,000 stock options, respectively, which are
covered by the contingent bonus plan. In the event that the closing price of
Protective's common stock on the effective date of the merger falls to $27.50
(thereby causing the Merger Consideration to fall to $17.26), such officers of
United Dental would receive the maximum possible bonuses under the plan of
$336,000, $130,500 and $69,600, respectively. Eight other United Dental
employees hold an aggregate of 154,800 stock options which are covered by the
plan.
SEVERANCE POLICY
On March 8, 1998, United Dental's Board of Directors adopted a severance
policy relating to involuntary terminations initiated by United Dental, which
policy is applicable to all employees of United Dental and its subsidiaries. In
the event of a reduction-in-force (as defined in the policy) resulting from a
merger or sale of United Dental, each employee who is involuntarily terminated
is entitled to certain severance payments based upon the position held by such
employee prior to termination and the number of each such terminated employee's
years of service with United Dental and its subsidiaries at or below the Vice
President level. The policy does not apply to any directors or executive
officers of United Dental. The severance payment amounts are determined in
accordance with United Dental's Severance Policy Support Schedule which will be
in effect for one year from the date of closing of the merger or sale of United
Dental. Generally, the amounts of severance range from 16 to 24 weeks of salary
for Vice Presidents, from 10 to 18 weeks of salary for senior managers, from 5
to 13 weeks of salary for exempt management, and from 2 to 10 weeks of salary
for all other employees of United Dental and its subsidiaries, with certain
exceptions for retention purposes with respect to key individuals and positions.
EMPLOYMENT AGREEMENTS
United Dental has entered into employment agreements with the following
individuals: (i) Mr. William H. Wilcox, President and Chief Executive Officer
and Senior Vice President, such employment agreement dated as of May 13, 1996,
(ii) Dr. Peter R. Barnett, Chief Operations Officer, such employment agreement
dated as of June 1, 1996; (iii) Mr. John W. McCarty, Senior Vice President,
Chief Financial Officer, Treasurer and Secretary, such employment agreement
dated as of November 10, 1997, (iv) Mr. Jeff P. Hollansworth, Senior Vice
President, such employment agreement dated as of October 15, 1996 and (v) Mr.
Jeffrey R. Gullo, Senior Vice President and Chief Information Officer, such
employment agreement dated as of March 1, 1997. Pursuant to the above employment
agreements, Mr. Wilcox, Dr. Barnett, Mr. McCarty, Mr. Hollansworth and Mr. Gullo
will receive (i) base salaries in an amount equal to at least $300,000,
$165,000, $175,000, $148,000 and $150,000 respectively; (ii) an annual bonus
based on certain performance criteria determined by United Dental's Board of
Directors; and (iii) insurance and other fringe benefits provided to the other
employees of United Dental from time to time.
Mr. Wilcox's employment agreement has a term ending May 31, 1999. Mr.
McCarty's employment agreement, which initially included a term ending December
31, 1998, has been amended. Pursuant to such amendment, dated as of March 10,
1998, the term of Mr. McCarty's agreement will end on December 31, 1998;
provided, however, that if the merger has not occurred before October 1, 1998,
the term of Mr. McCarty's agreement shall be extended to the later of 90 days
after the merger or 90 days after the
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termination of the merger agreement without a closing thereunder. Dr. Barnett's
employment agreement, which initially included a term ending May 31, 1998, has
been amended. Pursuant to such amendment, dated as of March 10, 1998, the term
of Dr. Barnett's agreement will end on the later of October 1, 1998, 90 days
after the merger or 90 days after the termination of the merger agreement
without a closing thereunder. Mr. Hollansworth's employment agreement, which
initially included a term ending December 31, 1998, has been amended. Pursuant
to such amendment, dated as of March 10, 1998, the term of Mr. Hollansworth's
agreement will end on December 31, 1998; provided, however, that if the merger
has not occurred before October 1, 1998, the term of Mr. Hollansworth's
agreement shall be extended to the later of 90 days after the merger or 90 days
after the termination of the merger agreement without a closing thereunder. Mr.
Gullo's employment agreement has a term ending March 31, 1999. In its
consideration and approval of the above-described amendments to the employment
agreements, United Dental's Board of Directors believed it was prudent to extend
the terms of each of the employment agreements, which may have otherwise expired
prior to the consummation of the merger, in order to maintain continuity of
management and to retain such key employees through the anticipated closing date
of the merger.
Under the above agreements, as amended, United Dental may terminate each of
Mr. Wilcox, Dr. Barnett, Mr. McCarty, Mr. Hollansworth and Mr. Gullo
(individually, the "employee" and collectively, the "employees") "with cause"
which is defined as (i) the conviction of a crime constituting a felony; (ii)
the commission of a material act of dishonesty against United Dental; or (iii)
the employee's willful and material breach of his employment agreement. In
addition, each of the agreements provide that each of the employees may, upon a
change of control, terminate his employment for "good reason," which is defined
generally as the material diminution of the employee's responsibility and
authority or a decrease in the employee's compensation. Each of the employment
agreements further provides that if the agreement is terminated by United Dental
without cause or by the employee for good reason, such terminated employee will
be entitled to receive (i) a severance payment of (x) up to two years' base
salary plus bonus in the case of Mr. Wilcox, and (y) one year's base salary plus
bonus in the cases of Dr. Barnett, Mr. McCarty, Mr. Hollansworth and Mr. Gullo;
and (ii) the accelerated vesting of certain outstanding stock options or,
alternatively, with respect to any options that cannot be fully vested pursuant
to applicable law, cash in an amount equal to the amount of such options
forfeited. Such severance provisions were part of the original employment
agreements and were not amended by the recent extensions thereof. In the event
that each of such persons is terminated without cause immediately following the
merger, Mr. Wilcox, Mr. McCarty, Dr. Barnett, Mr. Hollansworth and Mr. Gullo
would be entitled to receive cash severance payments under such agreements in
the amounts of $720,313, $240,625, $207,500, $185,000 and $180,000,
respectively.
The above employment agreements also contain certain non-competition and
confidentiality covenants binding on the employee during the employment term and
for specified periods thereafter. In addition, Dr. Barnett's amended employment
agreement contains a covenant prohibiting the solicitation of employees of
OraCare Dental Associates, PA, a New Jersey professional association, which is
binding on Dr. Barnett until one year following the termination of his
employment. Other than the severance payments payable under the employment
agreements, no additional consideration will be paid for the non-competition
covenants. The enforceability of non-competition covenants is generally
determined in part based on a factual evaluation of the reasonableness of the
scope and duration of such covenants. United Dental believes that the
non-competition covenants of Messrs. Wilcox, Barnett, McCarty, Hollansworth and
Gullo set forth in such employment agreements are reasonable in terms of scope
and duration and are enforceable.
PLANS FOR UNITED DENTAL AFTER THE MERGER
Protective plans to combine United Dental's current operations with
Protective's existing operations in order to form a national market for dental
benefit programs. Protective believes that in effectuating the combination it
will be able to take advantage of operating synergies between United Dental and
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Protective's existing dental operations to achieve a reduction of combined
annual operating expenses of approximately $12 million over a three-year period.
There can be no assurance that such expense reductions, if any, will be
achieved.
United Dental is headquartered in Dallas, Texas and Protective's
headquarters are in Birmingham, Alabama. Protective expects to maintain
operations at both locations.
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement not summarized elsewhere in this Proxy Statement/Prospectus. A copy of
the merger agreement is attached as Annex A to this Proxy Statement/Prospectus
and is incorporated herein by reference. The following summary does not purport
to be complete and is qualified in its entirety by reference to the merger
agreement.
THE MERGER
The merger agreement provides that, as soon as practicable following the
approval of the merger agreement by United Dental's stockholders, and the
satisfaction or waiver of the other conditions to each party's obligation to
consummate the merger, United Dental will be merged with and into PLC Merger
Subsidiary in accordance with the Delaware General Corporation Law, the separate
corporate existence of United Dental will cease, and PLC Merger Subsidiary will
continue as the surviving corporation ("Surviving Corporation") in the merger.
DIRECTORS AND OFFICERS
Pursuant to the merger agreement, the directors and officers of PLC Merger
Subsidiary immediately prior to the Effective Time will be the directors and
officers, respectively, of the Surviving Corporation following the merger.
CHARTER AND BYLAWS
Pursuant to the merger agreement, the Articles of Incorporation and Bylaws
of PLC Merger Subsidiary as in effect immediately prior to the Effective Time
will be the Certificate of Incorporation and Bylaws, respectively, of the
Surviving Corporation following the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various customary representations and
warranties of each of United Dental and Protective as to (i) organization, (ii)
capitalization, (iii) ownership of subsidiaries, (iv) authority relative to the
merger agreement, (v) consents and approvals, (vi) compliance with applicable
federal securities law requirements and absence of material misstatements in
documents and reports filed with the Commission, (vii) statutory financial
statements, (viii) the absence of certain changes, (ix) the absence of
undisclosed liabilities, (x) the conduct of insurance business by each of
Protective and United Dental and their respective insurance subsidiaries in
compliance with applicable laws, (xi) the accuracy of the information provided
for inclusion in this Proxy Statement/Prospectus and the Registration Statement,
(xii) brokers being entitled to fees in connection with the merger, (xiii)
regulatory filings and (xiv) absence of material misstatements or omissions in
the merger agreement, reports or documents filed with the Commission, and
statutory financial statements.
United Dental has also made representations and warranties as to (i) the
absence of undisclosed material litigation, (ii) the absence of material
violations, breaches or defaults under any charter documents, agreements, order,
statute, rule or regulation, or governmental authorization, (iii) taxes, (iv)
title to property, (v) investments, (vi) reserves, (vii) employee benefit plans
and compliance with the Employee Retirement Income Security Act of 1974, as
amended, (viii) labor relations and other employee matters, (ix) environmental
matters, (x) the receipt of an opinion of BT Alex. Brown Incorporated to the
effect that the Merger Consideration to be received by the holders of United
Dental's common stock in the merger is fair to such holders from a financial
point of view, (xi) material contracts to which United Dental or its
subsidiaries is a party or by which any of them is bound and (xii) voting
requirements.
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The respective representations and warranties of each of United Dental and
Protective will terminate at the Effective Time.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the merger agreement, United Dental and Protective have agreed
that, during the period from the date of the merger agreement until the
Effective Time, unless Protective shall otherwise agree in writing, or as
contemplated by the merger agreement, United Dental and the United Dental
Subsidiaries shall conduct their respective businesses in the ordinary course
consistent with past practice and shall use all reasonable efforts to preserve
intact their business organizations and relationships with third parties
(including but not limited to their respective relationships with policyholders,
members of pre-paid dental plans, insureds, dentists and agents) and to keep
available the services of their present officers and key employees, subject to
the terms of the merger agreement. In addition, United Dental has agreed that,
except as provided in the merger agreement, from the date of the merger
agreement until the Effective Time, without the prior written consent of
Protective: (i) it shall not adopt or propose any change in its Certificate of
Incorporation or Bylaws; (ii) it shall not declare, set aside or pay any
dividend or other distribution with respect to or acquire any shares of capital
stock of United Dental, or split, combine or reclassify any of United Dental's
capital stock, and United Dental and the United Dental Subsidiaries shall not
repurchase, redeem or otherwise acquire any shares of capital stock or other
securities of, or other ownership interests in, United Dental; (iii) it shall
not, and shall not permit any United Dental Subsidiary to, merge or consolidate
with any other person or (except in the ordinary course of business) acquire a
material amount of assets of any other person; (iv) it shall not, and shall not
permit any United Dental Subsidiary to, enter into, or terminate, any material
contract, agreement, commitment, or understanding other than agreements entered
into with unaffiliated third parties, on an arms-length basis and in the
ordinary course of business constituting either (a) employer group agreements at
premium rates and for terms comparable to its most recent employer group
agreements, (b) dental provider agreements on terms comparable with its existing
agreements of such nature and (c) marketing affiliation and sales agreements on
terms comparable with its existing agreements of such nature; (v) it shall not,
and shall not permit any United Dental Subsidiary to, sell, lease, license or
otherwise surrender, relinquish or dispose of (a) any material facility owned or
leased by United Dental or any United Dental Subsidiary or (b) any assets or
property which are material to United Dental and United Dental Subsidiaries,
taken as a whole, except pursuant to existing contracts or commitments (the
terms of which have been disclosed to Protective prior to the date hereof), or
in the ordinary course of business consistent with past practice; (vi) it shall
not, and shall not permit any United Dental Subsidiary to, settle any material
audit, make or change any material Tax election or file amended Tax Returns
unless required by law and United Dental notifies Protective at least five days
prior to the date any such action is taken or such settlement results in a
refund to United Dental; (vii) it and United Dental Subsidiaries shall not issue
any capital stock other than pursuant to United Dental Stock Options or United
Dental Warrants or other securities or enter into any amendment of any material
term of any outstanding security of United Dental, and United Dental and United
Dental Subsidiaries shall not incur any material indebtedness except in the
ordinary course of business pursuant to existing credit facilities or
arrangements, amend or otherwise increase, accelerate the payment or vesting of
the amounts payable or to become payable under or fail to make any required
contribution to any bonus, pension, post-retirement benefit, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, equity-based award, retirement, vacation, severance
or termination pay, disability, death benefit, hospitalization or other medical,
dental, accident, disability, life or other insurance, supplemental unemployment
benefits, fringe and other welfare benefit plan, program, policy, agreement or
arrangement, whether written or unwritten, and each other employee benefit plan,
program, agreement, arrangement or understanding providing benefits to any
current or former employee, agent, independent contractor, officer or director
of United Dental or any of the United Dental Subsidiaries (the "United Dental
Benefit Plans") or materially increase any non-salary benefits payable to any
employee or former employee, except in the ordinary course of business
consistent with past
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practice or as otherwise permitted by this Agreement; (viii) it shall not, and
shall not permit any United Dental Subsidiary to (a) grant United Dental Stock
Options; (b) grant any increase in the compensation, bonus, severance,
termination pay or other benefits of any former or current employee, agent,
consultant, officer or director of United Dental or any United Dental
Subsidiary; PROVIDED, HOWEVER, that increases in the ordinary course of business
consistent with past practice in the compensation of employees, consultants or
agents, who are not officers or directors, shall be permitted; (c) enter into or
amend any employment agreement, deferred compensation, consulting, severance,
termination, indemnification or any other such agreement with any such former or
current employee, agent, consultant, officer or director of United Dental or any
United Dental Subsidiary; or (d) amend, adopt or terminate any United Dental
Benefit Plan, except as may be required to retain qualification of any such plan
under Section 401(a) of the Code; (ix) United Dental shall not change any method
of accounting or accounting practice by United Dental or any United Dental
Subsidiary, except for any such required change in GAAP or the State Statutory
Accounting Principles; (x) United Dental shall not, and shall not permit any
United Dental Subsidiary to, take any action that would reasonably be expected
to cause the merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code; (xi) except as contemplated by the merger agreement,
it shall not permit any United Dental Insurance Subsidiary (as defined below) to
conduct transactions in United Dental investments except in compliance with the
investment policies of such United Dental Insurance Subsidiary as previously
disclosed to Protective and in effect on the date hereof and all applicable
insurance laws and regulations; (xii) it shall not, and shall not permit any
United Dental Subsidiary to, enter into any agreement to purchase, or to lease
for a term in excess of one year, any real property, provided that United
Dental, or any United Dental Subsidiary, may as a tenant, or a landlord, renew
any existing lease pursuant to an option granted prior to the date hereof;
(xiii) United Dental shall not, and shall not permit any United Dental
Subsidiary to, agree or commit to do any of the foregoing; (xiv) except to the
extent necessary to comply with the requirements of applicable laws and
regulations, United Dental shall not, and shall not permit any United Dental
Subsidiary to, (a) take, or agree or commit to take, any action that would make
any representation and warranty of United Dental hereunder inaccurate in any
material respect at, or as of any time prior to, the Effective Time, (b) omit,
or agree or commit to omit, to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time, provided however, that United Dental shall be permitted to take or
omit to take such action which (without any uncertainty) can be cured, and in
fact is cured, at or prior to the Effective Time or (c) take, or agree or commit
to take, any action that would result in, or is reasonably likely to result in,
any of the conditions of the merger set forth in Article VIII of the merger
agreement not being satisfied; (xv) United Dental shall not release any third
party from its obligations, or grant any consent, under any existing standstill
provision relating to any Takeover Proposal or otherwise under any
confidentiality or other agreement, or fail to fully enforce any such agreement;
and (xvi) none of United Dental Insurance Subsidiaries shall make any change in
its underwriting, claims management or reserving practices.
Pursuant to the merger agreement, United Dental and Protective have agreed
that, during the period from the date of the merger agreement until the
Effective Time, unless United Dental shall otherwise agree in writing, or except
as contemplated by the merger agreement, (a) Protective, PLC Merger Subsidiary
and the Protective Subsidiaries shall conduct their respective businesses in all
material respects in the ordinary course consistent with past practice and shall
use all reasonable efforts to substantially preserve intact their business
organizations and relationships with third parties (including, but not limited
to, their respective relationships with policyholders, insureds, agents,
underwriters, brokers and investment customers) and to keep available the
services of their present officers and key employees, subject to the terms of
the merger agreement; and (b) except to the extent necessary to comply with the
requirements of applicable laws and regulations, Protective shall not, and shall
not permit PLC Merger Subsidiary or any Protective Subsidiary to, (i) take, or
agree or commit to take, any action that would make any representation and
warranty of Protective hereunder inaccurate, in any material respect, at, or as
of any time prior to, the Effective Time, (ii) omit, or agree or commit to omit,
to take any action necessary to prevent any such
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representation or warranty from being inaccurate, in any material respect, at
any such time, provided, however, that Protective shall be permitted to take or
omit to take such action which (without any uncertainty) can be cured, and in
fact is cured, at or prior to the Effective Time, (iii) take any action that
would reasonably be expected to cause the merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code, (iv) take, or
agree or commit to take, any action that would result in, or is reasonably
likely to result in, any of the conditions of the merger set forth in Article
VIII of the merger agreement not being satisfied or (v) declare, set aside or
pay any dividend or other distribution with respect to any shares of capital
stock of Protective, other than regular quarterly dividends not in excess of
$0.25 per share.
In addition, from the date of the merger agreement until the Effective Time,
United Dental and each United Dental Subsidiary shall invest available cash only
in (a) corporate bonds (other than bonds issued by public utilities) rated no
lower than Baa3 by Moody's or BBB- by S&P, (b) commercial paper rated A1 or B1
by Moody's or (c) other securities or investments agreed to in writing by
Protective ("Permitted Investments"); PROVIDED, HOWEVER, that nothing in the
merger agreement shall require any United Dental Subsidiary that is an insurance
company, a health maintenance organization or prepaid dental plan, a limited
health service organization or a hospital, medical, dental service or indemnity
corporation (collectively, the "United Dental Insurance Subsidiaries") to make
any investment other than in compliance with the investment policies of such
United Dental Insurance Subsidiary and all insurance laws and regulations
applicable thereto.
FILINGS AND OTHER ACTIONS
Pursuant to the merger agreement, the parties have agreed that, as promptly
as practicable, each of United Dental, Protective and PLC Merger Subsidiary will
(i) promptly make all filings and submissions under the Hart Scott Rodino Act
and all filings required by the insurance authorities in Arizona and in
Oklahoma, and deliver notices and consents to jurisdiction to state insurance
departments, each as reasonably may be required to be made in connection with
the merger agreement and the transactions contemplated hereby, (ii) use all
reasonable efforts to cooperate with each other in (A) determining which filings
are required to be made prior to the Effective Time with, and which material
consents, approvals, permits, notices or authorizations are required to be
obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states or the District of
Columbia, the Commonwealth of Puerto Rico and foreign jurisdictions in
connection with the execution and delivery of the merger agreement and the
consummation of the transactions contemplated hereby and (B) timely making all
such filings and timely seeking all such consents, approvals, permits, notices
or authorizations, and (iii) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary
or appropriate to consummate the transactions contemplated by the merger
agreement as soon as practicable, and the insurance departments of any other
applicable states and make all filings and submissions under the HSR Act, (iv)
use reasonable best efforts to timely make all necessary filings and timely seek
all necessary consents, approvals, permits or authorizations from the date of
the merger agreement until the Effective Time, and (v) use reasonable best
efforts to take all other actions, make all filings, registrations and
submissions, and do all things necessary or appropriate to consummate the
transactions contemplated by the merger agreement as soon as practicable. See
"--Regulatory Filings and Approvals."
OTHER TAKEOVER PROPOSALS; CERTAIN FEES
The merger agreement provides that United Dental shall not, nor shall it
permit any of the United Dental Subsidiaries to, nor shall it authorize or
permit any officer, director or employee of or any investment banker, attorney
or other advisor or representative of, United Dental or any of the United Dental
Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage the
submission of any Takeover Proposal, (ii) enter into any agreement with respect
to any Takeover Proposal or give any
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approval that would be sufficient to render inapplicable to any Takeover
Proposal the provisions of Section 203 of the Delaware General Corporation Law
or (iii) continue or participate in any discussions or negotiations regarding,
or furnish to any person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
PROVIDED, HOWEVER, that if United Dental's Board of Directors determines in good
faith, after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to United Dental stockholders under
applicable law, United Dental may, in response to a Superior Proposal that
involves consideration to United Dental's stockholders that United Dental's
Board of Directors reasonably believes, after receiving advice from United
Dental's independent financial advisor, is superior to the consideration
provided for in the merger, (x) furnish information with respect to United
Dental pursuant to a customary confidentiality agreement to any person making
such proposal and (y) participate in negotiations regarding such proposal. The
merger agreement further provides that without limiting the foregoing, any
violation of the restrictions set forth in the preceding sentence by any
officer, director or employee of United Dental or any of the United Dental
Subsidiaries or any investment banker, attorney or other advisor or
representative of United Dental or any of the United Dental Subsidiaries,
whether or not such person is purporting to act on behalf of United Dental or
any of the United Dental Subsidiaries or otherwise, shall be deemed to be a
breach by United Dental of its obligations under the merger agreement.
United Dental has agreed to promptly advise Protective orally and in writing
of any request for information or of any Takeover Proposal or any inquiry with
respect to, or which could reasonably be expected to lead to, any Takeover
Proposal, the identity of the person making any such request, Takeover Proposal
or inquiry and all the terms and conditions thereof and promptly shall provide
Protective with a true and complete copy of such request, Takeover Proposal or
inquiry, if in writing. United Dental shall keep Protective fully informed of
the status and details (including amendments or proposed amendments) of any such
request, Takeover Proposal or inquiry and shall give Protective three business
days' advance notice of any information to be supplied to the person making such
request, proposal or inquiry.
United Dental's Board of Directors has agreed that neither it nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Protective, the approval or recommendation by
United Dental's Board of Directors or such committee of the merger agreement or
the merger or (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal except in connection with a Superior Proposal and then only at
or after the termination of the merger agreement pursuant to and in accordance
with the terms of the merger agreement.
In the event United Dental's Board of Directors (i) withdraws or modifies or
changes in a manner adverse to Protective or PLC Merger Subsidiary, its approval
or recommendation of the merger agreement or the merger, (ii) approves or
recommends any Takeover Proposal, (iii) enters into any agreement with respect
to a Takeover Proposal or (iv) terminates the merger agreement when a Takeover
Proposal is outstanding, United Dental has agreed to pay to Protective the sum
of (i) the out-of-pocket fees and expenses incurred or paid by or on behalf of
Protective in connection with the merger or the consummation of any of the
transactions contemplated by the merger agreement, including all fees and
expenses of counsel, commercial banks, investment banking firms, accountants,
experts and consultants to Protective in an amount up to but not to exceed
$2,000,000 and (ii) a termination fee of $4,600,000. Nothing contained in this
Prospectus shall prohibit United Dental from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act; PROVIDED, HOWEVER, that pursuant to the terms of the merger
agreement neither United Dental nor United Dental's Board of Directors nor any
committee thereof may, except in connection with a Superior Proposal and then
only at or after the termination of the merger agreement pursuant to and in
accordance with the terms of the merger agreement, withdraw or modify or change
its position with respect to the merger or approve or recommend a Takeover
Proposal.
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EXPENSES
The merger agreement provides that, except in the event of the break-up fee
described above, whether or not the merger is consummated, all costs and
expenses incurred in connection with the merger agreement and the transactions
contemplated thereby will be paid by the party incurring such expenses, except
that those expenses incurred in connection with printing and mailing of this
Proxy Statement/ Prospectus, as well as the filing fees relating to the
Registration Statement and the HSR Act, will be shared equally by Protective and
United Dental.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that (a) all rights to indemnification (and
rights to advancement of expenses) existing in favor of the Indemnified Parties
as provided in United Dental's Certificate of Incorporation or Bylaws or the
certificate or articles of incorporation, Bylaws or similar organizational
documents of any subsidiaries of United Dental as in effect as of the date
hereof or pursuant to the terms of any indemnification agreements entered into
between United Dental and any of the Indemnified Parties with respect to matters
occurring on or prior to the Effective Time including, without limitation, the
transactions contemplated by the merger agreement shall survive the merger and
shall continue in full force and effect (without modification or amendment,
except as required by applicable law or except to make changes permitted by law
that would enlarge the Indemnified Parties' right of indemnification), to the
fullest extent and for the maximum term permitted by law, and shall be
enforceable by the Indemnified Parties against the Surviving Corporation and
Protective and (b) to the extent that an Indemnified Party is not indemnified or
held harmless pursuant to subsection (a) above, Protective has agreed, for a
period of six years after the Effective Time, that the Surviving Corporation
shall, subject to the terms set forth herein, indemnify and hold harmless, to
the fullest extent permitted under applicable law (and the Surviving Corporation
shall also advance expenses as incurred to the fullest extent permitted under
applicable law provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification), each Indemnified Party against any
Costs incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the transactions contemplated by the merger agreement.
In the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until final disposition of any and all such claims.
CONDITIONS TO THE MERGER
The merger agreement provides that the respective obligations of United
Dental, PLC Merger Subsidiary and Protective to consummate the merger are
subject to a number of conditions, including, among others (i) the expiration or
early termination of the waiting period (and any extension thereof) under the
HSR Act and no action having been instituted by the Department of Justice or the
Federal Trade Commission; (ii) the absence of any statute, rule, regulation,
executive order, decree, ruling or preliminary or permanent injunction which
prohibits restrains, enjoins, or restricts consummation of the merger; (iii) the
filing or obtaining of all permits, authorizations, consents or approvals
required by statute, rule, regulation, executive order, decree, ruling or
preliminary or permanent injunction which prohibits restrains, enjoins, or
restricts consummation of the merger; (iii) the filing or obtaining of all
permits, authorizations, consents or approvals required by applicable
requirements of the HSR, the Securities Act, the Exchange Act, state or foreign
laws relating to takeovers, state securities or blue sky laws, state insurance
laws and the regulations promulgated thereunder, certain state and local
regulatory filings relating to insurance companies, health maintenance
organizations, prepaid dental plans or dental practice management and similar
matters and the filing of the Certificate of merger as required by the Delaware
General Corporation Law (collectively, the "Governmental Requirements"); (iv)
the approval of the merger by United Dental stockholders; (v) the Registration
Statement having become effective under the
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Securities Act and not being the subject of any stop order proceedings; (vi) the
approval for listing on the New York Stock Exchange of Protective's common stock
issuable in the merger; (vii) the performance in all material respects by the
parties to the merger agreement of their obligations under such agreement and
the parties' respective representations and warranties being true and correct in
all material respects; (viii) the receipt by each of United Dental and
Protective of opinions from their respective counsel to the effect that the
merger will be treated for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code; (ix) the obtaining of certain
non-governmental third party consents and approvals; and (x) the receipt by
Protective of an Affiliate Agreement from certain persons. United Dental and
Protective may determine to modify or waive any condition to the consummation of
the merger, provided that no modification or waiver by United Dental which
requires stockholder approval under applicable law, United Dental's Certificate
of Incorporation or United Dental's Bylaws will occur unless such approval is
obtained. In the event a modification or waiver by United Dental is contemplated
which requires stockholder approval under applicable law, a supplement to this
Proxy Statement/Prospectus will be distributed to stockholders and proxies will
be resolicited. See "THE SPECIAL MEETING-- Solicitation of Proxies." Neither
Protective nor United Dental presently contemplates waiving or modifying any of
the foregoing conditions. See "THE PROPOSED MERGER--The Merger Agreement--
Conditions to the Merger."
TERMINATION
The merger agreement provides that it may be terminated and the merger
abandoned at any time prior to the Effective Time, (i) by mutual consent of
United Dental and Protective; (ii) by either Protective's Board of Directors or
United Dental's Board of Directors, if (a) the merger agreement and the merger
shall fail to be approved by the United Dental stockholders at the Special
Meeting, (b) the merger shall not have been consummated on or before September
30, 1998, provided that under certain circumstances such date may be extended to
no later than December 31, 1998, and provided further that the merger agreement
may be extended by the mutual written agreement of United Dental and Protective,
or (c) a United States federal or state court of competent jurisdiction or
United States federal or state governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the merger agreement and such order, decree, ruling
or other action shall have become final and non-appealable, provided that
certain conditions are satisfied; (iii) by United Dental's Board of Directors
exercising its rights under the merger agreement to take action with respect to
a Takeover Proposal as necessary to comply with its fiduciary duties to United
Dental stockholders or by United Dental's Board of Directors if (a) there has
been a breach by Protective of any representation or warranty contained in the
merger agreement which would have or would be likely to have a material adverse
effect on the business, assets, liabilities, results of operations or financial
condition of Protective, PLC Merger Subsidiary or any other subsidiary of
Protective (the "Protective Subsidiaries"), taken as a whole, whether resulting
from individual or aggregate events, occurrences or circumstances (a "Protective
Material Adverse Effect"), (b) there has been a material breach of any of the
covenants or agreements set forth in the merger agreement on the part of
Protective, which breach is not curable or, if curable, is not cured within
thirty (30) days after written notice of such breach given by United Dental to
Protective or (c) the Top Up Event shall have occurred and Protective shall have
failed to provide written notice to United Dental no later than 5:00 p.m. (New
York time) on the second Trading Day following the Measurement Period of
Protective's intent to exercise the Top Up Right on or prior to the Effective
Time and (iv) by Protective's Board of Directors if (a) there has been a breach
by United Dental of any representation or warranty contained in the merger
agreement which would have or would be likely to have a material adverse effect
on the business, assets, liabilities, results of operations or financial
condition of United Dental and the United Dental Subsidiaries, taken as a whole,
whether resulting from individual or aggregate events, occurrences or
circumstances (a "United Dental Material Adverse Effect"); (b) there has been a
material breach of any of the covenants or agreements set forth in the merger
agreement on the
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part of United Dental, which breach is not curable or, if curable, is not cured
within thirty (30) days after written notice of such breach given by Protective
to United Dental; (c) United Dental's Board of Directors shall have withdrawn,
or modified or changed in a manner adverse to Protective or PLC Merger
Subsidiary its approval or recommendation of the merger agreement or the merger
or shall have recommended a Takeover Proposal, or shall have executed an
agreement in principle (or similar agreement) or definitive agreement providing
for a Takeover Proposal or other business combination with a person or entity
other than Protective or its affiliates (or United Dental's Board of Directors
resolves to do any of the foregoing); or (d) if the Trading Average is greater
than $39.50 or less than $27.50 (or such other amount as is required to adjust
for an Adjustment Event). For a discussion of certain fees and expenses payable
by United Dental in the event that the merger agreement or the merger is
terminated, see "--Other Takeover Proposals; Certain Fees."
The factors which United Dental's Board of Directors may consider in
deciding whether to exercise its termination rights in the event that the
Trading Average is below $27.50 and Protective fails to exercise the Top Up
Right include, among other things, whether to obtain an updated fairness
opinion, whether to negotiate with Protective to amend the merger agreement,
whether to seek Protective's agreement not to terminate the merger agreement in
order to permit United Dental to resolicit its stockholders for approval of the
merger at a Trading Average below $27.50, the strategic alternatives then
available to United Dental and the other facts and circumstances existing at
such time, including, without limitation, general market conditions. In the
event that United Dental's Board of Directors and Protective agree to amend the
merger agreement in lieu of termination, and the amount or the share/cash mix of
the Merger Consideration changes, then United Dental's Board of Directors
intends to resolicit approval of the amended merger agreement by United Dental's
stockholders pursuant to the requirements of Delaware law.
ACCOUNTING TREATMENT
The merger will be treated as a purchase by Protective for accounting and
financial reporting purposes. Under the purchase method of accounting, the
assets and liabilities of United Dental will be recorded on the consolidated
books of Protective at their respective fair values at the Effective Time.
