If the securities being registered on this form are
being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. ☐
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
Securities Act), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act. (Check one):
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Information both included and incorporated by reference in this document may contain forward-looking statements, which may be
identified by their use of terms such as intend, plan, may, should, will, anticipate, believe, could, estimate, expect,
forecast, continue, potential, opportunity, project and similar terms. These statements are based on certain assumptions and analyses that UnitedHealth Groups management or SCAs
management believe are appropriate under the circumstances. However, these statements are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect,
actual results may differ materially from those expected, estimated or projected. Forward-looking statements speak only as of the date they are made, and neither UnitedHealth Group nor SCA undertakes any obligation to publicly update or revise any
of them in light of new information, future events or otherwise.
All subsequent written and oral forward-looking statements attributable
to UnitedHealth Group, SCA or any person acting on UnitedHealth Groups or SCAs behalf are qualified by the cautionary statements in this section.
Factors that could have a material adverse effect on UnitedHealth Groups or SCAs operations and future prospects or the
consummation of the offer and the mergers, many of which are difficult to predict and beyond the control of UnitedHealth Group or SCA, include, but are not limited to:
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failure to satisfy the conditions to consummate the transactions; the risk that regulatory or other approvals required for the transactions are not obtained or are obtained subject to conditions that are not
anticipated;
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the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;
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the failure of the transactions to close in a timely manner or at all for any other reason;
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SCAs limited ability to pursue alternative transactions;
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the ability of UnitedHealth Group to successfully integrate SCA following completion of the transactions;
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realization of the expected benefits of the transactions in a timely manner or at all;
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the amount of the costs, fees, expenses and charges related to the offer and the mergers;
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effects of the pendency of the transactions on relationships with employees, physicians, suppliers, customers and other business partners;
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failure to effectively retain, attract and motivate key employees;
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UnitedHealth Group acquiring, managing and integrating new operations, businesses or assets, and the associated diversion of management attention or other related costs or difficulties;
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general political, economic and business conditions and industry conditions;
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changes to laws or regulations, including in the health care industry;
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the hiring and retention of qualified personnel in a competitive labor market;
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the inherent uncertainty associated with financial or other projections; and
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the ability to implement and achieve business strategies successfully.
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These risks and
uncertainties, along with the risk factors discussed under Risk Factors in this document, should be considered in evaluating any forward-looking statements contained in this document.
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THE COMPANIES
UnitedHealth Group
UnitedHealth Group Incorporated is a diversified health and well-being company dedicated to helping people live healthier lives and helping to
make the health system work better for everyone.
Through a diversified family of businesses, UnitedHealth Group leverages core
competencies in advanced, enabling technology; health care data, information and intelligence; and clinical care management and coordination to help meet the demands of the health system. These core competencies are deployed within our two distinct,
but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum.
UnitedHealthcare provides health care benefits to an array of customers and markets. UnitedHealthcare Employer & Individual serves
employers ranging from sole proprietorships to large, multi-site and national employers, public sector employers and other individuals. UnitedHealthcare Medicare & Retirement delivers health and well-being benefits for Medicare
beneficiaries and retirees. UnitedHealthcare Community & State manages health care benefit programs on behalf of state Medicaid and community programs and their participants. UnitedHealthcare Global includes UnitedHealthcare Brazil, a
health care company providing health and dental benefits and hospital and clinical services to employer groups and individuals in Brazil, and other diversified global health businesses.
Optum is a health services business serving the broad health care marketplace, including payers, care providers, employers, governments, life
sciences companies and consumers, through its OptumHealth, OptumInsight and OptumRx businesses. These businesses have dedicated units that help improve overall health system performance, through optimizing care quality, reducing costs and improving
consumer experience and care provider performance leveraging distinctive capabilities in data and analytics, pharmacy care services, population health, health care delivery and health care operations.
UnitedHealth Group Incorporated was incorporated in January 1977 in Minnesota. On July 1, 2015, UnitedHealth Group Incorporated changed
its state of incorporation from Minnesota to Delaware pursuant to a plan of conversion. Shares of UnitedHealth Group are traded on the NYSE under the ticker symbol UNH. The address and telephone number of UnitedHealth Group is
UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota 55343, (952) 936-1300. UnitedHealth Group also maintains a website at http://www.unitedhealthgroup.com. UnitedHealth Groups website and the information contained
therein or connected thereto shall not be deemed to be incorporated in this document, and you should not rely on any such information in deciding whether to tender your SCA shares in the offer.
Offeror
Spartan Merger Sub 1, Inc. is a Delaware corporation and an indirect wholly owned subsidiary of UnitedHealth Group. The Offeror was
incorporated on January 5, 2017 for the purpose of making the offer and consummating the mergers. The Offeror has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to
its formation and those incurred in connection with the merger agreement, the offer and the mergers.
The address and telephone number of
the Offerors principal executive offices is c/o UnitedHealth Group Incorporated, UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota 55343, (952) 936-1300.
Merger Sub
Spartan Merger Sub 2, LLC is a Delaware limited liability company and a direct wholly owned subsidiary of UnitedHealth Group. Merger Sub was
formed on January 5, 2017 for the purpose of consummating the second merger. Merger Sub has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those
incurred in connection with the mergers.
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The address and telephone number of Merger Subs principal executive offices is c/o
UnitedHealth Group Incorporated, UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota 55343, (952)
936-1300.
SCA
Surgical Care Affiliates, Inc. is a leading provider of solutions to physicians, health plans, and health systems to optimize surgical care.
SCA operates one of the largest networks of surgical facilities in the United States, which as of December 31, 2016, included 197 ambulatory surgery centers and seven surgical hospitals in partnership with approximately 3,000 physician
partners.
Surgical Care Affiliates, Inc., a Delaware corporation, was converted from a Delaware limited liability company, previously
named ASC Acquisition LLC, to a Delaware corporation on October 30, 2013. Its shares trade on Nasdaq Global Select Market under the ticker symbol SCAI.
The address and telephone number of SCAs principal executive offices is 510 Lake Cook Road, Suite 400, Deerfield, Illinois 60015,
(847) 236-0921.
SCA also maintains a website at http://www.scasurgery.com. SCAs website and the information contained therein
or connected thereto shall not be deemed to be incorporated in this document, and you should not rely on any such information in deciding whether to tender your SCA shares in the offer.
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THE TRANSACTIONS
General
UnitedHealth Group, through the Offeror, which is an indirect wholly owned subsidiary of UnitedHealth Group, is offering upon the terms and
subject to the conditions set forth in this document and in the accompanying letter of transmittal, to exchange for each outstanding share of SCA common stock that is validly tendered in the offer and not properly withdrawn:
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$11.40 in cash, without interest and less any applicable withholding taxes (the default cash consideration); and
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a number of shares of UnitedHealth Group common stock, par value $0.01 per share, equal to the amount obtained by dividing $45.60 by the volume weighted average of the closing sale prices per share of UnitedHealth Group
common stock on the NYSE, as reported in the New York City edition of
The Wall Street Journal
on each of the five full consecutive trading days ending on and including the third business day prior to the final expiration date of the offer,
together with cash in lieu of any fractional shares of UnitedHealth Group common stock, without interest and less any applicable withholding taxes (the default stock consideration).
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We refer to the above as the default transaction consideration. In lieu of delivering the default transaction consideration,
UnitedHealth Group may, by providing written notice to SCA no later than 5:00 p.m., New York City time, on the tenth business day prior to the final expiration date of the offer, deliver (i) an amount in cash greater than the default cash
consideration and not to exceed $27.93 per share of SCA common stock, without interest and less any applicable withholding taxes (we refer to the cash consideration, including as it may be increased at UnitedHealth Groups election, as the
applicable cash consideration), and (ii) a number of shares of UnitedHealth Group common stock equal to (a) $57.00 minus the applicable cash consideration, divided by (b) the volume weighted average of the closing sale
prices per share of UnitedHealth Group common stock on the NYSE, as reported in the New York City edition of
The Wall Street Journal
on each of the five full consecutive trading days ending on and including the third business day prior to the
final expiration date of the offer, together with cash in lieu of any fractional shares of UnitedHealth Group common stock, without interest and less any applicable withholding taxes (we refer to the stock consideration, including as it may be
decreased at UnitedHealth Groups election, as the applicable stock consideration). We refer to the applicable cash consideration and the applicable stock consideration together as the transaction consideration.
SCA stockholders will not receive any fractional shares of UnitedHealth Group common stock in the offer or the first merger, and each SCA
stockholder who otherwise would be entitled to receive a fraction of a share of UnitedHealth Group common stock pursuant to the offer or the first merger will be paid an amount in cash (without interest) in lieu thereof, based on the volume weighted
average of the closing sale prices per share of UnitedHealth Group common stock on the NYSE, as reported in the New York City edition of
The Wall Street Journal
on each of the five full consecutive trading days ending on and including the
third business day prior to the final expiration date of the offer.
The offer is for 100% of the outstanding shares of common stock, par
value $0.01 per share, of SCA. The purpose of the offer and the first merger is for UnitedHealth Group to acquire control of, and ultimately all of the outstanding equity in, SCA. The offer is the first step in UnitedHealth Groups plan to
acquire all of the outstanding SCA shares. As a second step in such plan, if the offer is completed, pursuant to the terms and subject to the conditions of the merger agreement, as soon as practicable following the consummation of the offer,
UnitedHealth Group intends to consummate a merger of the Offeror with and into SCA, with SCA surviving the merger. Immediately following the first merger, the surviving corporation will merge with and into Merger Sub, with Merger Sub surviving the
second merger. As a result of the second merger, the surviving corporation will be converted from a corporation into a limited liability company. If the offer is completed, tendered shares of SCA common stock will be exchanged for the transaction
consideration, and if the first merger is completed, any remaining shares of SCA common stock that were not tendered into the offer (other than
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certain dissenting, converted or cancelled shares, as described further in this document) will be converted into the right to receive the transaction consideration.
Background of the Transactions
The SCA Board, with the assistance of SCAs senior management, has regularly reviewed and evaluated the potential strategic alternatives
available to SCA (including possible acquisitions, divestitures, joint ventures, business collaborations and business combination transactions) to maximize stockholder value. As part of this review, the SCA Board has periodically considered whether
the continued execution of SCAs business strategy as a standalone company, or a business combination with a third party, would provide the best path to enhance stockholder value.
In addition, in the ordinary course SCA regularly engages in discussions with a variety of other organizations concerning commercial
partnering opportunities. Over the past two years, SCA has engaged in such discussions with UnitedHealth Group with respect to a commercial relationship focused on, among other things, the development of a national contract between SCA and
UnitedHealth Group that would include value-based contracts for surgical care based on quality, patient experience and efficiency and the establishment of partnerships between SCA and medical groups associated with UnitedHealth Groups
OptumCare business whereby SCA would partner with such medical groups to optimize surgical delivery (quality, experience and cost) in specific markets.
From time to time during 2015, in consultation with members of the SCA Board, Mr. Hayek met with UnitedHealth Group representatives
(including Stephen Hemsley, the Chief Executive Officer of UnitedHealth Group, and David S. Wichmann, the President of UnitedHealth Group). During these meetings, Mr. Hayek provided the UnitedHealth Group representatives with an overview of SCA
and its business model of partnering in specific markets with health plans, medical groups and health systems to enhance the delivery of surgical care, and had further discussions with UnitedHealth Group representatives about the proposed commercial
relationship.
At a November 2015 meeting between Messrs. Hayek and Wichmann, Mr. Wichmann briefly raised the potential benefits of a
business combination between SCA and UnitedHealth Groups OptumCare division. The UnitedHealth Group board of directors, with the assistance of UnitedHealth Groups senior management, has regularly reviewed opportunities for expanding
UnitedHealth Groups care management and local care delivery services, including through the acquisition of ambulatory surgery centers. For the reasons described in the section of this prospectus/offer to exchange entitled The
TransactionsUnitedHealth Groups Reasons for the Transactions, over the course of these reviews, UnitedHealth Group identified SCA as a potential acquisition opportunity. UnitedHealth Groups senior management began updating
the UnitedHealth Group board of directors regarding the status of the proposed commercial arrangements with SCA, as well as SCAs financial and operational performance, on a quarterly basis in November 2015.
Also in November 2015, a representative of another healthcare organization with which SCA had an existing commercial relationship
(Company A) asked Mr. Hayek whether he would be interested in joining Company A as a senior executive. Mr. Hayek indicated that he was committed to remaining in his position with SCA. The Company A representative then suggested
the possibility of a business combination between the companies in which Mr. Hayek would assume a senior leadership role in Company A that would include continued responsibility for SCAs business. The representative of Company A did not
indicate any price or valuation at which Company A would be interested in pursuing a potential business combination transaction in these discussions.
On December 1, 2015, at a regularly scheduled meeting, the SCA Board discussed the expressions of interest by UnitedHealth Group and
Company A in a potential business combination transaction with SCA. The SCA Board discussed various aspects of both potential business combinations, including the risks that they
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would implicate for SCA in light of certain change of control provisions contained in agreements governing certain of SCAs key joint ventures. The SCA Board agreed that the counterparty in
any potential transaction would need to assume the risk with respect to such change of control provisions, and that any transaction otherwise would need to offer SCAs stockholders a material premium to the then current trading price of the SCA
shares (which was in a range of $35 to $38 per SCA share). The SCA Board directed Mr. Hayek to continue his dialogue with both of UnitedHealth Group and Company A, and to report any material developments to the SCA Board.
Later in December 2015, Messrs. Hayek and Wichmann met to further discuss the proposed commercial relationship. At this meeting, Messrs. Hayek
and Wichmann also discussed the potential benefits of combining SCA and UnitedHealth Groups OptumCare division, including the ability to create a national clinical delivery network that included primary care physicians, urgent care clinics,
and surgery centers and the potential for SCA to serve as a platform for creating the surgical delivery component of that network. Messrs. Hayek and Wichmann also scheduled additional meetings between Mr. Hayek and UnitedHealth Group
executives to occur in January 2016.
Also in December 2015, Mr. Hayek spoke by telephone with the representative of Company A. The
representative advised Mr. Hayek that Company A was unlikely to offer a material premium to the then current trading price of the SCA shares (which was in a range of $35 to $41 per SCA share) and that a business combination transaction with SCA
would be dependent upon Mr. Hayeks willingness to assume a senior leadership role within Company A that would require Mr. Hayek to relocate. Following consultation with the SCA Board, Mr. Hayek later advised the Company A
representative that, for personal reasons, he would not be in a position to relocate, but that the SCA Board would otherwise consider a proposal for a business combination that would offer the SCA stockholders a material premium to the then- current
trading price of the SCA shares (which was in a range of $35 to $41 per SCA share). While SCA and Company A continued to engage on their commercial relationship, Company A did not make any additional proposals or engage in any further discussions
regarding a potential business combination transaction.
From time to time between January and July of 2016, Messrs. Hayek and Wichmann
met in person or spoke by telephone to discuss further the commercial relationships between SCA and UnitedHealth Group, and they engaged from time to time regarding the potential merits of a potential business combination between SCA and
UnitedHealth Groups OptumCare division. Mr. Hayek provided the SCA Board with periodic updates with respect to such discussions.
In a meeting on July 29, 2016, Mr. Wichmann advised Mr. Hayek that he believed that there was a strong strategic rationale to
combine SCA with UnitedHealths OptumCare division and that UnitedHealth Group therefore was interested in pursuing an all-stock business combination transaction with SCA in which the stockholders of SCA would receive shares of UnitedHealth
Group common stock in exchange for their SCA shares. Mr. Hayek updated the SCA Board on his discussion with Mr. Wichmann.
On
August 23, 2016, in addition to reporting on such discussions, Mr. Hayek provided the SCA Board with an overview of publicly available research analyst reports regarding UnitedHealth Group. The SCA Board determined that, given no further
determination had been made to engage in a sale or change-in-control of SCA, before engaging in more substantive discussions with UnitedHealth Group or permitting UnitedHealth Group to engage in in-depth due diligence, it should be confirmed that
the financial terms on which UnitedHealth Group would be willing to pursue a transaction would be acceptable to the SCA Board and likely to lead to a transaction that the SCA Board would be prepared to recommend to the holders of SCA common stock.
The SCA Board also discussed and affirmed the prior discussions of the SCA Board that UnitedHealth Group would need to assume the transaction risk attendant to the change of control provisions contained in the agreements governing certain of
SCAs key joint ventures. The SCA Board thus determined that Todd B. Sisitsky, SCAs lead outside director, and members of SCAs standing Transactions Committee of the SCA Board, consisting of Thomas Geiser and
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Jeffrey Rhodes, would provide oversight of, and guidance to, Mr. Hayek in connection with further discussions with UnitedHealth Group regarding a potential business combination transaction.
Messrs. Sisitsky and Rhodes are also partners of TPG Capital, LP, an affiliate of TPG Global, LLC (TPG Global).
In addition
to the meetings and conference calls further described below, from August 23, 2016 until the Merger Agreement was executed by SCA and UnitedHealth Group on January 7, 2017, Messrs. Sisitsky, Geiser and Hayek participated in numerous
conference calls, including with outside advisors, to discuss the potential transaction with UnitedHealth Group.
On August 30, 2016
and September 2, 2016, Mr. Hayek met with Mr. Wichmann and other UnitedHealth Group executives. In the course of these meetings, Messrs. Hayek and Wichmann continued their discussions concerning the possible financial terms of a
business combination transaction between SCA and UnitedHealth Group. Mr. Wichmann indicated that UnitedHealth Groups analysis of a potential transaction supported a range of value from $50 to $55 per SCA share. Mr. Hayek conveyed to
Mr. Wichmann that while the SCA Board had not determined to engage in any transaction or discussed the price at which it might be willing to do so, Mr. Hayek believed that affiliates of TPG Global, collectively SCAs largest
shareholders holding approximately 30% of the outstanding SCA shares (the TPG Stockholders), would not support any transaction at a price of less than $60 per share of SCA common stock. The closing trading price of the SCA common stock
on September 2, 2016 was $42.78 per share of SCA common stock.
On September 14, 2016, in a telephone call between Messrs. Hayek
and Wichmann, Mr. Wichmann informed Mr. Hayek that UnitedHealth Group was not prepared to pursue a transaction with SCA at the $60 per share of SCA common stock price level. Mr. Wichmann suggested, however, that the parties continue
their discussions regarding expanding their commercial relationship. The closing trading price of the SCA common stock on September 14, 2016 was $40.36 per SCA share.
On September 15, 2016, Mr. Hayek reported on his conversation with Mr. Wichmann to the SCA Board at a regularly scheduled
meeting thereof. The SCA Board agreed that Mr. Hayek should continue his dialogue with Mr. Wichmann regarding the proposed commercial relationship between the companies, and that Mr. Hayek would update the SCA Board on any further
expression of interest regarding a potential business combination.
Messrs. Hayek and Wichmann continued to engage in discussions about
the proposed commercial relationship, including development of a national contract with UnitedHealth Group and partnerships with OptumCare medical groups, throughout October 2016, regarding which Mr. Hayek reported to the SCA Board at its
regularly scheduled monthly financial review calls on October 4, 2016 and November 4, 2016.
On December 6, 2016,
Mr. Hayek met with Mr. Wichmann to discuss progress on their commercial relationship. At that meeting, Mr. Wichmann shared that UnitedHealth Group had decided to expand into surgical delivery as part of its OptumCare delivery network,
that UnitedHealth Group viewed SCA as a leading surgical services platform, and that he believed that the parties should re-engage in discussions regarding a potential business combination. Mr. Hayek indicated that he would share this
information with the SCA Board, that any detailed discussion of potential terms would include Mr. Sisitsky, as lead independent director, and that he and Mr. Sisitsky would work closely with the Transactions Committee of the SCA Board.
At a regularly scheduled meeting held on December 8, 2016, the SCA Board discussed a potential business combination transaction with
UnitedHealth Group. The SCA Board instructed Messrs. Sisitsky and Hayek to meet with Mr. Wichmann as a next step to explore the terms of a potential business combination.
On December 9, 2016, Messrs. Hayek and Sisitsky spoke by telephone with Mr. Wichmann. On the call, Mr. Wichmann stated that
UnitedHealth Group would be interested in pursuing a business combination transaction in which the SCA stockholders would receive both cash and shares of UnitedHealth stock having a fixed value in exchange for their SCA shares. Mr. Sisitsky
indicated that SCA would only engage in discussions
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of a potential transaction with the understanding that any risks related to change of control provisions contained in the agreements governing certain of SCAs key joint ventures would be
borne by UnitedHealth Group and that a transaction would not be contingent upon SCAs partners in these joint ventures waiving their change of control rights. Mr. Wichmann informed Messrs. Hayek and Sisitsky that he understood their
position and that UnitedHealth Group would be amenable to working with SCA to reduce the risks associated with the change of control provisions. Mr. Sisitsky also noted that the process of due diligence would need to be expeditious in order to
ensure the confidentiality of the process and to minimize disruption to the ongoing business operations of SCA. Mr. Wichmann indicated that $55 per share was the high end of UnitedHealth Groups valuation range for SCA, and
Mr. Sisitsky indicated that he and the SCA Board believed that a higher valuation was appropriate given SCAs strategic position and growth prospects. The parties agreed to defer further discussion of the financial terms of a potential
transaction until they could meet in person the following week.
On December 14, 2016, during a telephonic meeting of the SCA Board,
Mr. Hayek provided the SCA Board with a report on the December 9, 2016 call with Mr. Wichmann. At the meeting, the SCA Board also determined to engage J.P. Morgan Securities LLC (J.P. Morgan) as financial advisor to SCA
(subject to the SCA Boards review of and satisfaction with a relationship disclosure letter to be provided by J.P. Morgan following the meeting, and entering into a mutually acceptable engagement letter with J.P. Morgan), and Cleary Gottlieb
as outside counsel to SCA, in connection with SCAs consideration of a potential business combination transaction with UnitedHealth Group. The SCA Board determined to engage J.P. Morgan and Cleary Gottlieb based on, among other factors, each of
J.P. Morgans and Cleary Gottliebs qualifications, expertise and reputation and their familiarity with SCA. During this meeting, Cleary Gottlieb also discussed with the SCA Board certain legal and fiduciary duty considerations relating to
a potential business combination transaction involving SCA and UnitedHealth Group.
At a December 16, 2016 meeting, Messrs. Hayek,
Sisitsky and Wichmann discussed the principal terms of a potential business combination transaction between SCA and UnitedHealth Group, including price, the timeline and process for further discussions between the parties and the fact that SCA would
not be willing to engage in further discussions unless UnitedHealth Group was willing to move forward on the basis that the risks relating to the change of control provisions contained in the agreements governing certain of SCAs key joint
ventures would be borne by UnitedHealth Group and that a transaction would not be contingent upon SCAs partners in these joint ventures waiving their change of control rights. Messrs. Hayek, Sisitsky and Wichmann also discussed that in light
of the need to ensure the confidentiality of the process and to minimize disruption to the ongoing business operations of SCA and the fact that SCA was scheduled to present at an industry conference on January 9, 2017, SCA and UnitedHealth
Group would target an announcement of a transaction prior to the open of trading on the U.S. equity markets on January 9, 2017. Messrs. Sisitsky and Wichmann each shared their respective views regarding the price per share that UnitedHealth
Group would pay in consideration for the SCA common stock. Among other things, Mr. Wichmann noted that UnitedHealth Groups analysis supported a valuation range of $50 to $55 per share, and Mr. Sisitsky noted that the SCA Board was
enthusiastic about SCAs strategy and optimistic regarding SCAs growth prospects, and that he believed a valuation of $60 per share was appropriate. Messrs. Sisitsky and Wichmann engaged in a robust discussion relating to respective views
of valuation and how valuation tied to other deal terms, and, after discussing other key deal points (including that SCA would expect UnitedHealth Group to assume all change of control risks relating to its key joint ventures), ultimately agreed to
recommend to their respective boards a price of $57 per share.
Later on December 16, 2016, Mr. Hayek sent to Mr. Wichmann
a draft confidentiality agreement to facilitate the sharing of certain confidential information of SCA with UnitedHealth Group in connection with a potential business combination transaction. The draft confidentiality agreement provided by SCA
contained an express standstill provision.
On December 17, 2016, Mr. Wichmann delivered to Mr. Hayek a non-binding written
proposal to acquire SCA for $57 per SCA share. The $57 per SCA share price represented a 29.4% premium to the 60-day volume
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weighted average price of SCAs common stock as of December 16, 2016. As outlined in the proposal letter, the proposed business combination transaction would be structured as an
exchange offer, and the purchase price would be payable in shares of UnitedHealth Group common stock, provided that UnitedHealth Group would have the ability to elect, up until three days prior to closing, to pay up to 30% of the purchase price in
cash. UnitedHealth Groups proposal letter also outlined certain other proposed transaction terms, including (i) each partys agreement to use its respective reasonable best efforts to take all appropriate actions and do all things
necessary to consummate the transaction within twelve months, subject to certain exceptions, (ii) a termination fee would be payable by SCA in certain circumstances in the amount of 3.5% of the enterprise value of the proposed transaction (or
approximately 5.0% of the equity value of the proposed transaction), and (iii) the execution of a tender and support agreement by the TPG Stockholders. UnitedHealth Group also requested a thirty-day exclusivity period, during which SCA would be
(a) required to immediately terminate any other discussions or negotiations with third parties, and (b) prevented from, among other things, soliciting or initiating discussions or negotiations with any third party, regarding a transaction
involving a sale of 10% or more of SCAs equity interests or assets.
Later on December 17, 2016, a representative of
UnitedHealth Group sent comments to the draft confidentiality agreement to representatives of SCA and Cleary Gottlieb, which, among other things, eliminated the express standstill provision contained in the draft confidentiality agreement.
On the evening of December 17, 2016, Messrs. Hayek, Sisitsky and Geiser held a telephonic meeting with representatives of Cleary Gottlieb
to discuss UnitedHealth Groups proposal letter and comments to the confidentiality agreement. Following this discussion, Messrs. Hayek, Sisitsky and Geiser instructed the representatives of Cleary Gottlieb to engage with representatives of
UnitedHealth Group and Hogan Lovells, outside counsel to UnitedHealth Group, to obtain greater clarity on certain aspects of the proposal letter and comments to the confidentiality agreement prior to the SCA Board meeting scheduled for
December 18, 2016.
On the morning of December 18, 2016, representatives of Cleary Gottlieb spoke by telephone with
representatives of UnitedHealth Group and Hogan Lovells and discussed certain aspects of the proposal letter and confidentiality agreement comments. On this call, a representative of UnitedHealth Group stated that while UnitedHealth Group did not
intend to pursue a hostile acquisition of SCA, UnitedHealth Groups practice was not to enter into express standstill agreements and that UnitedHealth Group would terminate discussions if SCA insisted that it enter into such an express
agreement as a condition to engaging in further discussions.
Later on December 18, 2016, the SCA Board met telephonically with
members of SCA management and representatives of J.P. Morgan and Cleary Gottlieb. Messrs. Sisitsky and Hayek first updated the SCA Board on their meeting with Mr. Wichmann. Representatives of Cleary Gottlieb then discussed the key terms of the
UnitedHealth Group proposal letter and confidentiality agreement with the SCA Board, members of SCA management and representatives of J.P. Morgan. Members of SCA management then discussed with the SCA Board managements financial projections
for SCA for fiscal years 2016 through 2021, which discussion included the key drivers and the risks SCA faced in achieving the financial projections. The financial projections were based on SCAs normal long-term planning process from earlier
in the year, updated for actual year-to-date results, current forecasts of overhead spending, recent same-site growth trends and SCAs development pipeline. Representatives of J.P. Morgan then discussed with the SCA Board certain of J.P.
Morgans relationships and previous engagements with SCA and UnitedHealth Group and noted that they intended to provide the SCA Board with information relating to certain of J.P. Morgans relationships and engagements with the TPG
Stockholders and certain of their affiliates in the coming days. Following careful consideration, the SCA Board determined that the relationships and engagements disclosed by J.P. Morgan did not adversely impact J.P. Morgans independence or
ability to serve as financial advisor to SCA. J.P. Morgan also provided the SCA Board with an overview of potential counterparties that might be perceived as having an interest in pursuing a potential business combination transaction with SCA.
Representatives of J.P. Morgan also discussed preliminary financial analyses of the terms of UnitedHealth Groups proposal and publicly available information regarding SCA and UnitedHealth Group, each on a standalone basis, with the SCA Board.
Following careful consideration and discussions with members of SCA management and representatives of J.P. Morgan and Cleary Gottlieb, the SCA
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Board directed the representatives of Cleary Gottlieb to convey SCAs responses to the proposal letter and confidentiality agreement comments to representatives of UnitedHealth Group and
Hogan Lovells and, subject to the satisfactory resolution of the issues raised by the proposal letter and comments to the confidentiality agreement, authorized SCA management to continue the discussions with UnitedHealth Group regarding a potential
business combination transaction.
Following the SCA Board meeting, representatives of Cleary Gottlieb spoke by telephone with
representatives of UnitedHealth Group and Hogan Lovells to discuss SCAs responses to the proposal letter and confidentiality agreement comments, which included (i) rejecting the request for exclusivity, (ii) proposing to reduce the
amount of the termination fee to 3% of the equity value of the proposed transaction (or approximately $75 million), (iii) reiterating that prior to permitting UnitedHealth Group to perform in-depth due diligence on SCA, UnitedHealth Group would
need to confirm that it was willing to assume the risks relating to the change of control provisions contained in the agreements governing certain of SCAs key joint ventures and that any transaction would not be contingent upon SCAs
partners in these joint ventures waiving their change of control rights, and (iv) based on the statements made by a representative of UnitedHealth Group as to UnitedHealth Groups unwillingness to enter into an express standstill
agreement, accepting the request to eliminate the express standstill provision from the confidentiality agreement.
