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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): OCTOBER 2, 1995
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UNITED HEALTHCARE CORPORATION
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(Exact name of registrant as specified in charter)
MINNESOTA
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(State or other jurisdiction of incorporation)
0-13253 41-1321939
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(Commission File Number) (IRS Employer Identification No.)
300 OPUS CENTER, 9900 BREN ROAD EAST, MINNETONKA, MN 55343
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 936-1300
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Item 2. Acquisition or Disposition of Assets
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On October 2, 1995, United HealthCare Corporation ("United") completed its
acquisition of The MetraHealth Companies, Inc. ("MetraHealth"). The transaction
was effected by the merger of a wholly owned subsidiary of United ("Acquiror
Sub") with and into MetraHealth, pursuant to an Agreement and Plan of Merger
dated as of June 25, 1995 filed under Exhibit 2.1 of this Form 8-K. As a result
of the merger, the separate corporate existence of Acquiror Sub ceased and
MetraHealth continued as the surviving corporation of the merger and a wholly
owned subsidiary of United.
MetraHealth, which was privately held, was formed in January 1995 by combining
the group health care operations of Metropolitan Life Insurance Company and The
Travelers Insurance Company. MetraHealth covers more than 10 million
individuals, including 4.6 million in network-based care programs, approximately
450,000 of whom are health maintenance organization (HMO) members. It provides
health-related services to 58,000 companies, including more than 40 of the
Fortune 100. In addition, MetraHealth covers approximately 18 million
individuals through its specialty care programs.
Under the terms of the Agreement, adjusted for a $60 million pre-acquisition
dividend to MetraHealth's former owners, United paid $1.09 billion in cash and
$0.5 billion of 5.75% convertible preferred stock, for a total consideration at
closing of $1.59 billion. The convertible preferred stock is convertible into
United's common stock at $49.48, has a three-year no-call provision, and has a
ten-year mandatory redemption. In addition, the former owners of MetraHealth
are eligible to receive up to an additional $350 million if MetraHealth achieves
certain 1995 operating results, as defined. Any consideration payable for this
1995 earnout over and above the initial $1.59 billion may, at United's sole
discretion at that time, be in the form of cash, convertible debt, convertible
preferred stock, or straight debt. Moreover, if United's post-acquisition
combined net income for 1996 and 1997 reaches certain specified levels,
MetraHealth's former owners will be eligible to receive up to an additional $175
million in cash for each of those years. The agreement was negotiated at arms-
length and the cash portion of the consideration was paid from United's
available cash resources.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Business Acquired
Audited financial statements of MetraHealth and its predecessor companies
are currently not available. The financial statements will be filed as
soon as practicable but no later than December 16, 1995.
(b)Pro Forma Financial Information
The required pro forma financial information relative to the acquisition is
currently not available. The pro forma financial information will be
filed as soon as practicable, but not later than December 16, 1995.
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(c) Exhibits
Exhibit 2.1--Agreement and Plan of Merger dated as of June 25, 1995, by and
among United HealthCare Corporation, ("United"), a wholly owned subsidiary
of United ("Acquiror Sub"), The MetraHealth Companies, Inc. and certain of
its shareholders and their affiliates, The Travelers Insurance Company
("Travelers"), The Travelers Insurance Group, Inc., MetLife HealthCare
Holdings, Inc. and Metropolitan Life Insurance Company, a New York mutual
life insurance company ("MetLife").
Exhibit 2.2--Amendment No. 1 to Agreement and Plan of Merger dated as of
August 29, 1995, by and among United HealthCare Corporation, ("United"), a
wholly owned subsidiary of United ("Acquiror Sub"), The MetraHealth
Companies, Inc. and certain of its shareholders and their affiliates, The
Travelers Insurance Company ("Travelers"), The Travelers Insurance Group,
Inc., MetLife HealthCare Holdings, Inc. and Metropolitan Life Insurance
Company, a New York mutual life insurance company ("MetLife").
3
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED HEALTHCARE CORPORATION
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(Registrant)
By /s/David P. Koppe
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David P. Koppe
Chief Financial Officer
Date: October 17, 1995
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<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C> <C>
Exhibit No. Description Page No.
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2.1 Exhibit 2.1--Agreement and Plan of Merger dated as of June 25,
1995, by and among United HealthCare Corporation, ("United"), a
wholly owned subsidiary of United ("Acquiror Sub"), The
MetraHealth Companies, Inc. and certain of its shareholders and
their affiliates, The Travelers Insurance Company ("Travelers"),
The Travelers Insurance Group, Inc., MetLife HealthCare Holdings,
Inc. and Metropolitan Life Insurance Company, a New York mutual
life insurance company ("MetLife"). 7
2.2 Exhibit 2.2--Amendment No. 1 to Agreement and Plan of Merger
dated as of August 29, 1995, by and among United HealthCare
Corporation, ("United"), a wholly owned subsidiary of United
("Acquiror Sub"), The MetraHealth Companies, Inc. and certain of
its shareholders and their affiliates, The Travelers Insurance
Company ("Travelers"), The Travelers Insurance Group, Inc.,
MetLife HealthCare Holdings, Inc. and Metropolitan Life Insurance
Company, a New York mutual life insurance company ("MetLife"). 112
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SCHEDULES AND EXHIBITS OMITTED FROM
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AGREEMENT AND PLAN OF MERGER DATED AS OF JUNE 25, 1995
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The Company has omitted the following schedules and exhibits to the
Agreement and Plan of Merger and hereby agrees to furnish supplementally a copy
of any omitted schedule or exhibit to the Commission upon request:
EXHIBITS
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Exhibit 1.04 Amendments to Acquiror Sub's Certificate of Incorporation
Exhibit 2.03 Calculation of Company Earnings
Exhibit 2.05 Definition of Earnings Per Share
Exhibit 2.07(a) Company Restricted Shares
Exhibit 7.10(a) Amended Marketing Agreement
Exhibit 7.10(b) Standstill Agreement
Exhibit 7.14(b) Leased Premises
Exhibit 7.19 Liaison Committee
Exhibit 8.01(d) Registration Rights Agreement
Exhibit 11.01 Certificate of Designations
SCHEDULES
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Company Disclosure Schedule
Acquiror Disclosure Schedule
Stockholder Disclosure Schedule
Schedule of Stockholders
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNITED HEALTHCARE CORPORATION,
MONTANA ACQUISITION, INC.,
THE METRAHEALTH COMPANIES, INC.
AND
CERTAIN OTHER PERSONS NAMED HEREIN
JUNE 25, 1995
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER.................................................. 1
SECTION 1.01 The Merger............................................ 1
SECTION 1.02 Effective Time........................................ 2
SECTION 1.03 Effect of the Merger.................................. 2
SECTION 1.04 Certificate of Incorporation; By-Laws................. 2
SECTION 1.05 Directors and Officers................................ 2
SECTION 1.06 Taking Necessary Action; Further Action............... 2
SECTION 1.07 The Closing........................................... 3
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES................................................ 3
SECTION 2.01 Conversion of Securities.............................. 3
SECTION 2.02 Exchange of Certificates.............................. 5
SECTION 2.03 Adjustments to Contingent Consideration............... 6
SECTION 2.04 Determination of Preferred Conversion Price........... 10
SECTION 2.05 Contingent Payment Rights............................. 10
SECTION 2.06 Stock Transfer Books.................................. 13
SECTION 2.07 Restricted Stock and Stock Options.................... 13
SECTION 2.08 Dissenting Stockholders............................... 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 16
SECTION 3.01 Organization and Qualification; Subsidiaries.......... 16
SECTION 3.02 Certificate of Incorporation; By-Laws................. 17
SECTION 3.03 Capitalization........................................ 17
SECTION 3.04 Authority; Enforceability; Vote Required.............. 18
SECTION 3.05 No Conflict; Required Filings and Consents............ 18
SECTION 3.06 Permits; Compliance................................... 19
SECTION 3.07 Reports; Financial Statements; Financial Matters...... 20
SECTION 3.08 Absence of Certain Changes or Events.................. 23
SECTION 3.09 Absence of Litigation................................. 24
SECTION 3.10 Contracts; No Default................................. 24
SECTION 3.11 Employee Benefit Plans; Labor Matters................. 26
SECTION 3.12 Taxes................................................. 31
SECTION 3.13 Third-Party Funds..................................... 34
SECTION 3.14 Brokers and Agents; Insurance Matters................. 34
SECTION 3.15 Intellectual Property Rights.......................... 35
SECTION 3.16 Certain Business Practices and Regulations............ 36
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SECTION 3.17 Insurance............................................. 36
SECTION 3.18 Certain Relationships................................. 37
SECTION 3.19 Title to Properties; Environmental Matters............ 37
SECTION 3.20 Brokers............................................... 39
SECTION 3.21 Effective Time; Disclosure............................ 39
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS......... 40
SECTION 4.01 Organization and Qualification........................ 40
SECTION 4.02 Authority; Enforceability............................. 40
SECTION 4.03 No Conflict; Required Filings and Consents............ 40
SECTION 4.04 Ownership of Stock.................................... 41
SECTION 4.05 Brokers............................................... 42
SECTION 4.06 Investment Representations............................ 42
SECTION 4.07 Effective Time; Disclosure............................ 42
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
ACQUIROR SUB............................................... 42
SECTION 5.01 Organization and Qualification........................ 43
SECTION 5.02 Articles of Incorporation; By-Laws.................... 43
SECTION 5.03 Capitalization........................................ 43
SECTION 5.04 Authority; Enforceability............................. 44
SECTION 5.05 No Conflict; Required Filings and Consents............ 45
SECTION 5.06 Reports; Financial Statements......................... 46
SECTION 5.07 Ownership of Acquiror Sub; No Prior Activities........ 47
SECTION 5.08 Brokers............................................... 48
SECTION 5.09 Permits; Compliance................................... 48
SECTION 5.10 Absence of Litigation................................. 48
SECTION 5.11 Absence of Certain Changes or Events.................. 49
SECTION 5.12 Effective Time; Disclosure............................ 49
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS................... 49
SECTION 6.01 Affirmative Covenants of the Company.................. 49
SECTION 6.02 Negative Covenants of the Company..................... 50
SECTION 6.03 Covenants of the Stockholders......................... 53
SECTION 6.04 Affirmative Covenants of Acquiror..................... 55
SECTION 6.05 Access and Information................................ 55
ARTICLE VII ADDITIONAL AGREEMENTS....................................... 56
SECTION 7.01 Approval of Stockholders.............................. 56
SECTION 7.02 Appropriate Action; Consents; Filings................. 57
SECTION 7.03 New York State Employees Contract..................... 58
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SECTION 7.04 Update Disclosure; Breaches............................... 58
SECTION 7.05 Public Announcements...................................... 59
SECTION 7.06 Indemnification of Directors and Officers................. 59
SECTION 7.07 Obligations of Acquiror Sub............................... 60
SECTION 7.08 Severance and Employment Agreements....................... 60
SECTION 7.09 Company Employee Benefit Plans............................ 62
SECTION 7.10 Related Agreements........................................ 63
SECTION 7.11 Utilization of Products and Services...................... 63
SECTION 7.12 Amendment of Certain Agreements........................... 64
SECTION 7.13 Rights under Master Agreement............................. 64
SECTION 7.14 Restructuring Matters..................................... 65
SECTION 7.15 Cooperation and Exchange of Tax Information;
Preparation of Tax Returns................................ 66
SECTION 7.16 Use of Computer Software.................................. 68
SECTION 7.17 Assumption of Registration Rights Agreement............... 69
SECTION 7.18 Waiver of Rights of First Refusal......................... 69
SECTION 7.19 Post-Closing Cooperation.................................. 69
SECTION 7.20 Certain Litigation........................................ 70
SECTION 7.21 Post-Effective Time Employee Benefit Plans................ 71
ARTICLE VIII CLOSING CONDITIONS......................................... 73
SECTION 8.01 Conditions to Obligations of Each Party Under This
Agreement................................................. 73
SECTION 8.02 Additional Conditions to Obligations of Acquiror and
Acquiror Sub.............................................. 75
SECTION 8.03 Additional Conditions to Obligations of the Company....... 76
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.......................... 77
SECTION 9.01 Termination............................................... 77
SECTION 9.02 Effect of Termination..................................... 77
SECTION 9.03 Fees and Expenses......................................... 78
ARTICLE X INDEMNIFICATION............................................ 79
SECTION 10.01 Survival of Representations and Warranties................ 79
SECTION 10.02 Indemnification by the Stockholders....................... 79
SECTION 10.03 Indemnification by Acquiror............................... 81
SECTION 10.04 Method of Asserting Claims................................ 81
SECTION 10.05 Expiration of Indemnities................................. 83
SECTION 10.06 Indemnification Claims; Interest.......................... 83
SECTION 10.07 Tax Claims; Certain Contest Rights........................ 84
SECTION 10.08 No Right of Offset........................................ 86
SECTION 10.09 Exclusive Remedy.......................................... 86
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ARTICLE XI DEFINITIONS................................................ 86
SECTION 11.01 Defined Terms........................................ 86
ARTICLE XII GENERAL PROVISIONS......................................... 93
SECTION 12.01 Arbitration........................................... 93
SECTION 12.02 Notices............................................... 94
SECTION 12.03 Amendment............................................. 95
SECTION 12.04 Waiver................................................ 96
SECTION 12.05 Headings.............................................. 96
SECTION 12.06 Severability.......................................... 96
SECTION 12.07 Entire Agreements..................................... 96
SECTION 12.08 Assignment............................................ 96
SECTION 12.09 Parties in Interest................................... 96
SECTION 12.10 Governing Law......................................... 96
SECTION 12.11 Best Efforts.......................................... 97
SECTION 12.12 Counterparts.......................................... 97
SECTION 12.13 Tax Treatment......................................... 97
EXHIBITS
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Exhibit 1.04 Amendments to Acquiror Sub's Certificate of
Incorporation
Exhibit 2.03 Calculation of Company Earnings
Exhibit 2.05 Definition of Earnings Per Share
Exhibit 2.07(a) Company Restricted Shares
Exhibit 7.10(a) Amended Marketing Agreement
Exhibit 7.10(b) Standstill Agreement
Exhibit 7.14(b) Leased Premises
Exhibit 7.19 Liaison Committee
Exhibit 8.01(d) Registration Rights Agreement
Exhibit 11.01 Certificate of Designations
SCHEDULES
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Company Disclosure Schedule
Acquiror Disclosure Schedule
Stockholder Disclosure Schedule
Schedule of Stockholders
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THIS AGREEMENT AND PLAN OF MERGER, dated as of June 25, 1995 (this
"Agreement"), is by and among UNITED HEALTHCARE CORPORATION, a Minnesota
corporation ("Acquiror"), Montana Acquisition, Inc., a Delaware corporation and
a wholly owned Subsidiary of Acquiror ("Acquiror Sub"), The MetraHealth
Companies, Inc., a Delaware corporation (the "Company"), each of the
stockholders of the Company listed on the Schedule of Stockholders attached to
this Agreement (each a "Stockholder and collectively, the "Stockholders"), and
Metropolitan Life Insurance Company, a New York mutual life insurance company
("MetLife"). Capitalized terms used and not otherwise defined in this Agreement
are defined in Article XI.
WITNESSETH:
WHEREAS, the Board of Directors of the Company has (i) determined that
the Merger is in the best interests of the holders of Company Common Stock and
(ii) approved and adopted this Agreement and the transactions contemplated
hereby and recommended adoption of this Agreement by the stockholders of the
Company;
WHEREAS, the Board of Directors of Acquiror has determined that the
Merger is in the best interests of Acquiror and its stockholders and has
approved and adopted this Agreement and the transactions contemplated hereby;
WHEREAS, Acquiror Sub, upon the terms and subject to the conditions of
this Agreement and in accordance with Delaware Law, desires to merge with and
into the Company (the "Merger") and its Board of Directors has approved and
adopted, and its sole stockholder has adopted, this Agreement and the
transactions contemplated hereby; and
WHEREAS, the Stockholders collectively own approximately 96% of the
outstanding capital stock of the Company and desire to enter into this Agreement
to induce Acquiror and Acquiror Sub to enter into this Agreement and consummate
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
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SECTION 1.01 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with Delaware Law, at
the Effective Time, Acquiror Sub shall be merged with and into the Company. As
a result of the Merger, the separate corporate existence of Acquiror Sub shall
cease and
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the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"). Acquiror Sub and the Company are sometimes
collectively referred to in this Agreement as the "Constituent Corporations."
SECTION 1.02 Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver, of the conditions set forth in Article
VIII, but in no event later than December 31, 1995 (subject to extension as
provided in Section 9.01(d)), the parties shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware in such form as required by, and
executed in accordance with, the relevant provisions of Delaware Law (the date
and time of such filing being the "Effective Time"); provided that the parties
agree to use their best efforts to consummate the Merger as soon as practicable
after the date of this Agreement.
SECTION 1.03 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law. Without limiting the generality of those laws, and subject to
their provisions, at the Effective Time, all the property, interests, assets,
rights, privileges, immunities, powers and franchises of Acquiror Sub and the
Company shall vest in the Surviving Corporation, and all debts, liabilities,
duties and obligations of Acquiror Sub and the Company shall become the debts,
liabilities, duties and obligations of the Surviving Corporation.
SECTION 1.04 Certificate of Incorporation; By-Laws. At the
Effective Time, the Certificate of Incorporation, as amended by the amendments
thereto set forth in Exhibit 1.04 to this Agreement (which amendments shall
become effective only at the Effective Time), and the By-Laws of Acquiror Sub
shall be the Certificate of Incorporation and the By-Laws of the Surviving
Corporation.
SECTION 1.05 Directors and Officers. The directors of Acquiror
Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation, and the
officers of Acquiror Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 1.06 Taking Necessary Action; Further Action. Acquiror,
Acquiror Sub, the Company and the Stockholders, respectively, shall each use its
best efforts to take all such action as may be necessary or appropriate to
effectuate the Merger under Delaware Law at the time specified in Section 1.02.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all properties, interests,
assets, rights, privileges, immunities, powers and franchises of either of the
Constituent Corporations, the officers of the Surviving Corporation are fully
authorized in the name of each Constituent
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Corporation or otherwise to take, and shall take, all such lawful and necessary
action.
SECTION 1.07 The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") will take place at the offices of
Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York, or
at such other place that is mutually acceptable to the parties, and will be
effective at the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
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SECTION 2.01 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any further action on the part of Acquiror Sub,
the Company or the holders of any of the following securities:
(a) Each share of Company Common Stock, including all restricted
shares, outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to Section 2.01(b)) shall
be converted, subject to Section 2.02(c), into and become the right to receive
the following (collectively, the "Merger Consideration"):
(i) an amount in cash (the "Cash Consideration") equal to (A)
$1,150,000,000 (less the amount of dividends, if any, paid by the Company to its
stockholders after the date of this Agreement and prior to the Effective Time
which have been consented to by Acquiror) divided by (B) the number of shares of
Company Common Stock, including all restricted shares, outstanding at the
Effective Time;
(ii) a number of shares of Acquiror Preferred Stock equal to (A)
500,000 divided by (B) the number of shares of Company Common Stock, including
all restricted shares, outstanding at the Effective Time;
(iii) an amount (the "Contingent Consideration") equal to (A)
$350,000,000 less (B) the amount of the reductions, if any, determined under
Section 2.03 of this Agreement divided by (C) the number of shares of Company
Common Stock, including all restricted shares, outstanding at the Effective
Time, which amount shall, at Acquiror's election, be payable, subject to Section
2.03(c), either (x) in cash, (y) by issuance of one or more types of
Alternative Securities priced as provided in Section 2.03(d)(iv) in an aggregate
amount equal to the amount of the Contingent Consideration to be paid in the
form of Alternative Securities; or (z) any combination of cash and/or
Alternative Securities the Contingent Consideration (whether the initial payment
under Section 2.03(a) or any adjustments thereto under Sections 2.03(b) or (c))
shall also include interest, which interest shall be payable in cash, on the
amount of Contingent Consideration paid
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from the Effective Time to the date of payment or issuance of Contingent
Consideration at the rate specified in Section 10.06; and
(iv) one "Contingent Payment Right" having the rights and terms set
forth in Section 2.05.
Notwithstanding the foregoing, the amounts issuable in respect of Company Common
Stock under clauses (i) and (ii) above shall be aggregated, and each holder of
Company Common Stock shall have the right to elect to receive either all Cash
Consideration or a combination of Cash Consideration and Acquiror Preferred
Stock, subject to the following:
(aa) each of TIC and TIG hereby elects to receive all Cash
Consideration and no Acquiror Preferred Stock;
(bb) MHH hereby elects to receive the full $500,000,000 face value of
Acquiror Preferred Stock, subject to reduction under clause (cc) below, and the
balance of the amounts payable to it under clauses (i) and (ii) above as Cash
Consideration;
(cc) in no event shall the aggregate amount of Acquiror Preferred
Stock issued under clause (ii) above exceed a face value of $500,000,000, and if
one or more holders of Company Common Stock other than MHH elect to receive
Acquiror Preferred Stock, the amount of Acquiror Preferred Stock issuable to MHH
shall be reduced by the amount of Acquiror Preferred Stock allocable to the
holders who make such an election and MHH shall receive cash equal to the
aggregate face value of Acquiror Preferred Stock that such other holders have
elected to receive; and
(dd) in no event shall the Cash Consideration exceed $1,150,000,000
(less the amount of dividends, if any, paid by the Company to its stockholders
after the date of this Agreement and prior to the Effective Time which have been
consented to by Acquiror).
The foregoing formula for conversion of the Company Common Stock is
referred to as the "Exchange Ratio." Notwithstanding the foregoing, if between
the date of this Agreement and the Effective Time the outstanding shares of
Company Common Stock shall have been changed into a different number of shares
or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Exchange Ratio shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares. In addition, if between the date of this Agreement and the
Effective Time an event of the type described in Section 9 of the Certificate of
Designations occurs, the conversion price of the Acquiror Preferred Stock set
forth in the Certificate of Designations shall be correspondingly adjusted to
reflect such event in the same
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manner as such conversion price would have been adjusted if the Acquiror
Preferred Stock had been issued on the date of this Agreement.
All shares of Company Common Stock converted pursuant to the Merger
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent the right to receive the Merger Consideration
into which such Company Common Stock was converted in the Merger and cash in
lieu of fractional shares of Acquiror Preferred Stock pursuant to Section
2.02(c). Certificates previously representing shares of Company Common Stock
shall be exchanged for the Cash Consideration and certificates representing
whole shares of Acquiror Preferred Stock issued in consideration therefor upon
the surrender of such certificates in accordance with the provisions of Section
2.02. No fractional share of Acquiror Preferred Stock shall be issued, and, in
lieu thereof, a cash payment shall be made pursuant to Section 2.02(c) of this
Agreement, without interest.
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by any direct or indirect
wholly owned Subsidiary of the Company immediately prior to the Effective Time
shall be canceled and extinguished without any conversion of such shares and no
payment shall be made with respect to such shares.
(c) Each share of common stock, par value $.01 per share, of Acquiror
Sub ("Acquiror Sub Common Stock") issued and outstanding immediately prior to
the Effective Time, shall be converted into and become one newly and validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.
SECTION 2.02 Exchange of Certificates.
(a) Payment of Merger Consideration; Exchange of Certificates. On the
date the Effective Time occurs (the "Closing Date"), each holder of Company
Common Stock shall be entitled to receive (i) the Cash Consideration to which
such holder is entitled under Section 2.01, payable by cashier's or certified
check or, if requested by such holder, by wire transfer of immediately available
funds to an account specified by such holder, (ii) a certificate or certificates
representing the number of whole shares of Acquiror Preferred Stock, if any,
issuable to such holder with respect to the aggregate number of such shares as
provided in Section 2.01, (iii) a cash payment in lieu of fractional shares, if
any, as provided in Section 2.02(c), and (iv) the Contingent Payment Rights with
respect to such shares, which Rights shall be uncertificated and shall have only
the rights and terms set forth in Section 2.05. The Contingent Consideration to
which such holder is entitled, if any, shall be paid as specified in Section
2.03. Upon surrender of each outstanding certificate theretofore evidencing
outstanding shares of Company Common Stock
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("Certificates"), the Acquiror shall pay to the holder of such Certificate the
Merger Consideration, as set forth above in this Section 2.02(a).
(b) No Further Rights in Company Common Stock. All shares of Acquiror
Preferred Stock issued, the Cash Consideration paid, and cash paid in lieu of
fractional shares of Acquiror Preferred Stock pursuant to Section 2.02(c), upon
conversion of the shares of Company Common Stock in accordance with the terms of
this Agreement, shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
other than the right to receive payments in respect of the Contingent
Consideration in accordance with Section 2.03 and the Contingent Payment Rights
in accordance with Section 2.05.
(c) No Fractional Shares. No certificates or scrip representing
fractional shares of Acquiror Preferred Stock shall be issued upon the surrender
for exchange of Certificates, and the owner of such fractional share interests
will not be entitled to vote or to any other rights of a stockholder of
Acquiror. Each holder of Certificates who otherwise would be entitled to
receive a fractional share of Acquiror Preferred Stock shall receive, in lieu of
such fractional share interest, an amount of cash (without interest) determined
by multiplying (i) the closing sale price per share of Acquiror Common Stock as
reported on the NYSE on the business day immediately preceding the Closing Date
by (ii) the number of shares of Acquiror Common Stock into which the fractional
share interest to which such holder would otherwise be entitled would otherwise
be convertible.
SECTION 2.03 Adjustments to Contingent Consideration.
(a) If the amount of Company Earnings for the year ending December 31,
1995 is: (i) $190,000,000 or higher, there shall be no reduction in the
Contingent Consideration under this Section 2.03; (ii) less than $190,000,000
but greater than $155,000,000, then the aggregate Contingent Consideration shall
be reduced by $10 for every dollar by which the amount of Company Earnings for
such year is less than $190,000,000; and (iii) $155,000,000 or less, then the
aggregate Contingent Consideration shall be reduced by $350,000,000. Not later
than 10 days following completion of the special review to be conducted by
Deloitte & Touche of the combined financial statements of the MetraHealth
Business for the year ending December 31, 1995, the Company shall prepare and
deliver to each of Acquiror and the Stockholders in accordance with the
procedures set forth on Exhibit 2.03 a statement (the "Initial Company Earnings
Statement") setting forth the amount of Company Earnings and the aggregate
amount of the Contingent Consideration payable, if any, in accordance with this
Section 2.03, a detailed reconciliation of the combined after tax net income or
loss of the MetraHealth Business to Company Earnings, prepared by officers of
the Company who were officers prior to the Effective Time, and a reasonably
detailed description of the calculation of such Company Earnings and Contingent
Consideration. The parties hereby agree that Deloitte & Touche will be retained
by the Stockholders and that the scope of the
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work to be performed by Deloitte & Touche will be determined by the Stockholders
in their sole discretion. In no event will such scope be less than what would
otherwise be required had the procedures to be employed by Deloitte & Touche
been sufficient to constitute an audit in accordance with Generally Accepted
Auditing Standards. The Company shall use its best efforts to cause such special
review to be completed as soon as practicable after December 31, 1995. The
amount of the Contingent Consideration payment reflected on the Initial Company
Earnings Statement shall be paid (if cash) or issued (if Alternative Securities)
by Acquiror to the persons entitled to receive such Contingent Consideration on
the fifth business day following delivery of the Initial Company Earnings
Statement, subject to extension in accordance with Section 2.03(d). If Acquiror
intends to issue Alternative Securities, Acquiror shall give notice to the
Stockholders of such intent at least five business days prior to issuance of
such securities. The aggregate amount of Contingent Consideration payable or
issuable under this Agreement shall equal $350,000,000 less the aggregate
reductions, if any, to Contingent Consideration determined in accordance with
this Section 2.03(a). Cash paid in respect of Contingent Consideration, together
with interest thereon in accordance with Section 2.01(a)(iii), shall be paid by
cashier's or certified check or, if requested by a person entitled to receive
payment, by wire transfer of immediately available funds to an account specified
by such person. "Company Earnings" shall be determined in accordance with the
provisions of Exhibit 2.03 attached to this Agreement. The calculation of the
amount of Contingent Consideration paid under this Section 2.03(a) shall be
subject to review as provided in Section 2.03(c) below.
(b) The amount of Company Earnings reflected on the Initial Company
Earnings Statement and the amount of Contingent Consideration payable under
Section 2.03(a), as finally determined hereunder, shall be subject to adjustment
as set forth on Exhibit 2.03 (the "Claims Accrual Adjustment"). Not later than
August 31, 1996, the Company shall prepare and deliver to each of Acquiror and
the Stockholders in accordance with the procedures set forth on Exhibit 2.03 a
statement (the "Second Company Earnings Statement") setting forth the
calculation of the Claims Accrual Adjustment, including the resulting amount of
adjustments, if any, to Company Earnings and to the aggregate amount of
Contingent Consideration paid under Section 2.03(a), setting forth in reasonable
detail the basis for the determination of the Claims Accrual Adjustment. If as
a result of the Claims Accrual Adjustment an additional amount is payable to the
persons entitled to receive Contingent Consideration or an amount is required to
be paid by such persons to Acquiror, then such amount shall be paid in cash by
Acquiror to the persons entitled to receive Contingent Consideration, or by such
persons to Acquiror, as the case may be, on the fifth business day following
delivery of the Second Company Earnings Statement. The calculation of the
amount of the Claims Accrual Adjustment paid under this Section 2.03(b) shall be
subject to review as provided in Section 2.03(c) below. Cash paid in respect of
Contingent Consideration, together with interest thereon in accordance with
Section 2.01(a)(iii), shall be paid by cashier's or certified check or, if
requested by a person entitled to
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receive payment, by wire transfer of immediately available funds to an account
specified by such person.