REGULATORY FILINGS AND APPROVALS
The regulatory filings and approvals described below must be made before the
merger can be effected and certain of such approvals may take a significant
period of time to obtain. Although United Dental and Protective believe that
such approvals will be obtained, there can be no assurance that this will be the
case or that such approvals will be obtained in a timely manner or that such
approvals will not be conditioned temporarily or otherwise encumbered.
APPROVAL BY INSURANCE REGULATORS
United Dental is generally subject to the insurance laws in the state in
which it or any of its subsidiaries operate. Under the laws of certain of such
states, a change in control of United Dental or one of its subsidiaries is
subject to either the prior approval of the states' insurance regulatory
authority or to a requirement that a prior filing be made with such states'
insurance regulatory authority and a specified period of time pass without any
objection having been raised by such authority. Protective and United Dental are
cooperating to submit all necessary filings and requests for approval.
Before the merger can be effected, Protective will be required to obtain the
prior approvals of the Department of Insurance in the states of Florida,
Missouri, New Jersey, Oklahoma, Ohio, Arizona, Colorado, Indiana, Michigan,
Nebraska, New Mexico, Pennsylvania, Texas, Utah, and Washington, and with the
California Division of Corporations pursuant to applicable laws and regulations.
United Dental has made the necessary filings with the aforementioned insurance
regulatory authorities to obtain such
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approvals and is prepared to make any additional filings where necessary. There
can be no assurance that all regulatory approvals will be received by the time
of the Special Meeting.
ANTITRUST
The merger is subject to the expiration or termination of the 30-day waiting
period under the HSR Act and no action having been instituted by the Department
of Justice or the Federal Trade Commission which is not withdrawn or terminated
prior to the Effective Time. The HSR Act and the rules and regulations
thereunder, provide that certain merger transactions (including the merger) may
not be consummated until required information and materials have been furnished
to the Department of Justice and the Federal Trade Commission and certain
waiting periods have expired or been terminated. Protective and United Dental
made their respective filings with the Department of Justice and Federal Trade
Commission on April 14, 1998, and received notice of early termination of the
waiting period on April 27, 1998.
The Department of Justice and the Federal Trade Commission frequently
scrutinize the legality under the antitrust laws of transactions such as the
merger. Notwithstanding the expiration of the HSR waiting period, any time
before or after the Effective Time, the Federal Trade Commission, the Department
of Justice or others can take action under the antitrust laws, including seeking
to enjoin the consummation of the merger, or seeking the divestiture by
Protective of all or any part of the stock or assets of United Dental. There can
be no assurances that a challenge to the merger or antitrust grounds will not be
made, or if such a challenge is made, that it would not be successful.
Any pre-acquisition notices regarding the competition impact of the merger
will be timely filed with various insurance departments in non-domiciliary
states where both United Dental and Protective insurance subsidiaries transact
business. Otherwise, after the merger, any of these insurance subsidiaries would
be subject to a possible order (i) requiring the insurer to cease transacting a
line or lines of business or (ii) denying the license application of the
insurer.
STATE ANTI-TAKEOVER STATUTES
Section 203 of the Delaware General Corporation Law prohibits business
combination transactions involving a Delaware corporation (such as United
Dental) and an "Interested Stockholder" (defined generally as any person that
directly or indirectly beneficially owns 15% or more of the outstanding voting
stock of the subject corporation), unless special requirements are met or
certain exceptions apply, including that the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder. Because United
Dental's Board of Directors has approved the merger agreement and the
transactions contemplated thereby (including the stockholder agreement), the
provisions of Section 203 of the Delaware General Corporation Law are not
applicable to the merger or the stockholder agreement. For a further discussion
of the terms of Section 203 of the Delaware General Corporation Law, see
"COMPARISON OF STOCKHOLDERS RIGHTS--Anti-Takeover Statute."
State insurance laws applicable to United Dental and Protective typically
require regulatory approval for any proposed change of control. Generally, a
change of control would be deemed to result if anyone acquired 10% or more of
the outstanding voting stock of either company although regulatory authorities
generally have discretion to determine whether a change of control in a
particular case would occur whether or not 10% of the voting stock of either
company is required. Therefore, no one can acquire beneficial ownership of 10%
or more of the outstanding common stock, whether pursuant to this offering, open
market purchases or otherwise, without obtaining prior regulatory approval. Such
regulatory approval requirement could also apply to the solicitation of proxies
to vote 10% or more of the outstanding common stock of either company and
therefore could impair the ability of a stockholder to conduct a proxy contest.
Either company could seek a regulatory hearing with respect to any stockholder
proposal to
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acquire beneficial ownership or proxies for 10% or more of either company's
common stock, and any stockholder that fails to obtain regulatory approval in
such circumstances may be subject to regulatory sanctions including the
possibility of a divestiture order. In addition, failure to comply with such
regulatory requirements could result in adverse consequences to either company.
Certain provisions of the Delaware General Corporation Law, Protective's
Certificate of Incorporation and United Dental's Certificate of Incorporation
may have the effect of delaying, making more difficult or preventing a change in
control or acquisition of United Dental by means of a tender offer, a proxy
contest or otherwise. These provisions are expected to discourage certain types
of coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of United Dental first to negotiate with
United Dental. United Dental believes that the benefits derived from requiring
the proponent of an unfriendly or unsolicited proposal to negotiate with United
Dental outweigh the disadvantages of discouraging such proposals because, among
other things, negotiations with respect to such proposals could result in an
improvement of their terms.
OPERATIONS AFTER THE MERGER
As a result of the merger, the separate existence of United Dental and
United Dental's Board of Directors will terminate, but the directors of
Protective and PLC Merger Subsidiary will continue in office. The merger
agreement does not contain any provisions either (i) obligating Protective to
employ any officer or employee of United Dental following the merger or (ii)
requiring the election or nomination of any specified individuals or any
specified number of persons to the board of directors of either Protective or
PLC Merger Subsidiary.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of the material U.S. federal income tax
consequences of the merger under existing law, which is subject to change,
possibly retroactively. This discussion assumes that stockholders hold United
Dental's common stock as a capital asset as of the effective date of the merger.
This discussion does not discuss all aspects of U.S. federal income taxation
which may be relevant to particular stockholders in light of their personal
circumstances, such as stockholders whose stock was acquired pursuant to the
exercise of an employee stock option or otherwise as compensation or
stockholders who are subject to special treatment under U.S. federal income tax
laws (for example, financial institutions, insurance companies, tax-exempt
organizations, broker-dealers and foreign persons). This discussion also does
not address any aspects of state, local or foreign tax law. Stockholders who may
be subject to special rules because of their individual circumstances should
consult their own tax advisors as to the U.S. federal income tax consequences to
them of the merger. All stockholders should consult their own tax advisors
regarding any state, local or foreign tax consequences of the merger in their
particular circumstances.
The obligation of United Dental to consummate the merger is conditioned upon
the receipt by United Dental of an opinion from Strasburger & Price, L.L.P., and
the obligation of Protective to consummate the merger is conditioned upon the
receipt by Protective of an opinion from Debevoise & Plimpton, in each case
substantially to the effect that, on the basis of certain facts, representations
by management of the companies and assumptions set forth in such opinions, the
merger will be treated for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. Neither Protective nor United
Dental will waive the condition that the opinion of such party's special tax
counsel be delivered.
Accordingly, in the opinion of Strasburger & Price, L.L.P., special counsel
to United Dental, and Debevoise & Plimpton, special counsel to Protective,
subject to the representations, assumptions and limitations described above, the
material U.S. federal income tax consequences of the merger to the stockholders
of United Dental under the law in effect as of the date hereof will be as
described below. No
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rulings have been or will be sought from the Internal Revenue Service with
respect to any tax matters relating to the merger.
Notwithstanding the foregoing, in the event that Protective or United Dental
waives the condition that the opinion of such party's special tax counsel be
delivered, United Dental and Protective will amend this Proxy
Statement/Prospectus and United Dental will resolicit the holders of United
Dental's common stock.
RECEIPT OF MERGER CONSIDERATION
Except as described below under "--Additional Considerations," a stockholder
who receives the Merger Consideration (which is a combination of shares of
Protective's common stock and cash) in exchange for shares of United Dental's
common stock will generally recognize gain, but not loss, for U.S. federal
income tax purposes. The amount of gain, if any, recognized must be computed
separately with respect to each "block" of United Dental's common stock
surrendered in the merger. With respect to each block, gain will be recognized
in an amount equal to the lesser of (i) the amount of gain realized (I.E., the
excess of the amount of cash and the fair market value of the shares of
Protective's common stock received that is allocable to such block over the tax
basis of such block) and (ii) the amount of cash received that is allocable to
such block. For purposes of such calculation, the aggregate amount of cash and
shares of Protective's common stock received by a stockholder will be allocated
proportionally among the shares of United Dental's common stock surrendered in
exchange therefor pursuant to the merger. Shares of the same class of United
Dental's common stock that were acquired at the same time in a single
transaction will be considered a separate "block." Except as described below
under "--Additional Considerations," any gain recognized will be capital gain
and will be long-term capital gain if the holding period of the shares of United
Dental's common stock surrendered in the merger is more than one year as of the
Effective Time. For noncorporate stockholders, long-term capital gain is
generally subject to a maximum U.S. federal income tax rate of 20% in respect of
property held for more than one year.
The aggregate tax basis of the shares of Protective's common stock received
by a stockholder will be the same as the aggregate tax basis of the shares of
United Dental's common stock surrendered in exchange therefor pursuant to the
merger, decreased by the total amount of cash received and increased by the
amount of gain recognized. The holding period of the shares of Protective's
common stock will include the holding period of the shares of United Dental's
common stock surrendered in exchange therefor.
ADDITIONAL CONSIDERATIONS
Unless the requirements of Section 302 of the Code are satisfied, any gain
recognized by a stockholder on receipt of the Merger Consideration could be
treated as dividend income rather than capital gain. A stockholder's receipt of
the Merger Consideration will satisfy the requirements under Section 302 if it
either (i) is "not essentially equivalent to a dividend" or (ii) has the effect
of a "substantially disproportionate" redemption of Protective's common stock.
In order to determine whether those requirements are satisfied, a stockholder is
treated as receiving solely shares of Protective's common stock in the merger
(instead of the combination of shares of Protective's common stock and cash
actually received) and then receiving the cash from Protective in a hypothetical
redemption of a proportionate amount of those shares. Whether such hypothetical
redemption of shares of Protective's common stock is "not essentially equivalent
to a dividend" depends on the individual facts and circumstances of each
stockholder but in any event must result in a meaningful reduction of a
stockholder's proportionate stock interest in Protective. Generally, in the case
of a United Dental stockholder whose stock interest in Protective (relative to
the total number of Protective shares outstanding) is minimal, and who exercises
no control over the affairs of Protective, any actual reduction in proportionate
interest as a result of the hypothetical redemption of shares of Protective's
common stock will be treated as "meaningful." Alternatively, the hypothetical
redemption of shares of Protective's common stock will be "substantially
disproportionate" if the ratio which the shares of Protective's common stock
owned by the stockholder after the hypothetical redemption bears to all of the
common stock of Protective at such time is less than 80% of the ratio which
shares of
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Protective's common stock which the stockholder is treated as owning after the
merger but before the hypothetical redemption bears to all of the common stock
of Protective at such time. If the receipt of cash is treated as having the
effect of a dividend, only the portion of the recognized gain that is not in
excess of the stockholder's ratable share of accumulated earnings and profits
will be taxable as a dividend.
In applying the foregoing tests, there must be taken into account not only
actual ownership of stock but also stock constructively owned by a stockholder
by reason of certain attribution rules under Section 318 of the Code. Under
these rules, a stockholder is treated as owning the stock owned by certain
family members, stock subject to an option to acquire such stock, stock owned by
certain estates and trusts of which the stockholder is a beneficiary, and stock
owned by certain affiliated entities. Under certain circumstances, an individual
who actually owns no shares of Protective's common stock but pursuant to Section
318 of the Code constructively owns shares of Protective's common stock by
reason of attribution from family members may avoid such attribution by filing a
timely agreement with the Internal Revenue Service under Section 302(c)(2) of
the Code and the regulations thereunder. Because these rules may apply
differently depending on each holder's particular circumstances, each holder of
United Dental's common stock is urged to contact his or her own tax advisor with
respect to the application of these rules in light of each holder's particular
circumstances.
WITHHOLDING
Unless an exemption applies, the Exchange Agent will be required to
withhold, and will withhold, 31% of any cash payments to which a stockholder or
other payee is entitled pursuant to the merger, unless the stockholder or other
payee provides his or her tax identification number (social security number or
employer identification number) and certifies that such number is correct. Each
stockholder and, if applicable, each other payee is required to complete and
sign the IRS Form W-9 that will be included as part of the transmittal letter to
avoid backup withholding (or IRS Form W-8 if the stockholder is a nonresident
alien or foreign entity), unless an applicable exemption exists and is proved in
a manner satisfactory to Protective and the Exchange Agent.
Each stockholder is strongly advised to consult his or her own tax advisor
as to particular facts and circumstances which may be unique to such stockholder
and also as to any estate, gift, state, local or foreign tax consequences
arising out of the merger.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES
The shares of Protective's common stock issuable in connection with the
merger have been registered under the Securities Act. Such shares will be freely
transferable under the Securities Act, except for shares issued to any person
who may be deemed to be an affiliate, as such term is defined under the
Securities Act for purposes of Rule 145 (an "Affiliate"), of United Dental or
Protective at the time of the Special Meeting. Affiliates may not sell their
shares of Protective's common stock acquired in connection with the merger
except pursuant to (i) an effective Registration Statement under the Securities
Act covering the resale of such shares, (ii) the conditions contemplated by
paragraph (d) of Rule 145, or (iii) any other applicable exemption from the
registration requirements of the Securities Act. Persons who may be deemed to be
Affiliates of United Dental or Protective generally include individuals or
entities that may be deemed to control, be controlled by or be under common
control with United Dental or Protective, and may include officers, directors
and principal stockholders of United Dental or Protective.
STOCK EXCHANGE LISTING
The obligations of the parties to the merger agreement to consummate the
merger are subject to the shares of Protective's common stock to be issued in
connection with the merger being authorized for listing on the New York Stock
Exchange. See "THE PROPOSED MERGER--The Merger Agreement-- Conditions to the
Merger."
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RIGHTS OF DISSENTING STOCKHOLDERS
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE DELAWARE GENERAL CORPORATION LAW AND IS QUALIFIED
IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW ("SECTION 262"), WHICH IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS ANNEX C. ALL REFERENCES IN SECTION 262 AND IN THIS
SUMMARY TO A "STOCKHOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF UNITED
DENTAL COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED. A PERSON HAVING A
BENEFICIAL INTEREST IN SHARES OF UNITED DENTAL COMMON STOCK HELD OF RECORD IN
THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO
CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A
TIMELY MANNER TO PERFECT APPRAISAL RIGHTS.
Under the Delaware General Corporation Law, holders of shares of United
Dental's common stock who follow the procedures set forth in Section 262 will be
entitled to have their shares of United Dental's common stock appraised by the
Delaware Court of Chancery and to receive payment of the "fair value" of such
shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, as determined
by such court.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the Special Meeting, the corporation,
not less than 20 days prior to the meeting, must notify each of its stockholders
entitled to appraisal rights that such appraisal rights are available and
include in such notice a copy of Section 262. This Proxy Statement/Prospectus
shall constitute such notice to the holders of shares of United Dental's common
stock, and the applicable statutory provisions are attached to this Proxy
Statement/Prospectus as Annex C. Any holder of shares of United Dental's common
stock who wishes to exercise such appraisal rights or who wishes to preserve
such holder's right to do so should review the following discussion and Annex C
carefully because failure to timely and properly comply with the procedures
specified will result in the loss of appraisal rights under the Delaware General
Corporation Law.
A holder of shares of United Dental's common stock wishing to exercise
appraisal rights must deliver to United Dental, before the vote on the merger at
the Special Meeting, a written demand for appraisal and must not vote in favor
of the merger. Because a duly executed proxy which does not contain voting
instructions will, unless revoked, be voted for the merger, a holder of shares
of United Dental's common stock who votes by proxy and who wishes to exercise
appraisal rights must either (1) vote against the merger or (2) abstain from
voting on the merger. A vote against the merger, in person or by proxy, will not
in and of itself constitute a written demand for appraisal satisfying the
requirements of Section 262. In addition, a holder of shares of United Dental's
common stock wishing to exercise appraisal rights must hold of record such
shares on the date the written demand for appraisal is made and must continue to
hold such shares until the Effective Time. If any holder of shares of United
Dental's common stock fails to comply with any of these conditions and the
merger becomes effective, the holder of shares of United Dental's common stock
will be entitled to receive the consideration receivable with respect to such
shares in the absence of a valid assertion of appraisal rights in accordance
with the merger agreement.
Only a holder of record of shares of United Dental's common stock is
entitled to assert appraisal rights for the shares of United Dental's common
stock registered in that holder's name. A demand for appraisal should be
executed by or on behalf of the holder of record, fully and correctly, as such
holder of record's name appears on such holder of record's stock certificates,
and must state that the stockholder intends thereby to demand appraisal of such
stockholder's shares in connection with the merger. If the shares of United
Dental's common stock are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity, and if the shares of
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United Dental's common stock are owned of record by more than one person, as in
a joint tenancy and tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including two or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds shares of United
Dental's common stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of United Dental's common stock held
for one or more beneficial owners while not exercising such rights with respect
to the shares of United Dental's common stock held for other beneficial owners.
Stockholders who hold their shares of United Dental's common stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
making of a demand for appraisal by such a nominee.
All written demands for appraisal pursuant to Section 262 should be sent or
delivered to United Dental at 13601 Preston Road, Suite 500 East, Dallas Texas
75240, Attention: John W. McCarty.
Within 10 days after the Effective Time, PLC Merger Subsidiary, as the
surviving corporation, must notify each holder of shares of United Dental's
common stock who has complied with Section 262 and has not voted in favor of or
consented to the merger of the date that the merger has become effective. Within
120 days after the Effective Time, but not thereafter, United Dental or any
holder of shares of United Dental's common stock who is entitled to appraisal
rights under Section 262 may file a petition in the Delaware Court of Chancery
demanding a determination of the fair value of such holder's shares of United
Dental's common stock. Notwithstanding the foregoing, at any time within 60 days
after the Effective Time, any stockholder has the right to withdraw his demand
for appraisal and to accept the terms offered in respect of the merger. United
Dental is under no obligation to and has no present intention to file such a
petition. Accordingly, it is the obligation of the holders of shares of United
Dental's common stock to initiate all necessary action to perfect their
appraisal rights within the time prescribed in Section 262.
Within 120 days after the Effective Time, any holder of shares of United
Dental's common stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from United
Dental a statement setting forth the aggregate number of shares of United
Dental's common stock not voted in favor of the merger and with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. Such statement must be mailed to the stockholders within ten days
after a written request therefor has been received by United Dental or within
ten days after the expiration of the period for delivery of demands for
appraisal, whichever is later.
If a petition for an appraisal is timely filed by a holder of shares of
United Dental's common stock and a copy thereof is served upon United Dental,
United Dental will then be obligated within 20 days to file with the Delaware
Register in Chancery a duly verified list containing the names and addresses of
all holders of shares of United Dental's common stock who have demanded an
appraisal of their shares and with whom agreements as to the value of their
shares have not been reached. After notice to such stockholders as required by
the Court, the Delaware Court of Chancery is empowered to conduct a hearing on
such petition to determine those holders of shares of United Dental's common
stock who have complied with Section 262 and who have become entitled to
appraisal rights thereunder. The Delaware Court of Chancery may require the
holders of shares of United Dental's common stock who demanded payment for their
shares to submit their stock certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceeding; and if any
stockholder fails to comply with such direction, the Court of Chancery may
dismiss the proceedings as to such stockholder.
After determining the holders of shares of United Dental's common stock
entitled to appraisal, the Delaware Court of Chancery will appraise the "fair
value" of their shares of United Dental's common stock, exclusive of any element
of value arising from the accomplishment or expectation of the merger,
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together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. Holders of shares of United Dental's common
stock considering seeking appraisal should be aware that the fair value of their
shares of United Dental's common stock as determined by Section 262 could be
more than, the same as or less than the consideration they would receive
pursuant to the merger if they did not seek appraisal of their shares of United
Dental's common stock, and that investment banking opinions as to fairness from
a financial point of view are not necessarily opinions as to fair value under
Section 262. The Delaware Supreme Court has stated that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in the
appraisal proceedings. In addition, Delaware courts have decided that the
statutory appraisal remedy, depending on factual circumstances, may or may not
be a dissenter's exclusive remedy. The Court of Chancery will also determine the
amount of interest, if any, to be paid upon the amounts to be received by
persons whose shares of United Dental's common stock have been appraised. The
costs of the action may be determined by the Court and taxed upon the parties as
the Court deems equitable. The Court may also order that all or a portion of the
expenses incurred by any stockholder in connection with an appraisal, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts utilized in the appraisal proceeding, be charged pro rata against the
value of all the shares of United Dental's common stock entitled to be
appraised.
Any holder of shares of United Dental's common stock who has duly demanded
an appraisal in compliance with Section 262 will not, after the Effective Time,
be entitled to vote the shares of United Dental's common stock subject to such
demand for any purpose or be entitled to the payment of dividends or other
distributions on those shares of United Dental's common stock (except dividends
or other distributions payable to holders of record of shares of United Dental's
common stock as of a date prior to the Effective Time).
If any stockholder who demands appraisal of such stockholder's shares of
United Dental's common stock under Section 262 fails to perfect, or effectively
withdraws or loses, such stockholder's right to appraisal, as provided in the
Delaware General Corporation Law, the shares of United Dental's common stock of
such stockholder will be converted into the right to receive the Merger
Consideration pursuant to the merger agreement (without interest). A stockholder
will fail to perfect, or effectively lose or withdraw, such stockholder's right
to appraisal if no petition for appraisal is filed by such holder within 120
days after the Effective Time, or if the stockholder delivers to United Dental a
written withdrawal of his, hers or its demand for appraisal and an acceptance of
the merger, except that any such attempt to withdraw made more than 60 days
after the Effective Time will require the written approval of United Dental and,
once a petition for appraisal is filed, the appraisal proceeding may not be
dismissed as to any holder absent court approval. It is not necessary that each
holder of shares of United Dental's common stock properly demanding appraisal
file a petition for appraisal in the Delaware Court of Chancery. Rather, a
single valid petition suffices for the petitioning and non-petitioning holders
of shares of United Dental's common stock who have properly demanded appraisal.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH
RIGHTS (IN WHICH EVENT A STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE MERGER
CONSIDERATION IN ACCORDANCE WITH THE MERGER AGREEMENT FOR EACH SHARE OF UNITED
DENTAL COMMON STOCK OWNED BY SUCH STOCKHOLDER).
Any dissenting stockholder who perfects his or her right to be paid the fair
value of his or her shares will generally recognize gain or loss, if any, for
U.S. federal income tax purposes upon the receipt of cash for such shares. The
amount of gain or loss and its character as ordinary or capital gain or loss
will be determined in accordance with applicable provisions of the Code.
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COMPARISON OF STOCKHOLDER RIGHTS
The rights of stockholders of United Dental are currently governed by the
Delaware General Corporation Law, United Dental's Certificate of Incorporation
and United Dental's Bylaws. The rights of Protective stockholders are currently
governed by the Delaware General Corporation Law, Protective's Certificate of
Incorporation, Protective's Bylaws and Protective's Rights Agreement. Upon
consummation of the merger, United Dental stockholders who receive Common Stock
Consideration will become stockholders of Protective and their rights will be
governed by the Delaware General Corporation Law, Protective's Certificate of
Incorporation and Protective's Bylaws.
The following is a summary of the material differences between the rights of
stockholders of United Dental and Protective. This summary does not purport to
be a complete description of the rights of stockholders of United Dental or the
rights of stockholders of Protective or a comprehensive comparison of such
rights, and is qualified in its entirety by reference to the Delaware General
Corporation Law, to United Dental's Certificate of Incorporation and United
Dental's Bylaws, and to Protective's Certificate of Incorporation, Protective's
Bylaws and Protective's Rights Agreement. For more information regarding
reviewing or obtaining a copy of the charter documents or bylaws of either
company, see "AVAILABLE INFORMATION."
AUTHORIZED CAPITAL STOCK
UNITED DENTAL
The authorized capital stock of United Dental consists of 15,000,000 shares
of common stock, par value $.10 per share and 500,000 shares of preferred stock,
par value $.10 per share. As of July 31, 1998, there were 8,982,616 shares of
United Dental's common stock and no shares of United Dental's preferred stock
outstanding.
PROTECTIVE
The authorized capital stock of Protective consists of 160,000,000 shares of
Protective's common stock and 4,000,000 shares of preferred stock, par value
$1.00 per share, of which 400,000 have been designated as Series A Junior
Participating Cumulative Preferred Stock, par value $1.00 per share (the "Junior
Preferred Stock"). As of July 31, 1998, there were 61,774,852 shares of
Protective's common stock and no shares of Protective's preferred stock or
Junior Preferred Stock outstanding.
PREFERRED SHARE PURCHASE RIGHTS ("POISON PILL" OR "STOCKHOLDER RIGHTS PLAN")
UNITED DENTAL
None
PROTECTIVE
On August 7, 1995, Protective's Board of Directors declared a dividend
distribution of one Right for each outstanding share of common stock. The
distribution was payable on August 18, 1995 to the stockholders of record on
that date. Each Right entitles the registered holder to purchase from Protective
one two-hundredth of a share of Junior Preferred Stock at a price of $55 per one
two-hundredth of a share of junior preferred stock (the "Purchase Price"),
subject to adjustment. The Rights have certain anti-takeover effects. The Rights
will cause substantial dilution to a person or group that attempts to acquire
Protective in a manner which causes the Rights to become exercisable unless the
offer is conditioned on the Rights being redeemed. This potential dilution may
have the effect of delaying, deferring or discouraging attempts to acquire
control of Protective which are not approved by Protective's Board of Directors.
However, the Rights should not interfere with any merger or other business
combination approved by Protective's Board of Directors.
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Until the earlier to occur of (i) ten days following the time of a public
announcement or notice to Protective that a person or group of affiliated or
associated persons (an "Acquiring Person") acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding common stock of
Protective (the "Stock Acquisition Time") or (ii) ten days following the
commencement or announcement of an intention to make a tender offer or exchange
offer which, if successful, would cause the bidder to own 15% or more of the
outstanding common stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
common stock certificates outstanding as of August 18, 1995, by such common
stock certificate with a copy of a "Summary of Rights" attached thereto. The
Rights Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with the common stock, including the Common Stock
Consideration to be issued in the merger. Until the Distribution Date (or
earlier redemption or expiration of the Rights), new common stock certificates
issued after August 18, 1995, upon transfer or new issuance of the common stock,
will contain a notation incorporating the Rights Agreement by reference. Until
the Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the common stock certificates outstanding as of
August 18, 1995, even without a copy of a "Summary of Rights" attached thereto,
will also constitute the transfer of the Rights associated with the common
shares represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the common stock as of the
close of business on the Distribution Date and such separate Right Certificates
alone will evidence the Rights.
THE RIGHTS ARE NOT EXERCISABLE UNTIL THE DISTRIBUTION DATE. The Rights will
expire on August 18, 2005, unless earlier redeemed by Protective as described
below or extended.
The Purchase Price payable, and the number of shares of Junior Preferred
Stock or other securities or property issuable upon exercise of the Rights, are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Junior Preferred Stock, (ii) upon the fixing of a record date for the issuance
to holders of Junior Preferred Stock of certain rights, options or warrants to
subscribe for or purchase Junior Preferred Stock or convertible securities at
less than the current market price of Junior Preferred Stock or (iii) upon the
fixing of a record date for the making of a distribution to holders of Junior
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends not exceeding 125% of the last regular periodic cash
dividend or dividends payable in Junior Preferred Stock) or of subscription
rights or warrants (other than those referred to above). The number of Rights
and number of shares of Junior Preferred Stock issuable upon the exercise of
each Right are also subject to adjustment in the event of a stock split,
combination or stock dividend on the common stock prior to the Distribution
Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of common stock will be issued and, in
lieu thereof, an adjustment in cash will be made based on the market value of
the common stock on the last trading date prior to the date of exercise.
In the event that after the Stock Acquisition Time, Protective is acquired
in a merger or other business combination transaction or 50% or more of its
assets, cash flow or earning power are sold or otherwise transferred, the Rights
Agreement provides that proper provision shall be made so that each holder of a
Right (other than the Acquiring Person) upon the exercise thereof at the
then-current exercise price of the Right, shall thereafter be entitled to
receive that number of shares of common stock of the acquiring company which at
the time of such transaction would have a market value of two times the exercise
price of the Right. In the event that Protective were the surviving corporation
in a merger and its common stock was changed or exchanged, proper provision
shall be made so that each holder of a Right (other than the Acquiring Person)
will thereafter have the right to receive upon exercise, that number of shares
of the common stock having a market value of two times the exercise price of the
Right.
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In the event that a person or group becomes an Acquiring Person (otherwise
than pursuant to a tender offer or exchange offer for all outstanding shares of
common stock at a price and on terms which are determined to be fair and in the
best interests of Protective and its stockholders by a majority of the members
of Protective's Board of Directors who are not Acquiring Persons or
representatives or nominees of or affiliated or associated with an Acquiring
Person), proper provision shall be made so that each holder of a Right, other
than Rights that were beneficially owned by the Acquiring Person, which will
thereafter be void, will thereafter have the right to receive upon exercise that
number of shares of common stock having a market value (as defined in the Rights
Agreement) of two times the exercise price of the Right. A person or group will
not be deemed to be an Acquiring Person if Protective's Board of Directors
determines that such person or group became an Acquiring Person inadvertently
and such person or group promptly divests itself of a sufficient number of
shares of common stock so that such person or group is no longer an Acquiring
Person.
At any time prior to the earlier of (i) the Stock Acquisition Time and (ii)
August 18, 2005, Protective, by resolution of Protective's Board of Directors,
may redeem the Rights in whole, but not in part, at a price of $.01 per Right
(the "Redemption Price"). Immediately upon the action of Protective's Board of
Directors electing to redeem the Rights (or at such time subsequent to such
action as Protective's Board of Directors may determine), the right to exercise
the Rights will terminate, and the only right of the holders of Rights will be
to receive the Redemption Price.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person of 50% or more of the outstanding Protective's common
stock, Protective's Board of Directors may exchange the Rights (other than
Rights beneficially owned by such person which have become void), in whole or in
part, for common stock of Protective at an exchange ratio of one share of common
stock per Right (subject to adjustment). Protective may at its option substitute
shares of Junior Preferred Stock (or other series of substantially similar
preferred stock of Protective) for some or all of the shares of common stock
exchangeable for Rights, at an exchange ratio of one two-hundredth of a share of
Junior Preferred Stock (or such other series of preferred stock) for each share
of common stock to be exchanged.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of Protective, other than rights resulting from such holder's
ownership of shares of common stock, including, without limitation, the right to
vote or to receive dividends. Stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for common stock (or other consideration) of Protective or for
common stock of the acquiring company as set forth above.
The Rights and the Rights Agreement can be amended by Protective's Board of
Directors in any respect (including, without limitation, any extension of the
period in which the Right Certificates may be redeemed) at any time prior to the
Stock Acquisition Time. From and after such time, without the approval of the
stockholders of Protective or the holders of the Rights, Protective's Board of
Directors may only supplement or amend the Rights Agreement in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained in the
Rights Agreement which may be defective or inconsistent with any other provision
in the Rights Agreement, (iii) to shorten or lengthen any time period under the
Rights Agreement or (iv) to make any changes or supplements which Protective may
deem necessary or desirable which shall not adversely affect the interests of
the holders of Right Certificates (other than an Acquiring Person or an
affiliate or associate of any such person), provided that any such action by
Protective's Board of Directors must have the concurrence of a majority of the
Continuing Directors (as defined in the Rights Agreement) and provided that the
Continuing Directors constitute a majority of directors then in office, and
provided that the Rights Agreement may not be supplemented or amended to
lengthen (A) a time period relating to when the Rights may be redeemed or to
modify the ability (or inability) of Protective's Board of Directors to redeem
the Rights, in either case at such time as the Rights are not then redeemable or
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the Rights of or the benefits to the holders
of Rights (other than an Acquiring Person or an affiliate or associate of any
such person).
