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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
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)
JULY 28, 1998
Commission file number: 0-26090
COMPDENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3185995
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 MANSELL COURT EAST, SUITE 400
ROSWELL, GEORGIA 30076
(Address of principal executive offices)
(770) 998-8936
(Registrant's telephone number, including area code)
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Item 5 - Other Events
On July 28, 1998, CompDent Corporation's ("CompDent") Board of Directors
approved the terms of a definitive merger agreement ("Merger Agreement") with a
new company formed by Golder, Thoma, Cressey, Rauner, Inc., TA Associates, Inc.
and NMS Capital Partners which will effect a re-capitalization of CompDent.
Under the Merger Agreement, CompDent will be re-capitalized and each outstanding
share of CompDent's common stock, other than certain shares held by management,
will be converted into the right to receive $18.00 in cash, and the existing
funded indebtedness of CompDent will be refinanced. Certain shares held by
management will be converted into shares of the surviving corporation and
management will maintain an equity interest in the surviving corporation. The
press release issued by CompDent in connection with the execution of the Merger
Agreement is attached hereto as Exhibit 99.1 and is incorporated herein by
reference. The Merger Agreement is attached hereto as Exhibit 2.1 and is
incorporated herein by reference.
The proposed transaction is subject to certain conditions including
approval by stockholders of CompDent holding a majority of the outstanding
shares, regulatory approval, the closing of equity and debt financing
commitments and other customary closing conditions. The transaction will be
funded by equity commitments of Golder, Thoma, Cressey, Rauner, Inc., TA
Associates, Inc. and NMS Capital Partners. NationsBank, N.A. and NationsBridge,
L.L.C. together have committed subject to certain terms and conditions, to
provide the necessary debt financing for the transaction.
Prior to the execution of the Merger Agreement, CompDent amended its
Shareholder Rights Agreement (the "Rights Agreement"). This amendment (the
"Rights Amendment") provides, among other things, that neither TAGTCR
Acquisition, Inc. ("TAGTCR"), nor any of its affiliates or associates, shall be
deemed an "Acquiring Person" (as such term is defined in the Rights Agreement),
and no "Stock Acquisition Date" or "Distribution Date" (as such terms are
defined in the Rights Agreement) shall be deemed to occur as a result of (i) the
execution and delivery of the Merger Agreement, (ii) any action taken by TAGTCR
or any of its affiliates, associates, or shareholders in accordance with the
provisions of the Merger Agreement, or (iii) the consummation of the Merger (as
such term is defined in the Merger Agreement) in accordance with the Merger
Agreement.
Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Financial Statements of Business Acquired Not Applicable
(b) Pro Forma Financial Information Not Applicable
(c) Exhibits
</TABLE>
2.1 Agreement and Plan of Merger by and between CompDent Corporation,
TAGTCR Acquisition, Inc., and the Guarantors dated as of July 28,
1998
4.1 Amendment to the Shareholder Rights Agreement between CompDent
Corporation, TAGTCR Acquisition, Inc., and the Guarantors described
therein dated as of July 28, 1998
99.1 Press release dated July 28, 1998
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SIGNATURES
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.
COMPDENT CORPORATION
Date: August 12, 1998 By: /s/ Keith J. Yoder
-------------------------------------------
Keith J. Yoder
Chief Financial Officer and Treasurer
(Signing as duly authorized officer and
chief financial officer)
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and between
CompDent Corporation,
TAGTCR Acquisition, Inc.
and the Guarantors described herein
Dated as of July 28, 1998
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TABLE OF CONTENTS
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ARTICLE I THE MERGER............................................................................. 1
1.1 The Merger............................................................................. 1
1.2 Closing................................................................................ 1
1.3 Effective Time of the Merger........................................................... 2
1.4 Effects of the Merger.................................................................. 2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES........................................................................... 3
2.1 Effect on Capital Stock................................................................ 3
(a) Capital Stock of TAGTCR..................................................... 3
(b) Cancellation of Treasury Stock and TAGTCR-Owned
Stock....................................................................... 3
2.2 Conversion of Securities............................................................... 3
2.3 Payment for Shares..................................................................... 4
(a) Paying Agent................................................................ 4
(b) Payment Procedures.......................................................... 5
(c) Termination of Payment Fund; Interest....................................... 5
(d) No Liability................................................................ 6
(e) Withholding Rights.......................................................... 6
2.4 Stock Transfer Books................................................................... 6
2.5 Stock Options.......................................................................... 6
2.6 Dissenting Shares...................................................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES......................................................... 7
3.1 Representations and Warranties of the Company.......................................... 7
(a) Organization, Standing and Power............................................ 7
(b) Capital Structure........................................................... 8
(c) Authority; No Violations; Consents and Approvals............................ 9
(d) SEC Documents............................................................... 11
(e) Information Supplied........................................................ 12
(f) Regulated Subsidiaries...................................................... 12
(g) Compliance with Applicable Laws............................................. 13
(h) Litigation.................................................................. 13
(i) Taxes....................................................................... 13
(j) Pension and Benefit Plans; ERISA............................................ 15
(k) Absence of Certain Changes or Events........................................ 17
(l) No Undisclosed Material Liabilities......................................... 17
(m) Vote Required............................................................... 17
(n) Labor Matters............................................................... 17
(o) Intellectual Property....................................................... 18
</TABLE>
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(p) Environmental Matters....................................................... 19
(q) Insurance................................................................... 21
(r) DHDC Financial Statements................................................... 21
(s) Board of Directors Recommendation........................................... 22
(t) Material Contracts.......................................................... 22
(u) Fairness Opinion............................................................ 22
(v) Regulatory Filings.......................................................... 22
(w) State Takeover Laws......................................................... 23
3.2 Representations and Warranties of TAGTCR............................................... 23
(a) Organization, Standing and Power............................................ 23
(b) Authority; No Violations; Consents and Approvals............................ 23
(c) Information Supplied........................................................ 24
(d) Board of Directors Recommendation........................................... 24
(e) Delaware Law................................................................ 25
3.3 Representations and Warranties of the Guarantors....................................... 25
(a) Organization, Standing and Power............................................ 25
(b) Authority; No Violations; Consents and Approvals............................ 25
(c) Information Supplied........................................................ 26
(d) Bridge Loan and Financing Commitment........................................ 26
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.............................................. 27
4.1 Covenants of the Company............................................................... 27
(a) Ordinary Course............................................................. 27
(b) Dividends; Changes in Stock................................................. 27
(c) Issuance of Securities...................................................... 28
(d) Governing Documents......................................................... 28
(e) No Solicitation............................................................. 28
(f) No Acquisitions............................................................. 29
(g) No Dispositions............................................................. 29
(h) Governmental Filings........................................................ 29
(i) No Dissolution, Etc......................................................... 29
(j) Other Actions............................................................... 29
(k) Certain Employee Matters.................................................... 29
(l) Indebtedness; Agreements.................................................... 30
(m) Accounting.................................................................. 30
(n) Capital Expenditures........................................................ 30
(o) Insurance................................................................... 30
(p) Hedging..................................................................... 30
(q) Transfer of Interest in DHDC and DHMI....................................... 31
4.2 Covenants of TAGTCR.................................................................... 31
</TABLE>
(ii)
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ARTICLE V ADDITIONAL AGREEMENTS.................................................................. 32
5.1 Preparation of the Proxy Statement; Company Stockholders
Meeting................................................................................ 32
5.2 Access to Information.................................................................. 33
5.3 Broker and Finders..................................................................... 33
5.4 Indemnification; Directors' and Officers' Insurance.................................... 34
5.5 Efforts and Actions.................................................................... 35
5.6 Publicity.............................................................................. 35
5.7 Notice of Certain Events............................................................... 35
5.8 State Takeover Laws.................................................................... 36
ARTICLE VI CONDITIONS PRECEDENT................................................................... 36
6.1 Conditions to Each Party's Obligation to Effect the Merger............................. 36
(a) Stockholder Approval........................................................ 36
(b) HSR Act..................................................................... 36
(c) Governmental Consents....................................................... 36
6.2 Conditions of Obligations of TAGTCR and the Guarantors................................. 36
(a) No Material Adverse Effect.................................................. 36
(b) Representations and Warranties.............................................. 36
(c) Performance of Obligations of the Company................................... 37
(d) Financing................................................................... 37
(e) No Injunctions or Restraints................................................ 37
6.3 Conditions of Obligations of the Company............................................... 37
(a) Representations and Warranties of TAGTCR.................................... 37
(b) Representations and Warranties of the Guarantors............................ 38
(c) Performance of Obligations of TAGTCR........................................ 38
(d) Performance of Obligations of the Guarantors................................ 38
(e) No Injunctions or Restraints................................................ 38
ARTICLE VII TERMINATION AND AMENDMENT.............................................................. 38
7.1 Termination............................................................................ 38
7.2 Effect of Termination.................................................................. 39
7.3 Payment of Fees and Expenses........................................................... 40
ARTICLE VIII GENERAL PROVISIONS..................................................................... 41
8.1 Nonsurvival of Representations, Warranties and Agreements.............................. 41
8.2 Notices................................................................................ 41
8.3 Interpretation......................................................................... 42
8.4 Counterparts........................................................................... 43
8.5 Entire Agreement; Third Party Beneficiaries............................................ 43
8.6 GOVERNING LAW.......................................................................... 43
8.7 Assignment............................................................................. 43
8.8 Amendment.............................................................................. 43
</TABLE>
(iii)
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8.9 Extension; Waiver.................................................................... 44
8.10 Severability......................................................................... 44
8.11 Enforcement of Agreement............................................................. 44
8.12 Guarantors........................................................................... 44
8.13 Disclosure Letters................................................................... 45
</TABLE>
(iv)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 28, 1998 (this
"Agreement"), is made and entered into by and among TAGTCR Acquisition, Inc., a
Delaware corporation ("TAGTCR"), NMS Capital, L.P. ("NMS"), Golder, Thoma,
Cressey, Rauner Fund V, L.P. ("GTCR"), TA/Advent VIII L.P. ("TA" and together
with NMS and GTCR, herein referred to as the "Guarantors"), and CompDent
Corporation, a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of TAGTCR and the Company
have approved the merger of TAGTCR with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Merger and this Agreement require the vote of a majority
of the issued and outstanding shares of common stock, par value $.01 per share
of the Company (the "Company Common Stock");
WHEREAS, TAGTCR and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the consummation thereof;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law, as amended (the "DGCL"), TAGTCR shall be merged with and into
the Company at the Effective Time as set forth in Section 1.3. At the Effective
Time, the separate corporate existence of TAGTCR shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation"), and
shall continue under the name "CompDent Corporation."
1.2 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") shall take place
at 10:00 a.m., Eastern time, on the thirtieth business day after satisfaction
and/or waiver of all of the conditions set forth in Article VI (the "Closing
Date"), at the offices of McDermott, Will & Emery, New York, New York, unless
another date, time or place is agreed to in writing by the parties hereto.
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1.3 Effective Time of the Merger. Subject to the provisions of
this Agreement, the parties hereto shall cause the Merger to be consummated by
filing a duly executed certificate of merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware, as provided in the DGCL, on
the Closing Date, and the parties shall take such other and further actions as
may be required by law to make the Merger effective. The Merger shall become
effective as of the time of the filing of the Certificate of Merger (the
"Effective Time").
1.4 Effects of the Merger.
(a) The Merger shall have the effects as set forth in
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers, and franchises of the Company and TAGTCR shall vest
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and TAGTCR shall become the debts, liabilities and duties of the
Surviving Corporation.
(b) The directors of TAGTCR and the officers of the
Company immediately prior to the Effective Time shall, from and after the
Effective Time, be the initial directors and officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified, or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws and
the DGCL.
(c) The Certificate of Incorporation of the Company
shall be amended and restated in its entirety as set forth in an exhibit to be
provided by TAGTCR to the Company at least one (1) business day prior to the
mailing of the Proxy Statement (as defined below) and such exhibit shall be
deemed an amendment to this Agreement and incorporated herein, and, from and
after the Effective Time, such amended and restated Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL; provided, however, that if such exhibit is not provided on a timely
basis, the Certificate of Incorporation of the Company shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by applicable law.
(d) The Bylaws of the Company shall be amended and
restated in their entirety as set forth in an exhibit to be provided by TAGTCR
to the Company at least one (1) day prior to the mailing of the Proxy Statement
(as defined below) and such exhibit shall be deemed an amendment to this
Agreement and incorporated herein, and, from and after the Effective Time, such
amended and restated Bylaws shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by applicable law, the Certificate of
Incorporation or the Bylaws; provided, however, that if such exhibit is not
provided on a timely basis, the Bylaws of the Company shall be the Bylaws of
the Surviving Corporation until thereafter amended as provided by applicable
law.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of shares of
Company Common Stock or any holder of shares of capital stock of TAGTCR:
(a) Capital Stock of TAGTCR. Each share of the common
stock of TAGTCR issued and outstanding immediately prior to the Effective Time
shall be converted into and become one fully paid and nonassessable share of
Common Stock, par value $0.01 per share, of the Surviving Corporation and each
share of Class A Preferred Stock of TAGTCR issued and outstanding immediately
prior to the Effective Time shall be converted into and become one share of
Class A Preferred Stock of the Surviving Corporation with all of the rights and
privileges set forth in the Certificate of Incorporation of Surviving
Corporation in accordance with Section 1.4(c).
(b) Cancellation of Treasury Stock and TAGTCR-Owned
Stock. Each share of Company Common Stock and all other shares of capital stock
of the Company that are owned by the Company or any of its Subsidiaries (as
defined below) and all shares of Company Common Stock and other shares of
capital stock of the Company owned by TAGTCR shall be cancelled and retired and
shall cease to exist and no consideration shall be delivered or deliverable in
exchange therefor.
2.2 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of TAGTCR, the Company or the
holders of any of the shares thereof:
(a)(i) Subject to the other provisions of this Section
2.2, each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (excluding shares owned by the Company or any of
its Subsidiaries (as defined below) or by TAGTCR and Recapitalization Shares
(as defined below) and Dissenting Shares (as defined in Section 2.6)) shall be
converted into the right to receive $18.00 per share, net to the seller in
cash, payable to the holder thereof, without any interest thereon (the "Merger
Consideration"), upon surrender and exchange of the Certificate (as defined in
Section 2.3(b)) representing such share of Company Common Stock.