Over the next several
days, representatives of SCA and UnitedHealth Group and their respective legal advisors continued to discuss and negotiate the terms of the proposal letter and draft confidentiality agreement, including the amount of the termination fee and the
scope of UnitedHealth Groups obligations to obtain the required regulatory approvals. During this time, members of SCA management and Cleary Gottlieb continued to discuss these matters, including the appropriate size of the termination fee,
with Messrs. Sisitsky and Geiser. Following numerous discussions between the parties, Messrs. Hayek and Wichmann agreed, subject to satisfactory resolution of the other terms and conditions of the transaction agreements, to recommend to their
respective boards of directors a termination fee of $90 million (or approximately 3.7% of the equity value of the proposed transaction).
On the morning of December 19, 2016, SCA and UnitedHealth Group entered into a confidentiality agreement effective as of
December 18, 2016 relating to the proposed transaction, and thereafter UnitedHealth Group and its advisors were provided access to SCAs electronic data room.
Later on December 19, 2016, certain representatives of SCA, including Mr. Hayek, met with representatives of UnitedHealth Group,
including Mr. Wichmann, to present certain information regarding SCA. From December 19, 2016 until the execution of the Merger Agreement on January 7, 2017, representatives of UnitedHealth Group and its advisors continued their due
diligence investigation of SCA.
On December 20, 2016, the SCA Board met telephonically with members of SCA management and
representatives of J.P. Morgan and Cleary Gottlieb. Mr. Hayek first updated the SCA Board on his discussions with Mr. Wichmann regarding a potential business combination transaction and the December 19, 2016 meeting between
representatives of SCA and UnitedHealth Group. Mr. Sisitsky informed the SCA Board that Messrs. Hayek and Wichmann had agreed to recommend to their respective boards of directors a termination fee $90 million and that this recommendation was
supported by Messrs. Sisitsky and Geiser. Representatives of J.P. Morgan and Cleary Gottlieb noted that in their view a termination fee of $90 million was within the range of a market termination fee for a transaction of this nature, and
representatives of Cleary Gottlieb noted that in their view such termination fee was reasonable. Representatives of Cleary Gottlieb then updated the SCA Board on certain other aspects of the discussions with representatives of UnitedHealth Group and
Hogan Lovells relating to the proposal letter and confidentiality agreement comments and the proposed resolution of the other open issues that had been previously discussed with the SCA Board. After further discussions and careful consideration, the
SCA Board instructed members of SCA management and the representatives of J.P. Morgan and Cleary Gottlieb to continue the discussions with UnitedHealth Group and its advisors regarding a potential business combination transaction consistent with the
guidance provided by the SCA Board. The SCA Board then further discussed the
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financial projections considered by the SCA Board at the December 18, 2016 meeting and, after careful consideration, approved the financial projections and authorized SCA management to share
the financial projections with UnitedHealth Group.
On December 20, 2016, J.P. Morgan provided information regarding certain of its
relationships and previous engagements with the TPG Stockholders and certain of their affiliates to the SCA Board.
Also on
December 20, 2016, Mr. Wichmann delivered to Mr. Hayek a revised, non-binding proposal to acquire SCA for $57 per share of SCA common stock. The terms of UnitedHealth Groups revised proposal were substantially consistent with
those contained in UnitedHealth Groups December 17 proposal, except that, as discussed between representatives of SCA and UnitedHealth Group and their respective legal advisors, (i) the amount of the proposed termination fee had been
reduced to $90 million, and (ii) the proposed exclusivity agreement and certain other terms had been eliminated.
On
December 21, 2016, Mr. Wichmann confirmed to Mr. Hayek that UnitedHealth Group was prepared to assume the risks relating to the change of control provisions contained in the agreements governing certain of SCAs key joint
ventures and understood that any transaction would not be contingent upon SCAs partners in these joint ventures waiving their change of control rights. Through the signing of the merger agreement, representatives of UnitedHealth Group and SCA
engaged in joint discussions on how to mitigate the risks relating to the change of control provisions.
On December 22, 2016, the
SCA Board met telephonically with members of SCA management and representatives of J.P. Morgan and Cleary Gottlieb. Mr. Hayek updated the SCA Board on the discussions with UnitedHealth Group regarding a potential business combination
transaction. Representatives of Cleary Gottlieb also summarized for the SCA Board the terms of UnitedHealth Groups December 20 proposal. The SCA Board also discussed the information J.P. Morgan had provided on December 20, 2016
regarding certain of its relationships and previous engagements with the TPG Stockholders and certain of their affiliates. Following careful consideration, the SCA Board determined that the relationships and engagements disclosed by J.P. Morgan did
not adversely impact J.P. Morgans independence or ability to serve as financial advisor to SCA.
Later on December 22, 2016,
representatives of Hogan Lovells sent an initial draft of the merger agreement to representatives of Cleary Gottlieb.
On
December 24, 2016, after consulting with representatives of Cleary Gottlieb and noting that agreement had been reached on the key economic terms of the proposed transaction, Messrs. Sisitsky and Geiser, on behalf of the SCA Board, authorized
Mr. Hayek to commence discussions with UnitedHealth Group regarding the terms of employment for Mr. Hayek and certain other SCA executives following the closing of the transactions.
On December 26, 2016, Messrs. Sisitsky, Geiser and Hayek and representatives of Cleary Gottlieb met telephonically to discuss the key
issues raised by the draft merger agreement and Messrs. Sisitsky, Geiser and Hayek provided the representatives of Cleary Gottlieb with guidance on the key issues.
On December 27, 2016, representatives of Cleary Gottlieb circulated a revised draft of the merger agreement to representatives of Hogan
Lovells.
Between December 26, 2016 and December 28, 2016, SCA and UnitedHealth Group held due diligence meetings. On
December 28, 2016, representatives of UnitedHealth Group and SCA also held meetings with their respective legal advisors at which certain terms of the draft merger agreement were negotiated. Following the December 28, 2016 meeting until
the merger agreement was executed by the parties on the morning of January 7, 2017, representatives of Cleary Gottlieb, Hogan Lovells and UnitedHealth Group held several telephonic meetings to discuss and negotiate the terms and conditions of
the draft merger agreement. During the same period, Messrs. Hayek and Wichmann spoke on several occasions to discuss certain terms of the draft merger agreement.
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On December 29, 2016, Hogan Lovells circulated a revised draft of the merger agreement to
Cleary Gottlieb.
On December 30, 2016, during a telephonic meeting of the SCA Board, Mr. Hayek provided the SCA Board with
updates regarding his discussions with Mr. Wichmann regarding a potential business combination transaction. Mr. Hayek also updated the SCA Board on the meetings that had taken place on December 26 through December 28 among SCA,
UnitedHealth Group and their respective advisors. Representatives of Cleary Gottlieb then addressed various questions from members of the SCA Board relating to, among other things, the structure of the proposed consideration to be received by
SCAs stockholders in the proposed transaction. Representatives of J.P. Morgan then presented their preliminary valuation analyses of the proposed consideration to be received by SCAs stockholders in the proposed transaction and views as
to other potential counterparties, including Company A, that might be perceived to have an interest in pursuing a potential business combination transaction with SCA. Representatives of J.P. Morgan noted that UnitedHealth Groups strategic
interest in SCA made it a unique buyer and the best possible suitor for SCA. In this respect, representatives of J.P. Morgan also expressed their view that it would be unlikely for a competing bidder to be interested and capable of acquiring SCA at
a price that would be higher than that proposed by UnitedHealth Group or capable of assuming the change-in-control risks relating to certain key joint ventures, which UnitedHealth Group had advised SCA that it was prepared to do. The SCA Board also
discussed the risk that UnitedHealth Group would terminate discussions with SCA if it were to learn SCA was soliciting alternative proposals from other parties and the harm that could result to SCA if its discussions with UnitedHealth Group or
solicitation of alternative proposals were to become public. The SCA Board also discussed with representatives of Cleary Gottlieb and J.P. Morgan the timeline for commencing the offer and consummating the transactions and the fact that the draft
merger agreement would, under certain circumstances, permit SCA to respond to unsolicited acquisition proposals and terminate the merger agreement to accept an unsolicited acquisition proposal that was financially superior to the transactions
following compliance with UnitedHealth Groups matching right and payment of the $90 million termination fee, which the SCA Board believed was unlikely to meaningfully deter other acquisition proposals. After careful consideration and taking
into account the input of SCAs financial and legal advisors, the SCA Board determined not to contact other potential counterparties to gauge their interest in pursuing a potential business combination transaction at that time and to continue
discussing a potential business combination transaction with UnitedHealth Group.
On December 31, 2016, Mr. Wichmann advised
Mr. Hayek that UnitedHealth Group wished to modify its proposal to increase the amount of cash it could substitute for UnitedHealth Group common stock in the proposed consideration, with the stock consideration comprising a smaller percentage
of the total consideration, and the rest of the proposed consideration to be paid in cash. Following discussions with Messrs. Sisitsky and Geiser and SCAs financial and legal advisors, Mr. Hayek advised Mr. Wichmann that he would be
prepared to recommend to the SCA Board to provide UnitedHealth Group with greater flexibility to increase the portion of the total consideration that would consist of cash so long as at least 51% of the total consideration would continue to consist
of UnitedHealth Group common stock, which Mr. Wichmann confirmed would be acceptable to UnitedHealth Group.
On January 2, 2017,
during a telephonic meeting of the SCA Board, Mr. Hayek updated the SCA Board on discussions between representatives of SCA and UnitedHealth Group on a range of topics during certain diligence sessions held on December 31, 2016 and
January 1, 2017. Mr. Hayek also updated the SCA Board on his discussions with Mr. Wichmann on December 31, 2016 relating to the potential business combination transaction involving SCA and UnitedHealth Group, including
UnitedHealths request to increase the portion of the total consideration that would be comprised of cash. After discussion and careful consideration, the SCA Board agreed that the proposed change to the stock component of the transaction
consideration was acceptable. Members of SCAs management then left the meeting, and an executive session of the SCA Board was held to further discuss the status of discussions with UnitedHealth Group and the proposed next steps.
Also on January 2, 2017, representatives of Cleary Gottlieb sent to representatives of Hogan Lovells a revised draft of the merger
agreement and an initial draft of the tender and support agreement to be entered into by the TPG Stockholders, UnitedHealth Group and the Offeror.
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On January 3, 2017, Cleary Gottlieb and Hogan Lovells spoke by telephone to discuss, among
other things, certain of SCAs comments to the merger agreement and UnitedHealth Groups positions with respect to such comments. On January 4, 2017, Hogan Lovells circulated revised drafts of the merger agreement and the tender and
support agreement to Cleary Gottlieb. From January 4, 2017 until the tender and support agreement was executed by the TPG Stockholders, UnitedHealth Group and the Offeror on the morning of January 7, 2017, representatives of Cleary
Gottlieb and Hogan Lovells held several telephonic meetings to discuss and negotiate the terms and conditions of the draft tender and support agreement.
On January 4, 2017, during a telephonic meeting of the SCA Board, Mr. Hayek updated the SCA Board on the discussions and
negotiations between representatives of SCA and UnitedHealth Group and their respective advisors regarding a potential business combination transaction. Representatives of Cleary Gottlieb then updated the SCA Board on the status of discussions with
representatives of UnitedHealth Group and Hogan Lovells with respect to the terms and conditions of the draft merger agreement and draft tender and support agreement. Representatives of Cleary Gottlieb also noted that at the meeting of the SCA Board
scheduled for January 6, 2017 it anticipated making a presentation to the SCA Board on the principal terms of the merger agreement and the tender and support agreement and a forum selection bylaw that it would be recommending that the SCA Board
adopt in connection with the transaction. The SCA Board also engaged in a discussion with respect to the employment terms UnitedHealth Group had proposed to offer certain SCA executives as contemplated by the draft employment agreements UnitedHealth
Group had sent to Mr. Hayek on January 3, 2017. Mr. Hayek noted that the proposed terms were being reviewed by outside counsel to SCAs management team. Members of SCAs management then left the meeting, and an executive
session of the SCA Board was held to further discuss the status of discussions with UnitedHealth Group and the proposed next steps.
On
the evening of January 6, 2017, the SCA Board held a telephonic meeting with members of SCA management and representatives of Cleary Gottlieb. At this meeting, representatives of Cleary Gottlieb discussed with the SCA Board certain legal and
fiduciary duty considerations relating to the proposed transaction with UnitedHealth Group. Mr. Geiser then reviewed with the SCA Board the principal terms of the proposed engagement letter with J.P. Morgan, pursuant to which J.P. Morgan would
be engaged as outside financial advisor to SCA in connection with the transactions. Following careful consideration, the SCA Board approved the engagement letter with J.P. Morgan and later that day SCA entered into the engagement letter with J.P.
Morgan effective as of December 14, 2016. Representatives of J.P. Morgan then joined the meeting of the SCA Board. Representatives of Cleary Gottlieb then reviewed with the SCA Board the principal terms and conditions of the merger agreement
and tender and support agreement. Representatives of Cleary Gottlieb also provided the SCA Board with an overview of the treatment of the existing SCA equity awards in the proposed transaction, and briefly discussed the 2017 equity awards expected
to be granted to certain members of SCA management and the employment agreements to be entered into by certain members of SCA management with UnitedHealth Group concurrently with the execution of the merger agreement and to become effective upon the
closing of the transactions. Representatives of J.P. Morgan then presented their financial analyses of the transaction consideration and confirmed to the SCA Board that there had been no material changes to such analyses from the presentation made
by J.P. Morgan to the SCA Board on December 30, 2016. Representatives of J.P. Morgan then delivered to the SCA Board J.P. Morgans oral opinion, which was confirmed by delivery of a written opinion, dated January 7, 2017, that, as of
such date, and based upon and subject to the factors and assumptions set forth in its opinion, the transaction consideration to be paid in the proposed transactions to holders of SCA common stock entitled to receive the transaction consideration
pursuant to the merger agreement was fair, from a financial point of view, to such holders. Representatives of Cleary Gottlieb then discussed with the SCA Board the forum selection bylaw that was proposed for adoption by the SCA Board in connection
with the transaction. Following further discussion and careful consideration, the SCA Board unanimously (i) determined and resolved that the terms of the offer, the mergers and the other transactions contemplated by the merger agreement were
advisable, and fair to and in the best interests of, SCA and its stockholders, (ii) determined that it was advisable and in the best interests of SCA and its stockholders to enter into the merger agreement, and that the merger agreement was
advisable, (iii) approved the merger agreement and the transactions contemplated thereby, on the terms and conditions set forth in the merger agreement and (iv) resolved to recommend, subject to its ability to change its
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recommendation as permitted by the Merger Agreement, that SCAs stockholders accept the offer and tender their shares to the Offeror pursuant to the offer. For further information concerning
the factors considered by the SCA Board in reaching its decision that the merger agreement and the transactions contemplated thereby, including the offer and the mergers, are in the best interests of the SCA stockholders, and its decision to approve
the merger agreement and the transactions contemplated thereby, see
SCAs Reasons for the Transactions; Recommendation of the Board of Directors of SCA
.
Following the SCA Board meeting through the morning of January 7, 2017, Cleary Gottlieb and Hogan Lovells worked to finalize the merger
agreement and the tender and support agreement.
On the morning of January 7, 2017, (i) the merger agreement was executed by
SCA, UnitedHealth Group, the Offeror and Merger Sub and (ii) the tender and support agreement was executed by UnitedHealth Group, the Offeror and the TPG Stockholders. Concurrently with the execution of the merger agreement and the tender and
support agreement, Mr. Hayek and certain other members of SCA management entered into employment agreements with UnitedHealth Group effective as of the closing of the transactions.
On January 9, 2017, prior to the opening of trading of the shares of SCA common stock on Nasdaq, SCA and UnitedHealth Group issued a
joint press release announcing the execution of the merger agreement and the tender and support agreement and the forthcoming commencement of the offer.
UnitedHealth Groups Reasons for the Transactions
UnitedHealth Groups board of directors approved the merger agreement and determined that the terms of the merger agreement and the
transactions contemplated by the merger agreement, including the offer and the mergers, are in the best interests of UnitedHealth Group and its stockholders. In reaching its determination, UnitedHealth Groups board of directors consulted with
UnitedHealth Groups management, as well as with UnitedHealth Groups legal advisors, and considered a variety of factors weighing favorably towards the transactions, including the factors described below.
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the combined company is expected to create long-term stockholder value by creating additional growth opportunities relating to SCAs facilities;
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trends and competitive developments in the health care industry and the range of strategic alternatives available to UnitedHealth Group;
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broader consumer access to higher value, higher quality and lower cost ambulatory surgical centers;
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advancement of OptumCares growth strategy through the addition of more than 200 facilities in 33 states;
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the experience and strength of SCAs management team;
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the amount and form of consideration to be paid in the transaction, the expected
pro forma
ownership of the combined company and other financial terms of the transactions;
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the recommendation of UnitedHealth Groups management in favor of the transactions; and
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the expectation that the conditions to consummation of the offer and the first merger will be satisfied on a timely basis.
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The board of directors of UnitedHealth Group also identified and considered certain potentially negative factors in its deliberations to be
balanced against the positive factors, including:
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the risk that the anticipated benefits of the transactions will not be realized in full or in part, including the risks that expected synergies will not be achieved or not achieved on the expected timeframe;
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the risk that while UnitedHealth Group performed due diligence on SCA and its business, the scope of that due diligence was limited and there may be aspects of SCA or its business of which UnitedHealth Group is not
aware;
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the risk that the transactions may not be consummated despite the parties efforts or that the closing of the transactions may be unduly delayed;
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other costs associated with the transactions;
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the risk of diverting UnitedHealth Group managements focus and resources from other strategic opportunities and from operational matters while working to implement the transaction with SCA, and other potential
disruption associated with combining the companies, and the potential effects of such diversion and disruption on the businesses and customer relationships of UnitedHealth Group and SCA; and
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the risks associated with the transactions, the combined company following the transactions, UnitedHealth Groups business and SCAs business described under the sections entitled Cautionary Statement
Regarding Forward-Looking Statements and Risk Factors.
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After consideration of these factors, the board of
directors of UnitedHealth Group determined that, overall, the potential benefits of the transactions outweighed the potential risks.
This
discussion of the information and factors considered by the board of directors of UnitedHealth Group includes the material positive and negative factors considered by the board of directors of UnitedHealth Group, but it is not intended to be
exhaustive and may not include all the factors considered by the board of directors of UnitedHealth Group. The board of directors of UnitedHealth Group did not quantify or assign any relative or specific weights to the various factors that it
considered in reaching its determination to approve the merger agreement and the transactions. Rather, the board of directors of UnitedHealth Group viewed its position as being based on the totality of the information presented to and factors
considered by it. In addition, individual members of the board of directors of UnitedHealth Group may have given differing weights to different factors. It should be noted that this explanation of the reasoning of the board of directors of
UnitedHealth Group and certain information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled Cautionary Statement Regarding Forward-Looking
Statements.
SCAs Reasons for the Transactions; Recommendation of the Board of Directors of SCA
In evaluating the merger agreement and the offer, the mergers and the other transactions contemplated by the merger agreement,
including the tender and support agreement, the SCA Board consulted with the senior management of SCA, as well as J.P. Morgan and Cleary Gottlieb. In the course of making the determination (i) that the offer, the mergers and the other
transactions contemplated by the merger agreement were advisable, fair to and in the best interests of SCA and its stockholders, (ii) that it was advisable and in the best interests of SCA and its stockholders to enter into the merger agreement
and that the merger agreement was advisable, and (iii) to recommend that SCAs stockholders accept the offer and tender their SCA shares to the Offeror pursuant to the offer, the SCA Board considered each of the following reasons, among
others, each of which the SCA Board believed supported its unanimous determination and recommendation (but which are not presented in any relative order of importance):
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Transaction Consideration
. The SCA Board considered the fact that the transaction consideration consists
of a mix of cash and shares of UnitedHealth Group common stock and that the portion of a share of UnitedHealth Group common stock included in the transaction consideration will be determined based on a floating exchange ratio, which, in combination
with the cash portion of the transaction consideration, is designed to maintain the $57 total value per SCA share of the transaction consideration and therefore provides certainty of value to SCAs stockholders and protects against decreases in
the value of UnitedHealth Group
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common stock between the execution of the merger agreement and the determination of the exchange ratio, and:
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that this total value per SCA share:
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represents a 21.1% premium to the trading price at which the SCA shares closed on January 5, 2017, the last trading day before delivery of J.P. Morgans oral opinion on January 6, 2017;
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represents a 27.2% premium over the volume-weighted average closing price for the SCA shares for the 30-trading day period ending on and including January 5, 2017;
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represents a 9.6% premium to the highest closing price for the SCA shares during the last 52-weeks ending on and including January 5, 2017; and
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exceeded the all-time high trading price of the SCA shares; and
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the SCA Board considered that, based on discussions and negotiations with UnitedHealth Group and its advisors, in its view the transaction consideration represented the highest per-SCA share consideration that
UnitedHealth Group was willing to pay.
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Form of Consideration.
The SCA Board considered that the consideration to be paid to SCAs stockholders consists of a combination of cash and shares of UnitedHealth Group common stock, which with respect to
the applicable cash consideration, allows holders of SCA shares to realize immediate value, in cash, for their investment in SCA, without the continued exposure to SCAs business risks and the uncertainty associated with SCA executing on its
standalone plan, and with respect to the applicable stock consideration, provides holders of SCA shares with the ability to participate in the future growth of UnitedHealth Group. SCA also considered that shares of UnitedHealth Group common stock
are highly liquid and that UnitedHealth Group pays quarterly dividends while SCA does not.
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Business and Financial Condition of SCA
. The SCA Board considered SCAs business, financial condition, results of operations, business, competitive position, properties, assets and prospects as well as its
standalone plan. The SCA Board considered, among other factors, that the holders of the SCA shares would continue to be subject to the risks and uncertainties of SCA executing on its standalone plan if it remained independent, including continued
financial pressure on smaller physician groups (which constitute a majority of SCAs physician partners), continued risks of hospital employment of independent physicians, reimbursement pressure on SCAs surgical facilities, risk of
increased competition, including from hospital systems and new market entrants, risks of declining interest from health plans and medical groups to strategically partner with SCA, and risks of declining valuation metrics for health care providers,
and other risks set forth in Part I, Item IA of SCAs Annual Report on Form 10-K for its fiscal year ended December 31, 2016 as filed with the SEC on February 21, 2017. The SCA Board weighed the certainty of realizing a compelling value
for SCA shares in the offer and the mergers compared to the uncertainty that trading values would approach the transaction consideration in the foreseeable future.
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Strategic Alternatives
. The SCA Board considered its belief that the value offered to holders of SCA shares in the offer and the mergers was more favorable to holders of SCA shares than the potential value of
remaining an independent public company and pursuing alternative strategies that might be available to an independent public company.
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Tax Treatment of the Offer and the Mergers
. The SCA Board considered the fact that the offer and the mergers are expected to be treated as a reorganization within the meaning of Section 368(a) of the Code,
and that, as a result, receipt of the applicable stock consideration by stockholders of SCA in exchange for their SCA shares would not be taxable to SCA stockholders that are U.S. persons for federal tax income purposes, although the applicable cash
consideration will be taxable up to the total amount of gain realized in the offer and mergers.
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J.P. Morgans Fairness Opinion and Related Analyses.
The SCA Board considered the oral opinion of J.P. Morgan delivered to the SCA Board on January 6, 2017, which was confirmed by delivery of a written
opinion dated January 7, 2017, that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the transaction consideration to be paid in the proposed offer and the mergers to the holders of SCA shares
entitled to receive the transaction consideration pursuant to the merger agreement was fair, from a financial point of view, to such holders, as more fully described below under
Opinion of SCAs Financial Advisor.
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Paucity of Potentially Interested Counterparties.
After discussions with J.P. Morgan and management of SCA, the SCA Board considered the paucity of potentially interested and capable counterparties based on the
criteria of whether such parties both had the capacity to compete with the terms proposed by UnitedHealth Group and the likely interest in pursuing a potential business combination transaction with SCA.
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Negotiation Process and Procedural Fairness.
The SCA Board considered the fact that the terms of the offer and mergers were the result of robust arms-length negotiations and that the Transaction Committee
of the SCA Board, with the assistance of SCAs independent financial and legal advisors, played an active role in the negotiations.
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Speed of Completion.
The SCA Board considered the anticipated timing of the consummation of the transactions contemplated by the merger agreement, and the structure of the transaction as an exchange offer for the
SCA shares, which, subject to the satisfaction or waiver of the applicable conditions set forth in the merger agreement, is expected to allow SCAs stockholders to receive the consideration for their SCA shares in a relatively short time frame,
followed by the first merger in which stockholders who do not validly exercise appraisal rights will receive the same consideration as received by those stockholders who tender their SCA shares in the offer. The SCA Board considered that the
potential for closing in a relatively short time frame could also reduce the amount of time in which SCAs business would be subject to the operational restrictions contained in the merger agreement and the potential disruption and uncertainty
pending closing.
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Likelihood of Completion; Certainty of Payment
. The SCA Board considered its belief that the offer and the mergers will likely be consummated, based on, among other factors:
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the absence of any financing condition to consummation of the offer or the mergers;
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the reputation and financial condition of UnitedHealth Group;
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the fact that the conditions to the offer and mergers are specific and limited in scope;
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the fact that the TPG Stockholders had entered into the Tender and Support Agreement, pursuant to which each TPG Stockholder has agreed to tender the SCA shares held by it into the offer, on the terms and conditions set
forth in the Tender and Support Agreement; and
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SCAs ability to specifically enforce the merger agreement, including the obligation of UnitedHealth Group and Offeror to consummate the offer and the mergers.
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Assumption of Certain Change-in-Control Risks.
The SCA Board considered that the risks relating to the change of control provisions contained in the agreements governing certain of SCAs key joint ventures
would be borne by UnitedHealth Group and that a transaction would not be contingent upon SCAs partners in these joint ventures waiving their change of control rights. The SCA Board also considered that it was unlikely for a competing bidder to
be capable of assuming the change-in-control risks relating to certain key joint ventures, which UnitedHealth Group had advised SCA that it was prepared to do.
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The SCA Board considered other terms of the merger agreement, which are more fully described in
the section of this prospectus/offer to exchange entitled Merger Agreement. Certain provisions of the merger agreement that the SCA Board considered important included:
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Minimum Tender Condition
. Consummation of the offer is conditioned on the satisfaction of the minimum tender condition, which, if satisfied, would demonstrate strong support for the offer and the mergers by
holders of SCA shares because satisfaction of the minimum tender condition would require that at least a majority of SCA shares would have been tendered in the offer and not withdrawn.
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Ability to Respond to Unsolicited Takeover Proposals
. Prior to the time of the Offerors acceptance of SCA shares tendered in the offer, the SCA Board may provide confidential information and/or engage in
discussions or negotiations in connection with an unsolicited bona fide written takeover proposal (for further discussion, see the section of this prospectus/offer to exchange entitled Merger AgreementNo Solicitation of Acquisition
Proposals) that did not result from SCAs breach of its non-solicitation obligations if the SCA Board determines in good faith, after consultation with its independent financial advisor and outside legal counsel, that such takeover
proposal constitutes or is reasonably likely to lead to a superior proposal (for further discussion, see the section of this prospectus/offer to exchange entitled Merger AgreementNo Solicitation of Acquisition Proposals) and that
the failure to take such action would be inconsistent with the directors fiduciary duties under applicable law, subject to certain notice requirements in favor of UnitedHealth Group and the entry into an acceptable confidentiality agreement.
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Company Adverse Recommendation Change in Response to a Superior Proposal; Ability to Accept a Superior Proposal
. The SCA Board may, in connection with a superior proposal, effect a change in recommendation (for
further discussion, see the section of this prospectus/offer to exchange entitled Merger AgreementNo Solicitation of Acquisition Proposals) and/or cause SCA to terminate the merger agreement to enter into a definitive agreement
with respect to a superior proposal, if the SCA Board determines in good faith, after consultation with its independent financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors
fiduciary duties under applicable law, subject to a five-business day match right that would allow UnitedHealth Group to match a superior proposal, and which will renew for two additional business days upon any revisions to the financial
terms or any material revisions to the other terms of the superior proposal. If the merger agreement is terminated in connection with SCAs entering into a definitive agreement with respect to a superior proposal or changing its recommendation
in response to a superior proposal, then SCA will have an obligation to pay UnitedHealth Group a termination fee of $90 million (as more fully described in the section of this prospectus/offer to exchange entitled Merger
AgreementTermination Fee). The SCA Board also considered, based on discussions with its independent financial and legal advisors, that the amount of the termination fee is comparable to termination fees in transactions of a similar size,
was reasonable, would not meaningfully deter competing bids and would not likely be required to be paid unless SCA entered into a more favorable transaction. The SCA Board also recognized that the provisions in the merger agreement relating to match
right and termination fees were insisted upon by UnitedHealth Group as a condition to entering into the merger agreement.
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General Company Adverse Recommendation Change
. The SCA Board may also effect a change in recommendation other than in response to a superior proposal if the SCA Board determines in good faith, after consultation
with its independent financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors fiduciary duties under applicable law, subject to a five-business day right that would allow
UnitedHealth Group to propose adjustments to the terms and conditions of the merger agreement such that the failure to take such action would no longer be inconsistent with the directors fiduciary duties under applicable law. If UnitedHealth
Group terminates the merger agreement as a result of such adverse change in recommendation, SCA will have an obligation to pay UnitedHealth Group a termination fee of $90 million (as more fully described in the section of this prospectus/offer to
exchange entitled Merger AgreementTermination Fee).
