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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)
January 27, 1999
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 January 18, 1999, CompDent Corporation's ("CompDent") Board of Directors
approved the terms of an amended and restated 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 Terms of the amendment to the Merger
Agreement which will among other things, reduce the cash purchase price to be
paid to CompDent's stockholders pursuant to the Merger by $3.00 per share from
$18.00 per share to $15.00 per share and modify provisions of the Merger
Agreement relating to solicitation of other offers and termination fees. 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 amended and restated 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.
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
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2.1 Amended and Restated Agreement and Plan of Merger by and between
CompDent Corporation, TAGTCR Acquisition, Inc., and the Guarantors
dated as of July 28, 1998
99.1 Press release dated January 19, 1999
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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: January 27, 1999 By: /s/ Keith J. Yoder
-------------------------------------------
Keith J. Yoder
Chief Financial Officer and Treasurer
Principal Financial and Accounting Officer
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EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
by and between
CompDent Corporation,
TAGTCR Acquisition, Inc.
and the Guarantors described herein
Dated as of July 28, 1998
Amended and Restated as of January 18, 1999
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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..........................................................5
(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.................................................11
(f) Regulated Subsidiaries...............................................12
(g) Compliance with Applicable Laws......................................12
(h) Litigation...........................................................13
(i) Taxes................................................................13
(j) Pension and Benefit Plans; ERISA.....................................15
(k) Absence of Certain Changes or Events.................................16
(l) No Undisclosed Material Liabilities..................................17
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(m) Vote Required........................................................17
(n) Labor Matters........................................................17
(o) Intellectual Property................................................18
(p) Environmental Matters................................................19
(q) Insurance............................................................21
(r) DHDC Financial Statements............................................21
(s) Board of Directors Recommendation....................................21
(t) Material Contracts...................................................21
(u) Fairness Opinion.....................................................22
(v) Regulatory Filings...................................................22
(w) State Takeover Laws..................................................22
3.2 Representations and Warranties of TAGTCR..............................................22
(a) Organization, Standing and Power.....................................22
(b) Authority; No Violations; Consents and Approvals.....................23
(c) Information Supplied.................................................24
(d) Board of Directors Recommendation....................................24
(e) Delaware Law.........................................................24
3.3 Representations and Warranties of the Guarantors......................................24
(a) Organization, Standing and Power.....................................24
(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...............................................27
(d) Governing Documents..................................................27
(e) Solicitation.........................................................28
(f) No Acquisitions......................................................28
(g) No Dispositions......................................................28
(h) Governmental Filings.................................................28
(i) No Dissolution, Etc..................................................28
(j) Other Actions........................................................28
(k) Certain Employee Matters.............................................29
(l) Indebtedness; Agreements.............................................29
(m) Accounting...........................................................30
(n) Capital Expenditures.................................................30
(o) Insurance............................................................30
(p) Hedging..............................................................30
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(ii)
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(q) Transfer of Interest in DHDC and DHMI................................30
4.2 Covenants of TAGTCR...................................................................30
ARTICLE V
ADDITIONAL AGREEMENTS...................................................................................31
5.1 Preparation of the Proxy Statement; Company Stockholders Meeting......................31
5.2 Access to Information.................................................................32
5.3 Broker and Finders....................................................................32
5.4 Indemnification; Directors' and Officers' Insurance...................................33
5.5 Efforts and Actions...................................................................34
5.6 Publicity.............................................................................34
5.7 Notice of Certain Events..............................................................35
5.8 State Takeover Laws...................................................................35
ARTICLE VI
CONDITIONS PRECEDENT....................................................................................35
6.1 Conditions to Each Party's Obligation to Effect the Merger............................35
(a) Stockholder Approval.................................................35
(b) HSR Act..............................................................35
(c) Governmental Consents................................................35
6.2 Conditions of Obligations of TAGTCR and the Guarantors................................35
(a) No Material Adverse Effect...........................................36
(b) Representations and Warranties.......................................36
(c) Performance of Obligations of the Company............................36
(d) Financing............................................................36
(e) No Injunctions or Restraints.........................................36
6.3 Conditions of Obligations of the Company..............................................37
(a) Representations and Warranties of TAGTCR.............................37
(b) Representations and Warranties of the Guarantors.....................37
(c) Performance of Obligations of TAGTCR.................................37
(d) Performance of Obligations of the Guarantors.........................37
(e) No Injunctions or Restraints.........................................37
ARTICLE VII
TERMINATION AND AMENDMENT...............................................................................38
7.1 Termination...........................................................................38
7.2 Effect of Termination.................................................................39
7.3 Payment of Fees and Expenses..........................................................39
ARTICLE VIII
GENERAL PROVISIONS......................................................................................40
8.1 Nonsurvival of Representations, Warranties and Agreements.............................40
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(iii)
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8.2 Notices...............................................................................40
8.3 Interpretation........................................................................42
8.4 Counterparts..........................................................................42
8.5 Entire Agreement; Third Party Beneficiaries...........................................42
8.6 GOVERNING LAW.........................................................................42
8.7 Assignment............................................................................43
8.8 Amendment.............................................................................43
8.9 Extension; Waiver.....................................................................43
8.10 Severability..........................................................................43
8.11 Enforcement of Agreement..............................................................44
8.12 Guarantors............................................................................44
8.13 Disclosure Letters....................................................................45
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(iv)
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as
of July 28, 1998 and amended and restated as of January 18, 1999 (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"). Unless otherwise indicated,
references herein to the phrases "the date hereof," "the date of this
Agreement," and other phrases of similar import shall be deemed to be references
to the date of the amendment and restatement of this Agreement, rather than the
original date of this Agreement.
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
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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., Central 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 Kirkland &
Ellis, Chicago, Illinois, unless another date, time or place is agreed to in
writing by the parties hereto.
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 on Exhibit A attached
hereto, 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.
(d) The Bylaws of the Company shall be amended and
restated in their entirety as set forth on Exhibit B attached hereto, 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.
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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 Convertible Participating Preferred Stock of TAGTCR issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one share of Convertible Participating 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) 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 $15.00 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.
(b) All such shares of Company Common Stock, when
converted as provided in Section 2.2(a) (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,
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shall only represent the right to receive for their Shares, the Merger
Consideration, without any interest thereon.
(c) Each share of Company Common Stock identified on
Schedule 2.2(c) (a "2.2(c) Recapitalization Share"), as revised from time to
time at least one (1) business day prior to the mailing of the Proxy Statement
by TAGTCR, shall be converted into 1.243056 fully paid and nonassessable shares
of Common Stock, par value $0.01 per share, of the Surviving Corporation and
0.0142542 fully paid and nonassessable shares of Convertible Participating
Preferred Stock.
(d) Each share of Company Common Stock identified on
Schedule 2.2(d) (a "2.2(d) Recapitalization Share" and together with the 2.2(c)
Recapitalization Shares, the "Recapitalization Shares"), as revised from time to
time at least one (1) business day prior to the mailing of the Proxy Statement
by TAGTCR, shall be converted into 30 fully paid and nonassessable shares of
Common Stock, par value $0.01 per share, of the Surviving Corporation.
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) 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 Payment Fund shall not be used for any
purpose except as expressly provided in this Agreement.
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(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.
(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.
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(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 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
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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 January 18, 1999, 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 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,
7
<PAGE> 13
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 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
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<PAGE> 14
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
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
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<PAGE> 15
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 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
10
<PAGE> 16
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 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
11
<PAGE> 17
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 each of the quarters ended March 31, June 30 and
September 30, 1998.
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
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<PAGE> 18
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 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
13
<PAGE> 19
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 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,
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<PAGE> 20
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").
(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.
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<PAGE> 21
(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 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 September 30, 1998, since
September 30, 1998, the business of the
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<PAGE> 22
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 September 30,
1998 (the "September 30 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 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
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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 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.
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(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 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
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<PAGE> 25
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;
(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;
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(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 September 30, 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.
(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
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"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.
(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.
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(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; 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
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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.
(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.
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(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 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
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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 $145 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 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 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 (including the shares of DHDC common stock
which GTCR has agreed to repurchase from RH Capital Partners, L.P.) 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 $255.7 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 Convertible
Participating Preferred Stock to be received by the holders of Recapitalization
Shares will be identical to the Convertible Participating Preferred Stock to be
received by the Guarantors. The holders of the Recapitalization Shares that
receive Convertible Participating Preferred Stock will pay a per share amount
equal to that paid by the Guarantors.
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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 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.
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(e) Solicitation. On and after January 18, 1999,
notwithstanding any other covenant or agreement contained in this Agreement to
the contrary, the Company, its Subsidiaries and DHDC and any of the respective
officers, directors, employees, agents and representatives of the Company, its
Subsidiaries and DHDC (including, without limitation, any investment banker,
attorney or accountant retained by the Company, any of its Subsidiaries or DHDC)
shall be permitted 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") and to engage in any
negotiations concerning, and provide any confidential information or data to,
and have any discussions with, any person relating to any Acquisition Proposal,
and may otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. The Company will notify TAGTCR immediately after it
receives an indication of interest, inquiry or proposal from a third party
regarding an Acquisition Proposal and such third party commences a due diligence
investigation of the Company with respect to such Acquisition Proposal. The
Company will keep TAGTCR apprised of all material developments relating to such
Acquisition Proposal.
(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
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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 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.
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(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.
(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
$3.0 million such that the aggregate amount of Recapitalization Shares does not
exceed $10 million. 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.
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(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 $3.0 million
such that the aggregate amount of Recapitalization Shares does not exceed $10
million.
