SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
United Payors & United Providers, Inc.
(Name of Issuer)
Common Stock, Par Value $ .01 Per Share
(Title of Class of Securities)
911 319-10-1
(CUSIP Number)
Mark Roppel, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-4000
(Name, Address and Telephone Number
of Person Authorized to Receive Notices)
February 4, 2000
(Date of Event which requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss. 240.13d-1(e), ss. 240.13d-1(f) or ss. 240.13d-1(g),
check the following box |_|.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 23
<PAGE>
SCHEDULE 13D
CUSIP No. 911 319-10-1
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
BCE Emergis Inc.
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |_|
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds (See Instructions) OO
- -------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
|-|
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization Canada
- -------------------------------------------------------------------------------
NUMBER OF 7 Sole Voting Power
SHARES 0
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 Shared Voting Power
EACH 5,709,032 shares
REPORTING ----------------------------------------------------------------
PERSON 9 Sole Dispositive Power
WITH 0
----------------------------------------------------------------
10 Shared Dispositive Power
0
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
5,709,032 shares
- -------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) |_|
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
30.0%
- -------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
- -------------------------------------------------------------------------------
Page 2 of 23
<PAGE>
CUSIP No. 911 319-10-1
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Jetco Inc.
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |_|
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds (See Instructions) OO
- -------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
|-|
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization Delaware
- -------------------------------------------------------------------------------
NUMBER OF 7 Sole Voting Power
SHARES 0
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 Shared Voting Power
EACH 5,709,032 shares
REPORTING ----------------------------------------------------------------
PERSON 9 Sole Dispositive Power
WITH 0
----------------------------------------------------------------
10 Shared Dispositive Power
0
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
5,709,032 shares
- -------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) |_|
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
30.0%
- -------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
- -------------------------------------------------------------------------------
Page 3 of 23
<PAGE>
CUSIP No. 911 319-10-1
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
BCE Inc.
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |_|
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds (See Instructions) OO
- -------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
|-|
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization Canada
- -------------------------------------------------------------------------------
NUMBER OF 7 Sole Voting Power
SHARES 0
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 Shared Voting Power
EACH 5,709,032 shares
REPORTING ----------------------------------------------------------------
PERSON 9 Sole Dispositive Power
WITH 0
----------------------------------------------------------------
10 Shared Dispositive Power
0
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
5,709,032 shares
- -------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) |_|
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
30.0%
- -------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
- -------------------------------------------------------------------------------
Page 4 of 23
<PAGE>
CUSIP No. 911 319-10-1
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
3588513 Canada Inc.
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |_|
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds (See Instructions) OO
- -------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
|-|
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization Delaware
- -------------------------------------------------------------------------------
NUMBER OF 7 Sole Voting Power
SHARES 0
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 Shared Voting Power
EACH 5,709,032 shares
REPORTING ----------------------------------------------------------------
PERSON 9 Sole Dispositive Power
WITH 0
----------------------------------------------------------------
10 Shared Dispositive Power
0
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
5,709,032 shares
- -------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) |_|
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
30.0%
- -------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
- -------------------------------------------------------------------------------
Page 5 of 23
<PAGE>
Item 1. Security and Issuer
The class of equity securities to which this statement relates is the
common stock, par value $.01 per share (the "Common Stock") of United Payors &
United Providers, Inc., a Delaware corporation (the "Issuer"). The principal
executive offices of the Issuer are located at 2275 Research Boulevard, 6th
Floor, Rockville, Maryland 20850.
Item 2. Identity and Background
The persons listed in numbers 1 through 4 are the persons filing this
joint statement.
1. a. BCE Emergis Inc. is a corporation incorporated under the Canada
Business Corporations Act ("Emergis").
b. The address of the principal office of Emergis is 1155
Rene-Levesque Boulevard West, Montreal, Quebec, Canada H3B 4T3.
c. The principal business of Emergis is the delivery of
network-centric Internet commerce business solutions that improve
customer processes through the exchange of secure transactions.
d. During the last five years, Emergis has not been convicted in
any criminal proceeding.
e. During the last five years, Emergis has not been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding is or was subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws.
2. a. Jetco Inc. is a Delaware corporation ("Jetco").
b. The address of the principal office is 1155 Rene-Levesque
Boulevard West, Montreal, Quebec, Canada H3B 4T3.
c. Jetco is a wholly owned subsidiary of Emergis.
d. During the last five years, Jetco has not been convicted in any
criminal proceeding.
e. During the last five years, Jetco has not been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding is or was subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws.
Page 6 of 23
<PAGE>
3. a. BCE Inc. is a corporation incorporated under the Canada
Business Corporations Act ("BCE").
b. The address of the principal office of BCE is 1000, rue de La
Gauchetiere Ouest, Bureau 3700, Montreal, Quebec, Canada H3B 4Y7.
c. BCE is Canada's largest communications company and indirectly
owns 64.8% of Emergis.
d. During the last five years, BCE has not been convicted in any
criminal proceeding.
e. During the last five years, BCE has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding is or was subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws.
4. a. 3588513 Canada Inc. is a corporation incorporated under the
Canada Business Corporations Act ("3588513").
b. The address of the principal office of 3588513 is 1000 rue de
la Gauchetiere Ouest, Bureau 3800, Montreal, Quebec, Canada H3B
4Y7.
c. 3588513 is a wholly owned subsidiary of BCE and owns 55.31% of
Emergis directly and 9.49% of Emergis indirectly through two
wholly owned subsidiaries.
d. During the last five years, 3588513 has not been convicted in
any criminal proceeding.
e. During the last five years, 3588513 has not been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding is or was subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws.
Emergis, Jetco, BCE and 3588513 are referred to collectively in this
Schedule 13D as the "Reporting Persons". The name, citizenship, business address
and present principal occupation or employment, as well as the name and address
of any corporation or other organization in which such occupation or employment
is conducted, of each of the directors and executive officers of the Reporting
Persons are set forth on Exhibit A attached hereto, which Exhibit is
incorporated herein by reference. Except as set forth on Exhibit A, all of the
directors and executive officers of the Reporting Persons are citizens of
Canada. During the last five years, to the knowledge of the Reporting Persons,
no person named on Exhibit A with respect to that particular company has been
(i) convicted in any criminal proceeding (excluding
Page 7 of 23
<PAGE>
traffic violations or similar misdemeanors) or (ii) a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding is or was subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
This Statement relates to a voting agreement entered into by certain
stockholders of the Issuer (the "Stockholders") in favor of Emergis and Jetco
(the "Voting Agreement"). Pursuant to the Voting Agreement, the Stockholders
have agreed (a) to vote to approve the Merger (as defined in Item 4), the Merger
Agreement (as defined in Item 4) and any transactions contemplated by the Merger
Agreement and (b) to vote against any transaction pursuant to an Acquisition
Proposal. An "Acquisition Proposal" is defined as any offer or proposal
concerning any (i) merger, consolidation, business combination or similar
transaction involving the Issuer, (ii) sale, lease or other disposition directly
or indirectly by merger, consolidation, business combination, share exchange,
joint venture, or otherwise of assets of the Issuer or its subsidiaries
representing 10% or more of the consolidated assets of the Issuer and its
subsidiaries, (iii) issuance, sale, or other disposition of (including by way of
merger, consolidation, business combination, share exchange, joint venture, or
any similar transaction) securities (or options, rights or warrants to purchase,
or securities convertible into or exchangeable for, such securities) of the
Issuer or (iv) transaction in which any person shall acquire beneficial
ownership or the right to acquire beneficial ownership or any "group" shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 10% or more of the outstanding voting capital stock of the Issuer.
A copy of the Voting Agreement is filed herewith as Exhibit B to this Schedule
13D and is incorporated herein by reference.
Item 4. Purpose of Transaction
On February 4, 2000, Emergis, Jetco, the Issuer and Thomas L. Blair
entered into an agreement and plan of merger (the "Merger Agreement"). Pursuant
to the Merger Agreement, each outstanding share of the Common Stock will be
converted into the right to receive US$27.00 at the effective time of the
merger. Pursuant to the Merger Agreement, Jetco will merge with and into the
Issuer (the "Merger") at the effective time. A copy of the Merger Agreement is
filed herewith as Exhibit C to this Schedule 13D and is incorporated herein by
reference. As a result of the Merger, the Issuer will continue as the surviving
corporation, and Emergis will be the sole stockholder of the Issuer. Emergis
requested the Stockholders to execute the Voting Agreement as an inducement to
Emergis and Jetco to enter into the Merger Agreement. The Voting Agreement is
intended to provide greater certainty that Emergis' acquisition of the Issuer
will be consummated.
If the Merger is consummated in accordance with the terms of the
Merger Agreement, (i) the directors and officers of Jetco immediately prior to
the effective time of the Merger will become the initial directors and officers
of the surviving corporation, respectively, (ii) the Certificate of
Incorporation of the Issuer shall be amended and restated to read as the
Page 8 of 23
<PAGE>
Certificate of Incorporation of Jetco as in effect immediately prior to the
effective time of the Merger, except that Article I, relating to the name of the
Issuer, and Article X, relating to the indemnification of the directors and
officers, shall remain unchanged and (iii) the By-laws of Jetco, as in effect
immediately prior to the effective time of the Merger, shall be the By-laws of
the surviving corporation. Additionally, the Common Stock will be deregistered
under the Securities Act of 1933 and delisted from The Nasdaq National Market.
Except as set forth above, neither the Reporting Persons, nor any
person controlling such companies, nor any of the persons named on Exhibit A,
has any plan or proposals which relate to or would result in any of the
transactions described in subparagraphs (a) through (j) of Item 4 of Schedule
13D.
Item 5. Interest in Securities of the Issuer
As a result of the Voting Agreement, the Reporting Persons may be
deemed to each be the beneficial owner of 5,709,032 shares of Common Stock for
purposes of Rule 13d-1(a) promulgated under the Securities Exchange Act of 1934,
as amended, which represents approximately 30.0% of the shares of Common Stock
outstanding (based on the number of shares of Common Stock outstanding on
February 4, 2000).
The Stockholders who signed the Voting Agreement retain the right to
receive, or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the Common Stock of the Issuer.
To the knowledge of the Reporting Persons, neither the Reporting
Persons nor any other person referred to in Exhibit A hereto beneficially owns
or has acquired or disposed of any shares of Common Stock during the past 60
days.
Item 6. Contracts, Arrangements, Understanding of Relationships with Respect
to Securities of the Issuer
Pursuant to the Merger Agreement and subject to the terms and
conditions set forth therein (including approval by the holders of the Issuer's
outstanding shares of Common Stock and expiration or termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended), Jetco will merge with and into the Issuer, with the Issuer continuing
as the surviving corporation, and each issued and outstanding share of Common
Stock, other than shares owned by Emergis or the Issuer, will be converted into
the right to receive US$27.00, without interest.
Pursuant to the Voting Agreement, each Stockholder has agreed that, at
the Issuer's stockholders' meeting or any meeting of the stockholders of the
Company, such Stockholder will vote all of the shares of Common Stock held by
such Stockholder (i) in favor of the adoption of the Merger Agreement and
approval of the Merger and the other transactions contemplated by the Merger
Agreement, (ii) against any transaction pursuant to an Acquisition Proposal or
any other action, proposal, agreement or transaction that would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of the Issuer
Page 9 of 23
<PAGE>
under the Merger Agreement or which would result in any of the conditions to the
Issuer's obligations under the Merger Agreement not being fulfilled.
The obligations of the Stockholders under the Voting Agreement
terminate upon the earlier of (i) the effective time of the Merger or (ii) 180
days after the termination of the Merger Agreement in the case of termination
that entitles Emergis to a termination fee under the Merger Agreement or (iii)
on the date of termination, in the case of termination for any other reason.
The descriptions herein of the Voting Agreement and the Merger
Agreement are qualified in their entirely by reference to such agreements,
copies of which are filed hereto as Exhibits B and C respectively, and which are
specifically incorporated herein by reference in their entirety.
Concurrently with the execution of the Merger Agreement and the Voting
Agreement, Thomas L. Blair, the Chairman and Co-Chief Executive Officer of the
Issuer ("TLB"), and Edward S. Civera, President and Co-Chief Executive Officer
of the Issuer ("ESC") executed an option agreement (the "Option Agreement") in
favor of Emergis and Jetco, a copy of which is filed herewith as Exhibit D to
this Schedule 13D and is incorporated herein by reference. Pursuant to the
Option Agreement in the event that a named third party exercises its option to
purchase 2,250,000 shares of Common Stock of the Issuer from TLB, Emergis and
Jetco have an irrevocable option to require TLB to purchase 2,250,000 shares of
Common Stock of the Issuer from Independent Divestment Trust. In the event that
an Acquisition Proposal is received by the Issuer, Emergis and Jetco also have
an irrevocable option to require ESC to exercise employee stock options to
purchase 640,625 shares of Common Stock of the Issuer. As a condition to
exercising these options, Emergis must, by way of loans, to each of TLB and ESC,
respectively, make available the funds necessary to purchase such shares of
Common Stock of the Issuer. As security for the granting of these loans, each of
TLB and ESC have agreed to pledge such shares of Common Stock to Emergis. Any
shares of Common Stock of the Issuer purchased by TLB and ESC under the Option
Agreement will be voted by TLB and ESC in accordance with the terms of the
Voting Agreement.
Except as described herein, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons named in
Item 2 and between such persons and any person with respect to any Securities of
the Issuer, including but not limited to transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option arrangements, put or
calls, guarantors of profit, division of profit or loss or the giving or
withholding of proxies.
Page 10 of 23
<PAGE>
Item 7. Material to be Filed as Exhibits
Exhibit A Directors and Officers of the Reporting Persons.
Exhibit B Voting Agreement entered into by various stockholders in favor of
Emergis and Jetco, dated February 4, 2000.
Exhibit C Merger Agreement among Emergis, Jetco, the Issuer and Thomas L.
Blair dated February 4, 2000.
Exhibit D Option Agreement entered into by Thomas L. Blair and Edward S.
Civera in favor of Emergis and Jetco, dated February 4, 2000.
Exhibit E Joint Filing Agreement between the Reporting Persons pursuant to
Rule 13d-1(k)(l)(iii).
Page 11 of 23
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 14, 2000
BCE EMERGIS INC.
By: /s/ Monique Mercier
-------------------------------------
Name: Monique Mercier
Title: Senior Vice President, Law and
Corporate Secretary
Page 12 of 23
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 14, 2000
JETCO INC.
By: /s/ Francois Cote
-------------------------------------
Name: Francois Cote
Title: President and Chairman
Page 13 of 23
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 14, 2000
BCE INC.
By: /s/ Marc J. Ryan
-------------------------------------
Name: Marc J. Ryan
Title: Corporate Secretary
Page 14 of 23
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 14, 2000
3588513 CANADA INC.
By: /s/ Marc J. Ryan
-------------------------------------
Name: Marc J. Ryan
Title: Secretary
Page 15 of 23
<PAGE>
Exhibit A
Directors and Officers of BCE Emergis Inc.
Name Business Address Principal Occupation
---- ---------------- --------------------
William D. Anderson BCE Inc. Chief Financial Office,
Director 1000 de La Gauchetiere West BCE Inc.
Bureau 3700
Montreal, Quebec
Canada H3B 4YZ
Micheline Charest Cinar Corporation Chairman & Co-CEO,
Director 1055 Rene-Levesque Blvd. East Cinar Corporation
Suite 800
Montreal, Quebec
Canada H2L 4S5
Pierre Ducros P. Ducros & Associates Engineer
Director 1155 Rene-Levesque Blvd. #1012
Montreal, Quebec
Canada H3B 2J2
Robert Kearney P.O. Box 542 Director
Director Knowlton, Quebec
Canada JQE 1VO
Jean C. Monty BCE Inc. President and Chief
Director 1000 rue de La Gauchetiere Ouest Executive Officer, BCE
3700 Inc.
Montreal Quebec
Canada H3B 4Y7
Richard J. Renaud Wynchurst Capital Executive
Director 1 Place Ville Moise
Suite 3303
Montreal, Quebec
Canada
Gedas A. Sakus 46 Pheasant Lane Director
Director Toronto, Ontario
Canada M9A 1T4
W. Brian Edwards BCE Emergis Inc. President & CEO,
Director and 1155 Rene-Levesque Blvd. West BCE Emergis Inc.
President & CEO Montreal, Quebec
Canada H3B 4T3
Page 16 of 23
<PAGE>
Name Business Address Principal Occupation
---- ---------------- --------------------
C. Wesley M. Scott 483 Bay Street Chief Corporate Officer,
Floor 19 South BCE Inc.
Toronto, Ontario
Canada M5G 2E1
Christian Trudeau BCE Emergis Inc. Executive Vice President
1155 Rene-Levesque Blvd. West & COO, BCE Emergis Inc.
Montreal, Quebec
Canada H3B 4T3
Barry V. Engel BCE Emergis Inc. Senior Vice President,
1155 Rene-Levesque Blvd. West Corporate Affairs, BCE
Montreal, Quebec Emergis Inc.
Canada H3B 4T3
Donald W. MacKeigan BCE Emergis Inc. Chief Financial Officer,
1155 Rene-Levesque Blvd. West BCE Emergis Inc.
Montreal, Quebec
Canada H3B 4T3
Monique Mercier BCE Emergis Inc. Senior Vice President,Law
1155 Rene-Levesque Blvd. West and Corporate Secretary,
Montreal, Quebec BCE Emergis Inc.
Canada H3B 4T3
Page 17 of 23
<PAGE>
Directors and Officers of Jetco Inc.
Name Business Address Principal Occupation
---- ---------------- --------------------
Francois Cote BCE Emergis Inc. Senior Vice President,
Director, 1155 Rene-Levesque Blvd. Ouest M&A, BCE Emergis Inc.
Chairman and Montreal, Quebec
President Canada H3B 4T3
Monique Mercier BCE Emergis Inc. Senior Vice President,
Director, Secretary 1155 Rene-Levesque Blvd. Ouest Law and Corporate
and Treasurer Montreal, Quebec Secretary, BCE
Canada H3B 4T3 Emergis Inc.
Page 18 of 23
<PAGE>
Directors and Officers of BCE Inc.
Name Business Address Principal Occupation
---- ---------------- --------------------
Ralph MacKenzie Valleydene Corporation Limited President
Barford 1903-20 Eglinton Avenue West
Director P.O. Box 2026
Toronto Ontario
Canada M4R 1K8
Micheline Charest CINAR Corporation Chairman and Co-CEO
Director 1055 Rene-Levesque Blvd. East
Suite 800
Montreal, Quebec
Canada H2L 4S5
Richard J. Currie George Weston Limited President
Director 22 St. Clair Avenue East
Suite 2001
Toronto, Ontario
Canada M4T 2S7
Donna S. Kaufman 2 St. Claire Avenue East Lawyer, Corporate
Director 800 Director
Toronto, Ontario
Canada M4T 2T5
Thomas E. Kierans 100 Richmond Street West Chairman
Director 331
Chairman and CEO
Can. Inst. for Advanced
Research
Toronto, Ontario
Canada M5H 3K6
Brian M. Levitt 600 de Maisonneuve Blvd. West President and Chief
Director 19th Floor Executive Officer
Montreal, Quebec
Canada H3A 3K7
Judith Maxwell 250 Albert Economist
Director 600
Ottawa, Ontario
Canada K1P 6M1
Page 19 of 23
<PAGE>
Name Business Address Principal Occupation
---- ---------------- --------------------
John H. McArthur Harvard University Dean Emeritus
Director Graduate School of Bus. Admin.