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Extension of the Offer
. Although the Offerors obligation to accept and pay for all SCA shares that have been validly tendered into the offer and not properly withdrawn is subject to the satisfaction or
waiver of a number of conditions, the Offeror is required, under certain circumstances, to extend the offer beyond the initial expiration date which will provide additional time for such conditions to be satisfied (see the section of this
prospectus/offer to exchange entitled Exchange Offer ProceduresExtension, Termination and Amendment of Offer).
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End Date
. The end date (as defined in the section of this prospectus/offer to exchange entitled Questions and Answers About the Transactions) under the merger agreement on which either party, subject
to certain exceptions, can terminate the merger agreement allows for sufficient time to consummate the offer and the mergers, while minimizing the length of time during which SCA would be required to operate subject to the restrictions on interim
operations set forth in the merger agreement.
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Obligations to Consummate the Offer and the Mergers
. The merger agreement requires UnitedHealth Group to use its reasonable best efforts to consummate the offer and the mergers and to obtain requisite approvals
to consummate the offer and the mergers.
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Appraisal Rights
. The SCA Board considered the availability of statutory appraisal rights under Delaware law in connection with the first merger for stockholders of SCA who do not tender their SCA shares into the
offer (and who otherwise comply with the statutory requirements of Delaware law), and who believe that exercising such rights would yield them a greater per-share amount than the transaction consideration, which appraisal rights avoid delays in the
transaction so that other stockholders of SCA will be able to receive in the offer and the first merger the transaction consideration, as applicable, for their SCA shares.
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In reaching its determinations and recommendations described above, the SCA Board also considered a number of uncertainties, risks and
potentially negative factors relevant to the transactions, including the following (but not in any relative order of importance):
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Floating Exchange Ratio.
The SCA Board considered that because 20-49% of the transaction consideration is payable in cash and the portion of a share of UnitedHealth Group common stock included in the transaction
consideration will be determined based on a floating exchange ratio, SCA stockholders will not benefit from any increase in the trading price of UnitedHealth Group common stock between the execution of the merger agreement and the determination of
the exchange ratio.
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Non-Solicitation Covenant
. The SCA Board considered that the merger agreement prohibits SCA from soliciting takeover proposals from third parties (as more fully described in the section of this prospectus/offer
to exchange entitled Merger Agreement
No Solicitation of Acquisition Proposals).
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Termination Fee
. The SCA Board considered the fact that SCA must pay UnitedHealth Group a termination fee of $90 million if the merger agreement is terminated under certain circumstances, including to accept a
superior proposal (as more fully described in the section of this prospectus/offer to exchange entitled Merger AgreementTermination Fee).
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Tax Treatment of the Offer and the Mergers
. The SCA Board considered the fact that receipt of the applicable cash consideration by stockholders of SCA in exchange for their SCA shares would be taxable to SCA
stockholders that are U.S. persons for federal tax income purposes.
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Interim Operating Covenants
. The SCA Board considered that the merger agreement imposes restrictions on
the conduct of SCAs business prior to the consummation of the first merger, requiring SCA and its subsidiaries to conduct their respective businesses in the ordinary course of business in all material respects and use their respective
commercially reasonable efforts to, among other things, maintain and preserve intact SCAs business organizations, and keep available the services of their key employees, and that these restrictions may limit SCA and its subsidiaries from
taking specified actions, subject to specific limitations, which may delay or prevent SCA from undertaking business
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opportunities that may arise pending completion of the transactions (as more fully described in the section of this prospectus/offer to exchange entitled Merger AgreementConduct of
SCAs Business Pending the First Merger).
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Risks and Uncertainties Relating to the Combined Business
. The SCA Board considered the challenges of combining the business of SCA with that of UnitedHealth Group and the risk that the anticipated performance or
operational synergies might not be fully realized.
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Risks the Offer and the Mergers May Not Be Completed
. The SCA Board considered the risk that the conditions to the offer may not be satisfied and that, therefore, SCA shares may not be purchased pursuant to the
offer and the mergers may not be consummated. The SCA Board also considered the risks and costs to SCA if the offer and the mergers are not consummated, including the diversion of management and employee attention, potential employee attrition, the
potential effect on vendors, distributors, customers, facilities, partners and others that do business with SCA and the potential effect on the trading price of the SCA shares.
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Potential Conflicts of Interest
. The SCA Board considered the fact that SCAs executive officers and directors have financial interests in the transactions contemplated by the merger agreement, including the
offer and the mergers that may be different from or in addition to those of other stockholders, as more fully described below in Agreements or Arrangements with Executive Officers and Directors of SCA.
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The foregoing discussion of the reasons considered by the SCA Board is intended to be a summary only and should not be considered an
exhaustive list of all of the reasons considered by the SCA Board. The SCA Board unanimously concluded that the positive reasons relating to the merger agreement and the transactions contemplated thereby, including the offer and the mergers,
substantially outweighed the potential negative reasons. The SCA Board collectively reached the conclusion to approve the merger agreement and the related transactions, including the offer and the mergers, in light of the various reasons described
above and other factors that the members of the SCA Board believed were appropriate. In view of the wide variety of reasons considered by the SCA Board in connection with its evaluation of the merger agreement and the transactions contemplated
thereby, including the offer and the mergers, and the complexity of these matters, the SCA Board did not consider it practical, and did not attempt to quantify, rank or otherwise assign relative weights to the specific reasons it considered in
reaching its decision, and it did not undertake to make any specific determination as to whether any reason, or any particular aspect of any reason, supported or did not support its ultimate determination. Rather, the SCA Board made its
recommendation based on the totality of information it received and the investigation it conducted. In considering the reasons discussed above, individual directors may have given different weights to different reasons. It should be noted that this
explanation of the reasoning of the SCA Board and certain information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled Cautionary Statement
Regarding Forward-Looking Statements.
For the reasons described above, and in light of other factors that they believed were
appropriate, the SCA Board unanimously determined and resolved that the terms of the offer, the mergers and the other transactions contemplated by the merger agreement are advisable, and fair to and in the best interests of, SCA and its
stockholders, and unanimously resolved to recommend that the stockholders of SCA accept the offer and tender their shares of SCA common stock to the Offeror pursuant to the offer.
Opinion of SCAs Financial Advisor
Pursuant to an engagement letter dated January 6, 2017 (which we refer to in this section of this prospectus/offer to exchange as the
engagement letter), SCA retained J.P. Morgan as its financial advisor in connection with the proposed offer and the mergers (referred to in this section of this prospectus/offer to exchange as the transactions).
39
At the meeting of the SCA Board of Directors on January 6, 2017, J.P. Morgan rendered its
oral opinion to the SCA Board of Directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the transaction consideration to be paid in the proposed transactions to the holders of SCA shares
entitled to receive transaction consideration pursuant to the merger agreement was fair, from a financial point of view, to such holders.
J.P. Morgan has confirmed its January 6, 2017 oral opinion by delivering its written opinion to the SCA Board, dated January 7,
2017, that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the transaction consideration to be paid in the proposed transactions to the holders of SCA shares entitled to receive transaction
consideration pursuant to the merger agreement was fair, from a financial point of view, to such holders. The full text of the written opinion of J.P. Morgan dated January 7, 2017, which sets forth the assumptions made, matters considered and
limits on the review undertaken, is attached hereto as Annex C and is incorporated herein by reference. SCAs stockholders are urged to read the opinion in its entirety. J.P. Morgans written opinion was provided to the SCA Board (in its
capacity as such) in connection with and for the purposes of its evaluation of the proposed transactions and was directed only to the transaction consideration to be paid in the proposed transactions to the holders of shares of SCA common stock
entitled to receive transaction consideration pursuant to the merger agreement and did not address any other aspect of the proposed transactions. The issuance of J.P. Morgans opinion was approved by a fairness committee of J.P. Morgan. The
summary of the opinion of J.P. Morgan set forth in this prospectus/offer to exchange is qualified in its entirety by reference to the full text of such opinion. The opinion does not constitute a recommendation to any stockholder of SCA as to whether
such stockholder should tender its SCA shares into the offer or how such stockholder should vote with respect to the proposed transactions or any other matter.
In arriving at its opinions, J.P. Morgan, among other things:
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reviewed the merger agreement;
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reviewed certain publicly available business and financial information concerning SCA and UnitedHealth Group and the industries in which they operate;
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compared the proposed financial terms of the proposed transactions with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such
companies;
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compared the financial and operating performance of SCA and UnitedHealth Group with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical
market prices of the SCA shares and UnitedHealth Group common stock and certain publicly traded securities of such other companies;
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reviewed certain internal financial analyses and forecasts prepared by the management of SCA relating to its business which are set forth in Table 1 of the section of this prospectus/offer to exchange entitled
Certain Unaudited Prospective Financial Information of SCA (referred to in this section as the unaudited prospective financial information) and certain financial analyses and forecasts derived therefrom by the
management of SCA and guidance provided by management of SCA with respect to extrapolations derived therefrom by J.P. Morgan (which extrapolations were reviewed and approved by management of SCA); and
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performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
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In addition, J.P. Morgan held discussions with certain members of the management of SCA with respect to certain aspects of the proposed
transactions, and the past and current business operations of SCA, the financial condition and future prospects and operations of SCA, the effects of the transactions on the financial condition and future prospects of SCA, and certain other matters
J.P. Morgan believed necessary or appropriate to its inquiry.
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In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all
information that was publicly available or was furnished to or discussed with J.P. Morgan by SCA or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and did not assume any obligation to undertake any such
independent verification of) any such information or its accuracy or completeness. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of SCA or
UnitedHealth Group under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on the unaudited prospective financial information or on financial analyses and forecasts derived therefrom by the management of SCA
and guidance provided by management of SCA with respect to extrapolations derived therefrom by J.P. Morgan (which extrapolations were reviewed and approved by management of SCA), J.P. Morgan assumed that they were reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of SCA to which the unaudited prospective financial information or such financial
analyses and forecasts derived therefrom by management and guidance provided by management of SCA with respect to extrapolations derived therefrom by J.P. Morgan (which extrapolations were reviewed and approved by management of SCA) relate. J.P.
Morgan expressed no view as to the unaudited prospective financial information or the financial analyses and forecasts derived therefrom by the management of SCA and guidance provided by management of SCA with respect to extrapolations derived
therefrom by J.P. Morgan (which extrapolations were reviewed and approved by management of SCA) or the assumptions on which they were based. J.P. Morgan also assumed that the proposed transactions and other transactions contemplated by the merger
agreement will qualify as a tax-free reorganization for United States federal income tax purposes and will be consummated as described in the merger agreement. J.P. Morgan also assumed that the representations and warranties made by SCA and
UnitedHealth Group in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to
SCA with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the proposed transactions will be obtained without any adverse effect on SCA or
UnitedHealth Group or on the contemplated benefits of the proposed transactions.
J.P. Morgans opinion was necessarily based on
economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of the date of its opinion. J.P. Morgans opinion noted that subsequent developments may affect J.P. Morgans opinion, and that
J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgans opinion is limited to the fairness, from a financial point of view, of the transaction consideration to be paid in the proposed transactions to
the holders of SCA shares entitled to receive transaction consideration pursuant to the merger agreement, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to be paid to the holders of any other class of securities,
creditors or other constituencies of SCA or the underlying decision by SCA to engage in the proposed transactions. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or
employees of any party to the proposed transactions, or any class of such persons relative to the transaction consideration to be paid in the proposed transactions to the holders of SCA shares entitled to receive transaction consideration pursuant
to the merger agreement or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which the SCA shares or UnitedHealth Group common stock will trade at any future time.
The terms of the merger agreement, including the transaction consideration, were determined through arms length negotiations between SCA
and UnitedHealth Group, and the decision to enter into the merger agreement was solely that of the SCA Board. J.P. Morgans opinion and financial analyses were only one of the many factors considered by the SCA Board in its evaluation of the
proposed transactions and should not be viewed as determinative of the views of the SCA Board or management with respect to the proposed transactions or the transaction consideration to be paid in the proposed transactions to the holders of SCA
shares entitled to receive transaction consideration pursuant to the merger agreement.
In accordance with customary investment banking
practice, J.P. Morgan employed generally accepted valuation methodologies in rendering its oral opinion to the SCA Board on January 6, 2017 and contained in the presentation delivered to the SCA Board on such date in connection with the
rendering of such oral opinion. The
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following is a summary of the material financial analyses utilized by J.P. Morgan in connection with providing its opinion. Some of the summaries of the financial analyses include information
presented in tabular format. The tables are not intended to stand alone and, in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set
forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgans analyses. For purposes
of the financial analyses utilized by J.P. Morgan in connection with providing its opinion, EBITDA for SCA was calculated as earnings before interest, taxes, depreciation and amortization before stock-based compensation, excluding income
attributable to non-controlling interests.
Public Trading Multiples
Using publicly available information, J.P. Morgan compared selected financial data of SCA with similar data for selected publicly traded
companies engaged in businesses which J.P. Morgan judged to be analogous to SCA or aspects thereof based on J.P. Morgans experience and its familiarity with the industries in which SCA operates. The companies selected by J.P. Morgan were as
follows:
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Envision Healthcare Holdings, Inc.
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TeamHealth Holdings Inc.
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With respect to the selected companies, the information J.P. Morgan presented
included the multiple of firm value (calculated as equity value plus net debt and, with respect to SCA, Surgery Partners, Inc. and Envision Healthcare Holdings, Inc., excluding non-controlling interests), referred to in this section as
FV, to adjusted EBITDA (calculated as earnings before interest, taxes, depreciation and amortization before stock-based compensation, and, with respect to SCA, Surgery Partners, Inc. and Envision Healthcare Holdings, Inc., excluding
income attributable to non-controlling interests), referred to in this section as EBITDA. Estimated financial data for the selected companies was based on the selected companies filings with the SEC and publicly available analyst
consensus estimates for the calendar year ended 2017 that J.P. Morgan obtained from FactSet Research Systems. Results of this analysis were presented for the selected companies, as indicated in the following table:
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Selected Company
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FV/EBITDA 2017E Multiple
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Surgery Partners, Inc.
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9.5x
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Envision Healthcare Holdings, Inc.
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9.3x*
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TeamHealth Holdings Inc.
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10.1x**
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MEDNAX, Inc.
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10.7x
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*
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Pro forma for the merger between AMSURG Corp. and Envision Healthcare Holdings, Inc. announced on June 17, 2016 and completed on December 1, 2016.
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**
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Based on TeamHealth Holdings Inc.s unaffected stock price as of October 28, 2016 prior to the announcement of The Blackstone Groups acquisition of TeamHealth Holdings Inc.
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Based on the above analysis and other factors that J.P. Morgan considered appropriate, J.P. Morgan then selected a FV/EBITDA 2017E reference
range for SCA of 9.50x to 10.75x. Applying this range to SCAs projected EBITDA for the calendar year ended 2017 included in the unaudited prospective financial information, the analysis indicated an implied equity value per SCA share between
$26.25 and $33.25 (rounded to the nearest $0.25), which J.P. Morgan compared to the value of the transaction consideration of $57.00 per SCA share. J.P. Morgan also derived the FV/EBITDA 2017E multiples for SCA based on publicly available analyst
consensus estimates and the unaudited prospective financial information of 14.00x and 13.30x, respectively, and noted that expanding the FV/EBITDA 2017E reference range to 9.50x to 14.00x and applying it to SCAs projected EBITDA for the
calendar year ended 2017 included in the unaudited prospective financial information would
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indicate an implied equity value per SCA share between $26.25 and $51.00 (rounded to the nearest $0.25), as compared to the value of the transaction consideration of $57.00 per SCA share.
Selected Transaction Analysis.
Using
publicly available information, J.P. Morgan examined selected transactions with respect to businesses which J.P. Morgan judged to be analogous to SCAs business or aspects thereof based on J.P. Morgans experience and familiarity with the
industries in which SCA operates. The transactions indicated in the following table were selected by J.P. Morgan as relevant in evaluating the proposed transactions. Using publicly available information, J.P. Morgan calculated, for each selected
transaction, the multiple of the target companys FV implied in the relevant transaction to the target companys EBITDA for the twelve-month period prior to the announcement date of the applicable transaction. Estimated financial data for
the selected transactions was based on the selected companies filings with the SEC and publicly available analyst consensus estimates that J.P. Morgan obtained from FactSet Research Systems. Results of this analysis were presented for the
selected transactions, as indicated in the following table:
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Announcement
Date
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Acquiror
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Target
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LTM EBITDA
Multiple
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October 2016
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Blackstone Group LP
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TeamHealth Holdings Inc.
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12.9x
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June 2016
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AMSURG Corp.
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Envision Healthcare Holdings, Inc.
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12.6x*
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August 2015
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TeamHealth Holdings Inc.
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IPC Healthcare, Inc.
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22.7x**
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May 2014
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AMSURG Corp.
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Sheridan Healthcare, Inc.
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12.2x*
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June 2014
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Surgery Partners Inc. / H.I.G. Capital, LLC
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Symbion Holdings Corp.
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10.3x
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April 2011
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AMSURG Corp.
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National Surgical Care, Inc.
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8.1x
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January 2011
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Surgery Partners Inc. / H.I.G. Capital, LLC
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NovaMed, Inc.
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7.7x*
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April 2007
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Crestview Partners, L.P.
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Symbion Holdings Corp.
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12.5x
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March 2007
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TPG Capital, L.P.
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HealthSouth Corporation (Surgery Centers)
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10.1x
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*
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EBITDA for Envision Healthcare Holdings, Inc. Sheridan Healthcare and NovaMed, Inc. calculated excluding income attributable to non-controlling interests.
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**
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Transaction included for reference purposes only and not as a component of J.P. Morgans fairness analysis.
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Based on the above analysis and other factors that J.P. Morgan considered appropriate, J.P. Morgan then selected a LTM EBITDA multiple
reference range for SCA of 8.00x to 13.00x. Applying this range to SCAs EBITDA for calendar year 2016 included in the unaudited prospective financial information, this analysis indicated an implied equity value per SCA share between $11.50 and
$35.25 (rounded to the nearest $0.25), which J.P. Morgan compared to the value of the transaction consideration of $57.00 per SCA share.
Discounted
Cash Flow Analysis.
J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity
value per SCA share. J.P. Morgan calculated the unlevered free cash flow estimates of SCA for calendar years 2017 through 2031 (as set forth in Table 2 of the section of this prospectus/offer to exchange entitled Certain Unaudited
Prospective Financial Information of SCA), which were discussed with, and approved by, SCAs management for J.P. Morgans use in connection with its financial analyses. J.P. Morgan also calculated a range of terminal values for SCA
at the end of this period by applying terminal value growth rates ranging from 1.50% to 2.00% to the unlevered free cash flow estimates for SCA during the terminal period. The unlevered free cash flow estimates, the cash flows generated by potential
tax savings resulting from utilization of the net operating losses of SCA as provided by SCA management and the range of terminal values were then discounted
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by J.P. Morgan to present value as of December 31, 2016 using discount rates ranging from 6.50% to 7.50%, which range was chosen by J.P. Morgan based upon an analysis of the weighted average
cost of capital of SCA. The present value of the unlevered free cash flow estimates and the range of terminal values were then adjusted by subtracting projected net debt as of December 31, 2016 and adding the discounted value as of
December 31, 2016 of the cash flows generated by potential tax savings resulting from utilization of the net operating losses of SCA. This analysis indicated a range of implied equity values for SCA, which J.P. Morgan divided by the number of
outstanding SCA shares, calculated on a fully-diluted basis, to derive a range of implied equity values per SCA share of between $40.00 and $70.50 (rounded to the nearest $0.25) per share, which J.P. Morgan compared to the value of the transaction
consideration of $57.00 per SCA share.
Other Information
Historical Trading Range for SCA
. For reference purposes only and not as a component of its fairness analysis, J.P. Morgan reviewed the
historical trading prices of the SCA shares during the 52-week period prior to January 5, 2017, the last trading day before delivery of J.P. Morgans oral opinion on January 6, 2017, noting that the low and high closing prices during
such period ranged from $38.29 per share to $52.01 per SCA share, as compared to the value of the transaction consideration of $57.00 per SCA share.
Analyst Price Targets for SCA
. For reference purposes only and not as a component of its fairness analysis, J.P. Morgan reviewed
certain publicly available equity research analyst share price targets for the SCA shares obtained from FactSet Research Systems, noting that the low and high share price targets ranged from $37.00 per share to $58.00 per SCA share, as compared to
the value of the transaction consideration of $57.00 per SCA share.
Miscellaneous
The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by
J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and
that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations
resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of
SCA. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered
by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses
performed in determining its opinion.
Analyses based upon forecasts of future results are inherently uncertain, as they are subject to
numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less
favorable than suggested by those analyses. Moreover, J.P. Morgans analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected
companies reviewed as described in the above summary is identical to SCA, and certain of these companies may have characteristics that are materially different from those of SCA, and none of the selected transactions reviewed was identical to the
proposed transactions. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgans analysis, may be considered similar to those of SCA. The
transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgans analysis, may be considered similar to the proposed transactions. The analyses necessarily involve complex
considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could
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affect the companies differently than they would affect SCA and the transactions differently than they would affect the proposed transactions.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other
purposes. J.P. Morgan was selected to advise the SCA Board in connection with the proposed transactions on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity
with SCA and the industries in which it operates.
For financial advisory services rendered in connection with the transactions (including
the delivery of its opinion), SCA has agreed to pay J.P. Morgan a fee of $14 million, $2 million of which was payable upon delivery by J.P. Morgan of its opinion, and the remainder of which will become due upon the closing of the proposed
transactions. In addition, SCA has agreed to reimburse J.P. Morgan for certain of its reasonable costs and expenses incurred in connection with its services, including certain of the reasonable fees and disbursements of counsel, and will indemnify
J.P. Morgan against certain liabilities arising out of J.P. Morgans engagement. During the two years preceding the date of J.P. Morgans opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with
SCA, UnitedHealth Group and TPG Capital, L.P. (together with its affiliates, TPG) for which J.P. Morgan and such affiliates have received customary compensation. With respect to SCA, such services during such period have included acting
as joint lead arranger and joint bookrunner with respect to its term loan B and revolving credit facility closed March 2015 and as sole bookrunner and sole lead arranger with respect to the increase of the said term loan B facility closed October
2016, as joint bookrunner with respect to its bond offering closed March 2015, and as joint bookrunner with respect to its equity offering closed March 2015. With respect to UnitedHealth Group, such services during such period have included acting
as joint lead arranger and bookrunner with respect to its revolving credit facility closed April 2015 and joint lead arranger and bookrunner with respect to its term loan A facility closed April 2015, as joint bookrunner with respect to its bond
offerings closed December 2016 and July 2015, respectively, and as financial advisor on its acquisition of Catamaran Corporation closed July 2015. With respect to TPG, such services during such period have included acting as joint lead arranger and
bookrunner with respect to its syndicated credit facilities closed October 2015 and August 2016 respectively. In addition, J.P. Morgans commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of SCA and
UnitedHealth Group, for which J.P. Morgan receives customary compensation or other financial benefits. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of each of the SCA shares and UnitedHealth Group common
stock. During the two years preceding the date of J.P. Morgans opinion, the aggregate fees received by J.P. Morgan from SCA were approximately $6 million, the aggregate fees received by J.P. Morgan from UnitedHealth Group were approximately
$49 million and the aggregate fees received by J.P. Morgan from TPG were approximately $183 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial
instruments (including derivatives, bank loans or other obligations) of SCA or UnitedHealth Group for its own account or for the accounts of customers and, accordingly, J.P. Morgan may at any time hold long or short positions in such securities or
other financial instruments.
Certain Unaudited Prospective Financial Information of SCA
SCA does not, as a matter of course, publicly disclose long-term forecasts or internal projections as to future revenues, earnings or other
results, due to, among other reasons, the unpredictability of such forecasts or projections and the underlying assumptions and estimates. However, in connection with its evaluation of UnitedHealth Groups acquisition proposal, SCAs
management prepared certain unaudited prospective financial information that was presented to the SCA Board on December 17, 2016 (the unaudited prospective financial information). SCAs management provided the unaudited
prospective financial information to (i) the SCA Board on December 17, 2016 for purposes of considering and evaluating UnitedHealth Groups acquisition
45
proposal, (ii) UnitedHealth Group on December 20, 2016 in connection with its evaluation of an acquisition of SCA, and (iii) J.P Morgan in connection with the rendering of J.P.
Morgans fairness opinion to the SCA Board and in performing its related financial analyses, as described above in Opinion of SCAs Financial Advisor. The SCA Board directed J.P Morgan to use the unaudited prospective
financial information in performing its financial analyses in connection with the rendering of its fairness opinion. To give holders of SCA common stock access to certain nonpublic information that was available to the SCA Board, UnitedHealth Group
and J.P. Morgan at the time of the evaluation of the offer, the mergers and the other transactions contemplated by the merger agreement, certain of the unaudited prospective financial information is included below.
The unaudited prospective financial information was developed from historical financial statements and a series of independent assumptions and
estimates of SCA management related to future trends and did not give effect to any significant changes or expenses as a result of the offer, the mergers or the other transactions contemplated by the merger agreement or any other effects of the
offer, the mergers and the other transactions contemplated by the merger agreement. The unaudited prospective financial information have been prepared by SCA management and were not prepared with a view toward public disclosure; and, accordingly, do
not necessarily comply with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. PricewaterhouseCoopers LLP,
SCAs independent registered public accounting firm, has not audited, reviewed, compiled or performed any procedures with respect to the unaudited prospective financial information and does not express an opinion or any form of assurance
related thereto. The PricewaterhouseCoopers LLP report included in this offering document by reference to SCAs Annual Report on Form 10-K for the year ended December 31, 2016 relates to SCAs historical financial information. It does not
extend to the unaudited prospective financial information and should not be read to do so. The inclusion of the unaudited prospective financial information in this prospectus/offer to exchange should not be regarded as an indication that SCA,
UnitedHealth Group, J.P. Morgan or any of their respective affiliates, or any other recipient of this information considered, or now considers, such unaudited prospective financial information to be a reliable prediction of future results or any
actual future events. None of SCA, UnitedHealth Group, J.P. Morgan, any of their respective affiliates or any other person assumes any responsibility for the validity, reasonableness, accuracy or completeness of the unaudited prospective financial
information included below. Except as required by law, none of SCA, UnitedHealth Group, J.P Morgan or any of their respective affiliates intends to, and each of them disclaims any obligation to, update, revise, or correct the unaudited prospective
financial information if they are or become inaccurate (in the long term or the short term).
SCAs future financial results may
materially differ from those expressed in the unaudited prospective financial information. While presented with numerical specificity, the unaudited prospective financial information necessarily was based on numerous variables and assumptions that
are inherently uncertain and many of which are beyond the control of SCA and difficult to predict, including with respect to industry performance, competitive factors, industry consolidation, general business, economic, regulatory, market and
financial conditions, as well as matters specific to SCAs business, which assumptions may not prove to have been, or may no longer be, accurate. SCA cannot ensure that any of the results expressed in the unaudited prospective financial
information will be realized or that SCAs future financial results will not materially vary from the unaudited prospective financial information. The unaudited prospective financial information speaks only as of the date it was prepared as it
does not take into account any circumstances or events occurring after the date they were prepared, including the January 9, 2017 announcement of the merger agreement or pendency of the transaction with UnitedHealth Group, and has not been
updated since its date of preparation. In addition, the unaudited prospective financial information does not take into account the effect of any failure of the offer, the mergers and the other transactions contemplated by the merger agreement to
occur and should not be viewed as accurate or continuing in that context. Because the unaudited prospective financial information covers multiple years, by their nature, it becomes subject to greater uncertainty with each successive year.
46
In light of the foregoing factors and the uncertainties inherent in the unaudited prospective
financial information, SCA stockholders are cautioned not to place undue reliance on the unaudited
prospective financial information.
They should not be utilized as public guidance and will not be provided in the ordinary course of our
business in the future. The unaudited prospective financial information should be evaluated in conjunction with SCAs historical financial statements and other information regarding SCA and its public filings with the SEC.
The unaudited prospective financial information is summarized in Table 1 below:
Table 1 Unaudited Prospective Financial Information
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Fiscal Year Ended 12/31
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2016E
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2017E
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2018E
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2019E
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|
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2020E
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|
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2021E
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Net Revenue (in millions)
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$
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1,200
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|
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$
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1,408
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|
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$
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1,677
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|
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$
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1,940
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|
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$
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2,225
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$
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2,573
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EBITDA (in millions) (1)
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$
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201
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$
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235
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$
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282
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$
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332
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$
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386
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$
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447
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Adjusted Net Income (in millions) (2)
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$
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76
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$
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94
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$
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121
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$
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150
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$
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181
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$
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220
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Adjusted EPS (2)
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$
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1.85
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$
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2.26
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$
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2.86
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$
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3.50
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$
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4.19
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$
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4.99
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(1)
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As used in this section of the prospectus/offer to exchange, EBITDA represents earnings before interest, taxes, depreciation and amortization before stock-based compensation, less income attributable to non-controlling
interests. EBITDA is a non-GAAP financial measure.
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(2)
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As used in this section of the prospectus/offer to exchange, Adjusted Net Income and Adjusted EPS include certain non-GAAP adjustments to remove the effects of stock-based compensation, amortization, provisions for
income taxes and, in the case of 2016E Adjusted Net Income and 2016E Adjusted EPS, impairment of assets and other non-recurring losses. Adjusted EPS is based on a weighted average of outstanding shares of SCA common stock. Adjusted Net Income and
Adjusted EPS are each non-GAAP financial measures.