(c) If Acquiror or a Stockholder entitled to receive Contingent
Consideration shall have any objections to the Initial Company Earnings
Statement or the Second Company Earnings Statement, Acquiror or such Stockholder
shall deliver a reasonably detailed statement describing its objections to
Acquiror, the Company and the other Stockholders entitled to receive Contingent
Consideration within 30 business days after receiving the Company Earnings
Statement in question. In the event no such statement is delivered within such
30-business day period, the Company's calculation of Company Earnings and the
amount of Contingent Consideration payable (as set forth in the Initial Company
Earnings Statement), or the Company's calculation of the Claims Accrual
Adjustment (as set forth in the Second Company Earnings Statement), as the case
may be, shall be conclusive. The Stockholders entitled to receive Contingent
Consideration and Acquiror will use reasonable efforts to resolve any objections
to the calculation of Company Earnings and/or the Contingent Consideration
payment and/or the Claims Accrual Adjustment, in each case which are timely
raised by a Stockholder or Acquiror. If the parties do not obtain a final
resolution within 20 days after delivery of a statement of objections, such
Stockholders and Acquiror will select an accounting firm mutually acceptable to
them to resolve any remaining objections. If such Stockholders and Acquiror are
unable to agree on the choice of an accounting firm, such accounting firm will
be selected by lot from a list of nationally-recognized accounting firms, after
excluding the regular outside accounting firms of Acquiror and each of the
Stockholders. The determination of any accounting firm so selected will be set
forth in writing and will be conclusive and binding upon the parties. In the
event that parties submit any unresolved objections to an accounting firm for
resolution as provided in this Section 2.03(c), the fees and expenses of the
accounting firm shall (i) be borne by the objecting party if such accounting
firm determines that no additional payment is due to such party, (ii) be borne
equally by Acquiror and the Stockholders if the payment which such accounting
firm determines to be due to the Stockholders or Acquiror does not vary from the
payment reflected on the Initial or Second Company Earnings Statement, as the
case may be, by more than $5,000,000, (iii) be borne by Acquiror if the payment
which such accounting firm determines to be due to the Stockholders exceeds the
payment reflected on the Initial or Second Company Earnings Statement, as the
case may be, by more than $5,000,000 or (iv) be borne by the Stockholders if the
payment reflected on the Initial or Second Company Earnings Statement, as the
case may be, is more than $5,000,000 in excess of the payment which such
accounting firm determines to be due to the Stockholders. Any additional amount
of Contingent Consideration to be paid to the holders of Company Common Stock
under this Section 2.03(c) upon final resolution of disputes regarding the
Initial Company Earnings Statement or the Second Company Earnings Statement, as
the case may be, shall be paid in cash by Acquiror to the persons entitled to
receive such additional Contingent Consideration on the fifth business day
following the final determination of the amount of such additional Contingent
Consideration. Any reduction to the
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Contingent Consideration initially paid by Acquiror under Section 2.03(a) which
is to be paid to Acquiror under this Section 2.03(c) upon final resolution of
disputes regarding the Initial Company Earnings Statement or the Second Company
Earnings Statement shall be paid in cash to Acquiror by the persons who were
entitled to receive the initial payment of Contingent Consideration under
Section 2.03(a) on the fifth business day following the final determination of
the amount of such additional Contingent Consideration. Any such cash payment
shall be paid by cashier's or certified check or, if requested by a person
entitled to receive payment, by wire transfer of immediately available funds to
an account specified by such person.
(d) For purposes of this Agreement, "Alternative Securities" means one
or more of the following types of securities: convertible preferred stock; non-
convertible preferred stock; convertible debt securities; non-convertible debt
securities; convertible MIPS(TM); or other comparable securities, in each case
having terms substantially similar to those which are prevailing in the market
at the time of issuance for Alternative Securities of the type(s) issued under
Section 2.01(a)(iii). In the event any Alternative Securities are issued under
Section 2.01(a)(iii), the following provisions shall apply:
(i) The aggregate liquidation value and/or principal amount of any
particular type or class of Alternative Securities shall be not less than $100
million;
(ii) Acquiror shall pay all Registration Expenses (as defined in the
Registration Agreement) incurred upon subsequent resale of Alternative
Securities, which expenses shall be subject to Acquiror's reasonable advance
approval;
(iii) Subject to postponement under the circumstances provided in
Section 2.6 of the Registration Agreement, Acquiror shall prepare and file a
registration statement under the Securities Act covering the resale of such
Alternative Securities, and shall use its best efforts to cause such
registration statement to become effective as soon as practicable after filing,
and shall use best efforts to keep such registration statement effective for a
period not to exceed 90 days from the date of its effectiveness; and
(iv) Such Alternative Securities shall be immediately marketable under
federal and state securities laws and shall be priced to trade at their
respective liquidation values or principal amounts on a fully distributed basis
on the date of delivery, provided that if Acquiror cannot deliver immediately
marketable securities on such date, it may deliver such Alternative Securities
within 60 days of such date, priced to trade at their respective liquidation
values or principal amounts on a fully distributed basis on such date of
delivery. If such Alternative Securities are not delivered within such 60-day
period, Acquiror shall in lieu thereof deliver cash equal to the aggregate
amount of Contingent Consideration represented thereby. The price of the
Alternative Securities shall be jointly
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determined by investment bankers for each of Acquiror and MetLife or, if such
investment bankers cannot agree within two business days, by a third investment
banker to be chosen by Acquiror's and MetLife's investment bankers.
SECTION 2.04 Determination of Preferred Conversion Price. The
"Preferred Conversion Price" of a share of Acquiror Preferred Stock means
$49.477; provided, however, that if the average closing price of Acquiror Common
Stock as quoted on the NYSE for the five trading days ending with the second
trading day preceding the Closing Date (the "Average Stock Price") is $48.27 or
higher, then the "Preferred Conversion Price" of a share of Acquiror Preferred
Stock means the product determined by multiplying (i) 1.025 by (ii) the Average
Stock Price.
SECTION 2.05 Contingent Payment Rights.
(a) Each Contingent Payment Right shall represent only a right to
receive a cash payment (the "Earn-Out") from Acquiror, subject to the terms set
forth in this Section 2.05. The amount of any Earn-Out payment payable with
respect to each Contingent Payment Right shall be equal to the aggregate Earn-
Out payment payable, calculated as set forth below, divided by the total number
of Contingent Payment Rights outstanding as of the date such payment is due.
Not later than 10 days following the completion of the audit of Acquiror's
financial statements for each Earn-Out Year (as defined below), Acquiror shall
prepare and deliver to the Stockholders entitled to receive payment a statement
(the "Earn-Out Statement") setting forth the amount of Earnings Per Share (as
defined below), the amount of the Earn-Out, if any, payable for such Earn-Out
Year in accordance with this Section 2.05 and a reasonably detailed description
of the calculations of such Earnings Per Share and Earn-Out amount. The amount
of the Earn-Out payment reflected on the Earn-Out Statement shall be paid by
Acquiror to the holders of Contingent Payment Rights not later than the tenth
business day following the date the Earn-Out Statement is required to be
delivered to the Stockholders entitled to receive payment (the "Earn-Out Payment
Date"). Any objections made to the calculation of Earnings Per Share and/or the
amount of the Earn-Out payment shall be resolved in accordance with Section
2.05(f). In connection with any payment of the Earn-Out, Acquiror shall also
pay to each holder of Contingent Payment Rights interest on the amount of the
Earn-Out determined to be payable under this Section 2.05 to such holder for the
period beginning on the Earn-Out Payment Date to the date such amount is
actually paid, at the rate specified in Section 10.06. Contingent Payment Rights
shall not possess any attributes of common stock or other security and shall not
entitle the holders of the Contingent Payment Rights to any rights of any kind
other than as specifically set forth in this Agreement.
(b) The term "Earn-Out Year" shall refer to each of the following
twelve-month periods: (i) the period from January 1, 1996 through December 31,
1996; and (ii) the period from January 1, 1997 through December 31, 1997.
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(c) The Earn-Out payments shall be determined by measuring Acquiror's
Earnings Per Share for Earn-Out Years 1996 and 1997 against Threshold Earnings
Per Share and Maximum Earnings Per Share for such Earn-Out Years, calculated as
set forth on Exhibit 2.05.
(d) Failure to achieve the Threshold Earnings Per Share amount in any
Earn-Out Year will result in no Earn-Out payment being made for that Earn-Out
Year. Achieving the Maximum or greater Earnings Per Share in any Earn-Out Year
will result in the maximum Earn-Out payment to all holders of Contingent Payment
Rights, collectively, of $175,000,000 being made for that Earn-Out Year.
Earnings Per Share in any Earn-Out Year which is between the Threshold and
Maximum Earnings Per Share amounts for such year will result in an Earn-Out
payment to all holders of Contingent Payment Rights, collectively, being made
for that Earn-Out Year calculated as follows:
Aggregate Earn-Out payment = [(X-Y) / (Z-Y)] x $175,000,000
Where: X = the actual Earnings Per Share for an Earn-Out Year,
Y = the Threshold Earnings Per Share for an Earn-Out Year
Z = the Maximum Earnings Per Share for an Earn-Out Year
Note: X will be calculated to four decimal places and rounded to
the nearest two decimal places.
(e) "Earnings Per Share" for each Earn-Out Year shall be determined in
accordance with the provisions of Exhibit 2.05.
(f) If a Stockholder entitled to receive payment shall have any
objections to the Earn-Out Statement, such Stockholder shall deliver a
reasonably detailed statement describing its objections to Acquiror within 30
days after receiving the Earn-Out Statement in question. In the event such
statement is not delivered to Acquiror within such 30-day period, Acquiror's
calculation of Earnings Per Share and the Earn-Out payment, as set forth in the
Earn-Out Statement, shall be conclusive as to such Stockholder. The
Stockholders entitled to receive payment and Acquiror will use reasonable
efforts to resolve any objections to the calculation of Earnings Per Share
and/or the Earn-Out Payment which are timely raised by such Stockholders. If
the parties do not obtain a final resolution within 20 days after Acquiror's
receipt of a statement of objections, the Stockholders entitled to receive
payment and Acquiror will select an accounting firm mutually acceptable to them
to resolve any remaining objections. If such Stockholders and Acquiror are
unable to agree on the choice of an accounting firm, such accounting firm will
be selected by lot from a list of nationally recognized accounting firms, after
excluding the regular outside accounting firms of Acquiror and each such
Stockholder. The determination of any accounting firm so selected will be set
forth in writing and will be conclusive and binding upon the parties. If such
accounting firm determines that the Stockholders are entitled, under this
Section 2.05, to an additional payment from
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Acquiror, the Acquiror shall pay such amount with interest from the Earn-Out
Payment Date to the date such amount is actually paid at the rate specified in
Section 10.06. In the event that the parties submit any unresolved objections to
an accounting firm for resolution as provided in this Section 2.05(f), the fees
and expenses of the accounting firm shall (i) be borne by the objecting
Stockholder if such accounting firm determines that no additional payment is due
to such Stockholder, (ii) be borne equally by Acquiror and such Stockholder if
the payment which such accounting firm determines to be due to such Stockholder
does not exceed the Earn-Out payment reflected on the Earn-Out Statement by more
than $5,000,000, or (iii) be borne by Acquiror if the payment which such
accounting firm determines to be due to such Stockholder exceeds the Earn-Out
payment reflected on the Earn-Out Statement by more than $5,000,000.
(g) The Contingent Payment Rights are personal to each initial holder
thereof and shall not be transferable for any reason other than (i) to an
affiliate of such holder, (ii) to another holder of Contingent Payment Rights or
(iii) by operation of law or by will or the laws of descent and distribution.
Any attempted transfer of a Contingent Payment Right by any holder thereof
(other than as permitted by the immediately preceding sentence) shall be null
and void.
(h) Payment of the Earn-Out shall be made by cashier's or certified
check or, if requested by a person entitled to receive payment, by wire transfer
of immediately available funds to an account specified by such person, after
taking such action as is necessary to assure that all applicable federal or
state income withholding and any other taxes are withheld and deducted from such
funds otherwise to be paid to the holders of Contingent Payment Rights. Each
payment of the Earn-Out shall, to the extent required by Law, be deemed to
include interest at the applicable federal rate under the Code (it being
understood that such deemed interest will not affect the amount due and payable,
if any, under this Section 2.05).
(i) In the event that an Acquiror Change of Control occurs prior to
the end of the second Earn-Out Year, Acquiror will, prior to or at the time of
such Acquiror Change of Control, make appropriate provision or cause appropriate
provision to be made (in each case reasonably satisfactory to the Stockholders
entitled to receive payment) so that (i) the Earn-Out can be calculated and paid
(if the targets for payment are met) following such Acquiror Change of Control,
and (ii) Acquiror's obligations under this Section 2.05 are expressly assumed by
the acquiring person. This Section 2.05, and Acquiror's obligation to pay the
Earn-Out hereunder, shall survive any Acquiror Change of Control which is
effected in such a manner that Acquiror does not have the opportunity to comply
with the provisions of the first sentence of this Section 2.05(i). In the event
that (x) Acquiror does not comply with the provisions of the first sentence of
this Section 2.05(i) in connection with an Acquiror Change of Control, or (y)
following any Acquiror Change of Control and prior to the end of the second
Earn-Out Year, the acquiring person (1) disposes of any material portion of the
businesses conducted by Acquiror as of the Acquiror Change of Control so as to
adversely affect Earnings Per Share or
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(2) engages in any other transaction or reorganization that makes calculation of
Earnings Per Share impossible or unduly burdensome (in each case, an "Earn-Out
Default"), then the maximum amount of the Earn-Out payment for (A) the year in
which the Earn-Out Default occurs and (B) for the second Earn-Out Year (if the
Earn-Out Default occurs in the first Earn-Out Year), shall become due and
payable upon consummation of the Acquiror Change of Control in the case of
clause (x) above or immediately upon occurrence of the circumstances described
in clause (y) above.
SECTION 2.06 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
Certificates shall cease to have any rights with respect to such shares of
Company Common Stock except as otherwise provided in this Agreement or by Law.
On or after the Effective Time, any Certificates presented to Acquiror for any
reason shall be converted into the Cash Consideration, shares of Acquiror
Preferred Stock, any cash in lieu of fractional shares of Acquiror Preferred
Stock to which the holders of the Certificates are entitled pursuant to Section
2.02(c), the right to receive the Contingent Consideration in accordance with
Section 2.03 and Contingent Payment Rights.
SECTION 2.07 Restricted Stock and Stock Options.
(a) Exhibit 2.07(a) sets forth a list of shares of restricted Company
Common Stock issued in connection with the merger of MetraHealth Acquisition
Corp., a wholly owned subsidiary of the Company, with and into HealthSpring,
Inc. (the "HealthSpring Merger") on March 9, 1995 ("Restricted Company Shares"),
including the name of the holder and the number of Restricted Company Shares
held by each such holder. All Restricted Company Shares shall be deemed to be
vested as of the Effective Time, shall be treated as outstanding for purposes of
Section 2.01 and shall be entitled to receive the Merger Consideration pursuant
to such Section.
(b) Prior to the Effective Time, the Company shall amend its 1995
Employee Stock Option Plan (as so amended, the "Company Stock Plan"), and each
option granted thereunder prior to such amendment (in each case in a manner
satisfactory to Acquiror), to eliminate any provision requiring termination of
options granted thereunder upon consummation of the Merger (including any
provision converting options into the right to receive payments of cash or other
consideration) and to permit such options to be converted into options to
acquire shares of Acquiror Common Stock in accordance with this Section 2.07.
The aggregate number of shares of Company Common Stock issuable upon exercise of
all options granted under the Company Stock Plan or otherwise outstanding as of
the Effective Time shall not exceed 400,000. No option grants shall be made
after the date of this Agreement under the Company Stock Plan, except to persons
and in
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amounts and on the terms set forth on Sections 2.07(b) and 3.03 of the Company
Disclosure Schedule or otherwise approved in writing by Acquiror.
(c) At the Effective Time, each outstanding option to purchase shares
of Company Common Stock issued pursuant to the Company Stock Plan, whether
vested or unvested, shall be assumed by Acquiror (each, an "Assumed Stock
Option") as follows:
(i) Each Assumed Stock Option granted prior to the date of this
Agreement or after the date of this Agreement to the persons and in the amounts
referenced in Section 3.03 of the Company Disclosure Schedule shall be deemed to
constitute an option to acquire that number of shares of Acquiror Common Stock
at the per share exercise price, in each case determined in accordance with the
applicable formula set forth below, and otherwise on the same terms and
conditions as were applicable to such Company Stock Option so converted.
N = p * {[k + ((b-a) * c)] / (0.8 * b)}, with the result rounded to the
nearest integer
S = 0.2 * b, with the result rounded to the nearest cent
Where:
N = number of shares of Acquiror Common Stock for which such Assumed Stock
Option may be exercised
S = exercise price per share of each Assumed Stock Option
p = number of shares of Company Common Stock covered by Assumed Stock
Option immediately prior to the Effective Time
k = $123.62
a = $40.225
b = The greater of a and the closing price of one share of Acquiror Common
Stock on the NYSE on the trading day immediately preceding the
Effective Time
c = k / (0.8 * a)
(ii) At the Effective Time, each Assumed Option other than those
issued prior to the date of this Agreement or those issued to the persons and in
the amounts referenced in Section 3.03 of the Company Disclosure Schedule shall
be deemed to constitute an option to acquire, on the same terms and conditions
as were applicable under such Assumed Stock Option, (A) a number of whole shares
of
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Acquiror Common Stock (rounded down to the nearest whole share) with a value,
valued at the closing price of Acquiror Common Stock on the NYSE on the trading
day immediately preceding the Closing Date, equal to the value of the Company
Common Stock, valued at a price per share of $494.49, that the holder of such
Assumed Stock Option would have been entitled to receive had such holder
exercised such option in full immediately prior to the Effective Time and (B) at
an exercise price per share (rounded up to the nearest whole cent) equal to (1)
the aggregate exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Assumed Stock Option divided by (2) the number of
whole shares of Acquiror Common Stock deemed purchasable pursuant to such
Assumed Stock Option; provided, however, that in the case of any Assumed Stock
Option to which Section 421 of the Code applies by reason of its qualification
under Section 422 of the Code ("qualified stock options"), the option price, the
number of shares purchasable pursuant to such Assumed Stock Option and the terms
and conditions of exercise of such Assumed Stock Option shall be determined in
order to comply with Section 424(a) of the Code.
(d) As soon as practicable after the Effective Time, Acquiror shall
deliver to the holders of Assumed Stock Options appropriate notices setting
forth such holders' rights with respect to such Assumed Stock Options pursuant
to the Company Stock Plan and the documents evidencing the grants of such
Assumed Stock Options shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 2.07 after giving effect to
the Merger and the assumption by Acquiror as set forth above). Acquiror shall
comply with the terms of the Company Stock Plan and shall use reasonable efforts
to ensure, to the extent required by, and subject to the provisions of, such
Plan, that Assumed Stock Options which qualified as qualified stock options
prior to the Effective Time continue to qualify as qualified stock options of
Acquiror after the Effective Time.
(e) Acquiror shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock for delivery
upon exercise of Assumed Stock Options. As soon as practicable, but in no event
more than 30 days, after the Effective Time, Acquiror shall file a registration
statement on Form S-8 (or any successor or other appropriate form) with respect
to the shares of Acquiror Common Stock subject to Assumed Stock Options and
shall use its reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses referred to therein) for so long as any of such Assumed Stock
Options remain outstanding. Acquiror shall administer the Company Stock Plan
assumed pursuant to this Section 2.07 in a manner that complies with Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. Acquiror
shall take such other action as is reasonably necessary to effectuate the
intents and purposes of this Section 2.07.
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SECTION 2.08 Dissenting Stockholders.
(a) Notwithstanding anything in this Agreement to the contrary, if
Section 262 of the Delaware Law shall be applicable to the Merger, shares of
Company Common Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who have not voted such shares
in favor of the Merger, who shall have delivered, prior to any vote on the
Merger, a written demand for appraisal for such shares in the manner provided in
Section 262 of the Delaware Law and who, as of the Effective Time, shall not
have effectively withdrawn or lost such right to dissenters' rights ("Dissenting
Shares") shall not be converted into or represent a right to receive the Merger
Consideration pursuant to Section 2.01 of this Agreement, but the holders
thereof shall be entitled only to such rights as are granted by Section 262 of
the Delaware Law. Each holder of Dissenting Shares who becomes entitled to
payment for such shares pursuant to Section 262 of the Delaware Law shall
receive payment therefor from the Surviving Corporation in accordance with the
Delaware Law; provided, however, that if such holder of Dissenting Shares shall
have effectively withdrawn such holder's demand for appraisal of such shares or
lost such holder's right to appraisal and payment of such shares under Section
262 of the Delaware Law, such holder shall forfeit the right to appraisal of
such shares and each such share shall thereupon be deemed to have been
converted, as of the Effective Time, into and represent only the right to
receive payment from the Surviving Corporation of the Merger Consideration, as
provided in Section 2.01 of this Agreement.
(b) The Company shall give Acquiror (i) prompt notice of any written
demand for appraisal, any withdrawal of any such demand for appraisal and any
other instrument served pursuant to Section 262 of the Delaware Law received by
the Company, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under such Section 262 of the Delaware
Law. The Company shall not, except with the prior written consent of Acquiror,
voluntarily make any payment with respect to any demand for appraisal or offer
to settle or settle any such demand.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth in the Disclosure Schedule delivered by the
Company to Acquiror prior to the execution of this Agreement (the "Company
Disclosure Schedule"), which identifies exceptions by specific Section
references, the Company hereby represents and warrants to Acquiror that:
SECTION 3.01 Organization and Qualification; Subsidiaries. Each of
the Company and its Subsidiaries is a corporation, duly incorporated, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation,
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has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary except such jurisdictions, if any,
where the failure to be so qualified or in good standing would not have a
Company Material Adverse Effect. A true and complete list of all of the
Company's directly or indirectly owned Subsidiaries, together with the
jurisdiction of incorporation or organization of each Subsidiary and the
percentage of each Subsidiary's outstanding capital stock or other equity
interests owned by the Company or another Subsidiary of the Company, is set
forth in Section 3.01 of the Company Disclosure Schedule.
SECTION 3.02 Certificate of Incorporation; By-Laws. The Company has
made available to Acquiror complete and correct copies of the Certificate of
Incorporation and the By-Laws, as amended or restated, of the Company and each
of its Subsidiaries. Neither the Company nor any Subsidiary is in violation of
any of the provisions of its Certificate of Incorporation or By-Laws, as amended
or restated, or equivalent organizational documents.
SECTION 3.03 Capitalization.
(a) As of June 22, 1995, the authorized capital stock of the Company
consists of: 5,000,000 shares of Company Common Stock of which (i) 3,730,570
shares of Company Common Stock are issued and outstanding, including 130,570
Restricted Company Shares issued in the HealthSpring Merger; (ii) 400,000 shares
of Company Common Stock are reserved for future issuance pursuant to outstanding
options under the Company Stock Plan; and (iii) no shares of Company Common
Stock are held in the treasury of the Company.
(b) Except as contemplated by this Agreement, there have been no
changes in the terms of outstanding Company Stock Options since the date of
their issuance. Section 3.03 of the Company Disclosure Schedule sets forth, for
each option outstanding or proposed to be issued in accordance with Section 2.07
under the Company Stock Plan, the name of the holder, the number of shares
subject to such option, and the exercise price, vesting terms and expiration
date of such option. All outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights under Delaware Law, the Company's Certificate of Incorporation
or By-Laws or any rights similar to preemptive rights under any agreement to
which the Company is a party or by which it is bound. Each of the outstanding
shares of capital stock of, or other equity interests in, each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and non-assessable,
and such shares or other equity interests are owned by the Company (or its
Subsidiaries) free and clear of all security interests, liens, claims, pledges,
agreements, limitations on the Company's voting rights, charges or other
encumbrances of any nature whatsoever. Except as disclosed in Section 3.03(a),
there are no options, warrants, restricted shares or other rights,
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agreements, arrangements or commitments to which the Company or any of its
Subsidiaries is a party of any character relating to the issued or unissued
capital stock of, or other equity interests in, the Company or any of the
Subsidiaries or obligating the Company or any of the Subsidiaries to grant,
issue, sell or register for sale any shares of the capital stock of, or other
equity interests in, the Company or any of the Subsidiaries, by sale, lease,
license or otherwise. As of the date of this Agreement, there are no
obligations, contingent or otherwise, of the Company or any of its Subsidiaries
to (x) repurchase, redeem or otherwise acquire any shares of Company Common
Stock, or the capital stock of, or other equity interests in, any Subsidiary of
the Company; or (y) provide funds to, or make any investment in (in the form of
a loan, capital contribution or otherwise), or provide any guarantee with
respect to the obligations of, any Subsidiary of the Company or any other
person, except for the provision of funds to, making an investment in (in the
form of a loan, capital contribution or otherwise) or provision of any
guarantees of obligations of Subsidiaries in the ordinary course.
SECTION 3.04 Authority; Enforceability; Vote Required.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement (other than with
respect to the adoption of this Agreement by the holders of Company Common Stock
in accordance with Delaware Law and the Company's Certificate of Incorporation
and By-Laws). This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by the
Stockholders, MetLife, Acquiror and Acquiror Sub, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
(b) The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock is the only vote of the holders of
any class or series of capital stock of the Company necessary to approve the
Merger.
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 the Certificate of Incorporation or By-Laws or
equivalent organizational documents of the Company or any of its Subsidiaries;
(ii) subject to (x) obtaining the requisite adoption of this Agreement by the
holders of a majority of the outstanding shares of Company Common Stock in
accordance with Delaware
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Law and the Company's Certificate of Incorporation and By-Laws, (y) obtaining
the consents, approvals, authorizations and permits of, and making filings with
or notifications to any Governmental Entity pursuant to the applicable
requirements of any Law (including any Health Benefit Law) or of any third party
listed on Section 3.05 of the Company Disclosure Schedule, and (z) the filing
and recordation of appropriate merger documents as required by Delaware Law,
conflict with or violate any Laws applicable to the Company or any of its
Subsidiaries or by which any of their respective properties is bound or
affected; or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the properties or
assets of the Company or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party, by which the Company or any of its Subsidiaries or any of their
respective properties is bound or affected, except for any matters described in
clause (ii) or (iii) that would not have a Company Material Adverse Effect.
Section 3.05 of the Company Disclosure Schedule sets forth a list of all (i)
consents, approvals, authorizations, permits, filings, and notifications of,
with and to any Governmental Entity required to be made, obtained or filed by
the Company under (A) any Health Benefit Law, (B) any other material Law
applicable to the Company and its Subsidiaries or (C) to the Company's
knowledge, any other Law applicable to the Company and its Subsidiaries and (ii)
all material consents and approvals of any other third party required as a
result of the execution and delivery of this Agreement by the Company and the
consummation of the Merger.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entities or other third party, except for (i) the consents,
approvals, authorizations, filings, notices or permits described in Section 3.05
of the Company Disclosure Schedule, (ii) the filing and recordation of
appropriate merger documents as required by Delaware Law, and (iii) consents,
approvals, authorizations, filings, notices or permits not required to be
disclosed on Section 3.05 of the Company Disclosure Schedule.
SECTION 3.06 Permits; Compliance. Each of the Company and its
Subsidiaries is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary for the Company or any of its
Subsidiaries to own, lease and operate its properties or to carry on their
business as it is now being conducted (the "Company Permits") and no suspension,
revocation or cancellation of any of the Company Permits is pending or, to the
knowledge of the Company, threatened. Neither the Company nor any of its
Subsidiaries is operating in conflict with, or in default or violation of, in
any material respect (i) any Law applicable to the Company or any of its
Subsidiaries or by which any of their respective properties is
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bound or affected (including, without limitation, all applicable regulations,
procedures and policies governing the development of community-rated and
experience-rated premiums charged to the United States Office of Personnel
Management for individuals covered by the Federal Employees' Health Benefit Plan
who enroll in a HMO or health insurance plan of the Company or its Subsidiaries)
or (ii) any of the Company Permits.
SECTION 3.07 Reports; Financial Statements; Financial Matters.
(a) Since December 31, 1991, the Company and each of its Subsidiaries,
and the Stockholders and their affiliates with respect to the Health Care
Benefits Business, have filed all material forms, reports, statements, notices
and other documents required to be filed with applicable federal or state
regulatory authorities including, without limitation, state insurance and health
regulatory authorities (all such forms, reports, statements, notices and other
documents being collectively referred to as the "Company Reports"). The Company
Reports were prepared in all material respects in accordance with the
requirements of applicable Law.