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For purposes of the Rights Agreement, the term "Continuing Director" means
any member of Protective's Board of Directors who was a member of Protective's
Board of Directors prior to the Stock Acquisition Time, and any person who is
subsequently elected to Protective's Board of Directors if such person is
recommended or approved by a majority of the Continuing Directors, but shall not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing entities.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire Protective in
a manner which causes the Rights to become exercisable unless the offer is
conditioned on the Rights being redeemed. This potential dilution may have the
effect of delaying, deferring or discouraging attempts to acquire control of
Protective which are not approved by Protective's Board of Directors. However,
the Rights should not interfere with any merger or other business combination
approved by Protective's Board of Directors.
The foregoing description of the Rights Agreement is qualified in its
entirety by reference to the complete terms of the Rights as set forth in the
Rights Agreement. The Rights Agreement is incorporated by reference as an
exhibit to the Registration Statement of which this Proxy Statement/Prospectus
is a part. A copy of the Rights Agreement can be obtained as described under
"AVAILABLE INFORMATION."
COMPARISON
United Dental does not have a Share Purchase Rights Plan in place. United
Dental stockholders who receive Stock Consideration will receive the associated
Rights with the shares of Protective's common stock they receive in the merger.
The Share Purchase Rights Plan may have the effect of delaying, making more
difficult or preventing a change in control or acquisition of Protective by
means of a tender offer, a proxy contest or otherwise. These provisions are
expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
Protective first to negotiate with Protective. Protective believes that the
benefits derived from requiring the proponent of an unfriendly or unsolicited
proposal to negotiate with Protective outweigh the disadvantages of discouraging
such proposals because, among other things, negotiations with respect to such
proposals could result in an improvement of their terms.
AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS
UNITED DENTAL
United Dental's Certificate of Incorporation does not contain any provision
which generally addresses amendments thereto and, therefore, is governed by
Section 242 of the Delaware General Corporation Law. In accordance with Section
242, United Dental's Board of Directors may propose, and the stockholders may
adopt by a majority vote of the outstanding shares then entitled to vote, an
amendment to United Dental's Certificate of Incorporation.
Amendments or repeals to United Dental's Bylaws or the adoption of new
provisions thereto may be effected by United Dental's Board of Directors or with
the approval of a majority of United Dental's outstanding shares then entitled
to vote.
PROTECTIVE
Protective's Certificate of Incorporation generally requires the approval of
a majority of the outstanding shares then entitled to vote to amend or repeal
any provision of or adopt provisions inconsistent with Protective's Certificate
of Incorporation unless a higher percentage is specified in any provision with
respect to such provision. Provisions in Protective's Certificate of
Incorporation relating to actions by directors by written consent, special
meetings of stockholders, the right of Protective to amend Protective's
Certificate of Incorporation, business combinations with interested stockholders
or their affiliates and
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amendments of such provisions of Protective's Certificate of Incorporation
require the approval of 67% of the voting power of the outstanding shares then
entitled to vote to effect such amendments, repeals or adoptions.
Amendments or repeals to Protective's Bylaws or the adoption of new
provisions thereto may be effected by Protective's Board of Directors or with
the approval of a majority of Protective's outstanding shares then entitled to
vote.
COMPARISON
The "supermajority" requirements in Protective's Certificate of
Incorporation discussed above may make it more difficult for an "interested
stockholder" to gain control of Protective to the disadvantage of other
stockholders by requiring 67% of the outstanding shares of Protection's common
stock to vote in favor of amending the provisions of Protective's Certificate of
Incorporation described above. Pursuant to United Dental's Certificate of
Incorporation, an interested stockholder needs fewer votes than he would under
Protective's Certificate of Incorporation in order to effect self-interested
changes to United Dental's corporate structure.
NOMINATION OF DIRECTORS
UNITED DENTAL
Neither United Dental's Charter nor Bylaws contain a provision relating to
the nomination of directors.
PROTECTIVE
Pursuant to Protective's Bylaws, nominations of persons for election as
directors of Protective may be made by any Protective stockholder entitled to
vote for the election of directors at the annual meeting who delivers to the
corporate Secretary of Protective (the "Secretary") written notice of such
nomination not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual stockholder meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the close of business
on the later of the 60th day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. Notwithstanding anything in the foregoing sentence to the contrary,
if the number of directors to be elected is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased board made by Protective at least 70 days prior to the first
anniversary of the preceding year's annual stockholder meeting, written notice
(with respect to nominees for any new positions created by such increase) must
be delivered or mailed to, and received by, the Secretary not later than the
close of business on the tenth day following the day on which such public
announcement is first made by Protective.
Nominations of persons for election as directors of Protective may be made
by any Protective stockholder at any special meeting at which directors are to
be elected pursuant to Protective's notice of meeting (i) by or at the direction
of Protective's Board of Directors, the Chief Executive Officer or the Secretary
of Protective or (ii) provided that Protective's Board of Directors has
determined that directors shall be elected at such special meeting, by a
stockholder entitled to vote and who complies with the notice procedures set
forth in Protective's Bylaws. If Protective calls a special meeting for the
purpose of electing one or more directors to Protective's Board of Directors,
any such stockholder may nominate a person or persons (as the case may be) for
election to such position(s) as specified in the Protective notice of meeting,
provided the notice procedures in Protective's By-laws are satisfied.
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COMPARISON
The nomination provision of Protective's Bylaws described above may make it
more difficult for a third party to nominate its affiliates to Protective's
Board of Directors and may impede unsolicited third party takeover efforts.
SPECIAL MEETINGS OF THE STOCKHOLDERS
UNITED DENTAL
United Dental's Bylaws provide that special meetings of stockholders may be
called by the chairman of the board, the president, the board of directors, or
the holders of not less than one-tenth of all the shares entitled to vote at
such special meeting.
PROTECTIVE
Protective's Certificate of Incorporation provides that special meetings of
stockholders may be called upon not less than 10 days' notice by resolution of
Protective's Board of Directors, Executive Committee or Chief Executive Officer.
Holders of a majority of the sum of the outstanding shares of Protective's
common stock and of Protective's common stock which would be outstanding upon
the conversion of all outstanding convertible securities of Protective may call
a special meeting upon 60 days' advance written notice. These provisions of
Protective Certificate of Incorporation can only be amended or repealed by vote
of 67% of the outstanding shares.
COMPARISON
Pursuant to Protective's Certificate of Incorporation, a greater percentage
of the outstanding shares of Protective's common stock is required for a
stockholder to be able to call a special meeting and to amend the provisions
governing the stockholders' ability to call a special meeting than under United
Dental's Certificate of Incorporation. The consequent effect of these provisions
is to make Protective less susceptible to the efforts of an interested
stockholder to gain control of the company than is United Dental and it may be
more difficult for an interested stockholder to change Protective's Certificate
of Incorporation than United Dental's Certificate of Incorporation.
STOCKHOLDER ACTION BY WRITTEN CONSENT
UNITED DENTAL
United Dental's Bylaws provide that stockholder action may be taken by
written consent without a meeting if the holders of outstanding capital stock
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present consent to such action.
PROTECTIVE
Protective's Certificate of Incorporation provides that no action requiring
the consent or approval of Protective's stockholders may be taken unless such
consent or approval be given at a duly convened annual or special meeting of
stockholders. Thus, Protective stockholder action may not be taken by written
consent.
COMPARISON
The inability of Protective's stockholders to vote by written consent
potentially limits the ability of stockholders to change Protective's corporate
structure and impedes interested stockholders from gaining control of Protective
to the detriment of other stockholders. Pursuant to Protective's Certificate of
Incorporation, Protective's stockholders may only vote on corporate matters at
the annual meeting or at a
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special meeting. United Dental's stockholders potentially have more control over
the affairs of United Dental than do Protective's stockholders over Protective;
therefore, United Dental may be more susceptible to the attempts of interested
stockholders to gain control of the company.
VOTE REQUIRED FOR MERGERS; SALE OF ASSETS; SUPERMAJORITY PROVISIONS
UNITED DENTAL
Under the Delaware General Corporation Law, a merger, consolidation or
dissolution of a corporation or the sale, lease or exchange of all or
substantially all of such corporation's assets are subject to the approval of
stockholders of the corporation by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote. United Dental is governed
by the Delaware General Corporation Law relating to mergers and sales of its
assets unless the transaction is with an "interested stockholder" (generally, a
stockholder who owns 15% or more of the outstanding voting power of a
corporation).
Pursuant to Section 203 of the Delaware General Corporation Law, United
Dental may not engage in any business combination with any interested
stockholder for a period of three years following the time that such stockholder
became an interested stockholder, unless: (i) prior to such time the board of
directors gives prior approval to the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, or (ii)
upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding those shares owned (a) by persons who are directors and
also officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (iii) the business
combination is approved by the board of directors and authorized at a meeting of
stockholders by the affirmative vote of at least 66% of the outstanding voting
stock which is not owned by the interested stockholder.
PROTECTIVE
Protective is also governed by the Delaware General Corporation Law with
respect to the required vote for mergers and sales of assets. In addition, under
Protective's Certificate of Incorporation, a merger, consolidation or
dissolution of Protective or the sale, lease or exchange of all or substantially
all of Protective's assets shall be subject to the approval of stockholders of
Protective by the affirmative vote of the holders of a majority of the
outstanding shares of Protective entitled to vote unless the transaction is with
a "Related Person" as discussed below.
Protective's Certificate of Incorporation contains a "fair price" provision
which generally requires that certain "Business Combinations" (as defined below)
with a "Related Person" (generally the beneficial owner of at least 20% of
Protective's voting stock) be approved by the holders of at least 80% of
Protective's voting stock and the holders of at least 67% of the voting stock
held by stockholders other than such Related Person, unless (a) at least a
majority of the "Continuing Directors" of Protective (i) has expressly approved
in advance the acquisition of Protective's voting stock that caused the Related
Person involved in the Business Combination to become a Related Person or (ii)
has approved the Business Combination, or (b) the Business Combination is either
a "Reorganization" or a Business Combination in which Protective is the
surviving corporation and, in either event, the cash or fair market value of the
property, securities or other consideration to be received per share as a result
of the Business Combination by holders of the Common Stock of Protective, other
than the Related Person, is not less than the highest per share price (with
appropriate adjustments for recapitalizations and for stock splits, stock
dividends and like distributions) paid by such Related Person in acquiring any
holdings of Protective's common stock either in or subsequent to the transaction
or series of transactions by reason of which the Related Person became a Related
Person. Protective's Certificate of Incorporation defines "Business Combination"
as (i) any Reorganization of Protective or a subsidiary of Protective with or
into a Related Person, (ii) any
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sale, lease, exchange, transfer or other disposition, including without
limitation a pledge, mortgage or any other security device, of all or any
"Substantial Part" (as defined herein) of the assets either of Protective or of
a subsidiary of Protective, or both, to a Related Person, (iii) any
Reorganization of a Related Person with or into Protective or a subsidiary of
Protective, (iv) any sale, lease, exchange, transfer or other disposition of all
or any Substantial Part of the assets of a Related Person to Protective or a
subsidiary of Protective, (v) the issuance of any securities of Protective or
any subsidiary of Protective to a Related Person except if such issuance were a
stock split, stock dividend or other distribution pro rata to all holders of the
same class of voting stock, (vi) any reclassification of Protective's securities
(including any reverse stock split) or any other recapitalization that would
have the effect of increasing the voting power of a Related Person, and (vii)
any agreement, contract, plan or other arrangement providing for any of the
transactions described in the definition of Business Transaction. "Continuing
Director" is defined to mean a director who was a member of the Board of
Directors of Protective immediately prior to the time such Related Person became
a Related Person. "Substantial Part" is defined as more than 20% of the fair
market value of the total assets of the corporation in question, as determined
in good faith by a majority of the Continuing Directors as of the end of its
most recent fiscal year ending prior to the time the determination is being
made. "Reorganization" is defined to mean a merger, consolidation, plan of
exchange, sale of all or substantially all of the assets (including, as pertains
to a subsidiary of Protective, bulk reinsurance or cession of substantially all
of its policies and contracts) or other form of corporate reorganization
pursuant to which shares of voting stock, or other securities of the subject
corporation, are to be converted or exchanged into cash or other property,
securities or other consideration. Under Protective's Certificate of
Incorporation, the amendment of, repeal of or adoption of any provision
inconsistent with provisions of Protective's Certificate of Incorporation
relating to Business Combinations with a Related Person requires the affirmative
vote of the holders of at least 80% of Protective's voting stock and the holders
of at least 67% of Protective's voting stock held by holders other than such
Related Person.
COMPARISON
Unless a merger, consolidation or dissolution of Protective or United Dental
is with a "related person," there is no difference between the rights of
Protective's stockholders and United Dental's stockholders with respect to such
a transaction; however, if such a transaction is with a related person, then the
provisions described above may have the effect of delaying and making more
difficult the acquisition of Protective than would be the case for United
Dental. With respect to Protective's fair price provisions, a greater percentage
of the outstanding shares of common stock are necessary in order to approve a
transaction with a related person than are necessary under Section 203 of the
Delaware General Corporation Law which governs transactions between United
Dental and interested stockholders, thereby providing greater protection to
Protective's stockholders from interested party transactions.
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SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF PROTECTIVE'S COMMON STOCK
The following table sets forth information concerning beneficial ownership
of Protective's common stock as of June 30, 1998, with respect to (i) persons
Protective believes to be the beneficial owners of 5% or more of Protective's
common stock, (ii) each current director and each of the executive officers
named in the Summary Compensation Table contained in Protective's Proxy
Statement dated March 27, 1998, and (iii) all current directors and executive
officers of Protective, as a group:
<TABLE>
<CAPTION>
SHARES OF PROTECTIVE'S
COMMON STOCK
BENEFICIALLY OWNED(1)(2)
------------------------
NAME NUMBER PERCENT(1)
- ---------------------------------------------------------------------------------------- --------- -------------
<S> <C> <C>
William J. Rushton III(3)............................................................... 1,271,052 2.1%
William J. Cabaniss, Jr.(4)............................................................. 345,230 *
Drayton Nabers, Jr.(5).................................................................. 347,373 *
John J. McMahon, Jr.(6)................................................................. 64,204 *
A. W. Dahlberg.......................................................................... 5,708 *
Ronald L. Kuehn, Jr.(7)................................................................. 6,646 *
Herbert A. Sklenar(8)................................................................... 8,646 *
James S. M. French(9)................................................................... 14,300 *
Robert A. Yellowlees(10)................................................................ 7,757 *
John D. Johns(11)....................................................................... 64,996 *
Elaine L. Chao(12)...................................................................... 3,057 *
Donald M. James(13)..................................................................... 2,473 *
R. Stephen Briggs(14)................................................................... 165,262 *
Jim E. Massengale(15)................................................................... 135,433 *
A. S. Williams III(16).................................................................. 111,653 *
All current directors, and executive officers as a group (23 individuals)(17)(18)....... 2,812,910 4.6%
AmSouth Bank of Alabama in various fiduciary capacities(19)............................. 7,178,784 11.6%
Nicholas Company, Inc.(20).............................................................. 4,081,040 6.6%
Firstar Corporation(21)................................................................. 5,182,894 8.4%
</TABLE>
- ------------------------------
* less than one percent
(1) The number of shares reflected are shares which under applicable
regulations of the Securities and Exchange Commission are deemed to be
beneficially owned. Shares deemed to be beneficially owned, under such
regulations, include shares as to which, directly or indirectly, through
any contract, relationship, arrangement, understanding or otherwise, either
voting power or investment power is held or shared. The percentage
calculation is based on the aggregate number of shares beneficially owned.
(2) This column may include shares held in the name of a spouse, minor
children, or certain other relatives sharing the same home as the director
or officer, or held by the director or officer, or the spouse of the
director or officer, as a trustee or as a custodian for children, as to all
of which beneficial ownership is disclaimed by the respective directors and
officers except as otherwise noted below.
(3) Includes 22,188 shares owned by the wife of Mr. Rushton.
(4) Includes 153,952 shares as to which voting/investment power is shared.
(5) Includes 12,478 shares held in Protective's 401(k) and Stock Ownership Plan
as of June 30, 1998 for which Mr. Nabers has sole voting power. Also,
includes 244,759 share equivalents allocated to Mr. Nabers' deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Officers. Upon distribution, share equivalents will
be distributed in shares of Protective's common stock. Such shares will be
issued directly to Mr. Nabers who will have sole voting power over the
shares at that time. Also includes 21,630 shares as to which
voting/investment power is shared. Does not include 300,000 stock
appreciation rights awarded under Protective's 1996 Stock Incentive Plan.
(6) Includes 9,916 share equivalents allocated to Mr. McMahon's deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Directors Who Are Not Employees of Protective. Upon
distribution, share equivalents will be distributed in shares of
Protective's common stock. Such shares will be issued directly to Mr.
McMahon who will have sole voting power over the shares at that time. Also
includes 36,000 shares as to which voting/investment power is shared.
(7) Includes 2,629 share equivalents allocated to Mr. Kuehn's deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Directors Who Are Not Employees of Protective. Upon
distribution, share equivalents will be distributed in shares of
Protective's common stock. Such shares will be issued directly to Mr. Kuehn
who will have sole voting power over the shares at that time.
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(8) Includes 2,476 share equivalents allocated to Mr. Sklenar's deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Directors Who Are Not Employees of Protective. Upon
distribution, share equivalents will be distributed in shares of
Protective's common stock. Such shares will be issued directly to Mr.
Sklenar who will have sole voting power over the shares at that time. Also
includes 3,085 shares as to which voting/investment power is shared.
(9) Includes 11,000 shares of Protective's common stock owned by Dunn
Investment Company, of which Mr. French is Chairman of the Board,
President, and Chief Executive Officer and an additional 1,800 shares as to
which voting/investment power is also shared.
(10) Includes 4,757 share equivalents allocated to Mr. Yellowlees' deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Directors Who Are Not Employees of Protective. Upon
distribution, share equivalents will be distributed in shares of
Protective's common stock. Such shares will be issued directly to Mr.
Yellowlees who will have sole voting power over the shares at that time.
(11) Includes 3,322 shares held in Protective's 401(k) and Stock Ownership Plan
as of June 30, 1998 for which Mr. Johns has sole voting power. Also,
includes 53,074 share equivalents allocated to Mr. Johns' deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Officers. Upon distribution, share equivalents will
be distributed in shares of Protective's common stock. Such shares will be
issued directly to Mr. Johns who will have sole voting power over the
shares at that time. Also includes 4,200 shares as to which
voting/investment power is shared. Does not include 150,000 stock
appreciation rights awarded under Protective's 1996 Stock Incentive Plan.
(12) Includes 1,871 share equivalents allocated to Ms. Chao's deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Directors Who Are Not Employees of Protective. Upon
distribution, share equivalents will be distributed in shares of
Protective's common stock. Such shares will be issued directly to Ms. Chao
who will have sole voting power over the shares at that time.
(13) Includes 1,473 share equivalents allocated to Mr. James deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Directors Who Are Not Employees of Protective. Upon
distribution, share equivalents will be distributed in shares of
Protective's common stock. Such shares will be issued directly to Mr. James
who will have sole voting power over the shares at that time.
(14) Includes 26,986 shares held in Protective's 401(k) and Stock Ownership Plan
as of June 30, 1998 for which Mr. Briggs has sole voting power. Also,
includes 88,353 share equivalents allocated to Mr. Briggs' deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for Officers. Upon distribution, share equivalents will
be distributed in shares of Protective's common stock. Such shares will be
issued directly to Mr. Briggs who will have sole voting power over the
shares at that time. Does not include 40,000 stock appreciation rights
awarded under Protective's 1996 Stock Incentive Plan. Also includes 1,428
shares as to which voting/investment power is shared.
(15) Includes 29,980 shares held in Protective's 401(k) and Stock Ownership Plan
as of June 30, 1998 for which Mr. Massengale has sole voting power. Also,
includes 56,559 share equivalents allocated to Mr. Massengale's deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for officers. Upon distribution, share equivalents will
be distributed in shares of Protective's common stock. Such shares will be
issued directly to Mr. Massengale who will have sole voting power over the
shares at that time. Also includes 700 shares as to which voting/investment
power is shared. Does not include 40,000 stock appreciation rights awarded
under Protective's 1996 Stock Incentive Plan.
(16) Includes 25,038 shares held in Protective's 401(k) and Stock Ownership Plan
as of June 30, 1998 for which Mr. Williams has sole voting power. Also,
includes 61,674 share equivalents allocated to Mr. Williams' deferred
compensation account pursuant to the terms of Protective's Deferred
Compensation Plan for officers. Upon distribution, share equivalents will
be distributed in shares of Protective's common stock. Such shares will be
issued directly to Mr. Williams who will have sole voting power over the
shares at that time. Does not include 40,000 stock appreciation rights
awarded under Protective's 1996 Stock Incentive Plan.
(17) No officer or director owns any stock of any affiliate of Protective.
(18) Included are the interests of the persons as of June 30, 1998 in 152,416
shares of Protective's common stock held in Protective's 401(k) and Stock
Ownership Plan, which owned a total of 2,595,910 shares of Protective's
common stock on such date. Each 401(k) and Stock Ownership Plan participant
has sole voting power with respect to the shares held in the participant's
account. The 1,291,185 shares held in Protective's 401(k) and Stock
Ownership Plan Trust which have not been allocated to participants will be
voted by the trustees in accordance with the majority of the vote of all
participants. Also, includes 707,687 share equivalents allocated to the
deferred compensation accounts of participating directors and executive
officers as a group pursuant to Protective's Deferred Compensation Plan for
Directors Who Are Not Employees of Protective and Protective's Deferred
Compensation Plan for Officers. Also includes 447,568 shares as to which
voting/investment power is shared. Does not include outstanding stock
appreciation rights awarded under Protective's 1996 Stock Incentive Plan.
(19) AmSouth Bank, 1400 AmSouth/Sonat Tower, Birmingham, Alabama 35203, has
advised Protective that the bank, in its capacity as fiduciary of various
trusts and estates, may be deemed the beneficial owner, as of December 31,
1997, of 7,178,784 shares of Protective's common stock, for which the bank
has no sole voting or investment power, but has shared voting power with
respect to 5,884,956 shares and shared investment power with respect to
4,869,528 shares. AmSouth Bank has further advised Protective that none of
the separate trusts and estates of which it is fiduciary holds as much as
5% of the outstanding shares of Protective's common stock. AmSouth Bank
reported its beneficial ownership as of December 31, 1997 as 11.7%. The
table shows the percentage based on 61,774,598 shares of Protective's
common stock outstanding on June 30, 1998 (as adjusted for the two-for-one
stock split on April 1, 1998).
87
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(20) Nicholas Company, Inc., 700 North Water Street, Milwaukee, Wisconsin 53202,
has advised Protective that, in its capacity as an investment company it
may be deemed the beneficial owner, as of December 31, 1997, of 4,081,040
shares of Protective's common stock, for which Nicholas Company, Inc. has
sole investment power but no voting power. Nicholas Company, Inc. further
advised Protective that none of its separate clients owns as much as 5% of
the outstanding shares of Protective's common stock. Nicholas Company, Inc.
reported its beneficial ownership as of December 31, 1997 as 6.62%. The
table shows the percentage based on 61,774,598 shares of Protective's
common stock outstanding on June 30, 1998 (as adjusted for the two-for-one
stock split on April 1, 1998).
(21) Firstar Corporation, 777 E. Wisconsin Avenue, Milwaukee, Wisconsin 53202,
has advised Protective that, in its capacity as a holding company, it may
be deemed the beneficial owner, as of December 31, 1997, of 5,184,894
shares of Protective's common stock. Firstar Corporation has sole voting
power with respect to 3,995,900 shares, sole investment power with respect
to 4,344,100 shares, shared voting power with respect to 838,794 shares,
and shared investment power with respect to 416,925 shares. A subsidiary of
Firstar Corporation, Firstar Investment Research & Management Company, LLC,
777 E. Wisconsin Avenue, Milwaukee, Wisconsin 53202, has advised Protective
that, in its capacity as an investment adviser, it may be deemed the
beneficial owner, as of December 31, 1997, of 5,177,950 shares of
Protective's common stock. Firstar Investment Research & Management Company
has sole voting power with respect to 1,811,350 shares, sole investment
power with respect to 2,159,550 shares, shared voting power with respect to
2,936,680 shares, and shared investment power with respect to 3,018,400
shares. Firstar Corporation reported its beneficial ownership as of
December 31, 1997 as 8.4%, which it has advised Protective includes
beneficial ownership by its subsidiary. The table shows the percentage
based on 61,774,598 shares of Protective's common stock outstanding on June
30, 1998 (as adjusted for the two-for-one stock split on April 1, 1998).
88
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF UNITED DENTAL'S COMMON STOCK
The following table sets forth, as of June 30, 1998, the beneficial
ownership of United Dental's common stock (i) by each stockholder known by
United Dental to own beneficially more than 5% of the outstanding United
Dental's common stock; (ii) by each United Dental director; (iii) by United
Dental's executive officers; (iv) by all United Dental executive officers and
directors as a group; and (v) and by Mark E. Pape who was an executive officer
for a portion of 1997 and an employee of United Dental until January 9, 1998.
Except as otherwise indicated below, each named beneficial owner has sole voting
and investment power with respect to the shares of United Dental's common stock
listed. Certain of the beneficial owners listed below are holders of unvested
United Dental Stock Options and United Dental Warrants for which vesting will
accelerate pursuant to the terms of the merger agreement and certain agreements
between United Dental and such persons. See "THE PROPOSED MERGER--Conversion of
Shares" and "THE PROPOSED MERGER--Interests of Certain Persons in the
Merger--Option Settlement and Cancellation Agreements/Warrant Settlement
Agreement." See also "THE PROPOSED MERGER--Contingent Transaction Bonus Plan."
<TABLE>
<CAPTION>
SHARES OF UNITED
DENTAL'S
COMMON STOCK
BENEFICIALLY OWNED
----------------------
NAME NUMBER PERCENT
- ---------------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
T. Rowe Price Associates, Inc.(1)(2).......................................................... 722,200 8.1
Franklin Mutual Advisors, Inc.(1)(3).......................................................... 590,700 6.6
T. Rowe Price New Horizons Fund, Inc.(1)(2)................................................... 564,500 6.3
Putnam Investments, Inc.(4)................................................................... 465,824 5.2
Jack R. Anderson(1)(5)........................................................................ 1,237,000 13.8
Citibank, N.A. and George E. Bello, Trustees(1)(6)............................................ 778,500 8.7
George E. Bello(7)............................................................................ 399,368 4.5
James Ken Newman(8)........................................................................... 79,666 *
William H. Longfield(9)....................................................................... 68,000 *
Donald E. Steen............................................................................... 2,000 *
James E. Buncher.............................................................................. -- --
Robert J. Nettinga............................................................................ 5,150 *
William H. Wilcox............................................................................. -- --
John W. McCarty............................................................................... -- --
Mark E. Pape(10).............................................................................. 91,695 1.0
Peter R. Barnett(11).......................................................................... 16,699 *
All directors and executive officers as a group (10 persons)(12).............................. 1,807,883 20.1
</TABLE>
- ------------------------------
* Less than 1%.
(1) The address of T. Rowe Price Associates, Inc. and T. Rowe Price New
Horizons Fund, Inc. is 100 E. Pratt Street, Baltimore, MD 21202. The
address of Franklin Mutual Advisors, Inc. is 777 Mariners Island Boulevard,
San Mateo, CA 94403. The address for Cumberland Associates is 1114 Avenue
of the Americas, New York, NY 10036. The address for Putnam Investments,
Inc. is One Post Office Square, Boston, MA 02109. The address of Jack R.
Anderson is 16475 Dallas Parkway, Suite 735, Dallas, TX 75248. The address
of Citibank, N.A. and George E. Bello, Trustees is c/o Citibank, N.A., 153
East 53rd Street, 25th Floor, New York, NY 10043.
(2) T. Rowe Price Associates, Inc. and T. Rowe Price New Horizons Fund, Inc.
have jointly filed a Schedule 13G dated February 12, 1998, which states
that T. Rowe Price Associates, Inc. has sole voting power with respect to
157,700 shares and sole investment power with respect to 722,200 shares and
that T. Rowe Price New Horizons Fund, Inc. has sole voting power with
respect to 564,500 shares (which shares are included in the aggregate
amount reported by T. Rowe Price Associates, Inc.). Both entities disclaim
beneficial ownership of all such shares.
(3) Franklin Mutual Advisors, Inc. ("FMA"), Franklin Resources, Inc., the
parent holding company of FMA ("FRI") and Rupert H. Johnson, Jr. and
Charles B. Johnson, principal stockholders of FRI, have jointly filed a
Schedule 13G dated February 6, 1998, which states that FMA has sole voting
and investment power with respect to the number of shares shown in the
table. Each of FRI and Messrs. Johnson and Johnson disclaim beneficial
ownership of all such shares.
(4) Putnam Investments, Inc. ("PI"), Marsh & McLennan Companies, Inc., the
parent holding company of PI ("MMC"), and Putnam Investment Management,
Inc. and The Putnam Advisory Company, Inc., which are registered investment
advisors owned by PI, have jointly filed a Schedule 13G dated December 5,
1996, which states that PI has shared voting power with respect to 64,224
shares and shared investment power with respect to 465,824 shares. MMC and
PI disclaim beneficial ownership of all shares covered by such Schedule
13G.
89
<PAGE>
(5) Includes 778,500 shares held by the two trusts of which Citibank, N.A. and
George E. Bello are trustees. See Note (6) below. Relatives of Mr. Anderson
are beneficiaries of both trusts. Excludes shares of United Dental's common
stock held by other trusts of which relatives of Mr. Anderson are
beneficiaries. Mr. Anderson disclaims beneficial ownership of the shares
owned by all of the trusts. Also includes 150,000 shares held by a
foundation of which Mr. Anderson is a director and officer.
(6) Citibank, N.A. and George E. Bello are trustees having shared voting and
investment power under two trusts owning in the aggregate the number of
shares shown in the table. Relatives of Jack R. Anderson are beneficiaries
of both trusts. Mr. Anderson disclaims beneficial ownership of the shares
owned by the trusts.
(7) Excludes 778,500 shares of United Dental's common stock held by the two
trusts of which Citibank, N.A. and George E. Bello are trustees. See Note
(6) above. Relatives of Mr. Anderson are beneficiaries of both trusts.
Messrs. Anderson and Bello disclaim beneficial ownership of the shares
owned by the trusts.
(8) Includes 8,000 shares of United Dental's common stock issuable upon
exercise of immediately exercisable stock options. Also includes 10,000
shares held by a foundation of which Mr. Newman is a director and officer.
(9) Includes 8,000 shares of United Dental's common stock issuable upon
exercise of immediately exercisable stock options.
(10) Includes 40,000 shares of United Dental's common stock issuable upon
exercise of immediately exercisable warrants.
(11) Includes 15,000 shares of United Dental's common stock issuable upon
exercise of immediately exercisable stock options.
(12) Includes 31,000 shares of United Dental's common stock issuable upon
exercise of immediately exercisable stock options.
UNITED DENTAL STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
If the merger is not consummated, it is anticipated that the 1998 Annual
Meeting of Stockholders of United Dental will be held in December 1998.
Under rules promulgated by the Commission, if the merger is not consummated,
United Dental stockholders who desire to submit proposals for inclusion in the
proxy statement of United Dental to be utilized in connection with the 1999
Annual Meeting of Stockholders of United Dental, to be held in April 1999, must
submit such proposals to be received by the Secretary of United Dental no later
than November 30, 1998.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities offered
hereby and the merger will be passed upon for Protective by Deborah J. Long,
Esq. Strasburger & Price, L.L.P., special counsel to United Dental, and
Debevoise & Plimpton, special counsel to Protective, will each render opinions
with respect to certain federal income tax consequence of the merger. See "THE
PROPOSED MERGER-- Material U.S. Federal Income Tax Consequences of the Merger".
EXPERTS
The consolidated financial statements of Protective incorporated by
reference in Protective's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 have been audited by PricewaterhouseCoopers LLP, independent
accountants, as set forth in their reports thereon and incorporated herein by
reference. Such consolidated financial statements have been incorporated herein
by reference in reliance upon such report given the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of United Dental incorporated herein
by reference to United Dental's Annual Report on Form 10-K for the year ended
December 31, 1997 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
90
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNEX A*
COMPOSITE
CONFORMED
COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROTECTIVE LIFE CORPORATION,
PLC MERGER SUBSIDIARY CORPORATION
AND
UNITED DENTAL CARE, INC.