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In connection with the rendering of its fairness opinion to the SCA
Board and in performing its related financial analyses, J.P. Morgan calculated unlevered free cash flow estimates of SCA for calendar years 2017 through 2031 (such estimates of unlevered free cash flow, the Unlevered Free Cash Flow
Estimates) based on the unaudited prospective financial information for calendar years 2017 through 2021 and certain extrapolations derived therefrom by J.P. Morgan, on the basis of and in accordance with guidance provided by SCA management,
which extrapolations were reviewed and approved by SCA management, for calendar years 2022 through 2031. In deriving such extrapolations from the unaudited prospective financial information for calendar years 2017 through 2021, J.P. Morgan, on the
basis of and in accordance with guidance provided by SCA management, utilized the following assumptions provided by SCA management: (i) EBITDA generated by SCAs existing facilities from 2018 to 2021 was expected to increase by
3.00% per annum, with the increase in EBITDA declining over the course of the forecast period to 1.50% by 2030; (ii) SCA would establish 9 to 12 de novo facilities per annum for 2017 to 2021 up to a maximum 16 de novo facilities per annum
in 2026 and thereafter the number of de novo facilities established by SCA each year would decline to $0 in 2031; and (iii) cash spent to acquire new facilities would increase each year over the forecast period up to a maximum of $276 million
in 2024 and would thereafter decline each year over the forecast period to $0 in 2031. The Unlevered Free Cash Flow Estimates were discussed with, and approved by, SCAs management for J.P. Morgans use in connection with its financial
analyses.
The EBITDA estimates and Unlevered Free Cash Flow Estimates for calendar years 2017 through 2031 and estimates of EBITDA for
2022 through 2031 are summarized in Table 2 below:
Table 2 EBITDA Estimates and Unlevered Free Cash Flow Estimates
Calendar Years 2017E through 2021E
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Fiscal Year
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2017E
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2018E
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2019E
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2020E
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2021E
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Unlevered Free Cash Flow (in millions) (1)
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($
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52
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)
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($
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69
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)
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($
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51
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)
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($
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26
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)
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($
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50
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)
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Calendar Years 2022E through 2031E
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Fiscal Year
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2022E
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2023E
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2024E
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2025E
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2026E
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2027E
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|
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2028E
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2029E
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2030E
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2031E
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EBITDA(2)
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$
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504
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$
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568
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|
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$
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633
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|
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$
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698
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|
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$
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754
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|
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$
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807
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$
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852
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$
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888
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|
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$
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914
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|
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$
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933
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Unlevered Free Cash Flow (in millions)(1)
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($82
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)
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($71
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)
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($57
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)
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$
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14
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|
|
$
|
76
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|
|
$
|
154
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|
|
$
|
229
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|
|
$
|
297
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|
|
$
|
350
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|
|
$
|
397
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(1)
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As used in this section of the prospectus/offer to exchange, the Unlevered Free Cash Flow Estimates for a given period are calculated as follows: EBITDA minus (i) taxes, (ii) stock based compensation and other
expenses, (iii) capital expenditures, and (iv) expenditures on acquisitions and de novo facilities, and plus income attributable to noncontrolling interests and equity (in each case, net of distributions), after giving effect to the impact
of changes in net working capital (including impact from allowance for doubtful accounts and deferred taxes).
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(2)
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As used in this section of the prospectus/offer to exchange, EBITDA represents earnings before interest, taxes, depreciation and amortization before stock-based compensation, less income attributable to non-controlling
interests. EBITDA is a non-GAAP financial measure.
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Ownership of UnitedHealth Group After the Offer
and the First Merger
It is estimated that former stockholders of SCA will own in the aggregate between approximately 0.8%, in the
case of the minimum applicable stock consideration, and 1.3%, in the case of the default stock consideration, of the outstanding shares of UnitedHealth Group common stock immediately following consummation of the offer and the mergers, assuming
that:
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the trading price for the UnitedHealth Group common stock equals $160.50 (based upon a hypothetical closing date of February 15, 2017, reflecting the volume-weighted average of the closing prices for the five
business days ending on and including the third business day prior to such hypothetical February 15, 2017 closing date);
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UnitedHealth Group acquires through the offer and the first merger 100% of the outstanding shares of common stock of SCA;
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in the offer and the mergers, UnitedHealth Group issues approximately 7,697,719 shares of UnitedHealth Group common stock, in the case of the minimum applicable stock consideration, or 12,074,853 shares of UnitedHealth
Group common stock, in the case of the default stock consideration; and
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immediately following completion of the mergers, there are approximately 959,689,048 shares of UnitedHealth Group common stock outstanding, in the case of the minimum applicable stock consideration, or there are
approximately 964,066,182 shares of UnitedHealth Group common stock outstanding, in the case of the default stock consideration (calculated by adding 951,991,329, the number of shares of UnitedHealth Group common stock outstanding as of
February 15, 2017, plus approximately 7,697,719 or 12,074,853, the number of shares of UnitedHealth Group common stock estimated to be issued as part of the transaction consideration in the cases of minimum applicable stock consideration or the
default stock consideration, respectively).
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Appraisal Rights
No appraisal rights are available to SCA stockholders in connection with the offer. However, if the first merger is consummated, the holders of
record of shares of SCA common stock immediately prior to the effective time of the first merger who (1) did not tender their shares of SCA common stock in the offer; (2) demand appraisal of their shares of SCA common stock in accordance
with Section 262 of the DGCL and otherwise follow the procedures set forth in Section 262 of the DGCL; and (3) do not thereafter withdraw their demand for appraisal of such shares or otherwise lose their appraisal rights, in each case
in accordance with the DGCL, will be entitled to have their shares appraised by the Delaware Court of Chancery and receive in lieu of the
48
transaction consideration payment of the fair value of such shares, determined as of the effective time of the first merger exclusive of any element of value arising from the
accomplishment or expectation of the transactions, together with a fair rate of interest, as determined by such court.
The fair
value of any shares of SCA common stock could be based upon considerations other than, or in addition to, the price paid in the offer and the first merger and the market value of such shares. SCA stockholders should recognize that the value so
determined could be higher or lower than, or the same as, the transaction consideration. Moreover, UnitedHealth Group and SCA may argue in an appraisal proceeding that, for purposes of such proceeding, the fair value of such shares of SCA common
stock is less than such amount.
Under Section 262 of the DGCL, if a merger is approved under Section 251(h) of the DGCL, either
a constituent corporation before the effective date of the merger, or the surviving corporation within 10 days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who is entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and must include in such notice a copy of Section 262 of the
DGCL.
The Schedule 14D-9 that is being mailed to you together with this document constitutes the formal notice of appraisal rights under Section 262 of the DGCL.
As described more fully in the Schedule 14D-9, if a SCA stockholder elects to exercise appraisal rights under Section 262 of the DGCL,
such stockholder must do all of the following, among other things:
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by the later of the consummation of the offer and 20 days after the mailing of the Schedule 14D-9, deliver to SCA a written demand for appraisal of shares of SCA common stock held by the stockholder, which demand must
reasonably inform SCA of the identity of the stockholder and that the stockholder is demanding appraisal;
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not tender such holders SCA shares in the offer; and
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continuously hold of record the shares from the date on which the written demand for appraisal is made through the effective time of the first merger.
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This does not purport to be a complete statement of the procedures to be followed by SCA stockholders desiring to exercise any appraisal
rights and is qualified in its entirety by reference to Section 262 of the DGCL. The proper exercise of appraisal rights requires strict and timely adherence to the applicable provisions of Delaware law. A copy of Section 262 of the DGCL
will be included as Annex B to the Schedule 14D-9.
Plans for SCA
In connection with the offer and the mergers, UnitedHealth Group has reviewed and will continue to review various possible business strategies
that it might consider in the event that UnitedHealth Group acquires control of SCA, whether pursuant to the offer and/or the first merger or otherwise. Following a review of additional information regarding SCA, these changes could include, among
other things, changes in SCAs business, operations, personnel, employee benefit plans, corporate structure, capitalization and management. See also The Transactions UnitedHealth Groups Reasons for the Transactions.
Delisting and Termination of Registration
Following consummation of the offer and the first merger, shares of SCA common stock will no longer be eligible for inclusion on Nasdaq and
will be withdrawn from listing. Assuming that SCA qualifies for termination of registration under the Securities Exchange Act of 1934, as amended (the Exchange Act), after the offer and the first merger are consummated, UnitedHealth
Group and SCA have agreed to cooperate to seek to terminate the registration of shares of SCA common stock under the Exchange Act.
49
Board of Directors, Management and Organizational Documents
Upon consummation of the first merger, the directors of the Offeror immediately prior to the effective time of the first merger will become the
initial directors of the surviving corporation, and the officers of the Offeror immediately prior to the effective time of the first merger will continue as the officers of the surviving corporation, in each case until their successors have been
duly elected and qualified or until their earlier death, resignation or removal. At the effective time of the first merger, the certificate of incorporation and bylaws of SCA will become the certificate of incorporation and bylaws of the surviving
corporation.
Upon consummation of the second merger, subject to applicable law, the manager of Merger Sub immediately prior to the
effective time of the second merger will become the manager of the surviving company, and, except as otherwise determined by UnitedHealth Group prior to the effective time of the second merger, the officers of the corporation surviving the first
merger immediately prior to the effective time of the second merger will be the officers of the company surviving the second merger. At the effective time of the second merger, the certificate of formation and limited liability company agreement of
Merger Sub will become the certificate of formation and limited liability company agreement of the surviving company. From and after the effective time of the first merger until the sixth anniversary thereof, the provisions providing rights to
indemnification, exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the first merger and advancement of expenses currently included in SCAs or any of its subsidiaries organizational documents or
any existing indemnification agreements may not be amended, repealed or modified in any manner that would adversely affect the rights of such indemnified parties.
After UnitedHealth Groups review of SCA and its corporate structure, management and personnel, UnitedHealth Group will determine what
additional changes, if any, are desirable.
Regulatory Approvals
UnitedHealth Group is not aware of any governmental license or regulatory permit that appears to be material to SCAs business that might
be adversely affected by the Offerors acquisition of SCA shares pursuant to the offer or the first merger or, except as described below, or of any approval or other action by any government or governmental administrative or regulatory
authority or agency, domestic or foreign, that would be required for the Offerors acquisition or ownership of SCA shares pursuant to the offer or the first merger. Should any of these approvals or other actions be required, UnitedHealth Group
and the Offeror currently contemplate that these approvals or other actions will be sought. There can be no assurance that (a) any of these approvals or other actions, if needed, will be obtained (with or without substantial conditions),
(b) if these approvals were not obtained or these other actions were not taken adverse consequences would not result to SCAs business or (c) certain parts of SCAs or UnitedHealth Groups businesses, or those of any of
their respective subsidiaries, would not have to be disposed of or held separate.
UnitedHealth Group and SCA agreed to use their
respective reasonable best efforts to take all actions necessary to obtain as soon as practicable any consent, waiver, authorization, order or approval, or any exemption by, any third party, including any governmental entity (including furnishing
all information and documentary material required under the HSR Act) required to be obtained or made by UnitedHealth Group, the Offeror, the Purchaser, SCA or any of their respective subsidiaries in connection with the offer or the mergers.
It is a condition to completion of the transactions that the waiting period under the HSR Act has expired or been terminated. Accordingly, and
in accordance with their obligations under the merger agreement, UnitedHealth Group filed a Notification and Report Form with respect to the offer and the mergers with the Antitrust Division of the U.S. Department of Justice (the Antitrust
Division) and the Federal Trade Commission (FTC) on January 13, 2017. SCA also filed a Notification and Report Form with respect to the offer and the mergers with the Antitrust Division and the FTC on January 13, 2017.
Under the HSR Act, the purchase of SCA common stock in the offer may not be completed until the expiration of a thirty (30) calendar
day waiting period, which began when UnitedHealth Group filed a Premerger
50
Notification and Report Form under the HSR Act with the FTC and the Antitrust Division on January 13, 2017, unless the FTC and Antitrust Division grant early termination of the waiting
period, UnitedHealth Group receives a request for additional information or documentary material prior to that time, or UnitedHealth Group voluntarily elects to withdraw and refile its Notification and Report Form to provide the Antitrust Division
and the FTC an additional thirty (30) calendar day waiting period to complete their review. If the thirty (30) calendar day waiting period expires on a federal holiday or weekend, the waiting period is automatically extended until 11:59
p.m. the next business day. The required waiting period under the HSR Act expired at 11:59 p.m., New York City time, on February 13, 2017. Accordingly, the condition to the offer relating to the expiration or termination of the waiting period
under the HSR Act has been satisfied.
At any time before or after consummation of the transactions, notwithstanding the expiration of the
waiting period under the HSR Act, the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the completion of the transactions, seeking
divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the transactions, and
notwithstanding any termination or expiration of the waiting period under the HSR Act, any state or other governmental entity could take such action under the antitrust laws as it deems necessary. Such action could include seeking to enjoin the
completion of the transactions or seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Private parties may also seek to
take legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the transactions on antitrust grounds will not be made, or if such a challenge is made, what the result will be.
Explanatory Note Regarding the Merger
Agreement and the Summary of the Merger Agreement; Representations, Warranties and Covenants in the Merger Agreement Are Not Intended to Function or Be Relied on as Public Disclosures
The merger agreement and the summary of terms included in this document have been prepared to provide you with information regarding its terms
and are not intended to provide any factual information about SCA, UnitedHealth Group, the Offeror, Merger Sub or any of their respective subsidiaries or affiliates. Such information can be found elsewhere in this document or in the public filings
that UnitedHealth Group or SCA makes with the SEC, as described in the section entitled Where to Obtain Additional Information. The representations, warranties and covenants contained in the merger agreement have been made solely for the
purposes of the merger agreement as of specific dates and solely for the benefit of parties to, or to third parties as specified in, the merger agreement and:
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are not intended as statements of fact, but rather as a way of allocating the risk between the parties in the event the statements therein prove to be inaccurate;
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have been modified or qualified by certain confidential disclosures that were made between the parties in connection with the negotiation of the merger agreement, which disclosures are not reflected in the merger
agreement itself;
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may no longer be true as of a given date;
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may be subject to a contractual standard of materiality in a way that is different from those generally applicable to you or other SCA stockholders and reports and documents filed with the SEC; and
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may be subject in some cases to other exceptions and qualifications (including exceptions that do not result in, and would not reasonably be expected to have, a material adverse effect).
|
Accordingly, you should not rely on the representations, warranties or covenants or any descriptions thereof as characterizations of the
actual state of facts or condition of SCA, UnitedHealth Group, the Offeror, Merger Sub or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after
the date as of which the representations and warranties were made in the merger agreement, which subsequent information may or may not be fully reflected in the public disclosures of SCA or UnitedHealth Group. Accordingly, the representations and
warranties and other provisions of the merger agreement or any description of such provisions should not be read alone, but instead should be read together with the information provided elsewhere in this document and in the documents incorporated by
reference into this document. See Where to Obtain Additional Information.
The Offer
The Offeror is offering to exchange the transaction consideration for each outstanding share of SCA common stock that is validly tendered in
the offer and not properly withdrawn.
The Offerors obligation to accept for exchange and to exchange shares of SCA common stock
validly tendered in the offer and not properly withdrawn is subject only to the satisfaction or waiver of certain
69
conditions, including there having been validly tendered and not properly withdrawn in accordance with the terms of the offer a number of shares of SCA common stock that, together with any shares
of SCA common stock then owned by UnitedHealth Group, the Offeror or UnitedHealth Groups other subsidiaries, represents at least a majority of all then-outstanding shares of SCA common stock. This condition is referred to as the minimum
tender condition. See Conditions to the Offer beginning on page 91 for a description of the other offer conditions.
The offer is scheduled to expire at 12:01 a.m., New York City time, on the expiration date, unless extended or the merger agreement is earlier
terminated. The expiration date means the twenty-first (21st) business day following (and including) the date that the offer is commenced (i.e. Tuesday, March 21, 2017), unless the Offeror has extended the period during which
the offer is open, subject to the terms and conditions of the merger agreement or as required by applicable laws or the interpretations of the SEC, in which event the term expiration date means the subsequent time and date that the
offer, as so extended, may expire.
Subject to the provisions of the merger agreement, and unless the offer or the merger agreement is
terminated in accordance with its terms, (1) the Offeror must (and UnitedHealth Group must cause the Offeror to) extend the expiration date for any period required by the U.S. federal securities laws and rules and regulations of the SEC and its
staff or of Nasdaq applicable to the offer (but in no event will the Offeror be required to extend the offer past July 7, 2017 (the end date)), and (2) if the offer conditions are not satisfied at any scheduled expiration date,
the Offeror may (and must, if requested by SCA) extend the offer and the expiration date to a date that is not more than 10 business days after the previously scheduled expiration date. If, as of any expiration date, the HSR clearance condition or
the minimum tender condition have not been satisfied, and if the Offeror elects to, or if SCA requests that the Offeror extend the offer and the expiration date, the Offeror will extend the offer and the then-scheduled expiration date to a date that
is not more than 20 business days after the then-scheduled expiration date (but which may in no event be later than the end date). However, in no event will the Offeror be required to (and the Offeror will not, if requested by SCA) extend the offer
and the expiration date to a date that is after the later of (i) 30 calendar days following the satisfaction of each of the conditions related to HSR clearance, effectiveness of the registration statement on Form S-4 of which this document is a
part, the approval for listing of the UnitedHealth Group shares to be issued in the offer and the first merger on the NYSE and required health care regulatory consents, and (ii) May 7, 2017.
If the offer has not been consummated at or prior to the end date, either SCA or UnitedHealth Group may terminate the merger agreement in
accordance with the terms of the merger agreement. If the merger agreement is validly terminated prior to any scheduled expiration date (pursuant to the foregoing sentence or otherwise), the Offeror must promptly (and in any case within twenty-four
hours of such termination), irrevocably and unconditionally terminate the offer.
Other than in connection with the termination of the
merger agreement, the Offeror may not terminate or withdraw the offer without the prior written consent of SCA.
Any decision to extend,
terminate or withdraw the offer will be made public by an announcement. See Exchange Offer Procedures Extension, Termination and Amendment of Offer.
The Offeror expressly reserves the right to waive any offer condition or modify the terms of the offer, including increasing the transaction
consideration payable in the offer. However, without the prior written consent of SCA, the Offeror may not (and UnitedHealth Group will not permit the Offeror to): (1) reduce the number of shares of SCA common stock subject to the offer,
(2) reduce the transaction consideration to be paid in the offer, (3) change the form of consideration payable in the offer, other than the election of UnitedHealth Group to increase the applicable cash consideration and proportionally
decrease the applicable stock consideration in accordance with the terms of the merger agreement, (4) waive, amend or modify the minimum tender condition or the conditions relating to HSR clearance, the effectiveness of the registration
statement on Form S-4 of which this document is a part, the approval for listing of the UnitedHealth Group shares to be issued
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in the offer and the first merger on the NYSE, there being no legal prohibitions against the offer or the mergers, and the receipt of tax opinions (provided that UnitedHealth Group will (and will
cause the Offeror to) waive the tax opinions conditions upon SCAs written request), (5) add any condition to the offer other than those described in Merger AgreementConditions to the Offer, (6) amend, modify or
supplement any offer condition or, except as otherwise expressly permitted by the merger agreement, any other term of the offer, in each case, in any manner adverse to the holders of SCA common stock, (7) except as otherwise expressly required
or permitted under the merger agreement, terminate or extend the offer, or (8) provide any subsequent offering period in accordance with Rule 14d-11 of the Exchange Act.
Without the prior written consent of SCA, the Offeror shall not accept for payment or pay for any shares of SCA common stock if, as a result,
the Offeror would acquire less than the number of shares of SCA common stock necessary to satisfy the minimum tender condition.
The Mergers
Upon the terms and subject to the satisfaction or waiver of the closing conditions, the first merger and the
second merger will be completed as soon as practicable after the Offeror accepts for payment the shares of SCA common stock validly tendered in the offer and not properly withdrawn. If the offer is completed such that the Offeror will own at least a
majority of the outstanding shares of SCA common stock, including any shares of SCA common stock (if any) owned by UnitedHealth Group, the Offeror and UnitedHealth Groups other subsidiaries, the first merger will be governed by
Section 251(h) of the DGCL, and accordingly no stockholder vote will be required to consummate the first merger. The first merger refers to the merger of the Offeror with and into SCA, with SCA surviving the first merger. The second merger
refers to the merger of SCA, as the company surviving the first merger, with and into Merger Sub, with Merger Sub surviving the second merger. After the first merger, SCA will be an indirect wholly owned subsidiary of UnitedHealth Group and a direct
wholly owned subsidiary of Merger Sub, and the former stockholders of SCA will no longer have any direct ownership interest in the surviving corporation. From and after the effective time of the second merger, the surviving company holding the SCA
business will be a limited liability company rather than a corporation.
Following the completion of the mergers, SCAs common stock
will be delisted from Nasdaq and deregistered under the Exchange Act and will cease to be publicly traded.
Directors and Officers; Certificate of Incorporation; By-laws
Following the effectiveness of the first merger, the board of directors of the Offeror immediately prior to the effective time of the first
merger will be the initial directors of the corporation surviving the first merger, until the earlier of their death, resignation or removal or until their successors have been duly elected and qualified. Following the effectiveness of the second
merger, the manager of Merger Sub immediately prior to the effective time of the second merger will be the manager of the company surviving the second merger.
The officers of the Offeror immediately prior to the effective time of the first merger will continue as the officers of the corporation
surviving the first merger, and unless otherwise determined by UnitedHealth Group, the officers of the corporation surviving the first merger immediately prior to the effective time of the second merger will be the officers of the company surviving
the second merger, until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.
The
certificate of incorporation and bylaws of SCA in effect immediately prior to the effective time of the first merger will be the certificate of incorporation and bylaws, respectively, of the corporation surviving the first merger, in each case,
until thereafter changed or amended in accordance with their terms or applicable law. The certificate of formation and limited liability company agreement of Merger Sub as in effect immediately prior to the effective time of the second merger will
be the certificate of formation and limited liability company agreement of the company surviving the second merger, until thereafter amended in accordance with applicable law and the applicable provisions of such certificate of formation and limited
liability company agreement.
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Closing and Effective Time of the Mergers
The closing of the mergers will take place at 10:00 a.m. New York City time as soon as practicable following the time at which the Offeror
accepts for payment the shares of SCA common stock tendered in the offer and not properly withdrawn, which date shall be no later than the second business day following the satisfaction or waiver of all of the conditions to closing of the mergers
described in Conditions to the Mergers beginning on page 93 (other than conditions that by their nature are to be satisfied at or immediately prior to the closing of the mergers, but subject to the satisfaction or waiver of
such conditions at the closing of the mergers), or at such other date and time as UnitedHealth Group and SCA have otherwise agreed to in writing.
Assuming timely satisfaction of the necessary closing conditions, we anticipate that the mergers will be completed in the first half of 2017.
Each merger will become effective at the time when the relevant certificate of merger is duly filed with the Secretary of State of the State of Delaware unless a later date is agreed to by SCA and UnitedHealth Group and is specified therein. The
first merger (the merger of the Offeror with and into SCA) must precede the second merger (the merger of the corporation surviving the first merger with and into Merger Sub).
Treatment of Offeror Common Stock and Merger Sub Membership Interests
First Merger
At the effective time of the
first merger, by virtue of the first merger and without any action on the part of the parties to the merger agreement or the holder of any securities of SCA or the Offeror, each issued and outstanding share of common stock of the Offeror, par value
$0.01 per share, will automatically be converted into and become one fully paid and nonassessable share of common stock of the corporation surviving the first merger and will constitute the only outstanding shares of capital stock of the corporation
surviving the first merger, and all certificates representing shares of the common stock of the Offeror will be deemed for all purposes to represent the number of shares of common stock of the first surviving corporation into which they were
converted.
Second Merger
At the
effective time of the second merger, by virtue of the second merger and without any action on the part of the parties to the merger agreement or the holder of any securities of the corporation surviving the first merger or Merger Sub, each
membership interest of Merger Sub issued and outstanding immediately prior to the effective time of the second merger will remain outstanding as a membership interest of the company surviving the second merger and all shares of common stock of the
corporation surviving the first merger will no longer be outstanding and will automatically be cancelled and will cease to exist without any consideration being payable therefor.
Treatment of SCA Common Stock and Equity Awards
Common Stock
At the effective time of the
first merger, by virtue of the first merger and without any action on the part of the parties to the merger agreement or the holders of any SCA shares or of any shares of the common stock of the Offeror, each SCA share issued and outstanding
immediately prior to the effective time of the first merger (other than (i) SCA Shares (if any) owned by UnitedHealth Group, the Offeror or any direct or indirect wholly owned subsidiary of UnitedHealth Group, or any SCA shares held by SCA as
treasury stock, or (ii) SCA shares that are held by any stockholder who is entitled to demand and properly demands appraisal pursuant to, and who complies in all respects with the provisions of, Section 262 of the DGCL with respect to such
SCA shares) will be cancelled and automatically converted into the right to receive the transaction consideration. In case of any change in the number of issued or outstanding SCA shares or UnitedHealth Group shares in between the date of
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the merger agreement and the time at which the Offeror first accepts for payment the shares of SCA common stock tendered in the offer as a result of a reclassification, recapitalization, share
split, reverse share split, combination, exchange of shares or other like change (other than in connection with the transactions contemplated by the merger agreement), or any share dividend or share distribution (including any dividend or
distribution of securities convertible into SCA shares or UnitedHealth Group shares, as applicable) with a record date during such period, the transaction consideration shall be equitably adjusted to reflect such change. No fraction of a share of
UnitedHealth Group common stock will be issued by virtue of the offer or the first merger, but in lieu thereof each holder of SCA common stock that would otherwise be entitled to a fraction of a share of UnitedHealth Group common stock (after
aggregating all SCA shares tendered in the offer (and not validly withdrawn) by such holder or otherwise held by such holder as of the effective time of the first merger, as applicable) will instead receive an amount of cash without interest and
less any applicable withholding taxes determined by multiplying (i) the UnitedHealth Group trading price, rounded to the nearest one-hundredth of a cent by (ii) the fraction of a share (after aggregating all SCA shares held by such holder
and accepted for payment by the Offeror pursuant to the Offer or otherwise held by such holder at the effective time of the first merger, as applicable, and rounded to the nearest one thousandth when expressed in decimal form) of UnitedHealth Group
common stock to which such holder would otherwise be entitled . SCA shares held in SCAs treasury and each SCA share (if any) owned by UnitedHealth Group, the Offeror or any other direct or indirect wholly-owned subsidiary of UnitedHealth Group
will be cancelled and cease to exist and no consideration shall be delivered in exchange therefor. SCA common stock owned by stockholders who are entitled to demand and who have properly exercised and perfected their demands for appraisal rights
under the DGCL will not be converted into the right to receive the per share transaction consideration. Such stockholders will instead be entitled to the appraisal rights provided under Delaware law. See The Transactions Appraisal
Rights.
SCA Stock Options
As
described under Interests of Certain Persons in the Transactions Treatment of Equity and Equity-Based Awards SCA Stock Options, at the effective time of the first merger, by virtue of the first merger, each outstanding SCA
stock option, will, without any further action on the part of any holder thereof, be converted into an option to purchase that number of shares of UnitedHealth Group common stock (rounded down to the nearest whole number) equal to the product of
(a) the number of shares of SCA common stock subject to such SCA stock option and (b) $57.00 divided by the volume weighted average of the closing sale prices per share of UnitedHealth Group common stock on the NYSE, as reported in the New
York City edition of
The Wall Street Journal
on each of the five full consecutive trading days ending on and including the third business day prior to the final expiration date of the offer (the equity conversion ratio), at an
exercise price per share (rounded up to the nearest whole cent) equal to the quotient obtained by dividing (1) the exercise price per share of SCA common stock for such option immediately prior to the effective time of the first merger, by
(2) the equity conversion ratio. UnitedHealth Group will convert SCA stock options into converted UnitedHealth Group options in such a manner as to ensure that the converted UnitedHealth Group options are not subject to Section 409A of the
Code as a result of the assumption and conversion. The converted UnitedHealth Group options will have the same vesting schedule, exercisability terms and other terms and conditions as the corresponding SCA stock options, provided that the period
following a change in control (as defined in the agreement governing any such awards) during which an individuals converted UnitedHealth Group options become fully vested in the event of certain terminations of employment shall be extended
from two (2) years to four (4) years, and all references to the Company in SCAs equity incentive plan and award agreements will be references to UnitedHealth Group.
SCA RSUs
As described under
Interests of Certain Persons in the Transactions Treatment of Equity and Equity-Based Awards SCA RSUs beginning on page 52, at the effective time of the first merger, by virtue of the first merger and without any further
action on the part of any holder thereof, the SCA RSUs outstanding
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immediately prior to the effective time of the first merger will be converted into restricted stock units of UnitedHealth Group common stock (converted RSUs) equal to the product
(rounded down to the nearest whole number) of (A) the number of shares of SCA common stock subject to such SCA RSUs and (b) the equity conversion ratio. Any converted RSUs so issued will be subject to the same terms and conditions
(including vesting terms) as were applicable under such SCA RSUs, provided that the period following a change in control (as defined in the agreement governing any such awards) during which an individuals converted RSUs become fully vested in
the event of certain terminations of employment shall be extended from two (2) years to four (4) years, and all references to the Company in SCAs equity incentive plan and award agreements will be references to
UnitedHealth Group.
Notwithstanding the above, if an SCA RSU is subject to an agreement with an individual holder in effect as of
January 7, 2017 that provides that such SCA RSU shall be settled in connection with a change of control involving SCA (without the required occurrence of termination or any other event), such SCA RSU shall be settled in shares of SCA common
stock immediately prior to the occurrence of the effective time of the first merger and the holder shall be treated as a shareholder and will receive the transaction consideration in respect thereof.