Soldiers Field
Boston, Massachusetts 02163
USA
J. Edward Newall Newall & Associates Chairman
Director 2015 Bankers Hall
855 2nd Street S.W.
Calgary, Alberta
Canada T2P 4J7
Guy Saint-Pierre Groupe SCN-Lavalin Inc. Chairman of the Board
Director 455, Rene-Levesque Blvd. West
21st Floor
Montreal, Quebec
Canada H2Z 1Z3
Paul M. Tellier Canadian National Railway Co. President and Chief
Director 935 rue de La Gauchetiere Ouest Executive Officer
16th Floor
Montreal Quebec
Canada H3B 2M9
Lynton R. Wilson BCE Inc. Chairman of the Board
Director 181 Bay Street
4700
BCE Place P.O. Box 794
Toronto, Ontario
Canada M5J 2T3
Victor L. Young 70 O'Leary Avenue Chairman and Chief
Director P.O. Box 550 Executive Officer
St. John's Newfoundland
Canada A1C 5L1
William D. BCE Inc. Chief Financial Officer
Anderson 1000 rue de La Gauchetiere Ouest
3800
Montreal, Quebec
Canada H3B 4Y7
Page 20 of 23
<PAGE>
Name Business Address Principal Occupation
---- ---------------- --------------------
Michael T. Boychuk BCE Inc. Corporate Treasurer
1000 rue de La Gauchetiere Ouest
3700
Montreal, Quebec
Canada H3B 4Y7
Jean C. Monty BCE Inc. President and Chief
1000 rue de La Gauchetiere Ouest Executive Officer
3700
Montreal, Quebec
Canada H3B 4Y7
Peter J.M. BCE Inc. Chief Strategy Officer
Nicholson 1000 rue de La Gauchetiere Ouest
3700
Montreal, Quebec
Canada H3B 4Y7
Barry W. Pickford BCE Inc. Vice President, Taxation
1000 rue de La Gauchetiere Ouest
3700
Montreal, Quebec
Canada H3B 4Y7
Marc J. Ryan BCE Inc. Corporate Secretary
1000 rue de La Gauchetiere Ouest
3800
Montreal, Quebec
Canada H3B 4Y7
Martine Turcotte BCE Inc. Chief Legal Officer
1000 rue de La Gauchetiere Ouest
3800
Montreal, Quebec
Canada H3B 4Y7
Page 21 of 23
<PAGE>
Directors and Officers of 3588513 Canada Inc.
Name Business Address Principal Occupation
---- ---------------- --------------------
David G. Masse 1000 rue de La Gauchetiere Ouest Assistant Corporate
4100 Secretary, BCE Inc.
Montreal, Quebec
Canada H3B 5H8
Marc J. Ryan 1000 rue de La Gauchetiere Ouest Corporate Secretary,
3800 BCE Inc.
Montreal, Quebec
Canada H3B 5H8
Martine Turcotte 1000 rue de La Gauchetiere Ouest Chief Legal Officer,
3800 BCE Inc.
Montreal, Quebec
Canada H3B 4Y7
William D. 1000 rue de La Gauchetiere Ouest Treasurer
Anderson 3800
Montreal, Quebec
Canada H3B 4Y7
Barry W. Pickford 1000 rue de La Gauchetiere Ouest Assistant Treasurer
3700
Montreal, Quebec
Canada H3B 4Y7
Marc J. Ryan 1000 rue de La Gauchetiere Quest Secretary
3800
Montreal, Quebec
Canada H3B 4Y7
C. Wesley M. Scott 483 Bay Street Chairman of the Board
Floor 19 South
Toronto, Ontario
Canada M5G 2E1
Martine Turcotte 1000 rue de La Gauchetiere Ouest President
3800
Montreal, Quebec
Canada H3B 4Y7
Page 22 of 23
<PAGE>
EXHIBIT B
EXECUTION COPY
VOTING AGREEMENT
VOTING AGREEMENT, dated as of February 4, 2000 (this "Agreement"),
in favor of BCE EMERGIS INC., a corporation organized under the laws of Canada
("Parent") and JETCO INC., a Delaware corporation and a wholly owned subsidiary
of Parent ("Subsidiary"), granted by the stockholders whose names appear on the
signature pages of this Agreement (each a "Stockholder" and collectively the
"Stockholders").
WHEREAS, as of the date hereof and except as noted on Exhibit A
hereto, each Stockholder represents and warrants to Parent that he owns of
record and beneficially, without encumbrance, and has the sole power to vote,
the number of shares of common stock, par value $0.01 per share ("Company Common
Stock"), of United Payors & United Providers, Inc., a Delaware corporation (the
"Company ") as set forth opposite such Stockholder's name on Exhibit A hereto
(all such Company Common Stock and any shares of Company Common Stock of which
ownership of record or the power to vote is hereafter acquired by the
Stockholders prior to the termination of this Agreement being referred to herein
as the "Shares"); and
WHEREAS, Parent, Subsidiary and the Company propose to enter into an
Agreement and Plan of Merger, dated as of even date herewith (as the same may be
amended from time to time, the "Merger Agreement"; capitalized terms used and
not otherwise defined herein shall have the respective meanings assigned to them
in the Merger Agreement), a draft of which has been made available to each
Stockholder and which provides, upon the terms and subject to the conditions
thereof, for the merger of the Subsidiary with and into the Company (the
"Merger");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
1. Transfer of Shares. No Stockholder shall, directly or indirectly, (a)
sell, pledge or otherwise dispose of or encumber any or all of such
Stockholder's Shares, (b) deposit any Shares into a voting trust or enter into a
voting agreement or arrangement with respect to any Shares or grant any proxy
with respect thereto or (c) enter into any contract, option or other arrangement
or undertaking with respect to the direct or indirect acquisition or sale,
assignment, transfer or other disposition of any Shares.
2. Voting of Shares. (a) Each Stockholder, by this Agreement, with respect
to the Shares set out in Exhibit A hereto (except as noted on Exhibit A hereto)
and any Shares hereinafter acquired by such Stockholder, does hereby agree that,
at the Company Stockholders' Meeting or any meeting of the stockholders of the
Company, however called, and in any action by written consent of the
stockholders of the Company, such Stockholder shall vote all of such
Stockholder's Shares (i) in favor of the adoption and approval of the Merger
Agreement, the Merger and the other transactions contemplated by the Merger
Agreement and this Agreement, and (ii) against any transaction pursuant to an
Acquisition Proposal (as set forth below in Section 3) or any other action,
proposal, agreement or transaction (other than the Merger Agreement or the
transactions contemplated thereby) that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or which could result in any of the
conditions to the Company's obligations under the Merger Agreement not being
fulfilled.
(b) The obligations of the Stockholders under this Agreement shall
terminate upon the earlier of (i) the Effective Time and (ii) (A) 180 days after
the termination of the Merger Agreement in case of termination pursuant to
Sections 8.01(d) or 8.01(e) of the Merger Agreement, or (B) on the date of
termination in the case of termination of the Merger Agreement for any other
reason. Nothing in this Section 1.02(c) shall relieve any party of liability for
any breach of this Agreement.
1
<PAGE>
3. Acquisition Proposals. The Stockholder shall not take, directly or
indirectly, (nor shall the Stockholder authorize or permit its representatives
or, to the extent within the Stockholder's control, its affiliates to take) any
action to (i) encourage (including by way of furnishing nonpublic information),
solicit, initiate or facilitate any Acquisition Proposal (as defined in the
Merger Agreement), (ii) enter into any letter of intent, term sheet or other
agreement with respect to any Acquisition Proposal or (iii) participate in any
way in discussions or negotiations with, or furnish any information to, any
person in connection with, or take any other action to facilitate any inquiries
or the making of any proposal that constitutes, or could reasonably be expected
to lead to, any Acquisition Proposal; provided, however, that nothing in this
Section 3.04 shall prevent the Stockholder, in his capacity as a director or
executive officer of the Company from engaging in any activity permitted
pursuant to Section 6.04 of the Merger Agreement. The Stockholder shall
immediately cease and cause to be terminated all discussions or negotiations
commenced prior to the date hereof with respect to any Acquisition Proposal.
From and after the date of the execution of this Agreement, the Stockholder will
as promptly as practicable communicate to Parent orally and in writing any
inquiry received by him relating to any potential Acquisition Proposal and the
material terms of any proposal or inquiry, including the identity of the person
and its affiliates making the same, that he may receive in respect of any such
negotiations or discussions being sought to be initiated with the Company. The
Stockholder shall (i) keep Parent fully informed on a prompt basis with respect
to any developments with respect to the foregoing and (ii) provide to Parent as
soon as practicable after receipt or delivery thereof with copies of all
correspondence and other written material sent or provided to the Company from
any third party in connection with any Acquisition Proposal. In addition, each
of the Stockholders who is also an employee of the Company agrees that he will
not enter into any employment, consulting or similar arrangement (or participate
in any negotiations or discussions concerning such arrangements) with any person
other than Parent or the Company prior to termination of this Agreement in
accordance with its terms.
4. Miscellaneous. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect as long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party; neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise); nothing in this Agreement,
express or implied, is intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
The parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity; this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York; all actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in the United States District Court
for the Southern District of New York and each of the parties to this Agreement
consents to submit itself to the personal jurisdiction of the United States
District Court for the Southern District of New York in the event that any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement; EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
STOCKHOLDERS
/s/ Thomas L. Blair
--------------------------------------------
Thomas L. Blair
/s/ Edward S. Civera
--------------------------------------------
Edward S. Civera
/s/ S. Joseph Bruno
--------------------------------------------
S. Joseph Bruno
/s/ Spiro Karadimas
--------------------------------------------
Spiro Karadimas
/s/ Eduardo V. Feito
--------------------------------------------
Eduardo V. Feito
/s/ John B. Maas
--------------------------------------------
John B. Maas
/s/ Michael A. Smith
--------------------------------------------
Michael A. Smith
/s/ Douglas P. Faucette
--------------------------------------------
Douglas P. Faucette
/s/ Steven B. Epstein
--------------------------------------------
Steven B. Epstein
/s/ David T. Blair
--------------------------------------------
David T. Blair
/s/ James A. Signora
--------------------------------------------
James A. Signora
/s/ Andrew L. Blair
--------------------------------------------
Andrew L. Blair
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
/s/ Michael P. Donovan
--------------------------------------------
Michael P. Donovan
/s/ Alice M. Blair
--------------------------------------------
Alice M. Blair for Blair Grandchildren
Under the Uniform Gifts to Minors Act
PRINCIPAL MUTUAL HOLDING COMPANY
By: /s/ Thomas J. Graff
--------------------------------------------
Name: Thomas J. Graff
HEALTHEXTRAS
By: /s/ Michael P. Donovan
--------------------------------------------
Name: Michael P. Donovan
SOUTHERN AIRCRAFT LEASING COMPANY
By: /s/ James Hoyt
--------------------------------------------
Name: James Hoyt
STALLION 51
By: /s/ Lee Lauderback
--------------------------------------------
Name: Lee Lauderback
4
<PAGE>
EXHIBIT A
LIST OF STOCKHOLDERS
Number of Shares of Company
Common Stock owned Beneficially
Name of Stockholder and of Record
------------------- -------------------------------
Thomas L. Blair 2,624,500
HealthExtras, Inc. 40,150
Southern Aircraft Leasing Corp 18,500
Sprio A. Karadimas 500,943
S. Joseph Bruno 434,839
Principal Health Care, Inc. 850,000
Steven Epstein 370,000
John Maas 168,000
Eduardo Feito 145,000
David T. Blair 135,600
Michael Smith 113,000
Douglas P. Faucette 90,000
James Signora 74,750
Andrew Blair 63,750
Stallion 51 45,000
Alice M. Blair as trustee under UGMA 35,000
---------
5,709,032
<PAGE>
5
EXHIBIT C
EXECUTION
COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
BCE EMERGIS INC.,
JETCO INC.,
UNITED PAYORS &
UNITED PROVIDERS, INC. and
THOMAS L. BLAIR
Dated as of February 4, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
1.01. The Merger..............................................................2
1.02. Closing.................................................................2
1.03. Effective Time..........................................................2
1.04. Effects of the Merger...................................................2
1.05. Certificate of Incorporation and By-Laws of the
Surviving Corporation...................................................2
1.06. Directors and Officers of the Surviving Corporation.....................3
ARTICLE II
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
2.01. Conversion of Company Common Stock......................................3
2.02. Dissenting Shares.......................................................4
2.03. Anti-Dilution Provisions................................................4
2.04. Surrender of Shares.....................................................4
2.05. Stock Transfer Books....................................................6
2.06. Company Stock Options...................................................6
2.07. Company Warrants........................................................7
2.08. Application of Certain Amounts of the Principal Stockholder's
Merger Consideration....................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01. Organization and Qualification; Subsidiaries...........................10
3.02. Certificate of Incorporation and By-Laws...............................11
3.03. Capitalization.........................................................11
3.04. Authority Relative to This Agreement...................................12
3.05. No Conflict; Required Filings and Consents.............................12
3.06. Permits; Compliance With Law...........................................14
3.07. SEC Filings; Financial Statements......................................14
3.08. Undisclosed Liabilities................................................15
3.09. Absence of Certain Changes or Events...................................15
3.10. Absence of Litigation..................................................16
3.11. Employee Benefit Matters...............................................16
3.12. Labor Matters..........................................................18
<PAGE>
ii
3.13. Employees of the Company...............................................19
3.14. Company Material Contracts.............................................19
3.15. Customers..............................................................21
3.16. Environmental Matters..................................................21
3.17. Title to Properties; Absence of Liens and Encumbrances.................22
3.18. Intellectual Property..................................................22
3.19. Year 2000 Compliance...................................................25
3.20. Taxes..................................................................26
3.21. Insurance..............................................................26
3.22. Affiliate Transactions.................................................27
3.23. Managed Care Matters...................................................27
3.24. State Takeover Statutes................................................27
3.25. Board Approval; Vote Required..........................................28
3.26. Opinion of Financial Advisor...........................................28
3.27. Brokers................................................................28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
4.01. Organization and Qualification; Subsidiaries...........................28
4.02. Authority Relative to This Agreement...................................29
4.03. No Conflict; Required Filings and Consents.............................29
4.04. Financing..............................................................30
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
5.01. Conduct of Business by the Company Pending the Merger..................30
5.02. Notification of Certain Matters........................................33
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Proxy Statement........................................................33
6.02. Company Stockholders' Meeting..........................................34
6.03. Access to Information; Confidentiality.................................34
6.04. No Solicitation of Transactions........................................35
6.05. Directors' and Officers' Indemnification and Insurance.................36
<PAGE>
iii
6.06. Further Action; Consents; Filings......................................37
6.07. Public Announcements...................................................38
6.08. Certain Employee Benefits Matters......................................39
6.09. HealthExtras Inc.......................................................39
6.10. Sale of the Company Bank...............................................39
6.11. Inactive Company Subsidiaries..........................................40
6.12. Warrants...............................................................40
6.13. Section 16 Matters.....................................................40
ARTICLE VII
CONDITIONS TO THE MERGER
7.01. Conditions to the Obligations of Each Party............................40
7.02. Conditions to the Obligations of Parent and Merger Sub.................41
7.03. Conditions to the Obligations of the Company...........................42
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01. Termination............................................................43
8.02. Effect of Termination..................................................44
8.03. Amendment..............................................................44
8.04. Waiver.................................................................44
8.05. Expenses...............................................................45
8.06. Fees...................................................................45
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.01. Survival of Representation and Warranties..............................46
9.02. Indemnification........................................................46
9.03. Notice of Claim........................................................47
9.04. Defense................................................................47
<PAGE>
iv
ARTICLE X
GENERAL PROVISIONS
10.01. Notices...............................................................48
10.02. Assignment; Binding Effect; Benefit...................................49
10.03. Certain Definitions...................................................50
10.04. Severability..........................................................51
10.05. Specific Performance..................................................51
10.06. Governing Law; Forum..................................................51
10.07. Headings..............................................................51
10.08. Counterparts..........................................................51
10.09. Entire Agreement......................................................52
10.10. Waiver of Jury Trial..................................................52
<PAGE>
Glossary of Defined Terms
Location of
Defined Term Definition
- ------------ -----------
Acquisition Proposal................................................ss. 6.04(c)
Action..............................................................ss. 3.10
Adjustment Amounts..................................................ss. 2.08(a)
affiliate...........................................................ss. 10.03(a)
Agreement...........................................................Preamble
Bank Regulatory Agreement...........................................ss. 3.05(c)
Bank Regulatory Authorities.........................................ss. 3.05(b)
Bank Sale...........................................................ss. 6.10(a)
Blue Sky Laws.......................................................ss. 3.05(b)
business day........................................................ss. 10.03(b)
Canadian Securities Laws............................................ss. 3.05(b)
Certificate of Merger...............................................ss. 1.03
Certificates........................................................ss. 2.04(b)
Closing.............................................................ss. 1.02
Closing Date........................................................ss. 1.02
Code................................................................ss. 2.04(f)
Company.............................................................Preamble
Company Bank........................................................ss. 6.06(a)
Company Benefit Plans...............................................ss. 3.11(a)
Company Board Approval..............................................ss. 3.25
Company Common Stock................................................Recitals
Company Disclosure Schedule.........................................ss. 3.01(b)
Company Licensed Intellectual Property..............................ss. 3.18(h)
Company Material Contracts..........................................ss. 3.14(a)
Company Owned Intellectual Property.................................ss. 3.18(h)
Company Permits.....................................................ss. 3.06(a)
Company Preferred Stock.............................................ss. 3.03
Company SEC Reports.................................................ss. 3.07(a)
Company Software....................................................ss. 3.18(h)
Company Stock Option Plan...........................................ss. 2.06(a)
Company Stock Options...............................................ss. 2.06(a)
Company Stockholders' Approval......................................ss. 3.04
Company Stockholders' Meeting.......................................ss. 3.24
Company Subsidiaries................................................ss. 3.01(a)
Company Systems.....................................................ss. 3.19
<PAGE>
Confidentiality Agreement...........................................ss. 6.03(b)
control.............................................................ss. 10.03(c)
DGCL................................................................Recitals
Dissenting Shares...................................................ss. 2.02
$ or dollar.........................................................ss. 10.03(i)
Effective Time......................................................ss. 1.03
Employee Amount.....................................................ss. 2.08(a)
Environmental Law...................................................ss. 3.16
Environmental Permits...............................................ss. 3.16
ERISA...............................................................ss. 3.11(a)
ESPP................................................................ss. 2.06(b)
Exchange Act........................................................ss. 3.05(b)
Executive...........................................................ss. 2.08(c)
Executive Agreements................................................Recitals
Executive Employees.................................................Recitals
Expenses............................................................ss. 8.05(a)
FDIC................................................................ss. 3.05(b)
Fee.................................................................ss. 8.06(a)
FRB.................................................................ss. 3.05(b)
Governmental Entity.................................................ss. 3.05(b)
Hazardous Substances................................................ss. 3.16
HealthExtras Option.................................................ss. 6.09(c)
HSR Act.............................................................ss. 3.05(b)
Inactive Company Subsidiaries.......................................ss. 3.01(b)
Indemnified Parties.................................................ss. 6.05(b)
Indemnity Amount....................................................ss. 2.08(a)
Intellectual Property...............................................ss. 3.18(h)
IRS.................................................................ss. 3.11(a)
knowledge...........................................................ss. 10.03(d)
Law.................................................................ss. 3.05(a)
Licenses............................................................ss. 3.18(h)
Liens...............................................................ss. 3.17(b)
Loss................................................................ss. 9.02(b)
JP Morgan...........................................................ss. 3.26
Material Adverse Effect.............................................ss. 10.03(e)
Merger..............................................................Recitals
Merger Consideration................................................ss. 2.01(a)
Merger Sub..........................................................Preamble
Multiemployer Plan..................................................ss. 3.11(b)
Multiple Employer Plan..............................................ss. 3.11(b)
NASDAQ..............................................................ss. 3.05(b)
<PAGE>
Note..............................................................ss. 2.07(a)(i)
Optionee..........................................................ss. 2.06(a)
Order.............................................................ss. 7.01(b)
OTS...............................................................ss. 3.05(b)
Parent............................................................Preamble
Parent Indemnified Parties........................................ss. 9.02(a)
Payor.............................................................ss. 3.15
Paying Agent......................................................ss. 2.04(a)
person............................................................ss. 10.03(f)
Principal Stockholder.............................................Preamble
Proxy Statement...................................................ss. 6.01(a)
Representatives...................................................ss. 6.03(a)
Required Consents.................................................ss. 3.05(b)
SEC...............................................................ss. 3.07(a)
Securities Act....................................................ss. 3.05(b)
Software..........................................................ss. 3.18(h)
subsidiary or subsidiaries........................................ss. 10.03(g)
Superior Proposal.................................................ss. 6.04(c)
Surviving Corporation.............................................ss. 1.01
Taxes.............................................................ss. 3.20
Third Party Provisions............................................ss. 10.02
TSE...............................................................ss. 3.05(b)
U.S. GAAP.........................................................ss. 3.07(b)
Voting Agreement..................................................Recitals
Warrants..........................................................ss. 10.03(h)
Year 2000 Compliant...............................................ss. 3.19
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of February 4, 2000
(this "Agreement") among BCE EMERGIS INC., a corporation organized under the
laws of Canada ("Parent"), JETCO INC., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), UNITED PAYORS & UNITED PROVIDERS, INC., a
Delaware corporation (the "Company"), and THOMAS L. BLAIR (the "Principal
Stockholder").