(b) The Company (i) has furnished Acquiror with a copy of (A) the
condensed combined balance sheet of the MetraHealth Business as of April 30,
1995 and the related statements of income and changes in stockholders' equity
for the four-month period then ended (together with any notes thereto, the
"April 30 Statements"), (B) the condensed combined balance sheet of the
MetraHealth Business as of January 3, 1995 (together with any notes thereto, the
"Opening Balance Sheet"), (C) the audited combined financial statements of the
Travelers Business as of December 31, 1993 and 1994 and for the respective years
then ended, which financial statements were prepared in compliance with the
Master Agreement (together with any notes thereto, the "Travelers Statements"),
and (D) the audited combined financial statements of the MetLife Business as of
December 31, 1993 and 1994 and for the respective years then ended, which
financial statements were prepared in compliance with the Master Agreement
(together with any notes thereto, the "MetLife Statements"), and (ii) will
furnish prior to the Closing (A) the condensed combined balance sheet of the
MetraHealth Business as of the last day of each fiscal quarter ending at least
45 days prior to the Closing Date and the related statements of income and
changes in stockholders' equity for the year-to-date period then ended (together
with any notes thereto, the "Quarterly Statements") and (B) the condensed
combined balance sheet of the MetraHealth Business as of the last day of the
last month ending at least 45 days prior to the Closing Date and the related
statements of income and changes in stockholders' equity for the year-to-date
period then ended (the "Final Statements" and, together with the April 30
Statements, the Quarterly Statements, the Opening Balance Sheet, the Travelers
Statements and the MetLife Statements, the "Company Financial Statements"). The
Company Financial Statements have been, or in the case of the Quarterly
Statements and the Final Statements will be, prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except (x) to the
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extent required by changes in GAAP and (y) with respect to Company Financial
Statements prepared prior to the date of this Agreement, as may be specifically
indicated in the notes thereto) and fairly present, or in the case of the
Quarterly Statements and the Final Statements will fairly present, the
consolidated financial position of the MetraHealth Business, the Travelers
Business or the MetLife Business, as the case may be, as of the dates thereof
and the consolidated results of operations, changes in stockholders' equity and
cash flows for the periods then ended, except that (i) the April 30 Statements,
the Quarterly Statements and the Final Statements (A) were or will be subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount and (B) are not or may not be necessarily indicative of
results for the full fiscal year, (ii) the Company Financial Statements relating
to the Travelers Business and the MetLife Business, respectively, have been
prepared on a basis consistent with the accounting practices of TIC or MetLife,
as the case may be, then applicable, (iii) the April 30 Statements, while
prepared in accordance with GAAP, have not necessarily been prepared on a basis
consistent with any past practices, although the Quarterly Statements and the
Final Statements delivered by the Company subsequent to the April 30 Statements
will be prepared on a basis consistent with the April 30 Statements, and (iv)
any pro forma financial information contained in the Opening Balance Sheet is
not necessarily indicative of the consolidated financial position of the
MetraHealth Business as of the date thereof and the consolidated results of
operations and cash flows for the period indicated. For purposes of this
Agreement, (i) "Travelers Business" means the Managed Care and Employee Benefits
Operations Medical Division of TIG, which includes the entire Health Care
Benefits Business conducted by TIG and its affiliates, (ii) "MetLife Business"
means the Metropolitan Life Insurance Company Health Care Benefits Business,
which includes the entire Health Care Benefits Business conducted by MetLife and
its affiliates, and (iii) "MetraHealth Business" means the businesses conducted
by the Company and its Subsidiaries and the portion of the Health Care Benefits
Businesses of the Stockholders and their affiliates which have not yet been
contributed to the Company and its Subsidiaries.
(c) The Company has furnished Acquiror with a copy of the statutory
reports of each Subsidiary of the Company which is a licensed insurance company
or HMO as of December 31, 1993 and 1994 (the "SAP Statements"). The SAP
Statements have been prepared in accordance with statutory accounting principles
prescribed or permitted by applicable insurance regulatory authorities ("SAP")
and comply in all material respects with the requirements of applicable
insurance Laws.
(d) The financial projections regarding the MetraHealth Business which
have been provided to Acquiror by the Company were prepared by the Company in
good faith based on assumptions that the Company believed at the time such
projections were prepared to be reasonable and represented at the time prepared
the Company's best estimate of the combined results of operations of the
MetraHealth Business as of the dates and for the periods covered by such
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projections, without taking into account the Merger. Such projections are
consistent with internal reports and projections prepared by the Company's
senior management for official use.
(e) Except as and to the extent set forth in the April 30 Statements,
neither the Company nor any of its Subsidiaries has any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a balance
sheet of the MetraHealth Business or in the notes thereto, prepared in
accordance with GAAP, except for liabilities or obligations (none of which is a
liability resulting from breach of contract, breach of warranty, or tort or
infringement claim or lawsuit) incurred in the ordinary course since April 30,
1995.
(f) The Company has delivered to Acquiror a statement calculating the
pro forma amount of life insurance company risk based capital (as currently
defined in NAIC) of The MetraHealth Insurance Company as of January 1, 1995, as
required by the NAIC formula, calculated at the Company action level.
(g) Other than the absence of the reserve for adverse deviation, the
amount of reserves of The MetraHealth Insurance Company and each Subsidiary
which is a licensed insurance company or a HMO reflected in the Company
Financial Statements has been determined in accordance with sound actuarial
principles using accounting and reserve criteria applied consistently with the
criteria applied during calendar 1994 by either Stockholder and its affiliates
with respect to its Health Care Benefits Business.
(h) Section 3.07(h) of the Company Disclosure Schedule sets forth a
list of all Investments owned or held by the Company and its Subsidiaries
("Company Investments") as of April 30, 1995. As of the date of this Agreement,
all Company Investments are owned by the Company or one of its Subsidiaries,
free and clear of all liens and encumbrances, other than inchoate tax or other
statutory liens and encumbrances. All Company Investments have been made in
accordance with the established investment guidelines of the Company or the
applicable Stockholder and its affiliates, as the case may be. "Investment" as
applied to any person means (i) any direct or indirect purchase or other
acquisition by such person of any note, obligation, instrument, stock, mortgage,
security, or ownership interest (including any partnership, limited liability
company or joint venture interest) of any other person (other than a wholly
owned Subsidiary) and (ii) any capital contribution by such person to any
person.
(i) Neither the Company nor any of its Subsidiaries owns any interest
in, or has any liability (including any contingent liability) with respect to,
any options, puts, calls, swaps, exchange contracts or other derivatives or any
other similar material off balance sheet financing arrangements or liabilities.
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(j) The April 30 Statements set forth the principal accounting
policies followed by the MetraHealth Business, and since April 30, 1995, except
as provided in Section 6.02(i), there has been no change in such policies,
except as required by changes in GAAP or SAP.
SECTION 3.08 Absence of Certain Changes or Events. Except as
disclosed in Section 3.08 of the Company Disclosure Schedule or as otherwise
contemplated in this Agreement, since January 1, 1995:
(a) each of the Company and its Subsidiaries has conducted its
business only in the ordinary course in all material respects including, without
limitation, with regard to underwriting, pricing, actuarial, accounting and
investment policies and the basis used to establish reserves;
(b) there has not occurred any Company Material Adverse Effect and the
Company has not had any development which would reasonably be expected to result
in a Company Material Adverse Effect;
(c) neither the Company nor any of its Subsidiaries has made any loans
or advances in excess of $60,000 to any officer, director, stockholder or
affiliate of the Company or of any of its Subsidiaries (except for ordinary
travel and business expense payments and loans or advances made to the
Stockholders in the ordinary course in accordance with the terms of any
Affiliate Contract);
(d) the Company has not declared or paid, or accrued any liability for
the payment of, any dividends or made any other distributions to its
stockholders with respect to shares of its capital stock;
(e) neither the Company nor any of its Subsidiaries has entered into
any commitment or transaction (including without limitation any borrowing or
capital expenditure) other than in the ordinary course;
(f) neither the Company nor any of its Subsidiaries has incurred any
indebtedness for borrowed money (or guaranteed any such indebtedness) in excess
of $2,000,000 or other than in the ordinary course, regardless of amount;
(g) neither the Company nor any of its Subsidiaries has issued,
redeemed or repurchased any stock, bond or other corporate security except
issuance of options pursuant to the terms of the Company Stock Plan, or issuance
of Company Common Stock upon exercise of any outstanding stock options issued
under such plan;
(h) neither the Company nor any of its Subsidiaries has experienced
any damage, theft or casualty loss in an amount exceeding $3,000,000 in the
aggregate;
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(i) neither the Company nor any of its Subsidiaries has relinquished
any material contract or contract right, except in the ordinary course;
(j) neither the Company nor any of its Subsidiaries has sold,
assigned, transferred or bulk reinsured any of its assets (tangible or
intangible), except in the ordinary course; and
(k) neither the Company nor any of its Subsidiaries has entered into
any commitment (contingent or otherwise) to do any of the foregoing.
SECTION 3.09 Absence of Litigation.
(a) Section 3.09(a) of the Company Disclosure Schedule lists and
briefly describes all material legal, arbitral or administrative claims,
actions, suits, litigation or proceedings of any kind affecting the Company or
any of its Subsidiaries or the Health Care Benefits Business, at law or in
equity (including actions or proceedings seeking injunctive relief), which are
pending or, to the knowledge of the Company, threatened (other than grievance or
complaint proceedings in the ordinary course). There is no action pending or,
to the knowledge of the Company, threatened seeking to enjoin or restrain the
Merger or the transactions contemplated by this Agreement.
(b) Neither the Company nor any of its Subsidiaries is subject to any
material order of, consent decree, settlement agreement or other similar written
agreement with, or pending or, to the knowledge of the Company, threatened
investigation by, any Governmental Entity, or any material judgment, order,
writ, injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease-and-desist or other orders.
(c) True and complete copies of all correspondence delivered to the
Company's or any Subsidiaries' external certified public accountants by the
Company's or any Subsidiaries' counsel since January 1, 1995 in connection with
any audit report by such accountants relating to any asserted pending or
unasserted claims or loss contingencies have been provided to Acquiror.
SECTION 3.10 Contracts; No Default.
(a) Section 3.10(a) of the Company Disclosure Schedule sets forth as
of the date of this Agreement a list of each Contract:
(i) of the Company or its Subsidiaries concerning a partnership or
joint venture with another person;
(ii) to which the Company, any of its Subsidiaries, the Stockholders
or any of their affiliates is a party limiting the right of the Company or any
of its Subsidiaries at any time on or after the date of this Agreement, or
Acquiror
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or any of its Subsidiaries or affiliates at or after the Effective Time, to
engage in, or to compete with any person in, any business of a type included in
the Health Care Benefits Business, including each such Contract containing
exclusivity provisions restricting the geographical area in which, or the method
by which, any such business may be conducted by the Company or any of its
Subsidiaries or affiliates, or by the Acquiror or any of its Subsidiaries or
affiliates after the Effective Time; or
(iii) between the Company or any of its Subsidiaries and either
Stockholder or one of their affiliates.
Correct and complete copies of all written Contracts required to be disclosed on
Section 3.10(a) of the Company Disclosure Schedule have been made available to
Acquiror and the material terms of all oral Contracts required to be disclosed
on Section 3.10(a) of the Company Disclosure Schedule and known to the Company
are described on such schedule.
(b) Each material Contract (i) to which the Company or any of its
Subsidiaries is a party or (ii) principally or exclusively relating to the
Health Care Benefits Business and to which a Stockholder or its affiliates is a
party, is in full force and effect in all material respects, each is a legal,
valid and binding Contract in all material respects and there is no material
default (or any event known to the Company which, with the giving of notice or
lapse of time or both, would be a material default) by the Company or any of its
Subsidiaries or the Stockholders and their affiliates or, to the knowledge of
the Company, any other party, in the timely performance of any obligation to be
performed or paid under any such Contract.
(c) The Master Agreement and each of the Affiliate Contracts is in
full force and effect and has not been modified since January 3, 1995, except as
contemplated by this Agreement. The Master Agreement and each Affiliate
Contract contemplated thereby has been implemented, and the Health Care Benefits
Business has been operated in compliance with the terms of the Master Agreement
and such Affiliate Contracts in all material respects.
(d) As of the date of this Agreement, to the knowledge of the Company,
the relationships of the Company and its Subsidiaries with the customers of the
Health Care Benefits Business, taken in the aggregate, are good commercial
working relationships. Since January 3, 1995, no customer of the Health Care
Benefits Business who represented more than 1% of the consolidated total
revenues or covered medical lives of the Health Care Benefits Business during
the 12-month period preceding its cancellation or termination has canceled or
otherwise terminated its relationship with the Company, any Subsidiary or either
Stockholder or its affiliates, and, to the Company's knowledge, no such customer
of the Health Care Benefits Business has indicated that it intends to cancel or
terminate its relationship with the Company, its Subsidiaries or either
Stockholder or its affiliates.
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SECTION 3.11 Employee Benefit Plans; Labor Matters.
(a) Section 3.11 of the Company Disclosure Schedule sets forth a list,
which is complete and true in all material respects, of (i) the compensation
scheduled to be paid to the 20 most highly compensated officers and employees of
the Company and its Subsidiaries in the 1995 calendar year, and (ii) all
compensation and bonus plans of the Company and its Subsidiaries relating to
officers and employees of the Company and its Subsidiaries, except deferred
compensation plans described in Section 3.11(b).
(b) Section 3.11 of the Company Disclosure Schedule lists any pension,
retirement, savings, disability, medical, dental, health, life (including any
individual life insurance policy as to which the Company or any ERISA Affiliate
is the owner, beneficiary or both of such policy), death benefit, group
insurance, profit sharing, deferred compensation, stock option, bonus,
incentive, vacation pay, severance pay, Code Section 125 "cafeteria" or
"flexible benefit" plan, or other employee benefit plan, trust, arrangement,
contract, agreement, policy or commitment (including without limitation, any
employee pension benefit plan as defined in Section 3(2) of ERISA, and any
employee welfare benefit plan as defined in Section 3(1) of ERISA), under which
current or former employees of the Company or any of its ERISA Affiliates (as
defined in Section 11.01(a) below) are entitled to participate by reason of
their employment with the Company or any of its ERISA Affiliates (and not by
reason of their former employment with a Stockholder), whether or not any of the
foregoing is funded, whether insured or self-funded, and whether written or
oral, (i) to which the Company or any of its ERISA Affiliates is a party or a
sponsor or by which the Company or any of its ERISA Affiliates (or any of their
rights, properties or assets) is bound or (ii) with respect to which the Company
or any of its ERISA Affiliates has made or is obligated to make any payments,
contributions or commitments, or may otherwise have any liability (whether or
not the Company or any of its ERISA Affiliates still maintains such plan, trust,
arrangement, contract, agreement, policy or commitment) (the "Employee Benefit
Plans"). The Company Disclosure Schedule also lists each contributing or
participating employer in each Employee Benefit Plan, regardless of whether each
such employer is an ERISA Affiliate. Except as described in this Agreement or
the Company Disclosure Schedule, there are no Employee Benefit Plans with
respect to which the Company or any of its ERISA Affiliates has any direct or
indirect material liability.
(c) Section 3.11 of the Company Disclosure Schedule lists all ERISA
Affiliates of the Company.
(d) As used in this Agreement, "Pension Plan" means any Employee
Benefit Plan which is an employee pension benefit plan as defined in Section
3(2) of ERISA or is otherwise a pension, savings or retirement plan or a plan of
deferred compensation and "Welfare Plan" means any Employee Benefit Plan which
is not a Pension Plan.
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(e) Except as described in Section 3.11 of the Company Disclosure
Schedule with respect to the Employee Benefit Plans (other than matters not
involving employees of the Company or its Subsidiaries or with respect to which
the Company and its Subsidiaries have no liability):
(i) There are no Employee Benefit Plans which are multi-employer plans
as defined in Section 3(37) of ERISA or plans subject to Title IV of ERISA, and
neither the Company nor any of its ERISA Affiliates has incurred or reasonably
expects to incur, any direct or indirect material liability under or by
operation of Title IV of ERISA;
(ii) There are no Employee Benefit Plans which promise or provide
health or life benefits to retirees or former employees of the Company or its
ERISA Affiliates;
(iii) Since January 1, 1991, each Employee Benefit Plan has at all
times been operated and administered in material compliance with the applicable
requirements of ERISA, the Code and any other applicable law (including
regulations and rulings thereunder), and its terms;
(iv) Each Employee Benefit Plan that is intended to be tax qualified
under Section 401(a) of the Code has received, or in a timely manner applied
for, a favorable determination letter from the IRS stating that the Plan meets
all the requirements of the Code and that any trust or trusts associated with
the plan are tax exempt under Section 501(a) of the Code. To the knowledge of
the Company, there is no reason why the qualified status under Section 401(a) of
the Code of any such tax qualified Employee Benefit Plan would be denied or
revoked, whether retroactively or prospectively, by any governmental agency
including the IRS or the United States Department of Labor. All material
amendments to the Employee Benefit Plans that were required to be made through
the date hereof and the Effective Time to maintain the continued qualified
status of such Employee Benefit Plans under Section 401(a) of the Code
subsequent to the issuance of each such Employee Benefit Plan's determination
letter, if any, have been made, or will be made by the Effective Time, including
all amendments required to be made by each respective date by the Tax Reform Act
of 1986 and any other tax acts or legislation affecting such Employee Benefit
Plans. There is no amendment which needs to be made to continue, and no
provision or amendment to the Employee Benefit Plan(s) which adversely affects,
the qualified status of such Employee Benefit Plan(s) under Section 401(a) of
the Code;
(v) Since January 1, 1991, to the knowledge of the Company, no actual
or threatened disputes, lawsuits, claims (other than routine claims for
benefits), investigations, audits or complaints to, or by, any person or
Governmental Entity have been filed or are pending with respect to the Employee
Benefit Plans or the Company or its ERISA Affiliates in connection with any
Employee Benefit Plan
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or the fiduciaries responsible for such Employee Benefit Plans, and to the
knowledge of the Company, no state of facts or conditions exist which reasonably
could be expected to subject the Company to a Company Material Adverse Effect or
its ERISA Affiliates to any material liability (other than routine claims for
benefits) under the terms of the Employee Benefit Plan or applicable law;
(vi) The Company and each of its ERISA Affiliates have filed or caused
to be filed every return, report, statement, notice, declaration and other
document, including audited financial statements, required by any federal, state
or local law or government agency (including, without limitation, the IRS and
the United States Department of Labor), with respect to each Employee Benefit
Plan, except where the failure to file would not result in the incurrence of a
Company Material Adverse Effect by the Company or of a material liability by any
of its ERISA Affiliates; and the Company has not incurred any Company Material
Adverse Effect nor has any of its ERISA Affiliates incurred any material
liability, in each case, in connection with the inadequacy, inaccuracy or
untimeliness of such filings;
(vii) Since January 1, 1991, the Company and each of its ERISA
Affiliates have delivered or caused to be delivered to every participant,
beneficiary and other party entitled thereto, all material returns, reports,
schedules, notices, statements and similar materials, including, without
limitation, summary plan descriptions, summaries of material modifications and
summary annual reports, as are required to be delivered under Title I of ERISA,
the Code or both; and the Company has not incurred any Company Material Adverse
Effect nor does any of its ERISA Affiliates have any material liability, in each
case, in connection with the inadequacy, inaccuracy or untimeliness of such
deliveries;
(viii) Since January 1, 1991, neither the Company nor any of its
ERISA Affiliates has made, or committed to make, whether in writing, orally or
through other representation, any payment, contribution or award to or under any
Employee Benefit Plan (other than as required by its terms, the Code, ERISA or
the actuarial valuation incident to the Plan);
(ix) There are no delinquent contributions or payments to or in
respect of any Employee Benefit Plan. Since January 1, 1991, the Company has
not requested, nor has pending as of the date hereof or the Effective Time, a
minimum funding variance or waiver within the meaning of Code Section 412(d).
There are no unfunded liabilities as of the Effective Time associated with any
Employee Benefit Plan that is a Pension Plan qualified under Section 401(a) of
the Code. As of the Effective Time, all payments of outstanding contributions,
due on or prior to that date, including minimum contributions, premiums,
including premiums owed to the PBGC and funding obligations imposed by the terms
of an Employee Benefit Plan or by any Law or Governmental Entity (including Part
3 of ERISA and Code Section 412) shall have been made with respect to each and
every Employee Benefit Plan. All contributions to and payments with respect to
or under the Employee Benefit Plans that are required to be made with respect to
periods ending
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on or before the Effective Time (including periods from the first day of the
then current plan or policy year to the Effective Time) have been made or
accrued before the Effective Time by the Company in accordance with the
appropriate actuarial report, plan documents, financial statement, collective
bargaining agreements or insurance contracts or arrangements;
(x) With respect to each material Employee Benefit Plan, the Company
has delivered to Acquiror true and complete copies of the following documents to
the extent, in each case, that such documents exist or are required by Law:
(A) plan documents, subsequent plan amendments, or any and all other
documents that establish or describe the existence of the plan, trust,
arrangement, contract, policy or commitment;
(B) summary plan descriptions and summaries of material modifications;
(C) the most recent tax qualified determination letters, if any,
received from or any determination letter applications pending with the IRS;
(D) the three most recent Form 5500 Annual Reports, including related
schedules and audited financial statements and opinions of independent certified
public accountants;
(E) all related trust agreements, insurance contracts or other funding
agreements that implement each such Employee Benefit Plan;
(F) the three most recent Form 990 and Form 1041 reports relating to
any trust or account maintained in connection with any Employee Benefit Plan;
(G) with respect to each 401k plan: the most recent nondiscrimination
testing results and the most recent annual and quarterly or monthly valuations;
(H) with respect to each Pension Plan, a copy of the most recent
actuarial valuation, copies of any amendments to freeze accruals or to change
benefit formulas and a record of quarterly Pension Plan contributions; and
(I) A schedule of any penalties and/or fines levied, imposed or
assessed during the preceding five (5) calendar years by the IRS and/or the
United States Department of Labor on the Company or its ERISA Affiliates or in
connection with any Employee Benefit Plan (except for any such penalties or
fines which did not and will not have a Company Material Adverse Effect); such
schedule
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shall indicate (1) the original amount of such penalty and/or fine and (2) the
amount of such penalty or fine, if any, outstanding as of the Effective Time.
(xi) Neither the Company nor any ERISA Affiliate has maintained
defined benefit plans covering employees of the Company within the meaning of
Section 3(35) of ERISA;
(xii) Neither the Company nor any ERISA Affiliate has terminated any
Pension Plan within the three preceding calendar years nor has the Company or
any ERISA Affiliate terminated any Welfare Plan within the preceding calendar
year which Welfare Plan termination may have a Company Material Adverse Effect;
(xiii) The benefits to be provided to participants under each
Welfare Plan are to be provided exclusively from the general assets of the
Company or through insurance contracts, or a combination thereof;
(xiv) The benefits to be provided to participants under each Pension
Plan, other than a tax qualified Pension Plan under Code Section 401(a), are to
be provided exclusively from the general assets of the Company;
(xv) With respect to each Employee Benefit Plan, there has not
occurred, and no person or entity is contractually bound to enter into, any
material nonexempt "prohibited transaction" within the meaning of Section 4975
of the Code or Section 406 of ERISA; and
(xvi) The audited financial statements and actuarial valuations, if
any, for each Employee Benefit Plan reflect in all material respects the
financial condition and funding of the Employee Benefit Plan as of the date of
such financial statements or valuations, and no material adverse change has
occurred with respect to the financial condition or funding of the Employee
Benefit Plan since the date of such financial statements or actuarial
valuations.
(f) Section 3.11(f) of the Company Disclosure Schedule lists, as of
the date of this Agreement, all collective bargaining or other labor union
contracts to which the Company or any of its Subsidiaries is a party and which
is applicable to persons employed by the Company or its Subsidiaries. To the
knowledge of the Company, there are no union organization attempts underway with
respect to the employees of the Company. There is no pending or, to the
knowledge of the Company, threatened labor dispute, strike or work stoppage
against the Company or any of its Subsidiaries, other than any disputes, strikes
or work stoppages in connection with which the number of employees involved will
not exceed 25 employees. Neither the Company nor its Subsidiaries, nor, to the
knowledge of the Company, their respective representatives or employees, has
committed any unfair labor practices in connection with the operation of the
respective businesses of the Company or its Subsidiaries, and there is no
pending or, to the knowledge of the
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Company, threatened charge or complaint against the Company or its Subsidiaries
by the National Labor Relations Board or any comparable state agency.
(g) Section 3.11(g) of the Company Disclosure Schedule sets forth a
list, and sets forth the term, of all written or, to the Company's knowledge,
all oral (i) employment agreements, employment contracts or understandings
providing for annual compensation in excess of $200,000 per year (other than
understandings with respect to "at will" employment) relating to employment and
(ii) severance agreements, contracts or understandings based on a change of
control of the Company or otherwise, regardless of amount, in each case to which
the Company or any of its Subsidiaries is a party. To the knowledge of the
Company, no employee of the Company or any of its Subsidiaries holding the
position of manager or higher is subject to any secrecy or noncompetition
agreement or any agreement or restriction of any kind with any third party that
would impede in any material way the ability of such employee to carry out fully
all activities of such employee in furtherance of the business of the Company or
any of its Subsidiaries.
(h) Except as described in Section 3.11(h) of the Company Disclosure
Schedule, the Company has no liability or obligation with respect to employee
benefits relating to the Stockholders or any predecessor employer or other
entity.
(i) Section 3.11(i) of the Company Disclosure Schedule sets forth the
number of employees of the Company and its Subsidiaries whose employment has
been terminated or who have been laid off by the Company and its Subsidiaries
since December 31, 1994. The Company and its Subsidiaries have not incurred any
liability under the Worker Adjustment and Retraining Notification Act of 1988,
as amended ("WARN"), and the Company and its Subsidiaries have complied with
WARN in all material respects.
SECTION 3.12 Taxes.
(a) (i) All Returns (as defined below) in respect of Taxes (as
defined below) required to be filed with respect to the Company and each of its
Subsidiaries (including any consolidated federal income tax returns of the
Company and any state tax returns that include the Company or any of its
Subsidiaries on a consolidated, combined or unitary basis) have been timely
filed (including extensions) except for any such failure to file which would not
have a Company Material Adverse Effect;
(ii) All Taxes shown on such Returns to be due or payable have been
timely paid and all payments of estimated Taxes required to be made with respect
to the Company or any of its Subsidiaries under Section 6655 of the Code or any
comparable provision of state, local or foreign law have been made on the basis
of the Company's good faith estimate of the required installments, except where
the failure to make such payments would not have a Company Material Adverse
Effect,
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and all material backup withholding obligations required by Law have been
satisfied;
(iii) All Taxes of the Company and its Subsidiaries which will be due
and payable, whether now or hereafter, for any period ending on, prior to or
including the Closing Date, shall have been paid by or on behalf of the Company
and its Subsidiaries or shall be reflected on the books of the Company and its
Subsidiaries as an accrued Tax liability, either current or deferred, determined
in a manner consistent with the April 30 Statements, without taking account of
the Merger, except where the failure to make such accruals would not have a
Company Material Adverse Effect;
(iv) All such Returns (or, in cases where amended Returns have been
filed, such Returns as amended) are believed by the Company to be true, correct
and complete in all material respects;
(v) No adjustment relating to any of such Returns has been proposed in
writing by any Tax authority, except proposed adjustments that have been
resolved prior to the date hereof and those that would not have a Company
Material Adverse Effect;
(vi) There are no outstanding subpoenas or requests for information
with respect to any federal, state, local or foreign income tax Returns of the
Company or its Subsidiaries or the Taxes reflected on such Returns;
(vii) The Company has not, in any taxable period for which the
statute of limitations on assessment remains open, acquired, either directly or
through any Subsidiary, any corporation that filed a consolidated federal income
tax return with any other corporation that was not also acquired, either
directly or through any Subsidiary, by the Company, and no Subsidiary or
corporation that was included in the filing of a Return with the Company on a
consolidated, combined, or unitary basis has left the Company's consolidated,
combined or unitary group in a taxable year for which the statute of limitations
on assessment remains open;
(viii) No consent under Section 341(f) of the Code has been filed
with respect to the Company or any of its Subsidiaries;
(ix) There are no material Tax liens on any assets of the Company or
any of its Subsidiaries other than liens for Taxes not yet due or payable;
(x) Neither the Company nor any of its Subsidiaries has been at any
time a member of any partnership or joint venture or the holder of a beneficial
interest in any trust for any period after December 31, 1990;
(xi) Except as provided in Section 6.01(h), neither the Company nor
any of its Subsidiaries owes any material amount pursuant to any Tax
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sharing agreement or arrangement, and neither the Company nor any Subsidiary
will have any liability after the date hereof in respect of any Tax sharing
agreement or arrangement executed or agreed to prior to the date hereof with
respect to any company that has been sold or disposed of by the Company or any
of its Subsidiaries, whether any such agreement or arrangement is written or
unwritten;
(xii) All Taxes required to be withheld, collected or deposited by
the Company or any of its Subsidiaries during any taxable period after December
31, 1990 have been timely withheld, collected or deposited and, to the extent
required, have been paid to the relevant Tax authority, except where the failure
to withhold, collect, deposit or pay would not have a Company Material Adverse
Effect;
(xiii) Neither the Company nor any of its Subsidiaries is or has been
subject to the provisions of Section 1503(d) of the Code related to "dual
consolidated loss" rules;
(xiv) Neither the Company nor any of its Subsidiaries is a party to
any agreement, contract, or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code by reason of the Merger; and
(xv) No property of the Company or any of its Subsidiaries is "tax-
exempt use property" within the meaning of Section 168 of the Code.
