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): FEBRUARY 18, 2000
HEALTHPLAN SERVICES CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 1-13772 13-3787901
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(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
3501 FRONTAGE ROAD, TAMPA, FLORIDA 33607
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 289-1000
NOT APPLICABLE
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS
On February 18, 2000, HealthPlan Services Corporation, a Delaware
corporation ("HPS"), and UICI, a Delaware corporation ("UICI"), issued a joint
press release announcing that HPS, UICI, UICI Acquisition Co., a Delaware
corporation, and UICI Capital Trust I, a Delaware business trust, have entered
into an Amended and Restated Agreement and Plan of Merger, dated February 18,
2000 (the "Merger Agreement"). A copy of this press release and the Merger
Agreement are filed as exhibits to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are included with this Report:
Exhibit 99.1 Joint press release dated February 18, 2000, issued by
HealthPlan Services Corporation and UICI.
Exhibit 99.2 Amended and Restated Agreement and Plan of Merger, dated
February 18, 2000, by and among UICI, HealthPlan Services Corporation, UICI
Acquisition Co., a Delaware corporation, and UICI Capital Trust I, a Delaware
business trust.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
HEALTHPLAN SERVICES CORPORATION
Date: February 23, 2000 By: /s/ PHILLIP S. DINGLE
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Phillip S. Dingle
Chief Financial Officer
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EXHIBIT INDEX
Exhibit 99.1 Press release dated February 18, 2000, issued by HealthPlan
Services Corporation and UICI.
Exhibit 99.2 Agreement and Plan of Merger, dated February 18, 2000, by
and among UICI, a Delaware corporation, HealthPlan Services
Corporation, a Delaware corporation, UICI Acquisition Co., a
Delaware corporation, and UICI Capital Trust I, a Delaware
business trust.
EXHIBIT 99.1
[UICI Letterhead] [HealthPlan Services Letterhead]
UICI HEALTHPLAN SERVICES CORPORATION
CONTACT:MATTHEW R. CASSELL, VP CONTACT: PHILLIP S. DINGLE, EVP
4001 McEwen, Suite 200 3501 Frontage Road
Dallas, Texas 75244 Tampa. Florida 33607
Phone: (972) 392-6700 Phone: (813) 289-1000
UICI ANNOUNCES AMENDED AGREEMENT TO ACQUIRE HEALTHPLAN SERVICES CORPORATION
PENDING ACQUISITION CREATES ONE OF THE LARGEST PLAYERS IN THE HEALTH CLAIMS AND
ADMINISTRATION PROCESSING INDUSTRY
DALLAS TX and TAMPA FL -- February 18, 2000 --- UICI (NYSE: UCI) and HealthPlan
Services Corporation (NYSE: HPS) announced today that their respective boards of
directors unanimously approved an amended agreement for UICI to acquire
HealthPlan Services for convertible preferred securities valued at $8.75 per
share, or $120 million in the aggregate. Upon completion of the pending
acquisition, HPS will become a wholly owned, separately-operated subsidiary of
UICI. Following the merger and after combining UICI's related third party
administration (TPA) and health care transaction activities, HealthPlan Services
will be one of the largest health claims and administration processing
companies, covering close to 5 million lives with annual volume of over 20
million claims.
In the merger, HPS shareholders will receive trust issued preferred securities
issued by a business trust established by UICI. At the option of the holder,
each preferred security can either be (1) exchanged at any time into a fixed
number of HealthAxis.com common shares, calculated at a 25% premium over the
average closing price per share of HealthAxis.com's common stock for the 10
consecutive trading days prior to the issue date, or (2) converted into a fixed
number of common shares of UICI at $25 per UICI common share. The preferred
securities have a maturity of 30 years and call for annual cumulative
distributions at the rate of 7% payable quarterly in arrears, subject to certain
deferral rights.
The preferred securities contain provisions relating to conversion price
adjustments and optional redemption features which will be described in Form 8-K
filings to be made by the companies next week and in the proxy statement to be
filed in due course. Among other features, for example, UICI has the option to
defer distributions for successive periods of up to 20 quarters but, during any
such period, distributions will accrue at 9% per annum instead of the stated
rate of 7% per annum. The trust issued preferred securities will be redeemable
at any time at the option of UICI - - however, any optional redemption occurring
within three years following the issue date will be at a redemption price
designed to compensate HPS shareholders for the early redemption. The UICI/HPS
transaction is a taxable event, and, as is customarily the case with these types
of securities, holders may recognize taxable interest income at rates that may
exceed cash distributions.
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The acquisition is contingent upon UICI's obtaining the consent of the HPS bank
group and lenders under the UICI bank facility to assume HPS's bank indebtedness
and to issue the subordinated debentures connected with, and to make the
dividend payments on, the preferred securities. The HPS acquisition is also
conditioned upon consummation of the upstream merger of HealthAxis.com, Inc. and
HealthAxis Inc. (NASDAQ: HAXS, formerly Provident American Corporation) and
registration of the underlying HealthAxis.com shares into which the preferred
securities are exchangeable, both of which events are expected to be completed
in May 2000. The transaction is otherwise subject to several closing conditions,
including the reissuance of a fairness opinion by HPS's financial advisor, Bear
Stearns on or about the time of mailing of the definitive proxy materials, and
approval by HPS shareholders.
Through its ownership of both HealthPlan Services and its approximate 44% stake
in HealthAxis.com, UICI believes it will be well positioned to participate in
the health care transaction, technology, insurance, and network-provider
marketplace. The HPS transaction further enhances UICI's strategy of
participating end-to-end in the health care transaction and information industry
and creates strong synergies among UICI's various operating units and companies.
UICI believes that advantages are also created by utilizing HPS's managed care
platform, National Preferred Provider Network, throughout the combined companies
and across a much broader reach of customers and claims.
James K. Murray, Jr., Chairman and Chief Executive Officer of HPS, is expected
to join UICI's board of directors following the merger, and Steven K. Arnold,
presently head of UICI's student health insurance division, will become
President and Chief Executive Officer at HPS. Phillip S. Dingle, currently HPS's
Chief Financial Officer, is expected to become CFO of UICI.
Gregory T. Mutz, President and Chief Executive Officer of UICI, commented: "By
leveraging the Internet as a common computing platform and by exploiting
opportunities of scale, we believe that a combined UICI/HPS will be in a
position to achieve a dominant role in the employer-based health benefits
administration industry. We intend to seek an early advantage by developing
e-business strategies and forming key relationships -- both business-to-business
and business-to-consumer. We will also provide closer and more immediate
servicing of customers by integrating HealthAxis.com's Web-based technologies
into UICI/HPS operations. We will remain single-minded in striving toward our
goal to drive down transaction costs while enhancing the customer experience
with our combined companies."
James K. Murray, Jr., Chairman and Chief Executive Officer of HealthPlan
Services, said: "We are delighted that we have revived our merger agreement with
UICI and are happy to announce a transaction that we believe is good for our
shareholders and our customers. UICI's progressive management team, together
with HPS's operators, has a clear vision and strategy for growth through
technology -- and has the ability to profitably guide HPS into the next
millennium. This pending merger is a consolidation of valuable strategic
resources and health care administrative services and will generate significant
synergies."
UICI and HPS previously announced on October 5, 1999 a stock-for-stock merger
that was expected to close in January 2000. After UICI's December 9, 1999
announcement of significant losses in its credit card operations, the UICI/HPS
transaction was delayed. The transaction contemplated by the Amended and
Restated Merger Agreement is expected to be completed in June 2000.
ABOUT UICI:
UICI is a diversified financial services company headquartered in Dallas, Texas.
Through its subsidiaries, UICI offers insurance and financial services to niche
consumer and institutional markets. The Company provides health insurance to the
self-employed and student marketplace; provides technology and outsourcing
solutions to the health insurance and health care markets, issues credit cards
to individuals with
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no credit or troubled credit histories; provides a variety of financial services
and products to college, university and graduate students, including
originating, funding, and servicing federally-guaranteed student loans; and
manages blocks of life insurance.
For more information on UICI, please visit the Company's Web site located at
WWW.UICI.NET
ABOUT HPS:
HealthPlan Services is a leading managed health care services company, providing
enrollment, billing and collection, claims administration, and risk management
services for health care payors and providers. HPS customers include insurance
companies, HMOs and other managed care organizations, and organizations with
self-funded health care plans. Based in Tampa, Florida, the company serves
approximately 140,000 businesses throughout the United States, a number of small
group and carrier partners, and several significant Taft-Hartley clients.
For more information on HealthPlan Services, please visit HPS' Web site located
at WWW.HEALTHPLAN.COM
ABOUT HEALTHAXIS.COM:
HealthAxis.com, Inc. is the leading provider of Internet solutions for
healthcare insurance marketing, sales, and payer connectivity. HealthAxis.com,
Inc. is the only e-healthcare company servicing both the consumer and
business-to-business marketplaces with health plan solutions. The Company's
consumer Web site, www.healthaxis.com, is a fully transactional, online health
insurance agency targeting the individual and small group markets. The Company's
proprietary workflow and business application software, built around an
application service provider model, enables healthcare payers --carriers, third
party administrators, and large, self-funded groups -- to more efficiently
capture, process, and share health plan data over the Internet. HealthAxis.com,
Inc. is headquartered in suburban Philadelphia, with significant operations in
Dallas, as well as offices in eight other locations both domestic and abroad.
The Company employs over 350 IT professionals.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: CERTAIN STATEMENTS IN THIS PRESS RELEASE ARE "FORWARD LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION ACT OF 1995. SUCH
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT
MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. SUCH RISKS, UNCERTAINTIES AND
OTHER FACTORS INCLUDE, BUT ARE NOT LIMITED TO, CHANGES IN GENERAL ECONOMIC
CONDITIONS; CHANGES IN THE REGULATORY ENVIRONMENT; LEVELS OF COMPETITION
(INCLUDING MANAGED HEALTH CARE COMPETITION IN THE HEALTH INDUSTRY); AVAILABILITY
OF, AND VOLATILITY OF INTEREST RATES ASSOCIATED WITH, FUNDING SOURCES TO
ORIGINATE STUDENT LOANS AND CREDIT CARD RECEIVABLES; AND OTHER FACTORS DESCRIBED
IN DETAIL IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998.
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EXHIBIT 99.2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UICI,
UICI ACQUISITION CO.,
UICI CAPITAL TRUST I
AND
HEALTHPLAN SERVICES CORPORATION
DATED AS OF FEBRUARY 18, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I. THE MERGER..............................................2
Section 1.1. The Merger.........................................2
Section 1.2. Effective Time of the Merger.......................2
Section 1.3. Closing............................................2
ARTICLE II. THE SURVIVING CORPORATION...............................2
Section 2.1. Certificate of Incorporation.......................2
Section 2.2. By-Laws............................................2
Section 2.3. Directors and Officers of Surviving Corporation....2
ARTICLE III. CONVERSION OF SHARES....................................3
Section 3.1. Exchange Ratio.....................................3
Section 3.2. Exchange of Company Common Stock; Procedures.......4
Section 3.3. Distributions; Escheat.............................4
Section 3.4. No Fractional Securities...........................5
Section 3.5. Closing of Company Transfer Books..................5
Section 3.6. Further Assurances.................................5
Section 3.7. Dissenting Shares..................................5
Section 3.8. Withholding Rights.................................6
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........6
Section 4.1. Corporate Organization; Related Entities...........6
Section 4.2. Capitalization.....................................7
Section 4.3. Authority Relative to this Agreement...............8
Section 4.4. Consents and Approvals; No Violations..............8
Section 4.5. Reports and Financial Statements...................9
Section 4.6. Absence of Certain Changes or Events...............9
Section 4.7. Litigation........................................10
Section 4.8. Absence of Undisclosed Liabilities................10
Section 4.9. No Default........................................10
Section 4.10. Taxes.............................................11
Section 4.11. Intellectual Property.............................13
Section 4.12. Stockholder Rights Plan...........................14
Section 4.13. Information in Disclosure Documents and
Registration Statement.........................14
Section 4.14. Employees.........................................14
Section 4.15. Employee Benefit Plans; ERISA.....................15
Section 4.16. Environmental Matters.............................17
Section 4.17. Vote Required.....................................17
Section 4.18. Opinion of Financial Advisor......................18
Section 4.19. Insurance.........................................18
Section 4.20. Affiliate Transactions............................18
Section 4.21. Brokers...........................................18
Section 4.22. Year 2000.........................................18
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT...............18
Section 5.1. Organization......................................18
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PAGE
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Section 5.2. Capitalization....................................19
Section 5.3. Authority Relative to this Agreement..............20
Section 5.4. Consents and Approvals; No Violations.............22
Section 5.5. Reports and Financial Statements..................22
Section 5.6. Absence of Certain Changes or Events; Material
Agreements.....................................22
Section 5.7. Litigation........................................23
Section 5.8. Absence of Undisclosed Liabilities................23
Section 5.9. No Default........................................23
Section 5.10. Information in Disclosure Documents and
Registration Statement.........................24
Section 5.11. Environmental Protection..........................24
Section 5.12. Vote Required.....................................25
Section 5.13. Insurance.........................................25
Section 5.14. Year 2000.........................................25
Section 5.15. Affiliate Transactions............................25
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER.................26
Section 6.1. Conduct of Business by the Company Pending
the Merger.....................................26
Section 6.2. Conduct of Business by Parent Pending the Merger..27
Section 6.3. Conduct of Business of Sub and Trust..............28
ARTICLE VII. ADDITIONAL AGREEMENTS..................................28
Section 7.1. Access and Information............................28
Section 7.2. Solicitation of Competing Transactions............28
Section 7.3. Registration Statement............................30
Section 7.4. Proxy Statement-Prospectus; Stockholder Approvals.30
Section 7.5. Compliance with the Securities Act................31
Section 7.6. Commercially Reasonable Efforts...................31
Section 7.7. Voting Agreement..................................32
Section 7.8. Company Stock Options.............................32
Section 7.9. Public Announcements..............................32
Section 7.10. Directors' and Officers' Indemnification and
Insurance......................................32
Section 7.11. Election to Parent Board of Directors.............33
Section 7.12. Expenses..........................................33
Section 7.13. Listing Application and Reservation of Shares.....33
Section 7.14. Supplemental Disclosure...........................33
Section 7.15. Letters of Accountants............................34
Section 7.16. Conveyance Taxes..................................34
Section 7.17. Non-solicitation of Employees.....................34
Section 7.18. Exchange Act Filings..............................34
Section 7.19. Tax Treatment.....................................34
Section 7.20. Fairness Opinion..................................34
ARTICLE VIII. CONDITIONS TO CONSUMMATION OF THE MERGER...............35
Section 8.1. Conditions to Each Party's Obligation to Effect
the Merger.....................................35
Section 8.2. Conditions to Obligations of Parent and Sub
to Effect the Merger...........................36
Section 8.3. Conditions to Obligation of the Company to
Effect the Merger..............................37
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PAGE
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ARTICLE IX. TERMINATION............................................37
Section 9.1. Termination.......................................38
Section 9.2. Effect of Termination.............................39
ARTICLE X. GENERAL PROVISIONS.....................................39
Section 10.1. Amendment and Modification........................39
Section 10.2. Waiver............................................39
Section 10.3. Survivability; Investigations.....................40
Section 10.4. Notices...........................................40
Section 10.5. Descriptive Headings; Interpretation..............41
Section 10.6. Entire Agreement; Assignment......................41
Section 10.7. Governing Law.....................................41
Section 10.8. Severability......................................41
Section 10.9. Counterparts......................................41
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EXHIBITS
Exhibit A Voting Agreement
Exhibit B Form of Affiliate Letter
Exhibit C Description of Preferred Securities
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of February
18, 2000 (this "Agreement"), by and among UICI, a Delaware corporation
("Parent"), UICI ACQUISITION CO., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), UICI CAPITAL TRUST I, a Delaware business trust
("Trust") and HEALTHPLAN SERVICES CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, Parent, Sub and the Company are party to an Agreement and Plan
of Merger dated as of October 5, 1999 (the "Original Agreement") providing for
the merger of the Company with and into Sub; and
WHEREAS, the Parent, Sub and the Company desire to change the
consideration to be received by the stockholders of the Company in such merger
and to make certain other changes in the Original Agreement; and
WHEREAS, each of Parent, Sub and the Company desires that the other
parties waive, release and hold them harmless from any and all obligations,
claims, potential claims, liabilities and/or potential liabilities existing,
arising or allegedly arising under the Original Agreement or resulting from the
failure to consummate the transactions contemplated by the Original Agreement on
the terms set forth therein; and
WHEREAS, the Boards of Directors of Parent and Sub and the Company deem
it advisable and in the best interests of their respective stockholders that
Parent acquire the Company pursuant to the terms and conditions of this
Agreement, and, in furtherance of such acquisition, such Boards of Directors
(and Parent as the sole stockholder of Sub) have approved this Agreement and the
merger of Sub with and into the Company in accordance with the terms of this
Agreement and the General Corporation Law of the State of Delaware (the "DGCL");
and
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, certain holders of shares of the Common Stock, par value $.01 per
share (the "Company Common Stock"), of the Company, are entering into an
agreement with Parent in the form attached hereto as Exhibit A (the "Voting
Agreement") to vote certain shares of Company Common Stock according to the
terms set forth in the Voting Agreement; and
WHEREAS, Parent, Sub and the Company desire to amend and restate the
Original Agreement in its entirety subject to the terms and conditions of this
Agreement as hereinafter set forth; and
WHEREAS, the Trust has agreed to become a party to this Agreement for
the limited purposes specified herein.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1. THE MERGER. In accordance with the provisions of this
Agreement and the DGCL, at the Effective Time (as defined in Section 1.2), Sub
shall be merged with and into the Company (the "Merger"), the separate existence
of Sub shall thereupon cease, and the Company shall be the surviving corporation
in the Merger (sometimes hereinafter called the "Surviving Corporation") and
shall continue its corporate existence under the laws of the State of Delaware.