(ii) All such shares of Company Common Stock, when
converted as provided in Section 2.2(a)(i) (the "Shares"), no longer shall be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each Certificate previously evidencing such Shares shall thereafter
represent only the right to receive the Merger Consideration. The holders of
Certificates previously evidencing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to the Company
Common Stock except as otherwise provided herein or by law and, upon the
surrender of Certificates in accordance with the provisions of Section 2.3,
shall only
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represent the right to receive for their Shares, the Merger Consideration,
without any interest thereon.
(iii) Each share of Company Common Stock identified on
Schedule 2.2(a)(iii) (a "2.2(a)(iii) Recapitalization Share"), as supplemented
from time to time at least one (1) business day prior to the mailing of the
Proxy Statement by TAGTCR, shall be converted into 1.975 fully paid and
nonassessable shares of Common Stock, par value $0.01 per share, of the
Surviving Corporation and a fully paid and nonassessable fraction of a share of
Class A Preferred Stock equal to $17.0125 divided by the stated value of each
share of Class A Preferred Stock.
(iv) Each share of Company Common Stock identified on
Schedule 2.2(a)(iv) (a "2.2(a)(iv) Recapitalization Share" and together with
the 2.2(a)(iii) Recapitalization Shares, the "Recapitalization Shares"), as
supplemented from time to time at least one (1) business day prior to the
mailing of the Proxy Statement by TAGTCR, shall be converted into a fully paid
and nonassessable fraction of a share of Class A Preferred Stock equal to
$18.00 divided by the stated value of each share of Class A Preferred Stock.
2.3 Payment for Shares.
(a) Paying Agent. Prior to the Effective Time, TAGTCR
shall appoint a bank or trust company reasonably acceptable to the Company to
act as paying agent (the "Paying Agent") for the payment of the Merger
Consideration, and TAGTCR shall deposit or shall cause to be deposited with the
Paying Agent in a separate fund established for the benefit of the holders of
shares of Company Common Stock, for payment in accordance with this Article II,
through the Paying Agent (the "Payment Fund"), immediately available funds in
amounts necessary to make the payments pursuant to Section 2.2(a)(i) and this
Section 2.3 to holders of shares of Company Common Stock (other than the
Company or TAGTCR or holders of Dissenting Shares). The Paying Agent shall,
pursuant to irrevocable instructions, pay the Merger Consideration out of the
Payment Fund.
The Paying Agent shall invest portions of the Payment Fund as TAGTCR
directs in obligations of or guaranteed by the United States of America, in
commercial paper obligations receiving the highest investment grade rating from
both Moody's Investors Services, Inc. and Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1,000,000,000 (collectively,
"Permitted Investments"); provided, however, that the maturities of Permitted
Investments shall be such as to permit the Paying Agent to make prompt payment
to former holders of Company Common Stock entitled thereto as contemplated by
this Section 2.3. The Surviving Corporation shall cause the Payment Fund to be
promptly replenished to the extent of any losses incurred as a result of
Permitted Investments. All earnings on Permitted Investments shall be paid to
the Surviving Corporation. If for any reason (including losses) the Payment
Fund is inadequate to pay the amounts to which holders of shares of Company
Common Stock shall be entitled under this Section 2.3, the Surviving
Corporation shall in any event be liable for payment thereof. The
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Payment Fund shall not be used for any purpose except as expressly provided in
this Agreement.
(b) Payment Procedures. As soon as reasonably
practicable after the Effective Time, the Surviving Corporation shall instruct
the Paying Agent to mail to each holder of record (other than the Company or
TAGTCR) of a certificate or certificates which, immediately prior to the
Effective Time, evidenced outstanding shares of Company Common Stock (the
"Certificates"), (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Paying Agent,
and shall be in such form and have such other provisions as the Surviving
Corporation reasonably may specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for payment therefor. Upon
surrender of a Certificate for cancellation to the Paying Agent together with
such letter of transmittal, duly executed, and such other customary documents
as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in respect thereof cash in an amount
equal to the product of (x) the number of shares of Company Common Stock
represented by such Certificate and (y) the Merger Consideration, and the
Certificate so surrendered shall forthwith be cancelled. No interest shall be
paid or accrued on the Merger Consideration payable upon the surrender of any
Certificate. If payment is to be made to a person other than the person in
whose name the surrendered Certificate is registered, it shall be a condition
of payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the surrendered Certificate or
established to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.3(b), each Certificate (other than Certificates
representing Shares owned by the Company or TAGTCR or the Dissenting Shares),
shall represent for all purposes only the right to receive the Merger
Consideration. In the event that any Certificate shall have been lost, stolen
or destroyed, the Paying Agent will pay in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration deliverable in respect thereof
pursuant to this Agreement upon the delivery of a duly executed affidavit of
that fact by the holder claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, reasonable
indemnification against any claim that may be made against the Surviving
Corporation with respect to such Certificate.
(c) Termination of Payment Fund; Interest. Any
portion of the Payment Fund which remains undistributed to the holders of
Company Common Stock for six months after the Effective Time shall be delivered
to the Surviving Corporation upon demand, and any holders of Company Common
Stock who have not theretofore complied with this Article II and the
instructions set forth in the letter of transmittal mailed to such holder after
the Effective Time shall thereafter look only to the Surviving Corporation for
payment of the Merger Consideration to which they are entitled. All interest
accrued in respect of the Payment Fund shall inure to the benefit of and be
paid to the Surviving Corporation.
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(d) No Liability. Neither the Surviving Corporation
nor the Paying Agent shall be liable to any holder of shares of Company Common
Stock for any cash from the Payment Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) Withholding Rights. The Surviving Corporation
shall be entitled to deduct and withhold from the corporation otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as the Surviving Corporation is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by the Surviving Corporation, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation.
2.4 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 transfer of shares of Company Common Stock thereafter on the
records of the Company. On or after the Effective Time, any certificates
presented to the Surviving Corporation or the Paying Agent for any reason shall
be converted into the Merger Consideration.
2.5 Stock Options. At the Effective Time, each holder of a then
outstanding option to purchase shares of Company Common Stock under any
outstanding stock option plan or arrangement, including any outstanding stock
option plan or arrangement which immediately prior to the Effective Time is
then exercisable (a "Vested Option"), including the Company's Directors' Stock
Option Plan, 1994 Stock Option and Grant Plan, as amended, 1997 Stock Option
Plan (collectively, the "Option Plans") and those certain stock option
agreements described in the Disclosure Schedule (as defined in Section 3.1,
each an "Option" and collectively, the "Options"), but excluding those certain
other stock option agreements described in the Disclosure Schedule (the
"Excluded Options"), shall, in settlement thereof, receive for each share of
Company Common Stock subject to such Option an amount (subject to any
applicable withholding tax) in cash equal to the excess of the Merger
Consideration over the per share exercise price of such Option to the extent
such difference is a positive number (such amount being hereinafter referred to
as the "Option Consideration"). Upon receipt of the Option Consideration, each
Option shall be cancelled in accordance with its terms or the terms of the
applicable Option Plan. All Options which are not Vested Options shall be
cancelled in accordance with their terms or the applicable Option Plan. The
surrender of an Option to the Company in exchange for the Option Consideration
shall be deemed a release of any and all rights the holder had or may have had
in respect of such Option. Prior the Effective Time, the Company shall use its
reasonable best efforts to obtain all necessary consents or releases from
holders of Options and take all such other lawful action as may be necessary to
give effect to the transactions contemplated by this Section 2.5. All Option
Plans and option agreements executed pursuant thereto, other than the Excluded
Options (an "Option Agreement"), shall terminate as of the Effective Time and
the provisions in any other plan, program or arrangement providing for the
issuance or
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grant of any other interest in respect of the capital stock of the Company or
any Subsidiary thereof shall be cancelled as of the Effective Time. The Company
shall use its reasonable best efforts to ensure that following the Effective
Time no participant in or under any Option Agreement, Option Plan or other
plans, programs or arrangements shall have any right thereunder to acquire
equity securities of the Company, the Surviving Corporation or any Subsidiary
thereof and to terminate all such Option Agreements, Option Plans and other
plans, programs and arrangements. Upon the execution and delivery of this
Agreement, the Company will suspend, terminate, or refrain from renewing the
Company's Employee Stock Purchase Plan ("ESPP") until the termination of this
Agreement.
2.6 Dissenting Shares. Notwithstanding any other provisions of
this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal
for such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders instead shall be entitled
to receive payment of the appraised value of such shares of Company Common
Stock held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares of Company Common Stock under such Section 262 shall
thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration upon surrender in the manner
provided in Section 2.3 of the Certificate or Certificates that, immediately
prior to the Effective Time, evidenced such shares of Company Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. With such
exceptions as are specifically set forth in a letter (the "Disclosure
Schedule") delivered by the Company to TAGTCR prior to the date of this
Agreement, the Company represents and warrants to TAGTCR as follows:
(a) Organization, Standing and Power. Each of the
Company, its Subsidiaries, and Dental Health Development Corporation, a
Delaware corporation ("DHDC"), is a corporation duly organized, validly
existing, and in good standing under the laws of its respective jurisdiction of
incorporation, has all requisite corporate power and authority to own, lease,
and operate its properties and to carry on its business as now being conducted,
and is duly qualified or licensed to do business as a foreign corporation and
in good standing to conduct business in each jurisdiction in which the conduct
of its business, or the operation, ownership or leasing of its properties,
makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to so qualify or become so
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licensed will not have, individually or in the aggregate, a Material Adverse
Effect (as described below) on the Company. The Company has heretofore made
available to TAGTCR true and complete copies of its, its Subsidiaries' and
DHDC's respective Certificates of Incorporation and Bylaws or comparable
organizational documents. DHDC and all Subsidiaries of the Company and their
respective jurisdictions of incorporation or organization are identified in
Section 3.1(a) of the Disclosure Schedule which is attached hereto and
incorporated herein. As used in this Agreement, the term "Material Adverse
Effect" shall mean, with respect to a specified Person, the result of one or
more events, changes or effects which, individually or in the aggregate, would
have a material adverse effect on the business, results of operations, assets,
liabilities (fixed or contingent), or financial condition of such Person and
its Subsidiaries, taken as a whole. As used in this Agreement, the word
"Subsidiary", with respect to any party, means any corporation, partnership,
joint venture or other organization, whether incorporated or unincorporated, of
which: (i) such party or any other Subsidiary of such party is a general
partner; (ii) voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation,
partnership, joint venture or other organization is held by such party or by
any one or more of its Subsidiaries, or by such party and any one or more of
its Subsidiaries; or (iii) at least 25% of the equity, other securities or
other interests is, directly or indirectly, owned or controlled by such party
or by any one or more of its Subsidiaries, or by such party and any one or more
of its Subsidiaries. As used in this Agreement, "Person" means any individual,
corporation, partnership, joint venture, association, trust or unincorporated
organization.
(b) Capital Structure. As of the date hereof,
the authorized capital stock of the Company consists of 50,000,000 shares of
Company Common Stock and 2,000,000 shares of preferred stock, $0.01 par value
("Preferred Stock"). At the close of business on the date of this Agreement:
(i) 10,112,629 shares of Company Common Stock were issued and outstanding; (ii)
no shares of Preferred Stock were issued and outstanding; (iii) 2,000,000
shares of Preferred Stock were reserved for issuance under the Shareholder
Rights Agreement between the Company and State Street Bank and Trust Company
(the "Rights Agreement"); (iv) 960,000 shares of Company Common Stock were
reserved for issuance pursuant to the Option Plans of which 694,500 shares of
Company Common Stock are subject to outstanding Options; (v) 438,500 shares of
Company Common Stock were reserved for issuance pursuant to Option Agreements
(other than Option Agreements under Option Plans); (vii) except for the
issuance of shares of Company Common Stock pursuant to the exercise of the
Options and agreements relating to the initial capitalization of DHDC, there
are no employment, executive termination or other agreements providing for the
issuance of shares of Company Common Stock; (vii) no shares of Company Common
Stock were held by the Company; and (ix) no bonds, debentures, notes or other
instruments or evidence of indebtedness having the right to vote (or
convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matters on which the Company's stockholders may vote
("Company Voting Debt") were issued or outstanding. All outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid, and
nonassessable and are not subject to preemptive or other similar rights. No
shares of Company Common Stock are owned by DHDC or any Subsidiary of the
Company. All
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outstanding shares of capital stock of DHDC and the Subsidiaries of the Company
are duly authorized, validly issued, fully paid and nonassessable and
(excluding the capital stock of DHDC) are owned by the Company or a direct or
indirect Subsidiary free and clear of all liens, charges, claims or
encumbrances of any nature ("Liens"). At the close of business on the date of
this Agreement, DHDC had (i) 84,000 shares of Class A Common Stock outstanding,
(ii) 13,000 shares of Class B Common Stock outstanding, (iii) 10,000 shares of
Class A Preferred Stock outstanding, and (iv) 150 shares of Class B Preferred
Stock outstanding, of which the Company owns beneficially and of record 150
shares of Series B Preferred Stock. Except (i) as set forth in this Section
3.1(b), (ii) for the rights under the Rights Agreement, (iii) for the issuance
of shares of Company Common Stock under the ESPP with respect to purchase
requests made prior to the date hereof, (iv) for the agreements entered into in
connection with the initial capitalization of DHDC, and (v) for changes
resulting from the exercise of Options or as contemplated by this Agreement,
there are outstanding: (A) no shares of capital stock, Company Voting Debt or
other voting securities of the Company, (B) no securities of the Company, DHDC
or any Subsidiary of the Company convertible into, or exchangeable or
exercisable for shares of capital stock, Company Voting Debt or other voting
securities of the Company, DHDC, or any Subsidiary of the Company, and (C) no
options, warrants, calls, subscriptions, or other rights, (including preemptive
rights), commitments or agreements to which the Company, DHDC or any Subsidiary
of the Company is a party or by which it is bound, to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Company Voting
Debt or other voting securities of the Company, DHDC or any Subsidiary of the
Company, or obligating the Company, DHDC or any Subsidiary of the Company to
grant, extend, or enter into any such option, warrant, call, subscription, or
other right, commitment or agreement. Set forth in Section 3.1(b) of the
Disclosure Schedule is a true and complete list of all outstanding options,
warrants and rights to purchase shares of Company Common Stock and the exercise
prices relating thereto. There are not as of the date hereof and there will not
be at the Effective Time any stockholder agreements, voting trusts, or other
agreements to which the Company is a party or by which it is bound relating to
the voting of any shares of the capital stock of the Company which will limit
in any way the solicitation of proxies by or on behalf of the Company from, or
the casting of votes by, the stockholders of the Company with respect to the
Merger. The Company is not a party to any agreement that restricts the
Company's voting of the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and
Approvals.