DATED AS OF MARCH 10, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* This Composite Conformed Copy reflects amendments entered into as of March 17,
1998 and as of July 8, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I THE MERGER...................................................................... 1
Section 1.1 The Merger....................................................... 1
Section 1.2 Closing.......................................................... 1
Section 1.3 Effective Time of the Merger..................................... 1
Section 1.4 Directors and Officers of the Surviving Corporation.............. 1
ARTICLE II SHAREHOLDER APPROVAL........................................................... 2
Section 2.1 Shareholder Meeting.............................................. 2
Section 2.2 Proxy Statement/Prospectus; Registration Statement............... 2
Section 2.3 No False or Misleading Statements................................ 2
ARTICLE III CONVERSION AND EXCHANGE OF SECURITIES......................................... 3
Section 3.1 Conversion of Shares............................................. 3
Section 3.2 Fractional Interests............................................. 4
Section 3.3 Exchange of Certificates......................................... 4
Section 3.4 Dissenting Shares................................................ 6
Section 3.6 No Liability..................................................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB............................ 7
Section 4.1 Organization..................................................... 7
Section 4.2 Capitalization................................................... 7
Section 4.3 Sub and Purchaser Subsidiaries................................... 7
Section 4.4 Authority Relative to this Agreement............................. 8
Section 4.5 Consents and Approvals; No Violations............................ 9
Section 4.6 Purchaser SEC Reports............................................ 9
Section 4.7 Statutory Financial Statements................................... 10
Section 4.8 Absence of Certain Changes....................................... 10
Section 4.9 Regulatory Filings............................................... 10
Information in Proxy Statement/Prospectus and Registration
Section 4.10 Statement...................................................... 10
Section 4.11 Brokers.......................................................... 10
Section 4.12 Absence of Undisclosed Liabilities............................... 10
Compliance with Laws; Certificates of Authority; Permits and
Section 4.13 Licenses....................................................... 11
Section 4.14 Disclosure....................................................... 11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................... 12
Section 5.1 Organization..................................................... 12
Section 5.2 Capitalization................................................... 12
Section 5.3 Company Subsidiaries............................................. 12
Section 5.4 Authority Relative to this Agreement............................. 13
Section 5.5 Consents and Approvals: No Violations............................ 13
Section 5.6 Company SEC Reports.............................................. 14
Section 5.7 Statutory Financial Statements................................... 14
Section 5.8 Absence of Certain Changes....................................... 14
Section 5.9 Litigation....................................................... 15
Section 5.10 Absence of Undisclosed Liabilities............................... 15
Section 5.11 No Default....................................................... 15
Section 5.12 Taxes............................................................ 15
Section 5.13 Title to Property................................................ 16
Compliance with Laws; Certificates of Authority; Permits and
Section 5.14 Licenses....................................................... 17
Section 5.15 Regulatory Filings............................................... 17
Section 5.16 Investments...................................................... 17
Section 5.17 Reserves......................................................... 17
Information in Proxy Statement/Prospectus and Registration
Section 5.18 Statement...................................................... 18
Section 5.19 Brokers.......................................................... 18
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Section 5.20 Employee Benefit Plans; ERISA.................................... 18
Section 5.21 Labor and Employee Relations..................................... 19
Section 5.22 Environmental Matters............................................ 20
Section 5.23 Opinion of Financial Advisor..................................... 20
Section 5.24 Contracts........................................................ 20
Section 5.25 Intellectual Property............................................ 21
Section 5.26 Voting Requirements; Takeover Statute............................ 21
Section 5.27 Disclosure....................................................... 22
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER......................................... 22
Section 6.1 Conduct of Business by the Company Pending the Merger............ 22
Section 6.2 Conduct of Business by Purchaser Pending the Merger.............. 24
Section 6.3 Investment Restrictions.......................................... 24
ARTICLE VII ADDITIONAL AGREEMENTS......................................................... 25
Section 7.1 Access and Information........................................... 25
Section 7.2 No Solicitation.................................................. 25
Section 7.3 Filings; Other Action............................................ 26
Section 7.4 Public Announcements............................................. 27
Section 7.5 Stock Exchange Listing........................................... 27
Section 7.6 Company Indemnification Provision................................ 27
Section 7.7 Comfort Letters.................................................. 27
Section 7.8 Employee Benefits................................................ 28
Section 7.9 Tax Matters...................................................... 28
Section 7.10 Affiliates....................................................... 28
Section 7.11 Additional Matters............................................... 28
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER..................................... 29
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger....... 29
Section 8.2 Conditions to Obligation of the Company to Effect the Merger..... 29
Conditions to Obligations of Purchaser and Sub to Effect the
Section 8.3 Merger......................................................... 30
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.............................................. 30
Section 9.1 Termination by Mutual Consent.................................... 30
Section 9.2 Termination by Either Purchaser or the Company................... 30
Section 9.3 Termination by the Company....................................... 31
Section 9.4 Termination by Purchaser......................................... 32
Section 9.5 Effect of Termination and Abandonment............................ 32
ARTICLE X GENERAL PROVISIONS.............................................................. 33
Section 10.1 Survival of Representations, Warranties and Agreements........... 33
Section 10.2 Notices.......................................................... 33
Section 10.3 Descriptive Headings............................................. 34
Section 10.4 Entire Agreement; Assignment..................................... 34
Section 10.5 Governing Law.................................................... 34
Section 10.6 Expenses......................................................... 34
Section 10.7 Amendment........................................................ 34
Section 10.8 Waiver........................................................... 34
Section 10.9 Counterparts; Effectiveness...................................... 34
Section
10.10 Severability; Validity; Parties in Interest...................... 34
Section
10.11 Enforcement of Agreement......................................... 35
Section
10.12 Knowledge........................................................ 35
</TABLE>
ii
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<S> <C>
Affiliate..................................................................... Section 4.3
Affiliate Agreements.......................................................... Section 7.10
Alternate Transaction......................................................... Section 9.5
Annual Statutory Statements of the Purchaser.................................. Section 4.7
Annual Statutory Statements of the Company.................................... Section 5.7
Benefits...................................................................... Section 7.8
Cash Consideration............................................................ Section 3.1
Certificates.................................................................. Section 3.1
Closing....................................................................... Section 1.2
Closing Date.................................................................. Section 1.2
Code.......................................................................... Recitals
Common Stock Consideration.................................................... Section 3.1
Company....................................................................... Recitals
Company Benefit Plan.......................................................... Section 5.20
Company Common Stock.......................................................... Section 3.1
Company Contracts............................................................. Section 5.24
Company Disclosure Letter..................................................... Article V
Company Insurance Subsidiaries................................................ Section 5.3
Company Intellectual Property Rights.......................................... Section 5.25
Company Investments........................................................... Section 5.16
Company Material Adverse Effect............................................... Section 5.1
Company Plans................................................................. Section 7.5
Company SEC Reports........................................................... Section 5.6
Company Special Meeting....................................................... Section 2.1
Company State Statutory Accounting Principles................................. Section 5.7
Company Stock Options......................................................... Section 5.2
Company Stockholder Approval.................................................. Section 5.26
Company Subsidiaries.......................................................... Section 5.3
Company Warrants.............................................................. Section 5.2
Confidentiality Agreement..................................................... Section 7.1
Contracts..................................................................... Section 5.24
Costs......................................................................... Section 7.6
DGCL.......................................................................... Section 1.1
Dissenting Share.............................................................. Section 3.4
Effective Time................................................................ Section 1.3
Effective Time Price.......................................................... Section 3.2
Encumbrances.................................................................. Section 4.3
Environmental Laws............................................................ Section 5.22
ERISA......................................................................... Section 5.20
ERISA Affiliate............................................................... Section 5.20
Exchange Act.................................................................. Section 2.3
Exchange Agent................................................................ Section 3.3
Exchange Ratio................................................................ Section 3.1
Expenses...................................................................... Section 9.5
GAAP.......................................................................... Section 4.6
Governmental Entity........................................................... Section 4.5
Governmental Requirements..................................................... Section 4.5
HMO........................................................................... Section 5.14
HSR Act....................................................................... Section 4.5
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Indemnified Parties........................................................... Section 7.6
IRS........................................................................... Section 5.20
Knowledge..................................................................... Section
10.12
Merger........................................................................ Recitals
Merger Consideration.......................................................... Section 3.1
Moody's....................................................................... Section 3.3
NYSE.......................................................................... Section 3.2
Oracare Business.............................................................. Section 5.14
Oracare Entities.............................................................. Section 5.14
Permitted Investments......................................................... Section 6.3
Person........................................................................ Section 3.3
Proxy Statement/Prospectus.................................................... Section 2.2
Purchaser..................................................................... Recitals
Purchaser Common Stock........................................................ Section 3.1
Purchaser Disclosure Letter................................................... Article IV
Purchaser Insurance Subsidiaries.............................................. Section 4.3
Purchaser Junior Preferred Stock.............................................. Section 4.2
Purchaser Material Adverse Effect............................................. Section 4.1
Purchaser Performance Shares.................................................. Section 4.2
Purchaser Preferred Stock..................................................... Section 4.2
Purchaser Rights Agreement.................................................... Section 3.1
Purchaser SARs................................................................ Section 4.2
Purchaser SEC Reports......................................................... Section 4.6
Purchaser Significant Subsidiaries............................................ Section 4.3
Purchaser Subsidiaries........................................................ Section 4.3
Purchaser Top Up Event........................................................ Section 9.3
Purchaser Top Up Right........................................................ Section 9.3
Quarterly Statutory Statements of Purchaser................................... Section 4.7
Quarterly Statutory Statements of the Company................................. Section 5.7
Registration Statement........................................................ Section 2.2
S&P........................................................................... Section 3.3
SEC........................................................................... Section 2.2
Securities Act................................................................ Section 2.2
Shares........................................................................ Section 3.1
Spread Amount................................................................. Section 3.1
State Statutory Accounting Principles......................................... Section 4.7
Statutory Financial Statements of Purchaser................................... Section 4.7
Statutory Financial Statements of the Company................................. Section 5.7
Stock Dividend................................................................ Section 3.1
Stockholder Agreement......................................................... Recitals
Sub........................................................................... Recitals
Subsidiary.................................................................... Section 4.3
Superior Proposal............................................................. Section 7.2
Surviving Corporation......................................................... Section 1.1
Takeover Proposal............................................................. Section 7.2
Taxes......................................................................... Section 5.12
Tax Returns................................................................... Section 5.12
Termination Payment........................................................... Section 9.5
Trading Average............................................................... Section 9.3
Trading Day................................................................... Section 3.2
Warrants...................................................................... Section 5.2
</TABLE>
iv
<PAGE>
EXHIBITS
Exhibit A: Form of Affiliate Letter Agreement
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 10, 1998 and amended as of
March 17, 1998 and as of July 8, 1998, by and among PROTECTIVE LIFE CORPORATION,
a Delaware corporation ("Purchaser"), PLC MERGER SUBSIDIARY CORPORATION, a
Delaware corporation and a wholly-owned subsidiary of Purchaser ("Sub"), and
UNITED DENTAL CARE, INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Purchaser, Sub and the
Company have approved the merger of the Company with and into Sub upon the terms
and subject to the conditions set forth herein (the "Merger");
WHEREAS as a condition of the willingness of Purchaser to enter into this
Agreement, a principal stockholder of the Company has entered into a Stockholder
Agreement, dated as of the date hereof (the "Stockholder Agreement"), with
Purchaser, which provides, among other things, that, subject to the terms and
conditions thereof, such stockholder will vote such stockholder's shares of
Company Common Stock in favor of the Merger and the approval and adoption of
this Agreement; and
WHEREAS, Purchaser, Sub and the Company intend that the Merger qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.3), the Company shall be
merged with and into Sub and the separate corporate existence of the Company
shall thereupon cease, and Sub shall be the surviving corporation in the Merger
(the "Surviving Corporation"). The Merger shall have the effects set forth in
the General Corporation Law of the State of Delaware (the "DGCL"). Pursuant to
the Merger, (a) the Articles of Incorporation of Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, until thereafter amended as provided by law and such
Certificate of Incorporation and (b) the Bylaws of Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
until thereafter amended as provided by law, such Bylaws and the Certificate of
Incorporation of the Surviving Corporation.
Section 1.2 CLOSING. The Company shall as promptly as practicable notify
Purchaser, and Purchaser and Sub shall as promptly as practicable notify the
Company, when the conditions to such party's or parties' obligation to effect
the Merger contained in Article VIII have been satisfied. The closing of the
Merger (the "Closing") shall take place at the offices of Debevoise & Plimpton,
875 Third Avenue, New York, New York 10022, at 10:00 a.m., New York time, on the
second business day after the later of these notices has been given (the
"Closing Date"), unless another date or place is agreed to in writing by the
parties hereto; provided, however, that the parties hereto agree to use all
reasonable efforts to consummate the Closing on June 30, 1998, or as soon as
practicable thereafter.
Section 1.3 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective when a properly executed Certificate of Merger meeting the
requirements of Section 251 of the DGCL is duly filed with the Secretary of
State of the State of Delaware (the "Effective Time"), which filing shall be
made as soon as practicable after the closing of the transactions contemplated
by this Agreement in accordance with Section 1.2.
Section 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of Sub immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation at the Effective Time.
The directors and officers of the Surviving Corporation shall hold office until
their respective successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Articles of Incorporation and Bylaws of the Surviving Corporation.
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ARTICLE II
SHAREHOLDER APPROVAL
Section 2.1 SHAREHOLDER MEETING. In order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law, duly call, give notice of, convene and hold a special meeting of
its shareholders (the "Company Special Meeting"), as soon as practicable after
the Registration Statement (as hereinafter defined) is declared effective, for
the purpose of voting upon the adoption of this Agreement. Subject to the
provisions of Section 7.2(b), the Company shall include in the Proxy
Statement/Prospectus (as hereinafter defined) the unanimous recommendation of
the Board of Directors of the Company that shareholders of the Company vote in
favor of the approval of the Merger and the adoption of this Agreement.
Section 2.2 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. In
connection with the solicitation of approval of the principal terms of this
Agreement and the Merger by the Company's shareholders, the Company and
Purchaser shall as promptly as practicable prepare and file with the Securities
and Exchange Commission (the "SEC") a preliminary proxy statement relating to
the Merger and this Agreement and use all reasonable efforts to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement/Prospectus. The Company, after consultation with Purchaser, shall
respond as promptly as practicable to any comments made by the SEC with respect
to the preliminary proxy statement and shall cause a definitive proxy statement
to be mailed to its shareholders at the earliest practicable date. Such
definitive proxy statement shall also constitute a prospectus of Purchaser with
respect to the Purchaser Common Stock (as hereinafter defined) to be issued in
the Merger (such proxy statement and prospectus are referred to herein as the
"Proxy Statement/Prospectus"), which prospectus is to be filed with the SEC as
part of a registration statement on Form S-4 (the "Registration Statement") for
the purpose of registering such shares of Purchaser Common Stock under the
Securities Act of 1933, as amended (the "Securities Act"). Purchaser shall
prepare and as promptly as practicable file with the SEC the Registration
Statement. Purchaser, after consultation with the Company, shall respond as
promptly as practicable to any comments made by the SEC with respect to the
Registration Statement, and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC. Purchaser shall also take
any action required to be taken under applicable state securities laws in
connection with the issuance of Purchaser Common Stock in the Merger, and the
Company shall furnish all information concerning the Company and the holders of
Company Common Stock (as hereinafter defined) as may be reasonably requested by
Purchaser in connection with such action.
Section 2.3 NO FALSE OR MISLEADING STATEMENTS. The information provided
and to be provided by each of Purchaser and the Company specifically for use in
the Registration Statement and the Proxy Statement/Prospectus shall not, with
respect to the information supplied by such party, in the case of the
Registration Statement, on the date the Registration Statement becomes effective
and, in the case of the Proxy Statement/Prospectus, on the date upon which the
Proxy Statement/Prospectus is mailed to the shareholders of the Company or on
the date upon which approval of the Merger by the shareholders of the Company is
obtained, 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. Each of Purchaser and the Company agrees to correct as promptly
as practicable any such information provided by it that shall have become false
or misleading in any material respect and to take all steps necessary to file
with the SEC and have declared effective or cleared by the SEC any amendment or
supplement to the Registration Statement or the Proxy Statement/Prospectus so as
to correct the same and to cause the Proxy Statement/Prospectus as so corrected
to be disseminated to the Company's shareholders to the extent required by
applicable law. The Registration Statement and the Proxy Statement/Prospectus
shall comply as to form in all material respects with the provisions of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and other applicable law.
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ARTICLE III
CONVERSION AND EXCHANGE OF SECURITIES
Section 3.1 CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of any of the parties hereto or any
holder of any of the following securities:
(a) Subject to Sections 3.1(g), 3.5 and 9.3(c), each share of common
stock, par value $0.10 per share, of the Company (the "Company Common
Stock," and the shares of such Company Common Stock, the "Shares") issued
and outstanding immediately prior to the Effective Time (other than Shares
to be cancelled pursuant to Section 3.1(c) hereof and shares with respect to
which dissenter's rights have been asserted) shall, at the Effective Time,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive:
(i) 0.2893 (as such ratio may be adjusted pursuant to Sections
3.1(g), 3.5 and 9.3(c), the "Exchange Ratio") duly authorized, validly
issued, fully paid and nonassesable shares of common stock, par value
$.50 per share, of the Purchaser (together with the attached Series A
Junior Participating Preferred Stock Purchase Rights, issued in
accordance with the Rights Agreement, dated as of August 7, 1995 (the
"Purchaser Rights Agreement"), between Purchaser and AmSouth Bank (as
successor by merger to AmSouth Bank of Alabama, successor by conversion
of charter to AmSouth Bank N.A.), as Rights Agent, the "Purchaser Common
Stock"); it being understood that the Exchange Ratio gives effect to the
two-for-one stock split in the form of a stock dividend announced by the
Purchaser on March 2, 1998 (the "Stock Dividend") payable on April 1,
1998, to holders of record of Purchaser Common Stock as of the close of
business on March 13, 1998 (the "Common Stock Consideration"); and
(ii) $9.31 in cash (as such amount may be adjusted pursuant to
Sections 3.1(g) and 9.3(c), the "Cash Consideration," together with the
Common Stock Consideration, the "Merger Consideration").
(b) All Shares of Company Common Stock converted into Merger
Consideration at the Effective Time shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such Shares of Company Common Stock
shall thereafter represent the right to receive, upon the surrender of such
certificate in accordance with the provisions of Section 3.3, only the
Merger Consideration. The holders of such certificates previously evidencing
such Shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares of
Company Common Stock except as otherwise provided herein or by law.
(c) Each share of Common Stock of Sub, par value $.01 per share, issued
and outstanding immediately prior to the Effective Time, shall remain
outstanding and shall be unchanged after the Merger and shall thereafter
constitute all of the issued and outstanding capital stock of the Surviving
Corporation.
(d) All Shares of Company Common Stock that are owned by the Company as
treasury stock and any Shares of Company Common Stock owned by Purchaser or
Sub or any other direct or indirect wholly owned Purchaser Subsidiary shall,
at the Effective Time, be canceled and retired and shall cease to exist and
no Purchaser Common Stock or other consideration shall be delivered in
exchange therefor except for any shares held in a Purchaser Subsidiary
separate account or mutual fund.
(e) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") shall cease to have any rights as stockholders of the
Company, except the right to receive the Merger Consideration for each Share
held by them.
(f) Each Company Stock Option and Company Warrant (each as defined in
Section 5.2) which is not exercisable immediately prior to the Effective
Time shall become exercisable and each
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Company Stock Option and Company Warrant (other than Company Stock Options
and Company Warrants for which exercise notices have been delivered and with
respect to which the exercise price has been paid) shall be canceled, and
each holder of such a Company Stock Option or Company Warrant will be
entitled to receive, for each share of Company Common Stock subject to such
Company Stock Option or Company Warrant, an amount of Purchaser Common Stock
and cash equal in the aggregate to the excess, if any, of the Merger
Consideration (calculated using the Effective Time Price (as hereinafter
defined)) over the per share exercise price of such Company Stock Option or
Company Warrant, without interest (the "Spread Amount"). The portion of such
Spread Amount equal to the product of (i) such Spread Amount multiplied by
(ii) the percentage of the Merger Consideration payable in Purchaser Common
Stock shall be paid in Purchaser Common Stock, and the remainder of the
Spread Amount shall be paid in cash. The amount payable pursuant to this
Section 3.l(f) shall be subject to all applicable tax withholding, which
shall be deducted from the portion of the Spread Amount payable in cash.
(g) If required by special counsel to the Company or special counsel to
Purchaser in order for such counsel to provide the opinions required by
Section 8.2(b) or Section 8.3(b), respectively, the Exchange Ratio (and the
number of shares of Purchaser Common Stock to be issued as Common Stock
Consideration with respect to each share of Company Common Stock pursuant to
Section 3.1) shall be increased (and the Cash Consideration correspondingly
decreased) so that, after taking into account the Effective Time Price, any
cash paid in lieu of fractional shares pursuant to Section 3.2, and any cash
paid with respect to Dissenting Shares pursuant to Section 3.4, the Common
Stock Consideration shall constitute not less than 45% by value of the total
consideration paid with respect to the Company Common Stock.
Section 3.2 FRACTIONAL INTERESTS. No certificates or scrip representing
fractional shares of Purchaser Common Stock shall be issued in connection with
the Merger, and such fractional interests will not entitle the owner thereof to
any rights as a shareholder of Purchaser. In lieu of a fractional interest in a
share of Purchaser Common Stock, each holder of a Share or Shares of Company
Common Stock exchanged pursuant to Section 3.1(a) and each holder of any Company
Stock Options cancelled pursuant to Section 3.1(f) who would otherwise have been
entitled to receive a fraction of a share of Purchaser Common Stock shall
receive cash (without interest) in an amount equal to the product of such
fractional interest multiplied by the closing sales price, regular way, per
share rounded to four decimal points, of the Purchaser Common Stock as reported
in THE WALL STREET JOURNAL, for the New York Stock Exchange ("NYSE") trading day
("Trading Day") which is the Trading Day of the Effective Time (the "Effective
Time Price").
Section 3.3 EXCHANGE OF CERTIFICATES. (a) As soon as practicable after the
execution and delivery of this Agreement and, in any event, not less than five
Trading Days prior to the mailing of the Proxy Statement/Prospectus to holders
of Company Common Stock, Purchaser shall designate a bank or trust company (or
such other person or persons as shall be reasonably acceptable to Purchaser and
Company) to act as exchange agent (the "Exchange Agent") in effecting the
exchange of Certificates of Company Common Stock for Merger Consideration
pursuant to Section 3.1(a) hereof (and cash in lieu of fractional interests in
accordance with Section 3.2). Upon the surrender to the Exchange Agent of
Certificates representing Shares of Company Common Stock and a duly completed
and executed letter of transmittal (referred to in Section 3.3(d)) with respect
to all of the Shares owned by a holder of Shares, Purchaser shall use its best
efforts to cause the Exchange Agent to, within three business days of receipt of
such Certificates and transmittal letter, pay the holder of such Certificates
the Merger Consideration (and cash in lieu of fractional interests in accordance
with Section 3.2), and such Certificate shall forthwith be cancelled. Until so
surrendered and exchanged, each such Certificate that prior to the Effective
Time represented Shares of Company Common Stock (other than Certificates
representing Dissenting Shares or Shares of Company Common Stock to be cancelled
in accordance with Section 3.1(d)) shall represent solely the right to receive
Merger Consideration (and cash in lieu of fractional interests in accordance
with Section 3.2). No interest shall be paid or accrued on Merger Consideration.
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(b) As of the Effective Time, Purchaser shall deposit or cause to be
deposited in trust with the Exchange Agent, for the benefit of the holders of
Shares of Company Common Stock, for exchange in accordance with this Article
III, the aggregate Merger Consideration.
(c) The cash portion of the aggregate Merger Consideration shall be invested
by the Exchange Agent, as directed by and for the benefit of the Surviving
Corporation, provided that such investments shall be limited to direct
obligations of the United States of America, obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, commercial paper rated of the highest quality
by Moody's Investor Services, Inc. ("Moody's") or Standard & Poor's Ratings
Group, a division of McGraw-Hill, Inc. ("S&P"), and certificates of deposit
issued by a commercial bank whose long-term debt obligations are rated at least
A2 by Moody's or at least A by S&P, in each case having a maturity not in excess
of one year and provided further that no such investment shall result in a delay
in the payment of Merger Consideration to holders of Company Common Stock.
(d) Promptly after the Effective Date, Purchaser shall send, or shall cause
the Exchange Agent to send, to each holder of Shares of Company Common Stock at
the Effective Date a letter of transmittal for use in such exchange (which shall
specify that delivery of the Merger Consideration shall be effected, and risk of
loss and title shall pass, only upon proper delivery of the Certificates
representing shares of Company Common Stock to the Exchange Agent).
(e) If any portion of the Merger Consideration is to be paid to a person
other than the registered holder of the shares of Company Common Stock
represented by the Certificate or Certificates surrendered in exchange therefor,
it shall be a condition to such payment that the Certificate or Certificates so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required as a result of such payment to a
Person other than the registered holder of such shares of Company Common Stock
or establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable. For purposes of this Agreement, "person" means an
individual, a corporation, a limited liability company, a partnership, an
association, a trust or any other entity or organization, including, without
limitation, a government or political subdivision or any agency or
instrumentality thereof.
(f) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 3.3(b) to pay for shares of Company Common Stock in
respect of which dissenters' rights have been perfected shall be returned to
Purchaser, upon demand.
(g) As promptly as practicable following the date which is six months after
the Effective Time, the Exchange Agent shall deliver to the Surviving
Corporation all cash, shares of Purchaser Common Stock, Certificates and other
documents in its possession relating to the transactions described in this
Agreement and the Exchange Agent's duties shall terminate. Thereafter, each
holder of a Certificate may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws and, in the case of Dissenting Shares, subject to applicable law) receive
in exchange therefor the applicable Merger Consideration (and cash in lieu of
fractional interests in accordance with Section 3.2), without any interest
thereon.
(h) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares of Company Common
Stock. If, after the Effective Time, Certificates formerly representing Shares
of Company Common Stock are presented to the Surviving Corporation or the
Exchange Agent, they shall be cancelled and (subject to applicable abandoned
property, escheat and similar laws and, in the case of Dissenting Shares,
subject to applicable law) exchanged for Merger Consideration (and cash in lieu
of fractional interests in accordance with Section 3.2), as provided in this
Article III.
(i) No dividends or other distributions declared or made after the Effective
Time with respect to shares of Purchaser Common Stock shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Purchaser
Common Stock such holder is entitled to receive, and no cash payment
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in lieu of fractional interests shall be paid pursuant to Section 3.2, in each
case, until the holder of such Certificate shall surrender such Certificate, in
accordance with the provisions of this Agreement.
(j) The Exchange Agent or Purchaser shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock such amounts as the Exchange Agent, Purchaser or
the Surviving Corporation, as the case may be, is required to deduct and
withhold with respect to such payment under the Code or any provision of state,
local or foreign tax law. Any amounts so withheld shall be treated for all
purposes of this Agreement as having been paid to the holder of the Company
Common Stock in respect of which such deduction and withholding was made.
Section 3.4 DISSENTING SHARES. (a) Notwithstanding anything in this
agreement to the contrary, shares of Company Common Stock which are held by any
recordholder who has not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal rights in accordance with Section 262 of
the DGCL (the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration hereunder but shall become the right to receive
such consideration as may be determined due in respect of such Dissenting Shares
pursuant to the DGCL; provided, however, that any holder of Dissenting Shares
who shall have failed to perfect, or shall have withdrawn or lost his rights to
appraisal of such Dissenting Shares, in each case under the DGCL, shall forfeit
the right to appraisal of such Dissenting Shares, and such Dissenting Shares
shall be deemed to have been converted into the right to receive, as of the
Effective Time, the Merger Consideration in accordance with Section 3.2, without
interest. Notwithstanding anything contained in this Section 3.5, if (i) the
Merger is rescinded or abandoned or (ii) if the stockholders of the Company
revoke the authority to effect the Merger, then the right of any stockholder to
be paid the fair value of such stockholder's Dissenting Shares shall cease. The
Surviving Corporation shall comply with all of its obligations under the DGCL
with respect to holders of Dissenting Shares.
(b) The Company shall give Purchaser (i) prompt notice of any demands for
appraisal (any withdrawals of such demands) received by the Company and any
other related instruments served pursuant to the DGCL and received by the
Company, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Purchaser, make any payment with
respect to any demands for appraisal or offer to settle any such demands.
Section 3.5 CERTAIN ADJUSTMENTS. If after the date hereof and on or prior
to the Effective Date the outstanding shares of Purchaser Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared thereon with a record
date within such period, or any similar event shall occur (any such action, an
"Adjustment Event"), the Exchange Ratio shall be adjusted accordingly to provide
to the holders of Company Common Stock the same economic result as contemplated
by this Agreement prior to such Adjustment Event, it being agreed that no
adjustment shall be made pursuant to this Section 3.5 for the Stock Dividend.
Section 3.6 NO LIABILITY. Neither Purchaser, the Company nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any Merger Consideration in respect of such shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Purchaser, the posting by such person of
a bond in customary form and amount as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration (and cash in lieu of fractional interests in accordance with
Section 3.4), without any interest or other payments thereon, upon due surrender
and delivery of such Certificate pursuant to this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB
Except as otherwise disclosed to the Company in a letter delivered to it
prior to the execution hereof (which letter contains appropriate references to
identify the representations and warranties to which the information in such
letter relates) (the "Purchaser Disclosure Letter"), Purchaser represents and
warrants to the Company as follows:
Section 4.1 ORGANIZATION. Each of Purchaser and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with the corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted or presently proposed to be conducted. Each of
Purchaser and Sub is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
individually or in the aggregate have a Purchaser Material Adverse Effect. As
used herein "Purchaser Material Adverse Effect" shall mean any material adverse
effect on the business, assets, liabilities, results of operations or financial
condition of Purchaser, Sub and the Purchaser Subsidiaries (as hereinafter
defined), taken as a whole, whether resulting from individual or aggregate
events, occurrences or circumstances.
Section 4.2 CAPITALIZATION. As of February 26, 1998: (i) the authorized
capital stock of Purchaser consists of 80,000,000 shares of Purchaser Common
Stock, 4,000,000 shares of Preferred Stock, par value $1.00 per share, of
Purchaser ("Purchaser Preferred Stock") of which 400,000 shares have been
designated as Series A Junior Participating Cumulative Preferred Stock, par
value $1.00 per share, of Purchaser ("Purchaser Junior Preferred Stock") and
reserved for issuance pursuant to the Purchaser Rights Agreement, (ii)
30,879,132 shares of Purchaser Common Stock, and no shares of Purchaser
Preferred Stock or Purchaser Junior Preferred Stock, were issued and
outstanding, (iii) 337,500 stock appreciation rights ("Purchaser SARs") were
issued and outstanding, which when exercised will be payable in an indeterminate
number of shares of Purchaser Common Stock and (iv) 222,360 performance share
awards (the "Purchaser Performance Shares") were issued and outstanding, which
are settleable upon the occurrence of certain events, or the satisfaction of
certain conditions, in up to 353,385 shares of Purchaser Common Stock. All of
the issued and outstanding shares of capital stock of Purchaser are validly
issued, fully paid and nonassessable and free of preemptive rights. All of the
shares of Purchaser Common Stock reserved for issuance in exchange for shares of
Company Common Stock or upon cancellation of Company Stock Options and Company
Warrants at the Effective Time in accordance with this Agreement will be, when
so issued, duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights. Since February 26, 1998 to the date hereof, no shares
of Purchaser's capital stock have been issued, except Purchaser Common Stock
issued pursuant to Purchaser SARs or other employee benefit plans. Except for
(i) outstanding Purchaser SARs and Purchaser Performance Shares, (ii) 2,000,000
FELINE (Flexible Equity-Linked Exchangeable) PRIDES (Preferred Redeemable
Increased Dividend Securities) of Purchaser and (iii) the Series A Junior
Participating Preferred Stock Purchase Rights attached to the Purchaser Common
Stock, as of the date of this Agreement, there are no options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Purchaser to issue, transfer, sell, redeem, repurchase or
otherwise acquire any shares of its capital stock.
Section 4.3 SUB AND PURCHASER SUBSIDIARIES. (a) The authorized capital
stock of Sub consists of 1000 shares of Common Stock, par value $1.0 per share.
As of the date hereof, 1000 shares of Common Stock of Sub are issued and
outstanding and are owned by Purchaser.