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 has received a bona fide offer of an Acquisition Proposal that
would be a Superior Transaction (as defined below), 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
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Agreement. A "Superior Transaction" is a transaction that the Special Committee
determines in its good faith judgment, after consultation with its legal and
financial advisors, (i) is reasonably capable of being completed, taking into
account, all legal, financial, regulatory and other aspects of the proposal and
the third party making the proposal, and (ii) provides greater value to the
holders of Common Stock (specifically taking into account the expected value of
the consideration to be received by the holders of Common Stock on the date such
consideration is expected to be received by such holders) than the Merger
Consideration contained in 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 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
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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.
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
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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 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
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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 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
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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 January 18, 1999 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 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.
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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 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.
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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:
(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 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
38
<PAGE> 44
(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 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 the amount of all of TAGTCR's Designated Expenses upon
the termination of this Agreement under Sections 7.1(f) or (g). Such Designated
Expenses shall be paid on the second business day following the submission
thereof by TAGTCR.
(c) In the event this Agreement shall be terminated
pursuant to Section 7.1(h), and 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 amount of all of
TAGTCR's Designated Expenses. Such Designated Expenses shall be paid on the
second business day following the submission thereof by TAGTCR.
(d) TAGTCR agrees to pay the Company a fee in immediately
available funds equal to the amount of all of the Company's Designated Expenses
upon the termination of this Agreement under Sections 7.1(a) or (e), provided
that the only unsatisfied closing condition (other than the delivery of
customary closing documents) is the condition set forth in Section 6.2(d). Such
Designated Expenses shall be paid on the second business day following the
submission thereof by the Company. If the Agreement is terminated under Sections
7.1(a) or (e) and the only unsatisfied
39
<PAGE> 45
closing condition (other than the delivery of customary closing documents) is
the condition set forth in Section 6.2(d), TAGTCR shall have no liability to the
Company except as set forth in this Section 7.3(d) (it being understood that
this sentence is for emphasis only, and is not meant to imply that but for this
sentence, TAGTCR would otherwise have any liability to the Company in the event
any closing condition is unsatisfied).
(e) 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.
(f) For purposes of this Section 7.3, the term
"Designated Expenses" shall mean, (i) with respect to the Company, all
documented, reasonable out-of-pocket fees and expenses (not to exceed $1.0
million) incurred or paid by or on behalf of the Company and its affiliates to
third parties, and (ii) with respect to TAGTCR, all documented, reasonable
out-of-pocket fees and expenses (not to exceed $1.5 million) incurred or paid by
or on behalf of TAGTCR and its affiliates to third parties, in each case in
connection with the Merger or the 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:
40
<PAGE> 46
(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: Donald J. Edwards
Telephone: 312-382-2200
Telecopy: 312-382-2201
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:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Sanford E. Perl, Esq.
Telephone: 312-861-2291
Telecopy: 312-861-2200
41
<PAGE> 47
(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 "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
42
<PAGE> 48
THEREOF. EACH OF TAGTCR, THE COMPANY AND THE GUARANTORS 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.
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.
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<PAGE> 49
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 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.
44
<PAGE> 50
(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 amended and
restated Agreement to be signed by their respective officers thereunto duly
authorized, all as of the amendment and restatement date first written above.
TAGTCR ACQUISITION, INC.
By:
----------------------------------------------
Name:
Title:
COMPDENT CORPORATION
By:
----------------------------------------------
Name:
Title:
TA/ADVENT VIII L.P.
By: TA Associates, Inc., its general partner
By:
------------------------------------------
Name:
Title:
GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P.
By: GTCR V, L.P., its General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By:
-------------------------------------
Name:
Title:
NMS CAPITAL, L.P.
By: NMS CAPITAL MANAGEMENT LLC,
its general partner
By:
------------------------------------------
Name:
Title:
46
<PAGE> 52
Schedule 2.2(c)
Kaufman Fund --- 200,000 shares
Roger B. Kafker --- 23,000 shares
Richard D. Tadler --- 4,000 shares
Jane Broderick --- 300 shares
Jonathan Goldstein --- 6,000 shares
David Klock --- 93,166.667
Phyllis Klock --- 93,666,667
<PAGE> 53
Schedule 2.2(d)
David Klock --- 6,833.333 shares
Phyllis Klock --- 6,333.333 shares
<PAGE> 54
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COMPDENT CORPORATION
This Amended and Restated Certificate of Incorporation has
been duly adopted by CompDent Corporation (the "Corporation") in accordance with
Sections 242 and 245 of the General Corporation Law of the State of Delaware.
ARTICLE I
The name of the Corporation is CompDent Corporation.
ARTICLE II
The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV
PART A. AUTHORIZED SHARES
The total number of shares of capital stock which the
Corporation has authority to issue is 11,200,000 shares, consisting of:
(1) 100,000 shares of Convertible Participating Preferred
Stock, par value $.01 per share (the "Convertible Preferred
Stock");
1
<PAGE> 55
(2) 100,000 shares of Perpetual Preferred Stock, par value
$.01 per share (the "Perpetual Preferred Stock"); and
(3) 11,000,000 shares of Common Stock, par value $.01 per
share (the "Common Stock").
The Convertible Preferred Stock and Perpetual Preferred Stock
are referred to collectively as the "Preferred Stock." The Preferred Stock and
Common Stock are referred to collectively as the "Stock." The shares of Stock
shall have the rights, preferences and limitations set forth below. Capitalized
terms used but not otherwise defined in Part A, Part B or Part C of this Article
IV are defined in Part D.
Except as otherwise restricted by this Amended and Restated
Certificate of Incorporation, the Corporation is authorized to issue, from time
to time, all or any portion of the capital stock of the Corporation which may
have been authorized but not issued, to such person or persons and for such
lawful consideration as it may deem appropriate, and generally in its absolute
discretion to determine the terms and manner of any disposition of such
authorized but unissued capital stock.
Any and all such shares issued for which the full
consideration has been paid or delivered shall be deemed fully paid shares of
capital stock, and the holder of such shares shall not be liable for any further
call or assessment or any other payment thereon.
PART A. CONVERTIBLE PARTICIPATING PREFERRED STOCK
1. Voting. Each share of Convertible Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such share of Convertible Preferred Stock could be converted
pursuant to Section 5 below on the record date for the vote or written consent
of stockholders, if applicable, with fractional votes for fractional shares. The
holder of each share of Convertible Preferred Stock shall be entitled to notice
of any stockholders' meeting in accordance with the by-laws of the Corporation
and shall vote with holders of the Common Stock, voting together as single
class, upon all matters submitted to a vote of stockholders, excluding those
matters required to be submitted to a class or series vote pursuant to the terms
hereof or by law.
2. Dividends. The holders of Convertible Preferred Stock
shall be entitled to receive dividends out of funds legally available therefor
at such times and in such amounts as the Board of Directors may determine in its
sole discretion; provided, however, that no such dividend may be declared or
paid on any shares of Convertible Preferred Stock unless at the same time a
dividend is declared or paid on all outstanding shares of Common Stock and vice
versa, with holders of Convertible Preferred Stock and Common Stock sharing in
any such dividends as if they constituted a single class of stock and with each
holder of shares of Convertible Preferred Stock entitled to receive such
dividends based on the number of shares of Common Stock into which such shares
of Convertible Preferred Stock are then convertible in accordance with Section 5
below. The right to dividends on shares of Convertible Preferred Stock shall not
be cumulative, and no right shall accrue to holders of Convertible Preferred
Stock by reason of the fact that dividends on said shares are not declared in
any prior period.
2
<PAGE> 56
3. Liquidation.
(a) Liquidation Preference. Upon any Liquidation
Event, each holder of outstanding shares of Convertible Preferred Stock
shall be entitled to be paid out of the assets of the Corporation
available for distribution to stockholders, whether such assets are
capital, surplus or earnings, and before any amount shall be paid or
distributed to the holders of Common Stock or of any other stock
ranking on liquidation junior to the Convertible Preferred Stock, an
amount in cash equal to (i) $1,008.72 per share of Convertible
Preferred Stock held by such holder (adjusted appropriately for stock
splits, stock dividends, recapitalizations and the like with respect to
the Convertible Preferred Stock), plus (ii) any declared but unpaid
dividends to which such holder of outstanding shares of Convertible
Preferred Stock is then entitled, if any, pursuant to Sections 2 and
4(f) hereof (the sum of clauses (i) and (ii) being referred to herein
as the "Convertible Preferred Base Liquidation Amount"), plus (iii) any
interest accrued pursuant to Section 4(e) hereof to which such holder
of Convertible Preferred Stock is entitled, if any (the sum of clauses
(i), (ii) and (iii) being referred to herein as the "Convertible
Preferred Liquidation Preference Amount"); provided, however, that if,
upon any Liquidation Event, the amounts payable with respect to the
Convertible Preferred Liquidation Preference Amount are not paid in
full, the holders of the Convertible Preferred Stock shall share
ratably in any distribution of assets in proportion to the full
respective preferential amounts to which they are entitled; and
provided further, however, that if upon any Liquidation Event the
holders of the outstanding shares of Convertible Preferred Stock would
receive more than the Convertible Preferred Liquidation Preference
Amount in the event all of their shares were converted into shares of
Perpetual Preferred Stock and Common Stock immediately prior to the
record date for distributions in connection with such Liquidation
Event, then each holder of an outstanding share of Convertible
Preferred Stock shall receive, in lieu of the Convertible Preferred
Liquidation Preference Amount, an amount equal to such holder's
Perpetual Stock Liquidation Preference Amount (as defined in Section 3
of Part C below) under Section 3 of Part C below plus any dividends
pursuant to Sections 2 or 4(f) hereof which are declared but unpaid and
any interest due under Section 4(e) below in respect of such share as
of the date of such Liquidation Event before any amount shall be paid
or distributed to the holders of Common Stock or of any other stock
ranking on liquidation junior to the Convertible Preferred Stock, and
thereafter shall share with the holders of Common Stock and any other
stock ranking on liquidation junior to the Convertible Preferred Stock
in the assets available for distribution, with such distributions to be
made in cash and as if each share of Convertible Preferred Stock had
been converted into the number of shares of Perpetual Preferred Stock
and Common Stock issuable upon the conversion of such holder's shares
of Convertible Preferred Stock immediately prior to any such
Liquidation Event. The provisions of this Section 3 shall not in any
way limit the right of the holders of Convertible Preferred Stock to
elect to convert their shares of Convertible Preferred Stock into
shares of Perpetual Preferred Stock and Common Stock pursuant to
Section 5 prior to or in connection with any Liquidation Event.