(i) The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to the approval
of this Agreement and the Merger by the holders of a majority of the
outstanding shares of Company Common Stock (the "Company Stockholder
Approval"), to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Company's Board of
Directors and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the Company
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Stockholder Approval). This Agreement has been duly executed and delivered by
the Company and, subject to the Company Stockholder Approval and (assuming that
this Agreement is duly executed and delivered by TAGTCR) constitutes a valid
and binding obligation of the Company enforceable in accordance with its terms
except that the enforcement hereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(ii) The execution and delivery of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby by the Company, following the satisfaction or waiver of the conditions
set forth in Article VI, will not: (A) violate any provision of the Certificate
of Incorporation or Bylaws of the Company, any of its Subsidiaries or DHDC, (B)
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under; give rise to a right of termination,
cancellation or acceleration (including pursuant to any put right) of any
obligation; or result in the creation of a Lien or right of first refusal with
respect to any asset or property (any such conflict, violation, default, right
of termination, cancellation or acceleration, loss, creation or right of first
refusal, a "Violation") pursuant to any loan or credit agreement, note,
mortgage, deed of trust, indenture, lease, Company Employee Benefit Plan (as
defined in Section 3.1(j)), Company Permit (as defined in Section 3.1(g)), or
any other agreement, obligation, instrument, concession, franchise or license,
or (C) any judgment, order, decree, law, statute, rule or regulation of any
public body or authority applicable to the Company or any of its Subsidiaries,
or DHDC, or their respective properties or assets; provided, however, that no
representation or warranty is made in the foregoing clauses (B) and (C) with
respect to matters that, individually or in the aggregate, will not have a
Material Adverse Effect on the Company or materially delay the ability of such
Person to consummate the transactions contemplated by this Agreement. The Board
of Directors of the Company has taken all actions necessary under the DGCL,
including approving the transactions contemplated by this Agreement, to ensure
that Section 203 of the DGCL does not, and will not, apply to the transactions
contemplated in this Agreement.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, notice to or permit from any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") is required by
or with respect to the Company or any of its Subsidiaries or DHDC in connection
with the execution and delivery of this Agreement by the Company or the
consummation by the Company of the Merger and the other transactions
contemplated hereby the failure to obtain which will, individually or in the
aggregate, have a Material Adverse Effect on the Company or materially delay
the ability of such Person to consummate the transactions contemplated by this
Agreement, except for: (A) the filing of a pre-merger notification and report
form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the expiration or termination of the
applicable waiting period thereunder; (B) the filing with the Securities and
Exchange Commission (the "SEC") of (x) a proxy statement in definitive form
relating to a
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meeting of the holders of Company Common Stock to approve this Agreement and
the Merger (such proxy statement as amended or supplemented from time to time
being hereinafter referred to as the "Proxy Statement"), and (y) such reports
under and such other compliance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and regulations thereunder as may be
required in connection with this Agreement and the transactions contemplated
hereby; (C) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware; (D) such filings and approvals as may be required by
any applicable state securities, "blue sky" or takeover laws; (E) the filing of
a Form A Statement Regarding the Acquisition of Control of a Domestic Insurer
with the Arizona and Texas Departments of Insurance and the approval thereof by
the Arizona and Texas Directors of Insurance, (F) the approval of this
Agreement and the Merger pursuant to applicable laws governing dental referral
plans, dental service corporations, health insurance organizations, life,
accident, health and/or disability insurance organizations, limited service
health maintenance organizations, prepaid dental plans, preferred provider
administrators, third party administrators, health maintenance organizations,
limited health service organizations, insurance holding companies and other
product, program or service of the Company and its Subsidiaries (collectively
"Dental Products") that is subject to regulation under the insurance laws of
any state in which the Company or its Subsidiaries do business; (G) approval of
transfer of ownership of any Dental Product of the Company and its Subsidiaries
by the applicable Governmental Entity in any state in which such approval is
required in connection with the performance of this Agreement; and (H) the
filing of any notice of transfer of ownership or other notice relating to any
Dental Product of the Company and its Subsidiaries, in compliance with the laws
of any state in which any such filing is prepared, in connection with the
performance of this Agreement.
(iv) The Board of Directors of the Company has
taken such action to amend the Rights Agreement so that neither TAGTCR nor its
Affiliates and Associates (as such terms are defined in the Rights Agreement)
are deemed "Acquiring Persons" in connection with the Rights Agreement.
(d) SEC Documents. Since May 1, 1995, the
Company has filed all forms, reports, schedules, registration statements, proxy
statements and documents with the SEC required to be filed by it pursuant to
the Securities Act of 1933, as amended (the "Securities Act") and the Exchange
Act and the SEC rules and regulations promulgated thereunder (all such
documents filed through the date hereof collectively, the "Company SEC
Documents"). The Company has made available to TAGTCR the Company SEC
Documents. As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act, or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Documents, and none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the Company SEC Documents complied as to form in all material respects with the
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally
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accepted accounting principles ("GAAP") applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Rule 10-01 of Regulation
S-X of the SEC) and fairly present in all material respects in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments) the consolidated financial
position of the Company and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the
consolidated cash flows of the Company and its consolidated Subsidiaries for
the periods presented therein.
(e) Information Supplied.
(i) None of the information supplied or to be
supplied by the Company for inclusion or incorporated by reference in the Proxy
Statement will, on the date it is first mailed to the holders of the Company
Common Stock or at the time of the Company's Stockholders Meeting (as
hereinafter defined) contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement, insofar as it relates to the Company
or its Subsidiaries or other information supplied by the Company for inclusion
therein will comply as to form, in all material respects, with the provisions
of the Exchange Act or the rules and regulations thereunder.
(ii) None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Rule
13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") will on
the date filed with the SEC or at the time of the Company's Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Schedule 13E-3, insofar as it relates to the Company
or its Subsidiaries or other information supplied by the Company for inclusion
therein, will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations promulgated thereunder.
(f) Regulated Subsidiaries.
(i) The Company has previously made available
to TAGTCR true and complete copies of the following statutory financial
statements for each Subsidiary of the Company that is required to prepare and
file statutory financial statements;
(A) the annual statutory statements for
each such Subsidiary for each of the years ended December 31, 1996 and 1997;
and
(B) the quarterly statutory statements
for each such Subsidiary for the quarter ended March 31, 1998.
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Each such statement was prepared in accordance with the accounting practices
required or permitted by the insurance regulatory authority in the applicable
state, consistently applied.
(ii) All Dental Products of the Company and each
Subsidiary that are regulated by insurance or health care laws are, to the
extent required by applicable law, on forms and at rates approved by the
regulatory authority in the jurisdictions where issued (or have been filed with
and not objected to by such regulatory authority within the period provided for
objection), except where the failure be on such forms or at such rates will
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
(g) Compliance with Applicable Laws. The
Company, its Subsidiaries and DHDC hold all permits, licenses, variances,
exemptions, orders, franchises and approvals of all Governmental Entities
necessary to enable them to conduct their respective businesses as they are now
being conducted other than those which the failure to hold does not have a
Material Adverse Effect on the Company (the "Company Permits"); a list of
Company Permits is set forth in Section 3.1(g) of the Disclosure Schedule. The
Company, its Subsidiaries and DHDC are in compliance with the terms of the
Company Permits, except for such noncompliance that will not, individually or
in the aggregate, have a Material Adverse Effect on the Company. Except as
disclosed in the Company SEC Documents, the Company, its Subsidiaries and DHDC
are in compliance in all material respects with applicable laws, except for
such noncompliance that will not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(h) Litigation. Except as disclosed in the
Company SEC Documents, there is no suit, claim, investigation, action or
proceeding pending or, to the knowledge of the Company, threatened against the
Company, DHDC or any Subsidiary of the Company or any of their respective
assets or properties, individually or in the aggregate, which will have a
Material Adverse Effect on the Company ("Company Litigation"). There is no
judgment, writ, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company, DHDC or any Subsidiary of the
Company which, individually or in the aggregate, will have a Material Adverse
Effect on the Company ("Company Order").
(i) Taxes.
(i) All Tax Returns (as defined herein)
required to be filed by or with respect to the Company, each of its
Subsidiaries and DHDC have been duly and timely filed, and all such Tax Returns
are true, correct and complete in all material respects except where the
failure to file would not have a Material Adverse Effect on the Company. The
Company, each of its Subsidiaries and DHDC has duly and timely paid (or there
has been paid on its behalf) all Taxes (as defined herein) that are due, or
claimed or asserted by any taxing authority to be due, from or with respect to
it, except for Taxes the liability for which is being contested in good faith
or the nonpayment of which will not have a Material Adverse Effect on the
Company. With respect to any period for which Taxes are not yet due with
respect to the Company or any Subsidiary, each of the Company and its
Subsidiaries has
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made due and sufficient current accruals for such Taxes in accordance with GAAP
in the most recent financial statements contained in the Company SEC Documents.
The Company and each of its Subsidiaries has made (or there has been made on
its behalf) all required estimated tax payments sufficient to avoid any
material underpayment penalties. Each of the Company, its Subsidiaries and DHDC
has withheld and paid all Taxes required by all applicable laws to be withheld
or paid in connection with any material amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(ii) There are no outstanding agreements,
waivers or arrangements extending the statutory period of limitation applicable
to any claim for, or the period for the collection or assessment of, Taxes due
from or with respect to the Company, any of its Subsidiaries or DHDC for any
taxable period. No audit or other proceeding by any court, governmental or
regulatory authority is pending or, to the knowledge of the Company, threatened
in regard to any Taxes due from or with respect to the Company, any of its
Subsidiaries or DHDC or any Tax Return filed by or with respect to the Company,
any Subsidiaries or DHDC. No material assessment of Taxes is proposed against
the Company, any of its Subsidiaries or DHDC or any of their assets.
(iii) No election under Section 338 of the
Internal Revenue Code of 1986, as amended (the "Code") has been made or filed
by or with respect to the Company, any of its Subsidiaries or DHDC. No closing
agreement pursuant to Section 7121 of the Code (or any predecessor provision)
or any similar provision of state, local or foreign law has been entered into
by or with respect to the Company, any of its Subsidiaries or DHDC. No consent
to the application of Section 341(f)(2) of the Code (or any predecessor
provision) has been made or filed by or with respect to the Company, any of its
Subsidiaries or DHDC or any of their assets. None of the Company, any of its
Subsidiaries or DHDC is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. None of
the Company, any of its Subsidiaries or DHDC has agreed to make any adjustment
pursuant to Section 481(a) of the Code (or any predecessor provision) by reason
of any change in any accounting method, and there is no application pending
with any taxing authority requesting permission for any changes in any
accounting method of the Company, any of its Subsidiaries or DHDC. The Internal
Revenue Service has not proposed any such adjustment or change in accounting
method. None of the assets of the Company, any of its Subsidiaries or DHDC is
or will be required to be treated as being owned by any Person (other than the
Company or its Subsidiaries) pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately before
the enactment of the Tax Reform Act of 1986.
(iv) None of the Company, any of its
Subsidiaries or DHDC is a party to, is bound by, or has any obligation under,
any Tax sharing agreement, Tax allocation agreement, Tax indemnity agreements
or similar contract.
(v) The Company and each of its Subsidiaries
are members of the affiliated group, within the meaning of Section 1504(a) of
the Code, of which the Company
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is the common parent, and such affiliated group files a consolidated federal
income Tax Return.
(vi) The Company has previously made available
to TAGTCR true and complete copies of each of (a) any written audit reports
issued by any representative of a taxing authority within the last three years
relating to the United States federal, state, local or foreign Taxes due from
or with respect to the Company, its Subsidiaries and DHDC; and (b) the United
States federal, state, local and foreign Tax Returns, for each of the last
three taxable years, filed by or with respect to the Company, its Subsidiaries
and DHDC.
(vii) "Code" shall mean the Internal Revenue Code
of 1986, as amended. "Taxes" shall mean all taxes, charges, fees, levies, or
other assessments or liabilities, including without limitation (a) income,
gross receipts, ad valorem, premium, excise, real property, personal property,
sales, use, transfer, withholding, employment, payroll, and franchise taxes,
license, severance, stamp, occupation, windfall profits, environmental, customs
duties, capital stock, unemployment, disability, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind, whether
disputed or not, imposed by the United States of America, or by any state,
local, or foreign government, or any subdivision or agency of the United States
or any such government, and (b) any interest, fines, penalties, assessments, or
additions to taxes resulting from, attributable to, or incurred in connection
with any Tax or any contest, dispute, or refund thereof, including any
obligations under any agreements with respect to any of the foregoing. "Tax
Returns" shall mean any report, return, or statement required to be supplied to
a taxing authority in connection with Taxes.
(j) Pension and Benefit Plans; ERISA.
(i) Section 3.1(j)(i) of the Disclosure
Schedule sets forth a true and complete list of:
(A) all "employee benefit plans," as
defined in Section 3(3) of ERISA, which the Company, any of its Subsidiaries or
DHDC has any obligation or liability, contingent or otherwise ("Benefit
Plans"); and
(B) all employment or consulting
agreements, bonus or other incentive compensation, deferred compensation,
salary continuation during any absence from active employment for disability or
other reasons, severance, sick days, stock award, stock option, stock purchase
or other equity-based plan or program, tuition assistance, club membership,
employee discount, employee loan, or vacation pay agreements, policies or
arrangements which the Company, any of its Subsidiaries or DHDC maintains or
has any obligation or liability (contingent or otherwise) with respect to any
current or former officer, director or employee of the Company, any of its
Subsidiaries or DHDC (the "Employee Arrangements").
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(ii) With respect to each Benefit Plan and
Employee Arrangement, a true and complete copy of each of the following
documents (if applicable) has been made available to TAGTCR: (A) the most
recent plan and related trust documents, and all amendments thereto (or, in the
case of an unwritten Employment Arrangement, a description thereof); (B) the
most recent summary plan description, and all related summaries of material
modifications thereto; (C) the most recent Form 5500 (including schedules and
attachments); (D) the most recent Internal Revenue Service determination
letter; (E) the most recent actuarial reports (including for purposes of
Financial Accounting Standards Board report no. 87, 88, 106, 112 and 132) and
(F) each written employment, consulting or individual severance or other
compensation agreement, and all amendments thereto.
(iii) The Company, its Subsidiaries and DHDC have
not during the preceding six years had any obligation or liability (contingent
or otherwise) with respect to a Benefit Plan which is described in Section
3(37); 4(b)(4), 4063 or 4064 of ERISA or which is subject to Section 412 of the
Code or Title IV of ERISA.