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company have approved and declared advisable this Agreement and the
merger of Merger Sub with and into the Company (the "Merger") in accordance with
the General Corporation Law of the State of Delaware (the "DGCL") and upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of common stock, par value $0.01 per share, of the
Company ("Company Common Stock"), other than shares of Company Common Stock
owned by Parent, Merger Sub or the Company, and other than Dissenting Shares (as
defined in Section 2.02 below), will be converted into the right to receive
$27.00 per share of Company Common Stock, without interest thereon, as provided
for herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, Parent and the Principal Stockholder, along with certain
other stockholders of the Company, are entering into a voting agreement (the
"Voting Agreement") pursuant to which such stockholders agree to vote to approve
the Merger and adopt this Agreement, and to take certain other actions in
furtherance of the Merger upon the terms and subject to the conditions set forth
in the Voting Agreement;
WHEREAS, certain executive officers (the "Executive
Employees") continue to be employed by the Company and the Company has executed
employment agreements with each of the Executive Employees and has executed a
consulting agreement with the Principal Stockholder (such employment agreements
and consulting agreement being, collectively, the "Executive Agreements"); and
WHEREAS, the Principal Stockholder has agreed to indemnify
Parent and Merger Sub in respect of certain matters and has agreed to purchase
all of the Company's right, title and interest in and to the Company Bank (as
defined herein), in each case as provided for herein;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, and intending
to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as
follows:
<PAGE>
2
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement and in accordance with the DGCL, Merger
Sub shall be merged with and into the Company at the Effective Time (as defined
in Section 1.03). Following the Effective Time, the separate corporate existence
of Merger Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of the Company in accordance with the DGCL.
SECTION 1.02. Closing. The closing of the Merger (the
"Closing") shall take place at 10:00 a.m. (New York time) at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York on a date to be
specified by the parties hereto (the "Closing Date"), which shall be no later
than the second business day after satisfaction or waiver of the conditions set
forth in Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of such
conditions), unless another time, date or place is agreed to by the parties
hereto.
SECTION 1.03. Effective Time. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date, the parties
shall file a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware executed in accordance with the
relevant provisions of the DGCL and shall make all other filings or recordings
required by applicable law in connection with the Merger. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of the State of Delaware or at such later date or time as
is agreed upon by the parties and specified in the Certificate of Merger (the
time the Merger becomes effective being hereinafter referred to as the
"Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the
effects as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.05. Certificate of Incorporation and By-Laws of the
Surviving Corporation. (a) At the Effective Time, the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended, subject to Section 6.05(a), as provided by law and
such Certificate of Incorporation; provided, however, that, at the Effective
Time, Article I of the Certificate of Incorporation of the Surviving Corporation
shall be amended to read as follows: "The name of the corporation is United
Payors & United Providers, Inc."
<PAGE>
3
(b) Unless otherwise determined by Parent prior to the
Effective Time, the By-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-laws.
SECTION 1.06. Directors and Officers of the Surviving
Corporation. (a) The directors of Merger Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation until the earlier of
their resignation or removal or until their successors are duly elected and
qualified, as the case may be.
(b) The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Company Common Stock. At the
Effective Time, by virtue of the Merger and without any action on the part of
Parent, Merger Sub, the Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. Subject to Section
2.02 and Section 2.04(e), each issued and outstanding share of Company
Common Stock (other than shares to be canceled pursuant to Section
2.01(b)) shall be automatically converted into the right to receive
$27.00 in cash, without interest thereon (the "Merger Consideration").
As of the Effective Time, all such shares of Company Common Stock shall
no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the
Merger Consideration, without interest.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of Company Common Stock owned by Parent or any direct or
indirect wholly owned subsidiary of Parent or held in the treasury of
the Company or any Subsidiary of the Company shall be canceled and
extinguished without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(c) Conversion of Merger Sub Common Stock. Each share of
common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted
into and exchanged for one validly issued, fully paid
<PAGE>
4
and nonassessable share of common stock, par value $0.01 per share, of
the Surviving Corporation.
SECTION 2.02. Dissenting Shares. Notwithstanding any provision
of this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders shall be entitled to receive
payment of the appraised value of such shares held by them in accordance with
the provisions of such section 262, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares under such section
262 shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, upon surrender, in the manner
provided in Section 2.04, of the certificate or certificates that formerly
evidenced such shares. The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other 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 Parent, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.
SECTION 2.03. Anti-Dilution Provisions. Subject to the terms
and conditions of this Agreement, in the event the Company changes the number of
shares of Company Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, recapitalization,
reclassification, redenomination of share capital or other similar transaction,
the Merger Consideration shall be proportionately adjusted to reflect such stock
split, stock dividend, recapitalization, reclassification, redenomination of
share capital or other similar transaction.
SECTION 2.04. Surrender of Shares. (a) Prior to the Effective
Time, Merger Sub shall designate a bank or trust company to act as agent (the
"Paying Agent") for the holders of shares of Company Common Stock to receive the
funds to which such holders shall become entitled pursuant to Section 2.01(a).
On or prior to the Effective Time, Parent shall deposit, or shall cause to be
deposited, with the Paying Agent, for the benefit of the holders of shares of
Company Common Stock for payment in accordance with this Article II through the
Paying Agent, cash required to pay the aggregate Merger Consideration. Such
funds shall be invested by the Paying Agent as directed by Parent.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at the Effective
Time, a holder of record of shares of Company Common Stock entitled to receive
the Merger Consideration pursuant to
<PAGE>
5
Section 2.01(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such shares of Company Common Stock (the "Certificates") shall pass,
only upon proper delivery of the Certificates to the Paying Agent), which shall
be in customary form and shall have such other conditions as Parent may
reasonably specify and instructions for use in effecting the surrender of the
Certificates pursuant to such letter of transmittal. Upon surrender to the
Paying Agent of a Certificate, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration for each share of Company Common Stock formerly evidenced
by such Certificate, and such Certificate shall then be canceled. No interest
shall accrue or be paid on the Merger Consideration payable upon the surrender
of any Certificate for the benefit of the holder of such Certificate. If the
payment equal to the Merger Consideration is to be made to a person other than
the person in whose name the surrendered Certificate formerly evidencing shares
of Company Common Stock is registered on the stock transfer books of the
Company, it shall be a condition of payment that the Certificate so surrendered
shall be endorsed properly or otherwise be in proper form for transfer,
accompanied by all documents required to effect such transfer and the ownership
of such shares by such transferor and evidence that all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered have been paid, or
shall have established to the satisfaction of Merger Sub that such taxes either
have been paid or are not applicable.
(c) No Further Rights in Company Common Stock. The Merger
Consideration paid upon conversion of the shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock.
(d) Return of Funds. At any time following the sixth month
after the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds which had been made available to the
Paying Agent and not disbursed to holders of shares of Company Common Stock
(including, without limitation, all interest and other income received by the
Paying Agent in respect of all funds made available to it), and, thereafter,
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat and other similar Law) only as general creditors
thereof with respect to any Merger Consideration that may be payable upon due
surrender of the Certificates held by them.
(e) No Liability. Neither Parent nor the Surviving Corporation
shall be liable to any holder of shares of Company Common Stock in respect of
any Merger Consideration that is delivered to a public official pursuant to any
abandoned property, escheat or similar Law. If any Certificate shall not have
been surrendered prior to six months after the Effective Time (or immediately
prior to such earlier date on which any Merger Consideration would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 3.05(b)), any such Merger Consideration, to the extent permitted by
applicable Law, will become the
<PAGE>
6
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(f) Withholding. Each of the Surviving Corporation, Parent and
the Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold under the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
any state, local or foreign tax law, with respect to the making of such payment.
To the extent that amounts are so withheld by the Surviving Corporation, Parent
or the Paying Agent, as the case may be, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of shares
of Company Common Stock in respect of which such deduction and withholding were
made by the Surviving Corporation, Parent or the Paying Agent, as the case may
be.
(g) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration, without any interest thereon.
SECTION 2.05. Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and, thereafter, there shall
be no further registration of transfers of shares of Company Common Stock
theretofore outstanding on the records of the Company. From and after the
Effective Time, the holders of Certificates representing 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 formerly
represented thereby, except as otherwise provided in this Agreement or by Law.
SECTION 2.06. Company Stock Options. (a) At the Effective
Time, all outstanding stock options (the "Company Stock Options") issued under
the Company's 1996 Stock Option Plan (the "Company Stock Option Plan") shall
become vested according to the terms of the Company Stock Option Plan and, at
the Effective Time, for each Company Stock Option, the holder of each such
Company Stock Option (an "Optionee") shall be entitled to receive, and shall
receive, in settlement and cancellation thereof, an amount of cash equal to the
product of (A) the difference between the Merger Consideration and the exercise
price of each Company Stock Option, and (B) the number of shares of Company
Common Stock covered by such Company Stock Option, which payment shall be made
to each Optionee as soon as practicable after the Effective Time. As of the
Effective Time, the Company shall cause the Company Stock Option Plan to
terminate. In the event any Optionee exercises any Company Stock Option prior to
the Effective Time, the Company shall deposit and preserve the proceeds
<PAGE>
7
from the exercise of any such Company Stock Option in a separate bank account to
be established by the Company.
(b) Employee Stock Purchase Plan. The Company's 1996 Employee
Stock Purchase Plan, as amended (the "ESPP"), will continue in effect according
to its terms until the end of the "offering period" (as such term is defined in
the ESPP) ending on March 31, 2000, on which date the Company shall terminate
the ESPP and cease making any payroll deductions in connection with the ESPP.
SECTION 2.07. Company Warrants. (a) At the Effective Time, the
holder of each Warrant (as defined in Section 10.03(a)) shall be entitled to
receive, and shall receive, in settlement and cancellation thereof, an amount of
cash equal to the product of (A) the difference between the Merger Consideration
and the exercise price of each such Warrant, and (B) the number of shares of
Company Common Stock covered by such Warrant, which payment shall be made to
each such Warrant holder as soon as practicable after the Effective Time. In the
event, any holder of a Warrant exercises such Warrant prior to the Effective
Time, the Company shall deposit and preserve the proceeds from the exercise of
any such Warrant in the bank account to be established by the Company pursuant
to Section 2.06(a).
SECTION 2.08. Application of Certain Amounts of the Principal
Stockholder's Merger Consideration.
(a) The aggregate amount of Merger Consideration the Principal
Stockholder would be entitled to receive pursuant to Section 2.01(a) in respect
of shares of Company Common Stock held by the Principal Stockholder at the
Effective Time which shall be paid to the Principal Stockholder in accordance
with the other provisions of this Article shall be reduced by the following
amounts (such amounts referred to in clauses (i) through (iii) of Section
2.08(a) being referred to collectively as the "Adjustment Amounts"):
(i) Subject to any claim Parent may have under the secured
promissory note that the Principal Stockholder shall issue to Parent or
its designee on or before the Effective Time (the "Note") on the
collateral represented by such amount, $5,000,000 shall be retained by
Parent, to be released to the Principal Stockholder in accordance with
the terms of the consulting agreement executed by the Company and the
Principal Stockholder upon the achievement of the goals of the business
plan of the Surviving Corporation to the extent reasonably practicable,
which business plan shall be developed by Parent prior to the Effective
Date;
(ii) $3,000,000, representing the "Indemnity Amount", shall be
retained by Parent and released to the Principal Stockholder in
accordance with this Section 2.08 and Article IX; and
<PAGE>
8
(iii) $2,000,000, representing the "Employee Amount", shall be
retained by Parent and released to the Principal Shareholder in
accordance with this Section 2.08.
(b) The Adjustment Amounts retained by Parent shall bear
interest at the rate of seven percent per annum, to be calculated annually and
paid to the Principal Stockholder on the release of the funds, if any,
represented by such Adjustment Amounts in accordance with the provisions of this
Section 2.08(a); provided, however, that the Principal Stockholder shall only be
entitled to interest on the actual Adjustment Amounts, if any, released to the
Principal Stockholder and not on any Adjustment Amounts retained by Parent in
accordance with this Section 2.08 and Article IX.
(c) Subject to any claims Parent may have under the Note on
the collateral represented by the Employee Amount, if Edward S. Civera (the
"Executive") continues to be employed by the Surviving Corporation on the first
year anniversary of the Effective Time, $1,000,000 of the Employee Amount,
together with any interest thereon, shall be released by Parent to the Principal
Stockholder within five business days of such first year anniversary and if the
Executive continues to be employed by the Surviving Corporation on the second
year anniversary of the Effective Time, the remaining Employee Amount, together
with any interest thereon, shall be released by Parent to the Principal
Stockholder within five business days of such second year anniversary; provided,
however, in the event the Executive's employment with the Surviving Corporation
is terminated other than for Cause (as defined in the Executive Agreement) or
pursuant to a Voluntary Termination (as defined below) at any time prior to the
second year anniversary of the Effective Time, the Employee Amount, together
with any interest thereon, shall be released by Parent to the Principal
Stockholder within five business days of such termination.
For purposes of this Section 2.08(c), the Executive shall be
deemed to continue to be employed by the Surviving Corporation unless: (i) the
Executive's employment is terminated for Cause by the Surviving Corporation in
accordance with his Executive Agreement or (ii) the Executive's employment is
terminated by a "Voluntary Termination" as defined below.
Voluntary Termination of employment shall be a termination by
the Executive of his employment with the Surviving Corporation, but shall not
include any termination as a result of:
(i) death or disability;
(ii) a termination of employment by the Executive after:
(A) a change in control of the Surviving Corporation,
including a change in control of any entity directly or indirectly
controlling the Surviving Corporation (collectively for purposes of the
definition or change in control set forth below, the "Surviving
Corporation");
<PAGE>
9
(B) a material adverse reduction in the Executive's
responsibilities which causes the Executive's position to become one of
lesser status within the Surviving Corporation from the Executive's
position with the Surviving Corporation immediately following the
Effective Time without his consent;
(C) a change in the location of the Executive's place of
employment of more than 50 miles from Rockville, Maryland without his
consent; or
(D) a material adverse change in the benefits or perquisites
payable to the Executive from those provided immediately after the
Effective Time, pursuant to his Executive Agreement unless such
material adverse change is imposed on employees of the Surviving
Corporation generally.
For purpose of this Section 2.08(c), a change in control shall
have occurred if:
(i) any "person" (as such term is used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934) is or
becomes the beneficial owner, directly or indirectly, of
securities of the Surviving Corporation representing 50% or
more of the combined voting power of the Surviving
Corporation's then outstanding securities; or
(ii) during any period of twenty-four consecutive
months, individuals who at the beginning of such period
constitute the Board of Directors of the Surviving Corporation
cease for any reason to constitute at least a majority thereof
unless the election, or the nomination for election by the
Surviving Corporation's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of
the period; or
(iii) the stockholders of the Surviving Corporation
approve a definitive agreement:
(A) for the merger or other business combination of
the Surviving Corporation with or into another corporation
pursuant to which the Surviving Corporation will not survive
or will survive only as a subsidiary of another corporation;
(B) for the sale or other disposition of all or
substantially all of the assets of the Surviving Corporation;
(C) for the merger of another corporation into the
Surviving Corporation which survives if, as a result of such
merger, less than fifty percent (50%) of the outstanding
voting securities of the Surviving Corporation shall be owned
in the
<PAGE>
10
aggregate immediately after such merger by the owners of the
voting shares of the Surviving Corporation outstanding
immediately prior to such merger;
(D) for the liquidation or dissolution of the
Surviving Corporation; or
(E) any combination of the foregoing.
(d) Subject to any claims Parent may have under the Note on
the collateral represented by the Indemnity Amount and subject further to any
reductions of the Indemnity Amount under Article IX, Parent shall release to the
Principal Stockholder the Indemnity Amount remaining on deposit with Parent
within five business days of the first year anniversary of the Effective Time;
provided, however, that if a notice of indemnification has been given to the
Principal Stockholder prior to the end of such period, the Indemnity Amount
shall be retained by Parent and not released to the Principal Stockholder, as
long as necessary to permit final resolution of such matter.
(e) On or before the Effective Time, Parent shall, or shall
cause its designee to, loan to the Principal Stockholder in immediately
available funds, the principal amount of the Note, which Parent and the
Principal Stockholder reasonably estimate will be $8,000,000. The Principal
Stockholder shall repay the principal amount of the Note, together with interest
thereon at the rate of seven percent per annum no later than one year from the
issue date of the Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each of the Company and the Principal Stockholder, jointly and
severally, hereby represent and warrant to Parent and Merger Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries.
(a) Each of the Company and each subsidiary of the Company (collectively, the
"Company Subsidiaries") is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (as defined in Section 10.03(e)) or prevent or
materially delay the consummation of transactions contemplated by this
Agreement. Each of the Company and the Company Subsidiaries is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing or good standing necessary,
except for such failures to be so qualified or licensed and in good standing
that would not, individually or in the aggregate, reasonably be expected to have
a Material
<PAGE>
11
Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
(b) Section 3.01(b) of the disclosure schedule delivered by
the Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule") sets forth a true and complete list of all the Company
Subsidiaries and separately identifies all inactive Company Subsidiaries (the
"Inactive Company Subsidiaries"). Except as set forth in Section 3.01 of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary
directly or indirectly owns, or has outstanding contractual obligations to
acquire, 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.