(b) (i) There are no outstanding waivers or agreements extending the
statute of limitations for any period with respect to any Tax, other than real
or personal property Taxes, to which the Company or any of its Subsidiaries may
be subject; and
(ii) Neither the Company nor any of its Subsidiaries is, as of the
date of this Agreement, under audit with respect to any taxable period for any
federal, state, local or foreign Tax (including income and franchise Taxes but
not including real or personal property Taxes) by the IRS or the applicable Tax
authority in each such state, local, or foreign jurisdiction.
(c) (i) Except as expressly provided in this subdivision (i),
neither the Company nor any of its Subsidiaries has any
(A) material income reportable for a period ending after the Effective
Time but attributable to an installment sale occurring in or a change in
accounting method made for a period ending at or prior to the Effective Time
which resulted in a deferred reporting of income from such transaction or from
such change in accounting method (other than a deferred intercompany
transaction), or
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(B) material deferred gain or loss arising out of any deferred
intercompany transaction.
(ii) Except as provided in Section 6.01(h), no written Tax sharing or
allocation agreement exists involving the Company or any of its Subsidiaries.
(iii) Neither the Company nor any of its Subsidiaries has any unused
net operating loss, unused net capital loss, unused credit, unused foreign tax
credit, or excess charitable contribution for federal income tax purposes as of
the Effective Time.
(d) For the purposes of this Section 3.12, references to the Company
and each of its Subsidiaries shall include former Subsidiaries of the Company
for periods during which any such corporations were owned, directly or
indirectly, by the Company.
SECTION 3.13 Third-Party Funds. Each of (a) the Company and its
Subsidiaries and (b) the Stockholders and their affiliates with respect to the
Health Care Benefits Business, has accurately accounted in all material respects
for all monies entrusted to it by third parties and all monies over which it has
or has had signature authority or other control for the benefit of others in the
operation of the Health Care Benefits Business and its third-party health claims
administration (collectively, "Entrusted Funds"); all Entrusted Funds have been
applied to the reimbursement or direct payment of covered benefits of employees
or eligible members of client employers in accordance in all material respects
with the instruments governing such benefit plans or the written instructions of
the plan administrator or employer; all material filings with any governmental
authorities with respect to the payment of Entrusted Funds have been made by
each of the Company and its Subsidiaries and the Stockholders and their
affiliates if required to be so filed and each of the Company and its
Subsidiaries and the Stockholders and their affiliates is in material compliance
with all federal and state laws and regulations pertaining to the holding and
administration of Entrusted Funds. Each of the Company's and its Subsidiaries's
and the Stockholders' and their affiliates' trust or other accounts in which
Entrusted Funds are held and administered are fully reconcilable in all material
respects.
SECTION 3.14 Brokers and Agents; Insurance Matters.
(a) True and correct copies of all standard forms of agency or brokers
contracts or agreements used by the Company or its Subsidiaries in the Health
Care Benefits Business have been made available to Acquiror. Section 3.14(a) of
the Company Disclosure Schedule lists all persons through which either (A) the
Company and its Subsidiaries or (B) the Stockholders and their affiliates with
respect to the Health Care Benefits Business, places or sells products with
premium volume, on an annualized basis, in excess of $10,000,000 per year for
calendar year
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1994 or 1995 ("Significant Agents"), and no Significant Agent has any Contract
which differs in any material respect from the Company's standard forms.
(b) Except as listed on Section 3.14(b) of the Company Disclosure
Schedule, all insurance contracts included in the Health Care Benefits Business
as now in force (i) are, in the aggregate, in all material respects, to the
extent required under applicable Law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected to by such
authorities within the period provided for objection, (ii) such forms comply in
all material respects with the insurance Laws applicable thereto and (iii) to
the Company's knowledge, are not subject to any review or investigation by any
insurance regulatory authority. True, complete and correct copies of such forms
have been furnished or made available to Acquiror and there are no other forms
of insurance contracts used in connection with the Health Care Benefits
Business. Premium rates established in connection with the Health Care Benefits
Business which are required to be filed with or approved by insurance regulatory
authorities (i) have been so filed or approved, (ii) the premiums charged
conform in all material respects thereto and comply in all material respects
with the insurance Laws applicable thereto and (iii) to the Company's knowledge,
no such premiums are subject to any review or investigation by any insurance
regulatory authority.
SECTION 3.15 Intellectual Property Rights. Section 3.15 of the
Company Disclosure Schedule sets forth (a) all material patents, patents
pending, trademarks, service marks, trade names, service names and slogans
owned, used or licensed by the Company or any of its Subsidiaries (the "Marks
and Rights"), including all titles, registration numbers, applications numbers,
dates of registration and application, inventors, licensors and licensees, as
applicable; and (b) since December 31, 1993 all litigation and claims brought or
made by the Company, a Subsidiary or a Stockholder or its affiliates or by a
third party against the Company, a Subsidiary or a Stockholder or its
affiliates, involving the Marks and Rights currently owned or licensed by the
Company or its Subsidiaries and used in the Company's operation of the Health
Care Benefits Business (the "Company Marks"), any computer software program used
or licensed by the Company and its Subsidiaries or other intellectual property
rights, including all conflicting claims of ownership and claims of infringement
of the Marks and Rights, computer software programs or other intellectual
property rights. As of the Effective Time, the Company or a Subsidiary will own
or possess a valid and enforceable right to use all Company Marks, without any
known conflict with the rights of others. All personal computer based operating
computer software and all application computer software programs (including
object code or other format and all related documentation), data bases and
information systems used in the Company's operation of the Health Care Benefits
Business (the "Company Software") (other than commercially available software
programs that may be licensed for a one-time or annual fee of $10,000 or less)
will at the Effective Time be owned by the Company or one of its Subsidiaries or
leased or licensed to the Company or one of its Subsidiaries pursuant to a valid
and enforceable lease or license agreement, free and clear of all liens and
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encumbrances, and as of the Effective Time there will be no material defaults
under such agreements by the Company and its Subsidiaries or, to the Company's
knowledge, any other party. The Company Software to be owned or licensed by the
Company and its Subsidiaries at the Effective Time will be adequate in all
material respects to serve the needs of the Health Care Benefits Business as
currently conducted. Neither the Company nor any of its Subsidiaries has sold,
licensed, leased or otherwise transferred, or granted any interest or rights in,
any such computer programs, data bases or information systems to any third
party, except for software, the use of which is made available to customers of
the Company and its Subsidiaries at customer locations for the purpose of
facilitating the provision of products and services to such customers.
SECTION 3.16 Certain Business Practices and Regulations. Neither
the Company nor any of its Subsidiaries, nor any of its or their respective
executive officers, directors, or managerial employees has, directly or
indirectly, (i) made or agreed to make any contribution, payment or gift to any
customer, supplier, governmental official, employee or agent where either the
contribution, payment or gift or the purpose thereof was illegal under any Law,
(ii) established or maintained any unrecorded fund or asset of the Company for
any improper purpose or made any false entries on its books and records for any
reason, (iii) made or agreed to make any contribution, or reimbursed any
political gift or contribution made by any other person, to any candidate for
federal, state or local public office in violation of any Law, or (iv) engaged
in any activity constituting fraud or abuse under the Health Benefit Laws or the
regulation of health care professionals or professional corporations.
SECTION 3.17 Insurance. All policies and binders of insurance for
professional liability, and directors and officers liability, and all material
policies and binders of insurance for property and casualty, fire, liability,
worker's compensation and other customary matters held by or on behalf of the
Company or its Subsidiaries ("Insurance Policies") have been made available to
Acquiror. The Insurance Policies are in full force and effect in all material
respects and neither the Company nor any of its Subsidiaries is in default with
respect to any provision contained in any Insurance Policy, nor, to the
knowledge of the Company, has the Company or its Subsidiaries failed to give any
notice of any claim under any Insurance Policy in due and timely fashion, nor
has any coverage for current claims been denied, except where such default,
failure or denial as of the date of this Agreement, individually or in the
aggregate, would not reasonably be expected to result in a cost to the Company
and its Subsidiaries in excess of $1,000,000. The business policy of the Company
and its Subsidiaries is to require that each individual or entity rendering
professional health care services as an employee of or contractor to the Company
or its Subsidiaries maintain professional liability insurance and the Company
has no reason to believe that such individuals and entities generally do not
comply with such policy of the Company and its Subsidiaries.
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SECTION 3.18 Certain Relationships. To the knowledge of the
Company, none of the executive officers or directors of the Company or its
Subsidiaries, or any entity controlled by any of the foregoing or any member of
the immediate family of any of the foregoing:
(a) owns, directly or indirectly, in whole or in part, any material
real property, leasehold interests, tangible property or intangible property
which the Company or its Subsidiaries currently use in their respective
businesses;
(b) has pending, or since January 1, 1995 has asserted, any suit,
action or claim whatsoever against, or owes any amount in excess of $60,000 to,
the Company or its Subsidiaries, except for claims in the ordinary course, such
as for accrued benefits under Company Benefit Plans and similar matters;
(c) has since January 1, 1995 sold to, or purchased from, the Company
or its Subsidiaries any assets or property for consideration in excess of
$25,000 in the aggregate; or
(d) has a contractual right to borrow a material amount of funds from
the Company.
As used in this Section 3.18, a person's immediate family shall mean such
person's spouse, parents, children, siblings, mothers and fathers-in-law, and
brothers and sisters-in-law.
SECTION 3.19 Title to Properties; Environmental Matters.
(a) All of the real property owned by the Company or any Subsidiary or
leased or subleased by the Company or any Subsidiary under leases or subleases
covering more than 20,000 square feet of rentable space is listed in Section
3.19 of the Company Disclosure Schedule (the "Real Property").
(b) The Company owns good and insurable title to each parcel of owned
Real Property and owns each of the tangible properties and tangible assets
reflected in the Company Financial Statements, in each case free and clear of
all liens and encumbrances, other than inchoate tax and other statutory liens
and encumbrances and easements, rights of way restrictions and other minor
imperfections of title that individually or in the aggregate do not detract from
the value or interfere with the use of any single property or asset subject
thereto. The leases and subleases for the Real Property described in Section
3.19 of the Company Disclosure Schedule are in full force and effect in all
material respects, and the Company holds a valid and existing leasehold interest
under each of such leases and subleases. Neither the Company nor the applicable
Subsidiary is in default, and to the knowledge of the Company no circumstances
exist which, if unremedied, would, either with or without notice or the passage
of time or both, result in the Company's or the applicable Subsidiary's default,
in any material respect, under any
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of such leases or subleases; nor, to the knowledge of the Company, is any other
party to any of such leases or subleases in such default.
(c) All of the buildings, machinery, equipment and other fixed assets
reasonably necessary for the conduct of the Company's and its Subsidiaries'
business, taken as a whole, are in reasonably good condition and repair in all
material respects, ordinary wear and tear excepted, and are useable in the
ordinary course. There are no significant defects in such assets or other
conditions relating thereto which adversely affect the operation or value of
such assets in any material respect.
(d) Neither the Company nor any Subsidiary is in violation of any
applicable zoning ordinance or other law, regulation or requirement relating to
the operation of any properties used in the operation of its business which
violation has had a Company Material Adverse Effect, and neither the Company nor
any Subsidiary has received any notice of any such violation, or the existence
of any condemnation proceeding with respect to any of the Real Property.
(e) All of the Real Property owned or used by the Company or any
Subsidiary has been maintained in all material respects in compliance with all
federal, state and local environmental protection, occupational, health and
safety or similar Laws, ordinances, restrictions, licenses and regulations,
including but not limited to the Federal Water Pollution Control Act (33 U.S.C.
(S) 1251 et seq.), Resource Conservation & Recovery Act (42 U.S.C. (S) 6901 et
seq.), Safe Drinking Water Act (42 U.S.C. (S) 3000(f) et seq.), Toxic Substances
Control Act (15 U.S.C. (S) 261 et seq.), Clean Air Act (42 U.S.C. (S) 7401 et
seq.), Comprehensive Environmental Response of Compensation and Liability Act
(42 U.S.C. (S) 6901 et seq.) ("CERCLA"), and similar state laws, ordinances,
restrictions, licenses and regulations.
(f) Neither the Company nor any Subsidiary has received any written
notification from any Governmental Entity with respect to current, existing
violations, or past violations which are not yet fully resolved, of any of the
Laws enumerated in clause (e) above, or pursuant to any of their respective
implementing regulations or state analogues to such Laws or regulations.
(g) To the Company's knowledge, there has not been, at any location
owned or used by the Company or any Subsidiary, any "Release" of any "Hazardous
Substance," in each case as defined in CERCLA (without giving effect to the
exclusion of any petroleum products from the definition of Hazardous Substance).
(h) To the Company's knowledge, neither the Company nor any Subsidiary
has sent or arranged for the transportation or disposal of Hazardous Substances
or wastes to a site which, pursuant to CERCLA or any similar state Law (i) has
been placed or is proposed (by the Environmental Protection Agency or relevant
state authority) to be placed, on the "National Priorities List" of hazardous
waste sites or its state equivalent, or (ii) is subject to a claim, an
administrative order
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or other request to take "removal" or "remedial" action (in each case as defined
in CERCLA) by any person.
(i) Neither (A) the Company and its Subsidiaries nor (B) any
Stockholder or its affiliates with respect to the Health Care Benefits Business,
has violated, or, to the Company's knowledge, is the subject of any
investigation, inquiry or enforcement action by any Governmental Entity under
any applicable Law relating to the disposal of medical wastes ("Medical Waste
Laws"). The Company and its Subsidiaries have obtained and are in material
compliance with all permits related to medical waste disposal required by
applicable Medical Waste Laws, and all disposal of medical wastes by them and by
the Stockholders and their affiliates with respect to the Health Care Benefits
Business has been in material compliance with such Laws.
(j) Neither the Company nor any of its Subsidiaries has used during
the last two years or currently uses underground storage tanks located on any
parcel of owned Real Property.
SECTION 3.20 Brokers. No broker, finder or investment banker (other
than Smith Barney Inc. and Morgan Stanley & Co. Incorporated) is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. Prior to the date of this Agreement, the Company has
furnished to Acquiror a complete and correct copy of all agreements between the
Company and Smith Barney Inc. and Morgan Stanley & Co. Incorporated, pursuant to
which such firms will be entitled to any payment relating to the transactions
contemplated by this Agreement.
SECTION 3.21 Effective Time; Disclosure. Each of the
representations and warranties set forth in this Article III shall be deemed
made at and as of the date of this Agreement and again at and as of the
Effective Time, as if made at such time and substituting the Effective Time for
the date of this Agreement throughout this Article III, except to the extent
such representations and warranties specifically refer to a date other than the
date of this Agreement. To the Company's knowledge, no representation or
warranty contained in this Agreement or in the Company Disclosure Schedule, or
in any document delivered by the Company to Acquiror pursuant to Article VIII of
this Agreement, contains or will, at the Effective Time, contain any untrue
statement of a material fact or omits or will, at the Effective Time, omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were or will be made, not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
--------------------------------------------------
As used in this Article IV, the term "Stockholder" shall mean (a) TIG
and TIC on one hand and (b) MetLife and MHH on the other. Except as set forth
in the Disclosure Schedule delivered by the Stockholders to Acquiror prior to
the execution of this Agreement (the "Stockholder Disclosure Schedule"), which
identifies exceptions by specific Section references, each Stockholder hereby
represents and warrants to Acquiror, as to such Stockholder and the Health Care
Benefits Business of such Stockholder and its affiliates, that:
SECTION 4.01 Organization and Qualification. Such Stockholder is a
corporation or mutual corporation, has been duly organized and is validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization.
SECTION 4.02 Authority; Enforceability. Such Stockholder has the
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations under this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by such Stockholder and the consummation by such Stockholder of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action and no other proceedings on the part of such
Stockholder are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by such Stockholder and, assuming the due authorization,
execution and delivery by the Company, the other Stockholders, Acquiror and
Acquiror Sub, constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms.
SECTION 4.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by such Stockholder
do not, and the performance of this Agreement by such Stockholder will not: (i)
conflict with or violate the Certificate of Incorporation or By-Laws or
equivalent organizational documents of such Stockholder; (ii) subject to
obtaining the consents, approvals, authorizations and permits of, and making
filings with or notifications to any Governmental Entity pursuant to the
applicable requirements of any Law (including any Health Benefit Law) or of any
third party listed on Section 3.05 of the Company Disclosure Schedule and
Section 4.03 of the Stockholder Disclosure Schedule, conflict with or violate
any Laws applicable to such Stockholder or by which any of such Stockholder's
properties is bound or affected; or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of
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a lien or encumbrance on any of the properties or assets of such Stockholder
with respect to the Health Care Benefits Business pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which such Stockholder or its affiliates is a
party or by which such Stockholder, its affiliates or any of their respective
properties is bound or affected, except for any such matters described in clause
(ii) or (iii) that would not have a Company Material Adverse Effect. Section
4.03 of the Stockholder Disclosure Schedule sets forth a list of (i) all
consents, approvals, authorizations, permits, filings, and notifications of,
with and to any Governmental Entity required to be made, obtained or filed by
the Stockholders under (A) any Health Benefit Law, (B) any other material Law
applicable to such Stockholder or (C) to such Stockholder's knowledge, any other
Law applicable to such Stockholder and (ii) all material consents and approvals
of any other any other third party required as a result of the execution and
delivery of this Agreement by such Stockholder and the consummation of the
Merger, other than those required to be disclosed in Section 3.05 of the Company
Disclosure Schedule.
(b) The execution and delivery of this Agreement by such Stockholder
do not, and the performance of this Agreement by such Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entities, or other third party except for the
consents, approvals, authorizations, filings, notices or permits (i) described
in Section 3.05 of the Company Disclosure Schedule or Section 4.03 of the
Stockholder Disclosure Schedule, and (ii) not required to be disclosed on
Section 3.05 of the Company Disclosure Schedule or Section 4.03 of the
Stockholder Disclosure Schedule.
(c) Since December 31, 1991, such Stockholder and each of its
affiliates have, with respect to the Health Care Benefits Business, filed all
material forms, reports, statements, notices and other documents required to be
filed with applicable federal or state regulatory authorities including, without
limitation, state insurance and health regulatory authorities, and such forms,
reports, statements, notices and other documents were prepared in all material
respects in accordance with the requirements of applicable Law.
SECTION 4.04 Ownership of Stock. Section 4.04 of the Stockholder
Disclosure Schedule sets forth the number of shares of Company Common Stock
owned by such Stockholder, together with any options, warrants, convertible
securities or other rights to acquire Company Common Stock owned by such
Stockholder. Such Stockholder has, and will have as of the Effective Time, good
title to all of the shares of Company Common Stock listed on Section 4.04 of the
Stockholder Disclosure Schedule as being owned by such Stockholder. Except as
set forth on Section 4.04 of the Stockholder Disclosure Schedule, such
Stockholder does not own or have the right to acquire any Company Common Stock
or other securities of the Company.
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SECTION 4.05 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of such Stockholder.
SECTION 4.06 Investment Representations. MHH is acquiring the
Acquiror Preferred Stock to be issued to it in the Merger for investment and not
with a view toward, or for sale in connection with, any distribution thereof,
nor with any present intention of distributing or selling such stock. MHH
acknowledges that neither the Acquiror Preferred Stock to be issued in the
Merger nor the Acquiror Common Stock issuable upon conversion thereof will, at
the time of issuance, be registered under the Securities Act, or any state
securities laws and that neither such Acquiror Preferred Stock nor such Acquiror
Common Stock may be sold, transferred or otherwise disposed of without
registration under the Securities Act and applicable state securities laws,
which registration Acquiror has agreed to effect on the terms and conditions set
forth in the Registration Agreement, or pursuant to an exemption from
registration thereunder. All certificates evidencing Acquiror Preferred Stock,
and Acquiror Common Stock issued upon conversion thereof, shall be imprinted
with a restrictive legend to such effect until such time as such stock may be
freely transferred without registration under the Securities Act and applicable
state securities laws.
SECTION 4.07 Effective Time; Disclosure. Each of the
representations and warranties set forth in this Article IV shall be deemed made
at and as of the date of this Agreement and again at and as of the Effective
Time, as if made at such time and substituting the Effective Time for the date
of this Agreement throughout this Article IV, except to the extent such
representations and warranties specifically refer to a date other than the date
of this Agreement. To such Stockholder's knowledge, no representation or
warranty of such Stockholder contained in this Agreement or in the Stockholder
Disclosure Schedule, or in any document delivered by such Stockholder to
Acquiror pursuant to Article VIII of this Agreement contains or will, at the
Effective Time, contain any untrue statement of a material fact with respect to
such Stockholder, or omits or will, at the Effective Time, omit to state a
material fact necessary to make the statements therein with respect to such
Stockholder, in light of the circumstances under which they were or will be
made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
----------------------------
Except as set forth in the Disclosure Schedule delivered by Acquiror
and Acquiror Sub to the Company prior to the execution of this Agreement (the
"Acquiror Disclosure Schedule"), which shall identify exceptions by specific
Section
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references, Acquiror and Acquiror Sub hereby jointly and severally represent and
warrant to the Company and the Stockholders that:
SECTION 5.01 Organization and Qualification. Each of Acquiror and
Acquiror Sub is a corporation, duly incorporated, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation, and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, except such jurisdictions, if
any, where the failure to be so qualified or in good standing would not have an
Acquiror Material Adverse Effect.
SECTION 5.02 Articles of Incorporation; By-Laws. Acquiror has
furnished to the Company a complete and correct copy of the Articles or
Certificate of Incorporation and the By-Laws, as amended or restated, of each of
Acquiror and Acquiror Sub. Neither Acquiror nor Acquiror Sub is in violation of
any of the provisions of its Articles or Certificate of Incorporation or By-
Laws, as amended or restated, or equivalent organizational documents.
SECTION 5.03 Capitalization.
(a) As of June 22, 1995, the authorized capital stock of Acquiror
consisted of the following:
(i) 500,000,000 shares of Acquiror Common Stock, of which:
(A) 173,207,110 shares were issued and outstanding as
of May 31, 1995;
(B) 14,279,391 shares were reserved for future issuance
pursuant to options outstanding as of May 31, 1995 pursuant
to Acquiror's stock option and incentive plans relating to
stock options and awards for certain officers, employees,
consultants and directors;
(C) 254,647 shares were reserved as of May 31, 1995 for
future issuance pursuant to Acquiror's 1993 Employee Stock
Purchase Plan;
(D) no shares are held in the treasury of Acquiror; and
(ii) 10,000,000 shares of preferred stock, par value $0.001 per
share, of which none are issued and outstanding.
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(b) As of the date of this Agreement, (i) no shares of the preferred
stock, par value $0.001 per share, are issued and outstanding, and (ii) all
shares of Acquiror Common Stock issued and outstanding are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights, whether created by statute or otherwise. Since May 31, 1995, Acquiror
has not issued any shares of Acquiror Common Stock or granted any options,
warrants, restricted shares or other rights to acquire shares of Acquiror Common
Stock other than pursuant to the exercise or grant of options or the issuance of
shares under the plans referred to in Sections 5.03(a)(i)(B) and (C).
(c) Except as disclosed in the Acquiror SEC Reports (as defined in
Section 5.06) or in this Section 5.03, as of the date of this Agreement, there
are no options, warrants, restricted shares or other rights, agreements,
arrangements or commitments to which Acquiror or any of its Subsidiaries is a
party of any character relating to the issued or unissued capital stock of, or
other equity interests in, Acquiror or any of its Subsidiaries or obligating
Acquiror or any of its Subsidiaries to grant, issue, sell or register for sale
any shares of the capital stock of, or other equity interests in, Acquiror or
any of its Subsidiaries by sale, lease, license or otherwise, except Acquiror's
existing stock option plans or stock purchase plans to the extent options have
not yet been granted thereunder and options granted thereunder since May 31,
1995 in the ordinary course of business. As of the date of this Agreement,
there are no obligations, contingent or otherwise, of Acquiror or any of its
Subsidiaries to (x) repurchase, redeem or otherwise acquire any shares of
Acquiror Common Stock or the capital stock of, or other equity interests in, any
Subsidiary of Acquiror; or (y) except for guarantees of obligations of, or loans
to, Subsidiaries entered into in the ordinary course of business, provide funds
to, make any investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the obligations of, any
Subsidiary of Acquiror or any other person. The shares of Acquiror Preferred
Stock to be issued pursuant to the Merger have been duly authorized, and, when
issued, will be validly issued, fully paid and non-assessable and are not
subject to preemptive rights created by the Minnesota Business Corporation Act,
Acquiror's Articles of Incorporation or By-Laws or any agreement to which
Acquiror is a party or is bound.
SECTION 5.04 Authority; Enforceability. Each of Acquiror and
Acquiror Sub has the requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder, and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Acquiror and Acquiror Sub, and the consummation by Acquiror and
Acquiror Sub of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action and no other corporate proceedings on the part
of Acquiror or Acquiror Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This Agreement has
been duly executed and delivered by Acquiror and Acquiror Sub and, assuming the
due authorization, execution and delivery by the Company, the Stockholders and
MetLife, constitutes a legal, valid and binding obligation of Acquiror and
Acquiror
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Sub, enforceable against Acquiror and Acquiror Sub in accordance with its terms.
The Acquiror Preferred Stock and the Alternative Securities, when issued in
accordance with this Agreement, and any securities issued upon the exercise or
conversion of the Acquiror Preferred Stock or Alternative Securities, when
issued in accordance with the terms of the Acquiror Preferred Stock or the
Alternative Securities, will be duly authorized and validly issued, and, in the
case of equity securities, fully paid and non-assessable and free of preemptive
rights, and, in the case of other securities, valid and binding obligations of
Acquiror. Acquiror shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock for delivery
upon conversion of such Acquiror Preferred Stock and, upon the issuance of
Alternative Securities, the exercise or conversion of such Alternative
Securities.
SECTION 5.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Acquiror and
Acquiror Sub do not, and the performance of this Agreement by Acquiror and
Acquiror Sub will not: (i) conflict with or violate the Articles or Certificate
of Incorporation or By-Laws or equivalent organizational documents of Acquiror
or Acquiror Sub; (ii) subject to (x) obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications to, any
Governmental Entities pursuant to the applicable requirements of Law (including
any Health Benefit Law) or of any third party which are required to be disclosed
in Section 3.05 of the Company Disclosure Schedule or Section 4.03 of the
Stockholder Disclosure Schedule, (y) the filing and recordation of appropriate
merger documents as required by Delaware Law and (z) obtaining the consents,
approvals, authorizations and permits of, and making filings with or
notifications to, any Governmental Entities pursuant to the applicable
requirements of Law (including any Health Benefit Law) or of any third party
which are required to be disclosed in Section 5.05 of the Acquiror Disclosure
Schedule, conflict with or violate any Laws applicable to Acquiror, Acquiror Sub
or any of Acquiror's Subsidiaries or by which any of their respective properties
is bound or affected; or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Acquiror, Acquiror Sub or any of Acquiror's
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Acquiror, Acquiror Sub or any of Acquiror's Subsidiaries is a party or
by which Acquiror, Acquiror Sub or any of Acquiror's Subsidiaries or any of
their respective properties is bound or affected, except for any such matters
described in clause (ii) or (iii) that would not have an Acquiror Material
Adverse Effect. Section 5.05 of the Acquiror Disclosure Schedule sets forth a
list of (i) all consents, approvals, authorizations, permits, filings, and
notifications of, with and to any Governmental Entity required to be made,
obtained or filed by Acquiror under (A) any Health Benefit Law, (B) any other
material Law applicable to Acquiror and its Subsidiaries or (C) to Acquiror's
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knowledge, any other Law applicable to Acquiror or its Subsidiaries and (ii) all
material consents and approvals of any other third party as a result of the
execution and delivery of this Agreement by Acquiror or Acquiror Sub and the
consummation of the Merger, other than those required to be disclosed in Section
3.05 of the Company Disclosure Schedule or Section 4.03 of the Stockholder
Disclosure Schedule (or not required to be disclosed thereon).
(b) The execution and delivery of this Agreement by Acquiror and
Acquiror Sub do not, and the performance of this Agreement by Acquiror and
Acquiror Sub shall not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entities or other third
party in addition to those required to be disclosed in the Company Disclosure
Schedule or the Stockholder Disclosure Schedule, except for (i) the consents,
approvals, authorizations or permits described in Section 5.05 of the Acquiror
Disclosure Schedule, (ii) the filing and recordation of appropriate merger
documents as required by Delaware Law and (iii) the consents and approvals not
required to be disclosed on Section 3.05 of the Company Disclosure Schedule,
Section 4.03 of the Stockholder Disclosure Schedule or Section 5.05 of the
Acquiror Disclosure Schedule.