(iv) The Benefit Plans and their related trusts
intended to qualify under Section 401 and to be tax-exempt under Section 501(a)
of the Code have received favorable determination letters from the Internal
Revenue Service. The Company is not aware of any event or circumstance that
could result in the failure of such Benefit Plans to be so qualified or tax
exempt. Any voluntary employee benefit association which provides benefits to
current or former employees of the Company and its Subsidiaries, or their
beneficiaries, which is intended to be qualified and is tax-exempt under
Section 501(c)(9) of the Code has received a favorable determination letter
from the Internal Revenue Service.
(v) All contributions or other payments
required to have been made by the Company, its Subsidiaries and DHDC to or
under any Benefit Plan or Employee Arrangements by applicable law or the terms
of such Benefit Plan or Employee Arrangement (or any agreement relating
thereto) have been timely and properly made, except for the failure to make
such contribution or payment as will not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(vi) The Benefit Plans and Employee Arrangements
comply in all material respects with applicable laws and have been maintained
and administered in all material respects in accordance with their terms and
applicable laws.
(vii) There are no pending or, to the knowledge
of Company, threatened actions, claims or proceedings against or relating to
any Benefit Plan or Employee Arrangement other than routine benefit claims by
Persons entitled to benefits thereunder and those actions, claims and
proceedings that will not have a Material Adverse Effect on the Company.
(viii) The Company, its Subsidiaries and DHDC do
not maintain or have an obligation to contribute to retiree life or retiree
health plans which provide for continuing benefits or coverage for current or
former officers, directors or employees of the
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Company or any of its Subsidiaries except (A) as may be required under part 6
of Title I of ERISA or applicable state law (after a termination of employment
or service as a director for which coverage of the participant or the
participant's beneficiary is charged at the maximum possible premium) or (B) a
medical expense reimbursement account plan pursuant to Section 125 of the Code.
(ix) None of the assets of any Benefit Plan is
stock of the Company, any of its affiliates or DHDC, or property leased to or
jointly owned by the Company, any of its affiliates or DHDC.
(x) The Company, its Subsidiaries and DHDC have
no liability (contingent or otherwise) under Section 4069 of ERISA by reason of
a transfer of an underfunded pension plan.
(k) Absence of Certain Changes or Events.
Except as disclosed in the Company SEC Documents filed after March 31, 1998,
since March 31, 1998, the business of the Company and its Subsidiaries has been
carried on only in the ordinary and usual course and in a manner which, if it
had been carried on after execution of this Agreement, would have been in
compliance with Section 4.1 hereof and no event or events has or have occurred
that (either individually or in the aggregate) has had or will have a Material
Adverse Effect on the Company.
(l) No Undisclosed Material Liabilities. There
are no liabilities of the Company or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, unmatured, absolute, determined,
determinable or otherwise, that are required to be reflected on a balance sheet
prepared in accordance with GAAP other than: (i) liabilities reflected on the
Consolidated Balance Sheet of the Company and its Subsidiaries contained in the
Quarterly Report on Form 10-Q or the notes thereto for the quarter ended March
31, 1998 (the "March 31 Balance Sheet"), (ii) liabilities under this Agreement,
(iii) liabilities with respect to the Company's investment in DHDC and (iv)
liabilities incurred in the ordinary course of business and consistent with
past practices, none of which individually or in the aggregate, has had or will
have a Material Adverse Effect on the Company.
(m) Vote Required. The Company Stockholder
Approval is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve the Merger and this Agreement and
the transactions contemplated hereby under any applicable law, rule or
regulation or pursuant to the requirements of the Company's Certificate of
Incorporation and Bylaws.
(n) Labor Matters.
(i) Neither the Company, any of its
Subsidiaries nor DHDC is a party to any labor or collective bargaining
agreement, and no employees of Company, any of its Subsidiaries or DHDC are
represented by any labor organization. Within the preceding three years, there
have been no representation or certification proceedings, or petitions
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seeking a representation proceeding, pending or, to the knowledge of the
Company, threatened in writing to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority. Within the
preceding three years, to the knowledge of Company, there have been no
organizing activities involving the Company, its Subsidiaries or DHDC with
respect to any group of employees of the Company, any of its Subsidiaries or
DHDC.
(ii) There are no strikes, work stoppages,
slowdowns, lockouts, material arbitrations or material grievances or other
material labor disputes pending or, to the Company's knowledge, threatened in
writing against or involving Company, any of its Subsidiaries or DHDC. There
are no unfair labor practice charges, grievances or complaints pending or, to
the knowledge of the Company, threatened in writing by or on behalf of any
employees or group of employees of the Company, any of its Subsidiaries or
DHDC, which have or will have a Material Adverse Effect on the Company.
(iii) There are no complaints, charges or claims
against the Company, any of its Subsidiaries or DHDC pending or, to the
knowledge of the Company, threatened to be brought or filed with any
governmental authority, arbitrator or court based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment of any individual by the Company, any of its Subsidiaries or DHDC,
which have or will have a Material Adverse Effect on the Company.
(iv) there has been no "mass layoff" or "plant
closing" (as defined by WARN) with respect to the Company, its Subsidiaries or
DHDC within the six months prior to Closing.
(o) Intellectual Property.
(i) Section 3.1(o) of the Disclosure Schedule
sets forth a true and complete list of each material trademark, trade name,
patent, service mark, brand mark, brand name, industrial design, and copyright
owned or used by the Company or its Subsidiaries on a regular basis in
connection with the operation of the businesses of each of the Company, its
Subsidiaries and DHDC as well as a true and complete list of all registrations
thereof and pending applications therefor, and each license or other contract
relating thereto (collectively, the "Company Intellectual Property"). All of
the Company Intellectual Property is owned by the Company, its Subsidiaries or
DHDC free and clear of any and all Liens, except where the failure to so own
will not, individually or in the aggregate, have a Material Adverse Effect on
the Company. To the Company's knowledge, the use of the Company Intellectual
Property by the Company, its Subsidiaries or DHDC does not, in any material
respect, conflict with, infringe upon, violate or interfere with or constitute
an appropriation of any right, title, interest or goodwill, including, without
limitation, any intellectual property right, trademark, trade name, patent,
service mark, brand mark, brand name, industrial design, copyright or any
pending application therefor of any other Person and neither the Company, any
of its Subsidiaries nor DHDC has received any notice of any claim or otherwise
knows that any of the Company Intellectual Property is
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<PAGE> 24
invalid or conflicts with the asserted rights of any other Person except where
such invalidity or conflict will not have a Material Adverse Effect on the
Company.
(ii) Each of the Company, its Subsidiaries and
DHDC owns or has a right to use all Company Intellectual Property necessary for
the operation of its respective business, except where the failure to so own or
have a right to use will not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(iii) Each of the licenses or other contracts
pursuant to which the Company, its Subsidiaries or DHDC has rights to Company
Intellectual property is in full force and effect and is valid and enforceable
in accordance with its terms, and there is no material default under any such
license or contract either by the Company, any of its Subsidiaries or DHDC or,
to the knowledge of the Company, by any other party thereto, except where such
failure or default will not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(p) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Costs and
Liabilities" means any and all losses, liabilities, obligations, damages,
fines, penalties, judgments, actions, claims, costs and expenses (including,
without limitation, fees, disbursements and expenses of legal counsel, experts,
engineers and consultants and the costs of investigation and feasibility
studies and clean up, remove, treat, or in any other way address any Hazardous
Materials) arising from or under any Environmental Law.
(B) "Environmental Law" means any
applicable law regulating or prohibiting Releases of Hazardous Materials into
any part of the natural environment, or pertaining to the protection of natural
resources, the environment and public and employee health and safety including,
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA") (42 U.S.C. ss.9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. ss.1801 et, seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et, seq.), The Clean Water Act (33 U.S.C. ss.
1251 et, seq.), the Clean Air Act (33 U.S.C. ss. 7401 et, seq.), the Toxic
Substances Control Act (15 U.S.C. ss. 7401 et, seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et, seq.), and the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et, seq.) ("OSHA") and
the regulations promulgated pursuant thereto, and any such applicable state or
local statutes, including, without limitation, the Industrial Site Recovery Act
("IRSA"), and the regulations promulgated pursuant thereto, as such laws have
been and may be amended or supplemented through the Closing Date;
(C) "Hazardous Material" means any
substance, material or waste which is regulated by any public or governmental
authority in the jurisdictions in
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<PAGE> 25
which the applicable party or its Subsidiaries conducts business, or the United
States, including, without limitation, any material or substance which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste" or "restricted hazardous waste," "contaminant,"
"toxic waste" or "toxic substance" under any provision of Environmental Law and
shall also include, without limitation, petroleum, petroleum products,
asbestos, polychlorinated biphenyls and radioactive materials;
(D) "Release" means any release,
spill, effluent, emission, leaking, pumping, injection, deposit, disposal,
discharge, disposal, leaching, or migration into the environment, including any
property owned by the Company, its Subsidiaries or DHDC or into or out of any
property; and
(E) "Remedial Action" means all
actions, including, without limitation, any capital expenditures, required by a
governmental entity or required under any Environmental Law by the Company, its
Subsidiaries or DHDC, or voluntarily undertaken by the Company, its
Subsidiaries or DHDC to (I) clean up, remove, treated, or in any other way
ameliorate or address any Hazardous Materials or other substance in the indoor
or outdoor environment, (II) prevent the Release or threatened of Release, or
minimize the further Release of any Hazardous Material so it does not endanger
or threaten to endanger the public health or welfare of the indoor or outdoor
environment, (III) perform pre-remedial studies and investigations or
post-remedial monitoring and care pertaining or relating to a Release, or (IV)
bring the applicable party into compliance with any Environmental Law.
(ii) Except as set forth in Company SEC
Documents or Section 3.1(q) of the Disclosure Schedule:
(A) The operations of the Company, its
Subsidiaries and DHDC have been and, as of the Closing Date, will be, in
compliance with all Environmental Laws, except where the failure to be in
compliance will not have a Material Adverse Effect on the Company;
(B) The Company, its Subsidiaries and
DHDC have obtained and will, as of the Closing Date, maintain all permits
required under applicable Environmental Laws for the continued operations of
their respective businesses, except such permits the lack of which would not
have a Material Adverse Effect on the Company;
(C) The Company, its Subsidiaries and
DHDC are not subject to any outstanding written orders from, or written
agreements with, any Governmental Entity or other Person respecting (1)
Environmental Laws, (2) Remedial Action, or (3) any Release or threatened
Release of a Hazardous Material;
(D) The Company, its Subsidiaries and
DHDC have not received any written communication alleging, with respect to any
such party, the violation of or liability under any Environmental Law, which
violation or liability is outstanding;
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<PAGE> 26
(E) To the knowledge of the Company,
neither the Company, any of its Subsidiaries or DHDC has any contingent
liability in connection with the Release of any Hazardous Material into the
indoor or outdoor environment (whether on-site or off-site) which will have a
Material Adverse Effect on the Company;
(F) Except for de minimis amounts which
are regulated as conditionally exempt small quantity generators, the operations
of the Company, its Subsidiaries and DHDC do not involve the transportation,
treatment, storage, or disposal of hazardous waste for purposes of the
requirements set forth under, 40 C.F.R. Parts 260-270 or any state equivalent;
(G) There is not now, nor to the
knowledge of the Company has there been in the past, on or in any property
owned by the Company, its Subsidiaries or DHDC any of the following: (1) any
underground storage tanks or surface impoundments, (2) any asbestos-containing
materials, or (3) any polychlorinated biphenyls;
(H) No judicial or administrative
proceedings are pending or, to the knowledge of the Company, threatened against
the Company, its Subsidiaries or DHDC alleging the violation of or seeking to
impose liability pursuant to any Environmental Law and there are no
investigations pending or, to the knowledge of the Company, threatened against
the Company, any of its Subsidiaries or DHDC under Environmental Laws, in each
case which will have a Material Adverse Effect on the Company; and
(I) The Company and its Subsidiaries
have made available to TAGTCR true and complete copies of all environmentally
related audits, assessments, studies, reports, analyses, and results of
investigations prepared within the past five years of any real property
currently or formerly owned, operated or leased by the Company, its
Subsidiaries or DHDC that are in the possession, custody or control of the
Company, any of its Subsidiaries or DHDC.
(q) Insurance. Set forth on Section 3.1(q) of
the Disclosure Schedule is a true and complete list and description of
insurance policies (including information on the premiums payable in connection
therewith, the scope and amount of the coverage and deductibles provided
thereunder and all claims against such policies) maintained by the Company, any
of its Subsidiaries and DHDC.
(r) DHDC Financial Statements. The Company has
made available to TAGTCR the operating statement for DHDC for the period
commencing January 1, 1998 until March 31, 1998 (the "DHDC Financial
Statements"). The DHDC Financial Statements were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments) the results of operations of DHDC for the
periods presented therein.
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(s) Board of Directors Recommendation. The
Board of Directors of the Company, based upon the unanimous recommendation of a
Special Committee consisting of only non-employee directors of the Company, at
a meeting duly called and held, has by the vote of those directors present (i)
determined that this Agreement, the Merger and the transactions contemplated
hereby are fair to and in the best interests of the stockholders of the Company
(other than TAGTCR and the holders of Recapitalization Shares) and has approved
the same, and (ii) resolved to recommend that the holders of the shares of
Company Common Stock approve and adopt this Agreement, the Merger and the
transactions contemplated hereby.
(t) Material Contracts. Except as set forth in
the Company SEC Reports, neither the execution and delivery of this Agreement
nor the consummation of the Merger or the other transactions contemplated
hereby will result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any director,
officer or employee of the Company, and, without limiting the generality of the
foregoing, no amount paid or payable by the Company in connection with the
Merger with the other transactions contemplated hereby will be an "excess
parachute payment" within the meaning of Section 280G of the Code. Each
contract, agreement or other document or instrument ("Material Contract") to
which the Company or any of its Subsidiaries is a party that was required to be
filed as an exhibit to the Company's annual report on Form 10-K for the year
ended December 31, 1997 was so filed. None of the Company or its Subsidiaries
is (with or without lapse of time or giving notice, or both) in material breach
or default in any respect under any Material Contract. Except for the Rights
Agreement, the Company is not a party to or subject to any "poison pill",
shareholders rights plan, rights agreement or similar agreement, instrument or
plan.
(u) Fairness Opinion. The Company has received
the opinion of The Robinson-Humphrey Company, LLC, financial advisor to the
Company (the "Financial Advisor"), to the effect that, as of the date hereof,
the Merger Consideration to be received by the stockholders of the Company in
the Merger is fair, from a financial point of view, to the stockholders of the
Company.