SECTION 3.02. Certificate of Incorporation and By-Laws. The
Company has heretofore made available to Parent a complete and correct copy of
the Certificate of Incorporation and the By-Laws of the Company, each as amended
to date. Such Certificate of Incorporation and By-Laws are in full force and
effect. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or By-Laws. True and complete copies of all minute
books of the Company have been made available by the Company to Parent.
SECTION 3.03. Capitalization. The authorized capital stock of
the Company consists of 35,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $0.01 per share ("Company Preferred
Stock"). As of February 4, 2000, (a) 19,052,939 shares of Company Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (b) 33,000 shares of Company Common Stock are held in the
treasury of the Company, (c) no shares of Company Common Stock are held by the
Company Subsidiaries, (d) 1,786,500 shares of Company Common Stock are reserved
for future issuance pursuant to outstanding Company Stock Options granted
pursuant to the Company Stock Option Plan and (e) 498,000 shares of Company
Common Stock are reserved for future issuance pursuant to outstanding Warrants.
As of the date hereof, no shares of Company Preferred Stock are issued and
outstanding. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. The Company has previously
provided Parent with a true and complete list, as of the date hereof, of the
prices at which outstanding Company Stock Options may be exercised under the
applicable Company Stock Option Plan, the number of Company Stock Options
outstanding at each such price, the vesting schedule and the expiration date of
the Company Stock Options for each holder thereof. There are no other options,
warrants or other rights to acquire Company Common Stock. Except as contained in
the Voting Agreement or as set forth in Section 3.03 of the Company Disclosure
Schedule, there are no outstanding contractual obligations, securities, warrants
or undertakings of any kind of the Company or any Company Subsidiary (A)
restricting the transfer of, (B) affecting the voting rights of, (C) requiring
the repurchase, redemption, issuance, sale or disposition of, or containing any
right of first refusal
<PAGE>
12
with respect to, (D) requiring the registration for sale of, or (E) granting any
preemptive or antidilutive right with respect to, any shares of Company Common
Stock or any capital stock of, or other equity interests in, any Company
Subsidiary. Except as set forth in Section 3.03 of the Company Disclosure
Schedule, each outstanding share of capital stock of, or other equity interest
in, each Company Subsidiary is duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and is owned by the Company or
another Company Subsidiary free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
the Company's or such other Company Subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever. Except as set forth in Section 3.03
of the Company Disclosure Statement, there are no outstanding contractual
obligations of the Company or any Company Subsidiary to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, any Company Subsidiary or any other person.
SECTION 3.04. Authority Relative to This Agreement. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Merger and the other transactions contemplated by this Agreement. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the Merger and the other transactions contemplated by this Agreement
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Merger and the other transactions
contemplated by this Agreement other than, with respect to the Merger, the
adoption of this Agreement by the affirmative vote of holders of a majority of
the outstanding shares of Company Common Stock entitled to vote thereon (the
"Company Stockholders' Approval") and the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware as required by the DGCL.
This Agreement has been duly authorized and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Parent and Merger Sub, constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate any provision of the Certificate of Incorporation or By-Laws of the
Company or any equivalent organizational documents of any Company Subsidiary,
(ii) assuming that all consents, approvals, authorizations and permits described
in Section 3.05(b) have been obtained and all filings and notifications
described in Section 3.05(b) have been made, conflict with or violate any
foreign or domestic law, statute, code, ordinance, rule, regulation, order,
injunction, writ, stipulation, award, judgment or decree ("Law") applicable to
the Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected, or (iii) except as set
forth in Section 3.05(a) of the Company Disclosure Schedule, require any consent
or approval under, result in any breach of, any loss of any benefit under or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of
<PAGE>
13
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
or any Company Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, Company Permit (as defined in Section
3.06(a)) or other instrument or obligation, except, with respect to clauses (ii)
and (iii) of this Section 3.05(a), for any such conflicts, violations, breaches,
defaults or other occurrences that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any foreign or domestic governmental, administrative, judicial
or regulatory authority (a "Governmental Entity"), except (i) pursuant to the
applicable requirements of (A) the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"),
(B) the statutes, regulations, or ordinances enforced by the Office of Thrift
Supervision (the "OTS"), the Board of Governors of the Federal Reserve System
(the "FRB"), the Federal Deposit Insurance Corporation (the "FDIC"), or the
staff thereof (collectively, the "Bank Regulatory Authorities"), (C) the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act"), and state securities or "blue sky" laws ("Blue Sky Laws"), (D) the
securities laws, rules, regulations and published policy statements applicable
in the Province of Quebec, as applied by the Quebec Securities Commission and
other Canadian provincial and territorial regulatory authorities (collectively,
the "Canadian Securities Laws"), (E) the rules and regulations of the NASDAQ
National Market System ("NASDAQ") and the Toronto Stock Exchange (the "TSE") and
(F) the filing and recordation of the Certificate of Merger as required by the
DGCL (collectively, the "Required Consents") and (ii) when the failure to obtain
such consents, approvals, authorizations or permits or to make such filings or
notifications would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
(c) Except as set forth in Section 3.05(c) of the Company
Disclosure Schedule, none of the Company or any of the Company Subsidiaries has
received any written notification or communication from the Bank Regulatory
Authorities (i) asserting that the Company or any of the Company Subsidiaries is
not in compliance with any of the statutes, regulations, or ordinances which
such Bank Regulatory Authority enforces, which noncompliance, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect,
(ii) threatening to revoke any license, franchise, Company Permit or
governmental authorization the loss of which would, individually or in the
aggregate, have a Material Adverse Effect or (iii) requiring or threatening to
require the Company or any of the Company Subsidiaries, or indicating that the
Company or any of the Company Subsidiaries may be required, to adopt a board
resolution, to enter into a cease and desist order, agreement or
<PAGE>
14
memorandum of understanding, or to enter into any other agreement or arrangement
restricting or limiting or purporting to restrict or limit in any manner the
operations of the Company or any of the Company Subsidiaries, or requiring the
Company or any Company Subsidiary to take or refrain from taking any action,
including, without limitation, any restriction on or prior notification relating
to the payment of dividends (any such notice, communication, board resolution,
memorandum, agreement or order described in this clause (iii) of Section 3.05(c)
being referred to as a "Bank Regulatory Agreement"), which, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect.
Except as set forth in Section 3.05(c) of the Company Disclosure Schedule, none
of the Company or any of the Company Subsidiaries has consented to or entered
into any Bank Regulatory Agreement which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect.
SECTION 3.06. Permits; Compliance With Law. (a) Each of the
Company and the Company Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Company or any Company Subsidiary to own, lease and operate its properties and
to carry on its business as it is now being conducted (the "Company Permits"),
and all such Company Permits are valid and in full force and effect, except
where the failure to have, or the suspension or cancellation of, or the failure
to be valid or in full force and effect of, any of the Company Permits would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
(b) Except as disclosed in Section 3.06(b) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is in
conflict with, or in default or violation of, (i) any Law applicable to the
Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected, (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any Company Subsidiary is
a party or by which the Company or any Company Subsidiary or any property or
asset of the Company or any Company Subsidiary is bound or affected or (iii) any
Company Permits, except in each case for any such conflicts, defaults or
violations that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
SECTION 3.07. SEC Filings; Financial Statements. (a) The
Company has timely filed all registration statements, prospectuses, forms,
reports and other documents required to be filed by it with the Securities and
Exchange Commission (the "SEC") since January 1, 1997 (collectively, the
"Company SEC Reports"). As of the respective dates they were filed, (i) the
Company SEC Reports were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) none of the
Company SEC Reports contained
<PAGE>
15
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No Company Subsidiary is required to file any form, report or other
document with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Company SEC Reports was
prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP") applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q under the Exchange Act) and each
presented or will present fairly, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and the
consolidated Company Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which are not expected
to be material, individually or in the aggregate). The books and records of the
Company and the Company Subsidiaries have been, and are being, maintained in
accordance with applicable legal and accounting requirements.
(c) The Company has heretofore furnished to Parent a complete
and correct copy of any amendments or modifications (which have not yet been
filed with the SEC but which will be required to be filed) to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Securities Act or the Exchange Act.
SECTION 3.08. Undisclosed Liabilities. Except as and to the
extent specifically disclosed in the Company SEC Reports filed prior to the date
of this Agreement or set forth in Section 3.08 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary has any liability or
obligation of any nature (whether absolute, accrued, contingent or otherwise and
whether due or to become due), except for liabilities or obligations incurred
since December 31, 1998 in the ordinary course of business consistent with past
practice and which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
SECTION 3.09. Absence of Certain Changes or Events. Since
December 31, 1998 through the date hereof, except as and to the extent set forth
in Section 3.09 of the Company Disclosure Schedule or specifically dislcosed in
the Company SEC Reports filed prior to the date of this Agreement, each of the
Company and the Company Subsidiaries has conducted its business only in the
ordinary course and in a manner consistent with past practice and, since such
date, there has not been (a) any event, occurrence, change or effect that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated by this Agreement or (b) any action taken by the
Company or any Company Subsidiary during the period from December 31,
<PAGE>
16
1998 through the date hereof that, if taken during the period from the date
hereof through the Effective Time, would constitute a breach of any of clauses
(a) through (p) of Section 5.01.
SECTION 3.10. Absence of Litigation. Except as specifically
disclosed in the Company SEC Reports filed prior to the date of this Agreement
or in Section 3.10 of the Company Disclosure Schedule, there is no material
litigation, suit, claim, action, proceeding or investigation (an "Action")
pending or, to the knowledge of the Company, threatened against the Company or
any Company Subsidiary, or against any property or asset of the Company or any
Company Subsidiary, before any court, arbitrator or Governmental Entity,
domestic or foreign. Neither the Company nor any Company Subsidiary is subject
to any outstanding order, writ, injunction, decree or arbitration ruling, award
or other finding which has had or, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
SECTION 3.11. Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.11(a) of the Company Disclosure Schedule lists (i) all
employee benefit plans (as defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, consulting, termination,
severance or other contracts or agreements, whether legally enforceable or not,
to which the Company or any Company Subsidiary is a party, with respect to which
the Company or any Company Subsidiary has any obligation or which are
maintained, contributed to or sponsored by the Company or any Company Subsidiary
for the benefit of any current or former employee, consultant, officer or
director of the Company or any Company Subsidiary, (ii) each employee benefit
plan for which the Company or any Company Subsidiary could incur liability under
section 4069 of ERISA in the event such plan has been or were to be terminated,
(iii) any plan in respect of which the Company or any Company Subsidiary could
incur liability under section 4212(c) of ERISA and (iv) any contracts,
arrangements or understandings between the Company or any Company Subsidiary or
any of their affiliates and any employee of the Company or any Company
Subsidiary relating to a sale of the Company or any Company Subsidiary
(collectively, the "Company Benefit Plans"). Each Company Benefit Plan is in
writing and, to the knowledge of the Company, the Company has furnished the
Parent with a true and complete copy of each Company Benefit Plan and has
delivered to Parent a true and complete copy of each material document, if any,
prepared in connection with each such Company Benefit Plan, including, without
limitation, a copy of (i) each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, (iii) the most
recently filed Internal Revenue Service ("IRS") Form 5500, (iv) the most
recently received IRS determination letter for each such Company Benefit Plan
and (v) the most recently prepared actuarial report and financial statement in
connection with each such Company Benefit Plan. Except as disclosed in Section
3.11(a) of the Company Disclosure Schedule, there are no other employee benefit
plans, programs, arrangements or agreements, whether formal or informal, whether
in writing or not, to which the Company or any Company Subsidiary is a party,
with respect to which the Company or any Company Subsidiary has any obligation
or which are maintained, contributed to or sponsored
<PAGE>
17
by the Company or any Company Subsidiary for the benefit of any current or
former employee, consultant, officer or director of the Company or any Company
Subsidiary. Except as disclosed in Section 3.11(a) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary has any express or
implied commitment, whether legally enforceable or not, (i) to create, incur
liability with respect to or cause to exist any other employee benefit plan,
program or arrangement, (ii) to enter into any other contract or agreement to
provide compensation or benefits to any individual or (iii) to modify, change or
terminate any Company Benefit Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
(b) Absence of Certain Types of Plans. None of the Company
Benefit Plans is a multiemployer plan (within the meaning of section 3(37) or
4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single employer pension plan
(within the meaning of section 4001(a)(15) of ERISA) for which the Company or
any Company Subsidiary could incur liability under section 4063 or 4064 of ERISA
(a "Multiple Employer Plan"). Except as disclosed in Section 3.11(b) of the
Company Disclosure Schedule, none of the Company Benefit Plans provides for or
promises to any current or former employee, consultant, officer or director of
the Company or any Company Subsidiary retiree medical, disability or life
insurance benefits.
(c) Compliance. Except as disclosed in Section 3.11(c) of the
Company Disclosure Schedule, to the knowledge of the Company, each Company
Benefit Plan is now and always has been operated in all respects in accordance
with its terms and the requirements of all applicable laws and regulations and
rules promulgated thereunder, including, without limitation, ERISA and the Code.
The Company and all Company Subsidiaries have performed all obligations required
to be performed by them under, are not in any respect in default under or in
violation of, and have no knowledge of any default or violation by any party
with respect to, any Company Benefit Plan. No action, claim or proceeding is
pending or, to the knowledge of the Company, threatened with respect to any
Company Benefit Plan (other than claims for benefits in the ordinary course) and
no fact or event exists that could give rise to any such action, claim or
proceeding.
(d) Qualification of Certain Plans. Except as disclosed in
Section 3.11(d) of the Company Disclosure Schedule, each Company Benefit Plan
that is intended to be qualified under section 401(a) or 401(k) of the Code has
timely received a favorable determination letter from the IRS, covering all of
the provisions applicable to the Company Benefit Plan for which determination
letters are currently available, stating that the Company Benefit Plan is so
qualified and each trust established in connection with any Company Benefit Plan
which is intended to be exempt from federal income taxation under section 501(a)
of the Code has received a determination letter from the IRS, stating that it is
so exempt, and no fact or event has occurred since the date of such
determination letter or letters from the IRS to adversely affect the qualified
status of any such Company Benefit Plan or the exempt status of any such trust.
(e) Absence of Certain Liabilities. Neither the Company nor
any Company Subsidiary has incurred any liability under, arising out of or by
operation of Title IV of ERISA
<PAGE>
18
(other than liability for premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course), including, without limitation, any liability in
connection with (i) the termination or reorganization of any employee benefit
plan subject to Title IV of ERISA or (ii) withdrawal from any Multiemployer Plan
or Multiple Employer Plan, and no fact or event exists which could give rise to
any such liability.
(f) Plan Contributions and Funding. All contributions,
premiums or payments required to be made with respect to any Company Benefit
Plan have been made on or before their due dates. All such contributions have
been fully deducted for income tax purposes, no such deduction has been
challenged or disallowed by any Governmental Entity and no fact or event exists
which could give rise to any such challenge or disallowance.
(g) Severance Payments. Except as disclosed in Section 3.11(g)
of the Company Disclosure Schedule, no amounts payable under the Company Benefit
Plans solely as a result of the consummation of the transactions contemplated by
this Agreement will fail to be deductible for federal income tax purposes by
virtue of section 280G of the Code. Except as disclosed in Section 3.11(g) of
the Company Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee, officer or director
of the Company or any Company Subsidiary to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount, of compensation due any such employee, officer or director, (iii)
constitute a "change of control" under any Company Benefit Plan or (iv)
accelerate the vesting or the exercisability of any Company Stock Option.
SECTION 3.12. Labor Matters. Except as set forth in Section
3.12 of the Company Disclosure Schedule, (a) neither the Company nor any Company
Subsidiary is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any Company
Subsidiary, and currently there are no organizational campaigns, petitions or
other unionization activities seeking recognition of a collective bargaining
unit which could affect the Company or any Company Subsidiary; (b) there are no
controversies, strikes, slowdowns or work stoppages pending or, to the best
knowledge of the Company after due inquiry, threatened between the Company or
any Company Subsidiary and any of their employees, and neither the Company nor
any Company Subsidiary has experienced any such controversy, strike, slowdown or
work stoppage within the past three years; (c) neither the Company nor any
Company Subsidiary has breached or otherwise failed to comply with the
provisions of any collective bargaining or union contract and there are no
grievances outstanding against the Company or any Company Subsidiary under any
such agreement or contract that could have a Material Adverse Effect; (d) there
are no unfair labor practice complaints pending against the Company or any
Company Subsidiary before the National Labor Relations Board or any other
Governmental Entity nor any current union representation questions involving
employees of the Company or any Company Subsidiary that could have a Material
Adverse Effect; (e) the Company and all Company Subsidiaries are currently in
compliance with all
<PAGE>
19
applicable laws relating to the employment of labor, including those related to
wages, hours, collective bargaining and the payment and withholding of taxes and
other sums as required by the appropriate Governmental Entity, have withheld and
paid to the appropriate Governmental Entity or are holding for payment not yet
due to such Governmental Entity all amounts required to be withheld from
employees of the Company or any Company Subsidiary and are not liable for any
arrears of wages, taxes, penalties or other sums for failure to comply with any
of the foregoing; (f) the Company and all Company Subsidiaries have paid in full
to all employees, or adequately accrued for in accordance with U.S. GAAP
consistently applied, all wages, salaries, commissions, bonuses, benefits and
other compensation due to or on behalf of such employees; (g) there is no claim
with respect to payment of wages, salary or overtime pay that has been asserted
or is now pending or threatened before any Governmental Entity with respect to
any persons currently or formerly employed by the Company or any Company
Subsidiary; (h) neither the Company nor any Company Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation by, any Governmental
Entity relating to employees or employment practices; (i) there is no charge or
proceeding with respect to a violation of any occupational safety or health
standards that has been asserted or is now pending or threatened with respect to
the Company or any Company Subsidiary; and (j) there is no charge of
discrimination in employment or employment practices, for any reason, including,
without limitation, age, gender, race, religion or other legally protected
category, which has been asserted or is now pending or threatened before the
United States Equal Employment Opportunity Commission, or any other Governmental
Entity in any jurisdiction in which the Company or any Company Subsidiary has
employed or currently employs any person.
SECTION 3.13. Employees of the Company. Section 3.13 of the
Company Disclosure Schedule lists the name, the place of employment, the current
annual salary rates (including descriptions of any raises in the preceding
twelve months), total Form W-2 compensation for 1999, deferred or contingent
compensation, pension, accrued vacation, "golden parachute" and other like
benefits paid or payable (in cash or otherwise) in the year ended December 31,
1999 and the current fiscal year; the date of employment and a description of
the position of each current salaried employee and officer of the Company.