The Merger shall have the effects set forth in Section 259(a) of the DGCL.
Section 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at the time of filing of a properly executed Certificate of Merger in
the form required by and executed in accordance with the provisions of Section
251 of the DGCL. The parties hereto shall cause such filing to be made as soon
as practicable after the Closing (as defined in Section 1.3). When used in this
Agreement, the term "Effective Time" shall mean the date and time at which the
Merger shall become effective.
Section 1.3. CLOSING. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at Fowler, White, Gillen,
Boggs, Villareal and Banker P.A., Suite 1700, 501 East Kennedy Blvd, Tampa,
Florida 33601, at 10:00 a.m., local time, on the day on which all of the
conditions set forth in Article VIII are satisfied or waived or on such other
date and at such other time and place as Parent and the Company shall agree
(such date, the "Closing Date").
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1. CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Sub in effect at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that, at the Effective Time, the Certificate of
Incorporation of the Surviving Corporation shall be amended to provide that the
name of the Surviving Corporation shall be "HealthPlan Services Corporation."
Section 2.2. BY-LAWS. The By-Laws of Sub as in effect at the Effective
Time shall be the By-Laws of the Surviving Corporation until amended in
accordance with applicable law.
Section 2.3. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation or By-Laws
of the Surviving Corporation or as otherwise provided by law.
(b) The officers of the Company at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office from the
Effective Time until their
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respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation or By-Laws of the Surviving
Corporation or as otherwise provided by law.
ARTICLE III.
CONVERSION OF SHARES
Section 3.1. EXCHANGE RATIO. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares (as
defined in Section 3.7) and other than shares to be canceled in accordance with
Section 3.1(b)), shall be converted into the right to receive preferred
undivided beneficial interests (the "Preferred Securities") in the assets of
UICI Capital Trust I, a statutory business trust created under the laws of
Delaware (the "Trust"), equal to the Exchange Ratio (as hereinafter defined) and
payable upon the surrender of the certificate formerly representing such share
of Company Common Stock in accordance with Section 3.2 hereof. The "Exchange
Ratio" shall be equal to the result (rounded to the nearest 1/10,000, with .0005
rounded up) obtained by dividing 4,800,000 by the number of shares of Company
Common Stock (including dissenting Shares) outstanding at the Effective Time.
The Preferred Securities shall have a liquidation preference of $25 per
preferred security, shall be convertible into shares of Common Stock, par value
$.01 per share (the "Parent Common Stock"), of Parent and shall be exchangeable,
in the alternative, into shares of Common Stock, par value $.10 per share, of
HealthAxis, Inc., a Pennsylvania corporation, and will contain such other terms
and conditions as are set forth in the term sheet attached hereto as Exhibit C
and other customary terms of trust preferred securities
(b) All shares of Company Common Stock that, in either case, are
(i) held by the Company as treasury shares or (ii) owned by Parent or any
wholly-owned Subsidiary of Parent, shall be canceled and retired and cease to
exist, and no securities of Parent or other consideration shall be delivered in
exchange therefor. As used in this Agreement, the term "Subsidiary" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (x) such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any Subsidiary of such
party do not have a majority of the voting interest in such partnership) or (y)
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party and/or
one or more of its Subsidiaries.
(c) All shares of Common Stock, $.01 par value per share ("Sub
Common Stock"), of Sub 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 $.01 per share, of the Surviving Corporation.
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(d) Each outstanding option to purchase Company Common Stock
(each, a "Company Stock Option") shall be assumed by Parent as more specifically
provided in Section 7.8.
Section 3.2. EXCHANGE OF COMPANY COMMON STOCK; PROCEDURES.
(a) Prior to the Closing Date, Parent shall designate a bank or
trust company reasonably acceptable to the Company to act as Exchange Agent
hereunder (the "Exchange Agent"). As soon as practicable after the Effective
Time, Parent shall deposit with or for the account of the Exchange Agent
certificates representing the aggregate number of Preferred Securities issuable
pursuant to Section 3.1 in exchange for outstanding shares of Company Common
Stock, which Preferred Securities shall be deemed to have been issued at the
Effective Time.
(b) As soon as practicable after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") that were
converted pursuant to Section 3.1 into the right to receive Preferred Securities
(i) a form of letter of transmittal specifying 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 Exchange Agent and (ii) instructions for use
in surrendering such Certificates in exchange for certificates representing
Preferred Securities. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole Preferred Securities which such
holder has the right to receive pursuant to the provisions of this Article III,
(y) cash in lieu of any fractional Preferred Security to which such holder is
entitled pursuant to Section 3.4, after giving effect to any required tax
withholdings, and the Certificate so surrendered shall forthwith be canceled and
(z) any dividends or distributions to which such holder may be entitled pursuant
to Section 3.3. In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, a certificate
representing the proper number of Preferred Securities may be issued to a
transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer, and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
3.2(b), each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender a certificate
representing Preferred Securities, cash in lieu of any fractional Preferred
Security and any distributions, which may be payable pursuant to Section 3.3
hereof.
Section 3.3. DISTRIBUTIONS; ESCHEAT. No distributions that are accrued
and payable on the Preferred Securities will be paid to persons entitled to
receive certificates representing Preferred Securities until such persons
surrender their Certificates. Upon such surrender, there shall be paid to the
person in whose name the certificates representing such Preferred Securities
shall be issued, any distributions with respect to such Preferred Securities
which are accrued and payable and which have not been deferred. In no event
shall the person entitled to receive such distributions be entitled to receive
interest thereon. Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall deliver to the Parent all cash,
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certificates and other documents in its possession relating to the transactions
described in this Agreement, and any holders of Company Common Stock who have
not theretofore complied with this Article III shall look thereafter only to the
Parent for the Preferred Securities, any distributions thereon, and any cash in
lieu of fractional shares thereof to which they are entitled pursuant to this
Article III. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Company Common Stock for any
Preferred Securities, any distributions thereon or any cash in lieu of
fractional shares thereof delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
Section 3.4. NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional Preferred Securities shall be issued upon the surrender
for exchange of Certificates, and such fractional interests shall not entitle
the owner thereof to vote or to any rights of a security holder. In lieu of any
such fractional securities, each holder of Company Common Stock who would
otherwise have been entitled to a fraction of a Preferred Security upon
surrender of such holder's Certificates will be entitled to receive a cash
payment (without interest) determined by multiplying (i) the fractional interest
to which such holder would otherwise be entitled (after taking into account all
shares of Company Common Stock then held of record by such holder) and (ii)
$25.00.
Section 3.5. CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall thereafter be made. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged as provided in this Article III.
Section 3.6. FURTHER ASSURANCES. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of Sub or the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of each of Sub and the Company or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in such names and on such
behalves or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the purposes of this Agreement.
Section 3.7.DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, shares of Company Common Stock that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall have
available to them and who shall have demanded properly in writing appraisal for
such shares of Company Common Stock in accordance with Section 262 of the DGCL
(collectively, the "Dissenting Shares") shall not represent the right to receive
the Preferred Securities. Such stockholders 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
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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 Section
262 shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Preferred
Securities, without any interest thereon, upon surrender, in the manner provided
in Section 3.1, of the certificate or certificates that formerly evidenced such
shares of Company Common Stock.
(b) The Company shall give Parent (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to the DGCL and received by the Company and
(ii) the opportunity to participate in all negotiation and proceedings with
respect to demands for appraisal under the DGCL. The Company shall not, except
with the prior written consent of Parent, make any payment with respect to any
demands for appraisal or offer to settle or settle any such demands.
Section 3.8. WITHHOLDING RIGHTS. Parent, Sub, the Surviving Corporation
and the Exchange Agent shall be entitled to deduct and withhold from the Merger
consideration otherwise payable pursuant to this Agreement to any holder of
Company Common Stock such amounts as Parent, Sub, the Surviving Corporation or
the Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local, provincial or
foreign tax law; provided, however, that Parent, Sub, the Surviving Corporation
or the Exchange Agent, as applicable, shall promptly pay any amounts deducted
and withheld hereunder to the applicable Governmental Entity (as defined in
Section 4.4), shall promptly file all Tax Returns (as defined in Section
4.10(b)(i) required to be filed in respect of such deductions and withholding,
and shall promptly provide to the Company proof of such payment and a copy of
all such Tax Returns. To the extent that amounts are so withheld, 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.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1. CORPORATE ORGANIZATION; RELATED ENTITIES.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power and authority to own or lease its properties and to carry on its
business as it is presently being conducted. Schedule 4.1(a) lists, and the
Company is duly qualified as a foreign corporation to do business and is in good
standing in, every jurisdiction where the character of the Company's properties
(owned or leased) or the nature of its activities makes such qualification
necessary, except for failures, if any, to be so qualified which would not in
the aggregate have a Company Material Adverse Effect (as hereinafter defined).
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(b) Schedule 4.1(b) lists all of the Subsidiaries of the Company
which would be required to be set forth as an exhibit to the Company's Annual
Report on Form 10-K pursuant to the rules and regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (the "Company
Subsidiaries"). Each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization or incorporation and has the corporate power and authority to own
or lease its properties and to carry on its business as it is presently being
conducted, except for failures, if any, to be so organized, validly existing or
in good standing or to have such corporate power and authority which would not
in the aggregate have a Company Material Adverse Effect.
(c) The copies of the Certificate of Incorporation and By-Laws of
the Company heretofore delivered to Parent are complete and correct copies of
such instruments as presently in effect.
(d) Except as set forth on Schedule 4.1(d), as used in this
Agreement, any reference to any event, change, circumstance or effect having a
"Company Material Adverse Effect" shall mean that such event, change,
circumstance or effect is, individually or in the aggregate, materially adverse
to the business, operations, properties, assets (including intangible assets),
liabilities (including contingent liabilities), condition (financial or other)
or results of operations of the Company and any of its Subsidiaries taken as a
whole or to the ability of the Company to consummate the Merger and the other
transactions contemplated by this Agreement, other than any event, change,
circumstance or effect relating to or resulting from: (i) general changes in the
industries in which the Company operates its business; (ii) changes in general
economic conditions or securities markets in general; and (iii) the termination
of any contract listed in Schedule 4.4 resulting from a termination right
triggered by this Agreement, the transactions contemplated hereby or the
announcement thereof.
Section 4.2. CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock
of the Company consists of 100,000,000 shares of Company Common Stock,
13,672,776 of which are issued and outstanding. As of the date of this
Agreement, options to acquire 2,033,316 shares of Company Common Stock ("Company
Stock Options") are outstanding under all of the Company Option Plans (as
defined below) and 724,984 shares of Company Common Stock are reserved for
issuance pursuant to the Company Option Plans. The "Company Option Plans" means
the Amended and Restated HealthPlan Services Corporation 1996 Employee Stock
Option Plan, the HealthPlan Services Corporation 1995 Incentive Equity Plan, the
HealthPlan Services Corporation 1995 Consultants Stock Option Plan, the
HealthPlan Services Corporation 1996 Employee Stock Purchase Plan, the
HealthPlan Services Corporation 1995 Directors Stock Option Plan and the Amended
and Restated HealthPlan Services Corporation Directors Equity Plan. All of the
issued and outstanding shares of Company Common Stock are validly issued, fully
paid and nonassessable.
(b) Except as disclosed in this Section 4.2 or on Schedule 4.2(b),
(i) there is no outstanding right, subscription, warrant, call, unsatisfied
preemptive right, option or other agreement or arrangement of any kind to
purchase or otherwise to receive from the Company any of the outstanding
authorized but unissued or treasury shares of the capital stock or any other
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security of the Company, (ii) there is no outstanding security of any kind
convertible into or exchangeable for such capital stock, and (iii) there is no
voting trust or other agreement or understanding to which the Company is a party
or is bound with respect to the voting of the capital stock of the Company.
(c) Except as set forth on Schedule 4.2(c), none of the awards,
grants or other agreements pursuant to which Company Stock Options were issued
have provisions which accelerate the vesting or right to exercise such options
upon the execution of this Agreement (including the documents attached as
Exhibits hereto), the consummation of the transactions contemplated hereby (or
thereby) or any other "change of control" or similar events.
(d) Except as set forth on Schedule 4.2(d) and for qualifying
shares required by certain foreign jurisdictions, all of the issued and
outstanding capital stock of each of the Company Subsidiaries has been validly
issued, is fully paid and nonassessable and is owned of record and beneficially,
directly or indirectly, by the Company or another Subsidiary of the Company,
free of any Liens, preemptive rights or other restrictions with respect thereto.
Section 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated on its part hereby have been duly authorized by
the Company's Board of Directors and, except for the approval of its
stockholders to be sought at the stockholders meeting contemplated by Section
7.3a) with respect to this Agreement, no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or for the Company to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
Section 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the
execution, delivery and performance of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby, will (i)
conflict with or result in any breach of any provisions of the charter, By-laws
or other organizational documents of the Company or the organizational documents
of any of its Subsidiaries, (ii) require a filing with, or a permit,
authorization, consent or approval of, any federal, state, local or foreign
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or administrative agency or
commission (a "Governmental Entity"), except in connection with or in order to
comply with the applicable provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), for the filing of a
registration statement on Form S-4 under the Securities Act of 1933, as amended
(the "Securities Act") with respect to Preferred Securities (and the related
subordinated debentures and guarantee of Parent), the Parent Common Stock and
the HealthAxis Common Stock to be offered to the Company stockholders, the
filing of the Proxy Statement-Prospectus under the Exchange Act, filings or
approvals required under state securities or "blue sky" laws, the By-Laws of the
National Association of Securities Dealers
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(the "NASD") and the filing and recordation of a Certificate of Merger as
required by the DGCL, (iii) except as set forth on Schedule 4.4 hereto, result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any mortgage,
pledge, security interest, encumbrance, lien, claim or charge of any kind or
right of others of whatever nature ("Liens"), on any property or asset of the
Company or any of its Subsidiaries pursuant to, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation (each, a "Contract") to
which the Company or any of its Subsidiaries is a party or by which it or any of
its properties or assets may be bound or (iv) violate any law, order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to the Company or any of its Subsidiaries or any of their properties
or assets, except, in the case of clauses (ii), (iii) and (iv), where failures
to make such filing or obtain such authorization, consent or approval would not
have, or where such violations, breaches or defaults or Liens would not have, in
the aggregate, a Company Material Adverse Effect.
Section 4.5. REPORTS AND FINANCIAL STATEMENTS. Except as set forth on
Schedule 4.5, the Company has timely filed all reports required to be filed by
the Company with the Securities and Exchange Commission (the "SEC") pursuant to
the Exchange Act or the Securities Act since December 31, 1998 (collectively,
the "Company SEC Reports"), and has previously made available to Parent true and
complete copies of all such Company SEC Reports. Such Company SEC Reports, as of
their respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such Company SEC Reports, as of their respective dates, 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 Reports have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") consistently applied throughout the periods indicated (except as
otherwise noted therein or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present (subject, in the case of unaudited
statements, to normal recurring year-end adjustments and any other adjustments
described therein) the financial position of the Company as at the dates thereof
and the results of operations and cash flows of the Company for the periods then
ended. Except as set forth on Schedule 4.5, since December 31, 1998, there has
been no change in any of the significant accounting (including tax accounting)
policies, practices or procedures of the Company.