(v) Regulatory Filings. The Company has made
available for inspection by TAGTCR complete copies of all material
registrations, filings and submissions made since January 1, 1996 by the
Company or any Subsidiary with any Governmental Entity and any reports of
examinations issued since January 1, 1996 by any such Governmental Entity that
relate to the Company or any Subsidiary. The Company and each Subsidiary has
filed all reports, statements, documents, registrations, filings or submissions
required to be filed by any of them with any Governmental Entity, except where
the failure to file, in the aggregate, will not have a Material Adverse Effect
on the Company; and, to the knowledge of the Company, all such reports,
statements, documents, registrations, filings or submissions were in all
material respects true, and complete and accurate when filed, except where such
incompleteness or inaccuracy individually, or in the aggregate, will not have a
Material Adverse Effect on the Company.
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<PAGE> 28
(w) State Takeover Laws. The Company's Board of
Directors has taken such action so that no takeover statute or similar statute
or regulation of the State of Delaware or the State of Georgia (and, to the
knowledge of the Company after due inquiry, of any other state or jurisdiction)
applies to this Agreement, the Merger, or any of the other transactions
contemplated hereby.
3.2 Representations and Warranties of TAGTCR. TAGTCR represents
and warrants to the Company as follows:
(a) Organization, Standing and Power. TAGTCR is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own, lease, and operate its properties and to carry on its business as now
being conducted, and is duly qualified or licensed to do business as a foreign
corporation and in good standing to conduct business in each jurisdiction in
which the conduct of its business, or the operation, ownership or leasing of
its properties, makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to so qualify or to become so licensed
does not have or could not reasonably be expected to have a Material Adverse
Effect on TAGTCR.
(b) Authority; No Violations; Consents and Approvals.
(i) TAGTCR has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of TAGTCR. This Agreement has
been duly executed and delivered by TAGTCR and (assuming this Agreement is duly
executed and delivered by the Company) constitutes a valid and binding
obligation of TAGTCR enforceable in accordance with its terms and conditions
except that the enforcement hereof may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or other similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(ii) The execution and delivery of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby
by TAGTCR, following the satisfaction or waiver of the conditions set forth in
Article VI, will not: (A) violate any provision of the Certificate of
Incorporation or Bylaws of TAGTCR, (B) conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under; give rise to a right of termination, cancellation or acceleration
(including pursuant to any put right) of any obligation; or result in the
creation of a Lien or right of first refusal with respect to any asset or
property (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss, creation or right of first refusal, a
"Violation") pursuant to any loan or credit agreement, note, mortgage, deed of
trust, indenture, lease or other agreement, obligation, instrument, concession,
franchise or license of TAGTCR or (C) any law applicable to TAGTCR or its
respective property or assets;
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<PAGE> 29
provided, however, that no representation or warranty is made in the foregoing
clauses (B) and (C) with respect to matters that, individually or in the
aggregate, will not have a Material Adverse Effect on TAGTCR.
(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with, notice to, or
permit from any Governmental Entity, is required by or with respect to TAGTCR
in connection with the execution and delivery of this Agreement by TAGTCR or
the consummation by TAGTCR of the transactions contemplated hereby, except for
(A) filings under the HSR Act, (B) the filing with the SEC of such reports
under and such other compliance with the Exchange Act and the rules and
regulations thereunder, as may be required in connection with this Agreement
and the transactions contemplated hereby, (C) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (D) such filings
and approvals as may be required by any applicable state securities, "blue sky"
or takeover laws, (E) the approval of this Agreement and the Merger pursuant to
applicable laws governing health maintenance organizations, limited service
health organizations, and insurance holding companies set forth in the
Disclosure Schedule, and (F) the filing of a Form A Statement Regarding the
Acquisition of Control of a Domestic Insurer with the Arizona and Texas
Departments of Insurance and the approval thereof by the Arizona and Texas
Directors of Insurance.
(c) Information Supplied. None of the
information supplied or to be supplied by TAGTCR for inclusion or incorporation
by reference in the Proxy Statement will, at the date it is first mailed to the
Company's stockholders or at the time of the Company Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. None of the information supplied or to be supplied by TAGTCR for
inclusion or incorporation by reference in the Schedule 13E-3 will, on the date
filed with the SEC or at the time of the Company Stockholders Meeting or the
Effective Time, contain any untrue statement of a material fact or admit to
state any material facts required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The Schedule 13E-3, insofar as it relates to TAGTCR
or other information supplied by TAGTCR for inclusion therein, will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder.
(d) Board of Directors Recommendation. The
Board of Directors of TAGTCR, at a meeting duly called and held (or by valid
written consent in lieu thereof), has determined that this Agreement, the
Merger and the transactions contemplated hereby are fair to and in the best
interests of TAGTCR and have approved the same. The Board of Directors of
TAGTCR has approved this Agreement and the Merger at a meeting duly called and
held (or by valid written consent in lieu thereof) and no further approval is
required pursuant to the DGCL, the Certificate of Incorporation or the Bylaws
of TAGTCR.
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(e) Delaware Law. TAGTCR was not, immediately prior
to the execution of this Agreement, an "interested stockholder" within the
meaning of Section 203 of the DGCL.
3.3 Representations and Warranties of the Guarantors. Each of
the Guarantors represents and warrants severally with respect to themselves to
the Company as follows:
(a) Organization, Standing and Power. Each of the
Guarantors is an entity duly organized, validly existing, and in good standing
under the laws of its formation, has all requisite corporate or partnership
power and authority to own, lease, and operate its properties and to carry on
its business as now being conducted, and is duly qualified or licensed to do
business as a foreign corporation and in good standing to conduct business in
each jurisdiction in which the conduct of its business, or the operation,
ownership or leasing of its properties, makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to so qualify or
to become so licensed does not have or could not reasonably be expected to have
a Material Adverse Effect on each of the Guarantors.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of the Guarantors has all requisite power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Guarantors. This Agreement has been
duly executed and delivered by each of the Guarantors and (assuming this
Agreement is duly executed and delivered by the Company) constitutes a valid
and binding obligation of each of the Guarantors enforceable in accordance with
its terms and conditions except that the enforcement hereof may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
(ii) The execution and delivery of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby
by each of the Guarantors, following the satisfaction or waiver of the
conditions set forth in Article VI, will not: (A) violate any provision of the
formation documents of each of the Guarantors, (B) conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under; give rise to a right of termination, cancellation or acceleration
(including pursuant to any put right) of any obligation; or result in the
creation of a Lien or right of first refusal with respect to any asset or
property (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss, creation or right of first refusal, a
"Violation") pursuant to any loan or credit agreement, note, mortgage, deed of
trust, indenture, lease or other agreement, obligation, instrument, concession,
franchise or
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<PAGE> 31
license or (C) any law applicable to each of the Guarantors or its respective
property or assets, which has or could reasonably be expected to have a
Material Adverse Effect on each of the Guarantors; provided, however, that no
representation or warranty is made in the foregoing clauses (B) and (C) with
respect to matters that, individually or in the aggregate, will not have a
Material Adverse Effect on each of the Guarantors.
(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with, notice to, or
permit from any Governmental Entity, is required by or with respect to any
Guarantor in connection with the execution and delivery of this Agreement by
such Guarantor or the consummation by such Guarantor of the transactions
contemplated hereby, except for (A) filings under the HSR Act, (B) the filing
with the SEC of such reports under and such other compliance with the Exchange
Act and the rules and regulations thereunder, as may be required in connection
with this Agreement and the transactions contemplated hereby, (C) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware,
(D) such filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws, (E) the approval of this Agreement and
the Merger pursuant to applicable laws governing health maintenance
organizations, limited service health organizations, and insurance holding
companies set forth in the Disclosure Schedule, and (F) the filing of a Form A
Statement Regarding the Acquisition of Control of a Domestic Insurer with the
Texas and Arizona Departments of Insurance and the approval thereof by the
Texas and Arizona Directors of Insurance.
(c) Information Supplied. None of the
information supplied or to be supplied by any Guarantor for inclusion or
incorporation by reference in the Proxy Statement will, at the date it is first
mailed to the Company's stockholders or at the time of the Company Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. None of the information supplied or to be supplied by any
Guarantor for inclusion or incorporation by reference in the Schedule 13E-3
will, on the date filed with the SEC or at the time of the Company Stockholders
Meeting, contain any untrue statement of a material fact or admit to state any
material facts required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Schedule 13E-3, insofar as it relates to any Guarantor or
other information supplied by any Guarantor for inclusion therein, will comply
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder.
(d) Bridge Loan and Financing Commitment.
TAGTCR or the Guarantors have received (i) a written commitment (each of which
is conditioned upon the conditions set forth therein) from NationsBridge,
L.L.C., NationsBank, N.A. and NationsBanc Montgomery Securities, LLC
(collectively, the "Banks") for the provision of a guaranteed loan in the
amount of $20 million and senior and subordinated debt financing of
approximately $175 million in the aggregate, (ii) written commitments from the
Guarantors to subscribe for an aggregate of at least $87.7 million (including
the DHDC Rollover (as
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defined below)), and (iii) a written commitment from certain existing
stockholders of the Company to cause 200,000 shares of Company Common Stock to
be treated as 2.2(a)(iii) Recapitalization Shares (the commitments set forth in
(i), (ii) and (iii) are collectively referred to as the "Commitments"). The
DHDC Rollover shall mean the agreement by GTCR to contribute its DHDC common
stock directly or indirectly into Surviving Corporation immediately after the
Effective Time, which agreement shall be valued so as to return $10 million and
provide a 31% internal rate of return on GTCR's $10.0 million investment in
DHDC from September 12, 1997. Based upon the representations and warranties set
forth in Section 3.1, the aggregate of $286.3 million of financing contemplated
by the Commitments (the "Financing") will be sufficient (i) to consummate the
Merger and pay the Merger Consideration and the Option Consideration, (ii) to
pay all fees and expenses required to be paid by TAGTCR and the Company in
connection with the Merger and the transactions contemplated thereby, and (iii)
to refinance the existing indebtedness of the Company to financial
institutions. True and correct copies of the Commitments have been provided to
the Company prior to the date hereof. The terms and conditions of the Class A
Preferred Stock to be received by the holders of Recapitalization Shares will
be identical to the Class A Preferred Stock to be received by the Guarantors.
The holders of the Recapitalization Shares that receive Class A Preferred Stock
will pay a per share amount equal to that paid by the Guarantors.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of the Company. During the period from the date
of this Agreement and continuing until the Effective Time, the Company agrees
that (except as expressly contemplated or permitted by this Agreement, or to
the extent that TAGTCR shall otherwise consent in writing):
(a) Ordinary Course. Each of the Company and its
Subsidiaries shall conduct its business and operations in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and shall use all reasonable efforts to preserve intact its present business
organizations, keep available the services of its current officers and
employees and preserve satisfactory relationships with customers, suppliers,
distributors and others having business dealings with it and will take no
action which would adversely affect its ability to consummate the Merger or the
other transactions contemplated hereby.
(b) Dividends; Changes in Stock. The Company shall
not, nor shall it permit any of its Subsidiaries to: (i) declare, set aside, or
pay any dividends on or make other distributions (whether in cash, stock or
property or any combination thereof) in respect of any of its capital stock
(other than dividends or distributions by any Subsidiary to the Company), (ii)
split, combine, or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for
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<PAGE> 33
shares of its capital stock or (iii) repurchase, redeem, or otherwise acquire,
or permit any Subsidiary to purchase or otherwise acquire, any shares of its
capital stock, except as required by the terms of its securities outstanding on
the date hereof, as contemplated by this Agreement or as contemplated by
employee benefit and dividend reinvestment plans as in effect on the date
hereof which terms are set forth on Section 4.1(b) of the Disclosure Schedule.
(c) Issuance of Securities. The Company shall
not, nor shall it permit any of its Subsidiaries to (i) grant any options,
warrants or rights, to purchase shares of Company Common Stock, (ii) amend any
Option or Option Plan, (iii) reprice any Option or Option Plans, or (iv) issue,
deliver or sell, or authorize or propose to issue, deliver or sell, any shares
of its capital stock of any class or series, any Company Voting Debt or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, Company Voting Debt or convertible securities, other than (A) the
issuance of shares of Company Common Stock pursuant to the terms of the ESPP
pursuant to purchase requests made prior to the date hereof, upon the exercise
of Options granted under Option Plans which are outstanding on the date hereof,
or in satisfaction of stock grants or stock based awards made prior to the date
hereof pursuant to Option Plans or pursuant to any individual agreements such
as employment agreements, executive termination agreements (in each such case,
as in effect on the date hereof); and (B) issuances by a wholly-owned
Subsidiary of its capital stock to its parent.
(d) Governing Documents. The Company shall not
amend or propose to amend its Certificate of Incorporation or Bylaws except to
give effect to the Merger.
(e) No Solicitation. None of the Company, any
of its Subsidiaries or DHDC nor any of the respective officers and directors of
the Company, any of its Subsidiaries or DHDC shall, and the Company will cause
its employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by the Company, any of its
Subsidiaries or DHDC) not to, initiate or solicit, directly or indirectly, any
inquiries or the making of any proposal with respect to a merger,
consolidation, recapitalization or similar transaction involving, or any
purchase of all or any significant portion of the assets of, or any equity
interest in, the Company, any Subsidiary or DHDC (an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to any
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however, that the foregoing shall
not prohibit the Special Committee of the Board of Directors of the Company
from furnishing information to, or entering into discussions or negotiations,
or otherwise facilitating any effort or attempt to make or implement an
Acquisition Proposal if, and to the extent, that the Special Committee
determines after consultation with counsel and in good faith that failing to
take such action would be inconsistent with the Special Committee's fiduciary
duty under applicable law. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any third
parties conducted heretofore with respect to any of
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the foregoing. The Company will notify TAGTCR immediately if any such inquiries
or proposals are received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated or continued with,
the Company, any of its Subsidiaries, DHDC or any of their respective officers,
directors, employees, agents or representatives.
(f) No Acquisitions. The Company shall not,
nor shall permit any of its Subsidiaries to, acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity interest
in or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof without the prior consent of TAGTCR.
(g) No Dispositions. Other than dispositions
in the ordinary course of business consistent with past practice which are not
material, individually or in the aggregate, to the Company and its Subsidiaries
taken as a whole, the Company shall not, nor shall it permit any of its
Subsidiaries to, sell, transfer, lease (whether such lease is an operating or
capital lease), encumber, agree to sell, transfer, lease or otherwise dispose
of, any of its assets.