(b) Notice. Prior to the occurrence of any
Liquidation Event, the Corporation will furnish each holder of
Convertible Preferred Stock notice in accordance with Section 7,
3
<PAGE> 57
together with a certificate prepared by the chief financial officer of
the Corporation describing in detail the facts of such Liquidation
Event, stating in detail the amount(s) per share of Convertible
Preferred Stock each holder of Convertible Preferred Stock would
receive pursuant to the provisions of Section 3(a) (both with respect
to the amount a holder would receive pursuant to clauses (i) and (ii)
of Section 3(a) and the amount a holder would receive pursuant to the
second proviso of Section 3(a)) and stating in detail the facts upon
which such amounts were determined.
4. Redemption.
(a) Redemption Events.
(i) Scheduled Redemption. At any one
time on or after _______, ____*, upon the election of the
holder or holders of not less than sixty-six and two-thirds
percent (66 2/3%) of the voting power of the outstanding
Convertible Preferred Stock, the Corporation shall redeem all
(and not less than all, other than pursuant to Section 4(e)
below) of the outstanding shares of Convertible Preferred
Stock at the Convertible Preferred Redemption Price specified
in Section 4(d). The foregoing election shall be made by such
holders giving the Corporation and each of the other holders
of Convertible Preferred Stock not less than fifteen (15) days
prior written notice, which notice shall set forth the date
for such redemption.
(ii) Extraordinary Transactions. Upon
the election of the holder or holders of not less than
sixty-six and two-thirds percent (66 2/3%) in voting power of
the outstanding Convertible Preferred Stock in connection with
any Extraordinary Transaction, then, as a part of and as a
condition to the effectiveness of such Extraordinary
Transaction, unless the holders of Convertible Preferred Stock
shall have elected to convert their shares of Convertible
Preferred Stock into shares of Perpetual Preferred Stock and
Common Stock in accordance with the voluntary conversion
provisions of Section 5 prior to the effective date of such
Extraordinary Transaction, the Corporation shall, on the
effective date of such Extraordinary Transaction, unless the
Convertible Preferred Stock is acquired in such Transaction on
terms giving effect to the preferential amount to which the
Convertible Preferred Stock would be entitled in connection
with a Liquidation Event and hereunder and otherwise as agreed
to by sixty-six and two-thirds percent (66 2/3%) of the
holders thereof, redeem all (but not less than all) of the
outstanding shares of Convertible Preferred Stock for an
amount equal to the Convertible Preferred Liquidation
Preference Amount, such amount to be payable in cash or, at
the election of holders of not less than sixty-six and
two-thirds percent (66 2/3%) in voting power of the
outstanding Convertible Preferred Stock, in the same form of
consideration as is paid to the holders of Common Stock in
such Extraordinary Transaction, and no payment shall be made
to the holders of the Common Stock or any
- -----------------------
* This date will be the eleventh anniversary of the date of the filing of
this Restated Certificate of Incorporation.
4
<PAGE> 58
other stock ranking on liquidation junior to the Convertible
Preferred Stock unless such amount is paid in full.
Notwithstanding the foregoing, if upon any Extraordinary
Transaction the holders of the outstanding shares of
Convertible Preferred Stock would receive more than the
Convertible Preferred Liquidation Preference Amount in the
event their shares were converted into shares of Perpetual
Preferred Stock and Common Stock immediately prior to such
Extraordinary Transaction, then each holder of Convertible
Preferred Stock shall receive with respect to each outstanding
share of Convertible Preferred Stock held by such holder an
amount equal to the per share Perpetual Stock Liquidation
Preference Amount under Section 3 of Part C below plus any
dividends pursuant to Section 2 or 4(f) hereof which are
declared but unpaid and any interest due under Section 4(e) in
respect of such share as of the date of such Extraordinary
Transaction before any amount shall be paid or distributed to
the holders of Common Stock or of any other stock ranking on
liquidation junior to the Convertible Preferred Stock, payable
in cash, and thereafter shall share with the holders of the
Common Stock and any other stock ranking on liquidation junior
to the Convertible Preferred Stock in the proceeds of such
Extraordinary Transaction or, as applicable, shall receive an
amount equal to the amount per share that would be paid if the
shares of Common Stock receivable upon conversion of the
Convertible Preferred Stock were being acquired in the
Extraordinary Transaction at the same price per share as is
paid for Common Stock, which excess amount shall be paid in
the same form of consideration as is paid to holders of Common
Stock, as if each share of Convertible Preferred Stock had
been converted into the number of shares of Perpetual
Preferred Stock and Common Stock issuable upon the conversion
of such share of Convertible Preferred Stock in accordance
with Section 5 hereof immediately prior to such Extraordinary
Transaction. Notwithstanding the foregoing, in connection with
the acquisition of the Convertible Preferred Stock in an
Extraordinary Transaction which is accounted for by the
acquiring entity as a pooling of interests, the holders of
shares of Convertible Preferred Stock shall receive, if so
required for the application of such accounting treatment, and
in lieu of cash, the number of shares of common stock of such
entity having a value equal to the amount otherwise payable to
the holders of Convertible Preferred Stock in such
Extraordinary Transaction pursuant to the preceding sentence
and having the same registered status or registration rights
as any other shares in such transaction. The foregoing
election shall be made by such holders giving the Corporation
and each other holder of Convertible Preferred Stock not less
than five (5) business days prior written notice, which notice
shall set forth the date for such redemption. The provisions
of this Section 4 shall not in any way limit the right of the
holders of Convertible Preferred Stock to elect to convert
their shares into shares of Perpetual Preferred Stock and
Common Stock pursuant to Section 5 prior to or in connection
with any Extraordinary Transaction.
(b) Valuation of Distribution Securities. Any
securities or other consideration to be delivered to the holders of the
Convertible Preferred Stock upon any Extraordinary Transaction in
accordance with the terms hereof shall be valued as follows:
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(i) If traded on a nationally
recognized securities exchange or inter-dealer quotation
system, the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system
over the 30-day period ending three (3) business days prior to
the closing;
(ii) If traded over-the-counter, the
value shall be deemed to be the average of the closing bid
prices over the 30-day period ending three (3) business days
prior to the closing; and
(iii) If there is no active public
market, the value shall be the fair market value thereof, as
mutually determined by the Corporation and the holders of not
less than sixty-six and two-thirds percent (66 2/3%) in voting
power of the outstanding shares of Convertible Preferred
Stock, provided that if the Corporation and the holders of
sixty-six and two-thirds percent (66 2/3%) in voting power of
the outstanding shares of Convertible Preferred Stock are
unable to reach agreement, then by independent appraisal by a
mutually agreed to investment banker, the fees of which shall
be paid by the Corporation.
(c) Notice by Corporation. Prior to the
occurrence of any Extraordinary Transaction, the Corporation will
furnish each holder of Convertible Preferred Stock notice in accordance
with Section 7 hereof, together with a certificate prepared by the
chief financial officer of the Corporation describing in detail all
material terms of such Extraordinary Transaction, including without
limitation the consideration to be delivered in connection with such
Extraordinary Transaction, the valuation of the Corporation at the time
of such Extraordinary Transaction and the identities of the parties to
the Extraordinary Transaction.
(d) Purchase Date and Price. Upon the election
of the holders of not less than sixty-six and two-thirds percent
(66 2/3%) of the voting power of the outstanding Convertible Preferred
Stock to cause the Corporation to redeem the Convertible Preferred
Stock or otherwise to participate in an Extraordinary Transaction
pursuant to Section 4(a)(i) or (ii), all holders of Convertible
Preferred Stock shall be deemed to have elected to cause the
Convertible Preferred Stock to be so redeemed or to so participate. Any
date upon which a redemption or other acquisition shall actually occur
in accordance with Section 4(a) shall be referred to as a "Convertible
Preferred Redemption Date." The redemption/purchase price for each
share of Convertible Preferred Stock redeemed or acquired pursuant to
this Section 4 shall be the per share Convertible Preferred Liquidation
Preference Amount or such greater per share amount as may be payable
pursuant to the second sentence of Section 4(a)(ii), if applicable (the
"Convertible Preferred Redemption Price"); provided, however, that if
at a Convertible Preferred Redemption Date shares of Convertible
Preferred Stock are unable to be redeemed (as contemplated by Section
4(e) below), then holders of Convertible Preferred Stock shall also be
entitled to interest and dividends pursuant to Section 4(e) and (f).