(b) Each subsidiary of Purchaser, other than Sub (collectively, the
"Purchaser Subsidiaries"), is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
the corporate power and authority and all necessary government approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the
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failure to be so organized, existing and in good standing or to have such power
and authority or necessary governmental approvals would not individually or in
the aggregate have a Purchaser Material Adverse Effect. Each Purchaser
Subsidiary is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not individually or in the
aggregate have a Purchaser Material Adverse Effect. For purposes of this
Agreement: (i) an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person; and (ii) a "subsidiary" of
any person means another person, an amount of the voting securities of which or
of other voting ownership or voting partnership interests of which is sufficient
to elect at least a majority of its board of directors or other governing body
(or, if there are no such voting interests, 50% or more of the equity interests
of which) is owned directly or indirectly by such first person.
(c) Each of the Purchaser Subsidiaries that is as of the date hereof a
significant subsidiary as such term is defined in Rule 1-02 of Regulation S-X
under the Exchange Act (collectively, the "Purchaser Significant Subsidiaries")
and is an insurance company, a health maintenance organization or a prepaid
dental plan, a limited health service organization or a hospital, medical,
dental services or indemnity corporation (collectively, the "Purchaser Insurance
Subsidiaries") is (i) duly licensed or authorized as an insurance company, a
health maintenance organization or a prepaid dental plan, a limited health
service organization or a hospital, medical, dental services or indemnity
corporation in its jurisdiction of incorporation and (ii) duly licensed or
authorized as an insurance company, a health maintenance organization or a
prepaid dental plan, a limited health service organization or a hospital,
medical, dental services or indemnity corporation in each other jurisdiction
where it is required to be so licensed or authorized, except where the failure
to be so licensed or authorized would not individually or in the aggregate have
a Purchaser Material Adverse Effect.
(d) Purchaser is, directly or indirectly, the record and beneficial owner of
all of the outstanding shares of capital stock of Sub and of each of the
Purchaser Insurance Subsidiaries, there are no proxies with respect to any such
shares, and no equity securities of Sub or of any Purchaser Subsidiary are or
may become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable or exercisable for, shares
of any capital stock of Sub or of any Purchaser Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which Purchaser or any
Purchaser Subsidiary is or may be bound to issue, redeem, purchase or sell
additional shares of capital stock of Sub or of any Purchaser Subsidiary or
securities convertible into or exchangeable or exercisable for any such shares.
All of such shares so owned by Purchaser are validly issued, fully paid and
nonassessable and are owned by it free and clear of all mortgages, pledges,
liens, charges, encumbrances, defects, security interests, claims, options and
restrictions of all kinds ("Encumbrances") securing obligations not reflected in
the Purchaser SEC Reports.
Section 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Purchaser and
Sub has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution, delivery and performance of
this Agreement by Purchaser and Sub and the consummation by Purchaser and Sub of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Purchaser and Sub, and by Purchaser as the sole shareholder of Sub
by written consent, and no other corporate proceedings on the part of Purchaser
or Sub are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Purchaser and Sub and (assuming this Agreement constitutes
a valid and binding obligation of the Company) constitutes a valid and binding
agreement of each of Purchaser and Sub, enforceable against
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Purchaser and Sub in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect and to general equitable
principles.
Section 4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except (a) for
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Securities Act, the Exchange Act, state or
foreign laws relating to takeovers, state securities or blue sky laws, state
insurance laws and the regulations promulgated thereunder, certain state and
local regulatory filings relating to insurance companies, health maintenance
organizations, prepaid dental plans or dental practice management and similar
matters and the filing of the Certificate of Merger as required by the DGCL
(collectively, the "Governmental Requirements"), or (b) where the failure to
make any filing with, or to obtain any permit, authorization, consent or
approval of, any court or tribunal or administrative, governmental or regulatory
body, agency, commission, division, department, public body or other authority
(a "Government Entity") would not prevent or delay the consummation of the
Merger, or otherwise prevent Purchaser or Sub from performing their respective
obligations under this Agreement, and would not individually or in the aggregate
have a Purchaser Material Adverse Effect, no filing with, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution, delivery and performance of this Agreement by Purchaser and Sub
and the consummation of the transactions contemplated by this Agreement. Neither
the execution, delivery or performance of this Agreement by Purchaser or Sub,
nor the consummation by Purchaser or Sub of the transactions contemplated
hereby, nor compliance by Purchaser or Sub with any of the provisions hereof,
will (i) conflict with or result in any breach of any provisions of the
Certificates of Incorporation or Bylaws of Purchaser or Sub or the Articles or
Certificate of Incorporation, as the case may be, or Bylaws of any of the
Purchaser Subsidiaries, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, acceleration, vesting, payment,
exercise, suspension or revocation) under, any of the terms, conditions, or
provisions of any note, bond, mortgage, deed of trust, security interest,
indenture, license, contract, agreement, plan or other instrument or obligation
to which Purchaser, Sub or any of the Purchaser Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Purchaser, Sub, any Purchaser Subsidiary or any of their
properties or assets, (iv) result in the creation or imposition of any
Encumbrance on any asset of Purchaser, Sub or any Purchaser Subsidiary, or (v)
cause the suspension or revocation of any permit, license, governmental
authorization, consent or approval necessary for Purchaser, Sub or any of the
Purchaser Subsidiaries to conduct its business as currently conducted, except in
the case of clauses (ii), (iii), (iv) and (v) for violations, breaches,
defaults, terminations, cancellations, accelerations, vestings, payments,
exercises, creations, impositions, suspensions or revocations which would not
individually or in the aggregate have a Purchaser Material Adverse Effect.
Section 4.6 PURCHASER SEC REPORTS. Purchaser has filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1995 (collectively, the "Purchaser SEC Reports"). As of the
respective dates such Purchaser SEC Reports were filed or, if any such Purchaser
SEC Reports were amended, as of the date such amendment was filed, each of the
Purchaser SEC Reports (i) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of (i) the
audited consolidated financial statements of Purchaser (including any related
notes and schedules) included (or incorporated by reference) in the Purchaser
SEC Reports, and (ii) the unaudited consolidated interim financial statements of
Purchaser (including any related notes and schedules) included (or incorporated
by reference) in the Purchaser SEC Reports, fairly present, in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of Purchaser and the Purchaser
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Subsidiaries as of the dates thereof and the consolidated results of their
operations and changes in their financial position for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements).
Section 4.7 STATUTORY FINANCIAL STATEMENTS. The Annual Statements of the
Purchaser Insurance Subsidiaries, as filed with the departments of insurance for
all applicable domiciliary states for the years ended December 31, 1996 and
December 31, 1997 (together with all exhibits and schedules thereto, the
"Statutory Financial Statements of Purchaser"), have been prepared in accordance
with the accounting practices prescribed or permitted by the departments of
insurance for all applicable domiciliary states for purposes of financial
reporting to the respective state's insurance regulators ("State Statutory
Accounting Principles"), and such accounting practices have been applied on a
basis consistent with State Statutory Accounting Principles throughout the
periods involved, except as expressly set forth in the notes, exhibits or
schedules thereto, and the Statutory Financial Statements of Purchaser present
fairly in all material respects the financial position and the results of
operations for the Purchaser Insurance Subsidiaries as of the dates and for the
periods therein in accordance with State Statutory Accounting Principles.
Purchaser has delivered to the Company true and complete copies of the Statutory
Financial Statements of Purchaser.
Section 4.8 ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there
has been no event or condition which has had (or is reasonably likely to result
in) a Purchaser Material Adverse Effect, and Purchaser and the Purchaser
Subsidiaries have in all material respects conducted their businesses in the
ordinary course consistent with past practices and have not taken any action
which, if taken after the date hereof, would violate Section 6.2 hereof.
Section 4.9 REGULATORY FILINGS. Purchaser and the Purchaser Subsidiaries
have filed all reports, statements, documents, registrations, filings or
submissions required to be filed by any of them with any Governmental Entity,
except where the failure to file, in the aggregate, would not have a Purchaser
Material Adverse Effect; and, to the knowledge of the senior executive officers
of Purchaser, all such reports, statements, documents, registrations, filings
and submissions were in all material respects true, complete and accurate when
filed.
Section 4.10 INFORMATION IN PROXY STATEMENT/PROSPECTUS AND REGISTRATION
STATEMENT. The Registration Statement (or any amendment thereof or supplement
thereto), at the date it becomes effective and at the time of the Company
Special Meeting, will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation is made by
Purchaser with respect to statements made therein based on information supplied
by the Company in writing for inclusion in the Registration Statement. None of
the information supplied by Purchaser for inclusion or incorporation by
reference in the Proxy Statement/Prospectus will, at the date mailed to
shareholders and at the time of the Company Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Registration
Statement will comply in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
Section 4.11 BROKERS. Other than A.G. Edwards & Sons, Inc., no person is
entitled to any brokerage, financial advisory, finder's or similar fee or
commission payable by Purchaser in connection with the transactions contemplated
by this Agreement based upon arrangements made by and on behalf of Purchaser.
Section 4.12 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities or
obligations which are accrued or reserved against in the Purchaser's financial
statements (or reflected in the notes thereto) included in the Purchaser SEC
Reports filed as of the date hereof or disclosed in Section 4.12 of the
Purchaser Disclosure Letter or which were incurred after September 30, 1997 in
the ordinary course of
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business and consistent with past practices or in connection with the
transactions contemplated by this Agreement, the Purchaser and the Purchaser
Subsidiaries do not have any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of a nature required by GAAP to be reflected
in a consolidated balance sheet (or reflected in the notes thereto) of the
Purchaser.
Section 4.13 COMPLIANCE WITH LAWS; CERTIFICATES OF AUTHORITY; PERMITS AND
LICENSES. (a) The business of the Purchaser and each of the Purchaser
Significant Subsidiaries is being conducted in compliance in all material
respects with all applicable laws, including, without limitation, all insurance,
health maintenance organization ("HMO") and prepaid dental plan codes, laws,
ordinances, rules, regulations, decrees and orders of any Governmental Entity,
and any other codes, laws, ordinances, rules, regulations, decrees and orders of
any Governmental Entity relating to the offer and sale of dental care products,
plans or services (including the practice of dentistry), the recruitment of
dentists or dental offices in connection with the offer and sale of such
products, plans or services, the marketing of any such products, plans or
services to potential purchasers, patients or subscribers thereto, or any joint
venture, cooperative arrangement or business relationship with any other party
relating to the foregoing, and all material notices, reports, documents and
other information required to be filed thereunder within the last three years
were properly filed in all material respects and were in compliance in all
material respects with such laws.
(b) Purchaser, and each of the Purchaser Significant Subsidiaries, has all
certificates of authority, permits and licenses, including, without limitation,
insurance licenses, the use and exercise of which are necessary for the conduct
of its business as now conducted, other than such certificates of authority,
permits and licenses, including without limitation, insurance licenses, the
absence of which would not, individually or in the aggregate, be reasonably
expected to have a Purchaser Material Adverse Effect. The business of Purchaser
and each of the Purchaser Subsidiaries has been and is being conducted in
compliance, in all material respects, with all such certificates of authority,
permits and licenses, including, without limitation, insurance licenses. To the
knowledge of the senior executive officers of Purchaser, all such certificates
of authority, permits and licenses, including, without limitation, insurance
licenses, are in full force and effect, and there is no proceeding or
investigation pending or threatened which would reasonably be expected to lead
to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such permit or insurance license.
Section 4.14 DISCLOSURE. No representation or warranty by Purchaser or the
Purchaser Subsidiaries in this Agreement, and no statement contained in the
Purchaser SEC Reports and the Statutory Financial Statements of Purchaser,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was made, to make the statements herein or therein not
misleading. There is no fact known to Purchaser which would reasonably be
expected to have a Purchaser Material Adverse Effect which has not been set
forth in the Purchaser SEC Reports, the Statutory Financial Statements of
Purchaser or in this Agreement, including the Purchaser Disclosure Letter.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Purchaser in a letter delivered to it prior
to the execution hereof (which letter contains appropriate references to
identify the representations and warranties herein to which the information in
such letter relates) (the "Company Disclosure Letter"), the Company represents
and warrants to Purchaser as follows:
Section 5.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted or presently proposed to be conducted. The Company
is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not individually or
in the aggregate have a Company Material Adverse Effect. As used herein "Company
Material Adverse Effect" shall mean any material adverse effect on the business,
assets, liabilities, results of operations or financial condition of the Company
and the Company Subsidiaries, taken as a whole, whether resulting from
individual or aggregate events, occurrences or circumstances.
Section 5.2 CAPITALIZATION. As of March 3, 1998: (i) the authorized
capital stock of the Company consisted of 15,000,000 shares of Company Common
Stock and 500,000 shares of Company Preferred Stock, (ii) 8,950,696 shares of
Company Common Stock and no shares of Company Preferred Stock were issued and
outstanding and (iii) stock options to acquire 878,800 shares of Company Common
Stock were issued and outstanding under the stock option plans of the Company
(the "Company Stock Options") and Warrants (the "Company Warrants") to acquire
40,000 shares of Company Common Stock were issued and outstanding. All of the
issued and outstanding shares of Company Common Stock are validly issued, fully
paid and nonassessable and free of preemptive rights. Since March 3, 1998 to the
date hereof, no shares of the Company's capital stock have been issued, except
Company Common Stock pursuant to Company Stock Options or Company Warrants.
Except as set forth above or as specified in Section 5.2 of the Company
Disclosure Letter, as of the date of this Agreement there are no shares of
capital stock of the Company issued or outstanding or any Company Stock Options,
warrants (any such warrants scheduled, the "Warrants"), subscriptions, calls,
rights, convertible securities or other agreements or commitments obligating the
Company to issue, transfer, sell, redeem, repurchase or otherwise acquire any
shares of its capital stock. Since January 1, 1997 the Company has not
repurchased any shares of Company Common Stock.
Section 5.3 COMPANY SUBSIDIARIES. (a) Section 5.3 (a) of the Company
Disclosure Letter sets forth the name of each subsidiary of the Company
(collectively, the "Company Subsidiaries") and the state or jurisdiction of its
incorporation. Each Company Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and all necessary
governmental approvals 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 or
necessary governmental approvals would not individually or in the aggregate have
a Company Material Adverse Effect. Each Company Subsidiary is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not individually or in the aggregate have a Company Material
Adverse Effect.
(b) Section 5.3(b) of the Company Disclosure Letter sets forth the name of
each of the Company Subsidiaries that is an insurance company, a health
maintenance organization or prepaid dental plan, a limited health service
organization or a hospital, medical, dental service or indemnity corporation
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(collectively, the "Company Insurance Subsidiaries"). Except as disclosed in
Section 5.3(b) of the Company Disclosure Letter, each of the Company Insurance
Subsidiaries is (i) duly licensed or authorized as an insurance company, a
health maintenance organization or a prepaid dental plan, a limited health
service organization or a hospital, medical, dental services or indemnity
corporation in its jurisdiction of incorporation and (ii) duly licensed or
authorized as an insurance company, a health maintenance organization or a
prepaid dental plan, a limited health service organization or a hospital,
medical, dental services or indemnity corporation in each other jurisdiction
where it is required to be so licensed or authorized.
(c) Except as set forth in Section 5.3(c) of the Company Disclosure Letter,
the Company is, directly or indirectly, the record and beneficial owner of all
of the outstanding shares of capital stock of each of the Company Subsidiaries,
there are no proxies with respect to any such shares, and no equity securities
of any Company Subsidiary are or may become required to be issued by reason of
any options, warrants, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable or exercisable for, shares of any capital stock of any Company
Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which the Company or any Company Subsidiary is or may be bound
to issue, redeem, purchase or sell additional shares of capital stock of any
Company Subsidiary or securities convertible into or exchangeable or exercisable
for any such shares. Except as set forth in Section 5.3(c) of the Company
Disclosure Letter, all of such shares so owned by the Company are validly
issued, fully paid and nonassessable and are owned by it free and clear of any
Encumbrances, restraints on alienation, or any other restrictions with respect
to the transferability or assignability thereof (other than restrictions on
transfer imposed by federal or state securities laws).
(d) Except for the Company Subsidiaries and as set forth in the Statutory
Financial Statements of the Company (as hereinafter defined) or in Section
5.3(d) of the Company Disclosure Letter, the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity
that directly or indirectly conducts any activity which is material to the
Company.
Section 5.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by the Company's Board of
Directors, and no other corporate proceedings on the part of the Company, other
than obtaining shareholder approval pursuant to Section 2.1, are necessary to
authorize this Agreement or the transactions contemplated hereby. Subject to the
foregoing, this Agreement has been duly and validly executed and delivered by
the Company and (assuming this Agreement constitutes a valid and binding
obligation of Purchaser and Sub) constitutes a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting creditors' rights generally from time to time in effect and
to general equitable principles.
Section 5.5 CONSENTS AND APPROVALS: NO VIOLATIONS. Except (a) for the
Governmental Requirements, or (b) where the failure to make any filing with, or
to obtain any permit, authorization, consent or approval of, any Governmental
Entity would not prevent or delay the consummation of the Merger, or otherwise
prevent the Company from performing its obligations under this Agreement, and
would not individually or in the aggregate have a Company Material Adverse
Effect, no filing with, and no permit, authorization, consent or approval of,
any Governmental Entity is necessary for the execution, delivery and performance
of this Agreement by the Company and the consummation of the transactions
contemplated by this Agreement. Except as set forth on Section 5.5 of the
Company Disclosure Letter, no consent or approval of any other party (including,
but not limited to, any party to any Company Contracts (as defined below)) is
required to be obtained by the Company or any Company Subsidiary for the
execution, delivery or performance of this Agreement or the performance by the
Company of the transactions contemplated hereby. Except as set forth in Section
5.5 of the Company Disclosure Letter, neither the execution, delivery
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or performance of this Agreement by the Company, nor the consummation by the
Company of the transactions contemplated hereby, nor compliance by the Company
with any of the provisions hereof, will (i) conflict with or result in any
breach of any provisions of the Certificate of Incorporation or Bylaws of the
Company or the Certificate or Certificate of Incorporation, as the case may be,
or Bylaws of any of the Company Subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation, vesting,
payment, exercise, acceleration, suspension or revocation) under, any of the
terms, conditions or provisions of any note, bond, mortgage, deed of trust,
security interest, indenture, license, contract, agreement, plan or other
instrument or obligation to which the Company or any of the Company Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound or affected, (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company, of the Company Subsidiaries or any
of their properties or assets, (iv) result in the creation or imposition of any
Encumbrance on any asset of the Company or any Company Subsidiary or (v) cause
the suspension or revocation of any certificate of authority, permit, license,
governmental authorization, consent or approval necessary for the Company or any
of the Company Subsidiaries to conduct its business as currently conducted,
except in the case of clauses (ii), (iii), (iv) and (v) for violations,
breaches, defaults, terminations, cancellations, accelerations, vestings,
payments, exercises, creations, impositions, suspensions or revocations which
would not individually or in the aggregate have a Company Material Adverse
Effect.
Section 5.6 COMPANY SEC REPORTS. The Company has filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1995 (collectively, the "Company SEC Reports"). As of the respective
dates the Company SEC Reports were filed or, if any such Company SEC Reports
were amended, as of the date such amendment was filed, each of the Company SEC
Reports (i) complied in all material respects with all applicable requirements
of the Securities Act and Exchange Act, and the rules and regulations
promulgated thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Each of (i) the audited consolidated
financial statements of the Company (including any related notes and schedules)
included (or incorporated by reference) in the Company SEC Reports and (ii) the
unaudited consolidated interim financial statements for the Company (including
any related notes and schedules) included (or incorporated by reference) in the
Company SEC Reports, fairly present, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and the Company Subsidiaries as
of the dates thereof and the consolidated results of their operations and
changes in their financial position for the periods then ended (subject to
normal year-end adjustments, in the case of any unaudited interim financial
statements).
Section 5.7 STATUTORY FINANCIAL STATEMENTS. The Annual Statements of each
of the Company Insurance Subsidiaries, as filed with the departments of
insurance for all applicable domiciliary states for the years ended December 31,
1996 and December 31, 1997 (together with all exhibits and schedules thereto,
the "Statutory Financial Statements of the Company"), have been prepared in
accordance with the accounting practices prescribed or permitted by the
respective state's department of insurance for purposes of financial reporting
to the respective state's insurance regulators ("Company State Statutory
Accounting Principles"), and such accounting practices have been applied on a
basis consistent with Company State Statutory Accounting Principles throughout
the periods involved, except as expressly set forth in the notes, exhibits or
schedules thereto, and the Statutory Financial Statements of the Company present
fairly in all material respects the financial position and the results of
operations for the Company Insurance Subsidiaries as of the dates and for the
periods therein in accordance with Company State Statutory Accounting
Principles. The Company has delivered to Purchaser true and complete copies of
the Statutory Financial Statements of the Company.
Section 5.8 ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there
has been no event or condition which has had (or is reasonably likely to result
in) a Company Material Adverse Effect, and
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except as set forth in Section 5.8 of the Company Disclosure Letter, the Company
and the Company Subsidiaries have in all material respects conducted their
businesses in the ordinary course consistent with past practices and have not
taken any action which, if taken after the date hereof, would violate Section
6.1 hereof.
Section 5.9 LITIGATION. Except as set forth in Section 5.9 of the Company
Disclosure Letter, there is no suit, action, proceeding or investigation
(whether at law or equity, before or by any federal, state or foreign court,
tribunal, commission, board, agency or instrumentality, or before any
arbitrator) pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of the Company Subsidiaries, the outcome of which,
in the reasonable judgment of the Company, is likely individually or in the
aggregate to have a Company Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against the
Company or any of the Company Subsidiaries having, or which, insofar as can
reasonably be foreseen, in the future may have, a Company Material Adverse
Effect.
Section 5.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities or
obligations which are accrued or reserved against in the Company's financial
statements (or reflected in the notes thereto) included in the Company's
Quarterly Report on Form 10-Q for the nine months ended September 30, 1997 or
disclosed in Section 5.10 of the Company Disclosure Letter or which were
incurred after September 30, 1997 in the ordinary course of business and
consistent with past practices or in connection with the transactions
contemplated by this Agreement, the Company and the Company Subsidiaries do not
have any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of a nature required by GAAP to be reflected in a consolidated
balance sheet (or reflected in the notes thereto) of the Company.
Section 5.11 NO DEFAULT. Except as set forth in Section 5.11 of the
Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries is in violation or breach of, or default under (and no event has
occurred which with notice or the lapse of time or both would constitute a
violation or breach of, or a default under) any term, condition or provision of
(a) its Articles or Certificate of Incorporation, as the case may be, or Bylaws,
(b) any note, bond, mortgage, deed of trust, security interest, indenture,
license, agreement, plan, contract, lease, commitment or other instrument or
obligation to which the Company or any of the Company Subsidiaries is a party or
by which they or any of their properties or assets may be bound or affected, (c)
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Company or any of the Company Subsidiaries or any of their properties or
assets, or (d) any permit, license, governmental authorization, consent or
approval necessary for the Company or any of the Company Subsidiaries to conduct
their respective businesses as currently conducted, except in the case of
clauses (b), (c) and (d) above for breaches, defaults or violations which would
not individually or in the aggregate have a Company Material Adverse Effect.
Section 5.12 TAXES. Except as set forth in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 or Section 5.12 of the Company
Disclosure Letter:
(a) the Company and the Company Subsidiaries have (i) duly filed (or
there has been filed on their behalf) with the appropriate governmental
authorities all Tax Returns required to be filed by them on or prior to the
date hereof, and (ii) duly paid in full or made provision in accordance with
GAAP (or there has been paid or provision has been made on their behalf) for
the payment of all Taxes for all periods or portions thereof ending through
the date hereof;
(b) no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Taxes or Tax Returns of the Company or any Company Subsidiary wherein an
adverse determination or ruling in any one such proceeding or in all such
proceedings in the aggregate would have a Company Material Adverse Effect;
(c) none of the federal income Tax Returns of the Company and each
Company Subsidiary has been examined by the Internal Revenue Service for any
period. Neither the Company nor any of the
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Company Subsidiaries has granted any requests, agreements, consent or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes with respect to any Tax Returns of the Company or
any of the Company Subsidiaries;
(d) neither the Company nor any Company Subsidiary is a party to any tax
sharing, tax indemnity (including, without limitation, any tax
indemnification provision of any acquisition or disposition agreement) or
other agreement or arrangement with respect to Taxes;
(e) none of Company or any of the Company Subsidiaries has been a member
of any affiliated group within the meaning of Section 1504(a) of the Code,
or any similar affiliated or consolidated group for tax purposes under
state, local or foreign law (other than a group the common parent of which
is the Company), or has any liability for the Taxes of any person (other
than Company and the Company Subsidiaries) under Treasury Regulations
Section 1.1502-6 or any similar provision of state, local or foreign law as
a transferee or successor, by contract or otherwise;
(f) neither Company nor any of the Company Subsidiaries has made any
change in accounting methods, received a ruling from any taxing authority or
signed an agreement with any taxing authority which is reasonably likely to
have a Company Material Adverse Effect;
(g) Company and each of the Company Subsidiaries have complied in all
respects with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes and have, within the time and the manner
prescribed by law, withheld wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws;
(h) neither Company nor any of the Company Subsidiaries has, with regard
to any assets or property held, acquired or to be acquired by any of them,
filed a consent to the application of Section 341(f) of the Code, or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by Company or any of its Subsidiaries.
(i) "Taxes" shall mean all income, gross income, gross receipts,
premium, sales, use, transfer, franchise, profits, withholding, payroll,
employment, excise, property and windfall profits taxes, and all other taxes
or similar governmental charges, together with any interest and any
penalties, additions to tax or additional amounts applicable thereto. "Tax
Returns" shall mean all federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and information returns
and any amendments to any of the foregoing relating to Taxes.
Section 5.13 TITLE TO PROPERTY. (a) Except as set forth in Section 5.13(a)
of the Company Disclosure Letter, each of the Company and the Company
Subsidiaries (i) has good and valid title to all of its properties, assets and
other rights that do not constitute real property, free and clear of all
Encumbrances, except for such Encumbrances that do not, individually or in the
aggregate, have a Company Material Adverse Effect, and (ii) owns, has valid
leasehold interests in or valid contractual rights to use, all of the assets,
tangible and intangible, used by, or necessary for the conduct of, its business,
except where the failure to have such valid leasehold interests or such valid
contractual rights do not, individually or in the aggregate, have a Company
Material Adverse Effect.
(b) Neither the Company nor any of the Company Subsidiaries owns any real
property. Section 5.13(b) of the Company Disclosure Letter sets forth a list,
which is accurate and complete in all material respects, of each lease under
which the Company or any of the Company Subsidiaries is a tenant, and the
Company has made a true and complete copy of each such lease available to
Purchaser. The Company and each Company Subsidiary is in peaceful and
undisturbed possession of the space and/or estate under each lease under which
it is a tenant, and there are no material defaults by it as tenant thereunder.
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Section 5.14 COMPLIANCE WITH LAWS; CERTIFICATES OF AUTHORITY; PERMITS AND
LICENSES. (a) The business of the Company and each of the Company Subsidiaries
is being conducted in compliance in all material respects with all applicable
laws, including, without limitation, all insurance, health maintenance
organization ("HMO") and prepaid dental plan codes, laws, ordinances, rules,
regulations, decrees and orders of any Governmental Entity, and any other codes,
laws, ordinances, rules, regulations, decrees and orders of any Governmental
Entity relating to the offer and sale of dental care products, plans or services
(including the practice of dentistry), the recruitment of dentists or dental
offices in connection with the offer and sale of such products, plans or
services, the marketing of any such products, plans or services to potential
purchasers, patients or subscribers thereto, or any joint venture, cooperative
arrangement or business relationship with any other party relating to the
foregoing, and all material notices, reports, documents and other information
required to be filed thereunder within the last three years were properly filed
in all material respects and were in compliance in all material respects with
such laws.
(b) The Company, and each of the Company Subsidiaries, has all certificates
of authority, permits and licenses, including, without limitation, insurance,
HMO and dental care and practice licenses, the use and exercise of which are
necessary for the conduct of its business as now conducted, other than such
certificates of authority, permits and licenses, including without limitation,
insurance, HMO and dental care and practice licenses, the absence of which would
not, individually or in the aggregate, be reasonably expected to have a Company
Material Adverse Effect. The business of the Company and each of the Company
Subsidiaries has been and is being conducted in compliance, in all material
respects, with all such certificates of authority, permits and licenses,
including, without limitation, insurance, HMO and dental care and practice
licenses. To the knowledge of the Company, all such certificates of authority,
permits and licenses, including, without limitation, insurance, HMO and dental
care and practice licenses, are in full force and effect, and there is no
proceeding or investigation pending or threatened which would reasonably be
expected to lead to the revocation, amendment, failure to renew, limitation,
suspension or restriction of any such permit or insurance license. Section
5.14(b) of the Company Disclosure Letter sets forth a list and description of
each such certificate of authority, permit or license.
(c) The business of the Company that is conducted through Oracare
Consultants, Inc., OraCare DPO, Inc. and UDC Services, Inc. (collectively,
together with Oracare Dental Associates, P.A., the "Oracare Entities") and the
Company's arrangement with Oracare Dental Associates, P.A. and its shareholder
comply in all material respects with all applicable laws (such business and
arrangements, the Company's "Oracare Business"). The operation of the Oracare
Business by the Oracare Entities, individually and in the aggregate, complies in
all material respects with all applicable laws.
Section 5.15 REGULATORY FILINGS. The Company has made available for
inspection by Purchaser complete copies of all material registrations, filings
and submissions made since January 1, 1996 by the Company or any of the Company
Subsidiaries with any Governmental Entity and any reports of examinations issued
since January 1, 1996 by any such Governmental Entity that relate to the Company
or any of the Company Subsidiaries. The Company and the Company Subsidiaries
have filed all reports, statements, documents, registrations, filings or
submissions required to be filed by any of them with any Governmental Entity,
except where the failure to file, in the aggregate, would not have a Company
Material Adverse Effect; and, to the knowledge of the Company, all such reports,
statements, documents, registrations, filings or submissions were in all
material respects true, complete and accurate when filed.
Section 5.16 INVESTMENTS. All of the securities and other investments of
the Company and the Company Subsidiaries are invested in (a) corporate bonds
rated no lower than Baa3 by Moody's or BBB-by S&P, (b) commercial paper rated A1
or B1 by Moody's, (c) U.S. government bonds or (d) money market funds issued by
U.S. commercial banks having net assets of at least $5 billion.
Section 5.17 RESERVES. The aggregate reserves of the Company Insurance
Subsidiaries as recorded in the Statutory Financial Statements of the Company
and the reserves or similar obligations of the Company and the Company's
non-insurance subsidiaries have been determined in accordance with
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generally accepted actuarial principles consistently applied (except as set
forth therein). Except as disclosed in Section 5.17 of the Company Disclosure
Letter, the insurance reserving practices and polices of the Company and the
Company Subsidiaries have not changed, in any material respect, since December
31, 1996 and the results of the application of such practices and policies are
reflected in the Statutory Financial Statements of the Company and the other
financial statements of the Company and the Company Subsidiaries. All reserves
of the Company Insurance Subsidiaries set forth in the Statutory Financial
Statements of the Company are, to the best knowledge of the Company, fairly
stated in accordance with sound actuarial principles and meet the requirements
of the insurance laws of the applicable insurance authority, except where the
failure to so state such reserves or meet such requirements would not have a
Company Material Adverse Effect. All other reserves of similar obligations of
the Company and the Company's non-insurance subsidiaries meet the requirements
of all applicable laws.
Section 5.18 INFORMATION IN PROXY STATEMENT/PROSPECTUS AND REGISTRATION
STATEMENT. The Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto), at the date mailed to Company shareholders and at the time
of the Company Special Meeting, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Purchaser in writing for inclusion in the Proxy
Statement/Prospectus. None of the information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement will, at
the date it becomes effective and at the time of the Company Special Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/Prospectus will comply in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 5.19 BROKERS. Except as set forth in Section 5.19 of the Company
Disclosure Letter, no person is entitled to any brokerage, financial advisory,
finder's or similar fee or commission payable by the Company in connection with
the transactions contemplated by this Agreement based upon arrangements made by
and on behalf of the Company. Any such brokerage, financial advisory, finder's
or similar fees or commissions are reasonable in relation to the services
actually performed by such person.