Section 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
on Schedule 4.6 or in the Company SEC Reports filed as of the date of this
Agreement, since December 31, 1998, (i) neither the Company nor any of its
Subsidiaries has conducted its business and operations other than in the
ordinary course of business and consistent with past practices or taken any
actions that, if it had been in effect, would have violated or been inconsistent
with the provisions of Section 6.1 and (ii) there has not been any fact, event,
circumstance or change affecting or relating to the Company or any of its
Subsidiaries which has had or is reasonably likely to have a Company Material
Adverse Effect. Except as set forth on Schedule 4.6 or as would not represent a
Company Material Adverse Effect, the transactions contemplated by this Agreement
will not constitute a change of control under or require the
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consent from or the giving of notice to a third party pursuant to the terms,
conditions or provisions of any Contract to which the Company or any of its
Subsidiaries is a party.
Section 4.7. LITIGATION. Except as disclosed on Schedule 4.7 and except
for litigation disclosed in the notes to the financial statements included in
the Company's Annual Report to Stockholders for the fiscal year ended December
31, 1998 or in the Company SEC Reports filed subsequent thereto, as of the date
hereof, there is no suit, action, proceeding or investigation pending or, to the
best knowledge of the Company, threatened against, the Company or any of its
Subsidiaries or with respect to which the Company or any of its Subsidiaries
could be required to provide indemnification or to otherwise contribute to
liabilities or damages relating thereto, the outcome of which could reasonably
be expected to have a Company Material Adverse Effect; nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity
outstanding against the Company or any of its Subsidiaries having, or which,
insofar as can reasonably be foreseen, in the future may have a Company Material
Adverse Effect. For purposes of this Agreement, wherever the term "Company
knowledge" or "best knowledge of the Company" or any phrase of similar import is
used it shall mean the actual knowledge of the directors and the executive
officers of the Company, or knowledge which such persons could reasonably be
expected to possess in view of their respective positions with the Company, and,
except as provided above, shall not include imputed, constructive or implied
knowledge of any such persons.
Section 4.8. ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities
or obligations which are accrued or reserved against in the Company's financial
statements (or reflected in the notes thereto) included in the Company SEC
Reports or which were incurred after September 30, 1999 in the ordinary course
of business and consistent with past practice, or except as set forth on
Schedule 4.8, none of the Company or any of its Subsidiaries has any liabilities
or obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a balance sheet (or reflected in the notes
thereto) and which could reasonably be expected to have a Company Material
Adverse Effect.
Section 4.9. NO DEFAULT. Except as set forth in Schedule 4.9, neither
the Company nor any of its Subsidiaries is in breach or violation of, or in
default under (and no event has occurred which with notice or lapse of time or
both would constitute such a breach, violation or default), any term, condition
or provision of (i) the Company's or the respective Subsidiary's Certificate or
Articles of Incorporation or By-Laws, or (ii) (x) any order, writ, decree,
statute, rule or regulation of any Governmental Entity applicable to the Company
or any of its Subsidiaries or any of their properties or assets or (y) any
Contract to which the Company or any of its Subsidiaries is a party or by which
the Company, or any of its Subsidiaries or any of their properties or assets may
be bound, except in the case of this clause (ii), which breaches, violations or
defaults, individually or in the aggregate, would not have a Company Material
Adverse Effect. The Company and each of its Subsidiaries have, and are in
compliance with, all licenses, permits, variances, exemptions, orders, approvals
and other authorizations of all Governmental Entities as are necessary in order
to enable them to own their businesses and conduct their businesses as currently
conducted and as currently proposed to be conducted and to enter into the
transactions contemplated hereby, the lack of which, under applicable law, rule
or regulation, (x) would render legally impermissible the transactions
contemplated hereby or (y) could reasonably be expected to have a Company
Material Adverse Effect.
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Section 4.10. TAXES.
(a) The Company has heretofore delivered or will make available to
Parent true, correct and complete copies of the federal, state, local and
foreign income, franchise sales and other Tax Returns (as hereinafter defined)
filed by the Company and each of its Subsidiaries for each of the Company's
years ended 1996, 1997 and 1998, inclusive.
(b) Except where the failure to be in compliance with any of the
following representations would not have a Company Material Adverse Effect or as
disclosed in Schedule 4.10(b):
(i) All returns, declarations, reports, estimates, statements,
schedules or other information or document with respect to Taxes (as
hereinafter defined) (collectively, "Tax Returns") required to be filed
by the Company and each of its Subsidiaries have been timely filed
(giving effect to extensions granted with respect thereto), and all such
Tax Returns are true, correct and complete. The Company and each of its
Subsidiaries is not required to file any state Tax Returns other than in
the states reflected on Schedule 4.10(b), identifying for the Company and
for each Subsidiary each such state. No authority in a jurisdiction where
any of the Company or its Subsidiaries does not file Tax Returns has
claimed that the Company or any of its Subsidiaries is subject to tax in
such jurisdiction.
(ii) The Company and each of its Subsidiaries has timely paid
all Taxes owed (whether or not shown on any Tax Return) or claimed to be
due from it by any federal, state, local, foreign or other taxing
authority.
(iii) There are no liens for Taxes upon the assets of the
Company or any of its Subsidiaries except Liens for Taxes not yet due and
payable.
(iv) No Tax Returns of the Company or any of its Subsidiaries
have been examined by the Internal Revenue Service (the "Service") since
1995. No deficiency for any Taxes has been proposed, asserted or assessed
against the Company or any of its Subsidiaries which has not been
resolved and paid in full. There are no outstanding waivers, extensions
or comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns that have been given
by the Company or any of its Subsidiaries (including the time for filing
of Tax Returns or paying Taxes).
(v) Neither the Company nor any of its Subsidiaries has made
any change in accounting methods, received a ruling from any taxing
authority or signed an agreement with any taxing authority.
(vi) The Company and each of its Subsidiaries has complied with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions
under any foreign laws) and has, within the time and the manner
prescribed by law, withheld from employee wages and paid over to the
proper
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governmental authorities all amounts required to be so withheld and paid
over under applicable laws.
(vii) Other than as set forth in Schedule 4.10(b)(vii), no audit
or other proceeding by any federal, state, local or foreign court,
governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of the Company
or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries has received a written notice of any pending audits or
proceedings. Schedule 4.10(b)(vii) shall set forth the nature of any such
audit or proceeding, the type of Tax Return, any deficiencies proposed,
asserted or assessed and the amount thereof and the tax year in question.
(viii) Neither the Company nor any its Subsidiaries is a party
to, is bound by or has any obligation under, any Tax sharing, allocation
or indemnity agreement or similar contract or arrangement.
(ix) The Company and each of its Subsidiaries has been and
continues to be an includible corporation which is a member of the
affiliated group (within the meaning of Section 1504 of the Code) for
which the Company files a consolidated return as the common parent.
(x) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries.
(xi) No power of attorney granted by the Company or any of its
Subsidiaries with respect to any Taxes is currently in force.
(xii) Neither the Company nor any of its Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired by any
of them, filed a consent to the application of Section 341(f) of the
Code, or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or any of its Subsidiaries.
(xiii) The Company has identified for Parent all agreements,
contracts and arrangements with the Company and each of its Subsidiaries,
and has provided to Parent all such information as of the date hereof
concerning the Company and each of its Subsidiaries and their employees
as may be necessary to enable Parent to determine the amount, if any, of
any "excess parachute payment" within the meaning of Section 28OG of the
Code that could result solely from the transactions contemplated by this
Agreement.
(xiv) Neither the Company nor any of its Subsidiaries is or has
been during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code a "United States real property holding company" (as defined
in Section 897(c)(2) of the Code).
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(xv) Neither the Company nor any of its Subsidiaries has
participated in, or cooperated with, an "international boycott" within
the meaning of Section 999 of the Code.
(xvi) The charges, accruals and reserves for Taxes reflected on
the books of the Company and each of its Subsidiaries are adequate under
GAAP to cover the Tax liabilities accruing or payable by the Company and
each of its Subsidiaries in respect of periods prior to the date hereof.
(xvii) Neither the Company nor any of its Subsidiaries is subject
to any joint venture, partnership or other arrangement or contract that
is treated as a partnership for U.S. federal income tax purposes.
(xviii) Neither the Company nor any of its Subsidiaries is subject
to liability for Taxes of any other person (other than with respect to
the Company), including, without limitation, liability arising from the
application of U.S. Treasury Regulation ss.1.1502-6 or any analogous
provision of Tax law.
(xix) The shares of Company Common Stock are of "a class of
stock that is regularly traded on an established securities market"
within the meaning of Section 1445(b)(6) of the Code.
(c) For purposes of this Agreement, "Taxes" (including, with
correlative meaning, the term "Tax") shall include all taxes, charges, fees,
levies or other assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, service, service use, ad valorem,
transfer, franchise, profits, license, withholding, social security, payroll,
employment, excise, estimated, severance, stamp, recording, occupation, property
or other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, whether computed on a separate consolidated, unitary, combined or
other basis, together with any interest, fines, penalties, additions to tax or
other additional amounts imposed thereon or with respect thereto imposed by any
taxing authority (domestic or foreign).
Section 4.11. INTELLECTUAL PROPERTY. Except as would not have a Company
Material Adverse Effect, the Company and each of its Subsidiaries owns, or
possesses valid license rights to use, all Intellectual Property (as hereinafter
defined) used in the conduct of the business. Except as would not have a Company
Material Adverse Effect, neither the execution, delivery and performance of this
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, will adversely affect the right of the Company
or any of its Subsidiaries, without obtaining the consent of any person, paying
any money or taking any other action, to continue to use all Intellectual
Property of the Company or any of its Subsidiaries as such Intellectual Property
is currently used in the conduct of the business of the Company or such
Subsidiary. Neither the Company nor any of its Subsidiaries has received any
notice, nor, except as would not have a Company Material Adverse Effect, has any
basis to believe, that any Intellectual Property owned or licensed by the
Company or any of its Subsidiaries conflicts with, violates or infringes any
asserted rights of any other person. To the Company's knowledge, there is no
infringement of any proprietary right owned by or licensed by or to the Company
or any of its Subsidiaries which could, individually or in the aggregate,
reasonably be expected to
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have a Company Material Adverse Effect. As used in this Agreement, the phrase
"Intellectual Property" means all intellectual property or other proprietary
rights of every kind, including, without limitation, all domestic or foreign
patents, patent applications, inventions (whether or not patentable), processes,
products, technologies, discoveries, works protected by copyright, computer
software, apparatus, trade secrets, trademarks (registered and unregistered) and
trademark applications and registrations, brand names, certification marks,
service marks and service mark applications and registrations, trade names,
trade dress, copyright registrations, design rights, customer lists, marketing
and customer information, mask work rights, know-how, licenses, technical
information (whether confidential or otherwise), and all documentation relating
to the foregoing.
Section 4.12. STOCKHOLDER RIGHTS PLAN. The Company has not proposed,
adopted, approved or implemented any stockholder rights plan, or authorized the
issuance of any similar dividend or the distribution of any securities to its
stockholders, or entered into any agreement with respect to the foregoing (any
such plan, authorization, dividend, distribution or agreement being referred to
herein as a "Stockholder Rights Plan"), which could have the effect of
restricting, prohibiting, impeding or otherwise affecting the consummation of
the transactions contemplated by this Agreement or the Voting Agreement, in each
case by the respective parties thereto.
Section 4.13. INFORMATION IN DISCLOSURE DOCUMENTS AND REGISTRATION
STATEMENT. None of the information to be supplied by the Company for inclusion
in (i) the Amended Registration Statement to be filed with the SEC by Parent on
Form S-4 under the Securities Act for the purpose of registering the securities
to be issued in connection with the Merger, amending that registration statement
filed with the SEC on October 26, 1999 (as amended, the "Registration
Statement") or (ii) the joint proxy statement-prospectus to be distributed in
connection with the Company's meetings of stockholders to vote upon this
Agreement (the "Proxy Statement-Prospectus") will, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, or, in the case of the Proxy Statement-Prospectus or any amendments
thereof or supplements thereto, at the time of the mailing of the Proxy
Statement-Prospectus and any amendments or supplements thereto, and at the time
of the meeting of stockholders of the Company to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement-Prospectus will comply as to form in all
material respects with the applicable provisions of the Exchange Act, and the
rules and regulations promulgated thereunder, except that no representation is
made by the Company with respect to statements made therein based on information
supplied by Parent or its representatives for inclusion in the Proxy
Statement-Prospectus or with respect to information concerning Parent or any of
its Subsidiaries incorporated by reference in the Proxy Statement-Prospectus.
Section 4.14. EMPLOYEES. Except as set forth on Schedule 4.14 or
Schedule 4.15, there are no employment or severance or termination agreements,
policies, plans, commitments or other Contracts, whether written or oral,
accruing to the benefit of any employee, director or independent contractor of
the Company or any of its Subsidiaries. To the knowledge of the Company, no
executive, key employee or group of employees has any plans to terminate his,
her or their employment with the Company or any of its Subsidiaries, whether as
a result of the
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Merger or otherwise, except as contemplated by this Agreement. Except as
disclosed on Schedule 4.14, the Company has complied in all material respects
with governmental requirements and laws relating in any way whatsoever to the
employment of labor, except where the failure to do so would not have a Company
Material Adverse Effect. Except as disclosed on Schedule 4.14 or 4.7, there are
no actions, charges or complaints currently pending, or to the knowledge of the
Company, threatened (and to the knowledge of the Company, there is no basis
therefor), against the Company or any of its Subsidiaries, relating to alleged
employment discrimination, failure to pay appropriate wages or overtime pay or
other compensation, unfair labor practices, equal pay discrimination,
affirmative action noncompliance, occupational safety and health, breach of
employment contract, employee benefit matters, wrongful discharge or other
employment-related matters which can reasonably be expected if adversely
determined to have a Company Material Adverse Effect. Except as disclosed on
Schedule 4.14, all levies, assessments and penalties made against the Company
pursuant to any applicable workers' compensation legislation in any jurisdiction
in which the Company conducts business have been paid by the Company where the
failure to so pay could have a Company Material Adverse Effect. Except for
contracts shown on Schedule 4.14, neither the Company nor any of its
Subsidiaries is a party to any Contracts with any labor union or employee
association nor has the Company or any of its Subsidiaries made commitments to
or conducted negotiations with any labor union or employee association with
respect to any future contracts. The Company is not aware of any current
attempts to organize or establish any labor union or employee association with
respect to any employees of the Company or any of its Subsidiaries, and there is
no existing or pending certification of any such union with regard to a
bargaining unit.
Section 4.15. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Schedule 4.15 (a) hereto sets forth a true and complete list
of each retirement, pension, bonus, stock purchase, profit sharing, stock
option, deferred compensation, severance or termination pay, insurance, medical,
hospital, dental, vision care, drug, sick leave, disability, salary
continuation, retiree health, legal benefits, unemployment benefits, vacation,
incentive or other compensation plan, agreement or arrangement or other employee
benefit, whether written or unwritten, insured or uninsured, whether single
employer, multiple employer or multiemployer plan, that is maintained or
otherwise contributed to or required to be contributed to at any time during the
three (3) calendar years preceding the date of this Agreement (the "Company
Plans"), by the Company and each of its Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), which together
with the Company or any of its Subsidiaries would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Neither the Company, any of its Subsidiaries
nor any ERISA Affiliate has any formal plan or commitment to create any
additional plan or modify any existing Company Plan.
(b) Except as set forth on Schedule 4.15(b), each of the Company
Plans that is subject to ERISA is in compliance with ERISA in all material
respects; each of the Company Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified, no event has occurred
which may affect such qualification and the trusts maintained thereunder are
exempt from taxation under Section 501(a) of the Code; no Company Plan has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Code; neither the Company nor an ERISA Affiliate has incurred, directly or
indirectly, any material
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liability (including any material contingent liability) to or on account of a
Company Plan pursuant to Title IV of ERISA; no proceedings have been instituted
to terminate any Company Plan that is subject to Title IV of ERISA; no
"reportable event," as such term is defined in Section 4043(b) of ERISA, has
occurred with respect to any Company Plan; and no condition exists that presents
a material risk to the Company or an ERISA Affiliate of incurring a liability to
or on account of a Company Plan pursuant to Title IV of ERISA. Except as set
forth on Schedule 4.15(b), neither the Company nor any ERISA Affiliate has any
unfunded liability for (i) post-retirement welfare benefits including retiree
life and medical benefits; or (ii) pension benefits under a Company Plan subject
to Title IV of ERISA.