SCA Performance Share Awards
At the
effective time of the first merger, by virtue of the first merger and without any further action on the part of any holder thereof, the SCA PSAs outstanding immediately prior to the effective time of the first merger shall be converted into that
number of UnitedHealth Group performance share awards, rounded down to the nearest whole share (converted PSAs) equal to the product of (x) the number of shares of SCA common stock subject to such SCA PSAs immediately prior to the
effectiveness of the first merger and (y) the equity conversion ratio. Other than the extension from two (2) years to four (4) years of the period following a change in control (as defined in the agreement governing any such awards)
during which an individuals converted PSA becomes fully vested in the event of certain terminations of employment, each converted PSA shall continue to be governed by the same terms and conditions as were applicable to the applicable SCA PSA
immediately prior to conversion, including the satisfaction of the performance criteria set forth in the SCA PSA, provided that all references to the Company in SCAs equity incentive plan and award agreements will be references to
UnitedHealth Group.
Treatment of Teammate Stock Purchase Plan
Following the date of the merger agreement, SCA will take all actions necessary to ensure that no offering period under the TSPP will be
authorized or commenced on or after the date of the merger agreement, except for the six-month offering period under the TSPP that commenced on January 1, 2017. If the first merger occurs prior to the end of the offering period in effect on the
date of the merger agreement (i.e., June 30, 2017), each individual participating in such offering period shall receive notice of the transactions contemplated by the merger agreement and shall have an opportunity to terminate his or her
outstanding purchase rights under the TSPP, and such offering period shall end prior to the date of the first merger. Each TSPP participants accumulated contributions under the TSPP shall be used to purchase shares of SCA common stock in
accordance with the TSPP as of the end of the offering period, and any remaining accumulated but unused payroll deductions shall be distributed to the relevant participants without interest as promptly as practicable. Additionally, the applicable
purchase price for shares of SCA common stock will not be decreased below the levels set forth in the TSPP as of the date of the merger agreement and no individual will be permitted to increase his or her rate of contribution under the TSPP
following the date of the merger agreement. SCA will terminate the TSPP and all rights under it prior to the effectiveness of the first merger.
Dissenting Shares
Shares of SCAs common stock which are issued and outstanding immediately prior to the effective time
of the first merger and held by a holder of record who is entitled to demand appraisal rights under Section 262 of
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the DGCL, and who (i) has not tendered his, her or its shares of SCA common stock in the offer, (ii) has properly demanded appraisal of his, her or its shares of SCA common stock in
accordance with Section 262 of the DGCL, and otherwise followed the procedures set forth in Section 262 of the DGCL and (iii) does not thereafter withdraw such demand for appraisal of such shares or otherwise lose his, her or its
right to appraisal, in each case in accordance with the DGCL, shall not be converted into the right to receive the per share transaction consideration but instead such holder shall be entitled to have such shares appraised by the Delaware Court of
Chancery and to receive in lieu of the consideration payable in the first merger payment of the fair value of such dissenting shares determined as of the effective time of the first merger exclusive of any element of value arising from
the accomplishment or expectation of the first merger, together with a fair rate of interest, if any, as determined by such court in accordance with Section 262 of the DGCL. The fair value of any shares of SCA common stock could be
based upon considerations other than, or in addition to, the price paid in the offer and the first merger and the market value of such shares. SCA stockholders should recognize that the value so determined could be higher or lower than, or the same
as, the consideration payable in the offer and the first merger. Moreover, UnitedHealth Group and SCA may argue in an appraisal proceeding that, for purposes of such proceeding, the fair value of such shares of SCA common stock is less than such
amount. In the event that any such stockholder fails to perfect, or otherwise waives, effectively withdraws or loses his or her right to appraisal under Section 262 of the DGCL, then the right of such holder to be paid the fair value of such
holders dissenting shares shall cease and such shares held by such stockholder will be deemed to have been converted into and shall be exchangeable solely for, the right to receive the per share transaction consideration. SCA has agreed to
give UnitedHealth Group prompt notice of any demands SCA receives for appraisal of shares of SCAs common stock, withdrawals or attempted withdrawals of such demands and any other instruments served pursuant to Section 262 of the DGCL, and
to provide UnitedHealth Group with the opportunity to direct any and all negotiations and proceedings with respect to such demands. SCA will not voluntarily make any payment to any dissenting stockholder with respect to, or settle or offer to
settle, or approve the withdrawal of, any such demands for appraisal without the prior written consent of UnitedHealth Group.
Representations and Warranties
The parties made customary representations and warranties in the merger agreement that are
subject, in some cases, to specified exceptions and qualifications contained in the merger agreement and, with respect to SCAs representations and warranties, the matters contained in confidential disclosure schedules delivered by SCA to
UnitedHealth Group concurrently with the execution of the merger agreement (the SCA disclosure schedules). SCAs representations and warranties relate to, among other things:
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due organization, existence, good standing and authority to carry on SCAs business as it is currently being conducted;
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the accuracy and completeness of each of SCAs and SCAs subsidiaries certificate of incorporation, by-laws or equivalent constituent documents, and the absence of any violations of these documents;
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SCAs and SCAs subsidiaries capitalization;
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SCAs corporate power and authority to execute, deliver, and consummate the transactions contemplated by the merger agreement, and the enforceability of the merger agreement against SCA, subject to certain
specified customary assumptions and exceptions;
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the absence of violations of, or conflicts with, SCAs constitutional documents, applicable law and certain agreements as a result of SCAs entrance into and performance under the merger agreement, subject to
certain specified standard qualifications and assumptions;
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SCAs SEC reports (including all amendments) since December 31, 2013, the financial statements included therein, and the absence of any material outstanding or unresolved written comments from the SEC staff
with respect to SCAs SEC reports;
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compliance with applicable requirements of the Securities Act, the Exchange Act, and the Sarbanes-Oxley Act of 2002;
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SCAs disclosure controls and procedures and internal controls over financial reporting;
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the absence of certain undisclosed liabilities;
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the absence of a SCA material adverse effect (as defined below) since December 31, 2015, and the absence of specified actions since December 31, 2015 that would be in violation of certain interim operating
covenants under the merger agreement if taken after date of the merger agreement;
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information supplied by SCA for inclusion in the offer documents, the Schedule 14D-9 and the registration statement on Form S-4 of which this document is a part;
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material contracts, the absence of any default or breach under any material contract, and the absence of any event, circumstance or condition which would give rise to a right to accelerate the maturity or performance
of, or cancel, terminate or modify, any material contract;
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employee benefit plans, ERISA and the applicability of the safe harbor provided pursuant to Rule 14d-10(d)(2) under the Exchange Act;
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except as would not be material to SCA and its subsidiaries taken as a whole, the absence of actions, claims, suits or proceedings against SCA or any of its subsidiaries, and the absence of governmental investigations
against SCA or any of its subsidiaries;
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compliance with applicable federal, state, local or foreign laws, statutes, ordinances, rules, regulations, judgments, orders, injunctions, decrees or agency requirements or permits, including compliance with certain
export laws and regulations by SCA and its subsidiaries, and including compliance with restrictions on certain payments by SCA and its subsidiaries, including those that would violate any provisions of the federal Foreign Corrupt Practices Act of
1977;
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privacy and data security;
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real property and tangible assets;
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possession of licenses and permits needed to carry out SCAs business and compliance therewith;
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the absence of any undisclosed brokers or finders fees;
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that no vote or consent of the SCA stockholders is needed to approve the merger agreement or the transactions contemplated thereby;
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the SCA Board determination that (i) the terms of the transactions contemplated by the merger agreement, including the offer and the mergers, are fair to, and in the best interests of, SCA and its stockholders, and
(ii) it is in the best interest of SCA and its stockholders to enter into the merger agreement, and the merger agreement is advisable, and the approval of the execution and delivery by SCA of the merger agreement (including the agreement of
merger, as such term is used in Section 251 of the DGCL), the performance by SCA of its covenants and agreements contained in the merger agreement and the consummation of the transactions contemplated by the merger agreement, including the
offer and the mergers, upon the terms and subject to the conditions contained in the merger agreement, and the recommendation that SCA stockholders accept the offer and tender their shares to the Offeror pursuant to the offer, unless the SCA Board
changes its recommendation as permitted by the merger agreement;
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the receipt of a written opinion from J.P. Morgan to the effect that, as of the date of such opinion and based upon and subject to the various matters and limitations set forth in such opinion, the transaction
consideration to be paid to the holders of SCA shares entitled to receive the transaction consideration pursuant to the merger agreement is fair, from a financial point of view, to such holders; and
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that the SCA Board has taken all action so that the state anti-takeover statutes or regulations applicable to business combinations, including those imposed by Section 203 of the DGCL, are, and will be,
inapplicable to the transactions contemplated by the merger agreement and the tender and support agreement, and that no anti-takeover statute or regulation would restrict, prohibit or otherwise be applicable with respect to the merger agreement, the
tender and support agreement and the transactions contemplated in the merger agreement.
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Many of SCAs representations
and warranties are qualified by, among other things, exceptions relating to the absence of a SCA material adverse effect, which means any condition, fact, change, circumstance, event, occurrence, development or effect that individually
or in the aggregate has had or would reasonably be expected to have a material adverse effect on the financial condition, business or results of operations of SCA and its subsidiaries, taken as a whole. However, no condition, fact, change,
circumstance, event, occurrence, development or effect arising from or relating to any of the following will be taken into account in determining whether there has been or would reasonably be expected to be a SCA material adverse effect:
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political or economic conditions, or securities, credit, financial or other capital markets conditions;
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(2)
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any condition or changes generally affecting SCAs industry or industries;
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(3)
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any decline in the market price or trading volume of the shares of SCA common stock on Nasdaq or a change in the credit rating of SCA or any of its subsidiaries (it being understood that the changes, effects or
developments underlying such decline that are not otherwise excluded from the definition of an SCA material adverse effect may be taken into account);
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(4)
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any failure, in and of itself, by SCA or any of its subsidiaries to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating
metrics for any period (it being understood that the changes, effects or developments underlying such failure that are not otherwise excluded from the definition of an SCA material adverse effect may be taken into account);
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(5)
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the execution and delivery of the merger agreement, the performance by any party of its obligations thereunder and consummation of the transactions or the public announcement or pendency of the offer or the mergers or
any of the other transactions contemplated by the merger agreement, including the impact thereof on the relationships, contractual or otherwise, of SCA or any subsidiary of SCA with customers, suppliers, distributors, employees or any other third
party (provided that this exception will not apply to any representation or warranty to the extent such representation or warranty addresses the consequences resulting from the execution and delivery of the merger agreement, the performance of a
partys obligations thereunder or the consummation of the transactions contemplated thereby);
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(6)
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changes or proposed changes in GAAP or in applicable laws or the enforcement or interpretation thereof;
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(7)
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the outbreak or escalation of hostilities, any acts of war, sabotage, terrorism or military actions, or any escalation or worsening of any such hostilities, acts of war, sabotage, terrorism or military actions
threatened or underway as of the date of the merger agreement;
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(8)
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any action taken at the request of UnitedHealth Group, the Offeror or Merger Sub in accordance with the merger agreement;
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(9)
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the identity of, or any facts or circumstances relating to, UnitedHealth Group, the Offeror, Merger Sub or any of their respective affiliates; or
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(10)
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certain matters set forth in the SCA disclosure schedules
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except, in the case of items (1) (2), (6) and (7) above, to the extent that such
condition, fact, change, circumstance, event, occurrence, development or effect has a disproportionate adverse effect on SCA and its subsidiaries, taken as a whole, relative to the adverse effect that it has on participants in SCAs industry or
industries.
The merger agreement also contains customary representations and warranties made by UnitedHealth Group that are subject to
specified exceptions and qualifications contained in the merger agreement. The representations and warranties of UnitedHealth Group, the Offeror and Merger Sub to SCA under the merger agreement, relate to, among other things:
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UnitedHealth Groups, the Offerors and Merger Subs due organization, existence, good standing and authority to carry on their business as it is currently being conducted;
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the corporate power and authority of UnitedHealth Group, the Offeror and Merger Sub to execute, deliver, and consummate the transactions contemplated by the merger agreement, and the enforceability of the merger
agreement against UnitedHealth Group, the Offeror and Merger Sub, subject to certain specified customary assumptions and exceptions;
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UnitedHealth Groups capitalization and the Offerors and Merger Subs capitalization;
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the absence of contraventions of, or conflicts with, the constitutional documents of UnitedHealth Group or any of its subsidiaries, applicable law and certain agreements as a result of UnitedHealth Groups, the
Offerors or Merger Subs execution and delivery of and consummation of the transactions contemplated by the merger agreement, subject to certain specified standard qualifications and assumptions;
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UnitedHealth Groups SEC reports (including all exhibits, supplements and schedules) since December 31, 2013, the financial statements included therein, and the absence of any outstanding or unresolved written
comments from the SEC staff with respect to UnitedHealth Groups SEC reports;
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compliance with applicable requirements of the Securities Act, the Exchange Act, and the Sarbanes-Oxley Act of 2002;
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UnitedHealth Groups disclosure controls and procedures and internal controls over financial reporting;
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the absence of undisclosed liabilities;
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the absence of a UnitedHealth Group material adverse effect since December 31, 2015;
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except as would not be material to UnitedHealth Group and its subsidiaries taken as a whole, the absence of actions, claims, suits or proceedings against UnitedHealth Group or any of its subsidiaries, and the absence of
governmental investigations against UnitedHealth Group or any of its subsidiaries;
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information supplied by UnitedHealth Group for inclusion in the offer documents, the Schedule 14D-9 and the registration statement on Form S-4 of which this document is a part;
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the absence of undisclosed brokers or finders fees;
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the absence of beneficial ownership of SCAs common stock by UnitedHealth Group or any of its subsidiaries as of and for the three years prior to the date of the merger agreement.
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Many of the representations and warranties of UnitedHealth Group are qualified by, among other things, exceptions relating to the absence of a
UnitedHealth Group material adverse effect which means any condition, fact, change, circumstance, event, occurrence, development or effect that individually or in the aggregate has had
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or would reasonably be expected to (a) prevent or materially impede, materially interfere with or materially delay the consummation by UnitedHealth Group, the Offeror or Merger Sub of the
transactions or (b) have a material adverse effect on the financial condition, business or results of operations of UnitedHealth Group and its subsidiaries, taken as a whole. However, no condition, fact, change, circumstance, event, occurrence,
development or effect arising from or relating to any of the following will be taken into account in determining whether there has been or would reasonably be expected to be a UnitedHealth Group material adverse effect:
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(1)
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political or economic conditions, or securities, credit, financial or other capital markets conditions;
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(2)
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any condition or changes generally affecting UnitedHealth Groups industry or industries;
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(3)
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any decline in the market price or trading volume of the shares of UnitedHealth Group common stock on the NYSE or a change in the credit rating of UnitedHealth Group or any of its subsidiaries (provided that this
exception does not present or otherwise affect a determination that any change, effect or development underlying such decline or change has resulted in a UnitedHealth Group material adverse effect);
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(4)
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any failure, in and of itself, by UnitedHealth Group or any of its subsidiaries to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or
operating metrics for any period (provided that this exception does not present or otherwise affect a determination that any change, effect or development underlying such decline or change has resulted in or contributed to a UnitedHealth Group
material adverse effect);
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(5)
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the execution and delivery of the merger agreement, the performance by any party of its obligations thereunder and consummation of the transactions or the public announcement or pendency of the offer or the mergers or
any of the other transactions contemplated by the merger agreement, including the impact thereof on the relationships, contractual or otherwise, of UnitedHealth Group or any subsidiary of UnitedHealth Group with customers, suppliers, distributors,
employees or any other third party (provided that this exception does not apply to any representation or warranty to the extent such representation or warranty addresses the consequences resulting from the execution and delivery of the merger
agreement, the performance of a partys obligations thereunder or the consummation of the transactions contemplated thereby);
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(6)
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changes or proposed changes in GAAP or in applicable law or the enforcement or interpretation thereof;
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(7)
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the outbreak or escalation of hostilities, any acts of war, sabotage, terrorism or military actions, or any escalation or worsening of any such hostilities, acts of war, sabotage, terrorism or military actions
threatened or underway as of the date of the merger agreement;
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(8)
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any action taken at the request of SCA or any of its subsidiaries in accordance with the merger agreement; or
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(9)
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the identity of, or any facts or circumstances relating to, SCA, its subsidiaries or any of their respective affiliates.
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except, in the case of items (1), (2), (6) and (7) above, to the extent that such condition, fact, change, circumstance, event,
occurrence, development or effect has a disproportionate adverse effect on UnitedHealth Group and its subsidiaries, taken as a whole, relative to the adverse effect that it has on participants in UnitedHealth Groups industry or industries.
Unless expressly provided otherwise, the representations, warranties, covenants or agreements in the merger agreement or in any
instrument delivered pursuant to the merger agreement of each of SCA, UnitedHealth Group, the Offeror and Merger Sub will not survive the effective time of the first merger or the termination of the merger agreement pursuant to its terms.
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Conduct of SCAs Business Pending the First Merger
SCA has agreed to certain covenants in the merger agreement restricting the conduct of its business from the date of the merger agreement until
the earlier of the effective time of the first merger and the termination of the merger agreement in accordance with its terms. In general, except as (i) may be required by law, (ii) contemplated under the merger agreement, (iii) set
forth in the SCA disclosure schedules, or (iv) permitted pursuant to UnitedHealth Groups written consent (not to be unreasonably withheld, conditioned or delayed), SCA and its subsidiaries have agreed that SCA will and will cause its
subsidiaries to conduct the business of SCA and its subsidiaries in the ordinary course of business in all material respects, and to the extent consistent therewith, use commercially reasonable efforts to maintain and preserve intact SCAs
business organization, keep available the services of key employees and preserve their relationships with government entities and partners, health systems, health plans, medical groups, payors, customers, suppliers, distributors and licensors having
significant business dealings with SCA and SCAs subsidiaries, and SCA and SCAs subsidiaries will not consent to allow any of SCAs facility entities to take any action inconsistent with the foregoing.
SCA has also agreed that, except as (i) may be required by applicable law, (ii) required or expressly permitted under the merger
agreement, (iii) set forth in SCA disclosure schedules, or (iv) permitted pursuant to UnitedHealth Groups prior written consent, from the date of the merger agreement until the earlier of the effective time of the first merger and
the termination of the merger agreement in accordance with its terms, neither SCA nor any of its subsidiaries will, and will not consent to allow certain other related entities of SCA to, subject to certain specified exceptions:
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amend or otherwise change its certificate of incorporation or bylaws, amend or otherwise change the organizational documents of its subsidiaries in any material respect, or amend or otherwise change the organizational
documents of certain other related entities of SCA;
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split, combine or reclassify any of its capital stock;
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make, declare or pay any dividend, or make any other distribution on, or redeem, purchase or otherwise acquire, any shares of its capital stock, or any other securities or obligations convertible into or exchangeable
for any shares of its capital stock, except for (a) by SCA subsidiaries to SCA or other SCA subsidiaries, (b) dividends paid by certain related entities of SCA in the ordinary course of business in accordance with its respective
organizational documents, (c) the acceptance of shares of SCA common stock as payment for the exercise price of SCA options or withholding taxes in connection with the exercise of SCA options or the vesting or settlement of SCA RSUs in
accordance with the terms of SCAs stock plans, (d) in connection with the SCA TSPP in accordance with its terms, or (e) the repurchase of shares of SCA common stock in connection with a forfeiture of SCA stock awards or the
termination of a SCA stock award holders position with SCA;
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grant any SCA stock awards or other equity-based awards or interests, or grant any individual, corporation or other entity any right to acquire any shares of its capital stock, in each case, other than as permitted
under the merger agreement;
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issue, sell, deliver, pledge, dispose of, encumber, grant or otherwise permit to become outstanding any additional shares of its capital stock or securities convertible or exchangeable into, or exercisable for, any
shares of its capital stock or any options, warrants, or other rights of any kind to acquire any shares of its capital stock, except (a) pursuant to the exercise of SCA options or the settlement of SCA RSUs outstanding as of the date of the
merger agreement in accordance with their terms, (b) in connection with the SCA TSPP in accordance with its terms, or enter into any agreement, understanding or arrangement with respect to the sale or voting of its capital stock or equity
interests, (c) by a wholly owned subsidiary of SCA to or in favor of SCA or another wholly owned subsidiary of SCA, and (d) as otherwise permitted in accordance with the merger agreement;
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adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization with respect SCA, any of its material subsidiaries or certain material related
entities of SCA;
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incur, assume, acquire, endorse, guarantee or otherwise become liable for any indebtedness for borrowed money (other than the assumption, endorsement, guarantee of or other liability for any existing indebtedness for
borrowed money of a SCA subsidiary) or issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities, except for (a) indebtedness for borrowed money in an aggregate principal amount not to exceed
$10,000,000 outstanding at any time, (b) any indebtedness for borrowed money among SCA and its wholly owned subsidiaries or among wholly owned subsidiaries of SCA, (c) incurring, assuming, acquiring, endorsing or guaranteeing any existing
indebtedness of any acquisition target in connection with any transaction permitted by the terms of the merger agreement, or (d) indebtedness for borrowed money incurred in the ordinary course of business under an existing credit facility (as
in effect on the date of the merger agreement);
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make any loans or advances to any other person in excess of $1,000,000 in the aggregate, except for (a) loans or advances among SCA and any of its subsidiaries in the ordinary course of business, and
(b) advances to directors or employees in the ordinary course of business to cover costs and expenses incurred in their respective capacities as such;
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(a) sell, transfer, lease, rent, license, assign, abandon, mortgage, encumber or otherwise dispose of any of its properties, legal entities or assets to any person other than sales, transfers, leases, rents, licenses,
assignments, abandonments, mortgages, encumbrances or dispositions (i) in the ordinary course of business consistent with past practice, (ii) on an intercompany basis among SCA and its subsidiaries, or (iii) mortgages or encumbrances
on properties, legal entities or properties that are not material or (b) cancel, release or assign any material indebtedness of any such person owed to it, in the case of each of clause (a) and clause (b) other than permitted liens;
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(a) acquire any other person for consideration in excess of $5,000,000 in any transaction or series of related transactions or any material assets or properties of any other person, or (b) make any material
investment in any other person either by purchase of stock or securities, contributions to capital, property transfers or purchase of property or assets of any person other than (i) a wholly owned subsidiary of SCA or (ii) as required by
the terms of any contract in effect as of the date of the merger agreement (other than letters of intent);
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make any capital expenditures in excess of its 2017 capital expenditure budget as disclosed to UnitedHealth Group prior to the date of the merger agreement, except that, subject to prior consultation with UnitedHealth
Group, SCA and its subsidiaries are permitted to make emergency capital expenditures in any commercially reasonable amount that SCA reasonably determines is necessary to maintain its ability to operate its businesses in the ordinary course of
business;
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except in the ordinary course of business, (a) terminate, materially amend, or waive any material right under, any SCA material contract or (b) enter into any contract that would constitute a SCA material
contract if it were in effect on the date of the merger agreement;
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except as required by applicable law or the terms of SCA benefit plan in effect on the date of the merger
agreement, or as required or permitted by the merger agreement, (a) establish, adopt, enter into, amend or terminate any collective bargaining agreement or SCA benefit plan or any plan that would be a SCA benefit plan if in effect on the date
the merger agreement, (b) increase in any manner the compensation or benefits of any of the current or former directors, officers, employees, partners, consultants, independent contractors or other service providers of SCA or its subsidiaries,
in each case other than in the ordinary course of business, (c) pay or award, or commit to pay or award, any bonuses or incentive compensation, (d) accelerate any rights or benefits, other than in the ordinary course of business and
consistent with past practice, (e) establish or fund any rabbi trust or other funding arrangement in respect of any SCA benefit plan, (f) grant or amend any SCA stock awards or other equity-based awards, or (g) hire, or terminate
(other than for cause) the employment or services of, any officer, employee, independent contractor or consultant who has annualized base compensation greater than $300,000; however, SCA may establish terms and conditions for the payment of cash
bonuses in respect of 2017 to the extent that the bonus targets, metrics, degree of attainability and reliance on
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subjective performance criteria are substantially comparable to such awards made in calendar year 2016 (with reasonable adjustments to account for changes in business objectives) and are
reflected at 100% of target payout in SCAs 2017 budget provided to UnitedHealth Group in connection with the transactions contemplated by the merger agreement;
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implement or adopt any change in its financial accounting principles, practices or methods, other than as may be required by GAAP or applicable law, each as concurred with by SCAs independent registered public
accountants;
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settle or compromise any legal or administrative proceeding, claim, suit, arbitration, mediation, charge, complaint, litigation or similar action, except for settlements or compromises that (a) with respect to the
payment of monetary damages, involve monetary remedies with a value not in excess of $1,000,000 (net of any amounts covered by insurance or reserved for in the most recent balance sheet included in the SCA financial statements as of the date of the
merger agreement), individually or in the aggregate or (b) do not impose any material restriction on SCAs business or the businesses of its subsidiaries;
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except in the ordinary course of business, make, change or revoke any material tax election, change or adopt any annual tax accounting period or adopt or change any material method of tax accounting, file any amended
tax return, enter into any closing agreement within the meaning of Section 7121 of the internal revenue code (or any analogous or similar provision of state, local or foreign law), request any tax ruling from any taxing authority,
settle or compromise any material tax liability or any audit, examination or other proceeding relating to a material amount of taxes, or surrender any claim for a material refund of taxes;
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enter into any new line of business;
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other than in the ordinary course of business consistent with past practice, reduce the amount of insurance coverage or fail to renew or replace any existing insurance policies;
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amend any material permit in a manner that adversely impacts the ability to conduct its business, or terminate or allow to lapse any material permits in a manner that adversely impacts its ability to conduct its
business;
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cancel or allow to lapse or otherwise abandon any material intellectual property;
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amend or modify the engagement letter of SCAs financial advisor in a manner that increases the fee or commission payable by SCA or any of its subsidiaries; or
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agree to take or authorize, or make any binding commitment to take, any of the foregoing actions.
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Access
The merger agreement provides that, prior to the effective time of the first merger, SCA will, upon reasonable advance
notice, afford UnitedHealth Group and its employees, accountants, consultants and legal counsel, financial advisors, financing sources, tax advisors, agents and other representatives reasonable access during normal business hours (and in a manner
that does not unreasonably interfere with their respective businesses) to SCAs and its subsidiaries and facility entities personnel, properties, contracts, books and records, tax returns, representatives, accountant work papers,
permits, licenses and any report, schedule or other document filed or received by it pursuant to the requirements of applicable law and will make available all information concerning its business, properties and personnel as UnitedHealth Group may
reasonably request.
However, SCA will not be required to provide access to or make available to any person any document or information
that, in SCAs reasonable judgment, (i) would violate any of its obligations with respect to any applicable law or order, (ii) would violate any of SCAs material obligations with respect to confidentiality or the terms of any
contract (provided that SCA will use reasonable best efforts to provide, or allow such access or
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disclosure to, any such document or information) or (iii) is subject to any attorney-client or work-product privilege (provided that SCA will use reasonable best efforts to allow such access
or disclosure in a manner that does not result in loss or waiver of such privilege, including, but not limited to, entering into appropriate common interest or similar agreements).
All information provided in connection with the merger agreement and the transactions contemplated thereby will be subject to the
confidentiality agreement between UnitedHealth Group and SCA.
Registration Statement; Schedule TO
Concurrently with the filing of certain specified offer documents, UnitedHealth Group agreed to prepare and file a registration statement on
Form S-4 with the SEC.
UnitedHealth Group and the Offeror shall, as soon as practicable on the commencement date of the offer, file a
tender offer statement on Schedule TO with the SEC, which will contain certain specified offer documents, deliver a copy of the offer statement on Schedule TO to SCA at its principal executive offices, give telephonic notice of certain information,
and mail a copy of the offer statement on Schedule TO, to Nasdaq, and, subject to SCAs compliance with certain obligations, cause these offer documents to be disseminated to holders of SCAs common stock as required by applicable law.
UnitedHealth Group will, with SCAs reasonable cooperation, use reasonable best efforts to (i) have the registration statement
declared effective under the Securities Act as promptly as practicable after its filing, (ii) ensure that the registration statement and offer documents comply in all material respects with applicable law, and (iii) keep the registration
statement effective for so long as necessary to complete the first merger. SCA will promptly furnish in writing to UnitedHealth Group and the Offeror information concerning SCA, its subsidiaries, the facility entities and the holders of shares of
SCA common stock that is required by applicable law or otherwise reasonably advisable to be included in the offer documents and the registration statement. Each of UnitedHealth Group, the Offeror and SCA will promptly correct any information
provided by it or any of its respective representatives for use in the offer documents and the registration statement if and to the extent that such information has become false or misleading in any material respect. UnitedHealth Group and the
Offeror will, with SCAs cooperation, take all reasonable steps to cause the offer documents and the registration statement, as so corrected, to be filed with the SEC and to be disseminated to the holders of shares of SCA common stock, in each
case as and to the extent required by applicable law, or by the SEC or its staff or Nasdaq. Each of UnitedHealth Group and the Offeror has agreed to (a) provide SCA and its counsel with reasonable opportunity to review and comment on the
registration statement and the offer documents (and any amendments or supplements to any of the foregoing) prior to filing with the SEC, and give reasonable consideration to any timely comments thereon made by SCA or its counsel, (b) promptly
notify SCA of the receipt of, and promptly provide SCA with copies of, all comments received from, and all correspondence with, the SEC or its staff with respect to any offer document or the registration statement, (c) provide SCA and its
counsel with a reasonable opportunity to review and comment on any proposed correspondence between UnitedHealth Group or any of its representatives on the one hand and the SEC or its staff on the other hand with respect to any offer document or the
registration statement and give reasonable consideration to any timely comments thereon made by SCA or its counsel, and (d) promptly provide SCA with final copies of any correspondence sent by it or any of its representatives to the SEC or its
staff with respect to any offer document or the registration statement, and of any amendments or supplements to any offer document or the registration statement. UnitedHealth Group will also take any other action required to be taken under the
Securities Act, the Exchange Act, any applicable foreign or state securities or blue sky laws and the rules and regulations thereunder in connection with the issuance of the UnitedHealth Group common stock in the offer or the first
merger, and will pay all expenses related thereto, and SCA will timely furnish all information concerning SCA and the holders of SCA common stock as may be reasonably requested in connection with any such actions.