The aggregate Convertible Preferred Redemption Price shall be payable
in cash in immediately available funds to the respective holders of the
Convertible Preferred Stock on the Convertible Preferred Redemption
Date (subject to
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Section 4(e)). Upon any redemption or purchase of the Convertible
Preferred Stock as provided herein, holders of fractional shares shall
receive proportionate amounts in respect thereof. Until the aggregate
Convertible Preferred Redemption Price has been paid for all shares of
Convertible Preferred Stock being redeemed or purchased: (A) no
dividend whatsoever shall be paid or declared, and no distribution
shall be made, on any capital stock of the Corporation; and (B) no
shares of capital stock of the Corporation (other than the Convertible
Preferred Stock in accordance with this Section 4) shall be purchased,
redeemed or acquired by the Corporation and no monies shall be paid
into or set aside or made available for a sinking fund for the
purchase, redemption or acquisition thereof; provided that, unless the
holders of not less than sixty-six and two-thirds percent (66 2/3%) of
the voting power of the outstanding Convertible Preferred Stock elect
otherwise, the Corporation may repurchase shares of Common Stock from
present or former employees of the Corporation and its subsidiaries on
terms approved by the Corporation's board of directors.
(e) Redemption Prohibited. If, at a Convertible
Preferred Redemption Date, the Corporation is prohibited under the
Delaware General Corporation Law from redeeming all shares of
Convertible Preferred Stock for which redemption is required hereunder,
then it shall redeem such shares on a pro-rata basis among the holders
of Convertible Preferred Stock in proportion to the full respective
redemption amounts to which they are entitled hereunder to the extent
possible and shall redeem the remaining shares to be redeemed as soon
as the Corporation is not prohibited from redeeming some or all of such
shares under the Delaware General Corporation Law, subject to Section
6(g). Any shares of Convertible Preferred Stock not redeemed shall
remain outstanding and entitled to all of the rights and preferences
provided in this Article IV. The Corporation shall take such action as
shall be necessary or appropriate to review and promptly remove any
impediment to its ability to redeem Convertible Preferred Stock or
Perpetual Preferred Stock under the circumstances contemplated by this
Section 4(e). In the event that the Corporation fails for any reason to
redeem shares for which redemption is required pursuant to this Section
4, including without limitation due to a prohibition of such redemption
under the Delaware General Corporation Law, then during the period from
the applicable Convertible Preferred Redemption Date through the date
on which such shares are redeemed, the applicable Convertible Preferred
Base Liquidation Amount of such shares shall bear interest at the rate
of twelve percent (12%) per annum, with such interest to accrue daily
in arrears and to be compounded annually; provided, however, that in no
event shall such interest exceed the maximum permitted rate of interest
under applicable law (the "Maximum Permitted Rate"). In the event that
fulfillment of any provision hereof results in such rate of interest
being in excess of the Maximum Permitted Rate, the obligation to be
fulfilled shall automatically be reduced to eliminate such excess;
provided, however, that any subsequent increase in the Maximum
Permitted Rate shall be retroactively effective to the applicable
Redemption Date. In the event the Corporation fails to redeem shares
for which redemption is required pursuant to this Section 4 within six
(6) months after the date on which redemption is required, for any
reason, and such failure thereafter continues (the period during which
such failure shall continue being referred to herein as a "Voting
Period"), the number of Directors constituting the Board of Directors
shall be automatically increased by a number equal to the number of
Directors then constituting the
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Board of Directors, plus one, and the holders of shares of Convertible
Preferred Stock then outstanding shall be entitled, voting as a class
on a one-vote-per-share basis (to the exclusion of the holders of all
other securities and classes of capital stock of the Corporation), to
elect such additional Directors. As soon as practicable after the
commencement of the Voting Period, the Corporation shall call a special
meeting of the holders of shares of Convertible Preferred Stock by
mailing a notice of such special meeting to such holders, such meeting
to be held not more than ten (10) days after the date of mailing of
such notice. If the Corporation fails to send a notice, the meeting may
be called by any such holder on like notice. The record date for
determining the holders entitled to notice of and to vote at such
special meeting shall be the close of business on the fifth business
day preceding the day on which such notice is mailed. At any such
special meeting and at each meeting of holders of shares of Convertible
Preferred Stock held during a Voting Period at which Directors are to
be elected (or with respect to any action by written consent in lieu of
a meeting of stockholders), such holders, voting together as if a
single class as contemplated by Section 1 (to the exclusion of the
holders of all other securities and classes of capital stock of the
Corporation), shall be entitled to elect the number of Directors
prescribed in this Section 4(e), and each share of Convertible
Preferred Stock shall be entitled to one (1) vote (whether voted in
person by the holder thereof or by proxy or pursuant to a stockholders'
consent). The terms of office of all persons who are Directors of the
Corporation at the time of a special meeting of the holders of
Convertible Preferred Stock to elect Directors shall continue,
notwithstanding the election at such meeting of the additional
Directors that such holders are entitled to elect, and the persons so
elected by such holders, together with the remaining incumbent
Directors, shall constitute the duly elected Directors of the
Corporation. Simultaneously with the termination of a Voting Period
upon the redemption of all outstanding shares of Convertible Preferred
Stock, the terms of office of the additional Directors elected by the
holders of the Convertible Preferred Stock shall terminate, the
remaining Directors shall constitute the Directors of the Corporation
and the voting rights of such holders to elect additional Directors
pursuant to this Section 4(e) shall cease.
(f) Dividend After Convertible Preferred
Redemption Date. From and after a Convertible Preferred Redemption
Date, no shares of Convertible Preferred Stock subject to redemption
shall be entitled to dividends, if any, as contemplated by Section 2;
provided, however, that in the event that shares of Convertible
Preferred Stock are unable to be redeemed and continue to be
outstanding in accordance with Section 4(e), such shares shall continue
to be entitled to dividends and interest thereon as provided in
Sections 2 and 4(e) until the date on which such shares are actually
redeemed by the Corporation.
(g) Surrender of Certificates. Upon receipt of
the applicable Convertible Preferred Redemption Price by certified
check or wire transfer, each holder of shares of Convertible Preferred
Stock to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation, duly assigned or endorsed
for transfer (or accompanied by duly executed stock powers relating
thereto), or, in the event the certificate or certificates are lost,
stolen or missing, shall deliver an affidavit or agreement satisfactory
to the Corporation to indemnify the Corporation from any loss incurred
by it in connection therewith
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(an "Affidavit of Loss") with respect to such certificates at the
principal executive office of the Corporation or the office of the
transfer agent for the Convertible Preferred Stock or such office or
offices in the continental United States of an agent for redemption as
may from time to time be designated by notice to the holders of
Convertible Preferred Stock, and each surrendered certificate shall be
canceled and retired; provided, however, that if the Corporation is
prohibited from redeeming all shares of Convertible Preferred Stock as
provided in Section 4(e), the holder shall not be required to surrender
said certificate(s) to the Corporation until said holder has received a
new stock certificate for those shares of Convertible Preferred Stock
not so redeemed.
5. Conversion. The holders of the Convertible Preferred
Stock shall have the following conversion rights:
(a) Conversion Upon Election of Holders. The
holders of shares of Convertible Preferred Stock shall be entitled,
upon the written election of the holder or holders of not less than
sixty-six and two-thirds percent (66 2/3%) in voting power of the
outstanding shares of Convertible Preferred Stock, without the payment
of any additional consideration, (i) immediately prior to and subject
to the closing or happening of a Liquidation Event or an Extraordinary
Transaction and (ii) at any time on or after ______, ____**, to cause
each (but not less than all) of the outstanding shares of Convertible
Preferred Stock to be automatically converted into (i) the number of
fully paid and nonassessable shares of Common Stock which results from
dividing the per share Conversion Value of the Convertible Preferred
Stock by the Conversion Price per share in effect for the Convertible
Preferred Stock at the time of conversion (collectively, the
"Conversion Shares") and (ii) one (1) fully paid and nonassessable
share of Perpetual Preferred Stock. Upon the filing of this Amended and
Restated Certificate of Incorporation with the office of the Secretary
of State of the State of Delaware, the "Conversion Price" per share of
Convertible Preferred Stock shall be $0.50, and the per share
"Conversion Value" of Convertible Preferred Stock shall be $8.72. The
Conversion Price per share of Convertible Preferred Stock and the
Common Stock Conversion Rate (as defined in this Section 5(a)) shall be
subject to adjustment from time to time as provided in Section 6
hereof. The number of shares of Common Stock into which a share of a
Convertible Preferred Stock is convertible is hereinafter referred to
as the "Common Stock Conversion Rate." The number of shares of
Perpetual Preferred Stock into which a share of Convertible Preferred
Stock is convertible is hereinafter referred to as the "Perpetual Stock
Conversion Rate." If the holders of shares of Convertible Preferred
Stock elect to convert the outstanding shares of Convertible Preferred
Stock at a time when there are any declared but unpaid dividends or
other amounts due on or in respect of such shares, such dividends and
other amounts shall be paid in full in cash by the Corporation in
connection with such conversion. Upon the election to so convert in the
manner and on the basis specified in this Section 5(a) all holders of
the Convertible Preferred Stock shall be deemed to have elected to
voluntarily convert all outstanding shares of Convertible Preferred
Stock pursuant to this Section 5(a).
- -----------------------
** This date will be the third anniversary of the date of the filing of
this Restated Certificate of Incorporation.
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(b) Automatic Conversion Upon Qualified Public
Offering. Each share of Convertible Preferred Stock shall automatically
be converted, without the payment of any additional consideration, into
shares of Common Stock and Perpetual Preferred Stock as of, and in all
cases subject to, the closing of a Qualified Public Offering; provided,
that if a closing of a Qualified Public Offering occurs, all
outstanding shares of Convertible Preferred Stock shall be deemed to
have been converted into shares of Common Stock and Perpetual Preferred
Stock immediately prior to such closing. Any such conversion shall be
at the Common Stock Conversion Rate and Perpetual Stock Conversion Rate
in effect upon the closing of a Qualified Public Offering, as
applicable. If the holders of shares of Convertible Preferred Stock are
required to convert the outstanding shares of Convertible Preferred
Stock pursuant to this Section 5(b) at a time when there are any
declared but unpaid dividends or other amounts due on or in respect of
such shares, such dividends and other amounts shall be paid in full in
cash by the Corporation in connection with such conversion.