SECTION 5.06 Reports; Financial Statements.
(a) Since December 31, 1991, Acquiror and its Subsidiaries have filed
(i) all material forms, reports, statements, notices and other documents
required to be filed with (A) the SEC including, without limitation, (1) all
Annual Reports on Form 10-K, (2) all Quarterly Reports on Form 10-Q, (3) all
proxy statements relating to meetings of stockholders (whether annual or
special), (4) all required Current Reports on Form 8-K, (5) all other reports or
registration statements and (6) all amendments and supplements to all such
reports and registration statements (collectively, the "Acquiror SEC Reports")
and (B) any applicable state securities authorities; and (ii) all forms,
reports, statements, notices and other documents required to be filed with any
other applicable federal or state regulatory authorities, including, without
limitation, state insurance and health regulatory authorities, except where the
failure to file any such forms, reports, statements, notices and other documents
under this clause (ii) would not have an Acquiror Material Adverse Effect (all
such forms, reports, statements, notices and other documents in clauses (i) and
(ii) of this Section 5.06(a) being collectively referred to as the "Acquiror
Reports"). The Acquiror Reports, including all Acquiror Reports filed after the
date of this Agreement and prior to the Effective Time, (i) were or will be
prepared in all material respects in accordance with the requirements of
applicable Law (including, with respect to the Acquiror SEC Reports, the
Securities Act and the Exchange Act, as the case may be), and (ii) did not at
the time they were filed, or will not at the time they are filed, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were or will be made, not
misleading.
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(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Acquiror SEC Reports,
including any Acquiror SEC Reports filed after the date of this Agreement and
prior to the Effective Time, (i) have been or will be prepared in all material
respects in accordance with the published rules and regulations of the SEC and
GAAP applied on a consistent basis throughout the periods involved (except (A)
to the extent required by changes in GAAP and (B) with respect to Acquiror SEC
Reports filed prior to the date of this Agreement, as may be indicated in the
notes thereto) and (ii) fairly present or will fairly present the consolidated
financial position of Acquiror and its Subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for the
periods indicated, except that (x) any unaudited interim financial statements
(1) were or will be subject to normal and recurring year-end adjustments which
were not or are not expected to be material in amount and (2) are not or may not
be necessarily indicative of results for the full fiscal year and (y) any pro
forma financial information contained in such consolidated financial statements
is not or may not be necessarily indicative of the consolidated financial
position of Acquiror and its Subsidiaries as of the respective dates thereof and
the consolidated results of operations and cash flows for the periods indicated.
(c) Except as and to the extent set forth on the consolidated balance
sheet of Acquiror and its Subsidiaries at December 31, 1994, including all notes
thereto, neither Acquiror nor any of its Subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on, or reserved against in,
a balance sheet of Acquiror or in the notes thereto, prepared in accordance with
the published rules and regulations of the SEC and GAAP, except (i) as otherwise
reported in the consolidated financial statements contained in Acquiror's
Quarterly Reports on Form 10-Q for the quarter ended March 31, 1995, or (ii) for
liabilities or obligations incurred (none of which is a liability resulting from
breach of contract, breach of warranty, or tort or infringement claim or
lawsuit) in the ordinary course of business since December 31, 1994 that would
not have an Acquiror Material Adverse Effect.
SECTION 5.07 Ownership of Acquiror Sub; No Prior Activities.
(a) Acquiror Sub was formed for the sole purpose of engaging in the
transactions contemplated by this Agreement.
(b) As of the Effective Time, all of the outstanding capital stock of
Acquiror Sub will be owned directly by Acquiror. As of the Effective Time,
there will be no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments to which Acquiror Sub is a
party of any character relating to the issued or unissued capital stock of, or
other equity interests in, Acquiror Sub or obligating Acquiror Sub to grant,
issue or sell any shares of the
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capital stock of, or other equity interests in, Acquiror Sub, by sale, lease,
license or otherwise. There are no obligations, contingent or otherwise, of
Acquiror Sub to repurchase, redeem or otherwise acquire any shares of the
capital stock of Acquiror Sub.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Acquiror Sub
has not and will not have incurred, directly or indirectly, through any
Subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 5.08 Brokers. No broker, finder or investment banker other
than Goldman, Sachs & Co. is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Acquiror.
SECTION 5.09 Permits; Compliance. Each of Acquiror and its
Subsidiaries is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary for Acquiror or any of its
Subsidiaries to own, lease and operate its properties or to carry on their
business as it is now being conducted (the "Acquiror Permits") and no
suspension, revocation or cancellation of any of the Acquiror Permits is pending
or, to the knowledge of Acquiror, threatened, except for any such suspension,
revocation or cancellation which would not have an Acquiror Material Adverse
Effect. Neither Acquiror nor any of its Subsidiaries is operating in conflict
with, or in default or violation of, in any material respect (i) any Law
applicable to Acquiror or any of its Subsidiaries or by which any of their
respective properties is bound or affected or (ii) any of the Acquiror Permits,
except for any of the foregoing which would not have an Acquiror Material
Adverse Effect.
SECTION 5.10 Absence of Litigation. There are no material claims,
actions, suits, litigations, proceedings or arbitrations of any kind affecting
Acquiror or any of its Subsidiaries, at law or in equity (including actions or
proceedings seeking injunctive relief), which are pending or, to the knowledge
of Acquiror, threatened (other than grievance or complaint proceedings in the
ordinary course of business) which would, if adversely determined, have an
Acquiror Material Adverse Effect. There is no action pending or, to the
knowledge of Acquiror, threatened seeking to enjoin or restrain the Merger or
the transactions contemplated by this Agreement. Neither Acquiror nor any of its
Subsidiaries is subject to any material order of, consent decree, settlement
agreement or other similar written agreement with, or pending or, to the
knowledge of Acquiror, threatened investigation by, any Governmental Entity, or
any material judgment, order, writ, injunction, decree or award of any
Governmental Entity or arbitrator,
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including, without limitation, cease-and-desist or other orders, except those
which have not had and would not have an Acquiror Material Adverse Effect.
SECTION 5.11 Absence of Certain Changes or Events. Except as
disclosed in Section 5.11 of the Acquiror Disclosure Schedule or as otherwise
contemplated in this Agreement, since March 31, 1995, (a) Acquiror has conducted
its business in the ordinary course of business in all material respects and (b)
there has not occurred any Acquiror Material Adverse Effect and Acquiror has not
had any development which would reasonably be expected to result in an Acquiror
Material Adverse Effect.
SECTION 5.12 Effective Time; Disclosure. Each of the
representations and warranties set forth in this Article V shall be deemed made
at and as of the date of this Agreement and again at and as of the Effective
Time, as if made at such time and substituting the Effective Time for the date
of this Agreement throughout this Article V, except to the extent such
representations and warranties specifically refer to a date other than the date
of this Agreement. To Acquiror's knowledge, no representation or warranty
contained in this Agreement or in the Acquiror Disclosure Schedule, or in any
document delivered by the Acquiror to the Company pursuant to Article VIII of
this Agreement, contains or will, at the Effective Time, contain any untrue
statement of a material fact or omits or will, at the Effective Time, omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were or will be made, not misleading.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
SECTION 6.01 Affirmative Covenants of the Company. The Company
hereby covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement, as set forth in Section 6.01 of the
Company Disclosure Schedule or otherwise consented to in writing by Acquiror,
the Company will and will cause each of its Subsidiaries to:
(a) operate its business in the ordinary course in all material
respects;
(b) use best efforts to preserve intact in all material respects its
business organization and assets, maintain its rights and franchises, retain the
services of its respective officers and key employees and maintain the
relationships with its respective customers and suppliers;
(c) use best efforts to keep in full force and effect liability
insurance and bonds comparable in amount and scope of coverage to that currently
maintained;
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(d) confer with Acquiror at its reasonable request to report
operational matters of a material nature and to report the general status of the
ongoing operations of the business of the Company and its Subsidiaries;
(e) comply in all material respects with the terms of, and perform all
of its obligations under, the Master Agreement and each Affiliate Contract
contemplated thereby, as amended as contemplated by this Agreement;
(f) make Investments only in accordance with the Company's investment
guidelines in effect as of April 30, 1995;
(g) use best efforts to cause each of the conditions set forth in
Article VIII to be satisfied as soon as practicable after the date of this
Agreement;
(h) pay for Tax benefits as follows: to the extent that the Company
(or its Subsidiaries) benefits from the use of federal, state or local net
operating loss carryforwards for income Tax purposes of MetLife (or its present
or former Subsidiaries) or TIG (or its present or former Subsidiaries)
attributable to one or more periods ending on or prior to January 3, 1995, then
when the appropriate Return for the year in which the Company (or its
Subsidiaries) realizes such benefit is filed, the Company will convey such
benefit to MetLife or TIG, as the case may be, in an amount which results in no
net cost to the Company (or its Subsidiaries). MetLife or TIG, as the case may
be, shall return to the Company an amount equal to such payment plus the amount
of expenses of the Company (or its Subsidiaries) deducted in determining the
amount of such payment (without duplication for amounts otherwise indemnified
under Section 10.07) with interest at the rate specified in Section 10.06 from
the date paid by the Company to the date such payment (including such expenses)
is returned to the Company, if and to the extent that such net operating loss
carryforwards are thereafter disallowed as a result of a final determination
within the meaning of Section 10.07(e), and the Stockholders shall bear all
costs reasonably related thereto (without duplication for amounts otherwise
indemnified under Section 10.07). The Company's obligations pursuant to this
Section 6.01(h) shall survive the Closing; and
(i) promptly notify Acquiror upon receiving any notice that any of the
20 largest customers is canceling, terminating or electing not to renew, or
intends to cancel, terminate or not renew, its relationship with the Company,
any Subsidiary or either Stockholder or its affiliates with respect to the
Health Care Benefits Business.
SECTION 6.02 Negative Covenants of the Company. Except as
expressly contemplated by this Agreement, as set forth in Section 6.02 of the
Company Disclosure Schedule or otherwise consented to in writing by Acquiror,
from the date of this Agreement until the Effective Time, the Company shall not
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and the Company shall not permit any of the Company's Subsidiaries to, do any of
the following:
(a) (i) increase the compensation payable or to become payable to any
director, officer or employee, except for increases payable or to become payable
in the ordinary course to employees of the Company or its Subsidiaries who are
not directors or executive officers of the Company; (ii) enter into any
severance or termination agreement or arrangement with any director, officer or
employee involving maximum severance payments in excess of $10,000 or creating a
severance obligation, regardless of amount, as a result of the transactions
contemplated by this Agreement, (iii) except as provided in clause (i) of this
subsection (a), enter into or amend any employment agreement with any director,
officer or employee that would extend beyond the Effective Time except on an at-
will basis; or (iv) establish, adopt, enter into or amend any Employee Benefit
Plan, except as may be required to comply with applicable Law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock, other than dividends from
Subsidiaries to the Company or to other Subsidiaries of the Company in the
ordinary course;
(c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its Subsidiaries' capital stock or any securities or obligations convertible
into or exchangeable for any shares of its or its Subsidiaries' capital stock,
or any options, warrants or conversion or other rights to acquire any shares of
its or its Subsidiaries' capital stock or any such securities or obligations;
(ii) effect any reorganization or recapitalization; or (iii) split, combine or
reclassify any of its or its respective Subsidiaries' capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for, shares of its or its respective Subsidiaries' capital
stock (except for the issuance of shares upon the exercise of options or
warrants in accordance with their terms);
(d) except in accordance with Section 2.07(b), issue, deliver, award,
grant or sell, or authorize the issuance, delivery, award, grant or sale
(including the grant of any security interests, liens, claims, pledges,
limitations on voting rights, charges or other encumbrances) of, any shares of
any class of its or its Subsidiaries' capital stock (including shares held in
treasury), any securities convertible into or exercisable or exchangeable for
any such shares, or any rights, warrants or options to acquire, any such shares
(except for the issuance of shares of Company Common Stock upon the exercise of
outstanding options or warrants in accordance with their or its terms), or amend
or otherwise modify the terms of any such rights, warrants or options the effect
of which shall be to make such terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner,
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any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets of any other person (other than the purchase of assets from suppliers or
vendors in the ordinary course);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any material amount of any of its or its respective
Subsidiaries' assets, except for dispositions in the ordinary course;
(g) directly or indirectly solicit or initiate any discussions or
negotiations with, or in any way participate in any negotiations with or provide
any information to or otherwise cooperate in any other way with, or facilitate
or encourage any effort to attempt to, or enter into any agreement or
understanding with, any person or group of persons (other than Acquiror and its
directors, officers, employees, representatives and agents), concerning any
Competing Transaction, or authorize any of the officers or directors of the
Company or any of its Subsidiaries to take any such action, and the Company
shall cause the directors, officers, employees, agents, stockholders and
representatives of the Company and its Subsidiaries (including, without
limitation, any investment banker, financial advisor, attorney or accountant
retained by the Company or any of its Subsidiaries) not to take any such action.
The Company shall promptly notify Acquiror (A) if any inquiries, or proposals or
requests for information concerning a Competing Transaction are received by the
Company or any of its Subsidiaries or any of its or their respective officers or
directors, or (B) when the Company becomes aware that any such inquiries or
proposals have been received by a Stockholder's, the Company's or any of their
respective affiliates' investment bankers, financial advisors, attorneys,
accountants, other representatives or stockholders.
For purposes of this Agreement, "Competing Transaction" shall mean any
of the following involving the Company or any of its Subsidiaries (other than
the transactions contemplated by this Agreement): (i) any sale of stock,
merger, consolidation, share exchange, business combination, or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of twenty percent or more of the assets of the Company and its
Subsidiaries, taken as a whole, in a single transaction or a series of related
transactions; or (iii) any agreement to, or public announcement by the Company
of a proposal, plan or intention to, do any of the foregoing;
(h) adopt any amendments to its Certificate of Incorporation or By-
Laws;
(i) subject to Acquiror's consent to the extent required under Section
7.15(d), except for changes in methods of accounting made in consultation with
Acquiror that relate to (i) premium stabilization reserves, (ii) the status of
the HMOs as insurance companies and (iii) changes in connection with the reserve
for
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adverse deviation, (A) make any change in its methods of accounting used in the
preparation of the April 30 Statements, except as may be expressly required by
Law, GAAP or SAP, or (B) make or rescind any material express or deemed election
relating to Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or make any material change in any of its methods of
reporting income or deductions for federal income Tax purposes from those
employed in the preparation of the federal income Tax returns for the taxable
year ending December 31, 1994, except as may expressly be required by Law or the
IRS;
(j) other than in the ordinary course, incur any obligation for
borrowed money or purchase money indebtedness, whether or not evidenced by a
note, bond, debenture or similar instrument;
(k) alter, amend, modify, terminate or cancel any Contract existing as
of the date of this Agreement between the Company or its Subsidiaries and a
Stockholder or its affiliates in a manner which is, individually or in the
aggregate, actually or potentially adverse to the Company and its Subsidiaries;
(l) enter into any reinsurance arrangements, or modify or amend any
existing reinsurance arrangements;
(m) modify or amend its provider reimbursement arrangements in any
respect that is material in the aggregate with respect to all such arrangements;
(n) modify or amend in any material respect any Contract covering or
relating to more than 10,000 covered medical lives or enter into any Contract,
or modify or amend in any material respect any existing Contract, with or
covering New York state employees;
(o) enter into any Contract limiting the right of the Company or any
of its Subsidiaries at any time on or after the date of this Agreement or
Acquiror or any of its Subsidiaries or affiliates at or after the Effective
Time, to engage in, or to compete with any person in, any business of a type
included in the Health Care Benefits Business, including any Contract which
includes exclusivity provisions restricting the geographical area in which, or
the method by which, any such business may be conducted by the Company or any of
its Subsidiaries or affiliates, or by the Acquiror or any of its Subsidiaries or
affiliates after the Effective Time, or modify or amend any such existing
Contract, except to reduce or eliminate the duration, geographic scope or other
terms of any existing restrictions or limitations;
(p) agree in writing or otherwise to do any of the foregoing.
SECTION 6.03 Covenants of the Stockholders. As used in this
Section 6.03, the term "Stockholder" shall mean (a) TIG on one hand and (b)
MetLife and MHH on the other. Each Stockholder hereby covenants and agrees
that, prior to the
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Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to in writing by the Acquiror, such Stockholder will:
(a) use its best efforts to cause the Company and its Subsidiaries to
fully comply with the provisions of Sections 6.01 and 6.02 of this Agreement;
(b) unless the conditions set forth in Section 8.03 are not satisfied,
adopt and approve the Merger and this Agreement in the manner provided in
Section 7.01 of this Agreement;
(c) not alter, amend, modify, terminate or cancel any Contract
existing as of the date of this Agreement between such Stockholder or its
affiliates and the Company or its Subsidiaries in a manner which is adverse to
the Company and its Subsidiaries;
(d) (i) comply in all material respects with the terms of, and perform
all of its obligations under, the Master Agreement and each Affiliate Contract
contemplated thereby, (ii) within 60 days of the date of this Agreement,
finalize all contribution adjustments and post-closing audits under Article III
of the Master Agreement, and (iii) pay in full all intercompany and similar
items owing to the Company and its Subsidiaries by the Stockholders and their
affiliates which have become due and payable, and cause the Company and its
Subsidiaries to pay any such amounts owing to the Stockholders and their
affiliates which have become due and payable; provided, however, that the
provisions of this Section 6.03(d) shall not apply to amounts which have not
become due and payable with respect to (x) reinsurance or administrative
agreements between the Company and its Subsidiaries and any Stockholder (or any
of its affiliates), (y) employee-related items, or (z) tax refunds or net
operating losses;
(e) not take any action, directly or indirectly, which, if taken by
the Company, would be prohibited under Section 6.02(g);
(f) (i) use its best efforts to terminate the Registration Rights
Agreement dated as of January 3, 1995, as amended, among the Company, the
Stockholders and certain affiliates of the Stockholders and, if unable to
terminate such agreement, Stockholder shall not at any time exercise any of its
rights thereunder, and (ii) terminate the Stockholders' Agreement dated as of
January 3, 1995, as amended, among the Company, the Stockholders and certain
affiliates of the Stockholders; provided that such Stockholder's obligation
under clauses (i) and (ii) are subject to the consummation of the transactions
contemplated by this Agreement;
(g) enter into any Contract limiting the right of the Company or any
of its Subsidiaries at any time on or after the date of this Agreement or
Acquiror or any of its Subsidiaries or affiliates at or after the Effective
Time, to engage in, or to compete with any person in, any business of a type
included in the Health Care
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Benefits Business, including any Contract which includes exclusivity provisions
restricting the geographical area in which, or the method by which, any such
business may be conducted by the Company or any of its Subsidiaries or
affiliates, or by the Acquiror or any of its Subsidiaries or affiliates after
the Effective Time, or modify or amend any such existing Contract, except to
reduce or eliminate the duration, geographic scope or other terms of any
existing restrictions or limitations;
(h) promptly notify Acquiror upon receiving any notice that any of the
20 largest customers is canceling, terminating or electing not to renew, or
intends to cancel, terminate or not renew, its relationship with the Company,
any Subsidiary or either Stockholder or its affiliates with respect to the
Health Care Benefits Business;
(i) use its best efforts to obtain, prior to the Effective Time,
approval by the Company's stockholders with respect to any payments which, in
the absence of such approval, would constitute "parachute payments" within the
meaning of Section 280G of the Code, and to provide adequate disclosure
regarding such payments in accordance with Section 280G(b)(5)(B)(ii) of the
Code; and
(i) use best efforts to cause each of the conditions set forth in
Article VIII to be satisfied as soon as practicable after the date of this
Agreement.
SECTION 6.04 Affirmative Covenants of Acquiror. Acquiror hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by the
Company or otherwise consistent with Acquiror's acquisition program reflected in
the Acquiror Reports, Acquiror will, and will cause each of its Subsidiaries to:
(a) operate its business in the usual and ordinary course in all
material respects (taking into account Acquiror's acquisition program);
(b) use best efforts to cause each of the conditions set forth in
Article VIII to be satisfied as soon as practicable after the date of this
Agreement;
(c) adopt the Certificate of Designations and file the Certificate of
Designations with the Minnesota Secretary of State; and
(d) approve the Merger in its capacity as sole stockholder of Acquiror
Sub.
SECTION 6.05 Access and Information.
(a) The Company and the Stockholders (but only with respect to their
respective Health Care Benefits Businesses) shall (and shall cause their
respective affiliates to) afford to Acquiror and its officers, employees,
accountants, consultants, legal counsel and other representatives reasonable
access upon
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reasonable notice to all information concerning the business, properties,
contracts, records and personnel of the Company, the Stockholders (but only with
respect to their respective Health Care Benefits Businesses) or their respective
affiliates as Acquiror may reasonably request.
(b) Acquiror shall (and shall cause its Subsidiaries to) afford to the
Company, the Stockholders and their respective officers, employees, accountants,
consultants, legal counsel and other representatives reasonable access upon
reasonable notice to all information concerning the business, properties,
contracts, records and personnel of Acquiror or its Subsidiaries as the Company
or the Stockholders may reasonably request. Upon delivery of each of the
Initial and Second Company Earnings Statements under Section 2.03 or any Earn-
Out Statement under Section 2.05, the Company shall afford to the Stockholders'
and, in the case of the Initial and Second Company Earnings Statements,
Acquiror's accounting representatives prompt and reasonable access upon
reasonable notice to all information reasonably necessary to verify calculation
of Company Earnings and the amount of Contingent Consideration payable, the
Claims Accrual Adjustment and the amount of adjustments to Contingent
Consideration, or Earnings Per Share and the amount of any Earn-Out payment
payable for an Earn-Out Year, as the case may be. The Company shall make its
employees who are familiar with such matters, its independent outside accounting
firm and its outside actuarial advisors (if any) available to the Stockholders
and Acquiror and their respective representatives on a mutually convenient basis
at reasonable times during normal business hours to provide an explanation of
such materials and provide such other information (including, but not limited
to, accountants work papers and reserve calculations) as the Stockholders and
Acquiror and their respective representatives may reasonable request in
connection with their review of each of the Initial and Second Company Earnings
Statements or any Earn-Out Statement.
(c) The parties will, and will cause their respective officers,
employees, accountants, consultants, legal counsel and other representatives to,
comply with all of their respective obligations under the Confidentiality
Agreement dated March 21, 1995 between the Company and Acquiror and the
Confidentiality Agreements, dated May 11, 1995, between Acquiror and each
Stockholder.
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
As used in this Article VII, the term "Stockholder" shall mean (a) TIG
and TIC on one hand and (b) MetLife and MHH on the other.
SECTION 7.01 Approval of Stockholders. The Company and the
Stockholders shall take all action necessary in accordance with Delaware Law and
the Company's Certificate of Incorporation and By-Laws to secure the vote or
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consent of stockholders required by Delaware Law to adopt and approve this
Agreement and the Merger, including calling and attending a meeting of
stockholders or obtaining and executing a written consent in lieu of a
stockholders meeting in accordance with the Delaware Law.
SECTION 7.02 Appropriate Action; Consents; Filings.
(a) The Company, the Stockholders and Acquiror shall use all
reasonable 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 transactions
contemplated by this Agreement as promptly as practicable, (ii) obtain from any
Governmental Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Acquiror or the
Company or any of their respective Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated in this Agreement, including, without limitation,
the Merger, and (iii) make all necessary notifications and filings, and
thereafter make any other required submissions, with respect to this Agreement
and the Merger required under applicable Health Benefit Laws and other
applicable Laws; provided that, Acquiror and the Company shall cooperate with
each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith. The Company and Acquiror shall
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable Law in
connection with the transactions contemplated by this Agreement.
(b) (i) The Company, the Stockholders and Acquiror shall give (or
shall cause their respective Subsidiaries to give) any notices to third parties,
and use, and cause their respective Subsidiaries to use, reasonable efforts to
obtain any third party consents (A) disclosed in the Company Disclosure
Schedule, the Stockholder Disclosure Schedule or the Acquiror Disclosure
Schedule, as the case may be, and which Acquiror identifies as being conditions
to the Closing pursuant to Section 8.02(c) or (B) which are otherwise identified
by Acquiror or required to prevent a Company Material Adverse Effect from
occurring prior to or after the Effective Time or an Acquiror Material Adverse
Effect from occurring prior to or after the Effective Time.
(ii) In the event that either party shall fail to obtain any third
party consent described in subsection (b)(i) above, such party shall use all
reasonable efforts, and shall take any such actions reasonably requested by the
other party, to minimize any adverse effect upon the Company and Acquiror, their
respective Subsidiaries, and their respective businesses resulting, or which
could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
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(c) Prior to the Effective Time, to the extent reasonably requested by
Acquiror the Company and the Stockholders will, to the extent permitted by
applicable Law, cooperate with Acquiror in approaching, meeting with and
communicating with the 100 largest customers of the Health Care Benefits
Business (as measured by the number of covered medical lives) to explain the
change in ownership of the Company and to assist in obtaining a renewal with or
transfer to the Company and its Subsidiaries of all contracts, agreements and
insurance policies with such customers, and the Company and the Stockholders
shall encourage such customers to renew or transfer their contracts, agreements
and policies with or to the Company and its Subsidiaries; provided that no
Stockholder shall be required to incur unreasonable costs under this Section
7.02(c).
(d) From the date of this Agreement until the Effective Time, the
Company shall, promptly following acquiring knowledge thereof, notify Acquiror
in writing of any pending or, to the knowledge of the Company, threatened
action, 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 the Company Common Stock into the Merger Consideration
pursuant to the Merger or (ii) seeking to restrain or prohibit the consummation
of the Merger or otherwise limit the right of Acquiror or, to the knowledge of
the Company, its Subsidiaries, to own or operate all or any portion of the
businesses or assets of the Company or its Subsidiaries.
(e) From the date of this Agreement until the Effective Time, the
Acquiror shall, promptly following acquiring knowledge thereof, notify the
Company in writing of any pending or, to the knowledge of Acquiror, threatened
action, 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 the Company Common Stock into the Merger Consideration
pursuant to the Merger or (ii) seeking to restrain or prohibit the consummation
of the Merger or otherwise limit the right of the Acquiror or its Subsidiaries
to own or operate all or any portion of the businesses or assets of the Company
or its Subsidiaries.
SECTION 7.03 New York State Employees Contract. So long as MetLife
or its affiliates is party to any Contract relating to the Health Care Benefits
Business covering or servicing New York state employees, Acquiror shall have the
right to provide coverage and/or service thereunder pursuant to arrangements
substantially similar to those in effect or contemplated with the Company and
its Subsidiaries as of the date of this Agreement, unless MetLife is prohibited
from doing so by Law, in which case MetLife shall use its best efforts to assure
Acquiror obtains the economic benefits of any such Contract on a mutually
acceptable basis.
SECTION 7.04 Update Disclosure; Breaches. From and after the date
of this Agreement until the Effective Time, each party shall promptly notify
the other parties by written update to its Disclosure Schedule of (i) the
occurrence or non-
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occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any condition to the obligations of any party to effect the
Merger and the other transactions contemplated by this Agreement not to be
satisfied, or (ii) the failure of the Company, the Stockholders, Acquiror or
Acquiror Sub, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this
Agreement which would be likely to result in any condition to the obligations of
any party to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied; provided, however, that the delivery of any
notice pursuant to this Section 7.04 shall not cure any breach of any
representation or warranty requiring disclosure of such matter prior to the date
of this Agreement or otherwise limit or affect the remedies available to the
party receiving such notice.
SECTION 7.05 Public Announcements. Acquiror, the Stockholders and
the Company shall consult in good faith with each other before issuing any
press release or otherwise making any public statements with respect to the
Merger or this Agreement and shall not issue any such press release or make any
such public statement prior to such consultation and obtaining the consent of
the other parties (which consent shall not be unreasonably withheld), except as
may be required by Law or the requirements of the NYSE.
SECTION 7.06 Indemnification of Directors and Officers.
(a) From and after the Effective Time, (i) each Stockholder shall
indemnify, defend and hold harmless those employees, officers and directors of
such Stockholder or its affiliates that were or are directors of the Company and
(ii) Acquiror shall indemnify, defend and hold harmless the present directors of
the Company who are not required to be indemnified by the Stockholders under
clause (i) of this Section 7.06(a) and the officers of the Company
(collectively, the "Indemnitees") against all losses, expenses, claims, damages
or liabilities arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement) to the full extent permitted or required as of the date of this
Agreement by the Company's Certificate of Incorporation and Bylaws (and shall
also advance expenses as incurred to the fullest extent permitted under the
Company's Certificate of Incorporation and Bylaws, provided that the person to
whom expenses are advanced provides the undertaking to repay such advances
contemplated by applicable Law, except as otherwise modified by this Section
7.06). The Company shall use reasonable efforts to obtain extended reporting
endorsements (tail coverage) on the fiduciary liability, professional liability
and directors and officers liability policies currently covering the Company or
any of its Subsidiaries or any of the Indemnitees required to be indemnified by
Acquiror at a commercially reasonable cost; provided that such coverage and the
cost thereof shall be subject to Acquiror's approval. In connection with such
efforts, the Company will use its best efforts to accurately complete any
insurance applications and forms of the applicable insurer and take any
reasonable steps to preserve any claims, including submitting a full and
complete list of any
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potential claims of which the Company has knowledge, under the policy issued by
such insurer. In the event the Company is unable to obtain such extended
reporting coverage under the Company's existing directors and officers liability
insurance policies at a commercially reasonable cost, Acquiror shall use
reasonable efforts to provide similar coverage for those Indemnitees that it is
required to indemnify under policies then maintained by Acquiror; provided that
such similar coverage is available to Acquiror at a commercially reasonable
cost.