SECTION 3.14. Company Material Contracts. (a) Sections
3.14(a)(i) through (xii) of the Company Disclosure Schedule set forth a list of
the following types of contracts, agreements (including all amendments thereto),
commitments and other instruments to which the Company or any Company Subsidiary
is a party (such contracts, agreements, commitments and other instruments as are
required to be set forth in Sections 3.14(a)(i) through (x) of the Company
Disclosure Schedule, together with all contracts, agreements, commitments and
other instruments required to be set forth in Sections 3.11, 3.17 and 3.18 of
the Company Disclosure Schedule, being the "Company Material Contracts"):
(i) each contract, agreement, commitment or other instrument,
including, without limitation, each customer and supplier contract
which (A) is likely to involve consideration of more than $250,000, in
the aggregate, during the fiscal years ending
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20
December 31, 1999 and December 31, 2000 or (B) is likely to involve
consideration of more than $1,000,000, in the aggregate, over the
remaining term of such contract, and which, in either case, cannot be
canceled by the Company or any Company Subsidiary without penalty or
further payment and without more than 60 days' notice;
(ii) all contracts, agreements, commitments and instruments
relating to indebtedness for borrowed money;
(iii) all contracts, agreements, commitments and instruments
that would be required to be listed as an exhibit to the Company's
Annual Report on Form 10-K under the rules and regulations of the SEC
and which were not listed in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 and any contracts that would be
required to be so listed but for the exception with respect to
contracts made in the ordinary course of business;
(iv) all contracts, agreements, commitments and instruments
that obligate the Company or any Company Subsidiary to make any
payments or issue or pay in excess of $100,000 to any employee or
consultant or make any payments or issue or pay anything of value to
any affiliate, director or officer;
(v) all contracts, agreements, commitments and instruments
relating to any obligation to engage in a merger, consolidation,
business combination, share exchange or business acquisition, or for
the purchase or sale of any assets of the Company or any of the Company
Subsidiaries other than in the ordinary course of business consistent
with past practice;
(vi) all contracts, agreements, commitments and instruments
that (A) provide for the Company or any Company Subsidiary to be the
exclusive provider of any product or service to any person in any
geographic area or during any period of time; (B) limit or purport to
limit the ability of the Company or any Company Subsidiary to compete
in any line of business or with any person in any geographic area or
during any period of time; or (C) would, after the Effective Time,
limit or otherwise restrict Parent or any subsidiary or affiliate of
Parent from engaging or competing in any line of business or in any
geographical area;
(vii) all contracts, agreements, commitments and instruments
that include any indemnification, contribution or support obligations
in an amount which would reasonably be expected to exceed $100,000, or
which in the aggregate would reasonably be expected to exceed $500,000;
(viii) all contracts, agreements, commitments and instruments
that obligate capital expenditures involving total payments of more
than $250,000;
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21
(ix) all contracts, agreements, commitments and instruments
that obligate the Company or any Company Subsidiary to issue or sell
any capital stock; and
(x) other than provider contracts, all contracts and
agreements with any Governmental Entity to which the Company or any
Company Subsidiary is a party.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (i) each Company
Material Contract is a legal, valid and binding agreement in full force and
effect, and none of the Company Material Contracts is in default by its terms or
has been canceled by the other party and no event has occurred that with notice
or lapse of time or both would constitute a default; (ii) to the Company's
knowledge, no other party is in breach or violation of, or default under, any
Company Material Contract; and (iii) no Company or Company Subsidiary is in
receipt of any claim of default under any such agreement. The Company has
furnished or made available to Parent true and complete copies of all Company
Material Contracts, including any amendments thereto.
SECTION 3.15. Customers. Section 3.15 of the Company
Disclosure Schedule contains a list of the top 20 Payors (as defined below)
sorted by 1999 revenue, during the years ended December 31, 1998 and 1999,
together with the amounts of revenues from each such customer or client during
such years. The Company is not aware of any facts indicating that any of these
Payors or any other material customers or clients intend to cease doing business
with the Company or any Company Subsidiary or that the Company will incur a
material reduction in the amount of the aggregate revenues derived from its top
20 Payors doing business with the Company and the Company Subsidiaries. "Payor"
means any insurance company, health maintenance organization, preferred provider
organization, independent practice association or other Person to whom medical
claims or encounters are submitted.
SECTION 3.16. Environmental Matters. Except as described in
Section 3.16 of the Company Disclosure Schedule or as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect: (a)
the Company and the Company Subsidiaries have not violated and are not in
violation of any Environmental Law (as defined below); (b) none of the
properties currently or formerly owned, leased or operated by the Company and
the Company Subsidiaries (including, without limitation, soils and surface and
ground waters) are contaminated with any Hazardous Substance (as defined below);
(c) the Company and the Company Subsidiaries are not actually, potentially or
allegedly liable for any off-site contamination by Hazardous Substances; (d) the
Company and the Company Subsidiaries are not actually, potentially or allegedly
liable under any Environmental Law (including, without limitation, pending or
threatened liens); (e) the Company and the Company Subsidiaries have all
permits, licenses and other authorizations required under any Environmental Law
("Environmental Permits"); (f) the Company and the Company Subsidiaries are in
compliance with their Environmental Permits; and (g) neither the execution of
this Agreement nor the consummation of the transactions contemplated herein will
require any investigation, remediation or other action with respect to Hazardous
Substances, or any notice to or consent of
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22
Governmental Entities or third parties, pursuant to any applicable Environmental
Law or Environmental Permit.
"Environmental Law" means any federal, state, local or foreign
law (A) relating to releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (B) relating to the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous Substances
or materials containing Hazardous Substances; or (C) otherwise relating to
pollution or protection of the environment, health, safety or natural resources.
"Hazardous Substances" means (i) those substances defined in
or regulated under the following federal statutes and their state counterparts,
as each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii)
petroleum and petroleum products, including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated
biphenyls, asbestos and radon; (v) any other contaminant; and (vi) any
substance, material or waste regulated by any federal, state, local or foreign
Governmental Entity pursuant to any Environmental Law.
SECTION 3.17. Title to Properties; Absence of Liens and
Encumbrances. (a) Section 3.17(a)(i) of the Company Disclosure Schedule lists
the real property interests owned by the Company and the Company Subsidiaries.
Section 3.17(a)(ii) of the Company Disclosure Schedule lists all real property
leases to which the Company or any Company Subsidiary is a party, and each
amendment thereto, that provide for annual payments in excess of $250,000. Other
than the owned real property identified in Section 3.17(a)(i) of the Company
Disclosure Schedule and leaseholds created under the real property leases
identified in Section 3.17(a) of the Company Disclosure Schedule, the Company
and the Company Subsidiaries have no ownership or leasehold interest in any real
property.
(b) Each of the Company and the Company Subsidiaries has good
and valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any
liens, pledges, charges, claims, security interests or other encumbrances of any
sort ("Liens"), except for Liens imposed by Law in respect of obligations not
yet due, which are owed in respect of taxes or which otherwise are owed to
carriers, warehousepersons or laborers, except as reflected in the financial
statements contained in the Company SEC Reports and except for such Liens or
other imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present or contemplated use, of the property
subject thereto or affected thereby.
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23
SECTION 3.18. Intellectual Property. (a) Section 3.18 of the
Company Disclosure Schedule sets forth a true and complete list of all (i)
patents and patent applications, registered trademarks and trademark
applications, registered copyrights and copyright applications and domain names
included in the Company Owned Intellectual Property, (ii) Company Software,
(iii) Licenses, other than licenses of commercial off-the-shelf, shrink-wrap or
click-wrap computer software, and (iv) other material Intellectual Property
included in the Company Owned Intellectual Property. Except as set forth in
Section 3.18 of the Company Disclosure Schedule, the Company and the Company
Subsidiaries have not granted any license or other rights to any third party
with respect to the Company Owned Intellectual Property or the Company Licensed
Intellectual Property.
(b) The Company Owned Intellectual Property and the Company
Licensed Intellectual Property include all of the Intellectual Property used in
the ordinary day-to-day conduct of the business of the Company and the Company
Subsidiaries, and there are no other items of Intellectual Property that are
material to the conduct of such business. The Company and the Company
Subsidiaries are entitled to use the Company Owned Intellectual Property and the
Company Licensed Intellectual Property without limitation, subject only to the
terms of the Licenses.
(c) The Company or a Company Subsidiary is the exclusive owner
of the entire and unencumbered right, title and interest in and to each item of
the Company Owned Intellectual Property.
(d) The Company Owned Intellectual Property and the Company
Licensed Intellectual Property are subsisting, valid and enforceable, and have
not been adjudged invalid or unenforceable in whole or in part. The consummation
of the transactions contemplated by this Agreement will not result in the
termination or impairment of any of the Company Owned Intellectual Property or
the Company Licensed Intellectual Property.
(e) The operation of the business of the Company and the
Company Subsidiaries as currently conducted or as contemplated to be conducted
by the Company and the Company Subsidiaries, including services provided by,
processes used by, or products manufactured, created, developed or sold by the
Company and the Company Subsidiaries, the use of the Company Owned Intellectual
Property and Company Licensed Intellectual Property in connection therewith and
the Company and the Company Subsidiaries' transmission, use, linking and other
practices related to its web sites, the content thereof and data do not conflict
with, infringe, misappropriate or otherwise violate the Intellectual Property
rights of any third party or Law; and no Actions have been asserted, are pending
or have been threatened against the Company or a Company subsidiary (i) alleging
any of the foregoing, (ii) based upon, challenging, seeking to deny or restrict
the use by the Company or any Company Subsidiary of any of the Company Owned
Intellectual Property or the Company Licensed Intellectual Property, or (iii)
alleging that the Licenses are in conflict with the terms of any license or
other agreement. No
<PAGE>
24
third party is engaging in any activity that infringes, misappropriates or
otherwise violates the Company Owned Intellectual Property or the Company
Licensed Intellectual Property.
(f) The Company and the Company Subsidiaries have delivered or
made available to Parent true and complete copies of all the agreements included
in the Licenses, other than licenses of commercial off-the-shelf, shrink-wrap or
click-wrap computer software. With respect to each such agreement:
(i) such agreement is valid and binding and
in full force and effect and represents the entire agreement
between the respective parties with respect to the subject
matter of such agreement, and no party to such agreement has
made any oral promises or agreements amending, modifying or
supplementing such agreements;
(ii) such agreement will not cease to be
valid and binding and in full force and effect on terms
identical to those currently in effect as a result of the
consummation of the transactions contemplated by this
Agreement, nor will the consummation of the transactions
contemplated by this Agreement constitute a breach or default
under such agreement or otherwise give the other party to such
agreement a right to terminate, materially modify or
accelerate such agreement;
(iii) neither the Company nor any Company
Subsidiary has (A) received any notice of termination or
cancellation under such agreement, (B) received any notice of
breach or default under such agreement, which breach has not
been cured, or (C) granted to any other third party any
rights, adverse or otherwise, under such agreement that would
constitute a breach of such agreement; and
(iv) neither the Company or any Company
subsidiary, nor, to the Company or any Company Subsidiary's
knowledge, after due inquiry, any other party to such
agreement, is in breach or default thereof in any material
respect, and no event has occurred that, with notice or lapse
of time, would constitute such a breach or default or permit
termination, modification or acceleration under such
agreement.
(g) The Company Software is free of all viruses, worms, trojan
horses and other material known contaminants, and does not contain any bugs,
errors, or problems of a material nature that disrupt its operation or have a
materially adverse impact on the operation of other software programs or
operating systems. The Company and Company Subsidiaries have the right to use
all software development tools, library functions, compilers, and other third
party software that is material to the business of the Company and Company
Subsidiaries, or that is required to operate or modify the Company Software.
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25
(h) The Company and the Company Subsidiaries have taken
reasonable steps in accordance with normal industry practice to maintain the
confidentiality of their trade secrets and other confidential Intellectual
Property. To the knowledge of the Company and the Company Subsidiaries (i) there
has been no misappropriation of any material trade secrets or other material
confidential Intellectual Property of the Company or the Company Subsidiaries by
any person, and (ii) no employee, independent contractor or agent of the Company
or the Company Subsidiaries has misappropriated any trade secrets of any other
person in the course of such performance as an employee, independent contractor
or agent; and (iii) no employee, independent contractor or agent of the Company
or the Company Subsidiaries is in default or breach of any term of any
employment agreement, non-disclosure agreement, assignment of invention
agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of Intellectual Property.
"Intellectual Property" means (i) patents, patent applications
and statutory invention registrations, (ii) trademarks, service marks, domain
names, trade dress, logos, and other source identifiers, including registrations
and applications for registration thereof, (iii) copyrights and copyrightable
works, including registrations and applications for registration thereof, (iv)
Software, (v) confidential and proprietary information, including trade secrets,
know-how, customer lists, confidential marketing and customer information, and
(vi) intangible property protected by the rights of privacy, person, publicity
and endorsement in any jurisdiction.
"Company Licensed Intellectual Property" means all
Intellectual Property licensed to the Company or any of the Company Subsidiaries
by a third party pursuant to the Licenses.
"Company Owned Intellectual Property" means all Intellectual
Property owned by the Company or any of the Company Subsidiaries.
"Company Software" means all Software (i) material to the
operation of the business of the Company and the Company Subsidiaries or (ii)
manufactured, distributed, sold, licensed or marketed by the Company or any
Company Subsidiary.
"Licenses" mean all agreements, whether express or implied,
and all rights and obligations deriving therefrom, governing (i) licenses of
Intellectual Property by the Company or any Company Subsidiary to third parties,
(ii) licenses of Intellectual Property by third parties to the Company or any
Company Subsidiary, and (iii) the rights between the Company or any Company
Subsidiary and third parties relating to the development or use of Intellectual
Property.
"Software" means computer software, programs, data, databases
in any form, files, applications, including Internet web sites, including
content thereof and all links and advertisements contained therein, source code,
object code, operating systems, specifications, database management code, data
formats, utilities, graphical user interfaces, methods of processing, software
engines, platforms, encryption keys and other security features, all versions,
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26
conversions, updates, patches, corrections, enhancements and modifications
thereof and all related documentation, developer notes, comments and
annotations.
SECTION 3.19. Year 2000 Compliance. Except as would not,
individually or in the aggregate, have a Material Adverse Effect, all Company
Systems are Year 2000 Compliant. For purposes hereof, "Company Systems" shall
mean all computer hardware, software, Company Software, systems, and equipment
(including embedded microcontrollers in non-computer equipment) embedded within
or required to operate the current products of the Company and the Company
Subsidiaries, and/or material to or necessary for the Company and the Company
Subsidiaries to carry on their businesses as currently conducted. For purposes
hereof, "Year 2000 Compliant" means that the Company Systems provide
uninterrupted millennium functionality in that the Company Systems will record,
store, process and present calendar dates falling on or after January 1, 2000
(including, without limitation, February 29, 2000 and all other intercalary
dates occurring after the year 2000), in the same manner and with the same
accuracy and functionality as the Company Systems record, store, process, and
present calendar dates falling on or before December 31, 1999.
SECTION 3.20. Taxes. Except as set forth in Section 3.20 of
the Company Disclosure Schedule, (a) the Company and each of the Company
Subsidiaries have timely filed or will timely file all returns and reports
required to be filed by them with any taxing authority with respect to Taxes for
any period ending on or before the Effective Time, taking into account any
extension of time to file granted to or obtained on behalf of the Company and
the Company Subsidiaries, (b) all Taxes that are due prior to the Effective Time
have been paid or will be paid, (c) no deficiency for any material amount of Tax
has been asserted or assessed by a taxing authority against the Company or any
of the Company Subsidiaries, (d) the Company and each of the Company
Subsidiaries have provided adequate reserves in their financial statements in
accordance with U.S. GAAP for any Taxes that have not been paid, whether or not
shown as being due on any returns, (e) neither the Company nor any of the
Company Subsidiaries has any income reportable for a Taxable period ending after
the date on which the Effective Time occurs that is attributable to an activity
or a transaction occurring in or a change in accounting method made for a period
ending on or prior to the date on which the Effective Time occurs, including,
without limitation, any adjustment pursuant to section 481 of the Code and (f)
neither the Company nor any of the Company Subsidiaries has made an election
under section 341(f) of the Code. As used in this Agreement, "Taxes" shall mean
any and all taxes, fees, levies, duties, tariffs, imposts and other charges of
any kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any government or
taxing authority, including, without limitation (i) taxes or other charges on or
with respect to income, franchise, windfall or other profits, gross receipts,
property, sales, use, stock, payroll, employment, social security, workers'
compensation, unemployment compensation or net worth; (ii) taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added or gains taxes; (iii) license, registration and documentation fees; and
(iv) customers' duties, tariffs and similar charges.
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27
SECTION 3.21. Insurance. (a) Section 3.21(a) of the Company
Disclosure Schedule sets forth, with respect to each insurance policy under
which the Company or any Company Subsidiary has been an insured, a named insured
or otherwise the principal beneficiary of coverage at any time within the past
two years, (i) the names of the insurer, the principal insured and each named
insured, (ii) the policy number, (iii) the period, scope and amount of coverage
and (iv) the premium charged. All material insurable risks of the Company and
the Company Subsidiaries in respect of the businesses of each are covered by
such insurance policies and the types and amounts of coverage provided therein
are usual and customary in the context of the businesses and operations in which
the Company and the Company Subsidiaries are engaged.
(b) With respect to each such insurance policy: (i) the policy
is legal, valid, binding and enforceable in accordance with its terms and,
except for policies that have expired under their terms in the ordinary course,
is in full force and effect; (ii) neither the Company nor any Company Subsidiary
is in material breach or default (including any such breach or default with
respect to the payment of premiums or the giving of notice), and no event has
occurred that, with notice or the lapse of time, would constitute such a breach
or default, or permit termination or modification, under the policy; and (iii)
to the knowledge of the Company, no insurer on the policy has been declared
insolvent or placed in receivership, conservatorship or liquidation.
(c) At no time subsequent to January 1, 1997 has the Company
or any Company Subsidiary (i) been denied any insurance or indemnity bond
coverage which it has requested, (ii) made any material reduction in the scope
or amount of its insurance coverage, or (iii) received notice from any of its
insurance carriers that any insurance premiums will be subject to increase in an
amount materially disproportionate to the amount of the increases with respect
thereto (or with respect to similar insurance) in prior years or that any
insurance coverage listed in Section 3.21(a) of the Company Disclosure Schedule
will not be available in the future substantially on the same terms as are now
in effect.
SECTION 3.22. Affiliate Transactions. Except as disclosed in
Section 3.22 of the Company Disclosure Schedule, there are no contracts,
commitments, agreements, arrangements or other transactions between the Company
or any of the Company Subsidiaries, on the one hand, and any (i) officer or
director of the Company or any of the Company Subsidiaries, (ii) record or
beneficial owner of 5% or more of the voting securities of the Company or (iii)
affiliate (as such term is defined in regulation 12b-2 under the Exchange Act)
of any such officer, director or beneficial owner, on the other hand.
SECTION 3.23. Managed Care Matters. Except as described in
Section 3.23 of the Company Disclosure Schedule or as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect: (a)
the Company and the Company Subsidiaries have not been and are not subject to
any federal or state laws pertaining to entities which deliver health care or
managed care and related administrative operations, including, without
limitation (i) the federal Fraud and Abuse Statute set forth in 42 U.S.C.A.
1320a-7b(b) or similar state laws, (ii) the federal False Claims Act set forth
in 42 U.S.C.A. 1320a-7b or similar state laws, (iii) state
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28
corporate practice of medicine laws, and (iv) state "any willing provider" laws;
(b) the Company and the Company Subsidiaries have not contracted with any health
care providers who have violated or are in violation of state licensing or
credentialing laws; (c) the Company and the Company Subsidiaries are in
compliance with all applicable (i) state utilization review laws and (ii) state
medical privacy laws; and (d) the Company and the Company Subsidiaries are not
fiduciaries as such term is defined in Section 404 of ERISA, applicable
Department of Labor regulations and relevant caselaw with respect to the
provision of any services to ERISA welfare plans and are not subject to Sections
404 or 406 of ERISA.