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Schedule 14D-9; Assistance with the Offer
Concurrently with the filing of the Schedule TO by UnitedHealth Group and the Offeror, SCA shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9, containing, among other things, the recommendation of the SCA Board that the holders of SCA common stock accept the offer and tender their shares of SCA common stock pursuant to the offer,
unless and until such recommendation is changed in accordance with the terms of the merger agreement. SCA has agreed to, promptly after commencement of the offer, cause the Schedule 14D-9 to be mailed to the holders of shares of SCA common stock
together with a notice of appraisal rights promptly after commencement of the offer.
SCA shall cause the Schedule 14D-9 to comply as to
form and substance in all material respects with applicable requirements of the Exchange Act and other applicable law. To the extent requested by SCA, UnitedHealth Group will cause the Schedule 14D-9 to be mailed or otherwise disseminated to the
holders of shares of SCA common stock (to the extent required by applicable law) together with the offer documents. Each of UnitedHealth Group and the Offeror will promptly furnish in writing to SCA all information concerning UnitedHealth Group and
the Offeror that is required by applicable law or otherwise reasonably advisable to be included in the Schedule 14D-9. Each of SCA, UnitedHealth Group and the Offeror will correct promptly any information provided by it or any of its representatives
for use in the Schedule 14D-9 if and to the extent that such information has become false or misleading in any material respect. SCA has further agreed to, with UnitedHealth Groups and the Offerors reasonable cooperation, take all
reasonable steps to cause the Schedule 14D-9, as corrected, to be filed with the SEC and disseminated to holders of shares of SCA common stock in each case as and to the extent required by applicable laws or by the SEC or its staff. Unless and until
SCAs board of directors has effected a change of recommendation pursuant to the merger agreement, SCA has agreed to (a) provide UnitedHealth Group and its counsel with a reasonable opportunity to review and comment on the Schedule 14D-9
(and any amendments or supplements to the foregoing) before it is filed with the SEC, and give reasonable consideration to any timely comments thereon made by UnitedHealth Group or its counsel, (b) promptly notify UnitedHealth Group of the
receipt of, and promptly provide UnitedHealth Group copies of, all comments from, and all correspondence with, the SEC or its staff with respect to the Schedule 14D-9, (c) provide UnitedHealth Group and its counsel with a reasonable opportunity
to review and comment on any proposed correspondence between SCA or any of its representatives on the one hand and the SEC or its staff on the other hand with respect to the Schedule 14D-9 and give reasonable consideration to any comments thereon
made by UnitedHealth Group or its counsel and (d) promptly provide UnitedHealth Group with final copies of any correspondence sent by it or any of its representatives to the SEC or its staff with respect to the Schedule 14D-9, and of any
amendments or supplements to the Schedule 14D-9. Notwithstanding anything to the contrary set forth above, but subject to the terms of the merger agreement, SCA may amend or supplement the Schedule 14D-9 in connection with a change in recommendation
effected by SCAs board of directors pursuant to the merger agreement without the prior consent of UnitedHealth Group and without providing UnitedHealth Group or its counsel an opportunity to review or comment thereon.
In connection with the offer, SCA has also agreed to, or to cause its transfer agent to, promptly furnish or cause to be furnished to
UnitedHealth Group and the Offeror with such assistance and such information as UnitedHealth Group, the Offeror or any of their representatives reasonably requests in order to disseminate and otherwise communicate the offer and the mergers to the
record and beneficial holders of shares of SCA common stock, including a list, as of the most recent practicable date, of the stockholders of SCA, mailing labels and any available listing or computer files containing the names and addresses of all
record and beneficial holders of shares of SCA common stock, and lists of security positions of shares of SCA common stock held in stock depositories (including updated lists of stockholders, mailing labels, listings or files of securities
positions), in each case as of the most recent practicable date, and shall promptly furnish UnitedHealth Group and the Offeror with such additional information and assistance (including updated lists of the record and beneficial holders of shares of
SCA common stock, mailing labels and lists of security positions) as UnitedHealth Group and the Offeror or their agents may reasonably request in order to communicate the offer and the mergers to the holders of shares of SCA common stock. Subject to
applicable laws, and except for such steps as are necessary to
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disseminate the offer documents and any other documents necessary to consummate the offer and the mergers, UnitedHealth Group and the Offeror (and their respective agents) must hold the
information contained in any such lists of stockholders, mailing labels and listings or files of securities positions in confidence, use such information only in connection with the offer and the mergers, and if the merger agreement if terminated,
promptly return (or use their reasonable efforts to cause their representatives to return or destroy) any and all copies and any extracts or summaries from such information then in their possession or control.
No Solicitation of Acquisition Proposals
Under the terms of the merger agreement, subject to certain exceptions described below, SCA has agreed that it will not, and will cause each of
its subsidiaries and its and their respective officers, directors, managers and employees, and will instruct and cause its and its subsidiaries respective agents, financial advisors, investment bankers, attorneys and accountants (which
officers, directors, managers, employees, agents, financial advisors, investment bankers, attorneys and accountants in their capacity as such are referred to in this section of this prospectus/offer to exchange as the representatives)
not to, directly or indirectly through intermediaries:
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solicit, initiate, knowingly encourage (including by way of furnishing non-public information relating to SCA or any of its subsidiaries) or knowingly facilitate any inquiries regarding, or the making of any proposal or
offer that constitutes, or could reasonably be expected to lead to, a takeover proposal;
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conduct, engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any information in connection with, or for the purpose of knowingly encouraging or
knowingly facilitating, a takeover proposal;
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approve, endorse, recommend or enter into, or propose to approve, endorse, recommend or enter into, any letter of intent, term sheet, acquisition agreement, merger agreement, joint venture agreement or similar document,
agreement, commitment or agreement in principle (whether written, oral, binding or non-binding) with respect to a takeover proposal;
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amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of SCA or any of its subsidiaries;
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approve any transaction involving SCA or any of its subsidiaries under or any third party (other than UnitedHealth Group or the Offeror) becoming an interested stockholder of SCA or any of its subsidiaries
under Section 203 of the DGCL or SCAs organizational documents (except a transaction involving UnitedHealth Group, the Offeror or their affiliates); or
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resolve to do any of the foregoing.
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SCA has also agreed that upon execution of the merger
agreement, it will, and will cause each of its subsidiaries and its and their respective representatives, to immediately cease and cause to be terminated any solicitation, discussions or negotiations with any persons (other than UnitedHealth Group
and its representatives) that are ongoing with respect to a takeover proposal.
Under the merger agreement, SCA is obligated to notify
UnitedHealth Group in writing promptly (and in no event later than 24 hours after receipt) after it or any of its representatives receives a takeover proposal or a request for information relating to SCA or its subsidiaries that contemplates a
takeover proposal. Such notice to UnitedHealth Group must include the identity of the person making the takeover proposal and the material terms and conditions of the takeover proposal (including an unredacted copy of the takeover proposal if it is
in writing and if not, a description of the terms thereof). SCA must promptly (and in no event later than 24 hours after receipt) provide UnitedHealth Group with copies of any proposals, indications of interest and/or draft agreements relating to
such takeover proposal and must provide UnitedHealth Group with at least 2 business days prior written notice (or such lesser notice as is provided to member of SCAs board of directors) of any meeting of SCAs board of directors at
which such takeover proposal is reasonably expected to be considered.
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Notwithstanding anything in the merger agreement to the contrary, SCA may (a) furnish
information to a person making a takeover proposal, including non-public information, pursuant to an executed confidentiality agreement (an acceptable confidentiality agreement) containing terms that are not materially less restrictive
with respect to the other party than those contained in the confidentiality agreement between SCA and UnitedHealth Group) and provided that SCA (i) promptly (and in no event later than 24 hours after receipt) provides a copy of such
confidentiality agreement to UnitedHealth Group and (ii) concurrently makes available to UnitedHealth Group any nonpublic information it provides the other party or its representatives that UnitedHealth Group has not previously received and
(b) engage in discussions and negotiations with the person making the takeover proposal, if at any time after the date of the merger agreement and prior to the Offerors acceptance of shares tendered in the offer (x) SCA or any of its
representatives receives a bona fide written takeover proposal from any person that did not result from a breach of SCAs non-solicitation obligations under the merger agreement; and (y) the SCA Board determines in good faith after
consultation with its independent financial advisor and outside legal counsel that such takeover proposal constitutes or is reasonably likely to lead to a superior proposal and that the failure to take such action would be inconsistent with the
directors fiduciary duties under applicable law.
A takeover proposal for purposes of the merger agreement means any
unsolicited, bona fide inquiry, proposal, indication of interest or offer from any person (other than UnitedHealth Group, the Offeror or any of their affiliates) relating to:
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a merger, consolidation, business combination, recapitalization, binding share exchange, liquidation, dissolution, joint venture or similar transaction involving SCA or any of its subsidiaries that would result in such
other person acquiring (a) 15% or more of SCAs outstanding common stock or securities of SCA representing more than 15% of the voting power of SCA or (b) 15% or more of the consolidated assets, net revenues or net income of SCA and
its subsidiaries;
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any acquisition, in one transaction or a series of related transactions, of the beneficial ownership of or the right to acquire beneficial ownership, directly or indirectly, of 15% or more of the outstanding SCA common
stock or securities of SCA representing more than 15% of the voting power of SCA;
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any acquisition (including the acquisition of stock in any subsidiary of SCA), in one transaction or a series of related transactions, of assets or businesses of SCA or its subsidiaries, including pursuant to a joint
venture, representing 15% or more of the consolidated assets, net revenues or net income of SCA and its subsidiaries; or
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any tender or exchange offer or similar transaction or series of transactions that, if consummated, would result in any person beneficially owning 15% or more of SCAs outstanding common stock or securities of SCA
representing more than 15% of the voting power of SCA.
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A superior proposal for purposes of the merger agreement
means any written takeover proposal (as defined above but substituting 50% for all references to 15%) that the SCA Board determines in good faith, after consultation with its outside financial advisor and outside legal
counsel, taking into account the timing, likelihood of consummation, legal, financial, regulatory and other aspects of such takeover proposal, including the identity of the third party making such takeover proposal and the financing terms thereof,
and such other factors as the SCA Board considers to be appropriate, and taking into account any revisions to the terms of the merger agreement committed to in writing by UnitedHealth Group in response to such takeover proposal, is more favorable to
the stockholders of SCA from a financial point of view than the transactions contemplated by the merger agreement.
Change of Recommendation
The merger agreement requires the SCA Board to recommend that the SCA stockholders accept the offer and tender their shares of SCA common stock
into the offer. In general, the SCA Board may not change such recommendation unless it has determined that the failure to so change its recommendation would be inconsistent with directors fiduciary duties, including as a result of a superior
proposal.
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More specifically, other than as described below (any of the following being a change of
recommendation), the SCA Board may not:
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unless a recommendation change has been made in compliance with the terms of the merger agreement, fail to include the recommendation in favor of the transactions in the Schedule 14-9 or the prospectus/offer to exchange
when it is distributed to the SCA stockholders;
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change, qualify, withhold, withdraw or modify (or authorize or publicly propose to change, qualify, withhold, withdraw or modify) the recommendation in favor of the transactions in a manner adverse to UnitedHealth
Group;
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publicly recommend a tender or exchange offer by any person other than the Offeror;
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adopt, approve or recommend, or publicly propose to adopt, approve or recommend a takeover proposal to the SCA stockholders;
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make any public statement inconsistent with the recommendation in favor of the transactions; or
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if a takeover proposal has been publicly announced or disclosed, either fail to recommend against such takeover proposal or fail to reaffirm its recommendation in favor of the transactions with UnitedHealth Group
promptly following a written request by UnitedHealth Group to do so, in either case on or prior to the later of the fifth business day prior to the then-scheduled expiration date of the offer and the tenth business day after the public announcement
or disclosure of any such takeover proposal (and in any event at least one business day prior to the then-scheduled expiration date of the offer).
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The merger agreement also prohibits the SCA Board from authorizing, causing or permitting SCA or any of its subsidiaries to enter into any
letter of intent, memorandum of understanding, agreement or agreement in principle with respect to any takeover proposal.
Notwithstanding
anything to the contrary in the merger agreement, the SCA Board may, prior to the Offerors acceptance of SCA shares tendered in the offer, in respect of a bona fide, written superior proposal that did not result from a breach of SCAs
non-solicitation obligations (i) make a change of recommendation or (ii) terminate the merger agreement (subject to payment of the termination fee) in order to enter into a definitive agreement for such superior proposal, in either case if
and only if prior to taking such action, the SCA Board has determined in good faith, after consultation with its independent financial advisor and outside legal counsel, that the failure to take such action would be inconsistent with the
directors fiduciary duties under applicable law; provided that prior to taking such action:
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SCA has given UnitedHealth Group at least five business days prior written notice of its intention to take such action, including the terms and conditions of and the basis for such action, and the identity of the
person making, any such superior proposal and has contemporaneously provided to UnitedHealth Group a copy of the superior proposal or any proposed acquisition agreements and a copy of any related financing commitments in SCAs possession (or,
in each case, if not provided in writing to SCA, a written summary of the terms thereof);
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SCA has negotiated, and has caused its representatives to negotiate, in good faith with UnitedHealth Group during such five business days period, to the extent UnitedHealth Group wishes to negotiate, any revisions
to the terms of the merger agreement proposed by UnitedHealth Group;
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following the end of such five business days notice period, the SCA Board determines, after consultation with its independent financial advisor and outside legal counsel, and giving due consideration to the
revisions to the terms of the merger agreement to which UnitedHealth Group has committed in writing, that the superior proposal would nevertheless continue to constitute a superior proposal (assuming the revisions committed to by UnitedHealth Group
in writing were to be given effect) and that the failure to take such action would be inconsistent with the directors fiduciary duties under applicable law; and
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in the event of any change to any of the financial terms (including the form, amount and timing of payment of consideration) or any other material terms of such superior proposal, SCA will, in each case, have delivered
to UnitedHealth Group an additional notice consistent with that described above and a new notice period will commence (except that the five business days notice period referred to above will instead be equal to two business days) during which
time SCA will be required to comply with the requirements above anew with respect to such additional notice.
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Neither SCA
nor any of its subsidiaries may enter into a definitive agreement with respect to a superior proposal unless the merger agreement is terminated in accordance with its and terms and SCA pays the termination fee.
Notwithstanding anything to the contrary contained in the merger agreement, other than in connection with a takeover proposal, the SCA Board
may, at any time prior to the Offerors acceptance of shares tendered in the offer, make a recommendation change in response to an intervening event if, prior to taking such action, the SCA Board has determined in good faith, after consultation
with its independent financial advisor and outside legal counsel, that the failure to take such action would be inconsistent with the directors fiduciary duties under applicable law, provided, however, that, prior to taking such action,
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SCA has given UnitedHealth Group at least five business days prior written notice of its intention to take such action, and specifying in reasonable detail the intervening event and the potential reasons that the
SCA Board is proposing to make a change of recommendation,
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SCA has negotiated, and has caused its representatives to negotiate, in good faith with UnitedHealth Group during such five business day period, to the extent UnitedHealth Group wishes to negotiate, to enable
UnitedHealth Group to propose revisions to the terms of the merger agreement such that it would cause the SCA Board to not make such change of recommendation, and
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following the end of such five business day period, the SCA Board has considered in good faith any revisions to the terms of the merger agreement to which UnitedHealth Group has committed in writing, and has determined,
after consultation with its independent financial advisor and outside legal counsel (assuming the revisions committed to by UnitedHealth Group in writing were to be given effect), that the failure to make a change of recommendation would be
inconsistent with the directors fiduciary duties under applicable law.
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For the purposes of the merger agreement, an
intervening event means a material event, development or change in circumstances with respect to SCA and its subsidiaries, taken as a whole, that occurred or arose after the date of the merger agreement, which (a) was unknown to and
was not reasonably foreseeable by, the SCA Board as of or prior to the date of the merger agreement and (b) becomes known to or by the SCA Board prior to the Offerors acceptance of shares tendered in the offer; provided, however that none
of the following will constitute, or be considered in determining whether there has been, an intervening event: (i) the receipt, existence of or terms of a takeover proposal or any inquiry, request, proposal or discussion that could reasonably
be expected to lead to a takeover proposal or any matter relating thereto or consequence thereof; (ii) changes in the market price or trading volume of the shares of SCA common stock on Nasdaq; (iii) the fact that SCA or its subsidiaries
have exceeded or met in and of itself (or the failure of UnitedHealth Group to meet in and of itself) any internal or published projections, forecasts or predictions in respect of revenues, earnings or other financial or operating performance for
any period ending on or after the date hereof; and (iv) changes in the market price or trading volume of the shares of UnitedHealth Group common stock on the NYSE (provided, however, that the underlying causes of such change or fact shall not
be excluded by clauses (ii), (iii) or (iv)).
Employee Benefit Matters
The merger agreement provides that for a period of twelve (12) months following the effective time of the first merger, UnitedHealth Group
will provide (or cause to be provided) certain SCA employees who continue to
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be employed following the effective time of the first merger with (x) a base salary or base wage, bonus and incentive opportunities (excluding any equity based compensation awards, the TSPP,
and any retention bonuses or special one-time payments) no less favorable than those provided to such SCA employees immediately prior to the effective time of the first merger, and (y) employee benefits including retirement and welfare benefits
(excluding equity based compensation awards and the TSPP) that are, in the aggregate, no less favorable than those provided to the SCA employees immediately prior to the effective time of the first merger or, in UnitedHealth Groups discretion,
are substantially comparable to those made available to similarly situated employees of UnitedHealth Group and its subsidiaries.
Following the effective time of the first merger, UnitedHealth Group will, or will cause the surviving company to, cause any employee benefit
plans sponsored or maintained by UnitedHealth Group or the surviving company or any of their subsidiaries in which SCA employees are eligible to participate following the closing date to waive any pre-existing conditions or limitations,
actively-at-work requirements and eligibility waiting periods under any welfare plans of UnitedHealth Group or its subsidiaries (subject to certain exceptions in the case of supplemental life insurance) and give the SCA employees credit for their
years of service with SCA and its subsidiaries before the effective time of the first merger for all purposes including determining eligibility to participate, level of benefits (including severance benefits), benefit accrual and vesting under any
applicable employee benefit plan maintained by UnitedHealth Group, as if such service had been performed with UnitedHealth Group, (except for any employee benefit plans that are frozen or grandfathered, for purposes of qualifying for any subsidized
early retirement benefits, for benefit accrual under any defined benefit pension plans, or to the extent necessary to avoid duplication of benefits). In addition, UnitedHealth Group will honor (or cause to be honored) in accordance with their
terms, including any right to amend or terminate, all existing employment and severance agreements with any officer, director, or employee of SCA and its subsidiaries (excluding agreements with any officers, directors or employees that primarily
work at (i) certain related entities of SCA or (ii) a provider of health care services). The merger agreement provides that UnitedHealth Group may request in writing, not less than 10 days prior to the anticipated effective time of
the first merger, that the SCA Board take such action as reasonably necessary to terminate SCAs 401(k) plans, effective as of the day prior to the effective time of the first merger.
Regulatory Approvals
UnitedHealth Group and SCA agreed to use their respective reasonable best efforts to take all actions necessary to obtain as soon as
practicable any consent, waiver, authorization, order or approval or, or any exemption by, any third party, including any governmental entity (including furnishing all information and documentary material required under the HSR Act) required to be
obtained or made by UnitedHealth Group, the Offeror, the Purchaser, SCA or any of their respective subsidiaries in connection with the offer or the mergers.
Takeover Statutes
Each of SCA and UnitedHealth Group agreed that neither it nor its subsidiaries will take any action that would cause the transactions
contemplated by the merger agreement or the tender and support agreement to be subject to requirements imposed by any takeover statute.
Public Announcements
Unless a change of recommendation has occurred, the parties will consult with one another prior to
issuing, and provide each other with the opportunity to review and comment on, any public announcement, statement or other disclosure with respect to the merger agreement or the transactions, except as may be required by law or the rules and
regulations of the NYSE or Nasdaq; however, each of SCA and UnitedHealth Group may make any public statements in response to questions by the press, analysts, investors or analyst or investor calls, so long as such statements are not inconsistent
with previous statements made jointly by SCA and UnitedHealth Group (or made by one party after having consulted with the other party).
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Transaction Litigation
The terms of the merger agreement require SCA to give UnitedHealth Group the opportunity to participate in the defense or settlement of any
stockholder litigation against SCA or its directors or executive officers relating to the transactions, including the offer and the mergers. SCA may not settle or offer to settle any such litigation commenced prior to or after the date of the merger
agreement against SCA or its directors, executive officers or similar persons by any stockholder of SCA relating to the merger agreement, the offer, the mergers or the other transactions without UnitedHealth Groups prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed to the extent that such settlement only requires (a) the issuance of additional disclosure or (b) the payment of money if the amount of money to be paid in connection with
such settlement does not materially exceed any insurance proceeds that SCA reasonably expects to receive with respect to such action and any deductible in respect thereof. Each of UnitedHealth Group and SCA shall notify the other promptly (and in
any event within 48 hours) of the commencement of any such stockholder action of which it has received notice.
Listing of UnitedHealth Group Common Stock; Delisting of SCA Common Stock
UnitedHealth Group agreed in the merger agreement to file a supplemental listing application with the NYSE with respect to the listing of the
shares of UnitedHealth Group common stock to be issued or reserved for issuance in connection with the offer and the first merger, subject to official notice of issuance, prior to the Offerors acceptance for exchange of shares of SCA common
stock tendered in the offer.
SCA agreed in the merger agreement to cooperate with UnitedHealth Group and use reasonable best efforts to
take, or cause to be taken, all actions reasonably necessary, proper or advisable on SCAs part under applicable law and the rules and policies of Nasdaq to enable the delisting of shares of SCA common stock from Nasdaq and the termination of
its registration under the Exchange Act, in each case, as promptly as practicable after the effective time of the first merger. Such delisting and termination will not be effective until after the effective time of the first merger.
Debt Matters
From and after the date of the merger agreement, and through the earlier of the closing and the date on which the merger agreement is
terminated in accordance with its terms, SCA and its subsidiaries and their respective representatives must use commercially reasonable efforts to provide all cooperation as may be reasonably requested by UnitedHealth Group to assist UnitedHealth
Group in any repayment of SCAs debt obligations at or following the closing, including in each case taking all customary actions as may be necessary or desirable to effect any such transactions. This requirement will not (a) require SCA
or any of its subsidiaries to agree to or to pay any fees, incur or reimburse any costs or expenses, or make any payment, prior to the occurrence of the closing or otherwise incur any liability or give any indemnities prior to the occurrence of the
closing, (b) require SCA or any of its subsidiaries to take any action that would reasonably be expected to conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, the
organizational documents of SCA or any of its subsidiaries, any applicable laws or any contract, (c) require SCA or any of its subsidiaries to execute or deliver any certificate, document, instrument or contract that is effective prior to the
closing or agree to any change or modification of any existing certificate, document, instrument or contract that is effective prior to the closing (other than customary payoff letters), (d) require SCA or any of its subsidiaries or their
respective representatives to enter into, execute or deliver any contract, or agree to any change or modification to any contract, that is effective prior to the occurrence of the closing or that would be effective if the closing does not occur, or
(e) require cooperation to the extent it would unreasonably disrupt or interfere with the conduct of the business or operations of SCA or its subsidiaries.
UnitedHealth Group will indemnify, defend and hold harmless SCA and its subsidiaries and their representatives from and against any and all
liabilities, obligations, losses, damages, claims, costs, expenses, awards, judgments and penalties suffered or incurred by any of them in connection with any actions taken at the request of UnitedHealth Group in relation to the debt matters
described above.
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Rule 14d-10 Matters
The compensation committee of the SCA board of directors, at a meeting to be held prior to the acceptance time, will duly adopt resolutions
approving as an employment compensation, severance or other employee benefit arrangement within the meaning of Rule 14d-10(d)(1) under the Exchange Act, (i) each employment compensation, severance and other employee benefit plans of
SCA presented to the compensation committee of the SCA board of directors on or prior to the date of the merger agreement, (ii) the treatment of the SCA stock awards, as applicable, in accordance with the terms set forth in the merger
agreement, and (iii) other terms set forth under the merger agreement, and will take all other actions necessary to satisfy the requirements of the non-exclusive safe harbor under Rule 14d-10(d)(2) under the Exchange Act with respect to the
foregoing arrangements.
Resignations
SCA will use its reasonable best efforts to cause to be delivered to UnitedHealth Group resignations executed by each director of SCA in office
as of immediately prior to the effective time of the first merger and effective upon the effective time of the first merger.
Conditions to the Offer
The Offeror will not be required to, and UnitedHealth Group will not be required to cause the Offeror
to, accept for payment or, subject to applicable rules and regulations of the SEC, pay for any tendered shares of SCA common stock if, at the time that the offer expires (after taking into account any extension of the expiration date):
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Minimum Tender Condition
there have not been validly tendered in the offer and not properly withdrawn a number of shares of SCA common stock that, together with the shares of SCA common stock (if any) then
owned by UnitedHealth Group, the Offeror and UnitedHealth Groups other subsidiaries, represents at least a majority of all then-outstanding shares of SCA common stock (excluding, for purposes of determining whether a sufficient number of
shares have been tendered in the offer to satisfy the minimum tender condition, shares of SCA common stock tendered pursuant to guaranteed delivery procedures that have not yet been received, as such term is defined in
Section 251(h) of the DGCL, by the depositary for the offer pursuant to such procedures);
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HSR Clearance
any waiting period (and extensions thereof) applicable to the offer and the mergers under the HSR Act has not expired or been terminated;
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Effectiveness of Form S-4
the registration statement on Form S-4 relating to the exchange offer (of which this document is a part) has not been declared effective by the SEC under the Securities Act or a
stop order suspending the effectiveness of such registration statement has been issued by the SEC or proceedings for that purpose have been initiated or threatened by the SEC;
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Listing of UnitedHealth Group Common Stock
the shares of UnitedHealth Group common stock to be issued in the offer and the first merger have not been approved for listing on the NYSE, subject to official
notice of issuance (provided that UnitedHealth Group will not be entitled to invoke this condition if it has not complied in all material respects with its obligations under the merger agreement with respect to submitting the requisite supplemental
listing application to the NYSE); or
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Other Conditions
any of the following has occurred and continues to exist as of the expiration date:
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No Legal Prohibition
an injunction, whether temporary, preliminary or permanent, by any court or other tribunal of competent jurisdiction has been entered and continues to be in effect, or a law has been
adopted or is effective, in each case that prohibits or makes illegal the consummation of the offer or the mergers;
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Accuracy of SCAs Representations
Any of the representations and warranties of SCA contained
in the merger agreement shall not be true and correct both at and as of the date of the merger agreement and at and as of the expiration date as though made at and as of the expiration date, other than for
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failures to be so true and correct (without regard to materiality, SCA material adverse effect and similar qualifiers contained in such representations and warranties) that have not
had and would not reasonably be expected to have a SCA material adverse effect, except that this condition shall not be satisfied if (i) certain representations and warranties of SCA relating to corporate organization and qualification, the
organizational documents of SCA, SCAs capitalization, required issuances of SCA, granting options or other similar rights with respect to equity interests of SCA, certain required payments of SCA, and the absence of a SCA material adverse
effect are not true and correct at and as of the date of the merger agreement and at and as of the expiration date as though made at and as of the expiration date, except for any
de minimis
inaccuracies, and (ii) certain representations
and warranties of SCA relating to the organizational documents of SCAs subsidiaries, debt securities and voting arrangements regarding SCAs securities, corporate authorization, due execution and delivery of the merger agreement, finders
and brokers and Section 251(h) of the DGCL are not true and correct in all material respects at and as of the date of the merger agreement and at and as of the expiration date as though made at and as of the expiration date; provided, however,
that representations and warranties that are made as of a particular date or period need be true and correct (in the applicable manner set forth above) only as of such date or period;
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SCAs Compliance with Covenants
SCA has failed to perform and comply in all material respects with all covenants and agreements required by the merger agreement to be performed or complied with by it
prior to the expiration date;
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SCA Closing Certificate
SCA has failed to deliver to UnitedHealth Group a certificate, dated as of the expiration date and signed by SCAs Chief Executive Officer or another senior officer, certifying
to the effect that the conditions regarding the accuracy of SCAs representations and warranties and compliance with its covenants have been satisfied;
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SCA Tax Opinion
SCA has not received a written opinion from Cleary Gottlieb, in form and substance reasonably satisfactory to SCA, dated as of the expiration date, to the effect that, on the basis of
certain facts, representations and assumptions set forth or referred to in such opinion, the offer and the mergers, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code;
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UnitedHealth Group Tax Opinion
UnitedHealth Group has not received a written opinion from Hogan Lovells, in form and substance reasonably satisfactory to UnitedHealth Group, dated as of the expiration
date, to the effect that, on the basis of certain facts, representations and assumptions set forth or referred to in such opinion, the offer and the mergers, taken together, will qualify as a reorganization within the meaning of
Section 368(a) of the Code;
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Termination of Merger Agreement
the merger agreement has been terminated in accordance with its terms; or
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Required Health Care Regulatory Consents
SCA has failed to obtain all consents, authorizations, waivers and approvals and to make all filings, applications and notices, in each case, with respect to
certificates of need and licenses to operate as an ambulatory surgery center or a hospital, as the case may be, required to be obtained by SCA pursuant to applicable health care laws in order to consummate the transactions with respect to more than
6% of all facilities that provide health care services that are operated or managed by SCA, its subsidiaries or certain related entities of SCA.