(h) Governmental Filings. The Company shall
promptly provide TAGTCR (or its counsel) with copies of all filings made by the
Company with the SEC or any other state or federal Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
(i) No Dissolution, Etc. Except as otherwise
permitted or contemplated by this Agreement, the Company shall not, nor shall
it permit any of its Subsidiaries to, authorize, recommend, propose or announce
an intention to adopt or enter into any agreement in principle or an agreement
with respect to, any plan of complete or partial liquidation or dissolution of
the Company or any of its Subsidiaries.
(j) Other Actions. Except as contemplated by
this Agreement, the Company shall not, nor shall it permit any of its
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of the Company's representations or warranties
hereunder being untrue in any material respect or in any of the Company's
covenants hereunder or any of the conditions to the Merger not being satisfied
in all material respects.
(k) Certain Employee Matters. The Company
shall not, nor shall it permit any if its Subsidiaries to (i) grant any
increase in the base compensation (excluding bonuses) of any of its directors,
officers or key employees who have base compensation of $100,000 a year or
more, (ii) pay or agree to pay any pension, retirement allowance or other
employee benefit not required or contemplated by any of the existing Company
Benefit Plans or Company Pension Plans as in effect on the date hereof to any
such director, officer or key employee, whether past or present, (iii) enter
into any new, or materially amend any existing, employment or severance or
termination agreement with any such director, officer
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or key employee, or (iv) except as may be required to comply with applicable
law, become obligated under any new Company Employee Benefit Plan or Company
Pension Plan, which was not in existence on the date hereof, or amend any such
plan or arrangement in existence on the date hereof if such amendment would
have the effect of materially enhancing any benefits thereunder.
(l) Indebtedness; Agreements.
(i) The Company shall not, nor shall the
Company permit any of its Subsidiaries to, assume or incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the Company
or any of its Subsidiaries or guarantee any debt securities of others or create
any Liens on the property of the Company or any of its Subsidiaries in
connection with any indebtedness thereof, or enter into any "keep well" or
other agreement or arrangement to maintain the financial condition of another
Person, other than the incurrence of indebtedness in accordance with the
Company's existing line of credit with First Union National Bank, providing
that the proceeds of such indebtedness are used only in the ordinary course of
business and consistent with past practice (which includes funding acquisitions
permitted under this Agreement).
(ii) The Company shall not, nor shall the
Company permit any of its Subsidiaries to, (a) make any loans, advances or
capital contributions to, or investments in, any other person or (b) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
contingent or otherwise), other than the payment, discharge or satisfaction of
liabilities in the ordinary course of business and consistent with past
practice; provided, that Dent Lease, Inc. may continue to make capital
expenditures that do not exceed $50,000 during any three month period.
(iii) The Company shall not, nor shall the
Company permit any of its Subsidiaries to, enter into, modify, rescind,
terminate, waive, release or otherwise amend in any material respect any of the
terms or provisions of any Material Contract.
(m) Accounting. The Company shall not change,
other than in the ordinary course of business, consistent with past practice or
as required by the SEC or by law, any of its accounting policies, procedures,
practices, books and records.
(n) Capital Expenditures. The Company shall
not, nor shall the Company permit any of its Subsidiaries to, incur any capital
expenditures, that in the aggregate, are in excess of $500,000; provided, that
DentLease, Inc. may continue to make capital expenditures that do not exceed
$50,000 during any three month period.
(o) Insurance. Neither the Company nor any
Subsidiary shall permit any insurance policy naming it as a beneficiary or a
loss payee to be cancelled, terminated or materially altered, except in the
ordinary course of business and consistent with past practice and following
written notice to TAGTCR.
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(p) Hedging. Neither the Company nor any
Subsidiary shall enter into any hedging, option, derivative or other similar
transaction.
(q) Transfer of Interest in DHDC and DHMI.
Prior to the Effective Time, the Company will cause all equity interests in
DHDC and DHMI owned by it or any of its subsidiaries to be transferred to a
newly formed, wholly owned subsidiary of the Company.
4.2 Covenants of TAGTCR and the Guarantors.
(a) TAGTCR and the Guarantors will use their
respective reasonable best efforts to cause the Financing to be closed on terms
consistent with the Commitments; provided that the Guarantors can reduce the
amount of equity they contribute to the extent of Recapitalization Shares in
excess of $3.6 million such that the aggregate amount of Recapitalization
Shares does not exceed $15,000,000. In the event that any portion of the
Financing becomes unavailable, regardless of the reason therefor, TAGTCR and
the Guarantors will use their respective reasonable best efforts to arrange
alternative financing on behalf of the Company from other sources on and
subject to substantially the same terms and conditions as the portion of the
Financing that has become unavailable. TAGTCR and the Guarantors shall use
their respective reasonable best efforts to (i) satisfy on or before the
Closing all requirements of the definitive agreements pursuant to which the
Financing will be obtained (the "Financing Agreements") which are conditions to
closing to be satisfied by TAGTCR with respect to all transactions constituting
the Financing and to drawing down the cash proceeds thereunder; (ii) defend all
lawsuits or other legal proceedings challenging the Financing Agreements or the
consummation of the transactions contemplated thereby; and (iii) lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated thereby.
TAGTCR and the Guarantors shall keep the Company apprised of all material
developments relating to the Financing. Any fees to be paid by the Company or
any other obligations to be incurred by the Company in connection with the
Financing shall be subject to the occurrence of the Closing.
(b) The Guarantors agree that on or prior to
the Closing Date they will purchase or cause to be purchased equity of TAGTCR
for a cash purchase price of at least $87.7 million in the aggregate (including
the DHDC Rollover), subject to the terms and conditions of, and in accordance
with the standards set forth in, the equity commitment letter of Guarantors
dated the date hereof; provided that, the Guarantors can reduce the amount of
equity they contribute to the extent of Recapitalization Shares in excess of
$3.6 million such that the aggregate amount of Recapitalization Shares does not
exceed $15,000,000.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of the Proxy Statement; Company Stockholders
Meeting.
(a) As soon as practicable following the date of
this Agreement, the Company shall prepare and file with the SEC the Proxy
Statement under the Exchange Act, and shall use its reasonable best efforts to
have the Proxy Statement cleared by the SEC. TAGTCR shall furnish all
information about itself, its business and operations and its owners and all
financial information to the Company as may be reasonably necessary in
connection with the preparation of the Proxy Statement. TAGTCR agrees promptly
to correct any information provided by it for use in the Proxy Statement if and
to the extent that such information shall have become false or misleading in
any material respect. The Company shall notify TAGTCR of the receipt of any
comments of the SEC with respect to the Proxy Statement and shall use its
reasonable best efforts to respond to all SEC comments with respect to the
Proxy Statement and to cause the Proxy Statement to be mailed to the Company's
stockholders at the earliest practicable date. The Company shall give TAGTCR
and its counsel the opportunity to review the Proxy Statement prior to its
being filed with the SEC and shall give TAGTCR and its counsel the opportunity
to review all amendments and supplements to the Proxy Statement and all
responses to requests for additional information and replies to comments prior
to their being filed with, or sent to, the SEC. If at any time prior to the
Effective Time, any event with respect to the Company or any of its
Subsidiaries or with respect to other information supplied by the Company or
TAGTCR for inclusion in the Proxy Statement, shall occur which is required to
be described in an amendment or supplement to the Proxy Statement, as the case
may be, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company.
(b) The Company will, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene and
hold the Company Stockholders Meeting for the purpose of approving this
Agreement and the transactions contemplated hereby. Except if the Special
Committee of the Board of Directors determines in good faith that to do so
would be inconsistent with its fiduciary duties under applicable law, the
Company, through its Board of Directors, shall recommend to its stockholders
approval of this Agreement (which recommendation shall be contained in the
Proxy Statement) and shall use all commercially reasonable efforts to solicit
from its stockholders proxies in favor of approval and adoption of this
Agreement.
(c) As soon as practicable following the date of
this Agreement, TAGTCR shall prepare and file with the SEC the Schedule 13E-3.
TAGTCR shall use all reasonable best efforts to have the Schedule 13E-3 cleared
by the SEC. The Company shall furnish all information about itself, its
business and operations and its owners and all financial information to TAGTCR
as may be reasonably necessary in connection with the preparation of Schedule
13E-3. The Company agrees promptly to correct any information provided by it
for use in Schedule 13E-3 if and to the extent that such information shall have
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become false or misleading in any material respect. TAGTCR shall notify the
Company of the receipt of any comments of the SEC with respect to Schedule
13E-3. TAGTCR shall give the Company and its counsel the opportunity to review
Schedule 13E-3 prior to its being filed with the SEC and shall give the Company
and its counsel the opportunity to review all amendments and supplements to
Schedule 13E-3 and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. If at
any time prior to the Effective Time, any event with respect to TAGTCR or with
respect to other information supplied by TAGTCR or the Company for inclusion in
Schedule 13E-3, shall occur which is required to be described in an amendment
or supplement to Schedule 13E-3, as the case may be, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC.
5.2 Access to Information. Upon reasonable notice, the Company
shall, and shall cause each of its Subsidiaries to, (i) afford to the officers,
employees, accountants, counsel and other representatives of TAGTCR, including
financing sources, access, during normal business hours from the date hereof to
the Effective Time, to all the properties, books, contracts, and commitments,
and (ii) furnish promptly to TAGTCR (a) a copy during such period of all
materials filed pursuant to SEC requirements and (b) all other information
concerning its business, properties and personnel as TAGTCR may reasonably
request. The Confidentiality Agreements between the Company and each of TAGTCR,
GTCR Golder- Rauner, LLC and TA/Advent VIII L.P., dated as of July 14, 1998
(collectively the "Confidentiality Agreement") shall apply with respect to
information furnished thereunder or hereunder and any other activity
contemplated thereby. No investigation pursuant to this Section 5.2 shall
affect any representation or warranty in this Agreement or any party hereto or
any condition to the obligations of the parties hereto.
5.3 Broker and Finders.
(a) The Company represents, as to itself, its
Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finders fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except for The
Robinson-Humphrey Company, LLC and Morgan, Stanley & Co. Incorporated, whose
fees and expenses will be paid by the Company in accordance with the Company's
agreements with such firms (copies of which have been delivered by the Company
to TAGTCR prior to the date of this Agreement).
(b) TAGTCR represents, as to itself and its
affiliates, that no agent, broker, investment banker, financial advisor or
other firm or Person is or will be entitled to any broker's or finders fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
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5.4 Indemnification; Directors' and Officers' Insurance.
(a) The Company shall, and from and after the
Effective Time, the Surviving Corporation shall, indemnify, defend and hold
harmless the present and former directors, officers, employees and agents of
the Company or any of its Subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including reasonable attorneys' fees
and expenses), liabilities or judgments or amounts that are paid in settlement
with the approval of the indemnifying party of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of or pertaining to the
fact that such person is or was a director or officer of the Company or any of
its Subsidiaries whether pertaining to any matter existing or occurring at or
prior to the Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities"), including all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the fullest extent a corporation is permitted under the
DGCL as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits broader rights
than such law permitted prior to such amendment and only to the extent such
amendment is not retroactively applicable) to indemnify its own directors or
officers, as the case may be. Without limiting the foregoing, in the event any
such claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel satisfactory to them and the
Surviving Corporation, and the Company or the Surviving Corporation shall pay
all fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received and otherwise advance to such Indemnified
Party upon request reimbursement of documented expenses incurred, in either
case to the fullest extent and in the manner permitted by the DGCL; and (ii)
the Company or the Surviving Corporation will use all reasonable efforts to
assist in the vigorous defense of any such matter, provided that neither the
Company nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld). Any Indemnified Party wishing to claim indemnification
under this Section 5.4, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify the Company (or after the Effective
Time, the Surviving Corporation) (but the failure so to notify shall not
relieve a party from any liability which it may have under this Section 5.4
except to the extent such failure materially prejudices such party), and shall
to the extent required by the DGCL deliver to the Company (or after the
Effective Time, the Surviving Corporation) the undertaking contemplated by
Section 145(c) of the DGCL. The Indemnified Parties 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 Indemnified Parties.
The Company and TAGTCR agree that all rights to indemnification, including
provisions relating to advances of expenses incurred in defense of any action
or suit, existing in favor of the Indemnified Parties with respect to matters
occurring through the Effective Time, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time; provided, however, that all rights to indemnification in
respect of any
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Indemnified Liabilities asserted or made within such period shall continue
until the disposition of such Indemnified Liabilities.
(b) For a period of six years after the Effective
Time, the Surviving Corporation shall cause to be maintained in effect the
current policies of directors' and officers' liability insurance maintained by
the Company and its Subsidiaries (provided that TAGTCR may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in any material respect to the
Indemnified Parties) with respect to matters arising before the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to maintain such insurance with comparable coverage if the cost of such
insurance is more than 125% of the cost of such insurance in the prior year,
but in such case, the Surviving Corporation shall purchase as much coverage as
possible for such amount.
5.5 Efforts and Actions. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement, including (a) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from all applicable
Governmental Entities and the making of all necessary registrations and
filings, including, without limitation, filings under the HSR Act and filings
with such Governmental Entities, and the taking of all reasonable steps
(including furnishing any information to any party hereto as such party may
reasonably request in connection with any such filing) as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
such Governmental Entity, (b) the obtaining of all necessary consents,
approvals or waivers from the third parties, (c) the defending of any lawsuits
or other legal proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of any of the transactions contemplated by
this Agreement, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or reversed,
and (d) the execution and delivery of any additional instruments reasonably
necessary to consummate the transactions contemplated by, and to fully carry
out the purposes of this Agreement.
5.6 Publicity. The parties will consult with each other and
will mutually agree upon any press release or public announcement pertaining to
this Agreement, the Merger or any transactions contemplated hereby and shall
not issue any such press release or make any such public announcement prior to
such consultation and agreement, except as may be required by applicable law or
by obligations arising under the Company's listing agreement with NASDAQ, in
which case the party proposing to issue such press release or make such public
announcement shall use reasonable efforts to consult in good faith with the
other party before issuing any such press release or making any such public
announcement.
5.7 Notice of Certain Events. The Company shall give prompt
written notice to TAGTCR, and TAGTCR shall give prompt notice to the Company,
of (a) the occurrence
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or nonoccurrence of any event that would be reasonably likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect at or prior to the Effective Time and (b) any failure
of the Company or TAGTCR, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.7 shall not serve to cure such breach or non-compliance or limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.8 State Takeover Laws. The Company shall, upon the request of
TAGTCR, take all reasonable steps to assist in any challenge by TAGTCR to the
validity or applicability to the transactions contemplated by this Agreement,
including the Merger, of any state takeover law.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock
entitled to vote thereon if such vote is required by applicable law.