(c) Except as set forth on Schedule 4.15(c), the current value of
the assets of each of the Company Plans that are subject to Title IV of ERISA,
based upon the actuarial assumptions (to the extent reasonable) presently used
by the Company Plans, exceeds the present value of the accrued benefits under
each such Company Plan; no Company Plan is a multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) and no Company Plan is a multiple
employer plan as defined in Section 413 of the Code; and all contributions or
other amounts payable by the Company as of the Effective Time with respect to
each Company Plan in respect of current or prior plan years have been either
paid or accrued on the balance sheet of the Company. There are no pending,
threatened or anticipated investigations, suits/proceedings or claims (other
than routine claims for benefits) by, on behalf of or against any of the Company
Plans or any trusts related thereto or to the knowledge of the Company are there
any facts that could rise to any liability in the event of such investigation,
suit, proceeding or claim.
(d) Except as set forth on Schedule 4.15(d), neither the Company
nor any ERISA Affiliate, nor any Company Plan, nor any trust created thereunder,
nor any trustee or administrator thereof has engaged in a transaction in
connection with which the Company or any ERISA Affiliate, any Company Plan, any
such trust, or any trustee or administrator thereof, or any party dealing with
any Company Plan or any such trust could be subject to either a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975, 4976 or 4980B of the Code. Except as set forth
on Schedule 4.15(d), no amounts payable under the Company Plans will,
individually or in the aggregate, fail to be deductible for federal income tax
purposes by virtue of Section 28OG of the Code. Except as set forth on Schedule
4.15(d), no Company Plan provides death or medical benefits (whether or not
insured), with respect to current or former employees of the Company or any
ERISA Affiliate beyond their retirement or other termination of service other
than (i) coverage mandated by applicable law or (ii) death benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA. The
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee, director or officer of the Company or
any ERISA Affiliate to severance pay, unemployment compensation or any other
payment, except as expressly provided or disclosed in the Schedules to this
Agreement or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer.
Section 4.16. ENVIRONMENTAL MATTERS. Except as could not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect or as disclosed on Schedule 4.16:
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(a) There are not any past or present conditions or circumstances
that could reasonably be expected to interfere with or prevent the conduct of
the business of the Company or any of its Subsidiaries in compliance with:
(i) any order of any court or arbitration board or tribunal or Governmental
Entity, or any law, ordinance, governmental rule or regulation related to human
health or the environment ("Environmental Law"); or (ii) the terms or conditions
of any permits, approvals, licenses or consents required to be issued by any
Governmental Entity pursuant to any applicable Environmental Law.
(b) There are not any past or present conditions or circumstances
at, arising out of, or related to, any current or former businesses, assets or
properties of the Company or any of its Subsidiaries, including but not limited
to on-site or off-site storage, treatment, disposal or the release or threatened
release of any chemical substance, product or waste, which could, individually
or in the aggregate, reasonably be expected to give rise to: (i) liabilities or
obligations for any cleanup, remediation, disposal or corrective action or any
long-term monitoring requirements under any Environmental Law or (ii) claims
arising for personal injury, property damage, or damage to natural resources.
(c) Neither the Company nor any of its Subsidiaries has (i)
received any notice of noncompliance with, violation of, or liability or
potential liability, or request for information under any Environmental Law or
(ii) entered into any consent decree, settlement or order or is subject to any
order of any court or Governmental Entity or tribunal under any Environmental
Law or relating to the cleanup of any hazardous or toxic materials, wastes,
substances or any pollutants or contamination.
(d) There are no persons or entities whose liability, for any
environmental matters or under any applicable Environmental Law, the Company or
any of its Subsidiaries has retained or assumed contractually.
(e) Neither the Company nor any of its Subsidiaries has handled or
directed the management of or participated in any decisions with respect to or
exercised any influence or control over the use, generation, storage, treatment
or disposal of any hazardous or toxic materials, wastes or substances at or
related to any of their business, assets or properties.
Section 4.17. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the Merger. The Board of Directors of the Company (at a meeting duly
called and held) has unanimously (i) approved this Agreement, (ii) determined
that the transactions contemplated hereby are in the best interests of the
holders of Company Common Stock and (iii) determined to recommend this
Agreement, the Merger and the other transactions contemplated hereby to such
holders for approval and adoption, subject to their rights to withdraw such
recommendation as granted in Section 7.2.
Section 4.18. OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of Bear Stearns & Co. Inc. ("Bear Stearns"), dated February 18,
2000, substantially to the effect that the consideration to be received by the
Company's stockholders pursuant to the Agreement is fair from a financial point
of view to the holders of the Company Common Stock. A copy of this opinion will
be delivered to Parent on or promptly after the date of this Agreement.
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Section 4.19. INSURANCE. The Company and each of its Subsidiaries is,
and has been continuously since January 1, 1995, insured in such amounts and
against such risks and losses as are customary for companies conducting the
respective businesses conducted by the Company and its Subsidiaries during such
time period. Neither the Company nor any of its Subsidiaries, has received any
written notice of cancellation or termination with respect to any material
insurance policy. To the knowledge of the Company, all material insurance
policies of the Company and its Subsidiaries are valid and enforceable policies
in all material respects.
Section 4.20. AFFILIATE TRANSACTIONS. Except as disclosed in the
Company SEC Reports or as otherwise disclosed in the Schedules to this
Agreement, there are no material Contracts or other transactions between the
Company, on the one hand, and any (i) officer or director of the Company, (ii)
record or beneficial owner of five percent or more of the voting securities of
the Company or (iii) affiliate (as such term is defined in Regulation 12b-2
promulgated under the Exchange Act) of any such officer, director or beneficial
owner, on the other hand.
Section 4.21. BROKERS. Except for Bear Stearns, no broker, finder or
financial advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Section 4.22. YEAR 2000. As of the date hereof the Company is not aware
of any condition or circumstance that has impeded or will impede the ability of
the Company or any Subsidiary to conduct business as usual prior to, during and
after the year-end change from 1999 to 2000 as a result of Year 2000
Functionality. As used in this Agreement, the phrase "Year 2000 Functionality"
means that, except as would not cause a Company Material Adverse Effect, all
date-sensitive devices material to the conduct of the entity's business have
provided and will provide uninterrupted functionality to record, store, process
and present calendar dates on or after January 1, 2000 (including without
limitation properly treating 2000 as a leap year) in substantially the same
manner and with the same functionality as such date-sensitive devices have
heretofore recorded, stored, processed and presented calendar dates falling on
or before December 31, 1999.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1. ORGANIZATION.
(a) Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the corporate
power and authority to carry on its business as it is now being, conducted or
presently proposed to be conducted. Parent is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified will not have a Parent Material Adverse Effect (as hereinafter
defined). Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Sub
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has not engaged in any business (other than in connection with this Agreement
and the transactions contemplated hereby) since the date of its incorporation.
The Trust has been duly created and is validly existing in good standing as a
business trust under the Business Trust Act of the State of Delaware, has the
business trust power and authority to conduct its business as presently
conducted, and is not required to be authorized to do business in any other
jurisdiction. The Trust has not engaged in any business (other than in
connection with this Agreement and the transactions contemplated hereby) since
the date of its inception.
(b) Schedule 5.1(b) lists all of the Subsidiaries of Parent which
would be required to be set forth as an exhibit to Parent's Annual Report on
Form 10-K pursuant to the rules and regulations under the Exchange Act (the
"Parent Subsidiaries"). Each Subsidiary of Parent is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization or incorporation and has the corporate power and
authority to own or lease its properties and to carry on its business as it is
presently being conducted, except for failures, if any, to be so organized,
validly existing or in good standing or to have such corporate power and
authority which would not in the aggregate have a Parent Material Adverse
Effect.
(c) The copies of the Certificate of Incorporation and By-Laws of
Parent and Sub and the copies of the Certificate of Trust and Declaration of
Trust of the Trust heretofore delivered to the Company are complete and correct
copies of such instruments as presently in effect.
(d) As used in this Agreement, any reference to any event, change
or effect having a "Parent Material Adverse Effect" shall mean that such event,
change or effect is, individually or in the aggregate, materially adverse to the
business, operations, properties, assets (including intangible assets),
liabilities (including contingent liabilities), condition (financial or other)
or results of operations of the Parent and its Subsidiaries taken as a whole or
to the ability of Parent to consummate the Merger and the other transactions
contemplated by this Agreement, other than any change, effect or circumstance
relating to or resulting from: (i) general changes in the industries in which
Parent operates its business; (ii) changes in general economic conditions or
securities markets in general and (iii) the other circumstances listed in
Schedule 5.1(d).
(e) Neither Trust nor Parent is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Section 5.2. CAPITALIZATION Trust and Parent have complied and will
comply with all provisions of Section 517.075, Florida Statues (Chapter 920198,
Laws of Florida).
(a) As of the date of this Agreement, the authorized capital stock
of Parent consists of 100,000,000 shares of Parent Common Stock, of which, at
February 18, 2000, 46,360,635 shares were issued and outstanding, and 10,000,000
shares of Parent Preferred Stock, of which, at February 18, 2000, none were
outstanding. As of the date of this Agreement, options to acquire 4,252,907
shares of Parent Common Stock (the "Parent Stock Options") are outstanding under
all stock option plans of Parent. All of the shares of Parent Common Stock
issuable in exchange for Preferred Securities in accordance with this Agreement
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable. As of the date of this
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Agreement, Parent owns 19,810,229 shares of common stock of HealthAxis.com, Inc.
Following the merger of HealthAxis.com and HealthAxis Inc. (the "HealthAxis
Merger"), Parent will own 22,326,127 shares of common stock of HealthAxis Inc.
(the "Parent HealthAxis Shares"). All of the Parent HealthAxis Shares will be
owned by Parent free and clear of any restriction which would encumber or
otherwise inhibit Parent from providing to holders of the Preferred Securities
the Parent HealthAxis Shares upon exercise of such holders' right to exchange
the Preferred Securities for Parent HealthAxis Shares.
(b) The authorized capital stock of Sub consists of one thousand
shares of Sub Common Stock, one hundred of which shares, as of the date hereof
are issued and outstanding, owned by Parent and are validly issued, fully paid
and nonassessable.
(c) Except as disclosed in this Section 5.2 or in the Parent SEC
Reports (as hereinafter defined), (i) there is no outstanding right,
subscription, warrant, call, unsatisfied preemptive right, option or other
agreement or arrangement of any kind to purchase or otherwise to receive from
Parent or Sub any of the outstanding authorized but unissued or treasury shares
of the capital stock or any other security of Parent or Sub, (ii) there is no
outstanding security of any kind convertible into or exchangeable for such
capital stock, and (iii) there is no voting trust or other agreement or
understanding to which Parent or Sub is a party or is bound with respect to the
voting of the capital stock of Parent or Sub.
(d) Except for qualifying shares required by certain foreign
jurisdictions, all of the issued and outstanding capital stock of each of the
Parent Subsidiaries has been validly issued, is fully paid and nonassessable
and, except as disclosed on Schedule 5.2(d), is owned of record and
beneficially, directly or indirectly, by Parent or another Subsidiary of Parent,
free of any Liens, preemptive rights or other restrictions with respect thereto.
The Preferred Securities will conform in all material respects to the
description thereof contained in Exhibit C hereto.
(e) At the Effective Time, the Preferred Securities will have been
duly authorized by the Declaration of Trust and (x) when the Preferred
Securities are issued in accordance with the terms of this Agreement, such
Preferred Securities will be duly and validly issued and (subject to the terms
of the Declaration of Trust) will be fully paid and nonassessable undivided
beneficial interests in the assets of the Trust, not subject to any preemptive
or similar rights. Holders of Preferred Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the DGCL.
Section 5.3. AUTHORITY RELATIVE TO THIS AGREEMENT. (a) Each of Parent
and Sub has the requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by each of Parent and Sub as applicable
and the consummation by Parent and Sub of the transactions contemplated on their
part hereby have been duly authorized by their respective Boards of Directors,
and by Parent as the sole stockholder of Sub, and, no other corporate
proceedings on the part of Parent or Sub or the stockholders of either are
necessary to authorize this Agreement or for Parent and Sub to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Sub and constitutes a valid and
binding agreement of each of Parent and Sub, enforceable against Parent and Sub
in accordance with its terms except to the extent that enforceability may be
limited by
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applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
(b) Trust has the requisite power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Trust and the consummation by
Trust of the transactions contemplated on its part hereby have been duly
authorized and, no other proceedings on the part of Trust are necessary to
authorize this Agreement or for Trust to consummate the transactions
contemplated on its part hereby. This Agreement has been duly and validly
executed and delivered by Trust and constitutes a valid and binding agreement of
Trust, enforceable against Trust in accordance with its terms except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
(c) At the Effective Time, the Declaration of Trust will have been
duly authorized, executed and delivered by the Parent and the trustees thereto
and will be a valid and binding obligation of the Parent and said trustees,
enforceable against the Parent and said trustees in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or equity).
(d) At the Effective Time, the convertible subordinated indenture
of Parent (the "Indenture") will have been duly qualified under the Trust
Indenture Act of 1939, as amended, (the "Indenture Act") and will have been duly
authorized, executed and delivered by the Parent and will be a valid and binding
agreement of the Parent, enforceable in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by equitable principles of general
applicability; the convertible subordinated debentures (the "Debentures") will
have been duly authorized and when executed and authenticated in accordance with
the provisions of the Indenture and delivered to the Trust against payment
therefore will be entitled to the benefits of the Indenture and the Indenture
and the Debentures will conform in all respects to the terms set forth in
Exhibit B.
(e) At the Effective Time, the guaranty agreement of the Parent in
respect of the Preferred Securities (the "Guaranty") will have been duly
qualified under the Indenture and will be a valid and binding agreement of the
Parent, enforceable in accordance with its terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or equity).
Section 5.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth
on Schedule 5.4, neither the execution, delivery and performance of this
Agreement, the Indenture, the Debentures, the Guaranty, the Declaration of
Trust, or the Preferred Securities by Parent, Trust or Sub, as the case may be,
nor the consummation by Parent, Trust or Sub of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provisions of (x)
the Certificate of Incorporation or By-Laws of Parent or of Sub, (y) the
Certificate of Trust or Declaration of Trust of the Trust, or (z) the
organizational documents of the Parent
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Subsidiaries, (ii) require a filing with, or a permit, authorization, consent or
approval of, any Governmental Entity except in connection with or in order to
comply with the applicable provisions of the HSR Act, the filing of the
Registration Statement/Proxy Statement-Prospectus under the Securities Act, the
Exchange Act and the Indenture Act, filings or approvals required under state or
foreign laws relating to takeovers, if applicable, state securities or "blue
sky" laws, the By-Laws of the NASD, and the filing and recordation of a
Certificate of Merger as required by the DGCL, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of a Lien on any property or asset of Parent or
any of its Subsidiaries pursuant to, any of the terms, conditions or provisions
of any material Contract to which Parent, Sub or Trust or any other Subsidiary
of Parent is a party or by which any of them or any of their properties or
assets may be bound or (iv) violate any law, order, writ, injunction, decree,
statute, rule or regulation of any Governmental Entity applicable to Parent,
Sub, Trust or any other Subsidiary of Parent or any of their properties or
assets, except, in the case of clauses (ii), (iii) and (iv), where the failure
to make such filing or obtain such authorization, consent or approval would not
have, or where such violations, breaches or defaults or Liens would not have, in
any such case, a Parent Material Adverse Effect.
Section 5.5. REPORTS AND FINANCIAL STATEMENTS. Parent has timely filed
all reports required to be filed by Parent with the SEC pursuant to the Exchange
Act or the Securities Act since December 31, 1998 (collectively, the "Parent SEC
Reports"), and has previously made available to the Company true and complete
copies of all such Parent SEC Reports. Except as set forth in Schedule 5.5, such
Parent SEC Reports, as of their respective dates, complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and none of such SEC Reports 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. Except as set forth in
Schedule 5.5, the financial statements of Parent included in the Parent SEC
Reports have been prepared in accordance with GAAP consistently applied
throughout the periods indicated (except as otherwise noted therein or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of unaudited statements, to normal, recurring
year-end adjustments and any other adjustments described therein) the
consolidated financial position of Parent and its consolidated Subsidiaries as
at the dates thereof and the consolidated results of operations and cash flows
of Parent and its consolidated Subsidiaries for the periods then ended. Since
December 31, 1998, there has been no change in any of the significant accounting
(including tax accounting) policies, practices or procedures of the Parent or
any of its consolidated Subsidiaries.