(c) Procedure for Voluntary Conversion. Upon
election to convert pursuant to Section 5(a), each holder of
Convertible Preferred Stock shall surrender the certificate or
certificates representing its Convertible Preferred Stock, duly
assigned or endorsed for transfer to the Corporation (or accompanied by
duly executed stock powers relating thereto), at the principal
executive office of the Corporation or the offices of the transfer
agent for the Convertible Preferred Stock or such office or offices in
the continental United States of an agent for conversion as may from
time to time be designated by notice to the holders of the Convertible
Preferred Stock by the Corporation, or shall deliver an Affidavit of
Loss with respect to such certificates. The issuance by the Corporation
of Common Stock and Perpetual Preferred Stock upon a conversion of
Convertible Preferred Stock pursuant to Section 5(a) hereof shall be
effective as of the surrender of the certificate or certificates for
the Convertible Preferred Stock to be converted, duly assigned or
endorsed for transfer to the Corporation (or accompanied by duly
executed stock powers relating thereto), or as of the delivery of an
Affidavit of Loss. Upon surrender of a certificate representing
Convertible Preferred Stock for conversion, or delivery of an Affidavit
of Loss, the Corporation shall issue and send by hand delivery, by
courier or by first class mail (postage prepaid) to the holder thereof
or to such holder's designee, at the address designated by such holder,
certificates for the number of shares of Common Stock and Perpetual
Preferred Stock to which such holder shall be entitled upon conversion
plus a cash payment in the amount of any declared but unpaid dividends
as contemplated by Section 5(a) in respect of the shares of Convertible
Preferred Stock. The issuance of certificates for Common Stock and
Perpetual Preferred Stock upon conversion of Convertible Preferred
Stock will be made without charge to the holders of such shares for any
issuance tax in respect thereof or other costs incurred by the
Corporation in connection with such conversion and the related issuance
of such stock. If a conversion of Convertible Preferred Stock upon an
Extraordinary Transaction occurs, all outstanding shares of Convertible
Preferred Stock shall be deemed to have been converted into shares of
Common Stock and Perpetual Preferred Stock immediately prior thereto,
provided that the Corporation shall make appropriate provisions (x) for
the Common Stock issued upon such conversion to be treated on the same
basis as all other Common Stock in such Extraordinary Transaction and
(y) if the Perpetual Preferred Stock is being simultaneously converted
into
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Common Stock in connection with such Extraordinary Transaction, for the
Common Stock issued upon such conversion to be treated on the same
basis as all other Common Stock in such Extraordinary Transaction. In
the event of any public offering constituting a Qualified Public
Offering, the provisions of Section 5(d) shall apply.
(d) Procedure for Automatic Conversion. As of,
and in all cases subject to, the closing of a Qualified Public Offering
(the "Automatic Conversion Date"), all outstanding shares of
Convertible Preferred Stock shall be converted automatically into
shares of Common Stock and Perpetual Preferred Stock at the applicable
conversion rates specified in Section 5(a) and without any further
action by the holders of such shares and whether or not the
certificates representing such shares of Convertible Preferred Stock
are surrendered to the Corporation or its transfer agent; provided,
however, that all holders of Convertible Preferred Stock shall be given
prior written notice of the occurrence of such Qualified Public
Offering in accordance with Section 7 hereof. On the Automatic
Conversion Date, all rights with respect to the Convertible Preferred
Stock so converted shall terminate, except any of the rights of the
holders thereof upon surrender of their certificate or certificates
therefor or delivery of an Affidavit of Loss thereof to receive
certificates for the number of shares of Common Stock and Perpetual
Preferred Stock into which such Convertible Preferred Stock has been
converted. If so required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by written instrument
or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or by his, her or its attorney
duly authorized in writing. Upon surrender of such certificates or
Affidavit of Loss the Corporation shall issue and deliver to such
holder, promptly (and in any event in such time as is sufficient to
enable such holder to participate in such Qualified Public Offering) at
such office and in its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of
Common Stock and Perpetual Preferred Stock into which the shares of the
Convertible Preferred Stock surrendered were convertible on the
Automatic Conversion Date and shall pay all declared but unpaid
dividends as contemplated by Section 5(b) in respect of the shares of
Convertible Preferred Stock which are converted.
(e) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock and
Perpetual Preferred Stock solely for the purpose of effecting the
conversion of the shares of Convertible Preferred Stock such number of
its shares of Common Stock and Perpetual Preferred Stock as shall from
time to time be sufficient to effect the conversion of all outstanding
shares of Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock and Perpetual Preferred
Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Convertible Preferred Stock, the Corporation will
take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock and Perpetual Preferred
Stock to such number of shares as shall be sufficient for such purpose.
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(f) No Closing of Transfer Books. The
Corporation shall not close its books against the transfer of shares of
Convertible Preferred Stock in any manner which would interfere with
the timely conversion of any shares of Convertible Preferred Stock.
6. Adjustments. The Conversion Price in effect from
time to time shall be subject to adjustment from and after the date of the
filing of this Amended and Restated Certificate of Incorporation with the office
of the Secretary of State of the State of Delaware and regardless of whether any
shares of Convertible Preferred Stock are then issued and outstanding as
follows:
(a) Dividends and Stock Splits. If the number of
shares of Common Stock outstanding at any time after the date hereof is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, on the date
such payment is made or such change is effective, the Conversion Price
shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of any shares of Convertible Preferred
Stock shall be increased in proportion to such increase of outstanding
shares of Common Stock.
(b) Reverse Stock Splits. If the number of
shares of Common Stock outstanding at any time after the date hereof is
decreased by a combination or reverse split of the outstanding shares
of Common Stock, then, on the effective date of such combination or
reverse split, the Conversion Price shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of any
shares of Convertible Preferred Stock shall be decreased in proportion
to such decrease in outstanding shares of Common Stock.
(c) Reorganization, etc. If the Common Stock
issuable upon the conversion of the Convertible Preferred Stock shall
be changed into the same or different number of shares of any class or
classes of stock, whether by reclassification or otherwise (other than
a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this Section 6), then and in each such event
the holders Convertible Preferred Stock shall have the right thereafter
to convert such shares into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the number of shares of
Common Stock into which such shares of Convertible Preferred Stock
might have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as
provided herein.
(d) Mergers and Other Reorganizations. Unless
such transaction is an Extraordinary Transaction in which the holders
of the Convertible Preferred Stock elect redemption (in which case
Section 4(a)(ii) shall apply and this subsection shall not apply), if
at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination or reclassification provided for elsewhere in this Section
6) or a merger or consolidation of the Corporation with or into another
Corporation or the sale of all or substantially all of the
Corporation's properties and assets to any other person, then, as part
of
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and as a condition to the effectiveness of such reorganization, merger,
consolidation or sale, lawful and adequate provision shall be made so
that the holders of the Convertible Preferred Stock shall thereafter be
entitled to receive upon conversion of the Convertible Preferred Stock
the number of shares of stock or other securities or property of the
Corporation or of the successor Corporation resulting from such merger
or consolidation or sale, to which a holder of Common Stock deliverable
upon conversion would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such case,
appropriate provisions shall be made with respect to the rights of the
holders of the Convertible Preferred Stock after the reorganization,
merger, consolidation or sale to the end that the provisions of this
Section 6 (including, without limitation, provisions for adjustment of
the applicable Conversion Price and the number of shares purchasable
upon conversion of the Convertible Preferred Stock) shall thereafter be
applicable, as nearly as may be, with respect to any shares of stock,
securities or assets to be deliverable thereafter upon the conversion
of the Convertible Preferred Stock.
(e) Calculations. All calculations under this
Section 6 shall be made to the nearest cent or to the nearest one
hundredth (1/100) of a share of Common Stock, as the case may be.
(f) Certificate. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 6, the Corporation
at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to each
holder of Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon
written request at any time of any holder of Convertible Preferred
Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii)
the applicable Conversion Prices before and after such adjustment or
readjustment, and (iii) the number of shares of Common Stock and
Perpetual Preferred Stock and the amount, if any, of other property
which at the time would be received upon the conversion of such
holder's shares of Convertible Preferred Stock.
(g) Certain Events. The Corporation shall not,
by amendment of this Amended and Restated Certificate of Incorporation
or through any Extraordinary Transaction or other reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale
of securities, agreement or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but shall at all
times in good faith assist in the carrying out of all the provisions of
this Article IV and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders
of the Convertible Preferred Stock and the Perpetual Preferred Stock
against impairment. Without limitation of the foregoing, the
Corporation shall take such action as shall be necessary or
appropriate, to the extent reasonably within its control, to remove
promptly any impediments to its ability to redeem Convertible Preferred
Stock under the circumstances contemplated by Section 4(e) of this Part
B. Any successor to the Corporation shall agree, as a
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condition to such succession, to carry out and observe the obligations
of the Corporation hereunder with respect to the Convertible Preferred
Stock and the Perpetual Preferred Stock.
7. Notice.
(a) Liquidation Events, Extraordinary
Transactions, Etc. In the event that (i) the Corporation establishes a
record date to determine the holders of any class of securities who are
entitled to receive any dividend or other distribution or who are
entitled to vote at a meeting (or by written consent) in connection
with any of the transactions identified in clause (ii) hereof, or (ii)
any Liquidation Event, Extraordinary Transaction, Qualified Public
Offering or other public offering becomes reasonably likely to occur,
the Corporation shall mail or cause to be mailed by first class mail
(postage prepaid) to each holder of Convertible Preferred Stock (or
each holder of Perpetual Preferred Stock, as applicable) at least
twenty (20) days prior to such record date specified therein or the
expected effective date of any such transaction, whichever is earlier,
a notice specifying (A) the date of such record date for the purpose of
such dividend or distribution or meeting or consent and a description
of such dividend or distribution or the action to be taken at such
meeting or by such consent, (B) the date on which any such Liquidation
Event, Extraordinary Transaction, Qualified Public Offering or other
public offering is expected to become effective, and (C) the date on
which the books of the Corporation shall close or a record shall be
taken with respect to any such event.