SECTION 3.24. State Takeover Statutes. (a) Except for section
203 of the DGCL, no "fair price", "moratorium", "control share acquisition" or
other similar anti-takeover statute or regulation is applicable, by reason of
the Company's being a party to the Merger or this Agreement or the transactions
contemplated hereby or thereby or by reason of the execution by certain
stockholders of the Voting Agreement and the transactions contemplated thereby.
Neither the Company nor any of the Company Subsidiaries is a party to any
"stockholder rights" plan or any similar anti-takeover plan or device.
(b) Prior to the time this Agreement was executed, the Board
of Directors of the Company has taken all action necessary, if any, to exempt
under or make not subject to section 203 of the DGCL (i) the execution of this
Agreement, (ii) the Merger and (iii) the other transactions contemplated hereby
and by the Voting Agreement.
SECTION 3.25. Board Approval; Vote Required. The Board of
Directors of the Company, by resolutions duly adopted by unanimous vote at a
meeting duly called and held and not subsequently rescinded or modified in any
way on or prior to the date hereof (the "Company Board Approval"), has duly (i)
determined that this Agreement and the Merger are fair to and in the best
interests of the Company and its stockholders, (ii) approved this Agreement and
the Merger, and determined that the execution, delivery and performance of this
Agreement is advisable and (iii) recommended that the stockholders of the
Company approve the Merger and adopt this Agreement and directed that this
Agreement and the transactions contemplated hereby be submitted for
consideration by the Company's stockholders at a meeting of the Company's
stockholders (the "Company Stockholders' Meeting").
SECTION 3.26. Opinion of Financial Advisor. The Company has
received the written opinion of J.P. Morgan & Company Inc. ("JP Morgan") dated
the date of this Agreement to the effect that, as of the date of this Agreement,
the Merger Consideration is fair to the Company's stockholders from a financial
point of view, a copy of which opinion has been delivered to Parent.
SECTION 3.27. Brokers. No broker, finder or investment banker
(other than Morgan Stanley) is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has heretofore made available to Parent a complete and
correct copy of all agreements between the Company and JP
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29
Morgan pursuant to which JP Morgan would be entitled to any payment relating to
the Merger or any other transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent
and warrant to the Company that:
SECTION 4.01. Organization and Qualification; Subsidiaries.
Parent is a corporation duly organized and validly existing under the laws of
Canada, Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and each of Parent and Merger
Sub has all requisite 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, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
SECTION 4.02. Authority Relative to This Agreement. Each of
Parent and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement and the Voting Agreement, to perform its obligations
hereunder and thereunder and to consummate the Merger and the other transactions
contemplated by this Agreement and the Voting Agreement. The execution and
delivery of each of this Agreement and the Voting Agreement by each of Parent
and Merger Sub and the consummation by each of Parent and Merger Sub of the
Merger and the other transactions contemplated by this Agreement and the Voting
Agreement have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of Parent or Merger Sub
are necessary to authorize this Agreement or to consummate the Merger and the
other transactions contemplated by this Agreement other than, with respect to
the Merger, the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware as required by the DGCL. Each of this Agreement and the
Voting Agreement has been duly authorized and validly executed and delivered by
each of Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes the legal, valid and binding obligation of
each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub
in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by each of Parent and Merger Sub
and of the Voting Agreement by Parent do not, and the performance of this
Agreement and the Voting Agreement by Parent will not, (i) conflict with or
violate any provision of the Articles of Incorporation or By-Laws of Parent, the
Certificate of Incorporation or By-Laws of Merger Sub, (ii) assuming that all
consents, approvals, authorizations and permits described in Section 4.03(b)
have been obtained and all filings and notifications described in Section
4.03(b) have been made, conflict with or
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30
violate any Law applicable to Parent or Merger Sub or by which any property or
asset of Parent or Merger Sub is bound or affected, or (iii) require any consent
or approval under, result in any breach of, any loss of any benefit under or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or Merger Sub pursuant
to any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation, except, with respect to
clauses (ii) and (iii) of this Section 4.03(a), for any such conflicts,
violations, breaches, defaults or other occurrences that would not prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
(b) The execution and delivery of this Agreement by each of
Parent and Merger Sub and of the Voting Agreement by Parent do not, and the
performance of this Agreement by each of Parent and Merger Sub and of the Voting
Agreement by Parent will not require any consent, approval, authorization or
permit of, or filing with or notification to any Governmental Entity, except (i)
for the Required Consents and (ii) when the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
would not prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
SECTION 4.04. Financing. Parent has, or shall have, sufficient
funds to cause Merger Sub to pay the aggregate Merger Consideration in
connection with the Merger and consummate the Merger and has previously made
available to the Company commitment letters from its lenders in respect thereof.
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the
Merger. The Company agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as specifically permitted by any other provision of this Agreement,
unless Parent shall otherwise agree in writing, the businesses of the Company
and the Company Subsidiaries shall be conducted only in, and the Company and the
Company Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice, and the Company shall
use its reasonable best efforts to preserve substantially intact its business
organization, maintain its rights and keep available the services of the current
officers, employees and consultants of the Company and the Company Subsidiaries
and to preserve the current relationships of the Company and the Company
Subsidiaries with customers, suppliers, licensors, licensees and other persons
with which the Company or any Company Subsidiary has significant business
relations.
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31
By way of amplification and not limitation, except as set
forth in Section 5.01 of the Company Disclosure Schedule or as specifically
permitted by any other provision of this Agreement, neither the Company nor any
Company Subsidiary shall, between the date of this Agreement and the Effective
Time, directly or indirectly, do or propose to do any of the following without
the prior written consent of Parent:
(a) amend or otherwise change its Certificate of Incorporation
or By-Laws or equivalent organizational documents;
(b) (i) issue, sell, pledge, dispose of, grant, transfer,
encumber, or authorize the issuance, sale, pledge, disposition,
granting, transfer or encumbrance of, any shares of capital stock of,
or other equity interest in, the Company or any Company Subsidiary of
any class, or securities convertible into or exchangeable for any
shares of such capital stock or other equity interest, or any options,
warrants or other rights of any kind to acquire any shares of such
capital stock or other equity interest or such convertible or
exchangeable securities, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any
Company Subsidiary (except for (A) the issuance of Company Common Stock
upon the exercise, in accordance with their terms, of the Company Stock
Options, (B) the issuance of a maximum of 498,000 shares of Company
Common Stock issuable pursuant to Warrants, or (C) the issuance of
shares of Company Common Stock pursuant to the ESPP, in respect of
payroll deductions under the ESPP that occur until the end of the
offering period ending on March 31, 2000) or (ii) except in the
ordinary course of business consistent with past practice, sell,
pledge, dispose of, transfer, lease, license, guarantee or encumber, or
authorize the sale, pledge, disposition, transfer, lease, licensing,
guarantee or encumbrance of, any material property or assets of the
Company or any Company Subsidiary;
(c) (i) sell, assign, or grant any security interest in and to
any item of the Company Owned Intellectual Property or Company Licensed
Intellectual Property, in whole or in part, (ii) grant any licenses
with respect to any Company Owned Intellectual Property, other than
grants of licenses of Company Software to the customers of the Company
and Company Subsidiaries to whom the Company and Company Subsidiaries
license such Company Software in the ordinary course of their business,
(iii) develop, create or invent any Intellectual Property jointly with
any third party, or (iv) disclose, or allow to be disclosed, any
confidential Company Owned Intellectual Property, unless such Company
Owned Intellectual Property is subject to a confidentiality or non-
disclosure covenant satisfactory to Parent protecting against
disclosure thereof;
(d) authorize, declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or in any other
form, with respect to any of its capital stock (other than dividends
paid by wholly owned Company Subsidiaries to the Company or to other
wholly owned Company Subsidiaries) or enter into any agreement
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32
with respect to the voting of its capital stock, other than a
distribution contemplated by Section 6.10;
(e) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(f) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or any division
thereof of any assets;
(g) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible to, the obligations of any person, or
make any loans, advances or capital contributions to any person;
(h) enter into any contract that would become a Company
Material Contract other than provider and payor contracts in the
ordinary course of business, or modify, amend or terminate any Company
Material Contract other than modifications, amendments or terminations
in the ordinary course of business consistent with past practice;
(i) make or authorize any capital expenditures, other than
capital expenditures reflected in the Company's capital expenditure
budget for the fiscal year ending December 31, 2000 previously
delivered by the Company to Parent;
(j) waive any stock repurchase or acceleration rights, amend
or change the terms of any options or restricted stock, or reprice
options granted under any Company Stock Option Plan or authorize cash
payments in exchange for any options granted under any such plans;
(k) (i) increase the compensation payable or to become payable
to its directors, officers or employees (except for increases in
accordance with past practice and consistent with current budgets in
salaries or wages of officers and employees of the Company or any
Company Subsidiary), (ii) grant any rights to severance or termination
pay to, or enter into any employment or severance agreement with, any
director, officer or other employee of the Company or any Company
Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any director, officer or
employee, (iii) take any affirmative action to accelerate the vesting
of any stock-based compensation, or (iv) hire or retain any person if
such person's aggregate annual compensation is expected to be in excess
of $150,000;
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33
(l) settle any material Action other than any settlement which
involves the payment of damages that are not material and does not
involve injunctive or other equitable relief;
(m) make or revoke any material Tax election, adopt or change
any method of Tax accounting, settle any material Tax liabilities or
take any action with respect to the computation of Taxes or the
preparation of Tax returns that is inconsistent with past practice;
(n) take any action, other than as required by U.S. GAAP or by
the SEC, with respect to accounting principles or procedures,
including, without limitation, any revaluation of assets;
(o) take any action that is intended or would reasonably be
expected to result in any of the conditions to the Merger set forth in
Article VII not being satisfied, except any action permissible under
Section 6.04 or other action as may be required by applicable Law; or
(p) announce an intention to authorize or enter into any
formal or informal agreement or otherwise make any commitment to do any
of the foregoing.
SECTION 5.02. Notification of Certain Matters. Parent shall
give prompt notice to the Company, and the Company shall give prompt notice to
Parent, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause (A) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (B) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (ii) any failure of Parent or the Company, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.02 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Proxy Statement. (a) As promptly as practicable
after the execution of this Agreement, Parent and the Company shall prepare and
the Company shall file with the SEC a proxy statement (together with all
amendments or supplements thereto, the "Proxy Statement") relating to the
Company Stockholders' Meeting to be held in connection with the Merger. Each of
Parent and the Company shall use all reasonable efforts to cause the Proxy
Statement to be cleared by the SEC as promptly as practicable after such filing,
and the Company shall use all reasonable efforts to cause the Proxy Statement to
be mailed to the Company's
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34
stockholders as promptly as practicable after the Proxy Statement is cleared by
the SEC. Subject to Section 6.04(d), the Proxy Statement shall include the
Company Board Approval.
(b) No amendment or supplement to the Proxy Statement will be
made by the Company without the approval of Parent (such approval not to be
unreasonably withheld or delayed). The Company will advise Parent, promptly
after it receives notice thereof, of any request by the SEC for amendment of the
Proxy Statement or comments thereon and responses thereto or requests by the SEC
for additional information.
(c) The information supplied by Parent for inclusion in the
Proxy Statement shall not at (i) the time the Proxy Statement is cleared by the
SEC, (ii) the time the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to the shareholders of the Company, (iii) the time of
the Company Stockholders' Meeting, and (iv) the Effective Time, contain any
untrue statement of a material fact or fail 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. If, at
any time prior to the Effective Time, any event or circumstance relating to
Parent or any subsidiary of Parent, or any of their respective officers or
directors, that should be set forth in an amendment or a supplement to the Proxy
Statement should be discovered by Parent, Parent shall promptly inform the
Company thereof. All documents that Parent is responsible for filing with the
SEC in connection with the Merger or the other transactions contemplated by this
Agreement will comply as to form and substance in all material aspects with the
applicable requirements of the Exchange Act.
(d) The information supplied by the Company for inclusion in
the Proxy Statement shall not, at (i) the time the Proxy Statement is cleared by
the SEC, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the shareholders of the Company, (iii)
the time of the Company Stockholders' Meeting, and (iv) the Effective Time,
contain any untrue statement of a material fact or fail 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. If, at any time prior to the Effective Time, any event or
circumstance relating to the Company or any Company Subsidiary, or any of their
respective officers or directors, that should be set forth in an amendment or a
supplement to the Proxy Statement should be discovered by the Company, the
Company shall promptly inform Parent. All documents that the Company is
responsible for filing with the SEC in connection with the Merger or the other
transactions contemplated by this Agreement will comply as to form and substance
in all material respects with the applicable requirements of the Exchange Act.
SECTION 6.02. Company Stockholders' Meeting. The Company shall
call and hold the Company Stockholders' Meeting as promptly as practicable for
the purpose of voting upon the approval of the Merger and this Agreement and the
Company shall use its reasonable best efforts to hold the Company Stockholders'
Meeting as soon as practicable after the date on which the Proxy Statement is
cleared by the SEC. The Company shall use its reasonable best efforts to solicit
from its stockholders proxies in favor of the approval of the Merger and this
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35
Agreement and shall take all other action advisable to secure the vote or
consent of stockholders of the Company. Without limiting the generality of the
foregoing, the Company agrees that it shall continue to be obligated to call and
hold a meeting pursuant to the first sentence of this Section 6.02 even if the
withdrawal or modification in any adverse manner of its approval or
recommendation of this Agreement is permitted under Section 6.04(d).
SECTION 6.03. Access to Information; Confidentiality. (a)
Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which the Company or any Company Subsidiary is a
party (which the Company shall use reasonable best efforts to cause the
counterparty thereto to waive) or pursuant to applicable Law, from the date of
this Agreement to the Effective Time, the Company shall (and shall cause its
subsidiaries to): (i) provide to Parent (and to the officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (together, "Representatives") of Parent) access, at reasonable
times upon prior notice, to its officers, employees, agents, properties, offices
and other facilities and to its books and records; and (ii) furnish promptly to
Parent such information concerning its business, properties, contracts, assets,
liabilities, personnel and other aspects as Parent or its Representatives may
reasonably request.
(b) Parent shall comply with, and shall cause its
Representatives to comply with, all of their obligations under the
Confidentiality Agreement dated January 24, 2000 (the "Confidentiality
Agreement") between the Company and Parent. All information obtained by Parent
pursuant to paragraph (a) above shall be subject to the Confidentiality
Agreement.
SECTION 6.04. No Solicitation of Transactions. (a) Neither the
Company nor any of the Company Subsidiaries shall, directly or indirectly, take
(nor shall the Company authorize or permit its Representatives or, to the extent
within the Company's control, other affiliates to take) any action to (i)
encourage (including by way of furnishing nonpublic information), solicit,
initiate or facilitate any Acquisition Proposal (as defined in Section 6.04(c)),
(ii) enter into any letter of intent, term sheet or other agreement with respect
to any Acquisition Proposal or (iii) participate in any way in discussions or
negotiations with, or furnish any information to, any person in connection with,
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or could reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that if, at any time prior to the
obtaining of the Company Stockholders' Approval, the Board of Directors of the
Company determines in good faith, based on the advice of outside counsel, that
it is necessary to do so to discharge properly its fiduciary duties to
stockholders, the Company may, in response to a Superior Proposal (as defined
below) and subject to such party's compliance with Section 6.04(b), (A) furnish
information with respect to the Company and the Company Subsidiaries to the
person making such Superior Proposal pursuant to a customary confidentiality
agreement the terms of which are no less favorable to the Company than the terms
of the Confidentiality Agreement and (B) participate in discussions with respect
to such Superior Proposal. Without limiting the foregoing, it is agreed that any
violation of the restrictions set forth in this Section 6.04(a) by any
Representative of the Company shall be deemed to be a breach of this Section
6.04(a) by the
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36
Company. The Company shall cease immediately and cause to be terminated any and
all existing discussions or negotiations with any parties conducted heretofore
with respect to an Acquisition Proposal and promptly request that all
confidential information furnished on behalf of the Company be returned.
(b) The Company will as promptly as practicable communicate to
Parent orally and in writing any inquiry received by it relating to any
potential Acquisition Proposal and the material terms of any proposal or
inquiry, including the identity of the person and its affiliates making the
same, that it may receive in respect of any such negotiations or discussions
being sought to be initiated with it. The Company shall (i) keep Parent fully
informed on a prompt basis with respect to any developments with respect to the
foregoing and (ii) provide to Parent as soon as practicable after receipt or
delivery thereof with copies of all correspondence and other written material
sent or provided to the Company from any third party in connection with any
Acquisition Proposal.
(c) "Acquisition Proposal" means any offer or proposal
concerning any (i) merger, consolidation, business combination or similar
transaction involving the Company, (ii) sale, lease or other disposition
directly or indirectly by merger, consolidation, business combination, share
exchange, joint venture, or otherwise of assets of the Company or the Company
Subsidiaries representing 10% or more of the consolidated assets of the Company
and the Company Subsidiaries, (iii) issuance, sale, or other disposition of
(including by way of merger, consolidation, business combination, share
exchange, joint venture, or any similar transaction) securities (or options,
rights or warrants to purchase, or securities convertible into or exchangeable
for, such securities ) of the Company or (iv) transaction in which any person
shall acquire beneficial ownership (as such term is defined in rule 13d-3 under
the Exchange Act), or the right to acquire beneficial ownership of any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 10% or
more of the outstanding voting capital stock of the Company. "Superior Proposal"
means a bona fide Acquisition Proposal made by a third party which was not
solicited by the Company, its subsidiaries, Representatives or other affiliates
and which, in the good faith judgment of the Company's Board of Directors,
taking into account the various legal, financial and regulatory aspects of the
proposal and the person making such proposal, (A) if accepted, is reasonably
likely to be consummated, and (B) if consummated, is reasonably likely to result
in a transaction that is more favorable to the Company's stockholders, from a
financial point of view, than the transactions contemplated by this Agreement.
(d) Neither the Company nor the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by the Board of Directors or such committee of the adoption and
approval of the Merger and the matters to be considered at the Company
Stockholders' Meeting, (ii) other than the Merger, approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal, or (iii)
other than the Merger, cause the Company to enter into any letter of intent,
agreement in principle, acquisition
<PAGE>
37
agreement or other similar agreement related to any Acquisition Proposal.
Nothing contained in this Section 6.04 shall prohibit the Company (A) from
taking and disclosing to its stockholders a position contemplated by rule 14d-9
or rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to its stockholders if, in the good faith judgment of its Board of
Directors, based on the advice of outside counsel, failure to so disclose would
result in a violation of applicable Law, or (B) in the event that a Superior
Proposal is made, from withdrawing or modifying its recommendation of the Merger
no earlier than two business days following written notice to Parent of its
intention to do so, so long as the Company continues to comply with all other
provisions of this Agreement, including, without limitation, Section 6.02.
SECTION 6.05. Directors' and Officers' Indemnification and
Insurance. (a) The Certificate of Incorporation of the Surviving Corporation
shall contain the provisions that are set forth, as of the date of this
Agreement, in Article X of the Certificate of Incorporation of the Company,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would affect
adversely the rights thereunder of individuals who at or at any time prior to
the Effective Time were directors, officers, employees, fiduciaries or agents of
the Company.