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The Offeror expressly reserves the right, prior to the expiration of the offer to waive any offer condition or modify the terms of the offer.
However, without the prior written consent of SCA, the Offeror may not (and UnitedHealth Group will not permit the Offeror to): (1) reduce the number of shares of SCA common stock subject to the offer, (2) reduce the transaction
consideration to be paid in the offer, (3) change the form of consideration payable in the offer, other than the election of UnitedHealth Group to increase the applicable cash consideration and proportionally decrease the applicable stock
consideration in accordance with the terms of the merger agreement, (4) waive, amend or modify the minimum tender condition or the conditions relating to HSR
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clearance, the effectiveness of the registration statement on Form S-4 of which this document is a part, the approval for listing of the UnitedHealth Group shares to be issued in the offer and
the first merger on the NYSE, there being no legal prohibitions against the offer or the mergers, and the receipt of tax opinions (provided that UnitedHealth Group will (and will cause the Offeror to) waive the tax opinions conditions upon
SCAs written request), (5) add any condition to the offer other than those described above, (6) amend, modify or supplement any offer condition or, except as otherwise expressly permitted by the merger agreement, any other term of
the offer, in each case, in any manner adverse to the holders of SCA common stock, (7) except as otherwise expressly required or permitted under the merger agreement, terminate or extend the offer, or (8) provide any subsequent
offering period in accordance with Rule 14d-11 of the Exchange Act.
Conditions to the Mergers
The respective obligations of UnitedHealth Group, the Offeror, Merger Sub and SCA to consummate the mergers are subject to the satisfaction (or
waiver by SCA or UnitedHealth Group if permissible under applicable law) on or prior to the closing date of the following conditions:
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no injunction, whether temporary, preliminary or permanent, by any court or other tribunal of competent jurisdiction shall have been entered and shall continue to be in effect, and no law shall have been adopted or be
effective, in each case that restrains, enjoins, prevents, prohibits or makes illegal the consummation of the mergers; and
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the Offeror shall have accepted for payment and paid for all shares of SCA common stock validly tendered and not properly withdrawn pursuant to the offer.
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Termination
The merger agreement may be terminated at any time before the Offerors acceptance for exchange of shares of SCA common stock tendered in
the offer only as follows and subject to any required authorizations of the SCA Board or the board of directors of UnitedHealth Group to the extent required by the DGCL, by mutual written consent of UnitedHealth Group and SCA or by either party:
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Offer Not Completed
if the offer has been terminated or expired in accordance with its terms (subject to the rights and obligations of UnitedHealth Group and the Offeror to extend the offer) without the
satisfaction of the minimum tender condition and the satisfaction (or waiver by UnitedHealth Group) of the other offer conditions;
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No Closing Before End Date
if the Offeror has not accepted for payment the shares of SCA common stock tendered in the offer and not properly withdrawn on or prior to the end date; provided, however, that
if all of the offer conditions, other than the condition relating to obtaining required health care regulatory consents, have been satisfied or waived (other than the minimum tender condition and those conditions which by their terms cannot be
satisfied prior to the acceptance for exchange of shares of SCA common stock), and the offer has not been terminated theretofore, the end date may be extended one or more times to 12:01 a.m., New York City time, on the date that is ten business days
following the then-current end date at the election of UnitedHealth Group by delivery of written notice to SCA prior to the then current end date. UnitedHealth Group may only exercise such an extension up to a maximum of two times; or
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Legal Prohibition
if an order by a governmental entity of competent jurisdiction has been issued permanently restraining, enjoining or otherwise prohibiting consummation of the offer or either merger and
such order has become final and nonappealable, except that such right to terminate will not be available to any party if such order (or such order becoming final and nonappealable) was due to such partys material breach of any covenant or
other agreement of such party set forth in the merger agreement.
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In addition to the mutual termination rights described above, SCA may terminate the merger
agreement at any time prior to the Offerors acceptance for exchange of shares of SCA common stock tendered in the offer in the following circumstances:
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UnitedHealth Group, the Offeror or Merger Subs Breach
if UnitedHealth Group, the Offeror or Merger Sub has breached or materially failed to perform any of their covenants or other agreements or any
of their representations or warranties becomes inaccurate, which breach or inaccuracy, individually or in the aggregate, would reasonably be expected to have a UnitedHealth Group material adverse effect and such breaches, failures to perform or
inaccuracies are not curable or are not cured by the earlier of (x) the end date, and (y) the date that is thirty calendar days following written notice from SCA to UnitedHealth Group describing such breach or failure or inaccuracy in
reasonable detail; SCA will not be entitled to exercise this termination right if SCA is then in breach of any representation, warranty, covenant or other agreement in the merger agreement that would cause a failure of the closing conditions
relating to the truth and accuracy of its representations and warranties and its compliance with its covenants (subject, in each case, to specified materiality standards) to be satisfied; or
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Superior Proposal
prior to the Offerors acceptance for exchange of shares of SCA common stock tendered in the offer, in order to enter into a definitive agreement providing for a superior proposal
concurrently with or immediately after such termination; SCA will only be entitled to exercise this termination right if it has complied in all respects with its obligations to provide UnitedHealth Group with the notice period and related
opportunities discussed above in Merger Agreement Change of Recommendation (including an opportunity to negotiate revisions to the merger agreement), has complied in all material respects with its other non-solicitation and
related obligations, and immediately prior to or concurrently with (and as a condition to) the termination of the merger agreement, SCA pays to UnitedHealth Group the termination fee in the manner described below under Merger Agreement
Termination Fee.
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In addition to the mutual termination rights described above, UnitedHealth Group may
terminate the merger agreement at any time prior to the Offerors acceptance for exchange of shares of SCA common stock tendered in the offer in the following circumstances:
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SCAs Breach
if SCA has breached or failed to perform any of its representations, warranties, covenants or other agreements in the merger agreement, which breach or failure to perform, if it occurred
or was continuing to occur at the time of the Offerors acceptance for exchange of shares of SCA common stock tendered in the offer, would result in a failure of the offer conditions relating to the truth and accuracy of SCAs
representations and warranties or SCAs compliance with its covenants (subject, in each case, to specified materiality standards) to be satisfied, and such breaches, failures to perform or inaccuracies are not curable or are not cured by the
earlier of (x) the date that is thirty days following written notice from UnitedHealth Group to SCA describing such breach or failure in reasonable detail and (y) the end date; UnitedHealth Group will not be entitled to exercise this
termination right if UnitedHealth Group is then in breach of any representation, warranty, covenant or other agreement in the merger agreement that would cause a failure of any of the offer conditions to be satisfied; or
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Change of Recommendation or Breach of the Non-Solicitation Obligations
if, prior to the Offerors acceptance for exchange of shares of SCA common stock tendered in the offer, the SCA Board effects a
change of recommendation (provided that UnitedHealth Groups right to terminate for a change of recommendation expires at 11:59 p.m., New York City time, on the last business day of the first extension of the offer made by UnitedHealth Group in
accordance with the merger agreement following a change of recommendation) or SCA has materially violated or materially breached its non-solicitation obligations with respect to takeover proposals under the merger agreement.
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Termination Fee
The merger agreement provides that SCA will pay UnitedHealth Group a termination fee of $90 million if:
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SCA terminates the merger agreement pursuant to the termination right described under SCAs termination rights related to Superior Proposal as described in Merger Agreement
Termination;
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UnitedHealth Group terminates the merger agreement pursuant to the termination right described under UnitedHealth Groups termination rights related to Change of Recommendation or Breach of the
Non-Solicitation Obligations as described in Merger Agreement Termination (including if SCA terminates the merger agreement pursuant to the termination rights described under SCAs termination rights related to
Offer Not Completed or No Closing Before End Date as described in Merger Agreement Termination at any time at which UnitedHealth Group would have been entitled to terminate the merger agreement
pursuant to the termination right described under UnitedHealth Groups termination rights related to Change of Recommendation or Breach of the Non-Solicitation Obligations as described in Merger Agreement
Termination);
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(a) after the date of the merger agreement, (i) a takeover proposal (with references to 15% in the definition of takeover proposal deemed to be references to 50%) is made directly to the SCA
shareholders or publicly announced or publicly disclosed or (ii) a bona fide third party or group makes (or discloses its intention to make) a takeover proposal to any member of the SCA Board, and in either case the takeover proposal is not
withdrawn in good faith at least five business days prior to termination of the merger agreement, and (b) thereafter, either SCA or UnitedHealth Group terminates the merger agreement pursuant to the termination rights described under
Offer Not Completed or No Closing Before End Date or UnitedHealth Group terminates the merger agreement pursuant to the termination right described under SCAs Breach, in each case as described in
Merger Agreement Termination and (c) within 12 months after such termination, SCA or any of its subsidiaries enters into a definitive agreement with respect to, or consummates, any transaction constituting a takeover
proposal (with references to 15% in the definition of takeover proposal deemed to be references to 50%) (whether or not involving the same takeover proposal previously announced, disclosed or made known). In the event a
termination fee is due as described in this bullet point as result of UnitedHealth Groups termination of the merger agreement pursuant to the termination right described under SCAs Breach as described in Merger
Agreement Termination, then the termination fee will be offset by the amount of any damages recovered by UnitedHealth Group as a result of the relevant breaches, failures to perform or inaccuracies.
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In no event will SCA be obligated to pay the termination fee on more than one occasion.
In the event that the termination fee is payable and SCA pays UnitedHealth Group the termination fee, the termination fee will be the sole and
exclusive remedy of UnitedHealth Group, the Offeror and Merger Sub for any loss suffered as a result of any breach of any covenant or agreement of the merger agreement by SCA or for the failure of the transactions to be consummated, except in the
case of SCAs fraud, intentional misrepresentation or other willful breach occurring prior to termination of the merger agreement.
Additionally, UnitedHealth Group, the Offeror, Merger Sub and SCA acknowledge in the merger agreement that the termination fee is not intended
to be a penalty, but rather is liquidated damages in a reasonable amount that will compensate UnitedHealth Group in the circumstances in which the termination fee is payable and which do not involve fraud, intentional misrepresentation or other
willful breach, for the efforts and resources expended and opportunities foregone while negotiating the merger agreement and in reliance on the merger agreement and on the expectation of the consummation of the transactions contemplated by the
merger agreement.
Expenses
All costs and expenses incurred in connection with the offer, the mergers, the merger agreement and the other transactions contemplated
thereby shall be paid by the party to the merger agreement incurring or required
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to incur such expenses, whether or not the offer and the mergers are consummated, provided, however, that UnitedHealth Group, on the one hand, and SCA, on the other hand, shall be responsible for
the payment of 50% of any filings fees under the HSR Act.
Remedies
Under the merger agreement, the parties have agreed that, prior to the valid termination of the merger agreement, each party will be entitled
to, in addition to any other remedy that may be available to it (including monetary damages):
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an injunction or injunctions to prevent any breaches of the merger agreement; and
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a decree or order of specific performance specifically enforcing the terms and provisions of the merger agreement.
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Indemnification; Directors and Officers Insurance
Under the merger agreement, from and after the effective time of the first merger, each of the surviving corporation and the surviving company
must, and UnitedHealth Group must cause the surviving corporation and the surviving company, as applicable (a) to indemnify and hold harmless, to the fullest extent permitted by or otherwise contemplated by SCAs or any of its
subsidiaries organizational documents, each current and former director and officer of SCA and its subsidiaries and any other person entitled to indemnification under SCAs or any of its subsidiaries organizational documents (in
each case, solely when acting in such capacity) (together with their respective heirs, executors and administrators, the SCA indemnified parties) against any documented costs or expenses (including documented attorneys fees),
damages and other losses incurred in connection with any claims, actions or other proceedings arising out of or related to the fact that such person is or was a director or officer of SCA or its subsidiaries and pertaining to matters existing or
occurring or actions or omissions taken at or prior to the effective time of the first merger (including the transactions contemplated by the merger agreement and actions to enforce these indemnification rights) and (b) to advance expenses to
each SCA indemnified party as incurred to the fullest extent permitted or otherwise contemplated by SCAs or any of its subsidiaries organizational documents, provided that any such SCA indemnified party provides an undertaking to repay
such advances if it is ultimately determined by a final and nonappealable judicial determination that such person is not entitled to indemnification. In addition, for a period of six years following the effective time of the first merger, the
provisions providing rights to indemnification, exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the first merger and advancement of expenses currently included in SCAs or any of its
subsidiaries organizational documents or any existing indemnification agreements will continue in full force and effect in accordance with their terms and may not be amended, repealed or modified in any manner that would adversely affect the
rights of such SCA indemnified parties, except as required by applicable law.
Prior to the effective time of the first merger, SCA will,
and if SCA is unable to, the surviving company will promptly following the effective time of the first merger, obtain and fully pay the premium for the extension of SCAs current directors and officers liability coverage for a
claims reporting or discovery period of at least six years from and after the effective time of the first merger from an insurer with the same or better credit rating as SCAs existing insurer and with terms, conditions, retentions and limits
of liability no less favorable in the aggregate than those in the existing policy. If SCA and the surviving company fail to obtain such tail policy, then for six years after the effective time of the first merger, the surviving company
must maintain in effect a directors and officers insurance and indemnification policy that provides coverage for claims arising from facts or events, or acts or omissions, occurring or alleged to occur prior to the effective time of the
first merger with terms, conditions, retentions and limits of liability no less favorable in the aggregate than those of SCAs existing policy, provided that the surviving company will not be required to pay annual premiums in excess of 200% of
the premiums paid by SCA in 2016 for such insurance (the premium cap), and if such premiums for such
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insurance would at any time exceed the premium cap, then the surviving company will cause to be maintained policies of insurance which, in the surviving companys good faith determination,
provide the maximum coverage available at an annual premium equal to the premium cap.
Modification or Amendment
At any time prior to the Offerors acceptance for exchange of shares of SCA common stock tendered in the offer, the merger
agreement may be amended by an amendment in writing and signed by UnitedHealth Group, the Offeror, Merger Sub and SCA.
Extensions and Waivers under the Merger Agreement
Under the merger agreement, at any time prior to the Offerors
acceptance for exchange of shares of SCA common stock tendered in the offer, either SCA or UnitedHealth Group, the Offeror and Merger Sub may, to the extent permissible by applicable law (a) extend the time for the performance of any of the
obligations or other acts of the other parties; (b) waive any inaccuracies in the representations and warranties of the other parties; or (c) waive compliance by the other parties with any of the agreements or conditions for the benefit of
the waiving party contained in the merger agreement.
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TENDER AND SUPPORT AGREEMENT
This section describes certain material terms of the tender and support agreement. The description in this section and elsewhere in this
document is qualified in its entirety by reference to the complete text of the tender and support agreement, a copy of which is attached as Annex B and is incorporated by reference into this document. This summary does not purport to be complete and
may not contain all of the information about the tender and support agreement that is important to you in determining whether to tender your SCA shares in the offer. We encourage you to read the tender and support agreement carefully and in its
entirety. The legal rights and obligations of the parties are governed by the specific language of the tender and support agreement and not this summary.
On January 7, 2017, concurrently with the execution of the merger agreement, the TPG stockholders entered into the tender and support
agreement with UnitedHealth Group and the Offeror. Pursuant to the terms of the tender and support agreement, and pursuant to and in accordance with the terms of the offer, each TPG stockholder agreed to validly tender (or cause to be tendered), no
later than fifteen business days after the commencement of the offer, all of the shares of SCA common stock beneficially owned by such TPG stockholder into the offer and to not withdraw (or cause to be withdrawn) such shares from the offer unless
and until the expiration date or the termination of the tender and support agreement in accordance with its terms. Subject to the terms of the tender and support agreement, to the extent that any of such TPG stockholders shares are not
purchased in the offer, each TPG stockholder further agreed that, during the time the tender and support agreement is in effect, at any annual or special meeting of the stockholders of SCA (including any adjournment or postponement thereof), such
TPG stockholder would (a) appear at each such meeting or otherwise cause all of its shares of SCA common stock to be counted as present thereat for purposes of determining a quorum, and (b) be present and vote (or cause to be voted) such
shares, among other things, (i) against any action, proposal, transaction or agreement that would reasonably be expected to result in a breach of any covenant, representation or warranty or other obligation of SCA contained in the merger
agreement (or of any TPG stockholder contained in the tender and support agreement), or result in any of the offer conditions not being satisfied on or before the end date, (ii) against any agreement or arrangement related to or in furtherance
of any takeover proposal, (iii) against any other action, agreement or transaction the consummation of which would reasonably be expected to materially impede, interfere with or delay the consummation of the transactions contemplated by the
merger agreement by SCA, including any extraordinary corporate transaction, to the extent SCA is prohibited from taking any such action pursuant to the merger agreement, and (iv) in favor of the adoption and approval of the merger agreement and
the transactions contemplated thereunder, in favor of any proposal to adjourn or postpone the meeting to a later date (if there are not sufficient votes for the adoption and approval of the merger agreement and the transactions contemplated thereby
on the day such meeting is held), and in favor of any other matter necessary for the consummation of such transactions, in each case to the fullest extent that such TPG stockholders shares of SCA common stock are entitled to vote thereon.
Pursuant to the tender and support agreement, each TPG stockholder also irrevocably appointed UnitedHealth Group (and any other person
designated by UnitedHealth Group) as attorney-in-fact and proxy for and on behalf of such TPG stockholder, to (a) attend any and all stockholder meetings of SCA with respect to the above matters, and (b) vote, express consent or dissent
with respect to such TPG stockholders shares of SCA common stock in accordance with the above at any such meeting. UnitedHealth Group agreed not to exercise the proxy granted in the tender and support agreement for any purpose other than the
purposes described in the tender and support agreement.
Pursuant to the tender and support agreement, each TPG stockholder also agreed,
subject to limited exceptions for transfers to partners or members, certain affiliated entities and trusts, not to, directly or indirectly, (a) create or permit to exist any encumbrance on its shares of SCA common stock, other than certain
permitted encumbrances, (b) transfer, sell, assign, gift, hedge, pledge or otherwise dispose of (whether by sale, liquidation, dissolution, dividend or distribution), or enter into any derivative arrangement with respect to, its shares of SCA
common stock (or any right or interest therein), or enter into any agreement or understanding to do so, (c) grant
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or permit the grant of any proxy, power-of-attorney or other authorization or consent in or with respect to any of its shares of SCA common stock, (d) deposit or permit the deposit of its
shares of SCA common stock into a voting trust or enter into a voting agreement with respect to its shares or (e) take or permit its representatives to take other action that would materially restrict, limit or interfere with the performance of
such TPG stockholders obligations under or the transactions contemplated by the tender and support agreement or otherwise make any representation or warranty of such TPG stockholder therein untrue or incorrect in any material respect. Under
the tender and support agreement, each TPG stockholder agreed, and authorized SCA and its counsel, to notify SCAs transfer agent that there is a stop transfer order with respect to all of such TPG stockholders shares of SCA common stock
and that the tender and support agreement places limits on the voting and transfer of such shares, in each case, prior to the termination of the tender and support agreement. The tender and support agreement also contains customary representations
and warranties of each of UnitedHealth Group, the Offeror and each TPG stockholder.
In addition, each TPG stockholder agreed (a) not
to make a written demand or file a petition for appraisal, and waived and agreed not to exercise any appraisal rights or dissenters rights pursuant to Section 262 of the DGCL or otherwise in respect of its shares of SCA common stock that
may arise in connection with the offer and the first merger, and (b) not to commence or participate in, and to take all actions necessary to opt out of any class in any class action with respect to, any claim, derivative or otherwise, against
SCA and its successors relating to the negotiation, execution or delivery of the tender and support agreement or the merger agreement.
Each TPG stockholder also agreed (and agreed to cause its representatives) (a) to immediately cease and cause to be terminated any
solicitation, discussions or negotiations by such TPG stockholder or its representatives with any persons (other than UnitedHealth Group and its representatives) that are ongoing with respect to a takeover proposal and (b) not to, directly or
indirectly through intermediaries, (i) solicit, initiate, knowingly encourage or knowingly facilitate any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, a takeover
proposal, (ii) conduct, engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any information in connection with, or for the purpose of knowingly encouraging or knowingly
facilitating, a takeover proposal (subject to certain exceptions in response to an unsolicited inquiry), and (iii) approve, endorse, recommend or enter into, or propose to approve, endorse, recommend or enter into, any letter of intent, term
sheet, commitment, agreement or similar document or agreement in principle with respect to a takeover proposal. Each TPG stockholder also agreed to notify UnitedHealth Group as promptly as practicable (and in any event no later than twenty-four
hours after receipt), among other things, in the event that such TPG stockholder or any of its representatives receives a takeover proposal or a request for information relating to SCA or its subsidiaries that contemplates a takeover proposal.
The tender and support agreement will terminate automatically with respect to each TPG stockholder upon the first to occur of (a) the
effective time of the first merger, (b) the termination of the merger agreement in accordance with its terms, (c) the entry into any amendment or modification to the merger agreement that results in a decrease in, or change in the form of,
the transaction consideration (other than as permitted pursuant to the terms of the merger agreement), (d) the date the offer terminates or the expiration date occurs, in each case without acceptance for payment of such TPG stockholders
shares of SCA common stock pursuant to the offer or (e) the mutual written consent of UnitedHealth Group and such TPG stockholder.
As of January 7, 2017, the TPG stockholders beneficially owned in the aggregate 12,156,480 shares of SCA common stock. The shares subject
to the tender and support agreement represented approximately 30% of the shares of SCA common stock outstanding as of January 5, 2017.
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ARTICLE II THE MERGERS
Section 2.1
The Mergers
. Upon the terms and subject to the satisfaction or waiver of the conditions set
forth in this Agreement, and in accordance with the DGCL (including Section 251(h)) and the DLLCA, as applicable, (a) at the First Effective Time (as defined below), Purchaser shall be merged with and into the Company, whereupon the
separate existence of Purchaser will cease, with the Company surviving the First Merger (the Company, as the surviving entity in the First Merger, sometimes being referred to herein as the
First Surviving Corporation
), such that
following the First Merger, the First Surviving Corporation will be an indirect wholly owned subsidiary of Parent and a direct wholly owned subsidiary of Merger Sub 2, and (b) immediately thereafter, and as part of the same plan, at the Second
Effective Time, the First Surviving Corporation shall be merged with and into Merger Sub 2, whereupon the separate existence of the First Surviving Corporation will cease, with Merger Sub 2 surviving the Second Merger (Merger Sub 2, as the surviving
entity of the Second Merger, sometimes being referred to herein as the
Surviving Company
), such that following the Second Merger, the Surviving Company will be a wholly owned direct subsidiary of Parent. The Mergers shall have the
effects provided in this Agreement and as specified in the DGCL and the DLLCA, as applicable. The First Merger shall be governed by and effected under Section 251(h) of the DGCL as soon as practicable following the Acceptance Time and the
Second Merger shall be governed by and effected under Section 267 of the DGCL and Section
18-209(i) of the DLLCA.
Section 2.2
Closing
. The closing of the Mergers (the
Closing
) shall take place at the offices of Hogan Lovells US LLP, 1601 Wewatta Street, Suite 900, Denver, Colorado at 10:00 a.m., New York City time as soon as practicable following the Acceptance Time, and in any event no later
than the second (2
nd
) Business Day after the satisfaction or waiver (to the extent permitted by applicable Law) of the last of the conditions set forth in
Article VII
(other than
those conditions that by their nature are to be satisfied at or immediately prior to the Closing, but subject to the satisfaction or waiver of such conditions), or at such other place, date and time as the Company and Parent may agree in writing.
The date on which the Closing actually occurs is referred to as the
Closing Date
.
Section 2.3
Effective Times
. As soon as practicable on the Closing Date, (a) the Parties shall
cause a certificate of merger with respect to the First Merger (the
First Certificate of Merger
) to be duly executed and filed with the Secretary of State of the State of Delaware (the
Delaware Secretary
) as
provided under the DGCL and make any other filings, recordings or publications required to be made by the Company or Purchaser under the DGCL in connection with the First Merger, and (b) immediately following, or contemporaneously with, the
filing of the First Certificate of Merger, Merger Sub 2 shall cause a certificate of ownership and merger with respect to the Second Merger (the
Second Certificate of Merger
, and together with the First Certificate of Merger, the
Certificates of Merger
) to be duly executed and filed with the Delaware Secretary as provided under the DGCL and the DLLCA and make any other filings, recordings or publications required to be made by the First Surviving
Corporation or Merger Sub 2 under the DGCL and the DLLCA in connection with the Second Merger. The First Merger shall become effective at such time as the First Certificate of Merger is duly filed with
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the Delaware Secretary or on such later date and time as shall be agreed to by the Company and Parent and specified in the First Certificate of Merger (such date and time being hereinafter
referred to as the First Effective Time). The Second Merger shall become effective at such time as the Second Certificate of Merger is duly filed with the Delaware Secretary or on such later date and time as shall be agreed to by the
Company and Parent and specified in the Second Certificate of Merger (such date and time being hereinafter referred to as the Second Effective Time). The First Effective Time shall, in all events, precede the Second Effective Time.
Section 2.4
Effects of the Mergers
. The effects of the Mergers shall be as provided in this Agreement
and in the applicable provisions of the DGCL and the DLLCA. Without limiting the generality of the foregoing, and subject thereto, (a) at the First Effective Time, all of the property, rights, privileges, powers and franchises of the Company
and Purchaser shall vest in the First Surviving Corporation, and all debts, liabilities and duties of the Company and Purchaser shall become the debts, liabilities and duties of the First Surviving Corporation, all as provided under the DGCL and
(b) at the Second Effective Time, all of the property, rights, privileges, powers and franchises of the First Surviving Corporation and Merger Sub 2 shall vest in the Surviving Company, and all debts, liabilities and duties of the First
Surviving Corporation and Merger Sub 2 shall become the debts, liabilities and duties of the Surviving Company, all as provided under the DGCL and the DLLCA.
Section 2.5
Organizational Documents of the Surviving Company
.
(a) At the First Effective Time, the Parties shall take all requisite action so that the Company Certificate and the Company Bylaws shall be
the certificate of incorporation and bylaws, respectively, of the First Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law (but subject to
Section 6.8
).
(b) At the Second Effective Time (but subject to Section 6.8), the Parties shall take all requisite action so that the certificate of
formation and limited liability company agreement of Merger Sub 2 as in effect immediately prior to the Second Effective Time shall be the certificate of formation and limited liability company agreement of the Surviving Company, until thereafter
amended in accordance with applicable Law and the applicable provisions of such certificate of formation and limited liability company agreement.
Section 2.6
Directors; Manager
.
(a) Subject to applicable Law, the Parties shall take all requisite action so that the directors of Purchaser immediately prior to the First
Effective Time shall be the initial directors of the First Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.
(b) Subject to applicable Law, the Parties shall take all requisite action so that the manager of Merger Sub 2 immediately prior to the Second
Effective Time shall be and become the manager of the Surviving Company as of the Second Effective Time.
Section 2.7
Officers
.
(a) The Parties shall take all requisite action so that the officers of Purchaser immediately prior to the First Effective Time, from and after
the First Effective Time, shall continue as the officers of the First Surviving Corporation.
(b) Except as otherwise determined by Parent
prior to the Second Effective Time, the Parties shall take all requisite action so that the officers of the First Surviving Corporation immediately prior to the Second Effective Time, from and after the Second Effective Time, shall be the officers
of the Surviving Company and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.
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ARTICLE III
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
Section 3.1
Effect on Capital Stock
.
(a) At the First Effective Time, by virtue of the First Merger and without any action on the part of any of the Parties or the holder of any
shares of Company Common Stock or Purchaser Common Stock:
(i)
Conversion of Company Common Stock
. At the First
Effective Time, subject to
Section 1.1(a)
, the first sentence of
Section 1.1(d)
,
Section 1.1(e)
and any applicable withholding Tax, each share of Company Common Stock issued and outstanding immediately prior to
the First Effective Time (other than any Cancelled Shares and any Dissenting Shares) shall be automatically converted into the right to receive the applicable Transaction Consideration. From and after the First Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and upon the conversion thereof shall cease to exist, and each applicable holder of such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to
receive the applicable Transaction Consideration upon the surrender of such shares of Company Common Stock in accordance with
Section 3.2
(including the right to receive the Fractional Share Cash Amount, if any), into which such shares
of Company Common Stock have been converted pursuant to this
Section 3.1(a)
, together with the amounts, if any, payable pursuant to
Section 3.2(e)
.
(ii)
Cancellation of Company Common Stock; Certain Subsidiary Owned Shares
. Each share of Company Common Stock issued
and outstanding immediately prior to the First Effective Time that is owned or held in treasury by the Company and each share of Company Common Stock issued and outstanding immediately prior to the First Effective Time that is owned by Parent,
Purchaser or any other direct or indirect wholly-owned subsidiary of Parent shall no longer be outstanding and shall automatically be cancelled and shall cease to exist (the
Cancelled Shares
), and no consideration shall be
delivered in exchange therefor.
(iii)
Treatment of Purchaser Shares
. At the First Effective Time, each issued and
outstanding share of common stock, par value $0.01 per share, of Purchaser (the
Purchaser Common Stock
) shall be automatically converted into and become one fully paid and nonassessable share of common stock, par value $0.01 per
share, of the First Surviving Corporation and shall constitute the only outstanding shares of capital stock of the First Surviving Corporation. From and after the First Effective Time, all certificates representing shares of Purchaser Common Stock
shall be deemed for all purposes to represent the number of shares of common stock of the First Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.