(b) Waiver of Notice. The holder or holders of
not less than sixty-six and two-thirds percent (66 2/3%) in voting
power of the outstanding shares of Convertible Preferred Stock (or
Perpetual Preferred Stock, as applicable) may, at any time upon written
notice to the Corporation, waive any notice provisions specified herein
for the benefit of such holders, and any such waiver shall be binding
upon all holders of such securities.
(c) General. In the event that the Corporation
provides any notice, report or statement to any holder of Common Stock
in his, her or its capacity as such, the Corporation shall at the same
time provide a copy of any such notice, report or statement to each
holder of outstanding shares of Convertible Preferred Stock (or
Perpetual Preferred Stock, as applicable).
8. Contractual Rights of Holders. The various provisions
set forth herein for the benefit of the holders of the Convertible Preferred
Stock and Perpetual Preferred Stock shall be deemed contract rights enforceable
by them, including without limitation, one or more actions for specific
performance.
PART B. PERPETUAL PREFERRED STOCK
1. Voting. The holder of each share of Perpetual
Preferred Stock shall be entitled to one vote for each such share as determined
on the record date for the vote or consent of stockholders and shall vote
together with the holders of the Common Stock as a single class upon any items
submitted to a vote of stockholders, except as otherwise provided herein.
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2. Dividends. The holders of outstanding shares of
Perpetual Preferred Stock shall be entitled to receive, out of any funds legally
available therefor, cumulative (non-compounding) dividends on the Perpetual
Preferred Stock in cash, at the per share rate per annum of ten percent (10%) of
$1,000.00 (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Perpetual Preferred Stock) (a
"Perpetual Cumulative Dividend"). Such dividends will accumulate quarterly in
arrears commencing as of the date of issuance of the Perpetual Preferred Stock
and be cumulative, to the extent unpaid, whether or not they have been declared
and whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends. The date on which the
Corporation initially issues any share of Perpetual Preferred Stock shall be
deemed to be its "date of issuance" regardless of the number of times transfer
of such share is made on the stock records maintained by or for the Corporation
and regardless of the number of certificates which may be issued to evidence
such share. Perpetual Cumulative Dividends shall become due and payable with
respect to any share of Perpetual Preferred Stock as provided in Section 3 and
4. So long as any shares of Perpetual Preferred Stock are outstanding and the
Perpetual Cumulative Dividends have not been paid in full in cash: (a) no
dividend whatsoever shall be paid or declared, and no distribution shall be
made, on any Common Stock or other capital stock of the Corporation ranking
junior to the Perpetual Preferred Stock; and (b) no shares of capital stock of
the Corporation ranking junior to the Perpetual Preferred Stock shall be
purchased, redeemed or acquired by the Corporation and no monies shall be paid
into or set aside or made available for a sinking fund for the purchase,
redemption or acquisition thereof; provided that, unless the holders of not less
than sixty-six and two-thirds percent (66 2/3%) of the voting power of the
outstanding Perpetual Preferred Stock elect otherwise, the Corporation may
repurchase shares of Common Stock from present or former employees of the
Corporation and its subsidiaries on terms approved by the Corporation's board of
directors. All numbers relating to the calculation of dividends pursuant to this
Section 2 shall be subject to equitable adjustment in the event of any stock
split, combination, reorganization, recapitalization, reclassification or other
similar event involving a change in the Perpetual Preferred Stock.
3. Liquidation. Upon any Liquidation Event, each holder
of outstanding shares of Perpetual Preferred Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to stockholders,
whether such assets are capital, surplus, or earnings, and before any amount
shall be paid or distributed to the holders of Common Stock or of any other
stock ranking on liquidation junior to the Perpetual Preferred Stock, an amount
in cash equal to the sum of (a) $1,000.00 per share of Perpetual Preferred Stock
held by such holder (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Perpetual Preferred Stock),
plus (b) any accumulated but unpaid dividends to which such holder of
outstanding shares of Perpetual Preferred Stock is entitled pursuant to Sections
2 and 4(d) hereof (the sum of clauses (a) and (b) being referred to herein as
the "Perpetual Stock Liquidation Preference Amount"); provided, however, that
if, upon any Liquidation Event, the amounts payable with respect to the
Perpetual Stock Liquidation Preference Amount are not paid in full, the holders
of the Perpetual Preferred Stock shall share ratably in any distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled.
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4. Special Conversion Provisions.
(a) Special Conversion Upon Extraordinary
Transactions, etc. The holders of shares of Perpetual Preferred Stock
shall be entitled, upon the written election of the holder or holders
of not less than sixty-six and two-thirds percent (66 2/3%) in voting
power of the outstanding shares of Perpetual Preferred Stock (or
Convertible Preferred Stock, as applicable, proposing to convert the
same in order to effect a conversion of the Perpetual Preferred Stock
received upon such conversion hereunder), without the payment of any
additional consideration, immediately prior to and subject to the
closing or happening of a Qualified Public Offering or an Extraordinary
Transaction, to cause all (but not less than all) of the outstanding
shares of Perpetual Preferred Stock to be automatically converted into
the number of fully paid and nonassessable shares of Common Stock which
results from dividing the Perpetual Stock Liquidation Preference Amount
at the time of conversion by the Fair Market Value (as defined below)
per share of the Common Stock at the time of conversion. In any such
case, the holders of shares of Common Stock resulting from such
conversion of Perpetual Preferred Stock shall be entitled, upon the
written election of the holder or holders of not less than sixty-six
and two-thirds percent (66 2/3%) in voting power of the outstanding
shares of Common Stock resulting from such conversion of Perpetual
Preferred Stock (or Convertible Preferred Stock or Perpetual Preferred
Stock, as applicable, proposing to convert the same in order to effect
a conversion into Common Stock hereunder), to participate in such
Qualified Public Offering or Extraordinary Transaction on the same
basis as the other holders of Common Stock. Any date upon which such
conversion shall actually occur in accordance with this Section 4(a)
shall be referred to as the "Perpetual Preferred Special Conversion
Date." Upon the election to so convert in the manner and on the basis
specified in this Section 4(a), all holders of the Perpetual Preferred
Stock shall be deemed to have elected to voluntarily convert all
outstanding shares of Perpetual Preferred Stock pursuant to this
Section 4(a).
(b) Valuation of Common Stock. For purposes of
Section 4(a) above, the "Fair Market Value" of each share of Common
Stock shall be deemed to mean:
(i) If the Common Stock is traded on a
nationally recognized securities exchange or inter-dealer
quotation system, its fair market value shall be deemed to be
the average of the closing prices of the Common Stock on such
exchange or system over the 30-day period ending three (3)
business days prior to the date of determination;
(ii) If the Common Stock is traded
over-the-counter, its fair market value shall be deemed to be
the average of the closing bid prices over the 30-day period
ending three (3) business days prior to the date of
determination; and
(iii) If there is no active public market
for the Common Stock, its fair market value shall be the fair
market value thereof (after taking into account the conversion
of the Perpetual Preferred into Common Stock in connection
with such event), as mutually determined by the Corporation
and the holders of not less than sixty-six and
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two-thirds percent (66 2/3%) in voting power of the
outstanding shares of Perpetual Preferred Stock, provided that
if the Corporation and the holders of sixty-six and two-thirds
percent (66 2/3%) in voting power of the outstanding shares of
Perpetual Preferred Stock are unable to reach agreement, then
by independent appraisal by a mutually agreed to investment
banker, the fees of which shall be paid by the Corporation;
provided that, notwithstanding anything in Section 4(b) to the
contrary, in the event the Perpetual Preferred Stock is converted into
Common Stock in connection with a Qualified Public Offering or a public
offering not constituting a Qualified Public Offering, the Fair Market
Value of each share of Common Stock shall be deemed to be the net
proceeds to the Corporation or the seller(s) thereof (after deduction
of applicable discounts and commissions) for each share of Common Stock
issued or sold pursuant to such public offering.
(c) Dividend After Perpetual Preferred Special
Conversion Date. From and after the Perpetual Preferred Special
Conversion Date, no shares of Perpetual Preferred Stock shall be
entitled to any further dividends pursuant to Section 2 hereof.
(d) Procedure for Conversion. If a conversion of
Perpetual Preferred Stock occurs in connection with a Qualified Public
Offering or an Extraordinary Transaction, all outstanding shares of
Perpetual Preferred Stock shall be deemed to have been converted into
shares of Common Stock immediately prior thereto, provided that the
Corporation shall make appropriate provisions for the Common Stock
issued upon such conversion to be treated on the same basis as all
other Common Stock in such transaction. If required by the Corporation,
each holder of Perpetual Preferred Stock shall surrender the
certificate or certificates representing its Perpetual Preferred Stock,
duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto), at the
principal executive office of the Corporation or the offices of the
transfer agent for the Perpetual Preferred Stock or such office or
offices in the continental United States of an agent for conversion as
may from time to time be designated by notice to the holders of the
Perpetual Preferred Stock by the Corporation, or shall deliver an
Affidavit of Loss with respect to such certificates. Upon surrender of
a certificate representing Perpetual Preferred Stock for conversion, or
delivery of an Affidavit of Loss, the Corporation shall issue and send
by hand delivery, by courier or by first class mail (postage prepaid)
to the holder thereof or to such holder's designee, at the address
designated by such holder, certificates for the number of shares of
Common Stock to which such holder shall be entitled. The issuance of
certificates for Common Stock upon conversion of Perpetual Preferred
Stock will be made without charge to the holders of such shares for any
issuance tax in respect thereof or other costs incurred by the
Corporation in connection with such conversion and the related issuance
of such stock.