(b) In the event any claim, action, suit, proceeding or investigation
(a "D & O Claim") for which indemnification is provided under this Section 7.06
is brought against an Indemnitee (whether arising before or after the Effective
Time) after the Effective Time (i) such Indemnitee may retain counsel
satisfactory to it (subject to approval by the indemnifying party), (ii) the
indemnifying party shall pay all reasonable fees and expenses of such counsel
for such Indemnitee promptly as statements therefor are received (subject to the
ability of the indemnifying party to receive such information relative to the
legal services provided as is customarily provided and reasonably requested by
the indemnifying party and provided that nothing in this Section 7.06 shall
prevent the indemnifying party from disputing any fees it believes are not
reasonable), and (iii) the indemnifying party will use all reasonable efforts to
assist in the vigorous defense of any such matter, provided that the
indemnifying party shall not be liable for any settlement of any D & O Claim
effected without its written consent. Any Indemnitee wishing to claim
indemnification under this Section 7.06, upon learning of any such D & O Claim,
shall notify the appropriate indemnifying party (but the failure so to notify
such indemnifying party shall not relieve it from any liability which it may
have under this Section 7.06 except to the extent such failure materially
prejudices such indemnifying party), and shall deliver to such indemnifying
party the undertaking contemplated by applicable Law. The Indemnitees as a
group may retain only one law firm to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnitees.
SECTION 7.07 Obligations of Acquiror Sub. Acquiror shall take all
action necessary to cause Acquiror Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
SECTION 7.08 Severance and Employment Agreements.
(a) Any severance, change of control or termination pay obligations
arising by reason of, or payable as a result of, (i) the transactions
contemplated by the Master Agreement or (ii) events occurring at or prior to
January 3, 1995 with respect to any employee of the Company or its Subsidiaries
who had previously been employed by a Stockholder or its affiliates immediately
prior to becoming an employee of the Company or its Subsidiaries shall be paid
by such Stockholder at such Stockholder's option, either (x) directly to the
appropriate persons (without
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taking into account any resultant Tax benefit or detriment to any person) or
(y) to the Company (which payment to the Company shall be made as a capital
contribution with respect to the Company Common Stock, net of any Tax benefit to
the Company attributable to such severance, change of control or termination pay
obligation and the Company will then make such payments), and such Stockholder
shall indemnify and hold Acquiror, the Company and their Subsidiaries harmless
against payment of any such amounts.
(b) Section 7.08(b) of the Company Disclosure Schedule sets forth a
list of each officer or employee of the Company and its Subsidiaries who is
party to any employment or severance Contract providing for the payment of
severance pay, termination pay or other consideration by reason of consummation
of the Merger. The Stockholders agree to pay (in the manner described in
Section 7.08(a)), and to indemnify and hold Acquiror, the Company and their
Subsidiaries harmless against payment of, any amounts payable to the persons
listed on Section 7.08(b) of the Company Disclosure Schedule by reason of
consummation of the Merger. If Acquiror or any of its Subsidiaries employs or
offers to employ any person listed in Section 7.08(b) of the Company Disclosure
Schedule, in connection therewith it shall use its best efforts to cause such
person to waive, subject to consummation of the Merger, the receipt of any such
payment.
(c) Section 7.08(c) of the Company Disclosure Schedule sets forth a
list of each officer or employee of the Company and its Subsidiaries (other than
the persons listed on Section 7.08(b) of the Company Disclosure Schedule) who is
party to any employment or severance Contract providing for the payment of
severance or termination pay in excess of the Company's standard severance
policy (without regard to the Merger) as such policy has been described to
Acquiror prior to the date of this Agreement, by reason of consummation of the
Merger or otherwise. Any severance pay, termination pay or other consideration
in excess of the Company's standard severance policy (i) payable by reason of
consummation of the Merger or (ii) otherwise payable upon termination, in each
case under employment or severance Contracts which are not disclosed on Section
7.08(c) of the Company Disclosure Schedule and which are not terminated prior to
the Effective Time, shall be paid by the Stockholders (in the manner described
in Section 7.08(a)) to the appropriate persons or to the Company, and each
Stockholder agrees, with respect to such payments, to indemnify and hold
Acquiror, the Company and their Subsidiaries harmless.
(d) Any severance or termination payments payable to the individuals
listed on Section 7.08(d) of the Company Disclosure Schedule shall be paid by
the Stockholders (in the manner described in Section 7.08(a)) or by the Company
as follows:
(i) if either or both of such individuals' employment terminates on or
prior to the six month anniversary of the Merger, the Stockholders shall pay
100% of severance or termination payments payable to such individual(s);
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(ii) if either or both of such individuals' employment terminates
after the six month anniversary of the Merger and on or prior to the 12 month
anniversary of the Merger, the Stockholders shall pay 75% of severance or
termination payments payable to such individual(s), and the Company shall pay
25% of such payments;
(iii) if either or both of such individuals' employment terminates
after the 12 month anniversary of the Merger and on or prior to the 18 month
anniversary of the Merger, the Stockholders shall pay 50% of severance or
termination payments payable to such individual(s), and the Company shall pay
50% of such payments;
(iv) if either or both of such individuals' employment terminates
after the 18 month anniversary of the Merger and on or prior to the 24 month
anniversary of the Merger, the Stockholders shall pay 25% of severance or
termination payments payable to such individual(s), and the Company shall pay
75% of such payments; and
(v) if either or both of such individuals' employment terminates after
the 24 month anniversary of the Merger, the Company shall pay 100% of such
payments.
(e) Acquiror shall pay 50% and the Stockholders shall (in the manner
described in Section 7.08(a)) pay 50% of any amounts payable to the individual
listed on Section 7.08(e) of the Company Disclosure Schedule in the amount and
under the circumstances set forth therein.
SECTION 7.09 Company Employee Benefit Plans. Each Stockholder
agrees to indemnify and hold harmless Acquiror, the Company and their
Subsidiaries against any Losses with respect to any current or former employee
of the Company or its Subsidiaries who had previously been employed by such
Stockholder arising out of any claim or liability made or arising under the
employee benefit plans of such Stockholder and its affiliates (a) which arises
as a result of (i) the transactions contemplated by the Master Agreement and the
Affiliate Contracts entered into in connection therewith, or (ii) any facts,
events or circumstances occurring prior to the Effective Time, and (b) for which
such Stockholder or its affiliates (i) has any liability or obligation to such
employees with respect to any time at or prior to the Effective Time, or (ii)
has failed to comply with any material provision of Law, including ERISA and,
with respect to any failure to achieve intended tax results, the Code, except
where such failure is due to the failure on the part of Acquiror or the Company
to cooperate with such Stockholder in the good faith attempt by such Stockholder
to comply with such provisions.
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SECTION 7.10 Related Agreements.
(a) Marketing Agreement. At the Closing, the Company and MetLife
shall enter into a replacement to the Marketing Agreement dated as of January 3,
1995 between the Company and MetLife, which replacement agreement shall be in
the form of Exhibit 7.10(a) attached hereto, and such replacement agreement
shall be in full force and effect as of the Merger.
(b) Standstill Agreement. At the Closing, Acquiror, MHH and MetLife
shall enter into a Standstill Agreement substantially in the form of Exhibit
7.10(b) attached hereto.
SECTION 7.11 Utilization of Products and Services.
(a) Each Stockholder (which for all purposes of this Section 7.11 only
shall include Travelers Group, Inc.) and its Subsidiaries will purchase from the
Company and Acquiror for calendar year 1996 those health care coverages and
managed care products and services ("Health Care Products"), for the same
employee populations, which are in effect with the Company on the date of this
Agreement. If the negotiations with respect to the provision of these products
and services extend beyond the Effective Time, Acquiror agrees to negotiate in
good faith with respect to the provision of these products and services. Prior
to the Effective Time, the Company and each of the Stockholders agree to
negotiate in good faith with respect to the provision of these products and
services.
(b) Each Stockholder and its Subsidiaries will, for calendar years
1997 and 1998, continue to purchase from the Company and Acquiror the same
Health Care Products for the same employee populations for which such Health
Care Products were in effect for calendar year 1996 so long as such Health Care
Products offered to such Stockholder and its Subsidiaries are competitive as to
quality, service and products and are reasonably competitive as to price
("Selection Criteria"). With respect to such employee populations, if such
Stockholder and its Subsidiaries reasonably determines that the Health Care
Products of Acquiror and the Company do not meet the Selection Criteria, such
Stockholder and its Subsidiaries shall give Acquiror and the Company a
reasonable opportunity to make a new proposal which meets the Selection
Criteria.
(c) For employee populations of each Stockholder and its Subsidiaries
for which the Company is not providing Health Care Products as of the date of
this Agreement (including any employee population added as a result of any
acquisition of any business operation by such Stockholder or its Subsidiaries,
whether by merger, consolidation, purchase of stock or assets, or otherwise
(unless any agreement relating to such acquisition prohibits such actions)) for
calendar years 1996, 1997 and 1998, the Company and Acquiror shall have the
opportunity to make a proposal (including in connection with any process in
which such Stockholder or its Subsidiaries is considering bids of competitors of
Acquiror or the Company) to
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provide Health Care Products for such employee populations. In the event that
such Stockholder and its Subsidiaries consider a proposal from a competitor of
Acquiror or the Company to be more competitive than the initial proposal
received from the Company and Acquiror, then such Stockholder and its
Subsidiaries shall give Acquiror and the Company a reasonable opportunity to
make a new proposal to provide Health Care Products for such employee
population.
SECTION 7.12 Amendment of Certain Agreements. The following
agreements are hereby amended, or shall be amended, as set forth below,
effective as of the Effective Time and subject to the consummation of the
Merger:
(a) by deleting Section 11 of the Supplementary Agreement dated as of
January 3, 1995 between TIC and the Company in its entirety, provided that in
consideration of such amendment, Acquiror agrees to give Moore's Business Forms,
Inc., for the time period set forth in such Section 11, the opportunity to
submit a bid on any matters with respect to which Moore's Business Forms, Inc.
had rights prior to the Effective Time under such Section 11;
(b) by extending until the Effective Time the time under the License
Agreements, each dated January 3, 1995, between TIC and the Company, between TIG
and the Company and between Travelers Group, Inc. and the Company, and the
License Agreement dated January 3, 1995 between MetLife and the Company for
which the Company may use certain marks of TIC and MetLife as part of the names
of certain of the Company's Subsidiaries;
(c) by requiring the Stockholders and their Subsidiaries to use their
best efforts to ensure that derivative software licensed back to the
Stockholders under the Software License Agreement dated January 3, 1995 between
the Company and TIC and the Software License Agreement dated January 3, 1995
between the Company and MetLife is used solely by the Stockholders or their
Subsidiaries or affiliates for internal business purposes; and
(d) prior to the Effective Time the Company shall convey back to
MetLife, and MetLife shall accept, all of the Company's interest in First Health
Associates.
SECTION 7.13 Rights under Master Agreement.
(a) Notwithstanding any provision to the contrary set forth in the
Master Agreement or other Affiliate Contracts, the Stockholders agree that, from
and after the Effective Time, Acquiror shall be entitled to enforce all rights
of the Company and its Subsidiaries under the Master Agreement and the other
Affiliate Contracts in effect as of the Effective Time, as such agreements may
be expressly amended or modified under the terms of this Agreement or the other
agreements contemplated by this Agreement.
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(b) Notwithstanding any provision to the contrary set forth in the
Master Agreement or other Affiliate Contract, Acquiror agrees that, from and
after the Effective Time, Acquiror shall cause the Company to comply with its
obligations under the Master Agreement and the other Affiliate Contracts in
effect as of the Effective Time, as such agreements may be expressly amended or
modified under the terms of this Agreement or the other agreements contemplated
by this Agreement.
(c) Notwithstanding Sections 7.13(a) and (b) above, to the extent of
any inconsistencies between the terms of this Agreement on one hand and the
Master Agreement and the other Affiliate Contracts on the other, the provisions
of this Agreement shall control.
SECTION 7.14 Restructuring Matters.
(a) Severance Costs. Prior to the date of this Agreement, the Company
has provided to Acquiror a copy of the Company's restructuring plan describing
planned personnel reductions and the setting forth the amount budgeted for the
costs of such reductions. In addition to any amounts payable by the
Stockholders under Section 7.08, each Stockholder shall pay directly or
reimburse the Company (in the manner described in Section 7.08(a)) for all
severance costs incurred with respect to employees of the Company and its
Subsidiaries formerly employed by such Stockholder or its affiliates immediately
prior to becoming employees of the Company or its Subsidiaries ("Severance
Costs") whose employment is terminated on or before December 31, 1995 or who has
been given notice on or before December 31, 1995 that their employment will be
terminated. From and after the Effective Time, Acquiror shall be entitled to
make all decisions relating to termination of employment. To the extent any
such Severance Costs are incurred by the Company or its Subsidiaries, the
Company shall, on a monthly basis, send to the Stockholders a notice setting
forth the aggregate amount of such Severance Costs and the amount payable by
each Stockholder, including the names of the persons to whom such payments
relate. The applicable Stockholder(s) shall pay or reimburse the Company (in
the manner described in Section 7.08(a)) the amount of Severance Costs set forth
in such notice within 10 days of receiving such notice. Notwithstanding the
foregoing, in no event shall the amounts for which the Stockholders are
obligated to pay or reimburse for the 12 months ending December 31, 1995 and
under this Section 7.14(a) exceed, on a pre-tax basis, $27,339,000; provided
that amounts required to be paid or reimbursed by the Stockholders under
Sections 7.08(a), (b), (c), (d) and (e) shall not be counted toward the maximum
payments under this Section 7.14(a).
(b) Real Estate and Operating Assets. Attached hereto as Exhibit
7.14(b) is a list of premises which were leased or subleased by the Company or
its Subsidiaries as of the Effective Time and which the Company, as of the date
of this Agreement, intends to vacate as permitted by the Master Agreement and
generally consistent with the intent of the Master Agreement ("Leased
Premises"). Exhibit
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7.14(b) may be updated by the Company at least 20 days prior to the Effective
Time and properties may be added to such list by the Company if all conditions
in the Master Agreement are met, and properties may be deleted from such list by
the Company (provided that the deletion from such exhibit of any property listed
thereon on the date of this Agreement and with respect to which notice of
vacation has been given to the Stockholders prior to such deletion shall in any
event require the consent of the Stockholders), and such updated exhibit shall
be attached to this Agreement at the Effective Time; provided that any change
from Exhibit 7.14(b) in the form attached to this Agreement on the date hereof
which would reasonably be expected to materially increase the cost to the
Stockholders shall require approval by the Company's board of directors. In
preparing any such update, the Company shall consult with Acquiror and provide
Acquiror with the opportunity to discuss any such update. At any time on or
prior to December 31, 1995, Acquiror may, by notice delivered to the
Stockholders, elect to (i) vacate any Leased Premises set forth on the final
Exhibit 7.14(b) (and which the Company has not elected to vacate prior to the
Effective Time) and/or (ii) return any Operating Assets (as defined in the
Master Agreement) contributed and delivered or leased to the Company under the
Master Agreement which are located at such Leased Premises. Acquiror shall
completely vacate not later than June 30, 1996 any Leased Premises or return any
Operating Assets for which the Company or Acquiror has timely made such an
election. From and after the Effective Time, Acquiror shall be entitled to make
all decisions relating to vacation of Leased Premises or return of Operating
Assets, it being understood that Acquiror may choose not to vacate any of the
Leased Premises listed on Exhibit 7.14(b) with respect to which the Company has
not made an election to vacate as of the Effective Time. Upon Acquiror's
vacation of such Leased Premises or return of Operating Assets, all rent and
other payment obligations of Acquiror and its Subsidiaries with respect to such
Leased Premises or Operating Assets shall terminate.
SECTION 7.15 Cooperation and Exchange of Tax Information;
Preparation of Tax Returns.
(a) Except as otherwise provided in this Section 7.15, the
Stockholders and Acquiror will provide each other with such cooperation and
information as either of them reasonably may request of the other in filing any
Return, amended Return or claim for refund, determining a liability for Taxes or
a right to a refund of Taxes or in conducting any audit or proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Returns or portions thereof, together with accompanying schedules and
related work papers and documents relating to rulings or other determinations by
Taxing authorities. Each party shall make its employees available on a mutually
convenient basis to provide explanation of any documents or information provided
hereunder. The Stockholders and Acquiror will also make available to each other
copies of all of their workpapers, schedules, all other books and records, and
such other information relating to the business of the Company or the businesses
transferred to the Company by such Stockholder (which information the
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Stockholders and Acquiror agree to maintain and preserve until six months after
the expiration of the applicable statute of limitations) which such person
reasonably may request in connection with its filing any Return, amended Return
or claim for refund, determining a liability for Taxes or a right to a refund of
Taxes, or in conducting any audit or proceeding in respect of Taxes of the
Company or Acquiror Sub.
(b) The Company shall file or cause to be filed, on the due date (as
it may be extended), all Returns of the Company required to be filed for all Tax
periods beginning on or after January 3, 1995 and ending on or before the
Closing Date. The Company, to the extent permissible, will include (or cause to
be included) the results of the operations of the Company in a separate Return
of the Company with respect to all Tax periods beginning on or after January 3,
1995 and ending on or before the Closing Date, and will cause the Company's Tax
year to end on the Closing Date. The Company shall provide Acquiror with a copy
of each federal and state income tax Return or election at least 10 business
days before the due date for such Return or election, and shall reasonably
cooperate with any request for information by Acquiror in connection therewith.
(c) Acquiror, on behalf of the Company, shall file or cause to be
filed, on the due date (as it may be extended), all Returns of the Company for
all Tax periods ending after the Closing Date. Acquiror will file (or cause to
be filed) any Returns of the Company for Tax periods which begin before the
Closing Date and end after the Closing Date ("Straddle Period Returns"). The
Company shall provide the Stockholders with a copy of each Straddle Period
Return at least 10 business days before the due date for such Return, and shall
reasonably cooperate with any request for information by the Stockholders in
connection therewith. All such Returns described in this Section 7.15(c) and
any schedules to be included therewith shall be prepared on a basis consistent
with those of the Company prepared for prior Tax periods.
(d) Without the prior written consent of Acquiror, which consent may
not be unreasonably withheld, the Company shall not make any election with
respect to Taxes, change an annual accounting period, adopt or change any
accounting method (except for the changes authorized by Section 6.02(i)) or
file any amended Return, if such election, adoption, change or filing would be
reasonably expected to increase the Tax liability or reduce any taxable loss of
the Company (or its successor) with respect to any period ending after the
Closing Date.
(e) Without the prior written consent of the Stockholders, which
consent may not be unreasonably withheld, the Company shall not, after the
Closing, make any election with respect to Taxes, change an annual accounting
period, adopt or change any accounting method or file any amended Return, if
such election, adoption, change or filing would be reasonably expected to
increase the Tax liability or reduce any taxable loss of the Company (or its
successor) with respect to any taxable period (or portion thereof) ending on or
before the Closing Date.
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Without the prior written consent of the Stockholders, which consent may not be
unreasonably withheld, the Company shall not, after the Closing, claim any
refund of Taxes of the Company with respect to any taxable period (or portion
thereof) ending on or before the Closing Date.
(f) For purposes of this Section 7.15, all references to the Company
shall include the Subsidiaries and affiliates, and the former Subsidiaries and
affiliates, of the Company.
SECTION 7.16 Use of Computer Software.
(a) Each Stockholder shall use its best efforts to, at or prior to the
Effective Time, transfer to the Company and its Subsidiaries, or provide an
enforceable license (which license shall be (x) perpetual in the case of any
computer software owned by a Stockholder or its affiliates or licensed to the
Company or its Subsidiaries by a Stockholder or its affiliates (other than
computer software licensed to the Company or its Subsidiaries through a pass
through arrangement with a third party) and (y) of like tenor in the case of
computer software licensed from parties other than a Stockholder or its
affiliates or licensed to the Company or its Subsidiaries through a pass through
arrangement with a third party) for the Company and its Subsidiaries to use, all
Company Software, and the right to use pursuant to existing contractual
arrangements (on the same terms as in effect on the date of this Agreement) all
operating software used by the Company and its Subsidiaries as of the date of
this Agreement which is not included in the definition of Company Software
("Operating Software"). Each Stockholder shall pay all costs and expenses in
excess of existing ongoing royalty obligations to persons other than a
Stockholder or its affiliates (including, but not limited to, existing royalty
obligations relating to computer software licensed to the Company or its
Subsidiaries through a pass through arrangement with a third party) incurred in
connection with the transfer or license to the Company of all Company Software,
including, but not limited to, payment of any transfer or license fees or
similar costs. In the event any Stockholder is unable to effect the transfer or
license to the Company of any Company Software, or provide the Company with the
right to use any Operating Software, such Stockholder shall make arrangements
for the provision of replacement computer software to the Company as of the
Effective Time, which replacement software shall be reasonably acceptable to
Acquiror, and such Stockholder shall pay all costs and expenses in excess of
existing ongoing royalty obligations to persons other than a Stockholder or its
affiliates (including, but not limited to, existing royalty obligations
relating to computer software licensed to the Company or its Subsidiaries
through a pass through arrangement with a third party) incurred in connection
with obtaining and/or developing such replacement software.
(b) Each Stockholder shall indemnify and hold Acquiror, the Company
and their Subsidiaries harmless against any Losses arising out of the use of any
Company Software or Operating Software by the Company and its
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Subsidiaries prior to the Effective Time, which use is claimed to be in
violation of the intellectual property rights of any person or any license or
other agreement relating to the use of such software.
SECTION 7.17 Assumption of Registration Rights Agreement. Effective
upon consummation of the Merger, Acquiror hereby assumes the Company's
obligations under the Registration Rights Agreement dated as of March 9, 1995,
as amended, among the Company and certain stockholders of the Company (all of
which are former stockholders of HealthSpring, Inc.) listed on Exhibit A thereto
(the "HealthSpring Stockholders") with respect to registration of (a) the
Acquiror Common Stock issuable upon conversion of any Acquiror Preferred Stock
issued to the HealthSpring Stockholders in the Merger and (b) any Acquiror
Preferred Stock issued to such stockholders in the Merger.
SECTION 7.18 Waiver of Rights of First Refusal. By execution of
this Agreement, each Stockholder, on behalf of itself and its respective
affiliates, waives all rights of first offer, rights of first refusal or similar
rights (whether under the Master Agreement, the Stockholders Agreement referred
to in Section 6.03(f) or otherwise), with respect to the Merger and the capital
stock or assets of the Company and its Subsidiaries.
SECTION 7.19 Post-Closing Cooperation.
(a) Until the second anniversary of the Merger (or such other period
provided in Section 7.15(a) in connection with Taxes), the Stockholders shall
provide any reasonable assistance requested by Acquiror in connection with the
matters contemplated by this Agreement, the Master Agreement and the Affiliate
Contracts entered into in connection with the Master Agreement; provided that no
Stockholder shall be required to incur unreasonable costs under this Section
7.19.
(b) In the event the Stockholders receive any notice from any
Governmental Entity regarding the Health Care Benefits Business of the Company
and its Subsidiaries, the recipient shall promptly deliver such notice to
Acquiror. The parties shall work together to resolve any issues raised by such
notice and, if requested by Acquiror, the Stockholders shall provide reasonable
assistance in accordance with Section 7.19(a) above in resolving any such
issues.
(c) At the Effective Time, a liaison committee (the "Liaison
Committee"), shall be formed consisting of two senior executives of each of TIG,
MetLife and Acquiror. The initial members of the Liaison Committee are set
forth on Exhibit 7.19 attached to this Agreement. In the event any such
member's employment terminates, a replacement member holding a comparable
position shall be named to serve on the Liaison Committee. The Liaison
Committee shall meet at least quarterly and shall be responsible for overseeing
the implementation of this Agreement, the Master Agreement and related Affiliate
Contracts, the transition of the operations of the Health Care Benefits Business
from the
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Stockholders to the Company and to Acquiror under such agreements, and any
issues which arise among the parties pursuant to such agreements. The Liaison
Committee shall remain in place until the second anniversary of the Merger, or
such earlier date as Acquiror determines that its functions have been completed
or are no longer necessary.
SECTION 7.20 Certain Litigation.
(a) Each Stockholder shall indemnify and hold harmless Acquiror, the
Company and their Subsidiaries against all Losses arising out of any legal,
arbitral or administrative claims, actions, suits, litigation or proceedings of
any kind affecting the Health Care Benefits Business, at law or in equity
(including actions or proceedings seeking injunctive relief), whether or not the
Company or its Subsidiaries is a named party, which (i) arise from facts, events
or circumstances occurring prior to January 3, 1995 with respect to the Health
Care Benefits Business conducted by such Stockholder and its affiliates, (ii)
arise on or after January 3, 1995 with respect to any matter relating to the
Health Care Benefits Business for which such Stockholder or its affiliates
exercised decision making authority (including by choosing not to act after
reviewing specific actions taken or proposed to be taken by the Company and its
Subsidiaries) under the Master Agreement, any Affiliate Contract or otherwise
(other than Losses resulting from actions or omissions of the Company and its
Subsidiaries after January 3, 1995 and for which such Stockholder would be
entitled to indemnification from the Company under the terms of any Affiliate
Contract contemplated by the Master Agreement) or (iii) arise on or after
January 3, 1995 with respect to any business conducted by the Stockholder or its
affiliates of the type included in the Health Care Benefits Business that was
not transferred to or reinsured by the Company or its Subsidiaries (other than
Losses resulting from actions or omissions of the Company and its Subsidiaries
after January 3, 1995 and for which such Stockholder would be entitled to
indemnification from the Company under the terms of any Affiliate Contract
contemplated by the Master Agreement) (collectively, "Litigation"). Effective
as of the Effective Time, the Company shall eliminate the litigation reserve of
the Company's Subsidiaries for the matters referred to in clause (i) above to
the extent that such reserve remains on the books of the Company and its
Subsidiaries as of the Effective Time and was part of the $2.5 million
litigation reserve established at the time of formation of the Company, and the
amount of such reserve which is eliminated shall be paid in cash to the
Stockholder who contributed the Subsidiary in question.
(b) Except as otherwise provided in this Section 7.20 or as otherwise
agreed by the parties, the defense of any Litigation existing as of the date of
this Agreement or instituted after the date of this Agreement shall be assumed
by the Stockholder in connection with whose Health Care Benefits Business such
Litigation arose as of the date of this Agreement (or the date of institution),
and thereafter such Litigation shall be managed by such Stockholder, and the
Stockholders shall be responsible for all costs, expenses and liabilities
relating to
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such Litigation. The Company and its Subsidiaries shall assign to the applicable
Stockholder all rights to any recovery, whether by reason of subrogation,
insurance or otherwise, against any third party in respect of any Losses to such
Stockholder resulting from the Litigation.
(c) The Stockholders shall keep Acquiror informed of all material
developments in such Litigation (including any proposed settlement), and the
Stockholders shall not take any action or enter into any settlement with respect
to such Litigation that could reasonably be expected to adversely affect the
Health Care Benefits Business without the prior written consent of Acquiror,
which consent shall not be unreasonably withheld. In the event that Acquiror,
in its reasonable judgment, determines that any Litigation managed by a
Stockholder is not being defended by such Stockholder in a reasonably diligent
manner or the management of such Litigation is otherwise materially adversely
affecting the business of Acquiror, the Company or their Subsidiaries, Acquiror
shall, upon written notice to such Stockholder, be permitted to assume the
defense of such Litigation, and all reasonable out-of-pocket costs and expenses
incurred by Acquiror in defending such Litigation, and all amounts paid pursuant
to any judgment or settlement relating thereto, shall be paid by the
Stockholders; provided, however, that no such settlement shall be entered into
without the prior consent of the applicable Stockholder, which consent shall not
be unreasonably withheld, and provided further that the applicable Stockholder
may participate in the defense of such Litigation at its own cost and expense.
SECTION 7.21 Post-Effective Time Employee Benefit Plans.