(b) HSR Act. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(c) Governmental Consents. All licenses, permits,
consents, authorizations, approvals, qualifications and orders of Governmental
Entities set forth in Section 3.1(c)(iii) of this Agreement shall have been
obtained except where the failure to obtain such licenses, permits, consents,
authorizations, approvals, qualifications and orders, individually and in the
aggregate, will not have a material Adverse Effect on the Company.
6.2 Conditions of Obligations of TAGTCR and the Guarantors. The
obligations of TAGTCR and each of the Guarantors to effect the Merger are
subject to the satisfaction of the following conditions, any or all of which
may be waived in whole or in part by TAGTCR and each Guarantor respectively:
(a) No Material Adverse Effect. There shall not
have occurred a Material Adverse Effect on the Company from the date hereof to
the Effective Time.
(b) Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement shall
be true in all material respects
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as of the date of this Agreement and (except to the extent such representations
and warranties expressly relate to an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except as otherwise contemplated by
this Agreement and except that, with respect to representations and warranties
otherwise qualified by Material Adverse Effect, for purposes of the
satisfaction of this condition, such representations and warranties shall be
true and correct in all respects. TAGTCR shall have received a certificate
signed on behalf of the Company by the chief executive officer and by the chief
financial officer of the Company to such effect.
(c) Performance of Obligations of the Company.
The Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and TAGTCR shall have received a certificate signed on behalf of the
Company by the chief executive officer and by the chief financial officer of
the Company to such effect.
(d) Financing. The Company shall have received
the proceeds of the Financing or other financings reasonably acceptable to
TAGTCR in amounts sufficient to consummate the transactions contemplated by
this Agreement, including, without limitation, amounts sufficient (i) to pay
the Merger Consideration, (ii) to refinance existing indebtedness of the
Company, and (iii) to pay any fees and expenses in connection with the
transactions contemplated by this Agreement or the financing thereof; provided,
however, that this condition shall be deemed to have been satisfied if TAGTCR
and the Guarantors shall not have complied in all material respects with all of
their respective covenants under Section 4.2.
(e) No Injunctions or Restraints. There shall
have been no order or preliminary or permanent injunction entered in any action
or proceeding before any Governmental Entity or other action taken, nor
statute, rule, regulation, legislation, interpretation, judgment or order
enacted, entered, enforced, promulgated, amended, issued or deemed applicable
to the Company or any of its Subsidiaries or the Merger or this Agreement by
any Governmental Entity which shall have remained in effect, which, or any
suit, claim, action or proceeding before any Governmental Entity, which, if
adversely decided, would have the effect of: making illegal, materially
delaying or otherwise directly or indirectly restraining or prohibiting the
Merger, or the consummation of any of the other transactions contemplated by
this Agreement; provided, however, that TAGTCR shall have complied with its
obligations under Section 5.5.
6.3 Conditions of Obligations of the Company. The
obligations of the Company to affect the Merger are subject to the satisfaction
of the following conditions, any or all of which may be waived in whole or in
part by the Company.
(a) Representations and Warranties of TAGTCR.
The representations and warranties of TAGTCR set forth in this Agreement shall
be true in all material respects as of the date of this Agreement and (except
to the extent such representations and warranties expressly relate to an
earlier date) as of the Closing Date as
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though made on and as of the Closing Date, except as otherwise contemplated by
this Agreement and except that, with respect to representations and warranties
otherwise qualified by Material Adverse Effect, for purposes of the
satisfaction of this condition, such representations and warranties shall be
true and correct in all respects. The Company shall have received a certificate
signed on behalf of TAGTCR by an executive officer of TAGTCR to such effect.
(b) Representations and Warranties of the
Guarantors. The representations and warranties of the Guarantors set forth in
this Agreement shall be true in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties
expressly relate to an earlier date) as of the Closing Date as though made on
and as of the Closing Date, except as otherwise contemplated by this Agreement
and except that, with respect to representations and warranties otherwise
qualified by Material Adverse Effect, for purposes of the satisfaction of this
condition, such representations and warranties shall be true and correct in all
respects. The Company shall have received certificates signed on behalf of each
Guarantor by an executive officer of such Guarantor to such effect.
(c) Performance of Obligations of TAGTCR.
TAGTCR shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of TAGTCR by an
executive officer of TAGTCR to such effect.
(d) Performance of Obligations of the
Guarantors. The Guarantors shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior
to the Closing Date, and the Company shall have received certificates signed on
behalf of each Guarantor by an executive officer of such Guarantor to such
effect.
(e) No Injunctions or Restraints. No court of
competent jurisdiction or Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of preventing or prohibiting the
consummation of the transactions contemplated by this Agreement or the
effective operation of the business of the Company and the Subsidiaries after
the Effective Time; provided, however, that the Company shall have complied
with its obligations under Section 5.5.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of the Merger by the stockholders of the Company:
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(a) by mutual written consent of the Company,
by action of the Special Committee of its Board of Directors, and TAGTCR, by
action of its Board of Directors;
(b) by the Company if there has been a material
breach or failure to perform any representation, warranty, covenant or
agreement on the part of TAGTCR which breach or failure to perform has not been
cured within 30 calendar days following receipt by TAGTCR of notice of such
breach or failure;
(c) by TAGTCR if there has been a material
breach or failure to perform any representation, warranty, covenant or
agreement on the part of the Company which breach or failure to perform has not
been cured within 30 calendar days following receipt by the Company of notice
of such breach or failure;
(d) by TAGTCR or the Company if any permanent
injunction or other order of a court or other competent authority preventing
the consummation of the Merger shall have become final and nonappealable;
(e) by TAGTCR or the Company if the Merger
shall not have been consummated on or before June 30, 1999;
(f) by TAGTCR in the event the Special
Committee of the Board of Directors or the Board of Directors of the Company
shall have (i) withdrawn or adversely modified its approval or recommendation
of the Merger or this Agreement, (ii) failed to duly call, give notice of,
convene or hold the Company Stockholders Meeting, in violation of Section
5.1(b) and at the time of such failure an Acquisition Proposal by any Person
(other than TAGTCR or its affiliates) shall have been publicly announced or
provided to the Company or the Special Committee, (iii) recommended, approved,
or accepted an Acquisition Proposal by any Person (other than TAGTCR or its
affiliates), or (iv) resolved to do any of the foregoing (or the Company has
agreed to do any of the foregoing);
(g) by the Company if the Special Committee of
the Board of Directors or the Board of Directors of the Company accepts or
recommends to the holders of the shares of Company Common Stock approval or
acceptance of, an Acquisition Proposal by any Person (other than TAGTCR or its
affiliates); provided, however that the Company shall not terminate this
Agreement pursuant to this Section 7.1(g) without providing TAGTCR at least
five (5) days prior written notice, which notice shall include in reasonable
detail the terms of the Acquisition Proposal; or
(h) by TAGTCR or the Company if the Merger and
this Agreement shall have been voted on by the holders of Company Common Stock,
and the votes shall not have been sufficient to satisfy the condition set forth
in Section 6.1(a).
7.2 Effect of Termination. In the event of termination of
this Agreement by either the Company or TAGTCR as provided in Section 7.1, this
Agreement shall forthwith
39
<PAGE> 45
become void and there shall be no liability or obligation on the part of TAGTCR
or the Company or their respective affiliates, officers, directors, or
stockholders, except (i) with respect to this Section 7.2, Section 5.2 and
Section 7.3 each of which shall survive such termination, and (ii) for any
breach by a party hereto of any of its representations, warranties, covenants
or agreements contained in this Agreement.
7.3 Payment of Fees and Expenses.
(a) Except as otherwise provided in this
Section 7.3 and except with respect to claims for damages incurred as a result
of the breach of this Agreement, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense.
(b) The Company agrees to pay TAGTCR a fee in
immediately available funds equal to $7.0 million (the "Specified Fee") upon
the termination of this Agreement under Sections 7.1(f) or (g). The Specified
Fee shall be paid on the second business day following such termination.
(c) In the event (i) this Agreement shall be
terminated pursuant to Section 7.1(c) as a result of a willful breach by the
Company or pursuant to Section 7.1(h), and (ii) either (A) a transaction with
any person (other than TAGTCR or its affiliates) that is contemplated by the
term "Acquisition Proposal" and which is based on an Acquisition Proposal made
prior to such termination of this Agreement, shall be consummated on or before
the first anniversary of the termination of this Agreement, or (B) the Company
shall enter into an agreement with any person (other than TAGTCR or its
affiliates), on or before the first anniversary of the termination of this
Agreement, with respect to an Acquisition Proposal which is made prior to such
termination of this Agreement, and a transaction contemplated by the term
"Acquisition Proposal" shall thereafter be consummated with such person, then
the Company shall pay to TAGTCR a fee in immediately available funds equal to
the Specified Fee. Such amount shall be paid contemporaneously with the
consummation of such contemplated transaction. Notwithstanding the foregoing,
such fee shall be reduced by any amounts paid to TAGTCR pursuant to Section 7.3
(d).
(d) TAGTCR agrees to pay the Company a fee in
immediately available funds equal to the amount of all the Company's Designated
Expenses upon the termination of this Agreement under Section 7.1(b). The
Company agrees to pay TAGTCR a fee in immediately available funds equal to the
amount of all of TAGTCR's Designated Expenses upon the termination of this
Agreement under Section 7.1(c). Such Designated Expenses shall be paid on the
second business day following the submission thereof by the applicable party.
(e) For purposes of this Section 7.3, the term
"Designated Expenses" shall mean, with respect to a specified person, all
documented, reasonable out-of-pocket fees and expenses (not to exceed $2.0
million) incurred or paid by or on behalf of such specified person and its
affiliates to third parties in connection with the Merger or the
40
<PAGE> 46
consummation of any of the transactions contemplated by this Agreement,
including, without limitation, all printing costs and reasonable fees and
expenses of counsel, investment banking firms, brokers, accountants, experts
and consultants.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements.
None of the representations or warranties and agreements (other than Sections
5.4 and 5.6) in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time.
8.2 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telecopied or
sent by certified or registered mail, postage prepaid (and shall be deemed to
have been duly given upon receipt), to the following address or telecopy
number, or to such other address or addresses or telecopy numbers as may be
subsequently designated by notice given hereunder:
a) if to TAGTCR, to:
NMS Capital, L.P.
600 Montgomery Street
San Francisco, CA 94111
Attn: William Bunting
Telephone: 415-627-2426
Telecopy: 415-913-5704
Golder, Thoma, Cressey, Rauner Fund V, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attn: Don Edwards
Telephone: 312-382-2200
Telecopy: 312-382-2201
41
<PAGE> 47
and
TA/Advent VIII L.P.
High Street Tower
Suite 2500
125 High Street
Boston, Massachusetts 02110
Attn: Roger B. Kafker
Telephone: 617-574-6774
Telecopy: 617-574-6728
with a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Attn: Brian Hoffmann, Esq.
Telephone: 212-547-5400
Telecopy: 212-547-5444
(b) if to the Company, to:
Special Committee of the
Board of Directors
c/o CompDent Corporation
100 Mansell Court East
Suite 400
Roswell, Georgia 30076
Attn: Joseph E. Stephenson, Chairman
Telephone: 770-998-8936
Telecopy: 770-992-4349
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attn: John J. Kelley III, Esq.
Telephone: 404-572-4600
Telecopy: 404-572-5100
8.3 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the word
42
<PAGE> 48
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and any other documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereto. This Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder, except that the rights under Section 5.4 shall inure to the
benefit of and be enforceable by the Indemnified Parties.
8.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH OF TAGTCR AND THE
COMPANY HEREBY (A) IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE UNITED
STATES OF AMERICA LOCATED IN THE STATE OF DELAWARE (THE "DELAWARE COURTS") FOR
ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY, (B) AGREES NOT TO COMMENCE ANY LITIGATION
RELATING THERETO EXCEPT IN SUCH COURTS, (C) WAIVES ANY OBJECTION TO THE LAYING
OF VENUE OF ANY SUCH LITIGATION IN THE DELAWARE COURTS, AND (D) AGREES NOT TO
PLEAD OR CLAIM IN ANY DELAWARE COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS
BEEN BROUGHT IN ANY INCONVENIENT FORUM.
8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
8.8 Amendment. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by written agreement of TAGTCR, the
Company and the Guarantors at any time prior to the Effective Time with respect
to any of the terms contained herein; provided, however, that, after this
Agreement is approved by the Company's stockholders, no such amendment or
modification shall reduce the amount or change the form of consideration to be
delivered to the stockholders of the Company; and provided,
43
<PAGE> 49
further, that the exhibits referred to in Sections 1.4(c) and (d) shall be
deemed amendments hereto.
8.9 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors or Committees thereof, as the case may be, may, to the extent legally
allowed: (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto; and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
8.10 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.11 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions and other equitable remedies to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any Delaware Court, this being in addition to any other remedy to
which they are entitled at law or in equity. Any requirements for the securing
or positing of any bond with respect to such remedy are hereby waived by each
of the parties hereto.
8.12 Guarantors.
(a) Each Guarantor hereby unconditionally and
irrevocably guarantees severally, but not jointly, to the Company the due and
punctual performance of each of the obligations and the undertakings of TAGTCR
under this Agreement when and to the extent the same are required to be
performed and subject to all of the terms and conditions hereof; provided,
however, that neither TA nor GTCR shall have liability for more than 48.235% of
any liability, and NMS shall not have liability for more than 3.530% of any
liability, arising from a breach by TAGTCR under this Agreement, and provided,
further that no Guarantor shall have any liability whatsoever under this
guaranty after the Closing, whether based upon events occurring prior to or
after the Closing. If TAGTCR shall fail to perform fully and punctually any
obligation or undertaking of TAGTCR under this Agreement when and to the extent
the same is required to be performed, subject to the first sentence of this
Section 8.12(a) each Guarantor will upon written demand from the Company
forthwith perform or
44
<PAGE> 50
cause to be performed such obligation or undertaking, as the case may be. The
obligations of each Guarantor under this guaranty shall constitute an absolute
and unconditional present and continuing guarantee of performance to the extent
provided herein, and shall not be contingent upon any attempt by the Company to
enforce performance by TAGTCR.