Section 5.6. ABSENCE OF CERTAIN CHANGES OR EVENTS; MATERIAL AGREEMENTS.
Except as set forth on Schedule 5.6 or in the Parent SEC Reports filed as of the
date of this Agreement, since December 31, 1998, (i) neither Parent nor any of
its Subsidiaries has conducted its business and operations other than in the
ordinary course of business and consistent with past practices or taken any
action that, if it had been in effect, would have violated or been inconsistent
with the provisions of Section 6.2; and (ii) there has not been any fact, event,
circumstance or change affecting or relating to Parent or any of its
Subsidiaries which has had or is reasonably likely to have a Parent Material
Adverse Effect. Except as described in Section 5.4, the transactions
contemplated by this Agreement will not require a consent from or the giving of
notice to a third
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party pursuant to the terms, conditions or provisions of any contract to which
the Parent or any of its Subsidiaries is a party.
Section 5.7. LITIGATION. Except as disclosed on Schedule 5.7 and except
for litigation disclosed in the notes to the financial statements included in
the Parent's Annual Report to Stockholders for the fiscal year ended December
31, 1998 or in the Parent SEC Reports filed subsequent thereto, as of the date
hereof, there is no suit, action, proceeding or investigation pending or, to the
best knowledge of the Parent, threatened against, the Parent or any of its
Subsidiaries or with respect to which the Parent or any of its Subsidiaries
could be required to provide indemnification or to otherwise contribute to
liabilities or damages relating thereto, the outcome of which could reasonably
be expected to have a Parent Material Adverse Effect; nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity outstanding against
the Parent or any of its Subsidiaries having, or which, insofar as can
reasonably be foreseen, in the future may have a Parent Material Adverse Effect.
For purposes of this Agreement, wherever the term "Parent knowledge" or "best
knowledge of the Parent" or any phrase of similar import is used it shall mean
the actual knowledge of the directors and the executive officers of Parent, or
knowledge which such persons could reasonably be expected to possess in view of
their respective positions with the Company, and, except as provided above,
shall not include imputed, constructive or implied knowledge of any such
persons. There are no material legal or governmental proceedings pending to
which the Trust is a party or to which any of its respective property is the
subject, and, to the best of Parent's knowledge, no such proceedings are
threatened or contemplated.
Section 5.8. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
Schedule 5.8 and except for liabilities or obligations which are accrued or
reserved against in Parent's financial statements (or reflected in the notes
thereto) included in the Parent SEC Reports filed as of the date of this
Agreement or which were incurred after September 30, 1999 in the ordinary course
of business and consistent with past practices, none of Parent or any of its
Subsidiaries has any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be reflected in a
consolidated balance sheet (or reflected in the notes thereto) and which could
reasonably be expected to have a Parent Material Adverse Effect.
Section 5.9. NO DEFAULT. Neither Parent, Trust nor any of Parent's
Subsidiaries is in breach or violation, or in default under (and no event has
occurred which with notice or the lapse of time or both would constitute such a
breach, default or violation of) any term, condition or provision of (i) the
Parent's or the respective Subsidiary's Certificate of Incorporation or By-Laws,
(ii) the Trust's Certificate of Trust or Declaration of Trust, or (iii) (x) any
order, writ, decree, statute, rule or regulation of any Governmental Entity
applicable to Parent, Trust or any of Parent's Subsidiaries or any of their
properties or assets or (y) any Contract to which the Parent, Trust or any of
Parent's Subsidiaries is a party or by which Parent, Trust or any of Parent's
Subsidiaries or any of their properties or assets may be bound except in the
case of this clause (iii), which breaches, violations or defaults, individually
or in the aggregate, would not have a Parent Material Adverse Effect. The
Parent, Trust and each of Parent's Subsidiaries have, and are in compliance
with, all licenses, permits, variances, exemptions, orders, approvals and other
authorizations of all Governmental Entities as are necessary in order to enable
them to own their businesses and conduct their businesses as currently conducted
and as currently proposed to be conducted and to enter into the transactions
contemplated hereby, the lack of which, under
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applicable law, rule or regulation, (x) would render legally impermissible the
transactions contemplated hereby or (y) could reasonably be expected to have a
Parent Material Adverse Effect.
Section 5.10. INFORMATION IN DISCLOSURE DOCUMENTS AND REGISTRATION
STATEMENT. None of the information to be supplied by Parent, Trust or Sub for
inclusion in (i) the Registration Statement or (ii) the Proxy
Statement-Prospectus will in the case of the Registration Statement, at the time
it becomes effective and at the Effective Time, or, in the case of the Proxy
Statement-Prospectus or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement-Prospectus and any amendments or
supplements thereto, and at the time of the meeting of stockholders of the
Company to be held in connection with the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration
Statement and the Proxy Statement-Prospectus will comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act, and the rules and regulations promulgated thereunder, except that
no representation is made by Parent with respect to statements made therein
based on information supplied by the Company or its representatives for
inclusion in the Registration Statement or the Proxy Statement-Prospectus or
with respect to information concerning the Company incorporated by reference in
the Registration Statement or the Proxy Statement-Prospectus.
Section 5.11. ENVIRONMENTAL PROTECTION. Except as could not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect:
(a) There are not any past or present conditions or circumstances
that could reasonably be expected to interfere with or prevent the conduct of
the business of Parent or any of its Subsidiaries in compliance with: (i) any
order of any court or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation related to human health or the environment
("Environmental Law"); or (ii) the terms or conditions of any permits,
approvals, licenses or consents required to be issued by any Governmental Entity
pursuant to any applicable Environmental Law.
(b) There are not any past or present conditions or circumstances
at, arising out of, or related to, any current or former business, assets or
properties of Parent or any of its Subsidiaries, including but not limited to
on-site or off-site storage, treatment, disposal or the release or threatened
release of any chemical substance, product or waste, which could, individually
or in the aggregate, reasonably be expected to give rise to: (i) liabilities or
obligations for any cleanup, remediation, disposal or corrective action or any
long-term monitoring requirements under any Environmental Law or (ii) claims
arising for personal injury, property damage, or damage to natural resources.
(c) Neither Parent nor any of its Subsidiaries has (i) received
any notice of noncompliance with, violation of, or liability or potential
liability under any Environmental Law or (ii) entered into any consent decree,
settlement or order or is subject to any order of any court or Governmental
Entity or tribunal under any Environmental Law or relating to the cleanup of any
hazardous or toxic materials, wastes, substances or any pollutants or
contamination.
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(d) There are no persons or entities whose liability, for any
environmental matters or under any applicable Environmental Law, Parent or any
of its Subsidiaries has retained or assumed contractually.
(e) Neither Parent nor any of its Subsidiaries has handled or
directed the management of or participated in any decisions with respect to or
exercised any influence or control over the use, generation, storage, treatment
or disposal of any hazardous or toxic materials, wastes or substances at or
related to any of their business, assets or properties.
Section 5.12. VOTE REQUIRED. The affirmative vote of Parent, as the
sole stockholder of all outstanding shares of Sub Common Stock, is the only vote
of the holders of any class or series of Sub capital stock necessary to approve
the Merger. The Board of Directors of Parent (at a meeting duly called and held)
has unanimously (i) approved this Agreement, (ii) determined that the
transactions contemplated hereby are fair to and in the best interests of Parent
and the holders of Parent Common Stock, and (iii) determined to cause Parent, as
the sole stockholder of Sub, to approve and adopt this Agreement. The Board of
Directors of Sub (by unanimous written consent) has approved this Agreement.
Section 5.13. INSURANCE. Parent and each of its Subsidiaries is, and
has been continuously since January 1, 1995, insured in such amounts and against
such risks and losses as are customary for companies conducting the respective
businesses conducted by Parent and its Subsidiaries during such time period.
Neither Parent nor any of its Subsidiaries has received any written notice of
cancellation or termination with respect to any material insurance policy. To
the knowledge of the Parent, all material insurance policies of Parent and its
Subsidiaries are valid and enforceable policies in all material respects.
Section 5.14. YEAR 2000. As of the date hereof Parent is not aware of
any condition or circumstance that has impeded or will impede the ability of
Parent or any Subsidiary to conduct business as usual prior to, during and after
the year-end change from 1999 to 2000 as a result of Year 2000 Functionality. As
used in this Agreement, the phrase "Year 2000 Functionality" means that, except
as would not cause a Parent Material Adverse Effect, all date-sensitive devices
material to the conduct of the entity's business have provided and will provide
uninterrupted functionality to record, store, process and present calendar dates
on or after January 1, 2000 (including without limitation properly treating 2000
as a leap year) in substantially the same manner and with the same functionality
as such date-sensitive devices have heretofore recorded, stored, processed and
presented calendar dates falling on or before December 31, 1999.
Section 5.15. AFFILIATE TRANSACTIONS. Except as disclosed in Schedule
5.15 or in the Parent SEC Reports, there are no material Contracts or other
transactions between the Parent, on the one hand, and any (i) officer or
director of the Parent, (ii) record or beneficial owner of five percent or more
of the voting securities of the Parent or (iii) affiliate (as such term is
defined in Regulation 12b-2 promulgated under the Exchange Act) of any such
officer, director or beneficial owner, on the other hand.
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ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Prior to the Effective Time, unless Parent shall otherwise agree in writing, or
as set forth on Schedule 6.1 or as otherwise expressly contemplated by this
Agreement:
(a) the Company shall, and shall cause its Subsidiaries to,
conduct their respective businesses only in the ordinary and usual course
consistent with past practice, and use their reasonable efforts to preserve
intact their present business organization, keep available the services of their
present officers and key employees, and preserve the goodwill of those having
business relationships with them; the Company shall not, and shall not permit
any Subsidiary to, hire any person to any position as an employee or as a
consultant to the Company or a Subsidiary of the Company where the total annual
compensation payable to such person, whether in cash or otherwise, would exceed
$100,000;
(b) the Company shall not, and shall not permit any Subsidiary to,
(i) amend their respective charters, By-laws or other organizational documents,
(ii) split, combine or reclassify any shares of their outstanding capital stock,
(iii) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property, or (iv) directly or indirectly redeem or otherwise
acquire any shares of their capital stock;
(c) the Company shall not, and shall not permit any Subsidiary to,
(i) authorize for issuance, issue or sell or agree to issue or sell any shares
of, or rights or securities of any kind to acquire, rights or securities
convertible into any shares of, their respective capital stock (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise), except for the issuance of shares of Company
Common Stock upon the exercise of Company Stock Options outstanding on the date
of this Agreement, (ii) merge or consolidate with another entity, (iii) acquire
or purchase an equity interest in or a substantial portion of the assets of
another corporation, partnership or other business organization or otherwise
acquire any material assets outside the ordinary and usual course of business
and consistent with past practice or otherwise enter into any material contract,
commitment or transaction outside the ordinary and usual course of business
consistent with past practice, (iv) except as noted on Schedule 6.1(c)(iv),
sell, lease, license, waive, release, transfer, encumber or otherwise dispose of
any of its material assets outside the ordinary and usual course of business and
consistent with past practice, including any shares the Company holds of
HealthAxis.com, Inc., (v) incur, assume or prepay any material indebtedness or
any other material liabilities other than in the ordinary course of business and
consistent with past practice, (vi) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of a material nature any other person other than in the ordinary
course of business and consistent with past practice, (vii) make any loans,
advances or capital contributions to, or investments in, any other person,
(viii) authorize or make capital expenditures in excess of the amounts currently
budgeted therefor, (ix) permit any insurance policy naming the Company as a
beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business, or (x) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
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(d) the Company shall not, and shall not permit any Subsidiary to,
(i) adopt, enter into, terminate or amend (except as may be required by
applicable law) any Company Plan or other arrangement for the current or future
benefit or welfare of any director, officer or current or former employee, (ii)
increase in any manner the compensation or fringe benefits of, or pay any bonus
to, any director, officer or employee (except for normal increases in base
compensation in the ordinary course of business consistent with past practice),
or (iii) take any action to fund or in any other way secure, or to accelerate or
otherwise remove restrictions with respect to, the payment of compensation or
benefits under any employee plan, agreement, contract, arrangement or other
Company Plan (including the Company Stock Options);
(e) the Company shall not, and shall not permit any Subsidiary to,
take any action with respect to, or make any material change in, their
respective accounting policies or procedures;
(f) from the date hereof through the Effective Time, the Company
shall not, and shall not permit any Subsidiary to, make any Tax election or
settle or compromise any income Tax liability prior to the last day (including
extensions) prescribed by law, in the case of any of the foregoing, material to
the business, financial condition or results of operations of the Company; and
(g) the Company shall not, and shall not permit any Subsidiary to,
propose, adopt, approve or implement any Stockholder Rights Plan which could
have the effect of restricting, prohibiting, impeding or otherwise affecting the
consummation of the transactions contemplated by this Agreement or the Voting
Agreement, in each case by the respective parties thereto.
Section 6.2. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. Except
as set forth on Schedule 6.2, prior to the Effective Time, unless the Company
shall otherwise agree in writing, or as otherwise expressly contemplated by this
Agreement:
(a) the business of Parent and its Subsidiaries shall be conducted
only in the ordinary and usual course consistent with past practice, and Parent
shall use its reasonable efforts to preserve intact the present business
organization, to keep available the services of its present officers and key
employees, and preserve the goodwill of those having business relationships with
it;
(b) Parent shall not declare, set aside or pay any dividend or
other distribution payable in cash, stock or property;
(c) Parent shall not split, combine or reclassify the outstanding
Parent Common Stock; and
(d) neither Parent nor Sub shall take any action with respect to,
or make any material change in, its accounting policies or procedures.
Section 6.3. CONDUCT OF BUSINESS OF SUB AND TRUST. During the period
from the date of this Agreement to the Effective Time, neither Sub nor the Trust
shall engage in any activities of any nature except as provided in or
contemplated by this Agreement.
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ARTICLE VII.
ADDITIONAL AGREEMENTS
Section 7.1. ACCESS AND INFORMATION. Each of the Company and Parent
shall (and shall cause their respective Subsidiaries and their Subsidiaries'
respective officers, directors, employees, auditors and agents to) afford to the
other and to the other's officers, employees, financial advisors, legal counsel,
accountants, consultants and other representatives reasonable access during
normal business hours throughout the period prior to the Effective Time to all
of its books and records (other than privileged documents and subject to any
confidentiality provisions applicable to communications between any party and
its counsel) and its properties, plants and personnel and, during such period,
each shall furnish promptly to the other a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of federal
securities laws, provided that no investigation pursuant to this Section 7.1
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective parties to consummate the Merger. Unless
otherwise required by law, each party agrees that it (and its Subsidiaries and
its and their respective representatives) shall hold in confidence all nonpublic
information so acquired in accordance with the terms of the confidentiality
agreement, dated August 11, 1999 between Parent and the Company (the
"Confidentiality Agreement").
Section 7.2. SOLICITATION OF COMPETING TRANSACTIONS.
(a) The Company shall not, directly or indirectly, through any
officer, director, agent or otherwise, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information), or take any other
action knowingly to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Alternative
Acquisition (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain an Alternative Acquisition, or agree to or endorse any
Alternative Acquisition, or authorize any of the officers, directors or
employees of the Company or any investment banker, financial advisor, attorney,
accountant or other agent or representative of the Company to take any such
action, and the Company shall notify Parent as promptly as practicable of all of
the relevant material details relating to all inquiries and proposals which the
Company or any such officer, director, employee, investment banker, financial
advisor, attorney, accountant or other agent or representative may receive
relating to any of such matters; provided, however, that prior to the approval
of this Agreement by the stockholders of the Company, nothing contained in this
Section 7.2 shall prohibit the Board of Directors of the Company from (i)
furnishing information to, or entering into and engaging in discussions or
negotiations with, any person that makes a bona fide unsolicited written
proposal that the Board of Directors of the Company determines in good faith,
after consultation with the Company's financial advisors and independent legal
counsel, can be reasonably expected to result in a Superior Proposal; provided,
that prior to furnishing such information to, or entering into discussions or
negotiations with, such person, the Company, (1) provides notice to Parent to
the effect that it is furnishing information to, or entering into discussions or
negotiations with, such person and provides in any such notice to Parent in
reasonable detail the identity of the person making such proposal and the
material terms and conditions of such proposal, (2) provides Parent with all
information regarding the Company provided or to be provided to such person
which Parent has not previously been provided, and provided further that the
Company shall keep Parent informed, on a prompt basis,
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of the status and material terms of any such proposal and the status of any such
discussions and negotiations, and (3) receives from such person or entity an
executed confidentiality agreement containing customary terms (which need not
contain "standstill" or similar provisions); (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer or
making any disclosure required under applicable law; or (iii) failing to make or
withdrawing or modifying its recommendation referred to in Sections 4.17 and 7.4
following the making of a Superior Proposal if, solely in the case of this
clause (iii), the Board of Directors of the Company, after consultation with and
based upon the advice of independent legal counsel, determines in good faith
that such action is necessary for the Board of Directors of the Company to
comply with its fiduciary duties under applicable law.