(e) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock
solely for the purpose of effecting the conversion of the shares of
Perpetual Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the
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conversion of all outstanding shares of Perpetual Preferred Stock; and
if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Perpetual Preferred Stock, the Corporation will
take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares
as shall be sufficient for such purpose.
(f) No Closing of Transfer Books. The
Corporation shall not close its books against the transfer of shares of
Perpetual Preferred Stock in any manner which would interfere with the
timely conversion of any shares of Perpetual Preferred Stock.
5. Notice. In the event that the Corporation provides or
is required to provide notice to any holder of Convertible Preferred Stock and
Common Stock in accordance with the provisions of this Amended and Restated
Certificate of Incorporation and/or the Corporation's by-laws, the Corporation
shall at the same time provide a copy of any such notice to each holder of
outstanding shares of Perpetual Preferred Stock.
PART C. COMMON STOCK
1. Voting. The holder of each share of Common Stock
shall be entitled to one vote for each such share as determined on the record
date for the vote or consent of stockholders and, (i) for so long as any shares
of Convertible Preferred Stock remain outstanding, shall vote together with the
holders of the Convertible Preferred Stock as a single class upon any items
submitted to a vote of stockholders, except as otherwise provided herein and
(ii) for so long as any shares of Perpetual Preferred Stock remain outstanding,
shall vote together with the holders of the Perpetual Preferred Stock as a
single class upon any items submitted to a vote of stockholders, except as
otherwise provided herein.
2. Dividends. Subject to the payment in full of all
preferential dividends to which the holders of the Perpetual Preferred Stock are
entitled hereunder, the holders of Common Stock shall be entitled to receive
dividends out of funds legally available therefor at such times and in such
amounts as the Board of Directors may determine in its sole discretion, with
holders of Convertible Preferred Stock and Common Stock sharing pari passu in
such dividends as contemplated by Section 2 of Part B above.
3. Liquidation. Upon any Liquidation Event, after the
payment or provision for payment of all debts and liabilities of the Corporation
and all preferential amounts to which the holders of Convertible Preferred Stock
or Perpetual Preferred Stock, as applicable, are entitled with respect to the
distribution of assets in liquidation, the holders of Common Stock (and to the
extent applicable under Section 3(a) of Part B above, Convertible Preferred
Stock) shall be entitled to share ratably in the remaining assets of the
Corporation available for distribution.
4. Fractional Shares; Uncertificated Shares. The
Corporation may issue fractional shares of Common Stock and Preferred Stock.
Fractional shares shall be entitled to dividends (on a pro
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rata basis), and the holders of fractional shares shall be entitled to all
rights as stockholders of the Corporation to the extent provided herein and
under applicable law in respect of such fractional shares. Shares of Common
Stock and Preferred Stock, or fractions thereof, may, but need not be,
represented by share certificates. Such shares, or fractions thereof, not
represented by share certificates ("Uncertificated Shares") shall be registered
in the stock records book of the Corporation. The Corporation at any time at its
sole option may deliver to any registered holder of such shares share
certificates to represent Uncertificated Shares previously issued (or deemed
issued) to such holder.
PART D. CERTAIN DEFINITIONS
"Extraordinary Transaction" means any of the following: (A) a
merger or consolidation of the Corporation with or into another corporation
(with respect to which less than a majority of the outstanding voting power of
the surviving or consolidated corporation is held directly or indirectly by
stockholders of the Corporation immediately prior to such event), (B) the sale
or transfer of all or substantially all of the properties and assets of the
Corporation and its subsidiaries, (C) any purchase by any party (or group of
affiliated parties) other than the Specified Investors, of shares of capital
stock of the Corporation (either through a negotiated stock purchase or a tender
for such shares), the effect of which is that such party (or group of affiliated
parties) that did not beneficially own a majority of the voting power of the
outstanding shares of capital stock of the Corporation immediately prior to such
purchase beneficially owns at least a majority of such voting power immediately
after such purchase, (D) the redemption or repurchase of shares representing a
majority of the voting power of the outstanding shares of capital stock of the
Corporation or (E) a public offering not constituting a Qualified Public
Offering.
"Liquidation Event" means any liquidation, dissolution or
winding up of the Corporation and its subsidiaries, whether voluntary or
involuntary.
"Qualified Public Offering" means an underwritten offering to
the public pursuant to an effective registration statement under the Securities
Act of 1933, as amended, provided that (i) such registration statement covers
the offer and sale of Common Stock of which the aggregate net proceeds
attributable to sales for the account of the Corporation exceed $25,000,000,
(ii) such Common Stock is listed for trading on either the New York Stock
Exchange or The Nasdaq Stock Market (National Market System) and (iii) either
(A) all outstanding shares of Perpetual Preferred Stock which are outstanding or
issuable upon such automatic conversion are redeemed immediately upon and as of
the closing of such offering or (B) contemporaneously with such offering cash in
an amount sufficient to redeem all outstanding shares of Perpetual Preferred
Stock is segregated and irrevocably held by the Corporation for payment to
holders of Perpetual Preferred Stock.
"Specified Investors" means Golder, Thoma, Cressey, Rauner
Fund V, L.P., GTCR Associates V, TA/Advent VIII L.P., Advent Atlantic and
Pacific III, TA Executives Fund LLC, TA Investors LLC, David R. Klock, Phyllis
A. Klock, or any of their affiliates.
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ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred
by statute, the board of directors of the Corporation is expressly authorized to
make, alter or repeal the bylaws of the Corporation.
ARTICLE VII
Meetings of stockholders may be held within or without the
State of Delaware, as the bylaws of the Corporation may provide. The books of
the Corporation may be kept outside the State of Delaware at such place or
places as may be designated from time to time by the board of directors or in
the bylaws of the Corporation. Election of directors need not be by written
ballot unless the bylaws of the Corporation so provide.
ARTICLE VIII
To the fullest extent permitted by the General Corporation Law
of the State of Delaware as the same exists or may hereafter be amended, a
director of this Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a director.
If the General Corporation Law of the State of Delaware is amended after the
effective date of this Amended and Restated Certificate of Incorporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of each past or present Director of
the Corporation shall be eliminated or limited to the fullest extent permitted
by the General Corporation Law of the State of Delaware, as so amended. Any
repeal or modification of this Article VIII shall not adversely affect any right
or protection of a director of the Corporation existing at the time of such
repeal or modification.
ARTICLE IX
The Corporation expressly elects not to be governed by Section
203 of the General Corporation Law of the State of Delaware.
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ARTICLE X
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
* * * * *
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THIS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is
executed as of this ____ day of ________, 1999.
COMPDENT CORPORATION
By:
------------------------------------
Name:
Title: President
ATTEST:
- -------------------------------------
Name:
Title: Secretary
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EXHIBIT B
RESTATED BY-LAWS
OF
COMPDENT CORPORATION, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The address of the corporation's
registered office in the State of Delaware is 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company. The registered office and/or
registered agent of the corporation may be changed from time to time by action
of the board of directors.
Section 2. Other Offices. The corporation may also have offices at
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall be
determined by the president of the corporation; provided, that if the president
does not act, the board of directors shall determine the date, time and place
of such meeting. In addition, board shall hold such meetings as specified in
that certain Stockholders Agreement, dated on or about the date on which these
restated by-laws were adopted by the corporation, by and among the corporation
and the stockholders named therein, as amended from time to time (as amended,
the "Stockholders Agreement").
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof.
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Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends for the express purpose of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum. The holders of a majority of the outstanding shares
of capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
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applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of common stock
held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the stockholders,
and before any voting commences, all proxies filed at or before the meeting
shall be submitted to and examined by the secretary or a person designated by
the secretary, and no shares may be represented or voted under a proxy that has
been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in
the certificate of incorporation, any action required to be taken at any annual
or special meeting of stockholders of the corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested provided, however, that no consent or consents
delivered by certified or registered mail shall be deemed delivered until such
consent or consents are actually received at the registered office. All consents
properly delivered in accordance with this section shall be deemed to be
recorded when so delivered. No written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered to the corporation as required by this section,
written consents signed by the holders of a sufficient number of shares to take
such corporate action are so recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those
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stockholders who have not consented in writing. Any action taken pursuant to
such written consent or consents of the stockholders shall have the same force
and effect as if taken by the stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
Section 1. General Powers. Except as set forth in the Stockholders
Agreement, the business and affairs of the corporation shall be managed by or
under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of
directors which shall constitute the initial board shall be four (4).
Thereafter, the number of directors shall be established from time to time in
accordance with the terms and conditions set forth in the Stockholders
Agreement. The directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting of the
stockholders and entitled to vote in the election of directors. The directors
shall be elected in this manner at the annual meeting of the stockholders,
except as provided in Section 4 of this Article III or in the Stockholders
Agreement. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided or as provided in the Stockholders Agreement.