Section 5.20 EMPLOYEE BENEFIT PLANS; ERISA. (a) Section 5.20(a) of the
Company Disclosure Letter sets forth a complete and accurate list of: (i) all
severance, employment, consulting, change of control, retention and all other
similar agreements between the Company or any Company Subsidiary and any current
or former employee, agent, independent contractor, officer or director, (ii) all
severance programs, policies and practices of the Company and each of the
Company Subsidiaries, (iii) all plans or arrangements of the Company and each of
the Company Subsidiaries relating to its respective current or former employees,
agents, independent contractors, officers or directors that contain change in
control provisions, including in all cases any and all amendments thereto, and
(iv) all Company Benefit Plans. For purposes of this Agreement, "Company Benefit
Plan" shall mean any bonus, pension, post-retirement benefit, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, equity-based award, retirement, vacation, severance
or termination pay, disability, death benefit, hospitalization or other medical,
dental, accident, disability, life or other insurance, supplemental unemployment
benefits, fringe and other welfare benefit plan, program, policy, agreement or
arrangement, whether written or unwritten, and each other employee benefit plan,
program, agreement, arrangement or understanding providing benefits to any
current or former employee, agent, independent contractor, officer or director
of the Company or any of the Company Subsidiaries.
(b) With respect to each Company Benefit Plan, to the extent applicable, the
Company and the Company Subsidiaries have heretofore made available or have
caused to be made available to Purchaser true and complete copies of the
following documents: (i) a copy of each written Company Benefit Plan and a
summary of the essential terms of each unwritten Company Benefit Plan, (ii) a
copy of the most recent
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annual report on Form 5500 and actuarial report, if required under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (iii) a copy of
the most recent Summary Plan Description required under ERISA with respect
thereto, (iv) if the Company Benefit Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof, and (v) the most recent determination
letter received from the Internal Revenue Service (the "IRS") with respect to
each Company Benefit Plan intended to qualify under Section 401 of the Code.
(c) Except as set forth in Section 5.20(c) of the Company Disclosure Letter,
(i) with respect to the Company Benefit Plans, no event has occurred and there
exists no condition or set of circumstances in connection with which the Company
or any of the Company Subsidiaries could be subject to any liability under
ERISA, the Code or any other applicable law that, individually or in the
aggregate, would result in a material liability to the Company or any of the
Company Subsidiaries, (ii) each Company Benefit Plan has been administered
substantially in accordance with its terms, and all the Company Benefit Plans
have been operated and are in material compliance with the applicable provisions
of ERISA, the Code and all other applicable laws and the terms of all applicable
collective bargaining agreements, (iii) with respect to each plan treated as a
qualified plan, the IRS has issued a favorable determination letter with respect
to the qualification of each such Company Benefit Plan and its related trust, if
any, and the IRS has not taken any action to revoke any such letter, and (iv)
there are no pending or, to the knowledge of the Company, threatened or
anticipated actions, suits, claims, assessments, complaints, proceedings or
investigations of any kind in any court or governmental agency with respect to
any Company Benefit Plan (other than routine claims for benefits).
(d) Except as set forth in Section 5.20(d) of the Company Disclosure Letter,
(i) no Company Benefit Plan provides for medical benefits (whether or not
insured) to be made available with respect to current or former employees,
agents, officers, directors or independent contractors (or any dependent of any
of them) after retirement or other termination of service (other than (x)
coverage mandated by applicable law or (y) benefits the full cost of which is
borne by the current or former employee, agent, officer, director or independent
contractor) and (ii) and the consummation of the transactions contemplated by
this Agreement will not (x) entitle any current or former employee, agent,
independent contractor, director or officer of the Company or any of the Company
Subsidiaries or any ERISA Affiliate to severance pay, unemployment compensation,
golden parachute payment, or any other payment, (y) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee, agent, independent contractor, director or officer, or (z) constitute
a "change in control" under any Company Benefit Plan.
(e) Section 5.20(e) of the Company Disclosure Letter sets forth a complete
and accurate list of all Company Stock Options outstanding as of the date of
this Agreement and the exercise prices thereof.
(f) At the written request of the Purchaser, delivered not later than five
(5) business days prior to the Closing Date, the Company shall terminate either
or both of the United Dental Care Inc. 401(k) Plan and Trust (a Regional
Prototype Defined Contribution Plan and Trust) and the Oracare Consultants, Inc.
401(k) Profit Sharing Plan (together, the "401(k) Plans") no later than on the
day immediately preceding the Closing Date. If, at the written request of the
Purchaser, the Company causes such termination of either or both of the 401(k)
Plans, then with respect to the employees of the Company participating in the
401(k) Plans (the "Plan Participants"), the Company shall take all actions
necessary and appropriate to: (i) inform the Plan Participants of such
termination, and (ii) provide the Plan Participants with all distribution
options in respect of such termination available under Section 401(k) of the
Code, and the Regulations promulgated thereunder, including but not limited to,
roll-over distributions.
Section 5.21 LABOR AND EMPLOYEE RELATIONS. Except as disclosed in Section
5.21 of the Company Disclosure Letter, none of the employees of the Company or
the Company Subsidiaries are represented by any labor organization and, to the
knowledge of the Company, no union claims to represent these employees have been
made. Neither the Company nor any of the Company Subsidiaries is a party to any
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collective bargaining or other labor union contract applicable to persons
employed by the Company or any of the Company Subsidiaries, and no collective
bargaining agreement is being negotiated by the Company or Company Subsidiaries.
There is no labor dispute, strike or work stoppage against the Company or
Company Subsidiaries pending, or to the knowledge of the Company, threatened
that may interfere with the respective business activities of the Company or any
of the Company Subsidiaries. To the knowledge of the Company, the Company and
Company Subsidiaries are not, and have not been, engaged in any unfair labor
practices as defined in the National Labor Relations Act or similar applicable
law, ordinance or regulation, nor is there pending any unfair labor practice
charge.
Section 5.22 ENVIRONMENTAL MATTERS. (a) Except as disclosed in Section
5.22 of the Company Disclosure Letter, to the knowledge of the Company, (i) each
of the Company and the Company Subsidiaries is and has been in compliance in all
respects with and, has no existing liabilities under, and (ii) neither the
Company nor any of the Company Subsidiaries has received any written claims or
notices from any person that the Company or any of the Company Subsidiaries has
not been in compliance in all respects with, or has any existing liabilities
under, applicable laws, rules, regulations, common law, ordinances, decrees,
orders and other binding legal requirements relating to pollution, the
preservation of the environment, hazardous substance and waste handling, storage
or disposal, or exposure of persons to materials in the environment or the work
place (together "Environmental Laws") with respect to property owned or operated
by the Company or any of the Company Subsidiaries, except for such
non-compliance or liabilities that would not be reasonably likely to have a
Company Material Adverse Effect. Except as disclosed in Section 5.22 of the
Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries is subject to any decrees, orders, decisions of arbitrators or
judgments that impose requirements under Environmental Laws, restrictions under
Environmental Laws, liabilities under Environmental Laws, or penalties for
violations of Environmental Laws or the aforementioned requirements or
restrictions, except where such requirements, restrictions, liabilities, or
penalties would not be reasonably likely to have a Company Material Adverse
Effect.
(b) Except as disclosed in Section 5.22 of the Company Disclosure Letter,
with respect to currently owned property and all property formerly owned, leased
or operated by the Company or any of the Company Subsidiaries, including
foreclosure property, to the knowledge of the Company, there are no past or
present actions, conditions or occurrences that could form the basis of any
claim under Environmental Laws against, or liability under such laws of, the
Company or any of the Company Subsidiaries, except for such claims or
liabilities which in the aggregate would not reasonably be expected to result in
a Company Material Adverse Effect.
Section 5.23 OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has received an opinion from BT Alex. Brown Incorporated ("BT Alex.
Brown") dated as of the date of this Agreement, to the effect that the Merger
Consideration to be received by the holders of the Company Common Stock pursuant
to the Merger is fair to such holders from a financial point of view, and the
Company has received the permission of BT Alex. Brown to include such opinion in
its entirety as an exhibit in the Proxy Statement/Prospectus.
Section 5.24 CONTRACTS. (a) Section 5.24 of the Company Disclosure Letter
sets forth a list of contracts, arrangements or understandings (written or oral)
("Contracts") to which the Company or any of the Company Subsidiaries is a party
or by which it or any of them is bound which:
(i) contain covenants limiting the freedom of the Company or any of the
Company Subsidiaries to engage in any line of business in any geographic
area or to compete with any person or entity or restricting the ability of
the Company Subsidiaries to acquire equity securities of any person or
entity;
(ii) are employment, consulting or severance contracts applicable to any
employee, consultant or shareholder of the Company or the Company
Subsidiaries, including without limitation contracts to employ executive
officers and other contracts with officers or directors of the Company or
any of the
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Company Subsidiaries, other than any such contract which by its terms is
terminable by the Company or any of the Company Subsidiaries on not more
than 60 days' notice without liability;
(iii) is a management, marketing (including marketing contracts with
HMO's), administrative services, data processing, software licensing or
third party administration Contract; or
(iv) are other contracts (excluding dental provider contracts) which
were made in the ordinary course of business and either involve an
obligation on the part of the Company or a Company Subsidiary of more than
$50,000 per annum or could result, upon the breach thereof, in damages or
losses of more than $50,000 other than consequential damages or damages
resulting from liabilities sounding in tort (the Contracts in clauses
(i)-(iv), together with the Contracts filed as exhibits to the Company SEC
Reports, collectively, the "Company Contracts"). All contracts entered into
by the Company or any Company Subsidiary in connection with an acquisition
of another entity or block of business by the Company or any of the Company
Subsidiaries have been filed as exhibits to the Company SEC Reports.
(b) With respect to each of the Company Contracts, to the knowledge of the
Company, except as disclosed in Section 5.24 of the Company Disclosure Letter:
(i) such contract is (assuming due power and authority of, and due execution and
delivery by, the other party or parties thereto) valid and binding upon each
party thereto and is in full force and effect; (ii) there is no material default
or claim of material default thereunder and no event has occurred which, with
the passage of time or the giving of notice (or both), would constitute a
material default thereunder, or would permit material modification, acceleration
or termination thereof; and (iii) the consummation of the transactions
contemplated by this Agreement will not give rise to a right of the other party
or parties thereto to terminate such contract or impose liability under the
terms thereof on the Company or any of the Company Subsidiaries; provided, that
this representation shall not be deemed to give assurances regarding rights of
termination based on any decrease in insurance industry ratings of the Company
or the Company Subsidiaries resulting from the declaration and/or payment of the
extraordinary dividend.
(c) The Company has delivered to Purchaser a true, complete and accurate
list of all special agreements or arrangements between the Company or any
Company Subsidiary and any dentist, dental practice or dental association or
company under which the Company or any Company Subsidiary makes or is or will be
required to make special payments to any such person.
Section 5.25 INTELLECTUAL PROPERTY. The Company and/or each of the Company
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary information or materials
that are used in the business of the Company and the Company Subsidiaries as
currently conducted, except for any such failures to own, be licensed or possess
that are not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect, and to the knowledge of the executive officers
of the Company all patents, trademarks, trade names, service marks and
copyrights held by the Company and/or its Subsidiaries are valid and subsisting.
The executive officers of the Company do not know of any grounds for any claim
against the use by the Company or any of the Company Subsidiaries, of any
trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the business of
the Company or any of the Company Subsidiaries as currently conducted or as
proposed to be conducted.
Section 5.26 VOTING REQUIREMENTS; TAKEOVER STATUTES. (a) The affirmative
vote of the holders of a majority of the voting power of all outstanding shares
of the Company Common Stock, voting as a single class, at the Company
Stockholders Meeting (the "Company Stockholder Approval") is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement and the transactions contemplated by this
Agreement.
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(b) The Board of Directors of the Company has unanimously approved the terms
of this Agreement and the Stockholder Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement and the
Stockholder Agreement, and such approval is sufficient to render inapplicable to
the Merger and the other transactions contemplated by this Agreement and the
Stockholder Agreement the provisions of Section 203 of the DGCL. To the best of
the Company's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement, the
Stockholder Agreement or any of the transactions contemplated by this Agreement
or the Stockholder Agreement and no provision of the certificate of
incorporation, by-laws or other governing instruments of the Company or any of
the Company Subsidiaries would, directly or indirectly, restrict or impair the
ability of Purchaser to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of the Company and the Company Subsidiaries
that may be acquired or controlled by Purchaser.
Section 5.27 DISCLOSURE. No representation or warranty by the Company or
the Company Subsidiaries in this Agreement, including the Company Disclosure
Letter, and no statement contained in the Company SEC Reports and the Statutory
Financial Statements of the Company, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was made, to make the
statements herein or therein not misleading. There is no fact known to the
Company which would reasonably be expected to have a Company Material Adverse
Effect which has not been set forth in the Company SEC Reports, the Statutory
Financial Statements of the Company or in this Agreement, including the Company
Disclosure Letter.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. From
the date hereof until the Effective Time, unless Purchaser shall otherwise agree
in writing, or except as set forth in the Company Disclosure Letter or as
otherwise contemplated by this Agreement, the Company and the Company
Subsidiaries shall conduct their respective businesses in the ordinary course
consistent with past practice and shall use all reasonable efforts to preserve
intact their business organizations and relationships with third parties
(including but not limited to their respective relationships with policyholders,
members of pre-paid dental plans, insureds, dentists and agents) and to keep
available the services of their present officers and key employees, subject to
the terms of this Agreement. Except as set forth in the Company Disclosure
Letter or as otherwise provided in this Agreement, from the date hereof until
the Effective Time, without the prior written consent of Purchaser:
(a) the Company shall not adopt or propose any change in its Certificate
of Incorporation or Bylaws;
(b) the Company shall not declare, set aside or pay any dividend or
other distribution with respect to or acquire any shares of capital stock of
the Company, or split, combine or reclassify any of the Company's capital
stock, and the Company and the Company Subsidiaries shall not repurchase,
redeem or otherwise acquire any shares of capital stock or other securities
of, or other ownership interests in, the Company;
(c) the Company shall not, and shall not permit any Company Subsidiary
to, merge or consolidate with any other person or (except in the ordinary
course of business) acquire a material amount of assets of any other person;
(d) the Company shall not, and shall not permit any Company Subsidiary
to, enter into, or terminate, any material contract, agreement, commitment,
or understanding other than agreements entered into with unaffiliated third
parties, on an arms-length basis and in the ordinary course of
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business constituting either (1) employer group agreements at premium rates
and for terms comparable to its most recent employer group agreements, (2)
dental provider agreements on terms comparable with its existing agreements
of such nature and (3) marketing affiliation and sales agreements on terms
comparable with its existing agreements of such nature;
(e) the Company shall not, and shall not permit any Company Subsidiary
to, sell, lease, license or otherwise surrender, relinquish or dispose of
(i) any material facility owned or leased by the Company or any Company
Subsidiary or (ii) any assets or property which are material to the Company
and the Company Subsidiaries, taken as a whole, except pursuant to existing
contracts or commitments (the terms of which have been disclosed to
Purchaser prior to the date hereof), or in the ordinary course of business
consistent with past practice;
(f) the Company shall not, and shall not permit any Company Subsidiary
to, settle any material audit, make or change any material Tax election or
file amended Tax Returns unless required by law and the Company notifies
Purchaser at least five days prior to the date any such action is taken or
such settlement results in a refund to the Company;
(g) the Company and the Company Subsidiaries shall not issue any capital
stock other than pursuant to Company Stock Options or the Company Warrants
or other securities or enter into any amendment of any material term of any
outstanding security of the Company, and the Company and the Company
Subsidiaries shall not incur any material indebtedness except in the
ordinary course of business pursuant to existing credit facilities or
arrangements, amend or otherwise increase, accelerate the payment or vesting
of the amounts payable or to become payable under or fail to make any
required contribution to, any Company Benefit Plan (as hereinafter defined)
or materially increase any non-salary benefits payable to any employee or
former employee, except in the ordinary course of business consistent with
past practice or as otherwise permitted by this Agreement;
(h) the Company shall not, and shall not permit any Company Subsidiary
to (i) grant Options; (ii) grant any increase in the compensation, bonus,
severance, termination pay or other benefits of any former or current
employee, agent, consultant, officer or director of the Company or any
Company Subsidiary; provided, however, that increases in the ordinary course
of business consistent with past practice in the compensation of employees,
consultants or agents, who are not officers or directors, shall be
permitted; (iii) enter into or amend any employment agreement, deferred
compensation, consulting, severance, termination, indemnification or any
other such agreement with any such former or current employee, agent,
consultant, officer or director of the Company or any Company Subsidiary; or
(iv) amend, adopt or terminate any Company Benefit Plan, except as may be
required to retain qualification of any such plan under Section 401(a) of
the Code;
(i) the Company shall not change any method of accounting or accounting
practice by the Company or any Company Subsidiary, except for any such
required change in GAAP or the State Statutory Accounting Principles;
(j) the Company shall not, and shall not permit any Company Subsidiary
to, take any action that would reasonably be expected to cause the Merger to
fail to qualify as a reorganization within the meaning of Section 368(a) of
the Code;
(k) except as contemplated by Section 6.3, the Company shall not permit
any Company Insurance Subsidiary to conduct transactions in Company
Investments except in compliance with the investment policies of such
Company Insurance Subsidiary as previously disclosed to Purchaser and in
effect on the date hereof and all applicable insurance laws and regulations;
(l) the Company shall not, and shall not permit any Company Subsidiary
to, enter into any agreement to purchase, or to lease for a term in excess
of one year, any real property, provided that the Company, or any Company
Subsidiary, may as a tenant, or a landlord, renew any existing lease
pursuant to an option granted prior to the date hereof;
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(m) the Company shall not, and shall not permit any Company Subsidiary
to, agree or commit to do any of the foregoing;
(n) except to the extent necessary to comply with the requirements of
applicable laws and regulations, the Company shall not, and shall not permit
any Company Subsidiary to, (i) take, or agree or commit to take, any action
that would make any representation and warranty of the Company hereunder
inaccurate in any material respect at, or as of any time prior to, the
Effective Time, (ii) omit, or agree or commit to omit, to take any action
necessary to prevent any such representation or warranty from being
inaccurate in any material respect at any such time, provided however, that
the Company shall be permitted to take or omit to take such action which
(without any uncertainty) can be cured, and in fact is cured, at or prior to
the Effective Time or (iii) take, or agree or commit to take, any action
that would result in, or is reasonably likely to result in, any of the
conditions of the Merger set forth in Article VIII not being satisfied;
(o) the Company shall not release any third party from its obligations,
or grant any consent, under any existing standstill provision relating to
any Takeover Proposal (as hereinafter defined) or otherwise under any
confidentiality or other agreement, or fail to fully enforce any such
agreement; and
(p) none of the Company Insurance Subsidiaries shall make any change in
its underwriting, claims management or reserving practices.
Section 6.2 CONDUCT OF BUSINESS BY PURCHASER PENDING THE MERGER. From the
date hereof until the Effective Time, unless the Company shall otherwise agree
in writing, or except as set forth in the Purchaser Disclosure Letter or as
otherwise contemplated by this Agreement, (a) Purchaser, Sub and the Purchaser
Subsidiaries shall conduct their respective businesses in all material respects
in the ordinary course consistent with past practice and shall use all
reasonable efforts to substantially preserve intact their business organizations
and relationships with third parties (including but not limited to their
respective relationships with policyholders, insureds, agents, underwriters,
brokers and investment customers) and to keep available the services of their
present officers and key employees, subject to the terms of this Agreement; and
(b) except to the extent necessary to comply with the requirements of applicable
laws and regulations, Purchaser shall not, and shall not permit Sub or any
Purchaser Subsidiary to, (i) take, or agree or commit to take, any action that
would make any representation and warranty of Purchaser hereunder inaccurate, in
any material respect, at, or as of any time prior to, the Effective Time, (ii)
omit, or agree or commit to omit, to take any action necessary to prevent any
such representation or warranty from being inaccurate, in any material respect,
at any such time, provided however that Purchaser shall be permitted to take or
omit to take such action which (without any uncertainty) can be cured, and in
fact is cured, at or prior to the Effective Time, (iii) take any action that
would reasonably be expected to cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code, (iv) take, or
agree or commit to take, any action that would result in, or is reasonably
likely to result in, any of the conditions of the Merger set forth in Article
VIII not being satisfied or (v) declare, set aside or pay any dividend or other
distribution with respect to any shares of capital stock of Purchaser, other
than regular quarterly dividends not in excess of $0.25 per share.
Section 6.3 INVESTMENT RESTRICTIONS. From the date hereof until the
Effective Time, the Company and each Company Subsidiary shall invest available
cash only in (a) corporate bonds (other than bonds issued by public utilities)
rated no lower than Baa3 by Moody's or BBB--by S&P, (b) commercial paper rated
A1 or B1 by Moody's or (c) other securities or investments agreed to in writing
by Purchaser ("Permitted Investments"); provided, however, that nothing in this
Section 6.3 shall require any Company Insurance Subsidiary to make any
investment other than in compliance with the investment policies of such Company
Insurance Subsidiary and all insurance laws and regulations applicable thereto.
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS AND INFORMATION. The Company and Purchaser shall each
afford to the other and to the other's financial advisors, legal counsel,
accountants, consultants, financing sources, and other authorized
representatives access during normal business hours throughout the period prior
to the Effective Time to all of its books, records, properties, plants and
personnel and, during such period, each shall furnish as promptly as practicable
to the other (a) a copy of each report, schedule and other document filed or
received by it pursuant to the requirements of federal securities laws, and (b)
all other information as such other party reasonably may request, provided that
neither party shall disclose to the other any competitively sensitive
information and no investigation pursuant to this Section 7.1 shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Each party shall continue to
abide by the terms of the confidentiality agreement between Protective Life
Insurance Company ("PLIC") and the Company, dated January 6, 1998 and the
Confidentiality Agreement between Purchaser and the Company, dated March 5, 1998
(together, the "Confidentiality Agreement").
Section 7.2 NO SOLICITATION. (a) The Company shall not, nor shall it
permit any of the Company Subsidiaries to, nor shall it authorize or permit any
officer, director or employee of or any investment banker, attorney or other
advisor or representative of, the Company or any of the Company Subsidiaries to,
directly or indirectly, (i) solicit, initiate or encourage the submission of any
Takeover Proposal (as defined in Section 7.2(e)), (ii) enter into any agreement
with respect to any Takeover Proposal or give any approval of the type referred
to in Section 5.26(b) with respect to any Takeover Proposal or (iii) continue or
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal; PROVIDED, HOWEVER, that if the
Board of Directors of the Company determines in good faith, after consultation
with outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Company
may, in response to an unsolicited Takeover Proposal of the sort referred to in
clause (x) of Section 7.2(e) that involves consideration to the Company's
stockholders that the Company's Board of Directors reasonably believes, after
receiving advice from the Company's independent financial advisor, is superior
to the consideration provided for in the Merger, and subject to compliance with
Section 7.2(c), (x) furnish information with respect to the Company pursuant to
a customary confidentiality agreement to any person making such proposal and (y)
participate in negotiations regarding such proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any officer, director or employee of the Company or
any of the Company Subsidiaries or any investment banker, attorney or other
advisor or representative of the Company or any of the Company Subsidiaries,
whether or not such person is purporting to act on behalf of the Company or any
of the Company Subsidiaries or otherwise, shall be deemed to be a breach of this
Section 7.2(a) by the Company.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (x) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Purchaser, the approval or recommendation by such Board of Directors
or such committee of this Agreement or the Merger or (y) approve or recommend,
or propose to approve or recommend, any takeover proposal except in connection
with a Superior Proposal (as defined in Section 7.2(e)) and then only at or
after the termination of this Agreement pursuant to and in accordance with
Section 9.3.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 7.2, the Company promptly shall advise Purchaser
orally and in writing of any request for information or of any Takeover Proposal
or any inquiry with respect to or which could reasonably be expected to lead to
any Takeover Proposal, the identity of the person making any such request,
Takeover
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Proposal or inquiry and all the terms and conditions thereof and promptly shall
provide Purchaser with a true and complete copy of such request, Takeover
Proposal or inquiry, if in writing. The Company shall keep Purchaser fully
informed of the status and details (including amendments or proposed amendments)
of any such request, Takeover Proposal or inquiry and shall give Purchaser three
business days' advance notice of any information to be supplied to the person
making such request, proposal or inquiry.
(d) Nothing contained in this Section 7.2 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act; PROVIDED, HOWEVER, neither the
Company nor its Board of Directors nor any committee thereof shall, except as
permitted by Section 7.2(b), withdraw or modify, or propose to withdraw or
modify, its position with respect to the Merger or approve or recommend, or
propose or approve or recommend, a Takeover Proposal.
(e) As used in this Agreement: "Superior Proposal" means a bona fide written
Takeover Proposal (x) to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the shares and/or voting
power of Company Common Stock then outstanding or all or substantially all the
assets of the Company, (y) otherwise on terms which the Board of Directors of
the Company decides in its good faith reasonable judgment to be more favorable
to the Company's stockholders than the Merger (after receiving advice from the
Company's independent financial advisor that the consideration provided for in
such proposal is superior to the consideration provided for in the Merger), for
which financing, to the extent required, is then committed or which, in the good
faith reasonable judgment of the Board of Directors, after receiving advice from
the Company's independent financial advisor, is reasonably capable of being
obtained by such third party and (z) which the Board of Directors determines, in
its good faith reasonable judgment, is reasonably likely to be consummated
without undue delay; and "Takeover Proposal" means any written proposal for a
merger, consolidation or other business combination involving the Company or any
proposal or offer to acquire in any manner, directly or indirectly, an equity
interest in, any more than 15% of the voting power of, or a substantial portion
of the assets of, the Company and its subsidiaries, taken as a whole, other than
the transactions contemplated by this Agreement which proposal may contain
customary conditions and qualifications.
Section 7.3 FILINGS; OTHER ACTION. Subject to the terms and conditions
herein provided, as promptly as practicable, the Company, Purchaser and Sub
shall: (i) promptly make all filings and submissions under the HSR Act and all
filings required by the insurance regulatory authorities in Arizona and in
Oklahoma, and deliver notices and consents to jurisdiction to state insurance
departments, each as reasonably may be required to be made in connection with
this Agreement and the transactions contemplated hereby, (ii) use all reasonable
efforts to cooperate with each other in (A) determining which filings are
required to be made prior to the Effective Time with, and which material
consents, approvals, permits, notices or authorizations are required to be
obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states or the District of
Columbia, the Commonwealth of Puerto Rico and foreign jurisdictions in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (B) timely making all
such filings and timely seeking all such consents, approvals, permits, notices
or authorizations, and (iii) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary
or appropriate to consummate the transactions contemplated by this Agreement as
soon as practicable. In connection with the foregoing, the Company will provide
Purchaser, and Purchaser will provide the Company, with copies of
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or any of its representatives, on the one
hand, and any governmental agency or authority or members of their respective
staffs, on the other hand, with respect to this Agreement and the transactions
contemplated hereby. Each of Purchaser and the Company acknowledge that certain
actions may be necessary with respect to the foregoing in making notifications
and obtaining clearances, consents, approvals, waivers or similar third party
actions which are material to the consummation of the transactions contemplated
hereby, and each of Purchaser and the Company agree to take such
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action as is necessary to complete such notifications and obtain such
clearances, approvals, waivers or third party actions, provided, however, that
nothing in this Section 7.3 or elsewhere in this Agreement shall require any
party hereto to incur expenses in connection with the transactions contemplated
hereby which are not reasonable under the circumstances in relation to the size
of the transaction contemplated hereby or to require Purchaser, any Purchaser
Subsidiary, the Surviving Corporation, the Company or any Company Subsidiary to
hold separate or make any divestiture of a significant asset (including any part
of the Company's Oracare Business) or otherwise agree to any material
restriction on their operations (including any part of the Company's Oracare
Business) in order to obtain any waiver, consent or approval required by this
Agreement.
Section 7.4 PUBLIC ANNOUNCEMENTS. Purchaser, on the one hand, and the
Company, on the other hand, agree that they will not issue any press release or
otherwise make any public statement or respond to any press inquiry with respect
to this Agreement or the transactions contemplated hereby without the prior
approval of the other party (which approval will not be unreasonably withheld),
except as may be required by applicable law.
Section 7.5 STOCK EXCHANGE LISTING. Purchaser shall as promptly as
reasonably practicable prepare and submit to the New York Stock Exchange a
listing application covering the shares of Purchaser Common Stock to be issued
in connection with the Merger and this Agreement, and shall use its best efforts
to obtain, prior to the Effective Time, approval for the listing of such shares,
subject to official notice of issuance.
Section 7.6 COMPANY INDEMNIFICATION PROVISION. (a) Purchaser agrees that
all rights to indemnification (and rights to advancement of expenses) existing
in favor of the present or former directors, officers, employees, fiduciaries
and agents of the Company or any of the Company Subsidiaries (collectively, the
"Indemnified Parties") as provided in the Company's Restated Certificate of
Incorporation or Bylaws or the certificate or articles of incorporation, Bylaws
or similar organizational documents of any of the Company Subsidiaries as in
effect as of the date hereof or pursuant to the terms of any indemnification
agreements entered into between the Company and any of the Indemnified Parties
with respect to matters occurring on or prior to the Effective Time including,
without limitation, the transactions contemplated by this Agreement shall
survive the Merger and shall continue in full force and effect (without
modification or amendment, except as required by applicable law or except to
make changes permitted by law that would enlarge the Indemnified Parties' right
of indemnification), to the fullest extent and for the maximum term permitted by
law, and shall be enforceable by the Indemnified Parties against the Surviving
Corporation and Purchaser.
(b) To the extent that Section 7.6(a) shall not serve to indemnify and hold
harmless an Indemnified Party, for a period of six years after the Effective
Time, the Surviving Corporation shall, subject to the terms set forth herein,
indemnify and hold harmless, to the fullest extent permitted under applicable
law (and the Surviving Corporation shall also advance expenses as incurred to
the fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification), each
Indemnified Party against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the transactions contemplated by this Agreement. In the
event any claim or claims are asserted or made within such six-year period, all
rights to indemnification in respect of any such claim or claims shall continue
until final disposition of any and all such claims.
Section 7.7 COMFORT LETTERS. (a) Purchaser shall use all reasonable
efforts to cause Coopers & Lybrand L.L.P., Purchaser's independent accountants,
to deliver to the Company a letter dated as of the date of the Proxy
Statement/Prospectus and addressed to the Company, in form and substance
reasonably satisfactory to the Company, in connection with the procedures
undertaken by them with respect to the
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financial statements and other financial information of Purchaser contained in
the Registration Statement and the other matters contemplated by AICPA Statement
No. 72 and customarily included in comfort letters relating to transactions
similar to the Merger.
(b) The Company shall use all reasonable efforts to cause Price Waterhouse
LLP, the Company's independent accountants, to deliver to Purchaser a letter
dated as of the date of the Proxy Statement/ Prospectus and addressed to
Purchaser, in form and substance reasonably satisfactory to Purchaser, in
connection with the procedures undertaken by them with respect to the financial
statements and other financial information of the Company and the Company
Subsidiaries contained in the Registration Statement and the other matters
contemplated by AICPA Statement No. 72 and customarily included in comfort
letters relating to transactions similar to the Merger.
Section 7.8 EMPLOYEE BENEFITS. For a period of at least one (1) year
following the Effective Time, Purchaser shall cause the Surviving Corporation or
any of the Company Subsidiaries to provide each employee of the Company and the
Company Subsidiaries who becomes an employee of Purchaser and the Purchaser
Subsidiaries at or immediately following the Effective Time with benefits that,
in the aggregate, are substantially comparable to those provided under the
employee benefits plans, within the meaning of Section 3(3) of ERISA, maintained
by the Company or the Company Subsidiaries as of the Effective Time; PROVIDED
that, in the event the Company causes the termination of either or both of the
401(k) Plans (as such term is defined in Section 5.20(f)), at the written
request of the Purchaser made pursuant to Section 5.20(f), then the Purchaser
shall permit each employee of the Company and the Company Subsidiaries who
becomes an employee of the Purchaser and the Purchaser Subsidiaries as of the
Effective Time to participate in the Protective Life Corporation 401(k) and
Stock Ownership Plan and the Protective Life Corporation Pension Plan pursuant
to the respective terms of such plans. As used herein, "benefits" means non-cash
employee benefits only, and does not include wages, salaries, bonuses, stock
option, stock award or similar compensation.
Section 7.9 TAX MATTERS. The parties intend the Merger to qualify as a
reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code; each
party and its affiliates shall use all reasonable efforts to cause the Merger to
so qualify; neither party nor any affiliate shall take any action that would
reasonably be expected to cause the Merger not to so qualify; and the parties
will take the position for all purposes that the Merger so qualifies. The
Company and Purchaser shall each reasonably cooperate in connection with
obtaining the opinions of special counsel described in Sections 8.2(b) and
8.3(b) including, without limitation, providing to special counsel such
representations that are reasonably required by special counsel to enable them
to render such opinions.