(b) For purposes of this Agreement, "Alternative Acquisition"
shall mean any of the following involving the Company: (i) any merger,
consolidation, share exchange, business combination, issuance or purchase of
securities or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of the assets of the Company in
a single transaction or series of related transactions; (iii) any tender offer
or exchange offer for the Company securities or the filing of a registration
statement under the Securities Act in connection with any such exchange offer;
in the case of clauses (i), (ii) or (iii) above, which transaction would result
in a third party (or its stockholders) acquiring more than 35% of the voting
power of the shares of the Common Stock of the Company then outstanding or more
than 35% of the assets of the Company and its Subsidiaries, taken as a whole; or
(iv) any public announcement of an agreement, proposal, plan or intention to do
any of the foregoing, either during the effectiveness of this Agreement or at
any time thereafter, other than in each of (i), (ii), (iii) and (iv) the
transactions contemplated by this Agreement.
(c) For purposes of this Agreement, a "Superior Proposal" means
any proposal made by a third party which would result in such party (or in the
case of a parent-to-parent merger, its stockholders) acquiring, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, share exchange, business combination, share purchase, asset
purchase, recapitalization, liquidation, dissolution, joint venture or similar
transaction, more than 50% of the voting power of the shares of the Common Stock
of the Company then outstanding or all or substantially all the assets of the
Company and its Subsidiaries, taken as a whole, for consideration which the
Board of Directors of the Company determines in its good faith judgment to be
financially more favorable to the Company stockholders than the Merger and with
respect to which the Board of Directors of the Company determines, in its good
faith judgment, that financing, to the extent required, is then committed or is
reasonably available.
(d) If the Company receives any unsolicited offer or proposal to
enter into discussions or negotiations relating to an Alternative Acquisition,
the Company shall notify Parent thereof within twenty-four hours of the
Company's receipt thereof, including information as to the identity of the party
making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be.
The Company shall be entitled to provide copies of this Section 7.2 to
third parties who on an entirely unsolicited basis after the date hereof,
contact the Company concerning an
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Alternative Acquisition, provided that Parent shall concurrently be notified of
such contact and the delivery of such copy.
Section 7.3. REGISTRATION STATEMENT. As promptly as practicable (but in
no event prior to the filing with the SEC of Parent's Annual Report on Form 10-K
for the Year ended December 31, 1999), Parent and the Company shall in
consultation with each other prepare and file with the SEC the Proxy
Statement-Prospectus and Parent, in consultation with the Company, shall prepare
and file with the SEC the Registration Statement, which Registration Statement
will, to the extent deemed necessary or advisable, register the Preferred
Securities, the Debentures, the Guaranty, the Parent Common Stock and the Parent
HealthAxis Shares. Each of Parent and the Company shall use its reasonable best
efforts to have the Registration Statement declared effective as soon as
practicable. Parent shall also use its reasonable best efforts to take any
action required to be taken under state securities or blue sky laws in
connection with the issuance of the shares of Parent Common Stock pursuant to
this Agreement in the Merger. The Company shall furnish Parent with all
information concerning the Company and the holders of its capital stock and
shall take such other action as Parent may reasonably request in connection with
the Registration Statement and the issuance of Preferred Securities. If at any
time prior to the Effective Time any event or circumstance relating to Parent,
any Subsidiary of Parent, the Company, any Subsidiary of the Company or their
respective officers or directors, should be discovered by such party which
should be set forth in an amendment or a supplement to the Registration
Statement or the Proxy Statement-Prospectus, such party shall promptly inform
the other thereof and take appropriate action in respect thereof.
Section 7.4. PROXY STATEMENT-PROSPECTUS; STOCKHOLDER APPROVALS.
(a) The Company, acting through its Board of Directors, shall,
subject to and in accordance with applicable law and its Certificate of
Incorporation and By-Laws, promptly and duly call, give notice of, convene and
hold as soon as practicable following the date upon which the Registration
Statement becomes effective a meeting of the holders of Company Common Stock for
the purpose of voting to approve and adopt this Agreement and the transactions
contemplated hereby, and, subject to the fiduciary duties of the Board of
Directors of the Company under applicable law as advised by outside legal
counsel, (i) recommend approval and adoption of this Agreement and the
transactions contemplated hereby by the stockholders of the Company and include
in the Proxy Statement-Prospectus such recommendation, and (ii) take all
reasonable and lawful action to solicit and obtain such approval. Parent and the
Company, as promptly as practicable (or with such other timing as Parent and the
Company mutually agree), shall cause the definitive Proxy Statement-Prospectus
to be mailed to the Company's stockholders. Notwithstanding anything to the
contrary in the foregoing, unless this Agreement has been validly terminated in
accordance with Article IX hereof, the Company shall hold its stockholders
meeting in accordance with the time period specified in the first sentence of
this Section 7.3.
(b) At or prior to the Closing, the Company shall deliver to
Parent a certificate of the Company's Secretary setting forth the voting results
from its stockholder meeting.
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Section 7.5. COMPLIANCE WITH THE SECURITIES ACT.
(a) At least 30 days prior to the Effective Time, the Company
shall cause to be delivered to Parent a list identifying all persons who were,
in its reasonable judgment, at the record date for the Company's stockholders'
meeting convened in accordance with Section 7.3(a) hereof, "affiliates" of the
Company as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Affiliates").
(b) The Company shall use its reasonable best efforts to cause
each person who is identified as one of its Affiliates in its list referred to
in Section 7.4(a) above to deliver to Parent (with a copy to the Company), at or
prior to the Effective Time, a written agreement, in the form attached hereto as
Exhibit A, (the "Affiliate Letters ").
(c) If any Affiliate of the Company refuses to provide an
Affiliate Letter, Parent may place appropriate legends on the certificates
evidencing the shares of Parent Common Stock to be received by such Affiliate
pursuant to the terms of this Agreement and to issue appropriate stop transfer
instructions to the transfer agent for shares of Parent Common Stock to the
effect that the shares of Parent Common Stock received by such Affiliate
pursuant to this Agreement only may be sold, transferred or otherwise conveyed
(i) pursuant to an effective registration statement under the Securities Act,
(ii) in compliance with Rule 145 promulgated under the Securities Act, or (iii)
pursuant to another exemption under the Securities Act.
(d) Parent shall use its reasonable best efforts to file, and have
declared effective, a registration statement covering the resale of the
Preferred Securities by Affiliates of the Company.
Section 7.6. COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, the
obtaining of all necessary waivers, consents and approvals and the effecting of
all necessary registrations and filings. Without limiting the generality of the
foregoing, as promptly as practicable, the Company, Parent and Sub shall make
all filings and submissions under the HSR Act as may be reasonably required to
be made in connection with this Agreement and the transactions contemplated
hereby. Subject to the Confidentiality Agreement, the Company will furnish to
Parent and Sub, and Parent and Sub will furnish to the Company, such information
and assistance as the other may reasonably request in connection with the
preparation of any such filings or submissions. Subject to the Confidentiality
Agreement, the Company will provide Parent and Sub, and Parent and Sub will
provide the Company, with copies of all material written correspondence, filings
and communications (or memoranda setting forth the substance thereof) between
such party or any of its representatives and any Governmental Entity, with
respect to the obtaining of any waivers, consent or approvals and the making of
any registrations or filings, in each case that is necessary to consummate the
Merger and the other transactions contemplated hereby. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers or directors of Parent and the
Surviving Corporation shall take all such necessary action.
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Section 7.7. VOTING AGREEMENT. Concurrently with the execution and
delivery of the Agreement, and as an essential inducement for Parent's entering
into this Agreement, Parent is entering into a Voting Agreement with respect to
shares of Company Common Stock owned (beneficially or of record) by the
Stockholders, such shares to constitute in the aggregate not less than 17% of
the issued and outstanding shares of Common Stock of the Company; provided that
shares owned by the minor children or the spouse of a stockholder shall be
deemed not to be beneficially owned by a stockholder for purposes of this
Section 7.7.
Section 7.8. COMPANY STOCK OPTIONS. At the Effective Time, each of the
Company Stock Options which is outstanding immediately prior to the Effective
Time shall be assumed by Parent and converted automatically into an option to
purchase Parent Common Stock (a "New Option") in an amount and at an exercise
price determined as provided below:
(a) The number of shares of Parent Common Stock to be subject to
the New Option shall be equal to the product of the number of shares of Company
Common Stock remaining subject (as of immediately prior to the Effective Time)
to the original option and $8.75 divided by the average closing sale price of
the Parent Common Stock for the 20 calendar days immediately preceding the
Effective Time (the "Option Ratio"), provided that any fractional shares of
Parent Common Stock resulting from such multiplication shall be rounded down to
the nearest share; and
(b) The exercise price per share of Parent Common Stock under the
New Option shall be equal to the exercise price per share of Company Common
Stock under the original option divided by the Option Ratio , provided that such
exercise price shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with Section 424(a)
of the Code. After the Effective Time, each New Option shall be exercisable and
shall vest upon the same terms and conditions as were applicable to the related
Company Stock Option immediately prior to the Effective Time, except that all
references to the Company shall be deemed to be references to the Trust.
Section 7.9. PUBLIC ANNOUNCEMENTS. Each of Parent, Sub, Trust, and the
Company agrees that it will not issue any press release or otherwise make any
public statement with respect to this Agreement (including the Exhibits hereto)
or the transactions contemplated hereby or thereby without the prior consent of
the other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
consent if (i) the disclosure is required by law or by obligations imposed
pursuant to any listing agreement with the NYSE and (ii) the party making such
disclosure has first used its best efforts to consult with the other party about
the form and substance of such disclosure.
Section 7.10. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
All rights to indemnification, advancement of litigation expenses and limitation
of personal liability existing in favor of the directors and officers of the
Company under the provisions existing on the date hereof in the Company's
Certificate of Incorporation or By-Laws shall, with respect to any claims
arising out of any event or matter existing or occurring at or prior to the
Effective Time
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(including the transactions contemplated by this Agreement), survive the
Effective Time, and, as of the Effective Time, the Surviving Corporation shall
assume all obligations of the Company in respect thereof and no change shall be
made with respect to such rights after the Effective Time. Parent further agrees
that for a period of six (6) years after the Effective Time, Parent shall cause
to be maintained in effect the policies of directors' and officers' liability
insurance maintained by the Company or policies of at least the same coverage
containing terms that are no less advantageous with respect to matters occurring
at or prior to the Effective Time to the extent such liability insurance can be
maintained annually at a cost to Parent not greater than 200% of the current
annual premiums for the policies currently maintained by the Company for its
directors' and officers' liability insurance; provided however, that if such
insurance cannot be so maintained or obtained at such cost, Parent shall
maintain or obtain as much of such insurance as can be so maintained or obtained
at a cost equal to 200% of the current annual premiums of the Company for its
directors' and officers' liability insurance.
Section 7.11. ELECTION TO PARENT BOARD OF DIRECTORS. Parent shall take
all steps reasonably necessary to elect James K. Murray, Jr. to the Board of
Directors of Parent at the Effective Time. As a director, Mr. Murray will be
entitled to such compensation arrangements as are currently in place for outside
directors of Parent.
Section 7.12. EXPENSES. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement (including the
Exhibits hereto) and the transactions contemplated hereby shall be paid by the
party incurring such expenses, except that (i) the filing fee in connection with
filings under the HSR Act, (ii) the expenses incurred in connection with
printing and mailing the Registration Statement and the Proxy Statement and
(iii) the filing fee with the SEC relating to the Registration Statement or the
Proxy Statement shall be borne equally by Parent and the Company.
Section 7.13. LISTING APPLICATION AND RESERVATION OF SHARES. Parent
will use its reasonable best efforts to cause the Preferred Securities to be
issued pursuant to this Agreement in the Merger and the shares of Parent Common
Stock issuable upon conversion of the Preferred Securities to be listed for
quotation on the NYSE. Additionally, Parent shall reserve a sufficient number of
shares of the Parent Common Stock to accommodate the possible conversion of the
Preferred Securities into Parent Common Stock and shall keep a sufficient number
of shares of Parent HealthAxis Shares free and clear of any lien, charge or
encumbrance or other restriction so as to accommodate the possible exchange of
the Preferred Securities for Parent HealthAxis Shares.
Section 7.14. SUPPLEMENTAL DISCLOSURE. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause (x) any representation or warranty contained
in this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of the Company or Parent, 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 7.13 shall not have any effect for the purpose of determining the
satisfaction of the conditions set forth in
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Article VIII of this Agreement or otherwise limit or affect the remedies
available hereunder to any party.
Section 7.15. LETTERS OF ACCOUNTANTS.
(a) Parent shall use all reasonable efforts to cause to be
delivered to the Company a letter of Ernst & Young LLP, Parent's independent
auditors, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to the Company, in
form and substance reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
which letter shall be brought down to the Effective Time.
(b) The Company shall use all reasonable best efforts to cause to
be delivered to Parent a letter of PricewaterhouseCoopers LLP, the Company's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to Parent,
in form and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
which letter shall be brought down to the Effective Time.
Section 7.16. CONVEYANCE TAXES. Parent and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding (i) any real property transfer gains,
sales, use, transfer, value-added, stock transfer, and stamp taxes, (ii) any
recording, registration and other fees, and (iii) any similar taxes or fees that
become payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
Section 7.17. NON-SOLICITATION OF EMPLOYEES. Each of Parent and the
Company agree, for a period of one year from the date hereof, not to directly or
indirectly solicit any employee of the other or to induce or encourage any
employee of the other to terminate such employee's employment.
Section 7.18. EXCHANGE ACT FILINGS. For so long as Parent may be
required to do so, Parent shall timely file with the SEC all reports required to
be filed with the SEC pursuant to the Exchange Act.
Section 7.19. TAX TREATMENT. The parties agree that the Merger shall be
treated for Federal income tax purposes as a purchase by Parent of Company
Common Stock from the Company's stockholders. The parties further agree that for
Federal income tax purposes they will treat the Preferred Securities as
interests in a "grantor trust" and they will treat the Debentures as debt.
Section 7.20. FAIRNESS OPINION. It shall be a condition to the mailing
of the Proxy Statement-Prospectus that the Company shall have received an
opinion of Bear Stearns, dated the date of such Proxy Statement-Prospectus, to
the effect that the consideration to be received by the Company's Stockholders
pursuant to the Agreement is fair from a financial point of view to the holders
of the Company Common Stock.
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ARTICLE VIII.
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) HSR APPROVAL. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of this transaction, which action shall have not been withdrawn or
terminated.
(b) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite vote
(as described in Section 4.17) of the stockholders of the Company in accordance
with applicable law.
(c) NYSE LISTING FOR QUOTATION. The Preferred Securities issuable
to the holders of Company Common Stock pursuant to this Agreement in the Merger
and the Parent Common Stock issuable upon conversion of the Preferred Securities
shall have been authorized for listing on the NYSE, upon official notice of
issuance.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceeding by the SEC seeking a stop order. HealthAxis shall have
agreed to keep the registration statement relating to the exchange of the
Preferred Securities into Parent HealthAxis Shares effective for so long as
necessary under the then current rules and regulations of the Securities and
Exchange Commission to permit the holders of the Preferred Securities to
exchange.
(e) NO ORDER. No Governmental Entity (including a federal or state
court) of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and which materially restricts, prevents or prohibits consummation of
the Merger or any transaction contemplated by this Agreement; provided, however,
that the parties shall use their reasonable best efforts to cause any such
decree, judgment, injunction or other order to be vacated or lifted.
(f) APPROVALS. Other than the filing of Merger documents in
accordance with the DGCL, all authorizations, consents, waivers, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity that are listed on Schedule 8.1(f) on
Parent, the Trust or the Surviving Corporation shall have been obtained, been
filed or have occurred. Parent shall have received all state securities or "blue
sky" permits and other authorizations necessary to issue the shares of Parent
Common Stock pursuant to this Agreement in the Merger.