(b) The Company shall, to the fullest extent permitted under
applicable Law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable Law, indemnify and hold
harmless, each present and former director or officer of the Company and each
Company Subsidiary and each such person who served at the request of the Company
or any Company Subsidiary as a director, officer, trustee, partner, fiduciary,
employee or agent of another corporation, partnership, joint venture, trust,
pension or other employee benefit plan or enterprise (collectively, the
"Indemnified Parties") against all costs and expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages, liabilities and
settlement amounts paid in connection with any claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), whether
civil, administrative or investigative, arising out of or pertaining to any
action or omission in their capacities as officers or directors, in each case
occurring before the Effective Time (including the transactions contemplated by
this Agreement).
(c) For a period of three years after the Effective Time, the
Surviving Corporation shall use its reasonable best efforts to maintain in
effect the current directors' and officers' liability insurance policies
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies reasonably satisfactory to the Indemnified Parties
of at least the same coverage containing terms and conditions that are no less
advantageous) with respect to claims arising from facts or events that occurred
prior to the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend pursuant to this Section 6.05(c)
more than an amount per year equal to 150% of current annual premiums paid by
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38
the Company for such insurance (which premiums the Company represents and
warrants to be approximately $135,000 per year in the aggregate).
(d) In the event the Surviving Corporation or any successors
thereof (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity in such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each case, proper provision shall be made so that
the successors and assigns of the Surviving Corporation honor the
indemnification obligations set forth in this Section 6.05.
SECTION 6.06. Further Action; Consents; Filings. (a) Upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
its reasonable best efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the Merger
and the other transactions contemplated by this Agreement, (ii) obtain from
Governmental Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement and (iii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement, the Merger and the other transactions contemplated by
this Agreement that are necessary to obtain the Required Consents; provided,
however, that nothing in this Section 6.06(a) shall require Parent to agree to
(x) the imposition of any conditions or (y) the requirement of any divestiture,
other than the divestiture of the Baltimore American Savings Bank, F.S.B. (the
"Company Bank") in accordance with the terms of the Agreement. The parties
hereto shall cooperate with each other in connection with the making of all such
filings, including by providing copies of all such documents to the nonfiling
party and its advisors prior to filing and, if requested, by accepting all
reasonable additions, deletions or changes suggested in connection therewith.
Without limiting the generality of the Parent's and the Company's undertakings
in Section 6.06(a), Parent, the Principal Stockholder and the Company shall act
promptly to obtain the consent of the Bank Regulatory Authorities under any law,
rule or regulation enforced or promulgated by such Bank Regulatory Authorities
to the transfer and assignment to the Principal Stockholder at the Effective
Time of all of the Company's right, title and interest in and to the Company
Bank and shall take all other action necessary to effect such transfer.
(b) (i) The Company shall give any notices to third parties,
and use its reasonable best efforts to obtain any third party consents, (A)
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, (B) required to be disclosed in the Company Disclosure Schedule
or (C) required to prevent a Material Adverse Effect from occurring prior to or
after the Effective Time.
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39
(ii) In the event that the Company shall fail to obtain any
third party consent described in clause (i) above, the Company shall use its
reasonable best efforts, and shall take any such actions reasonably requested by
Parent, to minimize any adverse effect upon the Company and Parent and their
respective businesses resulting, or which could reasonably be expected to result
after the Effective Time, from the failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time,
the Company shall promptly notify Parent in writing of any pending or, to the
knowledge of the Company, threatened action, suit, arbitration or other
proceeding or investigation by any Governmental Entity or any other person (i)
challenging or seeking material damages in connection with the Merger or the
conversion of Company Common Stock into the Merger Consideration pursuant to the
Merger, (ii) seeking to restrain or prohibit the consummation of the Merger or
otherwise limiting the right of Parent or its subsidiaries to own or operate all
or any portion of the businesses or assets of the Company or its subsidiaries,
or (iii) which could reasonably be expected to have a Material Adverse Effect.
SECTION 6.07. Public Announcements. The initial press release
relating to this Agreement shall be a joint press release the text of which has
been agreed to by each of Parent and the Company. Thereafter, each of Parent and
the Company shall consult with the other before issuing any press release or
otherwise making any public statements with respect to this Agreement, the
Merger or any of the other transactions contemplated by this Agreement.
SECTION 6.08. Certain Employee Benefits Matters. For a period
of one year following the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, provide employee benefits that, in the aggregate, are
not substantially less favorable than the employee benefit plans, programs,
contracts and arrangements of the Company and the Subsidiaries as in effect
immediately prior to the Effective Time and that have been disclosed to Parent;
provided, however, that, except to the extent required pursuant to Section 2.06,
Parent and the Surviving Corporation shall not be required to provide employee
benefits in respect of stock options, stock purchase rights, restricted stock,
phantom stock or other stock-based compensation. To the extent that the length
of service is relevant for purposes of eligibility, participation or vesting
under any employee benefit plan, program or arrangement established or
maintained by the Company, employees of the Surviving Company shall be credited
with service accrued prior to the Effective Time with the Company and the
Company Subsidiaries to the extent such service was recognized by the Company
under such plans; provided, however, that such crediting of service shall not
operate to duplicate any benefit or the funding of any benefit.
SECTION 6.09. HealthExtras Inc. (a) At the option of Parent,
upon notice to the Company and the Principal Stockholder, the Company prior to
the Closing shall cause the termination of all contracts, commitments,
guarantees, agreements or arrangements (except for the HealthExtras Option (as
defined below)) between the Company or any Company Subsidiary
<PAGE>
40
and HealthExtras Inc., including, without limitation, the network access
contract expiring December 31, 2003 and the administrative services contract
expiring December 31, 2001.
(b) In the event Parent exercises its option pursuant to
Section 6.09(a), the Principal Stockholder shall use his best efforts to cause
to be terminated prior to the Closing, all such contracts, commitments,
guarantees, agreements or other arrangements referred to in Section 6.09(a).
(c) The Principal Stockholder shall not rescind and hereby
waives any right to terminate the option agreement between the Principal
Stockholder and the Company, dated October 8, 1999, whereby the Company was
granted an option (the "HealthExtras Option") to purchase 4,330,000 shares of
HealthExtras Inc. for an aggregate exercise price of $4,000,000.
SECTION 6.10. Sale of the Company Bank. (a) Subject to the
approval of the Bank Regulatory Authorities, on or prior to the Closing, the
Principal Stockholder shall purchase all of the Company's right, title and
interest in and to the outstanding capital stock of Quantum Financial Holdings,
Inc. and Baltimore American Savings Bank, F.S.B., and the Company shall transfer
and assign such interest to the Principal Stockholder (the "Bank Sale") for a
purchase price of the greater of $8,400,000 or the book-value of such capital
stock at such date to be paid in immediately available funds at Closing. All
existing liabilities of the Company Bank shall remain with the Company Bank
after the Bank Sale. The Company and the Principal Stockholder agree that each
party shall bear its own expenses in connection with the Bank Sale.
(b) Prior to the Bank Sale, the Company shall, and shall cause
each Company Subsidiary to, terminate or repay, as the case may be, all
contracts, agreements, commitments or other instruments between such party and
the Company Bank, including, without limitation, all contracts, agreements,
commitments or other instruments relating to indebtedness for borrowed money,
and any indemnification, contribution or support obligations in respect of the
Company Bank, but not including normal depository relationships in the ordinary
course of business on prevailing terms in the marketplace.
(c) In the event that the Bank Regulatory Authorities do not
approve the Bank Sale, Parent shall cooperate with the Company and the Principal
Stockholder to determine alternative means of divesting the Bank from the
Company, including, by way of a spin-off, dividend or pro rata distribution of
the Bank to the Company's stockholders; provided, however, that Parent shall not
obliged to agree to any such alternative means of divesting the Company Bank, if
the Company's expenses under such alternative proposal would reasonably be
expected to be greater than the expenses of the Company and the Principal
Stockholder pursuant to Section 6.10(a) or the period of time required to effect
such alternative proposal would materially delay consummation of the Merger.
<PAGE>
41
SECTION 6.11. Inactive Company Subsidiaries. Prior to the
Closing, the Company shall use it best efforts to dissolve or otherwise
terminate the corporate existence of the Inactive Company Subsidiaries and,
prior to the Closing, shall inform Parent of the status of such dissolutions.
SECTION 6.12. Warrants. Prior to the Closing, the Company
shall cause the holders of the Warrants to consent to receive the cash
consideration set forth in Section 2.07.
SECTION 6.13. Section 16 Matters. Prior to the Effective Time,
Company shall take all such steps as may be required to cause any dispositions
of Company Common Stock (including derivative securities with respect to Company
Common Stock) resulting from the transactions contemplated by this Agreement by
each individual who is subject to the reporting requirements of Section 16(a) of
the Exchange Act with respect to the Company to be exempt under Rule 16b-3
promulgated under the Exchange Act.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party. The
respective obligations of the Company, Parent and Merger Sub to consummate the
Merger are subject to the satisfaction at or prior to the Effective Time of the
following conditions, any or all of which may be waived, in whole or in part, to
the extent permitted by applicable Law:
(a) Company Stockholders' Approval. The Company Stockholders'
Approval shall have been obtained.
(b) No Order. No Governmental Entity, nor any court of
competent jurisdiction or arbitrator, shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment,
decree, injunction, executive order or award (whether temporary,
preliminary or permanent) (collectively, "Order") that is in effect,
pending or threatened and has, or would have, the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger or
any other transactions contemplated by this Agreement.
(c) Antitrust Waiting Periods. Any waiting period (and any
extensions thereof) applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
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42
SECTION 7.02. Conditions to the Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to consummate the Merger
are subject to the satisfaction or waiver (where permissible) of the following
additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects as of the
date hereof and as of the Effective Time as though made at and as of
the Effective Time, except that those representations and warranties
that address matters only as of a particular date shall remain true and
correct in all material respects as of such date (provided that any
representation or warranty that is qualified by materiality or Material
Adverse Effect shall be true in all respects as of the date hereof and
as of the Effective Time, or as of such particular date, as the case
may be), and Parent shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of the Company to that
effect.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, and Parent shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer
of the Company to that effect.
(c) Consents. All filings required to be made prior to the
Closing with, and all consents, approvals and authorizations legally
required to be obtained to consummate the Merger shall have been
obtained from and made with all Governmental Entities and all consents
from third parties under any Company Material Contract or other
material agreement, contract, license, lease or other instrument to
which the Company or any Company Subsidiary is a party or by which it
is bound required as a result of the transactions contemplated by this
Agreement shall have been obtained.
(d) Material Adverse Effect. There shall have been no
circumstance, event, occurrence, change or effect that would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect since the date of this Agreement.
(e) Actions. No Action shall have been brought and remain
pending by any Governmental Entity or other person, entity or group
that (i) seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or (ii) would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(f) Executive Agreements. The Executive Agreements shall be in
full force and effect.
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43
(g) First Health Group Litigation. There shall have been no
material adverse development in the Company's litigation with First
Health Group Corporation.
(h) Divestiture of the Company Bank. In accordance with all
applicable Law, the Company shall have transferred and assigned or
otherwise divested all of its right, title and interest in and to the
Company Bank.
(i) Dissenting Shares. The aggregate number of Dissenting
Shares shall constitute less than 15% of all shares of Company Common
Stock as of the date of the Company Stockholders' Meeting.
SECTION 7.03. Conditions to the Obligations of the Company.
The obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Merger Sub contained in
this Agreement shall be true and correct in all material respects as of
the date hereof and as of the Effective Time as though made on and as
of the Effective Time, except that those representations and warranties
that address matters only as of a particular date shall remain true and
correct in all material respects as of the date hereof and as of such
date (provided that any representation or warranty that is qualified by
materiality shall be true in all respects as of the Effective Time, or
as of such particular date, as the case may be), and the Company shall
have received a certificate of the Chief Executive Officer or Chief
Financial Officer of Parent to that effect.
(b) Agreements and Covenants. Each of Parent and Merger Sub
shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time and the Company
shall have received a certificate of the Chief Executive Officer or
Chief Financial Officer of Parent to that effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after adoption of this
Agreement by the stockholders of the Company, as follows:
(a) by mutual consent of Parent and the Company;
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44
(b) by either Parent or the Company, if the Effective Time
shall not have occurred on or before August 31, 2000; provided,
however, that the right to terminate this Agreement under this Section
8.01(b) shall not be available to any party whose action or failure to
act has caused the failure of the Merger to occur on or before such
date;
(c) by either Parent or the Company, if there shall be any
Order of a Governmental Entity which is final and nonappealable
preventing the consummation of the Merger; provided that the provisions
of this Section 8.01(c) shall not be available to any party whose
failure to fulfill its obligations hereunder shall have been the cause
of, or shall have resulted in, such Order;
(d) by Parent if (i) the Board of Directors of the Company
withholds, withdraws, modifies or changes the Company Board Approval in
a manner adverse to Parent, or shall have resolved to do so, (ii) the
Board of Directors of the Company shall have recommended to the
stockholders of the Company a Superior Proposal or shall have resolved
to do so or shall have entered into any letter of intent or similar
document or any agreement, contract or commitment accepting any
Superior Proposal, (iii) the Company shall have failed to include the
Company Board Approval in the Proxy Statement, (iv) the Company's Board
of Directors fails to reaffirm its recommendation in favor of the
approval of the Merger and this Agreement within five business days
after Parent requests in writing that such recommendation be
reaffirmed, (v) the Company shall have breached its obligations under
Section 6.04 or (vi) a tender offer or exchange offer for 20% or more
of the outstanding shares of stock of the Company is commenced, and the
Board of Directors of the Company fails to recommend against acceptance
of such tender offer or exchange offer by its stockholders (including
by taking no position with respect to the acceptance of such tender
offer or exchange offer by its stockholders);
(e) by either Parent or the Company if this Agreement shall
fail to receive the requisite vote for approval at the Company
Stockholders' Meeting;
(f) by Parent upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall
have become untrue, in either case such that the conditions set forth
in either Section 7.02(a) or (b) would not be satisfied; provided,
however, that if such breach is curable by the Company through the
exercise of its best efforts and for as long as the Company continues
to exercise such best efforts, Parent may not terminate this Agreement
under this Section 8.01(f); or
(g) by the Company upon a breach of any representation,
warranty, covenant or agreement on the part of Parent and Merger Sub
set forth in this Agreement, or if any representation or warranty of
Parent and Merger Sub shall have become untrue, in either case in such
a way that the conditions set forth in either Section 7.03(a) or (b)
would not be satisfied; provided, however, that if such breach is
curable by Parent and Merger
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45
Subsidiary through the exercise of their respective best efforts and
for as long as Parent and Merger Subsidiary continue to exercise such
best efforts, the Company may not terminate this Agreement under this
Section 8.01(g).
SECTION 8.02. Effect of Termination. Except as provided in
Section 9.01, in the event of termination of this Agreement pursuant to Section
8.01, this Agreement shall forthwith become void, there shall be no liability
under this Agreement on the part of Parent, Merger Sub or the Company or any of
their officers or directors, and all rights and obligations of each party hereto
shall cease, subject to the remedies of the parties set forth in Section 8.05;
provided, however, that nothing herein shall relieve any party from liability
for the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that after
the approval of the Merger and this Agreement by the stockholders of the
Company, no amendment may be made that would reduce the amount or change the
type of consideration into which each Share shall be converted upon consummation
of the Merger. This Agreement may not be amended, except by an instrument in
writing signed by the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any obligation
or other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
SECTION 8.05. Expenses. (a) Except as set forth in Section
8.06, all Expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, whether or not the Merger or any other transaction is
consummated. "Expenses", as used in this Agreement, shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred or accrued by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, the preparation, printing, filing
and mailing of the Proxy Statement, the solicitation of shareholder approvals
(including, without limitation, any advertising expenses), any filings relating
to the Required Consents or other similar regulations and all other matters
related to the closing of the Merger and the other transactions contemplated by
this Agreement.
(b) If this Agreement is terminated by either Parent or the
Company pursuant to Section 8.01(b) or Section 8.01(c) due to the failure to
divest the Company Bank in accordance with all Laws by the date of such
termination, the Company shall reimburse each of
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46
Parent and Merger Sub (not later than one business day after submission of
statements therefor) for all Expenses up to $750,000 in the aggregate; provided
that in the event the Company is required to pay the Fee pursuant to Section
8.06(a), the Company may deduct from such Fee any Expenses paid by the Company
pursuant to this Section 8.05(b).
SECTION 8.06. Fees. (a) The Company agrees to pay to Parent
(such payment to be made prior to the occurrence of any event described in
clause (x) or (y) thereof in the case of termination by the Company pursuant to
clause (ii) below or within two business days of a request from Parent in the
case of termination by Parent pursuant to clause (i) or (ii) below) a fee equal
to $22,000,000 (the "Fee") if:
(i) Parent terminates this Agreement pursuant to Section
8.01(d); or
(ii) (A) Parent or the Company terminates this Agreement
pursuant to Section 8.01(e), (B) prior to the time of such termination
an Acquisition Proposal had been made, and (C) on or prior to the
twelve month anniversary of the termination of this Agreement the
Company or any of its subsidiaries or affiliates (x) enters into an
agreement or letter of intent (or if the Company's Board of Directors
resolves or announces an intention to do so) with respect to any
Acquisition Proposal with any person, entity or group or (y)
consummates any transaction pursuant to an Acquisition Proposal with
any person, entity or group.
(b) In the event that the Company shall fail to pay the Fee or
any Expenses when due, the Company shall reimburse Parent for all Expenses
incurred or accrued by Parent in connection with the collection under and
enforcement of this Section 8.06, together with interest on such unpaid Fee and
Expenses, commencing on the date that such Fee or Expenses became due, at a rate
equal to the rate of interest publicly announced by Citibank, N.A., from time to
time, in The City of New York, as such bank's Prime Rate, plus 1.00%.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
SECTION 9.01. Survival of Representation and Warranties. (a)
The representations and warranties of the Principal Stockholder contained in
this Agreement shall not be extinguished by the Closing but shall survive for a
period of one year following the Closing Date; provided that:
(i) the representations and warranties contained in Sections
3.01, 3.03, 3.04 and 3.26 shall survive the Closing Date without
limitation;
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47
(ii) the representations and warranties obtained in Section
3.16 shall survive for a period of six years following the Closing
Date; and
(iii) the representations and warranties contained in Section
3.20 shall terminate ninety days following the expiration of the
applicable statute of limitations with respect to the assertion of any
claim in respect thereof by any Governmental Entity or other party.
(b) Any indemnification obligation of any party under any
representation or warranty set forth in this Agreement will terminate as of the
date set forth in Section 9.01(a) for the termination of the applicable
representation warranty, except for matters as to which notice is given prior to
the end of such period, in which event indemnification shall survive as long as
necessary to permit the final resolution of such matter.
SECTION 9.02. Indemnification. (a) Subject to the limitations
set forth in Section 9.02(c), the Principal Stockholder shall indemnify, defend
and hold harmless Parent, Merger Sub and the Surviving Corporation from and
against any and all Losses (as defined below) suffered or incurred by any of
Parent, Merger Sub or the Surviving Corporation or any successors or assigns
thereof (the "Parent Indemnified Parties") as a result of, or with respect to:
(i) any breach or inaccuracy of any representation or warranty
of the Principal Stockholder set forth in this Agreement, whether such
breach or inaccuracy exists or is made on the date of this Agreement or
as of the Closing Date; and
(ii) any breach of or noncompliance by the Company with any
covenant or agreement of the Company contained in this Agreement.