Section 7.10 AFFILIATES. The Company shall use all reasonable efforts to
obtain and deliver to Purchaser prior to the Closing executed letter agreements
("Affiliate Agreements") in the form attached as Exhibit A hereto from all
persons who, in the reasonable judgment of the Company, may be deemed to be
affiliates of the Company under Rule 145 of the Securities Act. For a period of
at least two years following the Effective Time, Purchaser or any successor
issuer thereto shall make available adequate current public information with
respect to itself, within the meaning of Rule 144(c) under the Securities Act.
Section 7.11 ADDITIONAL MATTERS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals in connection with the Governmental Requirements and any other
third party consents and to effect all necessary registrations and filings. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers
and/or directors of Purchaser, Sub and the Company shall take all such necessary
action.
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated;
(b) no statute, rule, regulation, executive order, decree, ruling or
preliminary or permanent injunction shall have been enacted, entered,
promulgated or enforced by any federal or state court or governmental
authority having jurisdiction which prohibits, restrains, enjoins or
restricts consummation of the Merger;
(c) each of the Company, the Company Subsidiaries and Purchaser shall
have made such filings, and obtained such permits, authorizations, consents,
or approvals, required by Governmental Requirements to consummate the
transactions contemplated hereby, and the appropriate forms shall have been
executed, filed and approved as required by the Governmental Requirements;
(d) this Agreement and the Merger shall have been adopted and approved
by the requisite vote of the shareholders of the Company in accordance with
the applicable provisions of the DGCL;
(e) the Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order; and
(f) the shares of Purchaser Common Stock issuable to the Company's
shareholders pursuant to this Agreement shall have been authorized for
listing on the New York Stock Exchange upon official notice thereof.
Section 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) each of Purchaser and Sub shall have performed in all material
respects its obligations under this Agreement required to be performed by it
at or prior to the Effective Time; the representations and warranties of
Purchaser and Sub contained in this Agreement which are qualified with
respect to materiality shall be true and correct in all respects, and such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and at and as of the Effective Time as if made at and as of such
time (except to the extent such representations and warranties specifically
relate to an earlier date, in which case as of such earlier date) except as
contemplated by the Purchaser Disclosure Letter and this Agreement; and the
Company shall have received a certificate of the Chairman of the Board, the
President, or the Chief Financial Officer of Purchaser as to the
satisfaction of this condition; and
(b) the Company shall have received an opinion from Strasburger & Price,
L.L.P., special counsel to the Company, dated the Effective Time, to the
effect that, on the basis of certain facts, representations and assumptions
set forth in such opinion which are consistent with the stated facts
existing at the Effective Time, the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section 368(a)
of the Code, and that Purchaser, Sub and the Company will each be a party to
that reorganization within the meaning of Section 368(b) of the Code. In
rendering the opinion described in the preceding sentence, such counsel may
require and
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rely upon representations contained in certificates of officers of
Purchaser, Sub and the Company and their respective subsidiaries.
Section 8.3 CONDITIONS TO OBLIGATIONS OF PURCHASER AND SUB TO EFFECT THE
MERGER. The obligations of Purchaser and Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions:
(a) the Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior
to the Effective Time; and the representations and warranties of the Company
contained in this Agreement which are qualified with respect to materiality
shall be true and correct in all respects, and such representations and
warranties that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and at and
as of the Effective Time as if made at and as of such time (except to the
extent such representations and warranties specifically relate to an earlier
date, in which case as of such earlier date), except as contemplated by the
Company Disclosure Letter or this Agreement; and Purchaser and Sub shall
have received a Certificate of the Chairman of the Board, the President, or
the Chief Financial Officer of the Company as to the satisfaction of this
condition;
(b) Purchaser shall have received an opinion from Debevoise & Plimpton,
special counsel to Purchaser, dated the Effective Time, to the effect that,
on the basis of certain facts, representations and assumptions set forth in
such opinion which are consistent with the stated facts existing at the
Effective Time, the Merger will be treated for Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code, and
that Purchaser, Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In
rendering the opinion described in the preceding sentence, such counsel may
require and rely upon representations contained in certificates of officers
of Purchaser, Sub and the Company and their respective subsidiaries;
(c) the third party consents and related amendments listed on Section
8.3(c) of the Company Disclosure Letter shall have been obtained and all
other third party consents shall have been obtained other than consents the
failure of which to be obtained would not reasonably be expected to have a
Company Material Adverse Effect; and
(d) Purchaser shall have received an Affiliate Agreement from each
Person identified as an Affiliate of the Company pursuant to Section 7.10.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Effective Time by mutual written agreement
of Purchaser and the Company.
Section 9.2 TERMINATION BY EITHER PURCHASER OR THE COMPANY. This Agreement
may be terminated and the Merger may be abandoned by action of the Board of
Directors of either Purchaser or the Company if (a) this Agreement and the
Merger shall fail to receive the requisite vote for approval and adoption by the
shareholders of the Company at the Company Special Meeting, (b) the Merger shall
not have been consummated on or before September 30, 1998; PROVIDED HOWEVER that
this Agreement may be extended by written notice of either Purchaser or the
Company to a date no later than December 31, 1998 if the Merger shall not have
been consummated as a direct result of the conditions in Section 8.1(a) or
8.1(c) not having been satisfied by such date; and provided further, however,
that this Agreement may be extended by the mutual written agreement of Purchaser
and the Company, or (c) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action
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permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable; provided, that the party seeking to
terminate this Agreement pursuant to clause (b) shall not be in material
violation of any of its representations, warranties or covenants set forth in
this Agreement, and the party seeking to terminate this Agreement pursuant to
clause (c) shall have used all reasonable efforts to remove such injunction,
order or decree.
Section 9.3 TERMINATION BY THE COMPANY. (a) This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of the Merger and the adoption of this
Agreement by the shareholders of the Company referred to in Section 2.1, by
action of the Board of Directors of the Company, if the Board of Directors of
the Company has (i) withdrawn, or modified or changed in a manner adverse to
Purchaser or Sub its approval or recommendation of this Agreement or the Merger
in order to approve and permit the Company to execute a definitive agreement
relating to a Takeover Proposal, (ii) determined, after consultation with
outside legal counsel to the Company, that the failure to take such action as
set forth in the preceding clause (i) would result in a breach of the Board of
Directors' fiduciary duties under applicable law, notwithstanding all terms and
conditions which may be offered by Purchaser in negotiations entered into
pursuant to the following proviso to this sentence, PROVIDED, HOWEVER, that
prior to any such termination, the Company shall, and shall cause its respective
financial and legal advisors to, negotiate in good faith with Purchaser to make
such adjustments in the terms and conditions of this Agreement as would enable
the Company to proceed with the transactions contemplated herein on such
adjusted terms and (iii) paid, immediately prior to such termination, the
Termination Payment in accordance with Section 9.5(b).
(b) This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time by action of the Board of Directors of the
Company, if (i) there has been a breach by Purchaser of any representation or
warranty contained in this Agreement which would have or would be likely to have
a Purchaser Material Adverse Effect or (ii) there has been a material breach of
any of the covenants or agreements set forth in this Agreement on the part of
Purchaser, which breach is not curable or, if curable, is not cured within
thirty (30) days after written notice of such breach given by the Company to
Purchaser.
(c) This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time by action of the Board of Directors of the
Company, if (i) the Purchaser Top Up Event shall have occurred and (ii)
Purchaser shall have failed to provide written notice to the Company no later
than 5:00 p.m. (New York time) on the second Trading Day following the
Measurement Period of Purchaser's intent to exercise the Purchaser Top Up Right
on or prior to the Effective Time.
"Purchaser Top Up Event" shall mean that the average (the "Trading Average")
of the high and low sales prices, regular way, per share, rounded to four
decimal places, of Purchaser Common Stock as reported in THE WALL STREET
JOURNAL, during 20 Trading Days selected by the Exchange Agent randomly by lot
from the 30 consecutive Trading Days ending on (and including) the Trading Day
which is 5 Trading Days prior to the Effective Time (such period, the
"Measurement Period") is less than $27.50 (or such other amount as is required
to adjust for an Adjustment Event). The Exchange Agent shall provide written
notice of the calculation of the Trading Average to the Company and Purchaser
promptly on the first Trading Day following the Measurement Period.
"Purchaser Top Up Right" shall mean the right (but not the obligation) of
Purchaser, subject to Section 3.1(g), following the occurrence of the Purchaser
Top Up Event, to (i) increase the Cash Consideration and/or (ii) increase the
Exchange Ratio such that the sum of (A) the Cash Consideration (as adjusted) and
(B) the product of the Exchange Ratio (as adjusted) multiplied by the Trading
Average is equal to or greater than $17.26.
It is hereby agreed that the prices of Purchaser Common Stock expressed in
this Section 9.3 and in Section 9.4 give effect to the Stock Dividend.
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Section 9.4 TERMINATION BY PURCHASER. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action of
the Board of Directors of Purchaser, if (a) there has been a breach by the
Company of any representation or warranty contained in this Agreement which
would have or would be likely to have a Company Material Adverse Effect; (b)
there has been a material breach of any of the covenants or agreements set forth
in this Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within thirty (30) days after written notice of such
breach given by Purchaser to the Company; (c) the Board of Directors of the
Company shall have withdrawn, or modified or changed in a manner adverse to
Purchaser or Sub its approval or recommendation of this Agreement or the Merger
or shall have recommended a Takeover Proposal, or shall have executed an
agreement in principle (or similar agreement) or definitive agreement providing
for a Takeover Proposal or other business combination with a person or entity
other than Purchaser or its affiliates (or the Board of Directors of the Company
resolves to do any of the foregoing) or (d) if the Trading Average is greater
than $39.50 or less than $27.50 (or such other amount as is required to adjust
for an Adjustment Event).
Section 9.5 EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event of
termination of the Agreement and the abandonment of the Merger pursuant to this
Article IX, written notice thereof shall as promptly as practicable be given to
the other parties to this Agreement and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided herein:
(i) except as provided in Section 9.5(b), there shall be no liability or
obligation on the part of Purchaser, the Purchaser Subsidiaries, the Company or
the Company Subsidiaries or their respective officers and directors, and all
obligations of the parties shall terminate, except for the obligations of the
parties pursuant to this Section 9.5, except for the provisions of Sections
4.11, 5.19, 7.4, 10.4, 10.5, 10.6 and 10.10, except for the obligations of the
parties set forth in the Confidentiality Agreement referred to in Section 7.1
and except that a party who is in material breach of its representations,
warranties, covenants or agreements set forth in this Agreement shall be liable
for damages occasioned by such breach, including without limitation any expenses
incurred by the other party in connection with this Agreement and the
transactions contemplated hereby, and (ii) all filings, applications and other
submissions made pursuant to the transactions contemplated by this Agreement
shall, to the extent practicable, be withdrawn from the agency or person to
which made.
(b) If (i) either the Company or Purchaser terminates this Agreement
pursuant to Section 9.2(a) and a Takeover Proposal had been made as of the
Company Special Meeting and within one year after such a termination, the person
that made the Takeover Proposal (or an affiliate thereof) completes a merger,
consolidation or other business combination with the Company or a Company
Significant Subsidiary, or the purchase from the Company or from a Company
Significant Subsidiary of 20% or more (in voting power) of the voting securities
of the Company or of 20% or more (in market value or book value) of the assets
of the Company and the Company Subsidiaries, on a consolidated basis (any such
transaction, an "Alternate Transaction") or (ii) Purchaser terminates this
Agreement (A) pursuant to Section 9.4(b) at any time after a Takeover Proposal
has been made and within one year after such termination, the person that made
the Takeover Proposal (or an affiliate thereof) completes an Alternative
Transaction or (B) pursuant to Section 9.4(c) or (iii) the Company terminates
this Agreement pursuant to Section 9.3(a), then the Company shall pay the
Purchaser in cash the sum (x) Purchaser's Expenses (as defined below) in an
amount up to but not to exceed $2,000,000 and (y) $4,600,000 (the "Termination
Payment"). The Company acknowledges that the agreements contained in this
Section 9.5(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Purchaser and Sub would not enter
into this Agreement; accordingly, if the Company fails to promptly pay the
amount due pursuant to this Section 9.5(b), and, in order to obtain such
payment, Purchaser or Sub commences a suit which results in a judgment against
the Company for the fee set forth in this paragraph (b), the Company shall pay
to Purchaser or Sub its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest from the date of termination
of the Agreement on the amounts owed at the prime rate of The Chase Manhattan
Bank, in effect from time to time during such period plus two percent.
"Expenses" shall
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mean the out-of-pocket fees and expenses incurred or paid by or on behalf of
Purchaser in connection with the Merger or the consummation of any of the
transactions contemplated by this Agreement, including all fees and expenses of
counsel, commercial banks, investment banking firms, accountants, experts and
consultants to Purchaser.
(c) Such Termination Payment and Expenses shall be made by wire transfer of
immediately available funds to an account designated by Purchaser (i) prior to
termination of this Agreement if such payment is made pursuant to Section
9.5(b)(iii), or (ii) prior to the consummation an Alternate Transaction if such
payment is made pursuant to Section 9.5(b)(i) or 9.5(b)(ii).
ARTICLE X
GENERAL PROVISIONS
Section 10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. No
representations, warranties, covenants or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement, shall survive beyond the
Effective Time other than those covenants and agreements which by their express
terms apply in whole or in part after the Effective Time.
Section 10.2 NOTICES. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given upon (a)
confirmation of receipt of a facsimile transmission, (b) confirmed delivery by a
standard overnight carrier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by registered or certified mail
(postage prepaid, return receipt requested), addressed to the respective parties
at the following addresses (or such other address for a party as shall be
specified by like notice):
(a) If to Purchaser or Sub, to:
Protective Life Corporation
2801 Highway 280 South
Birmingham, Alabama 35223
Telecopy: (205) 868-3597
Attention: Deborah J. Long, Esq.
With copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Attention: Paul S. Bird, Esq.
(b) If to the Company, to:
United Dental Care, Inc.
13601 Preston Road
Suite 500 East
Dallas, Texas 75240
Telecopy: (972) 702-0340
Attention: William H. Wilcox
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With copy to:
Strasburger & Price, L.L.P.
901 Main Street
Suite 4300
Dallas, Texas 25202
Telecopy: (214) 651-4330
Attention: David K. Meyercord, Esq.
Section 10.3 DESCRIPTIVE HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 10.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Exhibits, Company Disclosure Letter, Purchaser Disclosure Letter and other
documents and instruments referred to herein) constitutes the entire agreement
and supersedes all other prior agreements and understandings (other than those
contained in the Confidentiality Agreement, which are hereby incorporated by
reference herein), both written and oral, among the parties or any of them, with
respect to the subject matter hereof, including, without limitation, any
transaction between or among the parties hereto. This Agreement shall not be
assigned by operation of law or otherwise, except that Sub may assign all of its
rights and obligations hereunder to any direct wholly-owned subsidiary of
Purchaser which shall then be substituted for Sub for all purposes hereof.
Section 10.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
Section 10.6 EXPENSES. Except as provided in Section 9.5, whether or not
the Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expenses, except that those expenses incurred
in connection with printing and mailing the Proxy Statement/Prospectus, as well
as the filing fees relating to the Registration Statement and the HSR Act, will
be shared equally by Purchaser and the Company.
Section 10.7 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 10.8 WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) 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 an instrument in
writing signed on behalf of such party.
Section 10.9 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement. This Agreement shall
become effective when each party hereto shall have received counterparts thereof
signed by all of the other parties hereto.
Section 10.10 SEVERABILITY; VALIDITY; PARTIES IN INTEREST. If any
provision of this Agreement, or the application thereof to any person or
circumstance is held invalid or unenforceable, the remainder of this Agreement,
and the application of such provision to other persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this Agreement are
agreed to be severable. Nothing in this Agreement, express or implied, is
intended to confer upon any person not a party to this Agreement any rights or
remedies of any nature whatsoever under or by reason of this Agreement except
that the
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provisions of Section 7.6 shall inure to the benefit of and be enforceable by
the Indemnified Parties (as defined in such Section).
Section 10.11 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any provision of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section 10.12 KNOWLEDGE. As used in this Agreement, "to the knowledge of
the Company" means the knowledge of William H. Wilcox, Peter R. Barnett, John
McCarty, Tim Brown, Jeff P. Hollansworth, Robert Kukla, Jeff Gullo and Phil
Parker.
IN WITNESS WHEREOF, each of Purchaser, Sub and the Company has caused this
Agreement to be executed as of the date first above written.
<TABLE>
<S> <C> <C>
PROTECTIVE LIFE CORPORATION
By: /s/ JOHN D. JOHNS
-----------------------------------------
Name: John D. Johns
Title: President and Chief Operating
Officer
PLC MERGER SUBSIDIARY CORPORATION
By: /s/ JERRY W. DEFOOR
-----------------------------------------
Name: Jerry W. DeFoor
Title: Vice President
UNITED DENTAL CARE, INC.
By: /s/ WILLIAM H. WILCOX
-----------------------------------------
Name: William H. Wilcox
Title: President and Chief Operating
Officer
</TABLE>
35
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EXHIBIT A
FORM OF COMPANY AFFILIATE AGREEMENT
, 1998
Protective Life Corporation
2801 Highway 280 South
Birmingham, Alabama 35223
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of United Dental Care, Inc., a Delaware corporation (the
"Company"), as the term "affiliate" 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 "Act"). Pursuant to the terms of the
Agreement and Plan of Merger, dated as of March 10, 1998 (the "Agreement"), by
and among the Company, Protective Life Corporation, a Delaware corporation
("Purchaser"), and PLC Merger Subsidiary Corporation, a Delaware corporation and
a wholly-owned subsidiary of Purchaser ("Sub"), the Company will be merged with
and into Sub (the "Merger").
As a result of the Merger, I will receive a combination of cash and shares
of common stock, par value $.50 per share, of Purchaser (together with the
attached Series A Junior Participating Preferred Stock Purchase Rights, issued
in accordance with the Rights Agreement, dated as of August 7, 1995, between
Purchaser and AmSouth Bank (as successor by merger to AmSouth Bank of Alabama,
successor by conversion of charter to AmSouth Bank N.A.), as Rights Agent, as
such agreement may be amended from time to time, the "Purchaser Common Stock"),
in exchange for shares owned by me of common stock, par value $.10 per share of
the Company (the "Company Common Stock").
I represent, warrant, and covenant to Purchaser that in the event I receive
any Purchaser Common Stock as a result of the Merger:
1. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer, or otherwise dispose of the Purchaser Common
Stock to the extent I considered necessary, with my counsel or counsel for
the Company.
2. I have been advised that the issuance of the Purchaser Common Stock
to me pursuant to the Merger has been registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of
the Company and the distribution by me of the Purchaser Common Stock has not
been registered under the Act, I may not sell, transfer or otherwise dispose
of the Purchaser Common Stock issued to me in the Merger unless (i) such
sale, transfer, or other disposition has been registered under the Act, (ii)
such sale, transfer, or other disposition is made in conformity with Rule
145 promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Purchaser or a "no action" letter obtained
by the undersigned from the staff of the Commission, such sale, transfer, or
other disposition is otherwise exempt from registration under the Act.
3. I understand that Purchaser is under no obligation to register the
sale, transfer, or other disposition of the Purchaser Common Stock by me or
on my behalf under the Act.
4. I also understand that stop transfer instructions will be given to
Purchaser's transfer agent with respect to the Purchaser Common Stock and
that there will be placed on the certificates for the Purchaser Common Stock
issued to me, or any substitutions therefor, a legend stating in substance:
A-1
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED [ ] BETWEEN
THE REGISTERED HOLDER HEREOF AND PURCHASER A COPY OF WHICH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICES OF PURCHASER."
5. I also understand that unless the transfer by me of my Purchaser Common
Stock has been registered under the Act or is a sale made in conformity with the
provisions of Rule 145, Purchaser reserves the right to put the following legend
on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs 4 and 5
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or the Agreement,
including sales under Rule 145(d). It is also understood and agreed that such
legends and the stop orders referred to above will be removed if (i) one year
shall have elapsed from the date the undersigned acquired the Purchaser Common
Stock received in the Merger and the provisions of Rule 145(d)(2) are then
available to the undersigned, (ii) two years shall have elapsed from the date
the undersigned acquired the Purchaser Common Stock received in the Merger and
the provisions of Rule 145(d)(3) are then available to the undersigned, or (iii)
Purchaser has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Purchaser, or a "no action" letter obtained
by the undersigned from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
This Letter Agreement will terminate and will be of no further force or
effect upon any termination of the Agreement before the Effective Time.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
Accepted this day of
, 1998
PROTECTIVE LIFE CORPORATION
By:________________________
Name:
Title:
A-2
<PAGE>
ANNEX B
[LETTERHEAD OF BT ALEX. BROWN INCORPORATED]
March 10, 1998
Board of Directors
United Dental Care, Inc.
14755 Preston Road
Dallas, Texas 74240
Members of the Board:
United Dental Care, Inc., a Delaware corporation ("United Dental"),
Protective Life Corporation, a Delaware corporation ("Protective"), and PLC
Merger Subsidiary Corporation, a Delaware corporation and wholly owned
subsidiary of Protective ("Merger Sub"), have proposed to enter into an
Agreement and Plan of Merger, dated as of March 10, 1998 (the "Merger
Agreement"). Pursuant to the Merger Agreement, the implementation of which is
contingent on approval by the stockholders of United Dental, United Dental will
be merged with and into Sub (the "Merger") and each outstanding share of the
common stock, par value $0.10 per share, of United Dental (the "United Dental
Common Stock") will be converted into the right to receive (i) 0.2893 (the
"Exchange Ratio") of a share of the common stock, par value $0.50 per share, of
Protective (the "Protective Common Stock," and the number of shares of
Protective Common Stock into which shares of United Dental Common Stock will be
so converted, the "Common Stock Consideration") and (ii) $9.31 in cash (the
"Cash Consideration" and, together with the Common Stock Consideration, the
"Merger Consideration"), subject to adjustment under certain circumstances more
fully described in the Merger Agreement. We have been advised by representatives
of United Dental that the Exchange Ratio gives effect to the two-for-one stock
split in the form of a stock dividend announced by Protective in March 1998 and
payable in April 1998. You have requested our opinion as to whether the Merger
Consideration is fair, from a financial point of view, to the holders of United
Dental Common Stock.
BT Alex. Brown Incorporated ("BT Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of United
Dental in connection with this opinion and will receive a fee for our services
upon delivery of this opinion. We previously have provided investment banking
services to United Dental and Protective in connection with matters unrelated to
the proposed Merger, for which services we have received compensation. BT Alex.
Brown maintains a market in United Dental Common Stock and regularly publishes
research reports regarding the managed care and specialty managed care
industries and the businesses and securities of United Dental and other publicly
owned companies in such industries. In the ordinary course of business, BT Alex.
Brown may actively trade the securities of United Dental and Protective for our
own account and the account of our customers and, accordingly, may at any time
hold a long or short position in securities of United Dental and Protective.
<PAGE>
Board of Directors
United Dental Care, Inc.
March 10, 1998
Page 2
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning United Dental and
Protective and certain internal analyses and other information furnished to us
by United Dental and Protective. We have also held discussions with the members
of the senior management of United Dental and Protective regarding the business
and prospects of United Dental and Protective and the joint prospects of a
combined company. In addition, we have (i) reviewed the reported prices and
trading activity for United Dental Common Stock and Protective Common Stock,
(ii) compared certain financial and stock market information for United Dental
and Protective with similar information for certain other publicly traded
companies, (iii) reviewed the financial terms of certain recent business
combinations which we deemed comparable in whole or in part, (iv) reviewed the
terms of the Merger Agreement, and (v) performed such other studies and analyses
and considered such other factors as we deemed appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of United
Dental, Protective and the combined company, we have assumed that such
information reflects the best currently available judgments and estimates of the
management of United Dental and Protective as to the likely future financial
performance of their respective companies and of the combined company. In
addition, we have not made an independent evaluation or appraisal of the assets
or liabilities of United Dental or Protective, nor have we been furnished with
any such evaluations or appraisals. We are expressing no opinion as to the price
at which the Protective Common Stock actually may trade at any time. Our opinion
is based on market, economic and other conditions as they exist and can be
evaluated as of the date of this letter.
We have been retained by the Board of Directors of United Dental as
financial advisor solely for the purposes of rendering this opinion and,
accordingly, we were not requested to, and did not, participate in the
negotiation or structuring of the Merger, nor were we authorized to, and we did
not, solicit third party indications of interest with respect to the acquisition
of all or a part of United Dental.
Our advisory services and the opinion expressed herein are for the use of
the Board of Directors of United Dental and do not constitute a recommendation
to any stockholder as to how such stockholder should vote with respect to
matters relating to the proposed Merger. We hereby consent, however, to the
inclusion of this opinion in its entirety as an exhibit to the proxy or
registration statement of United Dental and Protective relating to the proposed
Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Merger Consideration is fair, from a financial point of
view, to the holders of United Dental Common Stock.
Very truly yours,
/s/ BT ALEX. BROWN INCORPORATED
BT ALEX. BROWN INCORPORATED
2
<PAGE>
ANNEX C
DELAWARE GENERAL CORPORATION LAW
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to (S)228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of his shares of stock under the circumstances described in subsections
(b) and (c) of this section. As used in this section, the word "stockholder"
means a holder of record of stock in a stock corporation and also a member of
record of a nonstock corporation; the words "stock" and "share" mean and include
what is ordinarily meant by those words and also membership or membership
interest of a member of a nonstock corporation; and the words "depository
receipt" mean a receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class of
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to subsection
(g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title.
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system of the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the holders of the surviving corporation as provided in
subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement or merger or consolidation pursuant to (S)(S)251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by a
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy
or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective date
of such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within twenty days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send
2
<PAGE>
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall not be more than 10 days prior
to the date the notice is given; provided that, if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account
3
<PAGE>
all relevant factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow money during
the pendency of the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder whose
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNEX D-
CONFORMED
COPY
STOCKHOLDER AGREEMENT
BETWEEN
PROTECTIVE LIFE CORPORATION
AND
JACK R. ANDERSON
DATED AS OF MARCH 10, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
STOCKHOLDER AGREEMENT dated as of March 10, 1998, between PROTECTIVE LIFE
CORPORATION, a Delaware corporation ("Purchaser"), and JACK R. ANDERSON, the
"Stockholder").
WHEREAS Purchaser, a Delaware corporation and a wholly owned subsidiary of
Purchaser ("Sub"), and United Dental Care, Inc., a Delaware corporation (the
"Company"), propose to enter into an Agreement and Plan of Merger dated as of
the date hereof (as the same may be amended or supplemented, the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement) providing for the merger of the
Company with and into Sub (the "Merger"), upon the terms and subject to the
conditions set forth in the Merger Agreement; and
WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
such number of shares of Common Stock, par value $0.10 per share, of the Company
(the "Company Common Stock") set forth opposite his name on Schedule A attached
hereto (such shares of Company Common Stock, together with any other shares of
capital stock of the Company acquired by such Stockholder after the date hereof
and during the term of this Agreement and the shares listed on Schedule A hereto
as to which beneficial ownership is disclaimed and voting and investment control
is exercised by others ("Others"), being collectively referred to herein as the
"Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Purchaser has requested that the Stockholder enter into this
Agreement;
NOW, THEREFORE, to induce Purchaser to enter into, and in consideration of
its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
hereby represents and warrants to Purchaser as of the date hereof as follows:
(a) AUTHORITY. The Stockholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
the Stockholder and constitutes a valid and binding obligation of the
Stockholder enforceable in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or
lapse of time or both) under any provision of, any trust agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets. If the Stockholder
is married and the Stockholder's Subject Shares constitute community
property or otherwise need spousal or other approval for this Agreement to
be legal, valid and binding, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of,
the Stockholder's spouse, enforceable against such spouse in accordance with
its terms. The Stockholder agrees to deliver to Purchaser upon request a
proxy substantially in the form attached hereto as Exhibit A, which proxy
shall be coupled with an interest and irrevocable to the extent permitted
under Delaware law, with the total number of such Stockholder's Subject
Shares correctly indicated thereon.
(b) THE SUBJECT SHARES. The Stockholder is the record and beneficial
owner of, and has good and marketable title to, the Subject Shares set forth
opposite his name on Schedule A attached hereto, free and clear of any
claims, liens, encumbrances and security interests whatsoever. The
Stockholder does not own, of record or beneficially, any shares of capital
stock of the Company other than the Subject Shares set forth opposite his or
its name on Schedule A attached hereto. The Stockholder has the sole right
to vote such Subject Shares, and none of such Subject Shares is subject to
any voting trust or other agreement, arrangement or restriction with respect
to the voting of such Subject Shares, except as contemplated by this
Agreement (other than the Stockholders Agreement dated September 16, 1994
among Stockholder, Robert J. Nettinga and certain other stockholders of
<PAGE>
the Company). The Stockholder does not own any options or warrants to
acquire any shares of Company Common Stock or any other securities
convertible into or exchangeable for Company Common Stock other than options
to acquire 12,000 shares of Company Common Stock.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants to the Stockholder that Purchaser has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Purchaser, and the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly executed and delivered by Purchaser and constitutes
a valid and binding obligation of Purchaser enforceable in accordance with its
terms. The execution and delivery of this Agreement do not, and the consummation
of the transactions contemplated hereby and compliance with the terms hereof
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any provision of, the certificate
of incorporation or by-laws of Purchaser, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Purchaser or
to Purchaser's property or assets.
3. COVENANTS OF THE STOCKHOLDER. Until the termination of this Agreement
in accordance with Section 7, the Stockholder agrees as follows:
(a) At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including
by written consent) with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) (and shall use his
best efforts to cause Others to vote) the Subject Shares in favor of the
Merger, the adoption of the Merger Agreement and the approval of the terms
thereof and each of the other transactions contemplated by the Merger
Agreement.
(b) At any meeting of stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which the Stockholder's vote,
consent or other approval is sought, the Stockholder shall vote (or cause to
be voted) (and shall use his best efforts to cause Others to vote) the
Subject Shares against (i) any merger agreement or merger (other than the
Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company or any other takeover
proposal, as such term is defined in Section 7.2(e) of the Merger Agreement
(a "Takeover Proposal") or (ii) any amendment of the Company's certificate
of incorporation or by-laws or other proposal (including with respect to the
election of directors) or transaction involving the Company or any of its
subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement. Subject to Section 9, the Stockholder further agrees not to
commit or agree to take any action inconsistent with the foregoing.
(c) Except as provided in the immediately succeeding sentence of this
Section 3(c), the Stockholder agrees not to (and to use his best efforts to
cause Others not to) (i) sell, transfer, pledge, assign or otherwise dispose
of (including by gift) (collectively, "Transfer"), or enter into any
contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, the Subject Shares to any
person other than pursuant to the terms of the Merger, (ii) enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection with, directly or indirectly, any Takeover Proposal.
Notwithstanding the foregoing, the Stockholder shall have the right, for
estate planning purposes, to Transfer Subject Shares to a transferee
following the due execution and delivery to Purchaser by each transferee of
a counterpart to this Agreement.
2
<PAGE>
(d) Subject to the terms of Section 9, during the term of this
Agreement, the Stockholder shall not, nor shall it permit any investment
banker, attorney or other adviser or representative of the Stockholder to,
(i) directly or indirectly solicit, initiate or encourage the submission of,
any Takeover Proposal or (ii) directly or indirectly participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal.
(e) Until after the Merger is consummated or the Merger Agreement is
terminated, the Stockholder shall use all reasonable efforts (and shall use
his best efforts to cause Others) to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with
the Company and Purchaser in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by the
Merger Agreement.
4. FURTHER ASSURANCES. Stockholder will (and will use his best efforts to
cause Others to), from time to time, execute and deliver, or cause to be
executed and delivered, such additional or further consents, documents and other
instruments as Purchaser may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement.
5. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties, except that Purchaser may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to any direct or indirect wholly owned subsidiary of Purchaser. 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.
6. TERMINATION. This Agreement shall terminate upon the earlier of (a) the
termination of the Merger Agreement in accordance with the terms thereof and (b)
the Effective Time of the Merger.
7. GENERAL PROVISIONS.
(a) AMENDMENTS. This Agreement may not be amended altered or
supplemented except by an instrument in writing signed by each of the
parties hereto.