(g) TAX OPINION. Parent shall have received from Gardner, Carton &
Douglas, Parent's special tax counsel, its opinion, dated the Effective Time, to
the effect that subject to the qualifications set forth in the opinion and the
Proxy Statement-Prospectus, under
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current law and assuming full compliance with the terms of the Declaration of
Trust and based upon certain facts and assumptions set forth therein, the Trust
will be characterized as a grantor trust for United States Federal income tax
purposes and not as an association taxable as a corporation.
(h) TRUST OPINION. Parent and the Company shall have received an
opinion from Richards, Layton & Finger, special Delaware counsel to the Trust,
concerning the organization of the Trust and the issuance of the Preferred
Securities and such other matters as they each shall reasonably request.
(i) HEALTHAXIS MERGER. The HealthAxis merger shall have occurred
and the common stock of HealthAxis shall be publicly traded.
Section 8.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent, Trust and Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by Parent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of the Company set forth in this Agreement shall be true and
correct (without regard to any materiality qualifiers) as of the date hereof
and, except to the extent such representations and warranties speak as of an
earlier date, will be true and correct as of the Effective Time as though made
at the Effective Time, except, in each case, where the failure to be true and
correct would not, individually or in the aggregate, have a Company Material
Adverse Effect, and Parent shall have received a certificate signed on behalf of
the Company by the chief executive officer or the chief financial officer of the
Company to such effect.
(b) 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 Effective Time, and Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer or the chief financial officer of the Company to such effect.
(c) AFFILIATE LETTERS. Parent shall have received the Affiliate
Letters from each of the Affiliates of the Company, as contemplated in Section
7.4.
(d) LENDERS' CONSENTS. Parent shall have obtained, on or before
30 calendar days following the execution and delivery of this Agreement, (a)
written consent of the requisite number of lenders (the "Company Lender
Consent") under the Amended and Restated Credit Agreement, dated as of May 1,
1998, as amended to date, between the Company, the lenders named therein and
First Union National Bank, as administrative agent (the "Company Credit
Facility"), to the Parent's assumption of all indebtedness outstanding under the
Company Credit Facility and to the taking of any and all other action
contemplated hereby, and (b) written consent of the requisite number of lenders
(the "Parent Lender Consent") under the Loan Agreement, dated as of May 17,
1999, as amended to date, between the Parent, the lenders named therein, and
Bank of America, N.A., as administrative agent (the "Parent Credit Facility") to
(i) the Parent's assumption of all indebtedness outstanding under the Company
Credit Facility,
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(ii) the Parent's issuance of the subordinated debentures, the making of
interest payments thereon and the payment by the Trust of the distributions on
the Preferred Securities, and (iii) the taking of any and all other action
contemplated hereby. Parent shall use its commercially reasonable efforts to
obtain the Company Lender Consent and the Parent Lender Consent. The Company
agrees to cooperate with the Parent and the Parent's prospective financing
sources in connection with due diligence inquiries sources related to the
Company Lender Consent and the Parent Lender Consent.
(e) RESIGNATIONS. Parent shall have received the resignations of
each member of the Company's Board of Directors (other than William Bennett, who
shall remain as a director of the Company).
(f) WITHHOLDING. Parent shall have received from the Company a
certificate, satisfying the requirements of Treasury Regulations Sections
1.897-2(h) and 1.445-3, that the Company was not a United States real property
holding corporation within the meaning of Section 897(c) of the Code within any
time during each of the five-year periods ending on the dates the date hereof
and the Effective Time occurs, and such other certificates as may reasonably be
required to avoid withholding of tax on the consideration to be issued in the
Merger (other than Federal backup withholding), which certificates shall survive
beyond the Effective Time.
(g) DISSENTING SHARES. The aggregate number of Dissenting Shares
shall not exceed 5% of the outstanding Company Common Stock.
Section 8.3. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of Parent set forth in this Agreement shall be true and correct
(without regard to any materiality qualifiers) as of the date hereof and, except
to the extent such representations and warranties speak as of an earlier date,
will be true and correct as of the Effective Time as though made at the
Effective Time, except, in each case, where the failure to be true and correct
would not, individually or in the aggregate, have a Parent Material Adverse
Effect, and the Company shall have received a certificate signed on behalf of
Parent by the chief executive officer or the chief operating officer of Parent
to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Each of Parent and
Sub shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and the
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief operating officer of Parent to such effect.
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ARTICLE IX.
TERMINATION
Section 9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) By mutual consent of Parent and the Company;
(b) By either Parent or the Company, if the Merger shall not have
been consummated before August 31, 2000 (unless the failure to so consummate the
Merger by such date shall be due to the action or failure to act of the party
(or its Subsidiaries, if any) seeking to terminate this Agreement, which action
or failure to act constitutes a breach of this Agreement);
(c) By the Company or Parent, if, upon a vote at the meeting of
stockholders of the Company called pursuant to Section 7.3 hereof (including any
adjournment or postponement thereof), the requisite vote of the stockholders of
the Company for approval of this Agreement and the Merger has not been obtained;
(d) By either Parent or the Company, if any permanent injunction
or action by any Governmental Entity of competent jurisdiction preventing the
consummation of the Merger shall have become final and nonappealable;
(e) By Parent, if (i) there has been a breach of any
representations or warranties of the Company set forth herein such that the
conditions set forth in Section 8.2(a) are not satisfied; (ii) there has been a
breach in any material respect of any of the covenants or agreements set forth
in this Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Parent to the Company; (iii), the Parent Lender Consent and the Company
Lender Consent shall not have been obtained within 30 calendar days of the date
hereof as provided in Section 8.2(d); (iv) the Board of Directors of the Company
(x) fails to recommend approval and adoption of this Agreement and the Merger by
the stockholders of the Company or withdraws or amends or modifies in a manner
adverse to Parent and Sub its recommendation or approval in respect of this
Agreement or the Merger, (y) makes any recommendation with respect to an
Alternative Acquisition other than a recommendation to reject such alternative
acquisition, or (z) takes any action of a material nature prohibited by Section
7.2; (v) there has occurred and is continuing any event, change or effect
resulting in a Company Material Adverse Effect; or (vi) there shall have
occurred a Parent Walkaway Event as set forth on Schedule 9.1(e).
(f) By the Company, if (i) there has been a breach of any
representations or warranties of Parent set forth herein such that the
conditions set forth in Section 8.3(a) are not satisfied; (ii) there has been a
breach in any material respect of any of the covenants or agreements set forth
in this Agreement on the part of Parent, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by the Company to Parent; (iii) the Parent Lender Consent and the Company
Lender Consent shall not have been obtained within 30 calendar days of the date
hereof as provided in Section 8.2(d); (iv) such termination is necessary to
allow the Company to enter into an agreement with respect to a
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Superior Proposal; (v) there has occurred and is continuing any event, change or
effect resulting in a Parent Material Adverse Effect or a HealthAxis Material
Adverse Effect (as defined below); or (vi) there shall have occurred a Company
Walkaway Event as set forth on Schedule 9.1(f).
For purposes of this 9.1(f), a HealthAxis Material Adverse Effect shall
mean any event, change or effect that, individually or in the aggregate, is
materially adverse to the business, operations, properties, assets (including
intangible assets), liabilities (including contingent liabilities), condition
(financial or other) or results of operations of HealthAxis Inc. and its
Subsidiaries taken as a whole, other than any change, effect or circumstance
relating to or resulting from (i) general changes in the industries in which
HealthAxis operates its business and (ii) changes in general economic conditions
or securities markets in general.
Section 9.2. EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to this
Article IX, the Merger shall be deemed abandoned and this Agreement shall
forthwith become void, without liability on the part of any party hereto, except
as provided in this Section 9.2, Section 7.1 and Section 7.11, and except that
nothing herein shall relieve any party from liability for any breach of this
Agreement; provided, however, the parties agree that any liability for a breach
of this Agreement that is not a willful breach shall be limited to the recovery
of all documented out-of-pocket expenses of the other party incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, all investment banking, legal, accounting and
other similar expenses). The parties further agree that termination of this
Agreement as a result of a Parent Material Adverse Effect, HealthAxis Material
Adverse Effect or Company Material Adverse Effect or pursuant to a Company
Walkaway Event or Parent Walkaway Event shall not constitute a willful breach of
this Agreement.
(b) If Parent shall have terminated this Agreement pursuant to
Section 9.1(e)(iv), unless the Board of Directors shall have contemporaneously
approved a Superior Proposal, then in any such case the Company shall promptly,
but in no event later than two business days after the date of such termination,
pay Parent a termination fee of Five Million Dollars ($5,000,000).
ARTICLE X.
GENERAL PROVISIONS
Section 10.1. AMENDMENT AND MODIFICATION. At any time prior to the
Effective Time, this Agreement may be amended, modified or supplemented only by
written agreement (referring specifically to this Agreement) of Parent, Sub and
the Company with respect to any of the terms contained herein; provided,
however, that after any approval and adoption of this Agreement by the
stockholders of the Company, no such amendment, modification or supplementation
shall be made which under applicable law requires the approval of such
stockholders, without the further approval of such stockholders. The parties
agree that they will modify this Agreement to the extent necessary to ensure
that the Trust will be entitled to treatment as a grantor trust; provided that
such modification will be required only so long as it does not adversely affect
the rights or of the parties or the economic substance of the Merger.
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Section 10.2. WAIVER. At any time prior to the Effective Time, Parent
and Sub, on the one hand, and the Company, on the other hand, may (i) extend the
time for the performance of any of the obligations or other acts of the other,
(ii) waive any inaccuracies in the representations and warranties of the other
contained herein or in any documents delivered pursuant hereto and (iii) waive
compliance by the other with any of the agreements or conditions contained
herein which may legally be waived. Any such extension or waiver shall be valid
only if set forth in an instrument in writing specifically referring to this
Agreement and signed on behalf of such party.
Section 10.3. SURVIVABILITY; INVESTIGATIONS. Except as may otherwise be
provided in this Agreement, the respective representations and warranties of
Parent and the Company contained herein or in any certificates or other
documents delivered prior to or as of the Effective Time (i) shall not be deemed
waived or otherwise affected by any investigation made by any party hereto and
(ii) shall not survive beyond the Effective Time
Section 10.4. NOTICES. All notices and other communications hereunder
shall be in writing, and shall be deemed given if delivered personally or by
next-day courier or telecopied with confirmation of receipt, to the parties at
the addresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, or one day after delivery to a
courier for next-day delivery.
(a) If to Parent, Trust or Sub, to:
UICI
4001 McEwen, Suite 200
Dallas, Texas 75244
Attention: Glenn W. Reed, Esq.
Telecopier No.: (972) 392-6717
with a copy to:
Gardner, Carton & Douglas
321 North Clark Street
Chicago, IL 60610-4795
Attention: Charles R. Manzoni, Jr., Esq.
Telecopier No.: (312) 644-3381
and
(b) If to the Company, to:
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
Attention: Phillip S. Dingle
Telecopier No.: (813) 282-0490
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with a copy to:
Fowler, White, Gillen, Boggs, Villareal & Banker, P.A.
501 East Kennedy Boulevard, Suite 1700
Tampa, Florida 33602
Attention: David C. Shobe, Esq.
Telecopier No.: (813) 228-9401
Section 10.5. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References in this
Agreement to Sections, Schedules, Exhibits or Articles mean a Section, Schedule,
Exhibit or Article of this Agreement unless otherwise indicated. References to
this Agreement shall be deemed to include the Exhibits and Schedules hereto,
unless the context otherwise requires. The term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, an association, a
trust, a Governmental Entity or an unincorporated organization or other entity.
Section 10.6. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including
the Schedules and other documents and instruments referred to herein), together
with the Confidentiality Agreement, constitute the entire agreement and
supersedes and replaces all other prior agreements and understandings (including
the Original Agreement), both written and oral, among the parties or any of
them, with respect to the subject matter hereof. The Original Agreement is of no
further force and effect, and each of the parties hereto hereby acknowledges,
waives, releases and holds harmless the other parties to the Original Agreement
from any and all obligations, claims, potential claims, liabilities, and/or
potential liabilities existing, arising or allegedly arising under the Original
Agreement or resulting from the failure to consummate the transactions
contemplated by the Original Agreement on the terms set forth therein. Except
for Sections 7.9 and 7.10, this Agreement is not intended to confer upon any
person not a party hereto any rights or remedies hereunder. This Agreement shall
not be assigned by operation of law or otherwise; provided that Parent or Sub
may assign its rights and obligations hereunder to a direct or indirect
subsidiary of Parent, but no such assignment shall relieve Parent or Sub, as the
case may be, of its obligations hereunder.
Section 10.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
Section 10.8. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
Section 10.9. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of Parent, Trust, Sub and the Company has
caused this Agreement to be executed under seal on its behalf by its officers
thereunto duly authorized, all as of the date first above written.
PARENT:
UICI
By: /s/ GREGORY T. MUTZ
------------------------
Name: Gregory T. Mutz
Title: President and Chief
Executive Officer
SUB:
UICI ACQUISITION CO.
By: /s/ GLENN W. REED
-------------------------
Name: Glenn W. Reed
Title: Secretary
THE COMPANY:
HEALTHPLAN SERVICES CORPORATION
By: /s/ JAMES K. MURRAY, JR.
----------------------------
Name: James K. Murray, Jr.
Title: Chairman and Chief Executive
Officer
TRUST:
UICI CAPITAL TRUST I
By: /s/ GLENN W. REED
----------------------------
Name: Glenn W. Reed
Title: Administrative Trustee
By: /s/ MATTHEW R. CASSELL
------------------------------
Name: Matthew R. Cassell
Title: Administrative Trustee
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EXHIBIT A
FORM OF
VOTING AGREEMENT
VOTING AGREEMENT (the "Agreement"), dated as of February __, 2000,
between HealthPlan Services Corporation, a Delaware corporation (the "Company"),
________________ (the "Stockholder") and UICI, a Delaware corporation
("Parent").
WHEREAS, concurrently with the execution of this Agreement, the
Company, Parent and UICI Acquisition Co., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), have entered into an Amended and Restated
Agreement and Plan of Merger (as the same may be amended from time to time, the
"Merger Agreement"), providing for the merger (the "Merger") of Sub with and
into the Company pursuant to the terms and conditions of the Merger Agreement;
and
WHEREAS, upon consummation the Merger, the stockholders of the Company
will receive Preferred Securities (as defined in the Merger Agreement) equal to
the Exchange Ratio (as defined in the Merger Agreement) for each share of common
stock, par value $.01 per share (the "Company Common Stock") of the Company
owned by them;
WHEREAS, the Stockholder owns of record and beneficially __________
shares of Company Common Stock and wish to enter into this Agreement with
respect to __________ of such shares (such __________ shares of Company Common
Stock being referred to as the "Shares"); and
WHEREAS, in order to induce Parent to enter into the Merger Agreement,
the Stockholder has agreed, upon the terms and subject to the conditions set
forth herein, to vote the Shares and to deliver an irrevocable proxy to Parent
to vote the Shares at a meeting of the Company's stockholders, in favor of
approval and adoption of the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO VOTE SHARES. The Stockholder agrees during the term of
this Agreement to vote the Stockholder's Shares, in person or by proxy, (a) in
favor of approval and adoption of the Merger Agreement and the Merger at every
meeting of the stockholders of the Company at which such matters are considered
and at every adjournment thereof, and (b) against an Alternative Acquisition (as
such term is defined in the Merger Agreement). The Stockholder agrees to deliver
to Parent upon request immediately prior to any vote contemplated by clause (a)
or (b) above a proxy substantially in the form attached hereto as Annex A (a
"Proxy"), which Proxy shall be irrevocable during the term of this Agreement to
the extent permitted under Delaware law, and Parent agrees to vote the Shares
subject to each such Proxy in favor of approval and adoption of the Merger
Agreement and the Merger.
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2. NO VOTING TRUSTS. The Stockholder agrees that the Stockholder will
not, nor will the Stockholder permit any entity under the Stockholder's control
to, deposit any of the Stockholder's Shares in a voting trust or subject any of
its Shares to any arrangement with respect to the voting of the Shares
inconsistent with this Agreement.
3. LIMITATION ON DISPOSITIONS AND PROXIES. During the term of this
Agreement, the Stockholder agrees not to sell, assign, pledge, transfer or
otherwise dispose of, or grant any proxies with respect to (except for a Proxy
or a proxy which is not inconsistent with the terms of this Agreement) any of
the Stockholder's Shares.