(b) Subject to 8.12(a), the obligations of each
Guarantor under this guaranty are absolute and unconditional, are not subject
to any counterclaim, set off, deduction, abatement or defense based upon any
claim a Guarantor may have against the Company (except for any defense TAGTCR
may have against the Company under the terms of this Agreement), and shall
remain in full force and effect without regard to (i) any agreement or
modification to any of the terms of this Agreement or any other agreement which
may hereafter be made relating thereto; (ii) any exercise, non-exercise, or
waiver by the Company of any right, power, privilege or remedy under or in
respect of this Agreement; (iii) any insolvency, bankruptcy, dissolution,
liquidation, reorganization or the like of TAGTCR at or prior to the Closing;
(iv) absence of any notice to, or knowledge by, Guarantor of the existence or
occurrence of any of the matters or events set forth in the foregoing causes
(i) through (iii); (v) any transfer of shares of capital stock of TAGTCR, or
any assignment by TAGTCR of its rights and obligations under this Agreement, to
a wholly-owned subsidiary of TAGTCR or a Guarantor; or (vi) any other
circumstance, whether similar or dissimilar to the foregoing.
(c) Each Guarantor unconditionally waives (i) any and
all notice of default, non-performance or non-payment by TAGTCR under this
Agreement, (ii) all notices which may be required by statute, rule of law or
otherwise to preserve intact any rights of the Company against a Guarantor,
including, without limitation, any demand, presentment or protest, or proof of
notice of non-payment under this Agreement, and (iii) any right to the
enforcement, assertion or exercise by the Company of any right, power,
privilege or remedy conferred in this Agreement or otherwise.
(d) Notwithstanding any provision of this Agreement to
the contrary, any liability arising under this contract or this guaranty shall
be limited to $41.0 million, in the case of TA and GTCR, and $3.0 million, in
the case of NMS.
8.13 Disclosure Letters. The Disclosure Letter is hereby
incorporated into this Agreement and is hereby made a part hereof as if set out
in full in this Agreement. Certain information set forth in the Disclosure
Letter is included solely for informational purposes and may not be required to
be disclosed pursuant to this Agreement. The disclosure of any information
shall not be deemed to constitute an acknowledgment that such information is
required to be disclosed in connection with the representations and warranties
made by the Company in this Agreement.
45
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
TAGTCR Acquisition, Inc.
By: /s/ Roger B. Kafker
----------------------------------
Name: Roger B. Kafker
Title: President
CompDent Corporation
By: /s/ Joseph E. Stephenson
----------------------------------
Name: Joseph E. Stephenson
Title: Chairman of the Special Committee
of the Board of Directors
TA/Advent VIII L.P.
By: TA Associates, Inc.,
its general partner
By: /s/ Roger B. Kafker
----------------------------------
Name: Roger B. Kafker
Title: President
Golder, Thoma, Cressey, Rauner Fund V, L.P.
By: /s/ Donald Edwards
----------------------------------
Name: Donald Edwards
Title: Principal
46
<PAGE> 52
NMS Capital, L.P.
By: NMS CAPITAL MANAGEMENT LLC,
its general partner
By: /s/ William B. Bunting
-----------------------------
Name: William B. Bunting
Title:
47
<PAGE> 53
Schedule 2.2(a)(iii)
David Klock --- 100,000 shares
Phyllis Klock --- 100,000 shares
48
<PAGE> 54
Schedule 2.2(a)(iv)
None
49
<PAGE> 1
EXHIBIT 4.1
AMENDMENT TO
SHAREHOLDER RIGHTS AGREEMENT
Amendment, dated as of July 28, 1998 to the Shareholder Rights
Agreement, dated as of Shareholder Rights Agreement (the "Rights Agreement")
between CompDent Corporation, a Delaware corporation (the "Company") and State
Street Bank and Trust Company a Massachusetts trust company (the "Rights
Agent").
W I T N E S S E T H
WHEREAS, in accordance with the terms of the Rights Agreement, the
Company deems it desirable to make certain amendments to the Rights Agreement;
and
WHEREAS, Section 27 of the Rights Agreement provides that prior to the
Distribution Date (as defined therein), the Company and the Rights Agent shall,
if the Company so directs, amend or supplement any provision of the Rights
Agreement as the Company may deem necessary or desirable without the approval
of holders of the Company's common stock, par value $.01 per share (the "Common
Stock");
WHEREAS, the Company intends to enter into an Agreement and Plan of
Merger (the "Merger Agreement") with TAGT Acquisition, Inc., a Delaware
corporation ("Newco"), pursuant to which NEWCO will be merged with and into the
Company upon the terms and subject to the conditions set forth in the Merger
Agreement, as defined below (the "Merger"), and each issued and outstanding
share of Common Stock, by virtue of the Merger, shall be cancelled and
converted soleley into the right to receive $18 in cash;
WHEREAS, prior to entering into the Merger Agreement, the Company
desires to amend certain provisions of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree that the Rights Agreement
is hereby amended as follows:
1. Section 1(a) of the Rights Agreement is amended by adding at the end
of Section 1(a) a new paragraph which provides as follows:
Notwithstanding anything in this Agreement to the contrary, neither
Newco nor any of its Affiliates or Associates shall be deemed to be an
Acquiring Person or an Adverse Person and no Stock Acquisition Date,
Distribution Date, Section 11(a)(ii) Event or Section 13 Event shall occur, as
a result of (i) the execution an delivery of the Agreement and Plan of Merger,
dated as of July 28, 1998, by and among Newco, the Company and the Guarantors
described therein (the "Merger
1
<PAGE> 2
Agreement"); (ii) any action taken by Newco, or any of its Affiliates;
Associates or shareholders in accordance with the provisions of the Merger
Agreement; or (iii) the consummation of the Merger (as such term is defined in
the Merger Agreement) in accordance with the provisions of the Merger
Agreement. Notwithstanding the foregoing, upon the termination of the Merger
Agreement in accordance with its terms, this paragraph shall become null and
void and of no further force or effects.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.)
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written. This Amendment may
be executed in one or more counterparts all of which shall be considered one
and the same amendment and eachof which shall be deemed to be an original.
ATTEST: COMPDENT CORPORATION
By: /s/ Bruce A. Mitchell By: /s/ David Klock
------------------------------ ------------------------------
Name: Bruce A. Mitchell Name: David R. Klock
Title: Chairman & CEO
ATTEST: STATE STREET BANK AND TRUST
COMPANY, as Rights Agent
By:/s/ David M. Elwood By: /s/ Charles Rossi
------------------------------- -------------------------------
Name: David M. Elwood Name: Charles V. Rossi
Title: Vice President
3
<PAGE> 1
EXHIBIT 99.1
NEWSRELEASE
[COMPDENT CORPORATION LOGO]
FOR IMMEDIATE RELEASE 100 Mansell Court East
Suite 400
Contact: Roswell, Georgia 30076
Keith Yoder 770.998.8936
Executive Vice President Facsimile 770.992.4349
Chief Financial Officer ________________
CompDent Corporation
(770) 998-8936
COMPDENT CORPORATION ANNOUNCES SIGNING OF A DEFINITIVE MERGER AGREEMENT AND
REPORTS SECOND QUARTER AND SIX MONTH RESULTS
Atlanta, GA - July 28, 1998 - CompDent Corporation (Nasdaq: CPDN)
Execution of Definitive Merger Agreement
CompDent Corporation, a leader in providing total dental benefits, announced
today that based upon the unanimous recommendation of a special committee of
independent directors of the Company, the Company's Board of Directors approved
the terms of a definitive merger agreement with a new company formed by Golder,
Thoma, Cressey, Rauner, Inc., TA Associates, Inc. and NMS Capital Partners
which will effect a re-capitalization of the Company. Under the definitive
merger agreement, CompDent will be re-capitalized and each outstanding share of
CompDent's common stock, other than certain shares held by management, will be
converted into the right to receive $18.00 in cash, and the existing funded
indebtedness of CompDent will be refinanced. Certain shares held by management
will be converted into shares of the surviving corporation and management will
maintain an equity interest in the surviving corporation.
The proposed transaction is subject to certain conditions including approval by
stockholders of CompDent holding a majority of the outstanding shares,
regulatory approval, the closing of equity and debt financing commitments and
other customary closing conditions. The transaction will be funded by equity
commitments of Golder, Thoma, Cressey, Rauner, Inc., TA Associates, Inc. and
NMS Capital Partners. NationsBank, N.A. and NationsBridge, L.L.C. together have
committed subject to certain terms and conditions, to provide the necessary
debt financing for the transaction.
David R. Klock, chairman and chief executive officer of CompDent Corporation,
stated, "We are pleased that this transaction provides full liquidity for our
current shareholders at a significant premium." Don Edwards, a principal with
GTCR, commented, "We believe CompDent is well-positioned as a leading provider
of dental health benefits and dental management services." Roger Kafker, a
managing director at TA, also commented, "We are excited to be investing in
this industry leader with the Company's strong existing management team."
Second Quarter and Six Month Results
Revenues for the second quarter increased 14.0% to $43.6 million, up from $38.2
million for the same period in 1997. The increase was the result of an increase
in subscriber premiums of $0.1 million and the addition of Dental Health
Management, Inc. ("DHMI") ($5.8 million) in the third quarter of 1997. The
increase was offset by a reduction in other revenue of $0.6 million for the
quarter compared to the same period in 1997. Net income for the quarter was
$2.6 million, or $0.26 per share, compared to $2.9 million, or $0.28 per share,
for the same period in 1997. EBITDA (earnings before interest, taxes,
depreciation and amortization) a standard measure of operating cash flow, was
$7.2 million for the quarter, or $0.71 per share, compared with $7.1 million,
or $0.70 per share for the same period last year.
Revenues for the six months increased 13.1% to $86.0 million, up from $76.0
million for the same period in 1997. The increase was due to addition of DHMI
($11.1 million) in the third quarter of 1997. The increase was offset by a
reduction in subscriber premiums and other revenue of $1.1 million for the six
months compared to the same period in 1997. Net income for the six months was
$5.1 million, or $0.50 per share, compared to $5.7 million, or $0.56 per share,
for the same period in 1997. EBITDA (earnings before
<PAGE> 2
interest, taxes, depreciation and amortization) a standard measure of operating
cash flow, was $14.0 million for the six months, or $1.37 per share, compared
with $14.3 million, or $1.41 per share for the same period last year.
David R. Klock, chairman and chief executive officer of CompDent Corporation,
said, "We are pleased with the retention of a number of large groups during the
second quarter. We are also pleased with the continued growth of DHMI during
the second quarter and the support this has provided in a number of our
markets. Phil Hertik has resigned his position as President of DHMI to focus on
his other financial interests but will remain as a member of the Board of
Directors. We appreciate Phil's leadership in the launching of DHMI."
CompDent Corporation, headquartered in Atlanta, is a fully integrated dental
management company. The Company offers a full line of dental care plan
services, including network-based dental care plans, referral fee-for-service
products, and third-party administrative services. CompDent Corporation
currently provides dental coverage for 2.1 million members in more than 23
states. The Company's managed dental care plans are sold through a network of
independent agents and an employee sales force that assists independent agents.
The Company also owns DHM which provides management and administrative services
to dental practices. DHM manages or operates 48 dental practices in 8 states.
This press release contains forward-looking information, regarding the Company.
The forward-looking statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be significantly impacted by certain risks and uncertainties,
including, the Company's ability to execute its strategy. Other risk factors
are described in CompDent Corporation's Annual Report on Form 10-K for the year
ended December 31, 1997 and 1st Quarter Report on Form 10-Q, all on file with
the Securities and Exchange Commission.
-tables follow-
Editor's Note: This release is also available on the Internet at
http://www.compdent.com
<PAGE> 3
COMPDENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1998 1997 1998 1997
------------ ------------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Revenues:
<S> <C> <C> <C> <C>
Subscriber premiums $ 35,982 $ 35,852 $ 71,404 $ 71,488
Affiliated practice revenue 5,824 - 11,115 -
Other revenue 1,757 2,348 3,486 4,547
------------ ----------- ----------- ----------
Total revenue 43,563 38,200 86,005 76,035
Expenses:
Dental care providers' fees and claim costs 19,505 19,906 38,934 39,450
Commissions 3,346 3,192 6,612 6,364
Premium taxes 194 256 455 521
DHMI operating expenses 5,262 - 9,867 -
General and administrative 8,293 7,967 16,667 15,827
Depreciation and amortization 1,475 1,355 2,854 2,676
------------ ----------- ----------- ----------
Total expenses 38,075 32,676 75,389 64,838
------------ ----------- ----------- ----------
Operating income 5,488 5,524 10,617 11,197
Other expense (income):
Interest income (245) (254) (499) (415)
Interest expense 1,159 738 2,172 1,446
Other, net (3) (16) (3) (61)
------------ ----------- ----------- ----------
911 468 1,670 970
Income before provision for income taxes 4,577 5,056 8,947 10,227
Income tax provision 1,972 2,172 3,850 4,504
------------ ----------- ----------- ----------
Net income $ 2,605 $ 2,884 $ 5,097 $ 5,723
Net income per common share - basic $ 0.26 $ 0.29 $ 0.50 $ 0.57
Net income per common share - fully diluted $ 0.26 $ 0.28 $ 0.50 $ 0.56
EBITDA $ 7,211 $ 7,149 $ 13,973 $ 14,349
EBITDA per share $ 0.71 $ 0.70 $ 1.37 $ 1.41
Weighted average common shares outstanding - basic 10,113 10,106 10,113 10,106
Weighted average common shares outstanding - fully diluted 10,181 10,179 10,178 10,172
</TABLE>
<TABLE>
<CAPTION>
MEMBERSHIP HIGHLIGHTS
AS OF JUNE 30, 1998 AS OF MARCH 31, 1998
--------------------------------------------------------------
<S> <C> <C>
DHMO Members 1,404,820 1,395,735
Indemnity Relationship Members 166,749 177,212
Referral Product Members 184,213 187,637
ASO Members 313,226 311,871
Network Leasing Members 71,762 79,238
----------------- ---------------
Total Members 2,140,770 2,151,693
================= ===============
</TABLE>
<TABLE>
<CAPTION>
DENTAL FACILITIES UNDER MANAGEMENT (DHMI)
Locations # of Dentists # of Facilities # of Operatories
--------- --------------- ----------------- -----------------
<S> <C> <C> <C>
Arkansas 3 1 11
Illinois 21 17 97
Florida 4 1 9
Georgia 9 5 30
Tennessee 2 1 8
Indiana 12 6 31
De Novo's* 18 17 99
Total 69 48 285
*revenues not consolidated
</TABLE>