(b) NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Purchaser in accordance
with Section 10.2 of the Merger Agreement and to the Stockholder at his
address set forth on Schedule A attached hereto (or at such other address
for a party as shall be specified by like notice).
(c) INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
(d) 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 of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(e) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein) (i) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject
3
<PAGE>
matter hereof and (ii) is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
(f) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
8. STOCKHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his capacity as such director or officer.
Stockholder signs solely in his capacity as the record holder and beneficial
owner of such Stockholder's Subject Shares and nothing herein shall limit or
affect any actions taken by a Stockholder in his capacity as an officer or
director of the Company to the extent specifically permitted by the Merger
Agreement.
9. 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 or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
IN WITNESS WHEREOF, Purchaser has caused this Agreement to be signed by its
officer thereunto duly authorized and the Stockholder has signed this Agreement,
all as of the date first written above.
PROTECTIVE LIFE CORPORATION,
By: /s/ JOHN D. JOHNS
--------------------------------------
Name: John D. Johns
Title: President and Chief
Operating Officer
/s/ JACK R. ANDERSON
--------------------------------------
JACK R. ANDERSON
Acknowledged and agreed as of the date
first above written:
/s/ ROSE MARIE ANDERSON
--------------------------------------
ROSE MARIE ANDERSON
4
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
SHARES OF COMMON
NAME STOCK
- --------------------------------------------------------------------------- -----------------
<S> <C>
Jack R. Anderson .......................................................... 458,500 shares
1645 Dallas Parkway
Suite 735
Dallas, TX 75248
Others..................................................................... 778,500 shares
</TABLE>
5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 6.5 of Article VI of Protective Life Corporation's Restated
Certificate of Incorporation provides that Protective Life Corporation shall
indemnify to the fullest extent permitted by law any person who is made or is
threatened to be made a party or is involved in any action, suit, or proceeding
whether civil, criminal, administrative or investigative by reason of the fact
that he is or was a director, officer, employee or agent of Protective Life
Corporation or was serving at the request of Protective Life Corporation as an
officer, director, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise including service with respect to employee
benefit plans.
Protective Life Corporation is empowered by Section 145 of the Delaware
General Corporation Law, subject to the proceedings and limitations stated
therein, to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
whether civil, criminal, administrative or investigative (other than an action
by or in the right of Protective Life Corporation) by reason of the fact that
such person is or was an officer, employee, agent or director of Protective Life
Corporation or is or was serving at the request of Protective Life Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of Protective Life Corporation, and, with respect
to any criminal action or proceedings, had no reasonable cause to believe his
conduct was unlawful. Protective Life Corporation may indemnify any such person
against expenses (including attorneys' fees) in an action by or in the right of
Protective Life Corporation under the same conditions, except that no
indemnification is permitted without judicial approval if such person is
adjudged to be liable to Protective Life Corporation. To the extent such person
is successful on the merits or otherwise in the defense of any action referred
to above, Protective Life Corporation must indemnify him against the expenses
which he actually and reasonably incurred in connection therewith.
Policies of insurance are maintained by Protective Life Corporation under
which directors and officers of Protective Life Corporation are insured, within
the limits and subject to the limitations of the policies, against certain
expenses in connection with the defense of actions, suits or proceedings, and
certain liabilities which might be imposed as a result of such actions, suits or
proceedings, to which they are parties by reason of being or having been such
directors or officers.
As permitted by Section 102 (b)(7) of the Delaware General Corporation Law,
Protective Life Corporation's Restated Certificate of Incorporation also
provides that no director shall be personally liable to Protective Life
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director, except (i) for breach of the director's
duty of loyalty to Protective Life Corporation or its stockholders, (ii) for
acts or omissions not in good faith which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit.
Protective Life Corporation has entered into indemnity agreements with each
of its directors which provide insurance protection in excess of the directors'
and officers' liability insurance maintained by Protective Life Corporation and
in force at the time up to $20 million and against certain liabilities excluded
from such liability insurance. The agreements provide generally that, upon the
happening of certain events constituting a change in control of Protective Life
Corporation, Protective Life Corporation must obtain a $20 million letter of
credit upon which the directors may draw for defense or settlement of any claim
relating to performance of their duties as directors. Protective Life
Corporation has similar
II-1
<PAGE>
agreements with certain of its executive officers under which Protective Life
Corporation is required to provide up to $10 million in indemnification,
although this obligation is not secured by a commitment to obtain a letter of
credit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
2 Agreement and Plan of Merger, dated as of March 10, 1998, as amended as of March 17, 1998 and as of
July 8, 1998, by and among Protective Life Corporation, PLC Merger Subsidiary Corporation and United
Dental Care, Inc. (included as Annex A to the Joint Proxy Statement/Prospectus included in Part I of
this Registration Statement).
4(a)(1) 1985 Restated Certificate of Incorporation of Protective Life Corporation (incorporated by reference to
Exhibit 3(a) to Protective Life Corporation's Form 10-K Annual Report for the year ended December 31,
1993).
4(a)(2) Certificate of Amendment of 1985 Restated Certificate of Incorporation of Protective Life Corporation
filed with the Secretary of State of Delaware on June 1, 1987 (incorporated by reference to Exhibit
3(a)(1) to Protective Life Corporation's Form 10-Q Quarterly Report for the period ended December 31,
1993).
4(a)(3) Certificate of Amendment of 1985 Restated Certificate of Incorporation of Protective Life Corporation
filed with the Secretary of State of Delaware on May 5, 1994 (incorporated by reference to Exhibit
3(a)(5) to Protective Life Corporation's Form 10-Q Quarterly Report for the period ended March 31,
1994).
*4(a)(4) Certificate of Amendment of 1985 Restated Certificate of Incorporation of Protective Life Corporation
filed with the Secretary of State Delaware on April 30, 1998.
4(a)(5) Certificate of Designation of Junior Participating Cumulative Preferred Stock of Protective Life
Corporation filed with the Secretary of State of Delaware on August 9, 1995 (incorporated by
reference to Exhibit A to Exhibit 1 to Protective Life Corporation's Form 8-A Report filed on August
7, 1995).
4(a)(6) Certificate of Decrease of Shares Designated as Junior Participating Cumulative Preferred Stock of
Protective Life Corporation filed with the Secretary of State of Delaware on August 8, 1995
(incorporated by reference to Exhibit 3(a)(4) to Protective Life Corporation's Form 10-K Annual
Report for the year ended December 31, 1995).
4(b)(1) 1995 Amended and Restated Bylaws of Protective Life Corporation (incorporated by reference to Exhibit
3(b) to Protective Life Corporation's Form 10-K Annual Report for the period ended December 31,
1996).
*4(b)(2) Amendment to the 1995 Amended and Restated Bylaws of Protective Life Corporation, effective March 3,
1998.
4(c) Rights Agreement, dated as of August 7, 1995 among Protective Life Corporation and AmSouth Bank, as
Rights Agent (incorporated by reference to Exhibit 1 to Protective Life Corporation's Form 8-A filed
August 7, 1995).
4(d) Rights Certificate (incorporated by reference to Exhibit 1 to Protective Life Corporation's Form 8-A
filed August 7, 1995).
*5 Opinion of Deborah J. Long, Esq, General Counsel of Protective Life Corporation, as to the validity of
the offered securities.
*8(a) Opinion of Strasburger & Price L.L.P., with respect to the consequences of the Merger contained in the
Proxy Statement/Prospectus.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
*8(b) Opinion of Debevoise & Plimpton, with respect to the consequences of the Merger contained in the Proxy
Statement/Prospectus.
*23(a) Consent of PricewaterhouseCoopers LLP.
*23(b) Consent of PricewaterhouseCoopers LLP.
23(c) Consent of Deborah J. Long (included in Exhibit 5).
23(d) Consent of Strasburger & Price L.L.P. (included in Exhibit 8(a))
23(e) Consent of Debevoise & Plimpton (included in Exhibit 8(b)).
*24 Power of Attorney of Board of Directors and Officers.
*99(a) Form of Proxy of United Dental Care, Inc. (relating to the special meeting of stockholders of United
Dental Care, Inc. described in the Joint Proxy Statement/Prospectus in Part I of this Registration
Statement).
*99(b) Consent of BT Alex. Brown Incorporated.
</TABLE>
- ------------------------
* Filed Herewith
(B) Financial Statement Schedules
Not Applicable.
ITEM 22. UNDERTAKINGS
(a) Rule 145 Offering.
The undersigned Registrant hereby undertakes:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 145(c), will be filed as a part of an amendment
to the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(b) Filings Incorporating Subsequent Exchange Act Documents by
Reference.
(1) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(2) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
(3) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Acceleration of Effectiveness.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Protective Life
Corporation has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Birmingham,
State of Alabama, on August 3, 1998.
<TABLE>
<S> <C> <C>
PROTECTIVE LIFE CORPORATION
(Registrant)
By: /s/ JOHN D. JOHNS
-----------------------------------------
Name: John D. Johns
Title: PRESIDENT, CHIEF OPERATING OFFICER
AND DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities with Protective Life Corporation and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board,
* Chief Executive Officer
- ------------------------------ and Director (Principal August 3, 1998
Drayton Nabers, Jr. Executive Officer)
President, Chief Operating
/s/ JOHN D. JOHNS Officer and Director
- ------------------------------ (Principal Financial August 3, 1998
John D. Johns Officer)
Vice President and
* Controller and Chief
- ------------------------------ Accounting Officer August 3, 1998
Jerry W. DeFoor (Principal Accounting
Officer)
*
- ------------------------------ Chairman Emeritus and August 3, 1998
William J. Rushton III Director
*
- ------------------------------ Director August 3, 1998
William J. Cabaniss, Jr.
*
- ------------------------------ Director August 3, 1998
John J. McMahon, Jr.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director August 3, 1998
A. W. Dahlberg
*
- ------------------------------ Director August 3, 1998
Ronald L. Kuehn, Jr.
*
- ------------------------------ Director August 3, 1998
Herbert A. Sklenar
*
- ------------------------------ Director August 3, 1998
James S.M. French
*
- ------------------------------ Director August 3, 1998
Robert A. Yellowlees
*
- ------------------------------ Director August 3, 1998
Elaine L. Chao
*
- ------------------------------ Director August 3, 1998
Donald M. James
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ NANCY KANE
------------------------- August 3, 1998
Name: Nancy Kane
Title: ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
2 Agreement and Plan of Merger, dated as of March 10, 1998, as amended as of March 17, 1998 and as of
July 8, 1998, by and among Protective Life Corporation, PLC Merger Subsidiary Corporation and United
Dental Care, Inc. (included as Annex A to the Joint Proxy Statement/Prospectus included in Part I of
this Registration Statement).
4(a)(1) 1985 Restated Certificate of Incorporation of Protective Life Corporation (incorporated by reference to
Exhibit 3(a) to Protective Life Corporation's Form 10-K Annual Report for the year ended December 31,
1993).
4(a)(2) Certificate of Amendment of 1985 Restated Certificate of Incorporation of Protective Life Corporation
filed with the Secretary of State of Delaware on June 1, 1987 (incorporated by reference to Exhibit
3(a)(1) to Protective Life Corporation's Form 10-Q Quarterly Report for the period ended December 31,
1993).
4(a)(3) Certificate of Amendment of 1985 Restated Certificate of Incorporation of Protective Life Corporation
filed with the Secretary of State of Delaware on May 5, 1994 (incorporated by reference to Exhibit
3(a)(5) to Protective Life Corporation's Form 10-Q Quarterly Report for the period ended March 31,
1994).
*4(a)(4) Certificate of Amendment of 1985 Restated Certificate of Incorporation of Protective Life Corporation
filed with the Secretary of State Delaware on April 30, 1998.
4(a)(5) Certificate of Designation of Junior Participating Cumulative Preferred Stock of Protective Life
Corporation filed with the Secretary of State of Delaware on August 9, 1995 (incorporated by
reference to Exhibit A to Exhibit 1 to Protective Life Corporation's Form 8-A Report filed on August
7, 1995).
4(a)(6) Certificate of Decrease of Shares Designated as Junior Participating Cumulative Preferred Stock of
Protective Life Corporation filed with the Secretary of State of Delaware on August 8, 1995
(incorporated by reference to Exhibit 3(a)(4) to Protective Life Corporation's Form 10-K Annual
Report for the year ended December 31, 1995).
4(b)(1) 1995 Amended and Restated Bylaws of Protective Life Corporation (incorporated by reference to Exhibit
3(b) to Protective Life Corporation's Form 10-K Annual Report for the period ended December 31,
1996).
*4(b)(2) Amendment to the 1995 Amended and Restated Bylaws of Protective Life Corporation, effective March 3,
1998.
4(c) Rights Agreement, dated as of August 7, 1995 among Protective Life Corporation and AmSouth Bank, as
Rights Agent (incorporated by reference to Exhibit 1 to Protective Life Corporation's Form 8-A filed
August 7, 1995).
4(d) Rights Certificate (incorporated by reference to Exhibit 1 to Protective Life Corporation's Form 8-A
filed August 7, 1995).
*5 Opinion of Deborah J. Long, Esq, General Counsel of Protective Life Corporation, as to the validity of
the offered securities.
*8(a) Opinion of Strasburger & Price L.L.P., with respect to the consequences of the Merger contained in the
Proxy Statement/Prospectus.
*8(b) Opinion of Debevoise & Plimpton, with respect to the consequences of the Merger contained in the Proxy
Statement/Prospectus.
*23(a) Consent of PricewaterhouseCoopers LLP.
*23(b) Consent of PricewaterhouseCoopers LLP.
23(c) Consent of Deborah J. Long (included in Exhibit 5).
23(d) Consent of Strasburger & Price L.L.P. (included in Exhibit 8(a)).
23(e) Consent of Debevoise & Plimpton (included in Exhibit 8(b)).
23(f) Consent of Strasburger & Price, LLP (included in Exhibit 8(a)).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
*24 Power of Attorney of Board of Directors and Officers.
*99(a) Form of Proxy of United Dental Care, Inc. (relating to the special meeting of stockholders of United
Dental Care, Inc. described in the Joint Proxy Statement/Prospectus in Part I of this Registration
Statement).
*99(b) Consent of BT Alex. Brown Incorporated.
</TABLE>
- ------------------------
* Filed Herewith
(B) Financial Statement Schedules
Not Applicable.
<PAGE>
Exhibit 4(a)(4)
CERTIFICATE OF AMENDMENT
OF
1985 RESTATED CERTIFICATE OF INCORPORATION
OF PROTECTIVE LIFE CORPORATION
Protective Life Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Protective Life
Corporation duly called and held on March 2, 1998, the Board of Directors
duly adopted a resolution setting forth a proposed amendment to the 1985
Restated Certificate of Incorporation of said Corporation, and the Board of
Directors declared said amendment to be advisable and directed the same to be
submitted to a vote of the stockholders of said Corporation at the Annual
Meeting of Stockholders to be held on April 27, 1998 or at any adjournment
thereof.
SECOND: That thereafter, the said Annual Meeting of Stockholders was
duly called and held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, on April 27, 1998, at which
meeting the necessary number of shares of Common Stock as required by statute
were voted in favor of the following amendment to the 1985 Restated
Certificate of Incorporation:
The first sentence of Section 4.1 of Article IV is hereby deleted
in its entirety and the following is inserted in lieu thereof:
4.1 The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is one hundred
sixty-four million (164,000,000), of which one hundred sixty
million (160,000,000) shares of the par value of $0.50 per share
are to be of a class designated "Common Stock" and four million
(4,000,000) shares of the par value of $1.00 per share are to be of
a class designated "Preferred Stock."
THIRD: That the said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
FOURTH: That the capital of the Corporation will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said Protective Life Corporation has caused its
corporate seal to be hereafter affixed and this Certificate of Amendment to
be signed by Drayton Nabers, Jr. its Chairman of the Board and Chief
Executive Officer, and Deborah J. Long, its Secretary, hereby declaring and
certifying that this is its act and deed and the facts herein stated are
true, this 27th day of April, 1998.
PROTECTIVE LIFE CORPORATION
By: /s/ Drayton Nabers, Jr.
----------------------------
Drayton Nabers, Jr.
Its Chairman of the Board
and Chief Executive Officer
ATTEST:
/s/ Deborah J. Long
- -------------------
Deborah J. Long
Secretary
(CORPORATE SEAL)
<PAGE>
Exhibit 4(b)(2)
AMENDMENT TO THE
1995 AMENDED AND RESTATED BY-LAWS OF
PROTECTIVE LIFE CORPORATION
DATED AS OF MARCH 2, 1998
The 1995 Amended and Restated By-Laws of Protective Life Corporation (herein
called "the Corporation"), as previously amended on March 3, 1997, are hereby
further amended by deleting Section 12. "Voting of Shares," contained in
Article II, "Stockholders," in its entirety and replacing it with the
following:
Section 12. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at
a meeting of stockholders. Unless otherwise prescribed by statute,
the Certificate of Incorporation or these By-laws, all elections
shall be had, and all questions decided, by a majority vote of those
shares present or represented by proxy and entitled to vote.
Notwithstanding the foregoing, matters which require a higher
affirmative vote are specified in the Certificate of Incorporation of
the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to the 1995
Amended and Restated By-Laws to be signed by Drayton Nabers, Jr., as its
Chairman of the Board and Chief Executive Officer, and attested by Kathy B.
Polk, as its Assistant Secretary, and has caused its corporate seal to be
hereunto affixed, hereby declaring and certifying that this Amendment to the
1995 Amended and Restated By-Laws of the Corporation was duly adopted by the
Board of Directors at a regular meeting held on the 2nd day of March, 1998.
/s/ Drayton Nabers Jr.
--------------------------
Drayton Nabers Jr.
Chairman of The Board and
Chief Executive Officer
ATTEST:
/s/ Kathy B. Polk
- -------------------
Kathy B. Polk
Assistant Secretary
(CORPORATE SEAL)
<PAGE>
Exhibit 5
[Letterhead of Protective Life Corporation]
August 3, 1998
Protective Life Corporation
2801 Highway 280 South
Birmingham, Alabama 35223
I have acted as counsel to Protective Life Corporation, a Delaware
corporation (the "Company") in connection with the acquisition by the Company
of United Dental Care, Inc., a Delaware Corporation ("UDCI"), pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") dated as of March 10,
1998, as amended as of March 17, 1998 and as of July 8, 1998, among the
Company, PLC Merger Subsidiary Corporation and UDCI. The Company has prepared
a Registration Statement on Form S-4 (the "Registration Statement") to be
filed by the Company with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
which Registration Statement relates to the proposed issuance by the Company
of certain shares of the Company's Common Stock, par value $.50 per share
(the "Shares") (together with the attached Preferred Share Purchase Rights,
"Common Stock"), pursuant to the Merger Agreement.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Act.
In connection with rendering this opinion, I have examined and am
familiar with originals or copies, certified or otherwise identified to my
satisfaction, of such documents as I have deemed necessary or appropriate as
a basis for the opinion set forth herein, including, without limitation, (i)
the Registration Statement, including the Proxy Statement/Prospectus; (ii)
the Restated Articles of Incorporation of the Company and the Certificates of
Amendment thereto; (iii) the Bylaws of the Company, as amended; (iv) the
Rights Agreement dated as of August 7, 1995, by and between the Company and
AmSouth Bank, as Rights Agent; (v) the Merger Agreement; (vi) resolutions of
the Board of Directors of the Company relating to the transactions
contemplated by the Registration Statement; (vii) a specimen certificate
evidencing the Common Stock; and (viii) such other certificates, instruments
and documents as I considered necessary or appropriate for the purposes of
this opinion.
<PAGE>
Protective Life Corporation
Page 2
August 3, 1998
As to any facts material to the opinions expressed herein which I have
not independently established or verified, I have relied upon statements and
representations of certain public officials, officers and other
representatives of the Company, and others.
For purposes of this opinion, I have assumed that prior to the issuance
of any of the Shares (i) the Registration Statement, as finally amended
(including all necessary post-effective amendments), will be effective; (ii)
the Merger Agreement will be approved by the UDCI stockholders; (iii) the
Articles of Merger, which will give effect to the Merger, will be properly
filed with the Secretary of State of the State of Delaware; (iv) the
transactions contemplated by the Merger Agreement will be consummated; and
(v) the certificates representing the Shares will be manually signed by an
authorized officer of the transfer agent for the Common Stock and will be
registered by the registrar for the Common Stock and will conform to the
specimen thereof examined by me.
I am admitted to the bar in the State of Alabama. This opinion is
limited in scope to the effect of the laws of the State of Alabama, the laws
of the United States of America, and the laws of the State of Delaware as
applied to general corporate matters, and I express no opinion herein as to
the laws of any other jurisdiction.
Based upon and subject to the foregoing and the limitations,
qualifications, exceptions and assumptions set forth herein, I am of the
opinion that when the conditions to the Merger set forth in the Merger
Agreement have been satisfied and the Merger has been effected in accordance
therewith, the Shares issued in exchange for shares of capital stock of UDCI
pursuant to the Merger will be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. I also consent to the reference to my
name under the caption "Legal Matters" in the Proxy Statement/Prospectus
forming a part of the Registration Statement. In giving this consent, I do
not thereby admit that I am included in the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations
of the Commission thereunder.
Very truly yours,
/s/ Deborah J. Long
General Counsel
<PAGE>
Exhibit 8(a)
[Letterhead of Strasburger & Price L.L.P.]
August 3, 1998
United Dental Care, Inc.
13601 Preston Road, Suite 500 East
Dallas, Texas 75240
Proxy Statement/Prospectus Regarding Proposed
Merger of United Dental Care, Inc. with PLC
Merger Subsidiary Corporation
----------------------------------------------
To Those Concerned:
We are acting as your special counsel in connection with the filing
with the Securities and Exchange Commission of the Joint Proxy Statement and
Prospectus (the "Proxy Statement/Prospectus") relating to the proposed merger
(the "Merger") of United Dental Care, Inc., a Delaware corporation ("United
Dental"), with and into PLC Merger Subsidiary Corporation ("PLC Merger Sub"),
a Delaware corporation and wholly owned subsidiary of Protective Life
Corporation, a Delaware corporation ("Protective"), pursuant to an Agreement
and Plan of Merger, dated as of March 10, 1998, and amended as of March 17,
1998 and as of July 8, 1998, by and among United Dental, Protective and PLC
Merger Sub.
We hereby confirm our opinion as set forth in the Proxy
Statement/Prospectus under the heading "THE PROPOSED MERGER -- Material U.S.
Federal Income Tax Consequences of the Merger."
This opinion is limited to the federal law of the United States and
administrative rulings of the Internal Revenue Service as in effect on the
date hereof. We have no obligation to advise you or any other person of
changes in law or in the administrative rulings of the Internal Revenue
Service that occur after the date hereof.
<PAGE>
We are delivering this opinion to you in connection with the
preparation and filing of the Proxy Statement/Prospectus. Without our prior
written consent, this opinion may not be furnished, in whole or in part, to
any other person except as provided in this paragraph. We hereby consent to
the filing of this opinion as an exhibit to the Proxy Statement/Prospectus
and to the use of our name under the heading "THE PROPOSED MERGER -- Material
U.S. Federal Income Tax Consequences of the Merger" in the Proxy
Statement/Prospectus. In giving such consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended or the Rules and Regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Strasburger & Price L.L.P.
<PAGE>
Exhibit 8(b)
[Letterhead of Debevoise & Plimpton]
August 3, 1998
Protective Life Corporation
2801 Highway 280 South
Birmingham, AL 35223
PROXY STATEMENT/PROSPECTUS REGARDING PROPOSED MERGER OF
UNITED DENTAL CARE, INC. WITH PLC MERGER SUBSIDIARY
CORPORATION
To Those Concerned:
We are acting as your special counsel in connection with the filing
with the Securities and Exchange Commission of the Joint Proxy Statement and
Prospectus (the "Proxy Statement/Prospectus") relating to the proposed merger
(the "Merger") of United Dental Care, Inc., a Delaware corporation ("United
Dental"), with and into PLC Merger Subsidiary Corporation ("PLC Merger Sub"),
a Delaware corporation and wholly owned subsidiary of Protective Life
Corporation, a Delaware corporation ("Protective"), pursuant to an Agreement
and Plan of Merger, dated as of March 10, 1998, and amended as of March 17,
1998 and as of July 8,
<PAGE>
2
August 3, 1998
1998, by and among United Dental, Protective and PLC Merger Sub.
We hereby confirm our opinion as set forth in the Proxy
Statement/Prospectus under the heading "THE PROPOSED MERGER -- Material U.S.
Federal Income Tax Consequences of the Merger."
This opinion is limited to the federal law of the United States and
administrative rulings of the Internal Revenue Service as in effect on the
date hereof. We have no obligation to advise you or any other person of
changes in law or in the administrative rulings of the Internal Revenue
Service that occur after the date hereof.
We are delivering this opinion to you in connection with the
preparation and filing of the Proxy Statement/Prospectus. Without our prior
written consent, this opinion may not be furnished, in whole or in part, to
any other person except as provided in this paragraph. We hereby consent to
the filing of this opinion as an exhibit to the Proxy Statement/Prospectus
and to the use of our name under the heading "THE PROPOSED MERGER -- Material
U.S. Federal Income Tax Consequences of the Merger" in the Proxy
Statement/Prospectus. In giving such consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended or the Rules and Regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Debevoise & Plimpton
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Protective Life Corporation on Form S-4 (File No. ) of our report
dated February 11, 1998, except for Note N, as to which the date is March 2,
1998, on our audits of the consolidated financial statements and financial
statement schedules of Protective Life Corporation and subsidiaries (the
Company) as of December 31, 1997 and 1996 and for the years ended December
31, 1997, 1996 and 1995, which report is included or incorporated by
reference in the Company's Annual Report on Form 10-K. We also consent to the
reference to our firm under the captions "Experts," "Summary Historical
Financial Data of Protective," and "Selected Historical Financial Data of
Protective."
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
PricewaterhouseCoopers LLP
Birmingham, Alabama
August 3, 1998
<PAGE>
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Protective
Life Corporation of our report dated February 23, 1998, except for Note 12,
as to which the date is March 11, 1998, appearing on page F-2 of United
Dental Care, Inc.'s Annual Report on Form 10-K/A for the year ended
December 31, 1997. We also consent to the reference to it under the headings
"Experts" and "Summary Historical Financial Data of UDCI" in such Prospectus.
However, it should be noted that PricewaterhouseCoopers LLP has not prepared
or certified such "Summary Historical Financial Data of UDCI".
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
PricewaterhouseCoopers LLP
Dallas, Texas
July 31, 1998
<PAGE>
Exhibit 24
PROTECTIVE LIFE CORPORATION
2801 Highway 280 South
Birmingham, Alabama 35223
KNOW ALL MEN BY THESE PRESENTS that the undersigned Officers and
Directors of Protective Life Corporation, a Delaware corporation (the
"Corporation"), hereby constitute and appoint John D. Johns, Deborah J. Long
and Nancy Kane, and each of them, the true and lawful agents and
attorneys-in-fact of the undersigned with full power and authority in said
agents and attorneys-in-fact, and any one or more of them, to sign for the
undersigned and in their respective names as Officers and Directors of the
Corporation one or more Registration Statements on Form S-4 of the
Corporation to be filed with the Securities and Exchange Commission,
Washington, D.C., under the Securities Act of 1933, as amended, any
subsequent registration statements which may be filed under Rule 462(b) and
any amendment or amendments to such registration statements (including,
without limitation, post-effective amendments), relating to the Common Stock
of the Corporation to be issued in connection with the proposed merger
transaction with United Dental Care, Inc., and the undersigned hereby ratify
and confirm all acts taken by such agents and attorneys-in-fact, or any one
or more of them, as herein authorized.
Dated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Drayton Nabers, Jr. Chairman of the Board, Chief
- ---------------------------- Executive Officer and Director
Drayton Nabers, Jr. (Principal Executive Officer) April 27, 1998
/s/ John D. Johns President, Chief Operating Officer
- ---------------------------- and Director (Principal Financial
John D. Johns Officer) April 27, 1998
/s/ Jerry W. DeFoor Vice President and Controller and
- ---------------------------- Chief Accounting Officer
Jerry W. DeFoor (Principal Accounting Officer April 27, 1998
<PAGE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ William J. Rushton III Chairman Emeritus and Director April 27, 1998
- ----------------------------
William J. Rushton III
/s/ William J. Cabaniss, Jr. Director April 27, 1998
- ----------------------------
William J. Cabaniss, Jr.
/s/ John J. McMahon, Jr. Director April 27, 1998
- ----------------------------
John J. McMahon, Jr.
/s/ A. W. Dahlberg Director April 27, 1998
- ----------------------------
A. W. Dahlberg
/s/ Ronald L. Kuehn, Jr. Director April 27, 1998
- ----------------------------
Ronald L. Kuehn, Jr.
/s/ Herbert A. Sklenar Director April 27, 1998
- ----------------------------
Herbert A. Sklenar
/s/ James S. M. French Director April 27, 1998
- ----------------------------
James S. M. French
/s/ Robert A. Yellowlees Director April 27, 1998
- ----------------------------
Robert A. Yellowlees
/s/ Elaine L. Chao Director April 27, 1998
- ----------------------------
Elaine L. Chao
/s/ Donald M. James Director April 27, 1998
- ----------------------------
Donald M. James
</TABLE>
<PAGE>
EXHIBIT 99(a)
UNITED DENTAL CARE, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF UNITED DENTAL CARE, INC.
The undersigned hereby constitutes and appoints WILLIAM H. WILCOX and JOHN
W. McCARTY, each with power to act with or without the other and with full power
of substitution, as Proxies of the undersigned to represent and to vote all
shares of the Common Stock of United Dental Care, Inc., a Delaware corporation
(the "Company"), standing in the name of the undersigned, at the Special Meeting
of Stockholders of the Company to be held at the Harvey Hotel Addision, 14315
Midway Road, Dallas, Texas 75244, on September 10, 1998 at 9:30 a.m., local
time, and at any and all adjournments or postponements thereof (the "Special
Meeting").
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ITEM 1. THE
PROXIES NAMED HEREIN ARE EACH AUTHORIZED TO VOTE AT THEIR DISCRETION UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING. ANY STOCKHOLDER
WHO WISHES TO WITHHOLD THE DISCRETIONARY AUTHORITY REFERRED TO IN ITEM 2 BELOW
SHOULD MARK A LINE THROUGH THE ENTIRE ITEM. VOTES AGAINST ITEM 1 AND ABSTENTIONS
WITH RESPECT TO SUCH ITEM WILL NOT BE USED TO VOTE IN FAVOR OF ADJOURNMENT TO
SOLICIT ADDITIONAL VOTES.
The undersigned hereby revokes any proxy or proxies heretofore given. This
Proxy may be revoked at any time before it is exercised by following the
procedures for revocation stated in the Proxy Statement/Prospectus.
(PLEASE MARK, SIGN AND DATE ON THE OTHER SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.)
<PAGE>
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. Proposal to adopt and approve the Agreement and Plan of Merger dated as of
March 10, 1998, as amended as of March 17, 1998 and as of July 8, 1998 among
Protective Life Corporation, a Delaware corporation, PLC Merger Subsidiary
Corporation, a Delaware corporation, and the Company and the Merger of the
Company with and into PLC Merger Subsidiary Corporation.
/ / FOR / / AGAINST / / ABSTAIN
2. The Proxies are authorized to vote in their discretion upon such other
matters as may properly come before the Special Meeting.
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
<TABLE>
<S> <C> <C> <C>
SIGNATURE ------------------------ Dated ---------- SIGNATURE ------------------------ Dated ----------
IF HELD JOINTLY
</TABLE>
NOTE: PLEASE DATE AND SIGN EXACTLY AS
NAME APPEARS HEREON. WHEN SHARES
OF COMMON STOCK ARE OWNED BY
JOINT TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE
NAME BE PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN FULL
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
<PAGE>
Exhibit 99(b)
[LETTERHEAD OF BT ALEX. BROWN INCORPORATED]
August 3, 1998
The Board of Directors
United Dental Care, Inc.
14755 Preston Road
Dallas, Texas 74240
Members of the Board:
We hereby consent to the inclusion of our opinion letter to
the Board of Directors of United Dental Care, Inc. ("United Dental") as Annex
B to the Proxy Statement/Prospectus of United Dental and Protective Life
Corporation ("Protective") relating to the proposed merger transaction
involving United Dental and Protective. In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under, and we do not admit that we are "experts" for purposes of, the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
By: /s/ BT Alex. Brown Incorporated
-------------------------------
BT ALEX. BROWN INCORPORATED