(a) As of the Effective Time, each employee who was employed by the
Company or any of its Subsidiaries immediately prior to the Effective Time
("Affected Employees") shall remain an employee of the Company, or as applicable
such Subsidiary, on the same terms and conditions (including salary and wage
rate) as were in effect immediately prior to the Effective Time. The Affected
Employees shall continue participation (without any break in service or full or
partial termination of the relevant plan), on the same terms and conditions as
were in effect immediately prior to the Effective Time, in The Travelers
Savings, Investment and Stock Ownership Plan, the Savings and Investment Plan
for Employees of Metropolitan Life and Participating Affiliates and The
Travelers TESIP Restoration and Nonqualified Savings Plan (each, a "Savings
Plan"), during the period commencing at the Effective Time and ending on
December 31, 1995, or, by mutual consent of Acquiror and the Stockholder
involved, a later date (any such date, which may be different between the
Savings Plans, is referred to herein as the "Transfer Date"). Between the
Effective Time and the Transfer Date, the Company shall continue to make
matching contributions (via reimbursement of the applicable Stockholder or
directly) to the Savings Plans in accordance with the provisions of the Savings
Plans. Notwithstanding the foregoing, nothing herein shall prohibit the Company
or its Subsidiaries from terminating employment of any Affected Employees, with
or without cause.
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(b) As of the Effective Time, the Affected Employees shall commence
participation, or, as applicable, continue to participate, in (without any
break in service for purposes of eligibility, pre-existing condition, deductible
or co-payment provisions) welfare benefit plans, including, but not limited to,
severance plans, of the Company ("Replacement Welfare Benefit Plans"), which
Replacement Welfare Benefit Plans shall provide for substantially identical
benefits at substantially identical cost and substantially identical terms and
conditions as were in effect immediately prior to the Effective Time, and such
Replacement Welfare Benefit Plans may not be amended or terminated, except as
may be required by Law or to preserve intended tax results, before January 1,
1996. Notwithstanding the foregoing, nothing herein shall prohibit, or be
construed to prohibit, the Company or its Subsidiaries from terminating or
amending the Replacement Welfare Benefit Plans at any time after January 1,
1996. From the Effective Time until January 1, 1996, the Stockholder that
administered the predecessor welfare benefit plan shall administer the
Replacement Welfare Benefit Plan under commercially reasonable terms agreed upon
by the parties; provided, however, that the Company may terminate such
administration at any time. With respect to any insured plan, each Stockholder
shall use its best efforts to cause the Company portion of the insurance
contract to be spun off as of the Effective Time into a separate contract for
the Company's employees with identical benefits and premiums. To the extent the
applicable Stockholder and the Company cannot obtain such a separate contract,
the requirement to provide substantially identical benefits in the first
sentence of this Section 7.21(b) shall not apply, but such Stockholder and the
Company shall exercise their best efforts to obtain a contract that duplicates
such benefits as nearly as practicable. Acquiror shall credit the Affected
Employees with credit for continued service with the Company, its Subsidiaries,
the Stockholders or their Subsidiaries, prior to the Effective Time for all
eligibility and vesting purposes, including for determination of entitlement to
vacation and short-term disability benefits. The Stockholders will cooperate
with the Company to provide service records for such Affected Employees.
(c) Effective as of the applicable Transfer Date, Acquiror shall cause
the Affected Employees who cease at such time to participate in a Savings Plan
which is a qualified plan, to commence participation in a qualified defined
contribution plan of the Company or Acquiror (the "Successor Plan"), and shall
credit under each Successor Plan the Affected Employees with credit for service
with the Company, its Subsidiaries, the Stockholders, or their Subsidiaries
prior to the Transfer Date for all purposes for which such service was
recognized by the applicable Savings Plan, including, without limitation, credit
for eligibility, vesting and the determination of the level of the match under
any Successor Plan. The Stockholders will cooperate with the Company to provide
service records for such Affected Employees.
(d) Prior to the Transfer Date, neither the Company nor Acquiror shall
take any action that may result in (or omit to take any action which would
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prevent) the disqualification of, or any adverse tax consequences to, any
Savings Plan. The Company and Acquiror shall at all times cooperate with the
Stockholders in all reasonable respects in connection with the filing or
providing documents and other data necessary for the administration of plans,
including payroll data, with regard to the Travelers Pension Plan for Salaried
Employees (the "Travelers Pension Plan") and the Savings Plans, and in
connection with similar administrative matters, and shall indemnify and hold
harmless the Stockholders with respect to any Losses due to Acquiror's or the
Company's failure to reasonably so cooperate with the Stockholders. No employee
communications shall be sent with respect to the Travelers Pension Plan and the
Savings Plan without the approval, which shall not be unreasonably withheld, by
the relevant Stockholder. Each Stockholder shall have the right, subject to the
consent of Acquiror, which shall not be unreasonably withheld, to communicate
with the participants in such plans with respect to any developments affecting
such participants.
(e) Anything in this Agreement to the contrary notwithstanding, no
employee benefits shall be paid or provided by the Stockholders after the
Effective Time, except to the extent explicitly provided for in this Section
7.21 or elsewhere in this Agreement.
(f) Each Stockholder shall indemnify and hold harmless the Company and
Acquiror with respect to any Losses arising under, or with respect to, its
respective Savings Plans or the continued participation of employees of the
Company and its Subsidiaries therein, except as otherwise provided in Section
7.09.
ARTICLE VIII
CLOSING CONDITIONS
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SECTION 8.01 Conditions to Obligations of Each Party Under This
Agreement. The respective obligations of each party to effect the Merger and
the other transactions contemplated by this Agreement shall be 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) No Injunction, Action or Proceeding. There shall not have been
any injunction or order issued and remaining in effect which restrains, enjoins
or prohibits the consummation of the Merger. There shall not be pending any
action or proceeding by a Governmental Entity before any court of competent
jurisdiction or governmental agency or regulatory or administrative body, and no
order or decree shall have been entered in any such action or proceeding (i)
imposing or seeking to impose limitations on the ability of Acquiror to acquire
or hold or to exercise full rights of ownership of any securities of the Company
or any of its Subsidiaries; (ii) imposing or seeking to impose limitations on
the ability of Acquiror to combine and operate the business and assets of the
Company with any
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of Acquiror's Subsidiaries or other operations; (iii) imposing or seeking to
impose other sanctions, damages or liabilities arising out of the Merger on
Acquiror, Acquiror Sub or the Company or any of their officers or directors;
(iv) requiring or seeking to require divestiture by the Acquiror of all or any
material portion of the business, assets or property of the Company or any of
its Subsidiaries; or (v) seeking to restrain, enjoin or prohibit the
consummation of the Merger, in each case, with respect to clauses (i) through
(iv) above, which would or is reasonably likely to result in a Company Material
Adverse Effect at or prior to the Effective Time or an Acquiror Material Adverse
Effect at, prior to or after the Effective Time or, with respect to clauses (i)
through (v) above, to subject any of their respective officers or directors to
substantial penalties or criminal liability; provided that prior to invoking
this condition, the party seeking to invoke it shall have used its reasonable
efforts to have any such action or proceeding dismissed or such order or decree
vacated.
(b) HSR Act. The applicable waiting period, together with any
extensions thereof, under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, shall have expired or been terminated.
(c) Health Benefit Laws. The applicable approvals and any applicable
waiting periods under Health Benefit Laws listed on Section 3.05 of the Company
Disclosure Schedule, Section 4.03 of the Stockholder Disclosure Schedule or
Section 5.05 of the Acquiror Disclosure Schedule and which have been identified
thereon by Acquiror on the date of this Agreement as being a condition to
Closing under this Section 8.01(c) shall have been received, waived or
terminated and all notices required by such Laws given, and any such matters
omitted from any such schedule on the date of this Agreement, which the failure
to receive, waive, terminate or give would reasonably be expected to have a
Company Material Adverse Effect prior to or after the Effective Time or an
Acquiror Material Adverse Effect after the Effective Time, shall have been
received, waived, terminated or given.
(d) Registration Agreement. Acquiror, MHH and MetLife shall have
entered into a Registration Rights Agreement substantially in the form of
Exhibit 8.01(d) attached hereto (the "Registration Agreement"), and such
agreement shall be in full force and effect.
(e) Other Approvals or Notices. All consents, waivers, approvals and
authorizations required to be obtained, and all filings or notices required to
be made, by Acquiror and the Company or any Subsidiary prior to consummation of
the transactions contemplated in this Agreement with all Governmental Entities
(other than the filing and recordation of merger documents in accordance with
Delaware Law and matters covered by Section 8.01(c)) which are listed on Section
3.05 of the Company Disclosure Schedule, Section 4.03 of the Stockholder
Disclosure Schedule or Section 5.05 of the Acquiror Disclosure Schedule and
which have been identified thereon by Acquiror on the date of this Agreement as
being a condition to
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Closing under this Section 8.01(e) shall have been obtained or made, and any
such matters omitted from any such schedule on the date of this Agreement, which
the failure to obtain or make would reasonably be expected to have a Company
Material Adverse Effect prior to or after the Effective Time or an Acquiror
Material Adverse Effect after the Effective Time, shall have been obtained or
made.
SECTION 8.02 Additional Conditions to Obligations of Acquiror and
Acquiror Sub. The obligations of Acquiror and Acquiror Sub to effect the
Merger and the other transactions contemplated in this Agreement are also
subject to each of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company, and of the Stockholders and MetLife contained in this
Agreement, without giving effect to any update to the Company Disclosure
Schedule or the Stockholder Disclosure Schedule under Section 7.04 shall,
without regard to any qualification by reference to "materiality" or "Company
Material Adverse Effect," be true and correct in all respects as of the
Effective Time, as though made on and as of the Effective Time (provided, that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), except for any
inaccuracies which, individually or in the aggregate, have not had, and would
not have, a material adverse effect on the financial condition, results of
operations, businesses, properties, assets or liabilities of the Company and its
Subsidiaries, taken as a whole; provided, however, that there shall be deemed
not to be such a material adverse effect to the extent that (i) such material
adverse effect is, or in the reasonable judgment of a person similarly situated
to Acquiror can be, compensated through a reduction in Contingent Consideration
in accordance with the terms of Section 2.03 or indemnification in accordance
with the terms of Section 10.02(a) or (ii) they are the result of general
economic conditions or changes generally in applicable Laws that affect the
industries in which the Company operates. Acquiror shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of the
Company and an appropriate officer of each Stockholder to that effect.
(b) Agreements and Covenants. The Company, the Stockholders and
MetLife 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 them on or prior to the Effective Time. Acquiror shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of the
Company and from an appropriate officer of each Stockholder to that effect.
(c) Third-Party Consents. The Company shall have obtained (i) each of
the consents or approvals listed in Section 3.05 of the Company Disclosure
Schedule or Section 4.03 of the Stockholder Disclosure Schedule (other than with
respect to matters covered by Section 8.01(c) or 8.01(e)) and which have been
identified thereon by Acquiror on the date of this Agreement as being a
condition to Closing under this Section 8.02(c), and (ii) any such consents or
approvals omitted
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from any such schedule on the date of this Agreement, which the failure to
receive, waive, terminate or give would reasonably be expected to have a Company
Material Adverse Effect prior to or after the Effective Time or an Acquiror
Material Adverse Effect after the Effective Time, shall have been obtained.
(d) Stockholder Approval. This Agreement shall have been adopted by
the requisite vote of the stockholders of the Company.
SECTION 8.03 Additional Conditions to Obligations of the Company.
The obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement, and the obligation of the Stockholders to vote
to approve the Merger, is also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Acquiror contained in this Agreement, without giving effect to any
update to the Acquiror Disclosure Schedule under Section 7.04 shall, without
regard to any qualification by reference to "materiality" or "Acquiror Material
Adverse Effect," be true and correct in all respects as of the Effective Time,
as though made on and as of the Effective Time (provided that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date), except for any inaccuracies
which, individually or in the aggregate, have not had, and would not have, a
material adverse effect on the financial condition, results of operations,
businesses, properties, assets or liabilities of Acquiror and its Subsidiaries,
taken as a whole; provided, however, that there shall be deemed not to be such a
material adverse effect to the extent that (i) such material adverse effect is,
or in the reasonable judgment of a person similarly situated to the Company can
be, compensated through indemnification in accordance with the terms of Section
10.03(a) or (ii) they are the result of general economic conditions or changes
generally in applicable Laws that affect the industries in which Acquiror
operates. The Company shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of Acquiror to that effect.
(b) Agreements and Covenants. Acquiror 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. The Company shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of Acquiror to that effect.
(c) Certificate of Designations. Acquiror shall have duly adopted,
executed and filed the Certificate of Designations with the Minnesota Secretary
of State, and the Certificate of Designations shall be in full force and effect
as of the Closing under the laws of the State of Minnesota and shall not have
been amended or modified.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 9.01 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of this
Agreement and the Merger by the stockholders of the Company:
(a) by mutual consent of Acquiror, the Company and the Stockholders;
(b) (i) by Acquiror, if there has been a breach by the Company or
either Stockholder of any of its covenants or agreements contained in this
Agreement or if any of the representations and warranties of the Company or the
Stockholders shall have become untrue, in any such case such that Section
8.02(a) or Section 8.02(b) will not be satisfied, and, if capable of being
cured, such breach or condition has not been cured within 30 days following
receipt by the Company or such Stockholder of written notice of such breach; or
(ii) by the Company, if there has been a breach by Acquiror of any of
its covenants or agreements contained in this Agreement or if any of the
representations and warranties of Acquiror shall have become untrue, in any such
case such that Section 8.03(a) or Section 8.03(b) will not be satisfied, and, if
capable of being cured, such breach or condition has not been cured within 30
days following receipt by Acquiror of written notice of such breach;
(c) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting consummation
of the Merger shall have become final and nonappealable; or
(d) by either Acquiror or the Company if the Merger shall not have
been consummated before December 31, 1995 (although the parties agree to use
their best efforts to consummate the Merger as soon as practicable after the
date of this Agreement); provided, however, that this Agreement shall be
extended not more than 90 days thereafter if (i) the Merger shall not have been
consummated as a result of the failure (A) to receive all regulatory approvals
or consents required to be obtained with respect to the Merger, or (B) to
resolve all actions or proceedings of a type described in Section 8.01(a) or the
last sentence of Section 3.09(a), and (ii) the parties are diligently pursuing
such approvals and consents and there is a reasonable likelihood that such
approvals and consents will be obtained.
SECTION 9.02 Effect of Termination. Except as provided below and
subject to the remedies of the parties set forth in Sections 9.03(c) and (d), in
the event of the termination of this Agreement pursuant to Section 9.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part
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of Acquiror, Acquiror Sub or the Company or any of their respective officers or
directors and all rights and obligations of each party hereto shall cease.
Notwithstanding the foregoing, the agreements set forth in Sections 6.05(c),
9.02 and 9.03 and Article XII shall survive termination of this Agreement.
SECTION 9.03 Fees and Expenses.
(a) Except as provided in Sections 9.03(c) and (d), all Expenses
incurred by the parties shall be borne solely and entirely by the party which
has incurred the same; provided that the amount of legal expenses paid by the
Company and its Subsidiaries shall be limited to $500,000, and any excess over
such amount shall be paid by the Stockholders.
(b) "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 and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and all other matters related to the closing of
the transactions contemplated by this Agreement.
(c) The Company agrees that (i) if Acquiror shall terminate this
Agreement pursuant to Section 9.01(b) by reason of a breach of Sections 6.02(g),
6.03(b) or 6.03(e), or (ii) if the Company determines not to consummate the
Merger for any reason not permitted under this Agreement, then on the Payment
Date (as defined below), TIG and MetLife shall pay to Acquiror an aggregate
amount equal to $100,000,000 (which amount shall be paid 50% by TIG and 50% by
MetLife). For purposes of this Section 9.03(c), the "Payment Date" is the date
10 days following the earliest of the following to occur: (1) the closing of
any transaction resulting from a Competing Transaction, (2) the date as of which
the Company publicly announces that the Competing Transaction giving rise to
Acquiror's termination of this Agreement will not proceed, (3) the date the
Company determines not to consummate the Merger under clause (ii) above and (4)
the date twelve months following a termination of this Agreement by Acquiror
giving rise to payment under this Section 9.03(c).
(d) The Company, the Stockholders, MetLife and Acquiror each agree
that (i) the payment provided for in Section 9.03(c) shall be the sole and
exclusive remedy of Acquiror upon any termination of this Agreement as described
in Section 9.03(c) (i) and such remedies shall be limited to the sum stipulated
in Section 9.03(c) regardless of the circumstances (including willful or
deliberate conduct) giving rise to such termination, and (ii) with respect to
any termination of this Agreement pursuant to Section 9.01(b) as a direct result
of a material, intentional breach by a party of any of its representations,
warranties, covenants or agreements contained in this Agreement (other than due
to a breach of Sections
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6.02(g), 6.03(b) or 6.03(e)), all remedies available to the other party either
in law or equity shall be preserved and survive the termination of this
Agreement.
(e) Any payment required to be made pursuant to Section 9.03(c) shall
be made to Acquiror not later than two business days after delivery to the
Company of notice of demand for payment, and shall be made by wire transfer of
immediately available funds to an account designated by Acquiror in the notice
of demand for payment delivered pursuant to this Section 9.03(e).
(f) Subject to Sections 9.03(c) and (d) above, if all conditions to
the obligations of a party at Closing contained in Article VIII of this
Agreement have been satisfied (or waived by the party entitled to waive such
conditions), and the first party does not proceed with the Closing, all remedies
available to the other party, either at law or in equity, on account of such
failure to close, including, without limitation, the right to pursue a claim for
damages on account of a breach of this Agreement, shall be preserved and shall
survive any termination of this Agreement.
ARTICLE X
INDEMNIFICATION
---------------
As used in this Article X, the term "Stockholder" shall mean (a) TIG
and TIC on one hand and (b) MetLife and MHH on the other.
SECTION 10.01 Survival of Representations and Warranties.
Notwithstanding any investigation made by or on behalf of any of the parties
hereto or the results of any such investigation and notwithstanding the
participation of such party in the Closing, the representations and warranties
contained in Articles III, IV and V hereof shall survive the Closing.
SECTION 10.02 Indemnification by the Stockholders.
(a) Subject to the limitations set forth in Section 10.02(b) below,
the Stockholders severally agree to indemnify Acquiror and its officers,
directors, employees and agents (collectively, the "Acquiror Indemnified
Parties") and hold them harmless against any loss, liability, Tax (including
interest and penalties), damage or expense (including reasonable legal expenses
and costs) or any assertion thereof, net of any Tax benefit to the person being
indemnified (determined at the maximum statutory federal corporate income tax
rate in effect at the time of determination) to the extent any indemnification
payment hereunder is not taxable to the applicable indemnified party ("Losses")
which any Acquiror Indemnified Party may suffer, sustain or become subject to as
a result of (i) any representation or warranty by the Company or the
Stockholders in, or in connection with, this Agreement, that is not true and
correct as of the date made, (ii) any breach of any
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covenant or agreement of the Company or the Stockholders contained in this
Agreement or any other agreement entered into by any such party in connection
with this Agreement, (iii) any amounts not paid by the Stockholders, or for
which the Stockholders are obligated to indemnify, in accordance with (including
any Tax arising from payments or reimbursements by the Stockholders made on an
after-Tax basis under) Sections 7.08, 7.09, 7.14, 7.16, 7.20 and 7.21,
respectively, due and payable (including, without limitation, any amounts paid
by Acquiror and its Subsidiaries after the Closing or by the Company and its
Subsidiaries prior to the Closing), (iv) any amounts for which a Stockholder is
obligated to indemnify under Section 7.06, and (v) without regard to limitations
set forth in Section 10.02(b)(ii), any Tax attributable to the disallowance of
any Tax benefit (determined at the same rate as used in determining such Tax
benefit) taken into account when computing the amount of any indemnification
payment hereunder.
(b) The Stockholders shall be liable to the Acquiror Indemnified
Parties for any Losses described in Section 10.02(a)(i) or (ii): (i) only if
Acquiror or another Acquiror Indemnified Party delivers to the Stockholders
written notice, setting forth in reasonable detail the identity, nature and
amount of Acquiror Losses related to such claim or claims prior to expiration of
Acquiror's right to indemnity under Section 10.05; and (ii) once, and not until,
the aggregate amount of all such Acquiror Losses exceeds $20,000,000, the
Stockholders shall be obligated to indemnify the Acquiror Indemnified Parties
for the full aggregate amount of all such Acquiror Losses in excess of
$20,000,000; provided that (x) once the aggregate amount of Acquiror Losses
exceeds $20,000,000, Acquiror shall refrain from asserting any claim for
indemnity hereunder until the aggregate of all individual claims asserted
exceeds $1,000,000, at which time Acquiror may bring all of its indemnity claims
hereunder (provided that Acquiror may bring any claim or claims which are less
than $1,000,000 in the aggregate if necessary to avoid the loss of any such
claim due to expiration of its indemnification rights hereunder) and (y)
Acquiror shall not be entitled to indemnity under Sections 10.02(a)(i) or (ii)
to the extent the amount of Acquiror Loss is recovered by Acquiror through the
adjustments to the Contingent Consideration under Section 2.03 or by
indemnification payments under Sections 10.02(a)(iii), 10,02(a)(iv) and
10.02(a)(v). Acquiror Losses described in Sections 10.02(a)(iii), 10.02(a)(iv)
and 10.02(a)(v) shall not be subject to the limitations of Sections 10.02(b)(i)
and (ii), or counted for purposes of the limitations set forth in Section
10.02(b)(ii). Notwithstanding the foregoing, the aggregate liability of the
Stockholders for indemnity under this Article X shall not exceed $800,000,000.
The indemnification obligations of the Stockholders under this Article X shall
be several such that:
(x) amounts payable for indemnification claims made under any
circumstances other than those described in clause (y) below shall be paid 50%
by TIG and 50% by MetLife; and
(y) amounts payable for indemnification claims made under (1) Section
10.02(a)(i) for breach of the representations and warranties set forth in
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Article IV and (2) Section 10.02(a)(ii) for breach of any covenants of a
Stockholder, shall be paid 100% by TIG if TIG or TIC was the breaching party or
100% by MetLife if MetLife or MHH was the breaching party.
SECTION 10.03 Indemnification by Acquiror.
(a) Subject to the limitations of Section 10.03(b), Acquiror agrees to
indemnify in full the Stockholders, and their officers, directors, employees,
and agents (collectively, the "Stockholder Indemnified Parties") and hold them
harmless against any Losses which any Stockholder Indemnified Party may suffer,
sustain or become subject to as a result of (i) any representation or warranty
by the Acquiror or the Acquiror Sub in, or in connection with, this Agreement,
that is not true and correct as of the date made, and (ii) any breach of any
covenant or agreement of Acquiror or the Acquiror Sub contained in this
Agreement or any other agreement entered into by any such party in connection
with this Agreement.
(b) Acquiror shall be liable to the Stockholder Indemnified Parties
for any Stockholder Losses described in Sections 10.03(a)(i) or (ii): (i) only
to the extent of the Stockholder Losses for which Stockholder or another
Stockholder Indemnified Party delivers to Acquiror written notice, setting forth
in reasonable detail the identity, nature and amount of Stockholder Losses
related to such claim or claims prior to expiration of Stockholder's right to
indemnity under Section 10.05; and (ii) only if the aggregate amount of all such
Stockholder Losses exceeds $20,000,000, in which case Acquiror shall be
obligated to indemnify the Stockholder Indemnified Parties for the full
aggregate amount of all such Stockholder Losses in excess of $20,000,000.
SECTION 10.04 Method of Asserting Claims. As used in this Section
10.04, an "Indemnified Party" shall refer to an "Acquiror Indemnified Party" or
"Stockholder Indemnified Party," as applicable, the "Notifying Party" shall
refer to the party hereto whose Indemnified Parties are entitled to
indemnification hereunder, and the "Indemnifying Party" shall refer to the party
hereto obligated to indemnify such Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Claim"), the Notifying Party shall give the Indemnifying Party prompt notice
thereof. Defense of any Claim relating to Taxes shall be governed by Section
10.07. Defense of all other Claims shall be governed by this Section 10.04.
The failure to give such notice shall not affect any Indemnified Party's ability
to seek reimbursement unless such failure has materially and adversely affected
the Indemnifying Party's ability to defend successfully a Claim. The
Indemnifying Party shall be entitled to contest and defend such Claim; provided
that the Indemnifying Party (i) has a reasonable basis for concluding that such
defense may be successful and (ii) diligently contests and
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defends such Claim. Notice of the intention so to contest and defend shall be
given by the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying Party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If the
Notifying Party elects to participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the conduct of such defense. Neither
the Notifying Party nor the Indemnifying Party may concede, settle or compromise
any Claim without the consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim seeks
equitable relief or (ii) if the subject matter of a Claim relates to the ongoing
business of any of the Indemnified Parties, which Claim, if decided against any
of the Indemnified Parties, would materially adversely affect the ongoing
business or reputation of any of the Indemnified Parties, then, in each such
case, the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall then have the
right to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the Indemnifying
Party. If the Indemnifying Party notifies the Notifying Party that it does not
dispute the claim described in such notice or fails to notify the Notifying
Party within 30 days after delivery of such notice by the Notifying Party
whether the Indemnifying Party disputes the claim described in such notice, the
Loss in the amount specified in the Notifying Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand,
subject to the provisions of Sections 10.02(b)(ii) and 10.03(b)(ii) (if
applicable to such Loss). If the Indemnifying Party has timely disputed its
Liability with respect to such claim, the Chief Executive Officers or other
representatives of each of the Indemnifying Party and the Notifying Party will
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through the negotiations of such persons within 60 days after the
delivery of the Notifying Party's notice of such claim, such dispute shall be
resolved fully and finally pursuant to an arbitration proceeding in accordance
with Section 12.01 below. The arbitrator(s) shall resolve the dispute within 30
days after selection, and judgment upon the award rendered by such arbitrator(s)
may be entered in any court of competent jurisdiction.
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(c) After the Closing, the rights set forth in this Article X shall be
each party's sole and exclusive remedies against the other party hereto for
misrepresentations or breaches of covenants contained in this Agreement and the
other agreements entered into in connection with this Agreement.
Notwithstanding the foregoing, nothing herein shall prevent any of the
Indemnified Parties from bringing an action based upon allegations of fraud or
other intentional breach of an obligation of or with respect to any party in
connection with this Agreement and such other agreements. In the event such
action is brought, the prevailing party's attorneys' fees and costs shall be
paid by the nonprevailing party.
SECTION 10.05 Expiration of Indemnities.
(a) The indemnification obligations of the Stockholders set forth in
Section 10.02(a)(ii) for covenants and agreements required to be performed, in
whole or in part, after the Closing, and in Sections 10.02(a)(iii) and
10.02(a)(iv) shall not expire. The remaining indemnification obligations of the
Stockholders set forth in Sections 10.02(a)(i), 10.02(a)(ii) and 10.02(a)(v)
shall expire upon the last to occur of:
(i) (A) with respect to claims under Sections 3.12 and 10.02(a)(v),
six months after the expiration of the statute of limitations period for the
applicable Tax and (B) with respect to claims under Sections 10.02(a)(i) (other
than for breach of any representation and warranty set forth in Section 3.12)
and 10.02(a)(ii) (for covenants and agreements required to be fully performed at
or prior to the Closing) on April 30, 1998; and
(ii) the full and complete discharge, settlement, arbitration or
adjudication of all such claims made under such sections before the applicable
period specified in clause (i) above, and payment in full of all amounts for
which liability has been established or agreed upon with respect thereto.
(b) The indemnification obligations of Acquiror set forth in Section
10.03(a)(ii) for covenants and agreements required to be performed, in whole or
in part, after the Closing, shall not expire. The remaining indemnification
obligations of Acquiror set forth in Sections 10.03(a)(i) and 10.03(a)(ii) shall
expire upon the last to occur of:
(i) April 30, 1998; and
(ii) the full and complete discharge, settlement, arbitration or
adjudication of all such claims made under such sections before the applicable
period specified in clause (i) above, and payment in full of all amounts for
which liability has been established or agreed upon with respect thereto.
SECTION 10.06 Indemnification Claims; Interest. Interest on any
claim for indemnification pursuant to this Article X shall accrue at a rate
equal to
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the three-month LIBOR rate, as in effect at the Effective Time, from the date
the Loss which gave rise to such claim arose until the claim is satisfied by
payment.
SECTION 10.07 Tax Claims; Certain Contest Rights.
(a) Within ten business days after receipt by Acquiror, Acquiror Sub
or the Company of a written notice of any demand, claim or circumstance which,
after the lapse of time, would or might give rise to a claim or the commencement
(or threatened commencement) of any action, proceeding or investigation relating
to Taxes with respect to which indemnity may be sought under Section 10.02 (an
"Asserted Tax Liability"), Acquiror shall give written notice thereof to the
Stockholders (the "Tax Claim Notice"), and payment to Acquiror of amounts due
pursuant to the Stockholders' indemnification obligation shall be made in
accordance with this Article X. In the event that any of the Stockholders elect
pursuant to Section 10.07(b) hereof to contest or compromise an Asserted Tax
Liability, except as otherwise provided herein, the Stockholders' Tax
indemnification obligation under this Article X shall be deferred until such
time as there is a final determination with respect to the Asserted Tax
Liability. A Tax Claim Notice shall contain factual information (to the extent
reasonably available to Acquiror, Acquiror Sub or the Company) generally
describing the Asserted Tax Liability in question and shall include copies of
any notice or other document received from any taxing authority in respect of
such Asserted Tax Liability. Failure by Acquiror, Acquiror Sub or the Company
to give the Stockholders prompt notice of an Asserted Tax Liability shall not
reduce or otherwise discharge the Stockholders' obligations pursuant to this
Article X; provided that to the extent that the Stockholders are damaged by such
failure, then any amount which the Stockholders would otherwise be required to
pay pursuant to this Article X with respect to such Asserted Tax Liability shall
be reduced by the amount which is solely and directly attributable to such
failure to give prompt notice.