4. SPECIFIC PERFORMANCE. Each party hereto acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with the obligations imposed by this Agreement, that, in the
event of any such failure, the other party will not have an adequate remedy at
law or in damages. Accordingly, each party hereto agrees that injunctive relief
or other equitable remedy, addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that the other party has an adequate remedy at law. Each
party hereto agrees that it will not seek, and agrees to waive any requirement
for, the securing or posting of a bond in connection with any other party's
seeking or obtaining such equitable relief.
5. TERM OF AGREEMENT; TERMINATION. Subject to Section 9(e), the term of
this Agreement shall commence on the date hereof and such term and this
Agreement shall terminate upon the earliest to occur of (i) the Effective Time,
and (ii) the date on which the Merger Agreement is terminated in accordance with
its terms. Upon such termination, no party shall have any further obligations or
liabilities hereunder; provided, that such termination shall not relieve any
party from liability for any breach of this Agreement prior to such termination.
6. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
represents and warrants to Parent that, as of the date hereof, (a) such
Stockholder has full legal power and authority to execute and deliver this
Agreement and the Proxy, and (b) such Stockholder's Shares are free and clear of
all proxies (except for a proxy which is not inconsistent with the terms of this
Agreement).
7. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by all parties hereto. No waiver of any provisions
hereof by any party shall be deemed a waiver of any other provisions hereof by
any such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
8. NOTICES. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission (with confirmation) and on the next business day
when sent by Federal Express, Express Mail or other reputable
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overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to Parent:
UICI
4001 McEwen Boulevard, Suite 200
Dallas, Texas 75244
Attention: Glenn W. Reed, Esq.
Telecopier No.: (972) 392-6717
with a copy to:
Gardner, Carton & Douglas
321 North Clark Street
Chicago, IL 60610-4795
Attention: Charles R. Manzoni, Jr., Esq.
Telecopier No.: (312) 644-3381
(b) If to Stockholder:
-----------------------------
-----------------------------
Attention: __________________
Telecopier No.: (___) ___-____
9. MISCELLANEOUS.
(a) This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the State of
Delaware, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability, and the
remainder of the provision held invalid or unenforceable and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, and the remainder of this Agreement, shall not be affected.
(c) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
(d) All Section headings herein are for convenience of reference
only and are not part of this Agreement, and no construction or reference shall
be derived therefrom.
A-3
<PAGE>
(e) The obligations of the Stockholder set forth in this Agreement
shall not be effective or binding upon the Stockholder until after such time as
the Merger Agreement is executed and delivered by the Company, Parent and Sub,
and the parties agree that there is not and has not been any other agreement,
arrangement or understanding between the parties hereto with respect to the
matters set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
STOCKHOLDER
By:
-------------------------
Name:
Title:
HEALTHPLAN SERVICES CORPORATION
By:
--------------------------
Name:
Title:
UICI
By:
---------------------------
Name:
Title:
A-4
<PAGE>
(ANNEX A)
FORM OF PROXY
The undersigned, for consideration received, hereby appoints UICI, a
Delaware corporation ("Parent"), its proxy to vote __________ shares of Common
Stock, par value $.01 per share, of HealthPlan Services Corporation, a Delaware
corporation (the "Company"), owned by the undersigned and described in the
Voting Agreement referred to below and which the undersigned is entitled to vote
at any meeting of stockholders of the Company, and at any adjournment thereof,
to be held for the purpose of considering and voting upon a proposal to approve
and adopt the Amended and Restated Agreement and Plan of Merger, dated as of
February __, 2000 (the "Merger Agreement"), by and among the Company, Parent,
and UICI Acquisition Co., a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), providing for the merger (the "Merger") of Sub with and into
the Company, FOR such proposal and AGAINST any Alternative Acquisition (as such
term is defined in the Merger Agreement). This proxy is subject to the terms of
the Voting Agreement, is coupled with an interest and revokes all prior proxies
granted by the undersigned with respect to such __________ shares, is
irrevocable and shall terminate and be of no further force or effect
automatically at such time as the Voting Agreement, dated as of February ___,
2000 between the undersigned and Parent, a copy of such Agreement being attached
hereto, terminates in accordance with its terms.
Dated: ____________________, 2000
[NAME OF STOCKHOLDER]
By:
-----------------------------
Name:
Title:
A-5
<PAGE>
EXHIBIT B
FORM OF AFFILIATE LETTER
_______________, 1999
- --------------------------------
- --------------------------------
- --------------------------------
Attention:
----------------------
Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of _________________________, a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Amended and Restated Agreement and Plan of Merger dated as of February ____,
2000 (the "Agreement"), by and among UICI, a Delaware corporation ("Parent"),
UICI Acquisition Sub, a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and the Company, Parent will acquire all of the issued and
outstanding shares of common stock, par value $.01 per share, of the Company
("Company Common Stock") and Sub will merge with and into the Company (the
"Merger").
As a result of the Merger, I may receive preferred undivided beneficial
interests (the "Preferred Securities") in the assets of UICI Capital Trust I, a
statutory business trust created under the laws of Delaware. I would receive the
Preferred Securities in exchange for shares (or options for shares) owned by me
of Company Common Stock.
I represent, warrant and covenant to Parent that in the event I receive
Preferred Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Preferred Securities (or shares of Parent Common Stock or HealthAxis Common
Stock (collectively, the "Underlying Stock") into which such Preferred
Securities may be convertible or exchangeable) in violation of the Act or the
Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Preferred Securities or
Underlying Stock to the extent I felt necessary, with my counsel or counsel for
the Company.
B-1
<PAGE>
C. I have been advised that the issuance of Preferred Securities and
the Underlying Stock to me pursuant to the Merger has been registered with the
Commission under the Act on a Registration Statement Form S-4. However, I have
also been advised that, because at the time the Merger is submitted for a vote
of the stockholders of the Company, (a) I may be deemed to be an affiliate of
the Company and (b) the distribution by me of the Preferred Securities or the
Underlying Stock has not been registered under the Act, I may not sell, transfer
or otherwise dispose of Preferred Securities or the Underlying Stock issued to
me in the Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by the
Commission under the Act, (ii) such sale, transfer or other disposition has been
registered under the Act or (iii) in the opinion of counsel reasonably
acceptable to Parent, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
D. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of the Preferred Securities or the
Underlying Stock by me or on my behalf under the Act or to take any other action
necessary in order to make compliance with an exemption from such registration
available solely as a result of the Merger.
E. I also understand that there will be placed on the certificates for
the Preferred Securities or the Underlying Stock issued to me, or any
substitutions therefor, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY ONLY
BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
_______________, 2000 BETWEEN THE REGISTERED HOLDER HEREOF AND
_________________________, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF _________________________."
F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
certificates issued to any transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SECURITIES
HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
B-2
<PAGE>
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legend after one year unless the provisions of Rule 145(d)(2) have been amended
to require a longer period than one year.
[WE UNDERSTAND, AND YOU AGREE, THAT, NOTWITHSTANDING ANYTHING HEREIN TO
THE CONTRARY, WE MAY DISTRIBUTE THE PREFERRED SECURITIES OR UNDERLYING STOCK
RECEIVED BY US IN THE MERGER TO OUR PARTNERS IN ACCORDANCE WITH THE TERMS OF OUR
PARTNERSHIP AGREEMENT SO LONG AS EACH PARTNER RECEIVING A DISTRIBUTION OF
PREFERRED SECURITIES OR UNDERLYING STOCK FROM US AGREES TO EXECUTE A LETTER
AGREEMENT ADDRESSED TO YOU CONTAINING SUBSTANTIALLY THE SAME TERMS AS THIS
LETTER AGREEMENT.]
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter, as or a waiver of any rights I may have to object to any claim
that I am such an affiliate or on after the date of this letter.
Very truly yours,
--------------------------------
Name:
Accepted this _____ day of
__________, 2000 by:
- -------------------------
By:
----------------------
Name:
Title:
B-3
<PAGE>
EXHIBIT C
DESCRIPTION OF PREFERRED SECURITIES
UICI - TRUST ISSUED PREFERRED EQUITY SECURITIES
- --------------------------------------------------------------------------------
ISSUER UICI Capital Trust (the "Issuer")
SECURITY Trust Issued Preferred Equity
Securities ("Preferred Securities")
OFFERING SIZE $120.0 million in the aggregate,
consisting of 4,800,000 shares of the
Issuer's Preferred Securities,
liquidation preference of $25 per
Preferred Security.
MATURITY OF UNDERLYING SUBORDINATED 30 years
DEBENTURES OF UICI
DISTRIBUTION 7.0% cumulative distributions payable
quarterly in arrears.
CONVERSION AND EXCHANGE RIGHTS Each Preferred Security can be
converted at any time at the option of
the holder into either (i) a fixed
number of common shares of HealthAxis
Inc. determined by the HealthAxis.
Inc. Exchange Price or (ii) a fixed
number of common shares of UICI
determined by the UICI Conversion
Price.
HEALTHAXIS INC. EXCHANGE PRICE 25.0% premium over the average closing
price per share of HealthAxis Inc.'s
common stock for the 10 trading days
prior to the Issue Date.
UICI CONVERSION PRICE $25.00 per UICI common share, equating
to a conversion rate of one (1) share
of UICI common stock per Preferred
Security.
CONVERSION PRICE ADJUSTMENT The HealthAxis.com Exchange Price and
the UICI Conversion Price will be
adjusted from time to time upon the
occurrence of certain events,
including, but not limited to: (i) if
HealthAxis.com or UICI issues any
shares of common stock or certain
rights, options or warrants to
purchase any shares of common stock,
without consideration or for a
consideration less than the respective
Conversion/ Exchange Price; (ii) if,
at any time after the issue date, the
number of shares of the respective
common stock outstanding is changed by
a stock dividend, distribution, stock
split, combination, capital
reorganization or reclassification or
(iii) other customary adjustments for
securities of this nature.
C-1
<PAGE>
OPTIONAL REDEMPTION The Preferred Securities may be
redeemed in accordance with the
provisions of Annex I hereto.
MANDATORY REDEMPTION The Preferred Securities are subject
to mandatory redemption 30 years after
issuance at 100.0% of the Liquidation
Preference plus all accrued and unpaid
distributions thereon.
OPTION TO DEFER DISTRIBUTIONS UICI has the option to defer
distributions on the Preferred
Securities from time to time for a
successive period not exceeding 20
quarters. During such period, UICI
shall not (a) declare or pay dividends
on or make any distributions with
respect to, or redeem, purchase
acquire or make a liquidation payment
with respect to, any shares of UICI's
capital stock, or (b) make any payment
of principal, interest or premium, if
any, on or repay, repurchase or redeem
any debt securities (including
guarantees of indebtedness) that rank
PARI PASSU with or junior to the
underlying convertible subordinated
notes; provided, that during any such
period, distributions on the Preferred
Securities shall accrue at 9% per
annum instead of the stated rate of 7%
per annum, compounded quarterly.
GUARANTEE Pursuant to the Guarantee, UICI will
irrevocably agree, on a subordinated
basis, to guarantee the payment in
full of: (a) any accumulated and
unpaid distributions payable by the
Issuer on the Preferred Securities, if
and to the extent the Issuer has
sufficient funds to make such
payments; (b) the redemption price of
any Preferred Securities called for
redemption if and to the extent the
Issuer has funds sufficient to make
such payments; and (c) certain
payments upon voluntary or involuntary
dissolution, winding up or liquidation
of the Issuer, if and to the extent
that there are sufficient assets of
the Issuer available for distribution
to holders of the Preferred
Securities.
RANKING The Preferred Securities will rank on
a parity with other existing and
future offerings of Preferred
Securities in right of payment.
VOTING RIGHTS Holders of the Preferred
Securities will generally have voting
rights relating only to the amendment
of the Preferred Securities.
REGISTRATION RIGHTS Preferred Securities of affiliates of
HPS will be registered for resale
after closing for a period of one
year.
C-2
<PAGE>
ANNEX I
OPTIONAL REDEMPTION
The Preferred Securities may be redeemed at the option of the Issuer, in whole
or in part (provided that any partial redemption or series of partial
redemptions shall not reduce the total outstanding liquidation value of the
Preferred Securities outstanding below $75,000,000), at any time upon not less
than 30 or more than 60 days' notice, as follows:
(i) (a) if redeemed within three years following the issue date, by (i) paying
to each holder whose Preferred Securities are to be redeemed (and whether or
not such holder elects to convert his Preferred Securities to UICI common
shares) an amount equal to the sum of (1) accrued and unpaid distributions,
if any, to the date fixed for redemption, (2) the sum of the present values
of the remaining scheduled quarterly distributions from and after the date
fixed for redemption through the twelfth (12th) quarterly payment date
(measured from the Issue Date), discounted to the redemption date at the
annual rate of 12%, compounded quarterly and (ii) delivering to those
holders whose Preferred Securities are actually redeemed (1) the number of
underlying common shares of HealthAxis Inc. into which the Preferred
Security is convertible and (2) paying an additional amount equal to a
percentage of liquidation preference set forth in the schedule below:
HEALTHAXIS INC. STOCK PRICE AS A % OF EXCHANGE
PRICE AT THE DATE FIXED FOR REDEMPTION
PRIOR TO
QUARTERLY
------------------------------------------------------
80.0% 100.0% 130.0%+
PAYMENT
------------------ ---------------- ---------------- ---------------
1 12.4% 7.4% 5.4%
2 12.7% 7.7% 5.3%
3 13.0% 8.0% 5.3%
4 13.3% 8.3% 5.2%
5 13.6% 8.6% 5.1%
6 14.5% 8.3% 4.8%
7 15.5% 8.0% 4.5%
8 16.5% 7.8% 4.3%
9 17.5% 7.5% 4.0%
10 18.0% 7.5% 3.9%
11 18.6% 7.6% 3.9%
12 19.3% 5.3% 2.7%
In the event the HealthAxis Inc. stock price as a percentage of the
exchange price at the date fixed for redemption is below 80.0%, the
percentage of liquidation preference will be equal to the sum of 80.0%
plus the percentage of liquidation preference set forth in the
C-3
<PAGE>
80% column in the above table, less the HealthAxis Inc. stock price as
a percentage of the exchange price at the date fixed for redemption. To
the extent the HealthAxis Inc. stock price as a percentage of the
exchange price at the date fixed for redemption is between the
percentages outlined above, the percentage of liquidation preference
will be interpolated ratably based on the values in the above table.
For example, if the HealthAxis Inc stock price is trading at 115% of
the exchange price at a date fixed for redemption prior to the first
quarterly payment, the corresponding liquidation preference would be
6.4%.
Instead of delivering the number of underlying common shares of
HealthAxis Inc. into which the Preferred Security is convertible, the
Issuer will have the option to pay an equivalent value in cash based
upon the average trading price for the 30 trading days ending on the
day preceding the redemption date. The issuer must give notice of
redemption, and of intent to pay cash or stock, 35 trading days before
the redemption date.
(b) if redeemed within three years following the issue date and the HealthAxis
Inc. stock price for at least 20 trading days in any period of 30 consecutive
trading days as a percentage of the exchange price is greater than 130%, by, at
the option of the Issuer, (i) paying to each holder whose Preferred Securities
are to be redeemed (and whether or not such holder elects to convert his
Preferred Securities to UICI common shares) an amount equal to the sum of (1)
accrued and unpaid distributions, if any, to the date fixed for redemption, (2)
the sum of the present values of the remaining scheduled quarterly distributions
from and after the date fixed for redemption through the twelfth (12th)
quarterly payment (measured from the issue date), discounted to the redemption
date at the annual rate of 12%, compounded quarterly and (ii) delivering (1) the
number of underlying common shares of HealthAxis Inc. into which the Preferred
Security is convertible, plus a percentage of the applicable liquidation
preference calculated as 130% plus the applicable liquidation preference set
forth in the 130%+ column in the table above, less the HealthAxis Inc. stock
price as a percentage of exchange price at the date fixed for redemption or (2)
redeeming in cash at a redemption price equal to 130% of the liquidation
preference price, plus a percentage of the applicable liquidation preference
calculated as 130% plus the applicable liquidation preference set forth in the
130%+ column in the table above, less the HealthAxis Inc. stock price as a
percentage of exchange price at the date fixed for redemption
or,
(ii) if redeemed later than three years following the issue date, at a
redemption price equal to 100.0%, plus accrued and unpaid distributions, if
any, to the date fixed for redemption.
The Issuer may not redeem the Preferred Securities unless, on or before the date
the Issuer gives notice of redemption to holders of the Preferred Securities,
all accrued and unpaid dividends for all quarterly payment periods ending on or
prior to the most recent dividend date have been paid in full on all outstanding
Preferred Securities.
C-4