(b) "Loss" shall mean any loss, damage, liability, cost or
expense including, without limitation, any interest, fine, penalty, criminal or
civil judgment or settlement, court costs, reasonable attorneys' and expert
witnesses' fees, reasonable accountants' fees, disbursements and expenses, and
any indemnification or similar payments required to be made to officers,
directors, employees or agents under duly enacted charter provisions or bylaws,
board resolutions or undertakings, commitments or other understandings or under
applicable corporate law, together with interest thereon from the later of the
Closing Date and the date suffered or incurred.
(c) No amounts of indemnity shall be payable as a result of
any claim made pursuant to Section 9.02(a)(i) unless and until the Persons
making claims thereunder shall have suffered, incurred, sustained or become
subject to indemnifiable Losses in the aggregate in excess of $1,000,000, in
which case the Parent Indemnified Parties shall be entitled to recover all
Losses incurred, up to and exceeding such amount; and in no event shall the
amount of indemnification payable by the Principal Stockholder to the Parent
Indemnified Parties for any claims pursuant to Section 9.02(a)(i) exceed
$3,000,000. In determining whether any amount of
<PAGE>
48
indemnification is payable for any claim made pursuant to Section 9.02(a), any
materiality or Material Adverse Effect qualifier in the relevant representation
and warranty shall be disregarded.
SECTION 9.03. Notice of Claim. The Parent Indemnified Parties
shall promptly notify the Principal Stockholder, in writing, of any claim for
recovery, specifying in reasonable detail the nature of the Loss, the facts that
form the basis of the Loss and, if known, the amount, or an estimate of the
amount, of the liability arising therefrom. The Parent Indemnified Parties shall
provide to the Principal Stockholder as promptly as practicable thereafter
information and documentation reasonably requested by the Principal Stockholder
to support and verify the claim asserted, unless the Parent Indemnified Parties
have been advised by counsel that there are no reasonable grounds to assert the
joint defense privilege with respect to such information and documentation. A
notice of claim furnished by the Parent Indemnified Parties under this Section
9.03 shall also be deemed to constitute timely notice by the Parent Indemnified
Parties of any claim that may at any time thereafter be made by any Person
claiming entitlement to indemnity under any charter, bylaws or other governing
documents or any board resolutions, undertakings, commitments or other
understandings, with respect to the state of facts or circumstances which gave
rise to the claim by the Parent Indemnified Parties which is the subject of such
notice.
SECTION 9.04. Defense. (a) If the facts pertaining to a Loss
arise out of the claim of any third party, or if there is any claim against a
third party available by virtue of the circumstances of the Loss, the Principal
Stockholder may assume the defense or the prosecution thereof by written notice
to the Parent Indemnified Parties agreeing to indemnify and defend the Parent
Indemnified Parties from and against all indemnifiable Losses under this Article
IX arising from such claim; provided that the third party claim seeks only
monetary damages and does not seek injunctive or other relief against the Parent
Indemnified Parties.
(b) If the Principal Stockholder agrees to assume the defense
and prosecution of such claim, then the Parent Indemnified Parties shall have no
further obligation with respect to such claim. In any such case, the Parent
Indemnified Parties shall have the right to employ counsel separate from counsel
employed by the Principal Stockholder in any such action and to participate
therein and the fees and expenses of such counsel employed by the Parent
Indemnified Parties shall be at the Principal Stockholders' expense. The
Principal Stockholder shall not agree to a settlement of any claim without the
Parent Indemnified Parties' prior written consent, which consent shall not be
unreasonably withheld in light of the Parent Indemnified Parties' circumstances.
(c) If the Principal Stockholder shall not assume the defense
and prosecution of any such claim, the Parent Indemnified Parties shall keep the
Principal Stockholder reasonably informed of the progress of any proceedings
relating to such claim and shall consult regularly with the Principal
Stockholder with respect thereto and shall not agree to a settlement of such
claim without the Principal Stockholder's prior written consent, which consent
shall not be unreasonably withheld in light of the Principal Stockholder's
circumstances.
<PAGE>
49
(d) All parties hereto shall cooperate in the defense or
prosecution of any third party claim and shall furnish all witnesses and
testimony, records, materials and other information, and attend such
conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.01):
if to Parent or Merger Sub:
BCE Emergis Inc.
155 Rene-Levesque Boulevard West
Montreal, Quebec
H3B 4T3 Canada
Facsimile No.: (514) 868-2340
Attention: Corporate Secretary
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Facsimile No.: (212) 848-7179
Attention: John J. Madden
if to the Company:
United Payors & United Providers, Inc.
2275 Research Boulevard
Sixth Floor
Rockville, MD 20850
Facsimile No.: (301) 921-2400
Attention: Edward S. Civera
with a copy to:
<PAGE>
50
Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, DC 20016
Facsimile No.: (202) 966-9409
Attention: Thomas Haggerty
if to the Principal Stockholder:
Thomas L. Blair
c/o United Payors & United Providers, Inc.
2275 Research Boulevard
Sixth Floor
Rockville, MD 20850
Facsimile No.: (301) 921-2400
SECTION 10.02. Assignment; Binding Effect; Benefit. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties; provided,
however, that Parent may assign its rights (but not its obligations) to a wholly
owned subsidiary of Parent without the prior written consent of the other
parties hereto. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, except for the provisions of Section 6.05 (the "Third
Party Provisions"), nothing in this Agreement, expressed or implied, is intended
to confer on any person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement. The Third Party Provisions may be enforced by the
beneficiaries thereof.
SECTION 10.03. Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a specified person means a person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such specified person;
(b) "business day" means any day on which both the principal
offices of the SEC in Washington, D.C. are open to accept filings, or,
in the case of determining a date when any payment is due, any day
(other than a Saturday or a Sunday) on which banks are not required or
authorized to close in The City of New York;
(c) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management and policies of a person, whether
<PAGE>
51
through the ownership of voting securities, as trustee or executor, by
contract or credit arrangement or otherwise;
(d) "knowledge" means the actual knowledge of any executive
officer (determined in accordance with rule 16a-1(f) under the Exchange
Act), after due inquiry;
(e) "Material Adverse Effect" means any circumstance, event,
occurrence, change or effect that materially and adversely affects the
business, operations, properties, condition (financial or otherwise),
assets (tangible or intangible), liabilities (including contingent
liabilities) or results of operations of the Company and the Company
Subsidiaries taken as a whole;
(f) "person" means an individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation,
a "person" as defined in section 13(d)(3) of the Exchange Act), trust,
association or entity or government, or political subdivision, agency
or instrumentality of a government;
(g) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which
such person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, more than 50% of the stock or
other equity interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body
of such corporation partnership, joint venture or other legal entity;
(h) "Warrants" means the warrants to purchase 252,000 shares
of Company Common Stock expiring October 24, 2000 and the option to
purchase 246,000 shares of Company Common Stock expiring November 20,
2001, at an exercise price of $10.67 and $8.34, respectively, per share
of Company Common Stock; and
(i) "$" or "dollar" means a United States dollar.
SECTION 10.04. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
Law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect as long as the economic or
legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party. Upon determination that
any such term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
fullest extent possible.
SECTION 10.05. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
were not performed in
<PAGE>
52
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or in equity.
SECTION 10.06. Governing Law; Forum. Except to the extent that
the Merger is mandatorily governed by the DGCL, this Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in that state and
without regard to any applicable conflicts of law principles. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in the United States District Court for the Southern District of New
York. Each of the parties to this Agreement (a) consents to submit itself to the
personal jurisdiction of the United States District Court for the Southern
District of New York in the event that any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action in relation to this Agreement, the Merger or any of the other
transactions contemplated by this Agreement in any court other than the United
States District Court for the Southern District of New York.
SECTION 10.07. Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 10.08. Counterparts. This Agreement may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.09. Entire Agreement. This Agreement, the Voting
Agreement and the Confidentiality Agreement constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
SECTION 10.10. Waiver of Jury Trial. Each of the parties
hereto irrevocably and unconditionally waives all right to trial by jury in any
action, proceeding or counterclaim (whether based in contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of the
parties hereto in the negotiation, administration, performance and enforcement
thereof.
<PAGE>
53
IN WITNESS WHEREOF, each of Parent, Merger Sub and the Company
has caused this Agreement to be executed by their officers thereunto duly
authorized and the Principal Stockholder has executed this Agreement, in each
case as of the date first written above.
BCE EMERGIS INC.
By: /s/ W. Brian Edwards
---------------------------------
Name: W. Brian Edwards
Title: President & CEO
JETCO INC.
By: /s/ Francois Cote
-----------------------------
Name: Francois Cote
Title: Chairman & President
UNITED PAYORS & UNITED
PROVIDERS INC.
By: /s/ Edward S. Civera
-----------------------------
Name: Edward S. Civera
Title: Co-CEO & President
/s/ Thomas L. Blair
---------------------------------
THOMAS L. BLAIR
<PAGE>
EXHIBIT D
EXECUTION COPY
OPTION AGREEMENT
OPTION AGREEMENT, dated as of February 4, 2000 (this
"Agreement"), in favor of BCE EMERGIS, INC., a corporation organized under the
laws of Canada ("Parent") and JETCO INC., a Delaware corporation and a wholly
owned subsidiary of Parent ("Subsidiary"), granted by Thomas L. Blair, Chairman
and Co-Chief Executive Officer of the Company ("TLB") and Edward S. Civera,
President and Co-Chief Executive Officer of the Company ("ESC");
WHEREAS, Parent, Subsidiary and United Payors & United
Providers, Inc., a Delaware corporation (the "Company") propose to enter into an
Agreement and Plan of Merger, dated as of even date herewith (as the same may be
amended from time to time, the "Merger Agreement"; capitalized terms used and
not otherwise defined herein shall have the respective meanings assigned to them
in the Merger Agreement), which provides, upon the terms and subject to the
conditions thereof, for the merger of Subsidiary with and into the Company (the
"Merger"); and
WHEREAS, TLB has the right to purchase at any time, and is
obligated to purchase on or before February 25, 2003, 4,500,000 shares (the
"Trust Shares") of the Company common stock, par value $.01 per share (the
"Shares"), from Independent Divestment Trust (the "Trust") under that certain
Securities Purchase Agreement (the "SPA") by and between the Trust and TLB dated
as of February 25, 1999.
WHEREAS, Capital Z Financial Services Fund, II, L.P.
("Capital Z") has an option from TLB to purchase 2,250,000 Shares from TLB (the
"Capital Z Option");
WHEREAS, ESC has employee stock options under the Company's
1996 Stock Option Plan (the "ESC Stock Options") to purchase 640,625 Shares (the
"Executive Shares"), which such ESC Stock Options are exercisable at any time by
ESC upon payment of the exercise price for such ESC Stock Options;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants set forth herein and in the Merger Agreement,
and intending to be legally bound hereby, the parties hereto hereby agree as
follows:
1. Exercise of Capital Z Option. In the event that Capital Z
notifies TLB of its exercise of the Capital Z Option, TLB, in his capacity as a
stockholder of the Company, shall exercise his right to purchase Shares under
the Trust and shall deliver 2,250,000 Shares to Capital Z from the Trust Shares.
TLB shall notify Parent and Subsidiary of any such notice of exercise of the
Capital Z Option.
2. Trust Option. (a) Subject to the provisions of this
Section 2, TLB grants to Parent and Subsidiary an irrevocable option (the "Trust
Option") to require TLB to purchase 2,250,000 Trust Shares, at the price per
Share set forth in the SPA. The Trust Option may be exercised by Parent or
Subsidiary, in whole or in part, at any time and from time to time by delivery
of written notice during the period commencing on the date of exercise of the
Capital Z Option and ending on the date of the first to occur of (i) the
Effective Time and (ii) (A) 180 days after the termination of the Merger
Agreement in case of termination pursuant to Sections 8.01(d) or 8.01(e) of the
Merger Agreement, or (B) on the date of termination in the case of termination
of the Merger Agreement for any other reason (the "Trust Exercise Period").
(b) If Parent wishes to exercise the Trust Option, Parent
shall send a written notice at any time during the Trust Exercise Period to TLB
of its intention to exercise the Trust Option, specifying the total number of
the Trust Shares that TLB shall be required to purchase. Following receipt of
notice from Parent, TLB shall promptly notify Parent in writing of the purchase
price per Share (the "Purchase Price"). TLB shall not be obliged to purchase
such Trust Shares unless Parent makes available by way of loan to TLB the cash
funds sufficient to satisfy the aggregate Purchase Price for such Trust Shares.
<PAGE>
(c) The closing of the purchase of such Trust Shares (the
"Trust Closing") shall occur within five business days of the date on which
Parent delivers a written notice to TLB specifying the number of Trust Shares to
be purchased by TLB. At the Trust Closing Parent shall advance to TLB, by way of
loan, cash in an amount equal to the product obtained by multiplying (i) such
number of the Trust Shares as to which the Trust Option is exercised and (ii)
the Purchase Price per Trust Share (such cash amount being, the "TLB Loan"). The
TLB Loan, together with accrued and unpaid interest thereon calculated at a rate
of seven percent per annum, shall be repaid prior to the earlier of (x) the
Closing (as defined in the Merger Agreement) and (y) the termination of the
Merger Agreement.
(d) At the Trust Closing, as collateral security for the
prompt payment in full when due of the obligations of TLB to repay the TLB Loan,
TLB shall pledge and grant to Parent a first priority security interest in all
of TLB's right, title and interest in and to the Trust Shares purchased at the
Trust Closing.
3. Executive Option. (a) ESC grants to Parent and Subsidiary
an irrevocable option (the "Executive Option") to require ESC to purchase
640,625 Executive Shares, at the price per Share set forth in the ESC Stock
Options. The Executive Option may be exercised by Parent or Subsidiary, in whole
or in part, at any time and from time to time by delivery of written notice
during the period commencing on the date of any Acquisition Proposal (as defined
in the Merger Agreement) and ending on the date of the first to occur of (i) the
Effective Time and (ii) (A) 180 days after the termination of the Merger
Agreement in case of termination pursuant to Sections 8.01(d) or 8.01(e) of the
Merger Agreement, or (B) on the date of termination in the case of termination
of the Merger Agreement for any other reason (the "Trust Exercise Period").
(b) If Parent wishes to exercise the Executive Option, Parent
shall send a written notice at any time during the Trust Exercise Period to ESC
of its intention to exercise the Executive Option, specifying the total number
of Executive Shares that ESC shall be required to purchase. Following receipt of
notice from Parent, ESC shall promptly notify Parent in writing of the Purchase
Price. ESC shall not be obliged to purchase such Executive Shares unless Parent
makes available by way of loan to ESC the cash funds sufficient to satisfy the
aggregate Purchase Price for such Executive Shares and to pay any applicable
taxes.
(c) The closing of the purchase of such Executive Shares (the
"Executive Closing") shall occur within five business days of the date on which
Parent delivers a written notice to ESC specifying the number of Executive
Shares to be purchased by ESC. At the Executive Closing, Parent shall advance to
ESC, by way of loan, cash in an amount equal to the product obtained by
multiplying (i) such number of the Executive Shares as to which the Executive
Option is exercised and (ii) the Purchase Price per Executive Share (such cash
amount being, the "ESC Loan") plus an amount sufficient to pay any applicable
taxes. The ESC Loan, together with accrued and unpaid interest thereon
calculated at a rate of seven percent per annum, shall be repaid prior to the
earlier of (x) the Closing (as defined in the Merger Agreement) and (y) the
termination of the Merger Agreement.
(d) At the Executive Closing, as collateral security for the
prompt payment in full when due of the obligations of ESC to repay the ESC Loan,
ESC shall pledge and grant to Parent a first priority security interest in all
of ESC's right, title and interest in and to all of the Executive Shares
purchased at the Executive Closing.
4. Transfer of Shares. Except as provided in Section 1,
neither TLB nor ESC shall, directly or indirectly, (a) sell, pledge or otherwise
dispose of or encumber any or all of the Trust Shares or the Executive Shares
subject to the Trust Option and the Executive Option, respectively, (b) deposit
any such Trust Shares or Executive Shares into a voting trust or enter into a
voting agreement or arrangement with respect to any such Trust Shares or
Executive Shares or grant any proxy with respect thereto or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect acquisition or sale, assignment, transfer or other disposition of
any such Trust Shares or Executive Shares.
5. Voting of Shares. Each of TLB and ESC agree that any Trust
Shares or Executive Shares purchased by TLB or ESC pursuant to this Agreement
shall be subject to the obligations and restrictions set
<PAGE>
forth in the voting agreement, dated the date hereof, among TLB, ESC and certain
other stockholders of the Company, in favor of Parent and Subsidiary.
6. Authorization. TLB and ESC each hereby represent and
warrant and covenant to Parent as follows: (a) each of TLB and ESC has all legal
capacity to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, (b) this Agreement has been duly executed and
delivered by each of TLB and ESC and, assuming its due authorization, execution
and delivery by each of Parent and Subsidiary, constitutes a legal, valid and
binding obligation of such person, enforceable against TLB and ESC in accordance
with its terms, (c) (i) TLB has taken all necessary action to authorize and
permit granting the Trust Option and a first priority security interest to
Parent in respect of any purchased Trust Shares pursuant to this Agreement and
the grant of the Trust Option by TLB does not, and the exercise of the Trust
Option by Parent will not, result in any breach under the SPA and (ii) ESC has
taken all necessary action to authorize and permit granting the Executive Option
and a first priority security interest to Parent in respect of any purchased
Executive Shares pursuant to this Agreement and the grant of the Executive
Option by ESC does not, and the exercise of the Executive Option by Parent will
not, result in any breach under the ESC Stock Options.
7. Miscellaneous. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect as long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party; neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise); nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement. The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement was not performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or in equity; this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York; all actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in the United States District Court
for the Southern District of New York and each of the parties to this Agreement
consents to submit itself to the personal jurisdiction of the United States
District Court for the Southern District of New York in the event that any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement; EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
/s/ Thomas L. Blair
------------------------------
THOMAS L. BLAIR
/s/ Edward S. Civera
------------------------------
EDWARD S. CIVERA
<PAGE>
Exhibit E
JOINT FILING AGREEMENT
The undersigned hereby agree that the Statement on Schedule 13D, dated
February [ ], 2000 ("Schedule 13D"), with respect to the shares of common stock,
par value $0.01 per share of United Payors & United Providers, Inc. is, and any
amendments thereto executed by each of us shall be, filed on behalf of each of
us pursuant to and in accordance with the provisions of Rule 13d-1(k) under the
Securities and Exchange Act of 1934, as amended, and that this Agreement shall
be included as an Exhibit to the Schedule 13D and each such amendment. Each of
the undersigned agrees to be responsible for the timely filing of the Schedule
13D and any amendments thereto, and for the completeness and accuracy of the
information concerning itself contained therein. This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
dated February 14, 2000.
BCE EMERGIS INC.
By /s/ Monique Mercier
------------------------------------
Name: Monique Mercier
Title: Senior Vice President Law and
Corporate Secretary
JETCO INC.
By /s/ Francois Cote
------------------------------------
Name: Francois Cote
Title: President and Chairman
BCE INC.
By /s/ Marc J. Ryan
------------------------------------
Name: Marc J. Ryan
Title: Corporate Secretary
3588513 CANADA INC.
By /s/ Marc J. Ryan
------------------------------------
Name: Marc J. Ryan
Title: Secretary
Page 23 of 23