(b) The Stockholders may elect to direct at their own expense, a
compromise or contest, either administratively or in the courts, of any Asserted
Tax Liability; provided that the Stockholders have acknowledged in writing their
obligation to indemnify Acquiror with respect to such Asserted Tax Liability;
and provided further that Acquiror, in its sole and absolute discretion, may
notify the Stockholders at any time that any such compromise or contest must be
immediately terminated, in which case the Stockholders' obligation to make
indemnity payments pursuant to this Article X with respect to such Asserted Tax
Liability (or any liability substantially related to such Asserted Tax Liability
(by virtue of common factual or legal issues underlying such liability)) shall
thereupon terminate. If, in accordance with the foregoing, the Stockholders
elect to direct the compromise or contest of any Asserted Tax Liability, they
shall within 30 calendar days after receiving the Tax Claim Notice with respect
to such Asserted Tax Liability (or sooner, if the nature of the Asserted Tax
Liability so requires) notify Acquiror of their intent to do so, and Acquiror
shall cooperate and shall cause the Company to cooperate, at the Stockholders'
sole expense (subject to Section 10.07(d)), in the compromise or contest
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of such Asserted Tax Liability. Notwithstanding any attempt to compromise or
contest any Asserted Tax Liability, Acquiror and the Company may reasonably
determine not to release or disclose to the Stockholders any information
relating to matters which arose after the Closing Date which either of them
determines is of a confidential nature and which, in the best interests of
Acquiror or the Company should not be disclosed to the Stockholders unless the
Stockholders, their advisors and agents agree in writing to protect the
confidential nature of such information and to use or disclose such information
solely to the extent necessary to contest an Asserted Tax Liability.
(c) The Stockholders may enter into a settlement agreement with
respect to, or otherwise resolve, any Asserted Tax Liability but only with prior
written consent of Acquiror, which consent may not be unreasonably withheld. In
the event that Acquiror reasonably determines in accordance with the immediately
preceding sentence not to consent to any settlement agreement or resolution of
any Asserted Tax Liability, then Acquiror, at its own expense, shall be
obligated to attempt to compromise or contest, in its sole and absolute
discretion, such Asserted Tax Liability. In such event the Stockholders'
obligation to make indemnity payments pursuant to this Article X with respect to
such Asserted Tax Liability shall be limited to the amount which would have been
payable by the Stockholders pursuant to this Article X if the settlement
agreement or resolution with respect to the Asserted Tax Liability which had
been agreed to by the Stockholders had also been consented to by Acquiror and
shall be deferred until such time that Acquiror, in its sole and absolute
discretion, decides no longer to proceed with any attempt to compromise or
contest such Asserted Tax Liability. If, in accordance with the provisions of
this Section 10.07, the Stockholders (i) do not attempt to contest the Asserted
Tax Liability, or (ii) contest their obligation to indemnify under this Article
X, Acquiror or the Company may pay, compromise or contest, in their sole and
absolute discretion, such Asserted Tax Liability without obtaining any approval
or consent from, or on behalf of, the Stockholders and without obtaining a final
determination of such Asserted Tax Liability (to the extent that Acquiror is
damaged thereby). If the Stockholders fail to notify Acquiror of their election
pursuant to Section 10.07(b) to compromise or contest an Asserted Tax Liability,
the Stockholders shall indemnify Acquiror and the Company to the extent that
Acquiror or the Company is damaged thereby.
(d) In the event that, in accordance with the provisions of this
Section 10.07, the Stockholders are attempting to compromise or contest any
Asserted Tax Liability, Acquiror or the Company, as the case may be, may
participate, at their own expense, in all proceedings, either administratively
or in the courts. In such event Acquiror shall promptly empower and shall cause
the Company promptly to empower (by power of attorney or such other
documentation as may be appropriate, limited to the Asserted Tax Liability) such
representative of the Stockholders as the Stockholders may designate as a co-
representative of Acquiror or the Company in any audit, claim for refund or
administrative or judicial proceeding, but only insofar as such audit, claim for
refund or proceeding involves
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an Asserted Tax Liability for which the Stockholders would be liable under this
Article X. For all purposes of this Section 10.07, the right to participate in
all proceedings either administratively or in the courts relating to an Asserted
Tax Liability shall include the right to attend and be kept fully informed of
all of the foregoing but shall not include, unless expressly provided for
herein, the power to compromise, contest or make any other decisions with
respect to an Asserted Tax Liability.
(e) For all purposes of this Section 10.07, a final determination
means a decision by the appropriate administrative officer empowered to review
and consider a compromise or contest of any Asserted Tax Liability, except that
in the case of any Asserted Tax Liability relating to federal Taxes, a final
determination means a final decision by the United States Tax Court, the
appropriate United States District Court or the United States Claims Court,
whichever the parties choose, with a right of appeal and except that in the case
of any Asserted Tax Liability relating to state income taxes, a final
determination means a final decision by the highest court of that state to which
a contest or protest of such Asserted Tax Liability may be taken. In the event
of a final determination, Acquiror or the Company in their sole and absolute
discretion, may terminate any compromise or contest relating to any Asserted Tax
Liability and in that event Acquiror shall receive all payments required to be
made pursuant to this Article X.
SECTION 10.08 No Right of Offset. Neither Acquiror nor the
Stockholders shall be entitled to offset the amount of any claim for
indemnification against any other party to this Agreement pursuant to this
Article X, against any amount owing to any such other party.
SECTION 10.09 Exclusive Remedy. The parties agree that the
indemnities provided for in this Agreement shall be the exclusive remedy of the
parties for any breach of this Agreement, other than in the case of fraud and
other than under Articles I and II of this Agreement.
ARTICLE XI
DEFINITIONS
-----------
SECTION 11.01 Defined Terms.
(a) When each of the following terms is used in this Agreement it
shall have the meaning stated below:
"Acquiror Change of Control" means (i) any sale or transfer of all or
substantially all of the assets of Acquiror and its Subsidiaries on a
consolidated basis, (ii) any sale of stock, merger, consolidation, share
exchange, business combination, or other similar transaction which results in
persons other than the holders of
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Acquiror Common Stock immediately prior to any such transaction holding a number
of shares of Acquiror Common Stock possessing the power, under ordinary
circumstances, to elect a majority of the board of directors of Acquiror or the
surviving entity following any such transaction.
"Acquiror Common Stock" means the common stock, par value $.01 per
share, of Acquiror.
"Acquiror Material Adverse Effect" means a material adverse effect on
the financial condition, results of operations, business, properties, assets or
liabilities of Acquiror and its Subsidiaries, taken as a whole.
"Acquiror Preferred Stock" means the 5.75% Series A Convertible
Preferred Stock, par value $.001 per share, of the Acquiror having the rights
and preferences set forth in the Certificate of Designations.
"Acquisition" means (i) the acquisition, by purchase of stock, merger
or otherwise, of the equity interests of any person and (ii) the acquisition of
any business as a going concern by means of an acquisition of all or
substantially all of the assets of any person or business, in each case if the
transaction is accounted for either as a purchase or pooling under GAAP.
"affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; provided that the Company shall not be deemed
to be an affiliate of TIC, TIG, MetLife or MHH.
"Affiliate Contracts" means each of the contracts and agreements
required to be disclosed in Section 3.10(a)(iii).
"business day" shall mean any day on which the NYSE is open for
trading.
"Certificate of Designations" means the Certificate of Designations in
the form attached to this Agreement as Exhibit 11.01.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company Common Stock" means the Common Stock, par value $.001 per
share, of the Company.
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"Company Material Adverse Effect" means a material adverse effect on
the financial condition, results of operations, businesses, properties, assets
or liabilities of the Company and its Subsidiaries, taken as a whole.
"Contract" means any written contract, agreement, arrangement or
understanding or any oral contract or agreement.
"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 or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise.
"Delaware Law" means the General Corporation Law of the State of
Delaware.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliates" shall mean any trade or business (whether or not
incorporated) that is part of the same controlled group, or under common control
with, or part of an affiliated service group that includes, the Company within
the meaning of Section 414(b), (c), (m) or (o) of the Code; provided, however,
that none of the Stockholders or any of their respective affiliates shall be
deemed an ERISA Affiliate of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"GAAP" means U.S. generally accepted accounting principles, as in
effect from time to time.
"Governmental Entity" means any governmental or regulatory authority,
domestic or foreign.
"Health Benefit Law" means all Laws related to the licensure,
certification, qualification or authority to transact business relating to the
provision of and/or payment for health benefits, including, but not limited to,
ERISA, COBRA and laws relating to the regulation of health maintenance
organizations, workers compensation, managed care organizations, insurance,
preferred provider organizations, point-of-service plans, certificates of need,
third party administrators, utilization review, coordination of benefits,
hospital reimbursement, Medicare and Medicaid participation, fraud and abuse and
patient referrals.
"Health Care Benefits Business" means the group health insurance,
managed care and HMO businesses, related administrative services and health care
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consulting businesses and other businesses conducted by the Company and its
Subsidiaries, including, but not limited to, their respective workers
compensation provider networks and other provider networks. "Health Care
Benefits Business" shall also include any of the foregoing (i) conducted by the
Stockholders and their Subsidiaries under contractual arrangements with the
Company and its Subsidiaries or otherwise for the benefit of the Company and its
Subsidiaries or (ii) contributed to the Company and its Subsidiaries under the
Master Agreement and related Affiliate Contracts.
"HMO" means a health maintenance organization organized or qualified
as such under applicable Law.
"IRS" means the Internal Revenue Service.
"knowledge" of a party means the actual knowledge of the senior
officers of that party, as such knowledge has been obtained in the normal
conduct of the business and also includes such knowledge as a reasonably prudent
senior officer would have obtained upon the exercise of reasonable diligence
under the same or similar circumstances; "known" shall have a correlative
meaning. Any reference in this Agreement to the knowledge of the Company shall
also include the knowledge of the senior officers of the Stockholders.
"Law" means any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order, judgment or decree.
"Master Agreement" means the Master Agreement dated as of September
1, 1994 between TIC and MetLife.
"Medicare" means the applicable provisions of Title XVIII of the
Social Security Act and the regulations promulgated thereunder.
"Medicaid" means the applicable provisions of Title XIX of the Social
Security Act and the regulations promulgated thereunder and the state laws and
regulations implementing the Medicaid program.
"MHH" means MetLife HealthCare Holdings, Inc.
"NYSE" means the New York Stock Exchange, Inc.
"ordinary course," when used in connection with the Company's
business, shall mean the normal course of the Company's business as conducted
since January 1, 1995, taking into account that the Company is a newly-formed
entity with an evolving business plan (which includes combining and
rationalizing the Health Care Benefits Business contributed by the Stockholders
under the Master Agreement) and shall not take into account the conduct of the
businesses contributed to the Company prior to January 1, 1995.
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"person" means an individual, corporation, partnership, association,
limited liability company, trust, unincorporated organization, other entity or
group (as defined in Section 13(d) of the Exchange Act).
"Returns" shall mean any and all returns, reports, information returns
and information statements with respect to Taxes required to be filed with the
IRS or any other Governmental Entity or tax authority or agency, whether
domestic or foreign, including, without limitation, consolidated, combined and
unitary tax returns.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Subsidiary" with respect to any person shall mean any corporation,
limited liability company, 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, 50% or more 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
or other legal entity.
"Tax" or "Taxes" means any and all taxes, charges, fees, levies, and
other governmental assessments and impositions of any kind, payable to any
federal, state, local or foreign governmental entity or taxing authority or
agency, including, without limitation,
(i) income, franchise, net worth, profits, gross receipts, minimum,
alternative minimum, estimated, ad valorem, value added, sales, use, service,
real or personal property, capital stock, license, payroll, withholding,
disability, employment, social security, Medicare, workers compensation,
unemployment compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes,
(ii) customs duties, imposts, charges, levies or other similar
assessments of any kind, and
(iii) interest, penalties and additions to tax imposed with respect
thereto.
"TIC" means The Travelers Insurance Company.
"TIG" means The Travelers Insurance Group, Inc.
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(b) When each of the following terms is used in this Agreement, it
shall have the meaning stated in the Section indicated below:
Acquiror PREAMBLE
Acquiror Disclosure Schedule ARTICLE V PREAMBLE
Acquiror Indemnified Parties SECTION 10.02(a)
Acquiror Permits SECTION 5.09
Acquiror Reports SECTION 5.06(a)
Acquiror SEC Reports SECTION 5.06(a)
Acquiror Sub PREAMBLE
Acquiror Sub Common Stock SECTION 2.01(c)
Affected Employees SECTION 7.21(a)
Agreement PREAMBLE
Alternative Securities SECTION 2.03(c)
April 30 Statements SECTION 3.07(b)
Asserted Tax Liability SECTION 10.07(a)
Assumed Stock Option SECTION 2.07(c)
Average Stock Price SECTION 2.04
Cash Consideration SECTION 2.01(a)
CERCLA SECTION 3.19(e)
Certificate of Merger SECTION 1.02
Certificates SECTION 2.02(a)
Claim SECTION 10.04(a)
Claims Accrual Adjustment SECTION 2.03(b)
Closing SECTION 1.07
Closing Date SECTION 2.02(a)
Company PREAMBLE
Company Disclosure Schedule ARTICLE III PREAMBLE
Company Earnings SECTION 2.03
Company Financial Statements SECTION 3.07(b)
Company Investments SECTION 3.07(h)
Company Marks SECTION 3.15
Company Permits SECTION 3.06
Company Reports SECTION 3.07(a)
Company Software SECTION 7.16
Company Stock Plan SECTION 2.07(b)
Competing Transaction SECTION 6.02(g)
Constituent Corporations SECTION 1.01
Contingent Consideration SECTION 2.01(a)
Contingent Payment Right SECTION 2.01(a)
D & O Claim SECTION 7.06(b)
Dissenting Shares SECTION 2.08
Earnings Per Share SECTION 2.05(e)
Earn-Out Default SECTION 2.05(i)
Earn-Out SECTION 2.05(a)
Earn-Out Payment Date SECTION 2.05(a)
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Earn-Out Statement SECTION 2.05(a)
Earn-Out Year SECTION 2.05(b)
Effective Time SECTION 1.02
Employee Benefit Plans SECTION 3.11(b)
Entrusted Funds SECTION 3.13
Exchange Ratio SECTION 2.01(a)
Expenses SECTION 9.03(b)
Final Statements SECTION 3.07(b)
Hazardous Substance SECTION 3.19(g)
Health Care Products SECTION 7.11(a)
HealthSpring Merger SECTION 2.07(a)
HealthSpring Stockholders SECTION 7.17
Indemnified Parties SECTION 10.04
Indemnifying Party SECTION 10.04
Indemnitees SECTION 7.06(a)
Initial Company Earnings
Statement SECTION 2.03(a)
Insurance Policies SECTION 3.17
Investment SECTION 3.07(h)
Leased Premises SECTION 7.14(b)
Liaison Committee SECTION 7.19(c)
Litigation SECTION 7.20
Losses SECTION 10.02(a)
Marks and Rights SECTION 3.15
Medical Waste Laws SECTION 3.19(i)
Merger PREAMBLE
Merger Consideration SECTION 2.01(a)
MetLife PREAMBLE
MetLife Business SECTION 3.07(b)
MetLife Statements SECTION 3.07(b)
MetraHealth Business SECTION 3.07(b)
Notifying Party SECTION 10.04
Opening Balance Sheet SECTION 3.07(b)
Operating Software SECTION 7.16(a)
Payment Date SECTION 9.03(c)
Pension Plan SECTION 3.11(d)
Petitioner SECTION 12.01(b)
Preferred Conversion Price SECTION 2.04
qualified stock options SECTION 2.07(b)
Quarterly Statements SECTION 3.07(b)
Real Property SECTION 3.19(a)
Registration Agreement SECTION 8.01(d)
Release SECTION 3.19(g)
Replacement Welfare Benefit Plan SECTION 7.21(b)
Respondent SECTION 12.01(b)
Restricted Company Shares SECTION 2.07(a)
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SAP SECTION 3.07(c)
SAP Statements SECTION 3.07(c)
Savings Plan SECTION 7.21(a)
Second Company Earnings
Statements SECTION 2.03(b)
Selection Criteria SECTION 7.11(b)
Severance Costs SECTION 7.14(a)
Significant Agents SECTION 3.14(a)
Stockholder Disclosure Schedule ARTICLE IV PREAMBLE
Stockholder Indemnified Parties SECTION 10.03(a)
Stockholders PREAMBLE
Straddle Period Returns SECTION 7.15(c)
Successor Plan SECTION 7.21(c)
Surviving Corporation SECTION 1.01
Tax Claim Notice SECTION 10.07(a)
Transfer Date SECTION 7.21(a)
Travelers Business SECTION 3.07(b)
Travelers Pension Plan SECTION 7.21(d)
Travelers Statements SECTION 3.07(b)
WARN SECTION 3.11(i)
Welfare Plan SECTION 3.11(d)
ARTICLE XII
GENERAL PROVISIONS
------------------
SECTION 12.01 Arbitration.
(a) Any dispute, controversy or claim arising out of or relating to
this Agreement or the agreements contemplated by this Agreement, the breach
hereof or thereof, or coverage of this arbitration provision which is not
settled by Acquiror and the Company or the Stockholders, other than disputes,
controversies or claims involving third party claims which have not been
settled, resolved or otherwise disposed of, shall be resolved by arbitration
conducted in accordance with this Section 12.01. In such cases the disputing
parties will submit their differences to a panel of three arbiters: one to be
selected by each disputing party and the third to be selected by the arbiters
named by the disputing parties. In the event of disagreement among the
arbiters, the decision will rest with the majority. The arbiters will make
their award with a view to effecting the intent of the parties; provided that
the arbiters shall have no authority to award punitive or exemplary damages or
to vary or ignore (but may interpret or construe) the terms of this Agreement or
the other agreements contemplated by this Agreement, and the arbiters shall be
bound by controlling laws and legal precedent. Each arbiter shall be a present
or former officer of a corporation engaged in a business similar to the
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Health Care Benefits Business, but not of any party or their affiliates, or
other person experienced in the Health Care Benefits Business.
(b) Arbitration may be initiated by Acquiror or by the Company or the
Stockholders (the initiating party is referred to as the "Petitioner") by
written notice to the other party or parties demanding arbitration and naming
its arbiter. The other party or parties (collectively, the "Respondent') shall
have 20 days after receipt of said notice within which to designate its arbiter.
The third arbiter shall be chosen by the two arbiters named by the Respondent
and the Petitioner within 20 days thereafter and the arbitration shall be held
at the place hereinafter set forth ten days after the appointment of the third
arbiter. Should the two arbiters not be able to agree on the choice of the
third, each arbiter shall nominate three persons of whom the other shall reject
two. The third arbiter shall then be chosen by drawing lots. If the Respondent
does not name its arbiter within 20 days, the Petitioner may designate the
second arbiter. Arbitration shall take place in Hartford, Connecticut.
(c) The arbiters shall apply the Commercial Arbitration Rules of the
American Arbitration Association, except as may otherwise be agreed and
stipulated by all of the disputing parties prior to commencement of any
arbitration. The arbiters shall conduct the arbitration so that a final result,
determination, finding, judgment and/or award is made or rendered as soon as
practicable, but in no event later than 90 days after the third arbiter is
chosen. The arbiters shall render their decision with 15 days of completion of
the arbitration. The decision of the majority of the arbiters shall be binding
upon the parties without appeal and may be entered as a judgment in any court of
competent jurisdiction. If injunctive or other equitable relief is permitted
under this Agreement or otherwise permissible under applicable law, either the
arbiters or a court of competent jurisdiction (if an arbitration panel cannot be
timely convened or is otherwise unavailable) shall be empowered to grant such
injunctive or other equitable relief on a permanent, preliminary or temporary
basis, as appropriate under the circumstances. The parties hereby irrevocably
consent and submit to the jurisdiction of the courts of the State of Connecticut
for all purposes relative to any arbitration and to any subsequent entry of
judgment on any decision rendered pursuant thereto. The Petitioner and the
Respondent each shall pay its own attorneys' and witnesses' fees and expenses
and other expenses connected with the presentation of its case. The remaining
costs of any arbitration, including the cost of the record or transcripts
thereof, if any, administrative fees and other fees and expenses of the arbiters
shall be shared equally between the Petitioner and the Respondent.
SECTION 12.02 Notices. All notices and other communications given
or made pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given or made as of the date delivered, mailed or transmitted,
and shall be effective upon receipt, if delivered personally, sent by reputable
overnight express courier, charges prepaid, to the Stockholders at their
addresses set forth on the Schedule of Stockholders, to MetLife at the address
of MHH set forth on the Schedule of Stockholders, and to the other parties at
the following addresses (or at
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such other address for a party as shall be specified by like changes of address)
or sent by electronic transmission to the telecopier number specified below:
(a) If to Acquiror or Acquiror Sub:
United HealthCare Corporation
9900 Bren Road East
Minnetonka, Minnesota 55343
Telecopier No.: (612) 936-1745
Attention: General Counsel
With a copy to:
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
Telecopier No.: (612) 340-8738
Attention: David J. Lubben, Esq.
(b) If to the Company:
The MetraHealth Companies, Inc.
2000 Corporate Ridge
10th Floor, Suite 1000
McLean, VA 22102
Telecopier No.: (203) 918-4298
Attention: Chief Executive Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 735-2001
Attention: Kenneth J. Bialkin, Esq.
SECTION 12.03 Amendment. This Agreement may be amended by the
parties 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 adoption
of this Agreement by the stockholders of the Company, no amendment may be made
without further approval of such stockholders which would reduce the amount or
change the type of consideration into which each share of Company Common Stock
shall be converted pursuant to this Agreement upon consummation of the Merger.
This Agreement may not be amended except by an instrument in writing signed by
the parties.
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SECTION 12.04 Waiver. At any time prior to the Effective Time, any
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement and (c) waive compliance by
the other party with any of the agreements or conditions contained in this
Agreement. 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 12.05 Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 12.06 Severability. If any term or other provision of this
Agreement is finally adjudicated by a court of competent jurisdiction to be
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 so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 12.07 Entire Agreement. This Agreement (together with the
Exhibits, the Company, Acquiror and Stockholder Disclosure Schedules and the
other documents delivered pursuant hereto), constitutes the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof.
SECTION 12.08 Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 12.09 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party, and nothing in this
Agreement, express or implied, other than the right to receive the consideration
payable in the Merger pursuant to Article II, is intended to or shall confer
upon any other person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
SECTION 12.10 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the Laws of the State of Delaware, regardless
of the Laws that might otherwise govern under applicable principles of
conflicts of law.
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SECTION 12.11 Best Efforts. No reference in this Agreement to "best
efforts" shall require a person obligated to use its best efforts to incur
unreasonable out-of-pocket expenses, to incur indebtedness or, except as
expressly provided herein, to institute litigation or to consent generally to
service of process in any jurisdiction.
SECTION 12.12 Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 12.13 Tax Treatment. Except as otherwise provided herein,
any payments made pursuant to this Agreement shall, to the extent permitted by
Law, be treated by the parties for all Tax purposes as part of or as an
adjustment to the Merger Consideration.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be executed as of the date first written above.
UNITED HEALTHCARE CORPORATION
By /s/William W. McGuire
------------------------------------
Its
-----------------------------------
MONTANA ACQUISITION, INC.
By /s/William W. McGuire
------------------------------------
Its
-----------------------------------
THE METRAHEALTH COMPANIES, INC.
By /s/K. L. Simmons
------------------------------------
Its
-----------------------------------
THE TRAVELERS INSURANCE GROUP, INC.
By /s/Jay S. Fishman
------------------------------------
Its
-----------------------------------
THE TRAVELERS INSURANCE COMPANY
By /s/Jay S. Fishman
------------------------------------
Its
-----------------------------------
<PAGE>
METLIFE HEALTHCARE HOLDINGS, INC.
By /s/John D. Moynahan
------------------------------------
Its
-----------------------------------
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/John D. Moynahan
------------------------------------
Its
-----------------------------------
<PAGE>
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER, dated as of August
29, 1995 (this "Amendment"), is by and among United Healthcare Corporation
("Acquiror"), Montana Acquisition, Inc. ("Acquiror Sub"), The MetraHealth
Companies, Inc. (the "Company"), Metropolitan Life Insurance Company
("MetLife"), The Travelers Insurance Company ("TIC"), The Travelers Insurance
Group Inc. ("TIG"), and MetLife HealthCare Holdings, Inc. ("MHH"). TIC, TIG
and MHH are referred to herein individually as a "Stockholder" and collectively
as the "Stockholders." Capitalized terms used and not otherwise defined in
this Amendment have the meanings set forth in Merger Agreement (as defined
below).
WHEREAS, Acquiror. Acquiror Sub, the Company, the Stockholders and MetLife
are parties to an Agreement and Plan of Merger, dated as of June 25, 1995 (the
"Merger Agreement"); and
WHEREAS, the parties desire to amend the Merger Agreement on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth in this Amendment, the parties agree as
follows:
1. Amendments to Merger Agreement.
(a) Section 2.01(a) of the Merger Agreement is hereby amended as follows:
(i) by deleting the word "and" at the end of clause (cc) of Section
2.01(a);
(ii) by deleting the "." at the end of clause (dd) of Section 2.01(a)
and replacing it with "; and"; and
(iii) by adding a new clause (ee) immediately following clause (dd) of
Section 2.01(a) as follows:
"(ee) each holder of Company Common Stock (other than TIC, TIG and MHH)
shall be required to make such election not later than September 28, 1995.
Prior to such date, a notice of election shall be sent by the Company to each
such holder, which notice in form and substance shall be reasonably acceptable
to the Company, Acquiror and the Stockholders. In the event Acquiror does not
receive such election from any holder on or before September 28, 1995, such
holder shall be
<PAGE>
deemed to have elected to receive all Cash Consideration and no Acquiror
Preferred Stock."
(b) The portion of Exhibit 2.03 attached to the Merger Agreement captioned
"Medical Expense and Other Benefits Accrual Adjustment ("Claims Accrual
Adjustment")" is hereby amended as follows:
(i) by adding a new Section VI. immediately following Section V. as
follows:
"VI. CERTAIN EXPLANATORY PROVISIONS
------------------------------
A. The word "corresponding" used throughout the portion of Exhibit 2.03
attached to the Merger Agreement captioned "Medical Expense and Other Benefits
Accrual Adjustment ("Claims Accrual Adjustment")" is not intended to limit the
reported medical expense, dividend/retro expense or loss adjustment expense
("LAE") to that associated specifically with dates of service in 1995 or earned
in 1995. Therefore, these amounts will continue to include any adjustments
reported in 1995 relating to medical expense, dividend/retro expense or LAE with
dates of service in or earned in years prior to 1995.
Similarly, in calculating the accrual adjustment for LAE, the completion factor
process set forth in Exhibit 2.03 to adjust LAE relative to claims with dates of
service in 1995 will also be performed regarding LAE associated with claims with
dates of service in 1994 and prior years, substituting the respective 1994 LAE
factors used by each of the Stockholders, such that any favorable or unfavorable
impact on 1995 reported LAE arising from LAE associated with claims with dates
of service in 1994 and prior years is eliminated.
B. Medical expense, dividend/retro expense and LAE, as used throughout Exhibit
2.03, will in all cases exclude the effect of adjustments, if any, to reserves
for adverse deviation, whether or not expressly noted."
2. Effect of Amendment. This Amendment amends the Merger Agreement as set
forth in Section 1 above, and the Merger Agreement, as amended hereby, shall
remain in full force and effect following execution and delivery of this
Amendment.
3. Miscellaneous.
(a) This Amendment may be amended by the parties only in the manner set
forth in the Section 12.03 of the Merger Agreement. Any provision of this
Amendment may be waived only in the manner set forth in Section 12.04 of the
Merger Agreement.
-2-
<PAGE>
(b) This Amendment shall be governed by, and construed in accordance with,
the Laws of the State of Delaware, regardless of the Laws that might otherwise
govern under applicable principles of conflicts of law.
(c) This Amendment may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to Agreement
and Plan of Merger to be executed as of the date first written above.
UNITED HEALTHCARE CORPORATION MONTANA ACQUISITION, INC.
By /s/ William W. McGuire By /s/ William W. McGuire
--------------------------- -----------------------------
Its Its
--------------------------- -----------------------------
THE TRAVELERS INSURANCE THE TRAVELERS INSURANCE
COMPANY GROUP INC.
By /s/ Jay S. Fishman By /s/ Jay S. Fishman
--------------------------- -----------------------------
Its Its
--------------------------- -----------------------------
METROPOLITAN LIFE INSURANCE METLIFE HEALTHCARE HOLDINGS,
COMPANY INC.
By /s/ John D. Moynahan By /s/ John D. Moynahan
--------------------------- -----------------------------
Its Its
--------------------------- -----------------------------
THE METRAHEALTH COMPANIES,
INC.
By /s/ K. L. Simmons
---------------------------
Its
---------------------------