Section 3. Removal and Resignation. Any director or the entire board
of directors may be removed at any time, with or without cause, as set forth in
the Stockholders Agreement. Whenever the holders of any class or series of
security are entitled to elect one or more directors by the provisions of the
corporation's certificate of incorporation, the provisions of this section shall
apply, in respect to the removal without cause of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as a whole. Any director
may resign at any time upon written notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors shall be
filled in accordance with the provisions of the Stockholders Agreement. Each
director so chosen shall hold office until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as herein
provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the president or the holders of not less than 30% of the outstanding
shares of common
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stock on at least twenty-four (24) hours notice to each director, either
personally, by telephone, by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the
total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of directors present at a meeting at which a
quorum is present shall be the act of the board of directors. If a quorum shall
not be present at any meeting of the board of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these restated by-laws shall have
and may exercise the powers of the board of directors in the management and
affairs of the corporation except as otherwise limited by law. The board of
directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors when required.
Section 9. Committee Rules. Each committee of the board of directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of
directors or any committee thereof may participate in and act at any meeting of
such board or committee through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of
the board of directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except when
such member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof
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or shall be forwarded by registered mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by
the certificate of incorporation, any action required or permitted to be taken
at any meeting of the board of directors, or of any committee thereof, may be
taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by
the board of directors and may consist of a president, any number of vice
presidents, a secretary, a chief financial officer, any number of assistant
secretaries and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person. In its discretion, the board of directors may choose
not to fill any office for any period as it may deem advisable, except that the
offices of president and secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter as
conveniently may be. Vacancies may be filled or new offices created and filled
at any meeting of the board of directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. President. The president, subject to the powers of the board
of directors, shall have general charge of the business, affairs and property of
the corporation, and control over its officers, agents
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and employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors or as may be provided in these by-laws.
Section 7. Vice-presidents. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the board of
directors shall, in the absence or disability of the president, act with all of
the powers and be subject to all the restrictions of the president. The
vice-presidents shall also perform such other duties and have such other powers
as the board of directors, the president or these by-laws may, from time to
time, prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the board of directors, all meetings of the
committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose.
Under the president's supervision, the secretary shall give, or cause to be
given, all notices required to be given by these by-laws or by law; shall have
such powers and perform such duties as the board of directors, the president or
these by-laws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his or her signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his or her signature. The assistant secretary, or if
there be more than one, the assistant secretaries in the order determined by the
board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors or
president may, from time to time, prescribe.
Section 9. The Chief Financial Officer and Assistant Treasurer. The
chief financial officer shall have the custody of the corporate funds and
securities; shall keep full and accurate accounts of receipts and disbursements
in books belonging to the corporation; shall deposit all monies and other
valuable effects in the name and to the credit of the corporation as may be
ordered by the board of directors; shall cause the funds of the corporation to
be disbursed when such disbursements have been duly authorized, taking proper
vouchers for such disbursements; and shall render to the president and the board
of directors, at its regular meeting or when the board of directors so requires,
an account of the corporation; shall have such powers and perform such duties as
the board of directors, the president or these by-laws may, from time to time,
prescribe. If required by the board of directors, the chief financial officer
shall give the corporation a bond (which shall be rendered every six years) in
such sums and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of the office of chief
financial officer and for the restoration to the corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers, vouchers,
money, and other property of whatever kind in the possession or under the
control of the chief financial officer belonging to the corporation. The
assistant treasurer, or if there shall be more than one, the assistant
treasurers in the order determined by
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the board of directors, shall in the absence or disability of the chief
financial officer, perform the duties and exercise the powers of the chief
financial officer. The assistant treasurers shall perform such other duties and
have such other powers as the board of directors or the president may, from time
to time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 11. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, 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 the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his heirs, executors and administrators; provided,
however, that, except as provided in Section 2 hereof, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the corporation. The right to indemnification
conferred in this Article V shall be a contract right and, subject to Sections 2
and 5 hereof, shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
The corporation may, by action of its board of directors, provide
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers.
Any indemnification of a director or officer of the corporation under Section 1
of this Article V or advance of expenses under Section 5 of this Article V shall
be made promptly, and in any event within thirty (30) days, upon the
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written request of the director or officer. If a determination by the
corporation that the director or officer is entitled to indemnification pursuant
to this Article V is required, and the corporation fails to respond within sixty
(60) days to a written request for indemnity, the corporation shall be deemed to
have approved the request. If the corporation denies a written request for
indemnification or advancing of expenses, in whole or in part, or if payment in
full pursuant to such request is not made within thirty (30) days, the right to
indemnification or advances as granted by this Article V shall be enforceable by
the director or officer in any court of competent jurisdiction. Such person's
costs and expenses incurred in connection with successfully establishing his
right to indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the corporation (including its board of directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article V shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the corporation or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, whether or not the corporation would have the power
to indemnify such person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in
Section 1 of this Article V in defending a proceeding shall be paid by the
corporation in advance of such proceeding's final disposition unless otherwise
determined by the board of directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
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Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such president, vice-president, secretary, or
assistant secretary may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of stock
of the
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corporation shall only be transferred on the books of the corporation by the
holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In
order that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded.
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Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by statute, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined by
the board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
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Section 2. Checks, Drafts or Orders. All checks, drafts, or other
orders for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer
or officers, or any agent or agents, of the corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities
in any other corporation held by the corporation shall be voted by the
president, unless the board of directors specifically confers authority to vote
with respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record,
in person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be
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directed to the corporation at its registered office in the State of Delaware or
at its principal place of business.
Section 9. Section Headings. Section headings in these restated by-laws
are for convenience of reference only and shall not be given any substantive
effect in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision
of these restated by-laws is or becomes inconsistent with any provision of the
certificate of incorporation, the General Corporation Law of the State of
Delaware or any other applicable law, the provision of these restated by-laws
shall not be given any effect to the extent of such inconsistency but shall
otherwise be given full force and effect.
ARTICLE VIII
AMENDMENTS
These restated by-laws may be amended, altered, or repealed and new
by-laws adopted at any meeting of the board of directors by a majority vote. The
fact that the power to adopt, amend, alter, or repeal the by-laws has been
conferred upon the board of directors shall not divest the stockholders of the
same powers.
* * * * *
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EXHIBIT 99.1
NEWSRELEASE
FOR IMMEDIATE RELEASE
- ---------------------
Contact:
Keith Yoder
Executive Vice President
Chief Financial Officer
CompDent Corporation
(770) 998-8936
CompDent Corporation Announces Amendment to Merger Agreement
Atlanta, GA - January 19, 1999 - CompDent Corporation ("CompDent")(Nasdaq:CPDN),
a leader in providing total dental benefits, today announces the signing of an
Amendment to the Agreement and Plan of Merger, dated as of July 28, 1998,
between CompDent and TAGTCR Acquisition, Inc. (the "Acquiror"). The Acquiror is
a newly formed company which was organized at the direction of Golder, Thoma,
Cressey, Rauner, Inc., TA Associates, Inc. and NMS Capital, L.P. (the "Equity
Investors"). As previously announced, CompDent has been informed by the Acquiror
that it is unlikely that the Acquiror will be able to obtain financing for the
merger transaction at the transaction price of $18.00 per share. As a result,
and following a review and analysis of relevant factors, the Special Committee
of the Board of Directors has negotiated with the Acquiror an Amendment to the
Merger Agreement which will, among other things, reduce the cash purchase price
to be paid to CompDent's stockholders pursuant to the merger by $3.00 per share
from $18.00 per share to $15.00 per share and modify provisions of the Merger
Agreement relating to solicitation of other offers and termination fees.
Specifically, the Amendment eliminates the "no solicitation" covenant in the
Merger Agreement, thus permitting CompDent to solicit, respond to and otherwise
engage in negotiations concerning alternative proposals to engage in business
combinations (each, an "Acquisition Proposal"). In this regard, the Special
Committee of the Board of Directors continues to recommend and support the
TAGTCR transaction but expects that it will review any alternative proposals
that may arise, although no assurance can be given that any such proposals will
be forthcoming. The Amendment also reduces the termination fee which CompDent is
obligated to pay the Acquiror in the event it enters into a transaction
resulting from an Acquisition Proposal to the amount of the Acquiror's
out-of-pocket fees and expenses incurred in connection with the transactions
contemplated by the Merger Agreement up to a cap of $1.5 million. The
Robinson-Humphrey Company, LLC, financial advisor to the Special Committee, has
advised that the merger consideration, as amended, is fair from a financial
point of view to the Company's stockholders. Prior to the signing of the
Amendment, the Equity Investors received revised commitment letters from
NationsBank, N.A. and NationsBridge, L.L.C. (collectively, "NationsBank")
pursuant to which NationsBank agreed, subject to customary terms and conditions,
to provide a portion of the financing for the proposed transaction, as amended,
in the form of certain credit facilities. As a result of the Amendment to the
Merger Agreement, the total indebtedness now required to finance the merger will
be approximately $126.9 million; the financial commitments of the Equity
Investors would remain unchanged at $87.7 million. Completion of the proposed
transaction with the Acquiror remains subject to availability of financing.
However, the Acquiror has agreed that if it is unable to close the merger due to
the failure to receive financing, the Acquiror will reimburse CompDent for its
out-of-pocket fees and expenses incurred in connection with the transactions
contemplated by the Merger Agreement up to a cap of $1.0 million. CompDent
currently expects to consummate the transaction in the second quarter, with
closing remaining subject to a number of conditions, including shareholder and
regulatory approval.
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 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
DHMI, which provides management and administrative services to dental practices.
DHMI manages or operates 57 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. Certain risk and
uncertainties, including uncertainty associated with the closing on the TAGTCR
transaction, the possibility of receiving alternative proposals, the Company's
ability to execute its strategy may significantly impact forward-looking
statements. Other risk factors are described in CompDent Corporation's Annual
Report on Form 10-K for the year ended December 31, 1997, and first, second and
third quarter reports on Form 10-Q, all on file with the Securities and Exchange
Commission.
EDITOR'S NOTE: This release is also available on the Internet at
http://www.compdent.com