All of the shares of Company Common Stock converted into the right to receive the Transaction Consideration pursuant to this
Article III
shall no
longer be outstanding and upon the conversion thereof shall cease to exist as of the First Effective Time, and uncertificated shares of Company Common Stock represented by book-entry form (
Book-Entry Shares
) and each certificate
that, immediately prior to the First Effective Time, represented any such shares of Company Common Stock (each, a
Certificate
) shall thereafter represent only the right to receive the applicable Transaction Consideration and the
Fractional Share Cash Amount into which the shares of Company Common Stock represented by such Book-Entry Share or Certificate have been converted pursuant to this
Section 3.1(a)
, as well as any dividends or other distributions to which
holders of Company Common Stock become entitled in accordance with
Section 3.2(e)
.
(b)
Conversion of First Surviving
Corporation Shares
. At the Second Effective Time, by virtue of the Second Merger and without any action on the part of any of the Parties or holders of any securities of the First Surviving Corporation or of Merger Sub 2, (i) each
membership interest of Merger Sub 2 issued and outstanding immediately prior to the Second Effective Time shall remain outstanding as a membership interest of the Surviving Company and (ii) all shares of common stock of the First Surviving
Corporation shall no longer be outstanding and shall automatically be cancelled and shall cease to exist without any consideration being payable therefor.
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(c)
Shares of Dissenting Stockholders
. Notwithstanding anything in this Agreement to the
contrary, any shares of Company Common Stock issued and outstanding immediately prior to the First Effective Time and held by a Person (a
Dissenting Stockholder
) who has not tendered into the Offer or has not voted in favor of, or
consented to, the adoption of this Agreement, and has complied with all the provisions of the DGCL concerning the right of holders of shares of Company Common Stock to demand appraisal of their shares (the
Appraisal Provisions
) of
Company Common Stock (
Dissenting Shares
), to the extent the Appraisal Provisions are applicable, shall not be converted into the right to receive the Transaction Consideration as described in
Section 3.1(a)(i)
, but
such holder shall be entitled to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to the procedures set forth in Section 262 of the DGCL. If such Dissenting Stockholder, after the First Effective
Time, effectively withdraws its demand for appraisal or fails to perfect or otherwise loses its right of appraisal, in any case pursuant to the DGCL, each of such Dissenting Stockholders shares of Company Common Stock shall thereupon be
treated as though such shares of Company Common Stock had been converted as of the First Effective Time into the right to receive the applicable Transaction Consideration pursuant to
Section 3.1(a)(i)
. The Company shall give Parent
prompt notice of any demands for appraisal of shares of Company Common Stock received by the Company, withdrawals or attempted withdrawals of such demands and any other instruments served pursuant to Section 262 of the DGCL and shall give
Parent the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, without the prior written consent of Parent, voluntarily make any payment to any Dissenting Stockholder
with respect to, or settle or offer to settle, or approve the withdrawal of, any such demands.
Section 3.2
Exchange of Certificates
.
(a)
Appointment of Exchange Agent
. Prior to the First Effective Time, Parent shall appoint a bank or trust company (which bank or trust
company shall be reasonably acceptable to the Company) to act as exchange agent (such exchange agent, which, if practicable, shall also be the depositary pursuant to the Offer, the
Exchange Agent
) for the payment of the
Transaction Consideration in the Offer and the First Merger and shall enter into an agreement relating to the Exchange Agents responsibilities under this Agreement, which shall be in form and substance reasonably satisfactory to the Company.
(b)
Deposit of Transaction Consideration
. Parent shall deposit, or cause to be deposited, with the Exchange Agent, prior to or
concurrently with the First Effective Time, cash sufficient to pay the aggregate Cash Consideration (together with, to the extent then determinable, the aggregate Fractional Share Cash Amount) payable in the First Merger to holders of Company Common
Stock and shall deposit, or shall cause to be deposited, with the Exchange Agent, prior to or concurrently with the First Effective Time, evidence of Parent Common Stock in book-entry form (or certificates representing such Parent Common Stock, at
Parents election) representing the number of shares of Parent Common Stock sufficient to deliver the aggregate Stock Consideration payable in the First Merger (such cash and certificates, together with any dividends or distributions with
respect thereto, the
Exchange Fund
).
(c)
Exchange Procedures
. Promptly after the First Effective Time (and in
any event within three (3) Business Days thereafter), Parent shall, and shall cause the Surviving Company to, cause the Exchange Agent to mail to each holder of record of shares of Company Common Stock whose shares of Company Common Stock were
converted pursuant to
Section 3.1(a)(i)
into the right to receive the Transaction Consideration (i) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Parent and the Company shall reasonably agree) (the
Letter of Transmittal
) and
(ii) instructions for use in effecting the surrender of Certificates or Book-Entry Shares in exchange for the Transaction Consideration, the Fractional Share Cash Amount and any dividends or other distributions to which such Certificates or
Book-Entry Shares become entitled in accordance with
Section 3.2(e)
(collectively, the
Exchanged Amounts
). Parent shall cause the Exchange Agent to make, and the Exchange Agent shall make, delivery of the Transaction
Consideration, including payment of the Fractional Share Cash Amount, and any amounts payable in respect of dividends or other distributions on shares of Parent Common Stock in accordance
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with
Section 3.2(e)
out of the Exchange Fund in accordance with this Agreement. The Exchange Fund shall not be used for any purpose that is not expressly provided for in this
Agreement.
(d)
Surrender of Certificates or Book-Entry Shares
. Upon surrender of Certificates or Book-Entry Shares to the Exchange
Agent together with the Letter of Transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may customarily be required by the Exchange Agent, the holder of such Certificates or
Book-Entry Shares shall be entitled to receive in exchange therefor the Exchanged Amounts. In the event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer or stock records of the Company, any cash to
be paid upon, or shares of Parent Common Stock to be issued upon, due surrender of the Certificate or Book-Entry Share formerly representing such shares of Company Common Stock may be paid or issued, as the case may be, to such a transferee if such
Certificate or Book-Entry Share is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer or other similar Taxes have been paid or are not
applicable. No interest shall be paid or shall accrue on the cash payable upon surrender of any Certificate or Book-Entry Share. Until surrendered as contemplated by this
Section 3.2
, each Certificate and Book-Entry Share shall be deemed
at any time after the First Effective Time to represent only the right to receive, upon such surrender, the Exchanged Amounts. Notwithstanding anything to the contrary in this Agreement, any holder of Book-Entry Shares shall not be required to
deliver a Certificate or an executed letter of transmittal to the Exchange Agent to receive the Exchanged Amounts that such holder is entitled to receive pursuant to this
Article III
. In lieu thereof, each holder of record of one or more
Book-Entry Shares whose Company Common Stock were converted into the right to receive the Exchanged Amounts shall upon receipt by the Exchange Agent of an agents message in customary form (or such other evidence, if any, as the
Exchange Agent may reasonably request), be entitled to receive, and Parent shall cause the Exchange Agent to exchange and deliver as promptly as reasonably practicable after the First Effective Time, the Exchanged Amounts in respect of each such
share of Company Common Stock, and the Book-Entry Shares of such holder shall forthwith be cancelled.
(e)
Treatment of Unexchanged
Shares
. No dividends or other distributions, if any, with a record date after the First Effective Time with respect to Parent Common Stock, shall be paid to the holder of any unsurrendered share of Company Common Stock to be converted into the
right to receive shares of Parent Common Stock pursuant to
Section 3.1(a)(i)
until such holder shall surrender such share in accordance with this
Section 3.2
. After the surrender in accordance with this
Section 3.2
of a share of Company Common Stock to be converted into the right to receive shares of Parent Common Stock pursuant to
Section 3.1(a)(i)
, the holder thereof shall be entitled to receive (in addition to the
Transaction Consideration and the Fractional Share Cash Amount payable to such holder pursuant to this
Article III
) any such dividends or other distributions, without any interest thereon, which theretofore had become payable with
respect to the Parent Common Stock issuable in respect of such share of Company Common Stock.
(f)
No Further Ownership Rights in
Company Common Stock
. The shares of Parent Common Stock delivered and cash paid in accordance with the terms of this
Article III
upon conversion of any shares of Company Common Stock shall be deemed to have been delivered and paid in
full satisfaction of all rights pertaining to such shares of Company Common Stock (subject to any rights of Dissenting Stockholders). From and after the First Effective Time, (i) all holders of Certificates and Book-Entry Shares shall cease to
have any rights as stockholders of the Company other than the right to receive the Transaction Consideration into which the shares represented by such Certificates or Book-Entry Shares have been converted pursuant to this Agreement upon the
surrender of such Certificate or Book-Entry Share in accordance with
Section 3.2(d)
(together with the Fractional Share Cash Amount and any dividends or other distributions to which such Certificates or Book-Entry Shares become entitled
in accordance with
Section 3.2(e)
), without interest, and (ii) the stock transfer books of the Company shall be closed with respect to all shares of Company Common Stock outstanding immediately prior to the First Effective Time.
From and after the First Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the First Surviving Corporation or the Surviving Company of
shares of Company Common Stock that were outstanding immediately prior to the First Effective Time. If, at any time after the First Effective Time, any Certificates or Book-Entry Shares formerly representing shares of Company Common Stock
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are presented to the Surviving Company, Parent or the Exchange Agent for any reason, such Certificates or Book-Entry Shares shall be cancelled and exchanged as provided in this
Article III
, subject to applicable Law in the case of Dissenting Shares.
(g)
Investment of Exchange Fund
. The Exchange
Agent shall invest any cash included in the Exchange Fund as directed by Parent;
provided
that such investments shall be in obligations of or guaranteed by the United States of America, in commercial paper obligations rated A-1 or P-1 or
better by Moodys Investors Service, Inc. or Standard & Poors Financial Services LLC, respectively, in certificates of deposit, bank repurchase agreements or bankers acceptances of commercial banks with capital exceeding $1
billion, or in money market funds having a rating in the highest investment category granted by a recognized credit rating agency at the time of investment. No such investment or loss thereon shall affect the amounts payable to holders of
Certificates or Book-Entry Shares pursuant to this
Article III
, and following any losses from any such investment, or to the extent the cash portion of the Exchange Fund otherwise diminishes for any reason below the level required for
the Exchange Agent to make cash payments pursuant to this
Article III
, Parent shall promptly provide additional funds to the Exchange Agent for the benefit of the holders of shares of Company Common Stock at the First Effective Time in
the amount of such losses or other shortfall, which additional funds will be deemed to be part of the Exchange Fund. Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any cash amounts in
excess of the amounts payable under
Section 3.1
, shall be promptly returned to Parent.
(h)
Termination of Exchange
Fund
. Any portion of the Exchange Fund (including any interest or other amounts received with respect thereto) that remains unclaimed by, or otherwise undistributed to, the holders of Certificates and Book-Entry Shares for 270 days after the
First Effective Time shall be delivered to Parent, upon Parents demand, and any holder of Certificates or Book-Entry Shares who has not theretofore complied with this
Article III
shall thereafter look only to Parent or the
Surviving Company (subject to abandoned property, escheat or other similar Laws), as general creditors thereof, for satisfaction of its claim for Transaction Consideration (including any Fractional Share Cash Amount) and any dividends and
distributions which such holder has the right to receive pursuant to this
Article III
without any interest thereon.
(i)
No
Liability
. None of Parent, the Company, Purchaser or Merger Sub 2 or the Exchange Agent shall be liable to any Person in respect of any portion of the Exchange Fund or the Transaction Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law. Notwithstanding any other provision of this Agreement, any portion of the Transaction Consideration or the cash to be paid in accordance with this
Article III
that remains
undistributed to the holders of Certificates and Book-Entry Shares as of the second (2
nd
) anniversary of the First Effective Time (or immediately prior to such earlier date on which the
Transaction Consideration or such cash would otherwise escheat to or become the property of any Governmental Entity), shall, to the extent permitted by applicable Law, become the property of the Surviving Company, free and clear of all claims or
interest of any Person previously entitled thereto.
(j)
Lost Certificates
. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, in form and substance reasonably acceptable to Parent, and, if required by Parent or the Exchange Agent, the posting by
such Person of a bond in customary amount as Parent or the Exchange Agent may reasonably require as indemnity against any claim that may be made against it or the Surviving Company with respect to such Certificate, the Exchange Agent (or, if
subsequent to the termination of the Exchange Fund and subject to
Section 3.2(h)
, Parent) shall deliver, in exchange for such lost, stolen or destroyed Certificate, the Transaction Consideration and any dividends and distributions
deliverable in respect thereof pursuant to this Agreement had such lost, stolen or destroyed Certificate been surrendered.
Section 3.3
Company Options, Company RSU Awards and ESPP
.
(a)
Company Options
. Each option to purchase shares of
Company Common Stock granted pursuant to a Company Stock Plan that is outstanding immediately prior to the First Effective Time (each, a
Company Option
) shall, as of the First Effective Time, by virtue of the First Merger and
without any action on the part of
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any holder of such Company Option, cease to represent an option to purchase shares of Company Common Stock and shall be converted into an option to purchase a number of shares of Parent Common
Stock equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such Company Option immediately prior to such time and (y) the Equity Award Conversion Ratio, at an
exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of Company Common Stock of such Company Option immediately prior to the First Effective Time divided by (B) the Equity Award
Conversion Ratio;
provided
,
however
, that the conversion of the Company Options as provided in this
Section 3.3(a)
shall in any event be done in a manner consistent with the requirements of Section 409A of the Code;
provided further
, that in the case of any Company Option to which Section 422 of the Code applies, the conversion of such option shall be done in accordance with the foregoing, subject to such adjustments as are necessary in order to
satisfy the requirements of Section 424(a) of the Code. Except as specifically provided above or in
Section 6.4(h)
of this Agreement, following the time of the conversion contemplated above, each Company Option shall continue to be
governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to such Company Option immediately prior to the First Effective Time. For purposes of this Agreement, the term
Equity Award Conversion
Ratio
means $57.00
divided by
the Parent Trading Price.
(b)
Company RSU Awards
.
(i) Each restricted stock unit awarded in respect of shares of Company Common Stock granted under a Company Stock Plan or
otherwise that is outstanding as of the First Effective Time (each, a
Company RSU Award
) shall, by virtue of the occurrence of the First Merger and without any action on the part of any holder of such Company RSU Award, as of the
First Effective Time, cease to represent a restricted stock unit denominated in shares of Company Common Stock and shall be converted into a restricted stock unit denominated in shares of Parent Common Stock (a
Parent Stock-Based
RSU
). The number of shares of Parent Common Stock subject to each such Parent Stock-Based RSU shall be equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such
Company RSU Award immediately prior to the First Effective Time and (y) the Equity Award Conversion Ratio. Except as specifically provided above or in
Section 6.4(h)
, following the First Effective Time, each such Parent Stock-Based
RSU shall continue to be governed by the same terms and conditions (including vesting terms) as were applicable to the applicable Company RSU Award immediately prior to the First Effective Time.
(ii) Notwithstanding anything in this Agreement to the contrary, if a Company RSU Award is subject to an agreement with an
individual holder in effect as of the date hereof that provides that such Company RSU Award shall be settled in connection with a change of control involving the Company (without the required occurrence of termination or any other event), such
Company RSU Award shall be treated as set forth in
Section 3.1
above.
(c)
Company Performance Share Awards
. Each
performance share award awarded in respect of shares of Company Common Stock granted under a Company Stock Plan that is outstanding as of the First Effective Time (each, a
Company Performance Share Award
) shall, by virtue of the
occurrence of the First Merger and without any action on the part of any holder of such Company Performance Share Award, as of the First Effective Time, cease to represent a performance share award denominated in shares of Company Common Stock and
shall be converted into a performance share award denominated in shares of Parent Common Stock (a
Parent Performance Share Award
). The number of shares of Parent Common Stock subject to each such Parent Performance Share Award
shall be equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such Company Performance Share Award immediately prior to the First Effective Time, multiplied by
(y) the Equity Award Conversion Ratio. Except as specifically provided above or in
Section 6.4(h)
, following the First Effective Time, each such Parent Performance Share Award shall continue to be governed by the same terms and
conditions as were applicable to the applicable Company Performance Share Award immediately prior to the First Effective Time, including the satisfaction of the performance criteria set forth in the Company Performance Share Award.
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(d) Any applicable Taxes required to be withheld with respect to payments in respect of Company
RSU Awards shall first be withheld from the Cash Consideration, if any. Prior to the First Effective Time, the Company Board of Directors or the appropriate committee thereof shall adopt resolutions and shall take all such other actions as are
necessary to effectuate the treatment of the Company Options, Company RSU Awards and Company Performance Share Awards (collectively, the
Company Stock Awards
) as contemplated by this
Section 3.3
.
(e) As soon as reasonably practicable following the date of this Agreement and in any event prior to the First Effective Time, the Company
shall take all actions, including obtaining any necessary determinations and resolutions of the Company Board of Directors or a committee thereof and, if appropriate, amending the terms of the Company Employee Stock Purchase Plan (the
ESPP
) that may be necessary or required under the ESPP and Law, to ensure that (A) except for the six-month offering period under the ESPP that commenced on January 1, 2017 (the
Final Offering
), no
offering period shall be authorized or commenced on or after the date of this Agreement; (B) if, with respect to the Final Offering, the First Effective Time shall occur prior to June 30, 2017 (which is the Purchase Date, as defined in the
ESPP), (i) each individual participating in the Final Offering shall receive notice of the transactions contemplated by this Agreement no later than ten (10) Business Days prior to the First Effective Time and shall have an opportunity to
terminate his or her outstanding purchase rights under the ESPP, (ii) the Final Offering shall end immediately prior to the First Effective Time, and (iii) any remaining accumulated but unused payroll deductions shall be distributed to the
relevant participants without interest as promptly as practicable following such termination; (C) each ESPP participants accumulated contributions under the ESPP shall be used to purchase shares of Company Common Stock in accordance with
the ESPP as of the end of the Final Offering (subject to the provisions of the ESPP regarding the maximum number and value of shares purchasable per participant); (D) the applicable purchase price for shares of Company Common Stock shall not be
decreased below the levels set forth in the ESPP as of the date of this Agreement; (E) no individual shall be permitted to increase his or her rate of contribution under the ESPP following the date of this Agreement; and (F) the ESPP shall
terminate in its entirety prior to the First Effective Time and no further rights shall be granted or exercised under the ESPP thereafter.
(f) If Parent so elects, Parent may, in its sole discretion, assume any or all of the Company Stock Plans;
provided
,
however
,
that if Parent does not elect to assume such Company Stock Plans, the Company Options, Parent Stock-Based RSUs and Parent Performance Share Awards contemplated under
Section 3.3
shall be granted under the stock plans of Parent. To the
extent that Parent does not elect to assume one or more of the Company Stock Plans, in response to written notice from Parent delivered not less than ten (10) Business Days prior to the First Effective Time, at or prior to the First Effective
Time, the Company, the Company Board of Directors and the compensation committee of the Company Board of Directors, as applicable, shall adopt any resolutions and take all steps necessary to (i) cause such Company Stock Plan(s) to terminate at
or prior to the First Effective Time and (ii) ensure that from and after the First Effective Time none of Parent, Purchaser, the Company or any of their successors or Affiliates will be required to deliver shares of Company Common Stock or
other capital stock of the Company to any Person pursuant to or in settlement of awards pursuant thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed (i) in the publicly available Company SEC Documents
filed with or furnished to the SEC (including the exhibits and schedules thereto or incorporated therein) since September 5, 2013 and prior to the date hereof (without giving effect to any amendment thereof filed with or furnished to the SEC on
or after the date of this Agreement and excluding any disclosures set forth in any such Company SEC Document that is in any risk factor section, or in any other section to the extent they are forward-looking statements or are similarly non-specific,
predictive, cautionary or forward-looking in nature), where the relevance of the information to a particular representation or warranty is reasonably apparent on the face of such disclosure or (ii) in the disclosure schedule delivered by the
Company to Parent immediately prior to the execution of this Agreement (the
Company Disclosure Schedule
) (provided that disclosure in any section of such Company Disclosure Schedule shall apply only to the corresponding section of
this Agreement except to the extent that it is reasonably apparent
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on the face of such disclosure that such disclosure applies to another representation or warranty), the Company represents and warrants to Parent and Purchaser as follows:
Section 4.1
Organization
.
(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted. Each of the (i) Companys Subsidiaries is a legal entity duly organized, validly existing and
in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and
(ii) Company and its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such approvals or
qualification necessary, except in the cases of each of clauses (i) and (ii) where the failure to be so organized or in existence or qualified or to have such power, authority or approvals or be in good standing, has not had and would not
reasonably be expected to have a Company Material Adverse Effect.
(b) The Company has made available to Parent prior to the date of this
Agreement a true and complete copy of the Companys certificate of incorporation (the
Company Certificate
) and bylaws (the
Company Bylaws
, and together with the Company Certificate, the
Company
Organizational Documents
), as amended through the date hereof. The Company Organizational Documents are in full force and effect and the Company is not in violation of their provisions. The Company has made available to Parent prior to the
date of this Agreement a true and complete copy of the certificate of incorporation, bylaws, limited partnership agreement, limited liability company agreement or comparable constituent or organizational documents (the
Organizational
Documents
) for each Subsidiary of the Company, in each case, as amended through the date hereof, and the Organizational Documents of the Subsidiaries of the Company are in full force and effect and no Subsidiary is in violation of its
Organizational Documents.
Section 4.1(b)
of the Company Disclosure Schedule sets forth a true and complete list of all Subsidiaries of the Company and any other joint ventures, partnerships or similar arrangements in which the Company or
its Subsidiaries have a limited liability, partnership or other equity interest (or any other security or other right, agreement or commitment convertible or exercisable into, or exchangeable for, any such interest in any Person), the amount and
percentage of any such interest held by the Company and such Subsidiary, in each case as of the date of this Agreement. Neither the Company nor any significant subsidiary of the Company within the meaning of Rule 1-02(w) of Regulation
S-X under the Exchange Act has filed for bankruptcy or filed for reorganization under the U.S. federal bankruptcy Laws or similar state or federal Law, or become subject to conservatorship or receivership, in each case, since December 31, 2013.
Section 4.2
Capital Stock
.
(a) The authorized capital stock of the Company consists of 180,000,000 shares of Company Common Stock and 20,000,000 shares of preferred
stock, par value $0.01 per share (
Company Preferred Stock
). As of January 5, 2017, (i) 40,499,340 shares of Company Common Stock were issued and outstanding, (ii) no shares of Company Common Stock were held in
treasury, (iii) no shares of Company Preferred Stock were issued or outstanding, (iv) 2,810,035 shares of Company Common Stock were subject to outstanding Company Stock Awards, of which amount (A) 726,587 shares of Company Common
Stock were subject to outstanding Company RSU Awards, (B) 2,006,176 shares of Company Common Stock were issuable upon the exercise of outstanding Company Options, and (C) 77,272 shares of Company Common Stock were subject to outstanding
Company Performance Share Awards, assuming target performance is attained, (v) 3,968,969 shares of Company Common Stock remained available for future grants of Company Stock Awards, (vi) 394,220 shares of Company Common Stock are reserved
for issuance in respect of the ESPP, and (vii) no other shares of capital stock or other voting securities of the Company were issued, reserved for issuance or outstanding. All outstanding shares of Company Common Stock are, and shares of
Company Common Stock reserved for issuance with respect to Company Stock Awards, when issued in accordance with the respective terms thereof, will be, duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights.
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(b) Except (x) as set forth in this
Section 4.2(b)
or in
Section 4.2(b)
of the Company Disclosure Schedule and (y) with respect to any of the following that are issued, granted, transferred, exchanged, sold, registered for sale, extended, entered into, redeemed or otherwise acquired or
arising after the date of this Agreement as expressly permitted under
Section 6.1(b)(xiii)
, there are no outstanding subscriptions, options, warrants, calls, convertible securities, exchangeable securities, preemptive rights, stock
appreciation rights, redemption rights, repurchase rights, or other similar rights, agreements or commitments to which the Company is a party (i) obligating the Company to (A) issue, transfer, exchange, sell or register for sale any shares
of capital stock or other equity interests of the Company or securities convertible into or exchangeable for such shares or equity interests, (B) grant, extend or enter into any such subscription, option, warrant, call, convertible securities
or other similar right, agreement or arrangement, in each case, with respect to equity interests of the Company, (C) redeem or otherwise acquire any such shares of capital stock or other equity interests, (D) provide a material amount of
funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary (other than a wholly owned Subsidiary of the Company), except as set forth in the Organizational Documents of the Subsidiaries of
the Company, or (E) make any payment to any Person the value of which is derived from or calculated based on the value of Company Common Stock or Company Preferred Stock (other than in connection with Company Benefit Plans and other employee or
contractor compensation arrangements) or (ii) granting any preemptive or antidilutive or similar rights with respect to any security issued by the Company.
(c) Except (x) as set forth in this
Section 4.2(c)
or in
Section 4.2(c)
of the Company Disclosure Schedule and
(y) with respect to any of the following that are issued, granted, transferred, exchanged, sold, registered for sale, extended, entered into, redeemed or otherwise acquired or arising after the date of this Agreement as expressly permitted
under
Section 6.1(b)(xiii)
, there are no outstanding subscriptions, options, warrants, calls, convertible securities, exchangeable securities, preemptive rights, stock appreciation rights, redemption rights, repurchase rights, or other
similar rights, agreements or commitments to which any of the Companys Subsidiaries is a party (i) obligating such Subsidiary to (A) issue, transfer, exchange, sell or register for sale any shares of capital stock or other equity
interests of such Subsidiary of the Company or securities convertible into or exchangeable for such shares or equity interests, (B) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other
similar right, agreement or arrangement, in each case with respect to equity interests of such Subsidiary, (C) redeem or otherwise acquire any such shares of capital stock or other equity interests, except as set forth in the Organizational
Documents of the Subsidiaries of the Company, (D) provide a material amount of funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary (other than a wholly owned Subsidiary
thereof), except as set forth in the Organizational Documents of the Subsidiaries of the Company, or (E) make any payment to any Person the value of which is derived from or calculated based on the value of Company Common Stock or Company
Preferred Stock (other than in connection with Company Benefit Plans and other employee or contractor compensation arrangements) or (ii) granting any preemptive or antidilutive or similar rights with respect to any security issued by the
Subsidiaries of the Company, except as set forth in the Organizational Documents of the Subsidiaries of the Company.
(d) The Company does
not have outstanding any bonds, debentures, notes or other indebtedness, the holders of which have the right to vote (or which are convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of the
Company on any matter. There are no voting trusts or other agreements or understandings to which the Company is a party with respect to the voting or registration of the capital stock or other equity interest of the Company. Since January 5,
2017 through the date hereof, the Company has not issued or repurchased any shares of its capital stock (other than in connection with the exercise, settlement or vesting of Company Stock Awards in accordance with their respective terms).
(e) With respect to each Subsidiary of the Company, such Subsidiary (i) does not have outstanding any bonds, debentures, notes or other
indebtedness, the holders of which have the right to vote (or which are convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of such Subsidiary on any matter, and (ii) there are no
voting trusts or other agreements or understandings to which such Subsidiary is a party with respect to the voting or registration of the capital stock or other equity interest of such Subsidiary.
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(f) All of the outstanding shares of capital stock or other equity interests of each Subsidiary
of the Company that is required to be set forth on
Section 4.1(b)
of the Company Disclosure Schedule and that are owned, directly or indirectly, by the Company or a Subsidiary of the Company, are owned free and clear of any Liens other
than Permitted Liens and all of such shares of capital stock or other equity interests are duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights. No Subsidiary of the Company owns any shares of capital stock of
the Company.
(g) No dividends or similar distributions which have accrued or been declared but are unpaid on the Company Common Stock,
Company Stock Awards, shares of capital stock or other equity interests of the Company and the Company is not subject to any obligation (contingent or otherwise) to pay any dividend or otherwise to make any distribution or payment to any current or
former holder of any of the Company Common Stock, Company Stock Awards, shares of capital stock or other equity interests, as applicable.
(h)
Section 4.2(h)
of the Company Disclosure Schedule sets forth a true and complete list of the number of Company Stock Awards
outstanding, including in each case the name of the holder thereof, the number of shares of Company Common Stock underlying each security, the date of grant, term, vesting schedule, the plan under which the Company Stock Award was granted, the
weighted average exercise price with respect to the Company Options and whether such Company Stock Award is intended to qualify as an incentive stock option as defined in Section 422 of the Code, in each case, as of the date of this
Agreement.
Section 4.3
Corporate Authority Relative to this Agreement; No Violation
.
(a) The Company has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the Transactions,
including the Offer and the Mergers. The execution, delivery and performance of this Agreement by the Company and the consummation of the Transactions, including the Offer and the Mergers, have been duly and validly authorized by the Company Board
of Directors and, other than as set forth in
Section 4.3(d)
, no other corporate proceedings on the part of the Company or vote of the Companys stockholders are necessary to authorize the consummation of the Transactions. The
Company Board of Directors has unanimously (i) determined that the terms of the Transactions, including the Offer and the Mergers, are fair to, and in the best interests of, the Company and its stockholders, (ii) determined that it is in
the best interest of the Company and its stockholders to enter into, and declared advisable, this Agreement, (iii) approved the execution and delivery by the Company of this Agreement (including the agreement of merger, as such term is used in
Section 251 of the DGCL), the performance by the Company of its covenants and agreements contained herein and the consummation of the Transactions, including the Offer and the Mergers, upon the terms and subject to the conditions contained
herein and (iv) resolved to, unless a Company Adverse Recommendation Change is made, recommend that the holders of shares of Company Common Stock accept the Offer and tender their shares of Company Common Stock to Purchaser pursuant to the
Offer.
(b) The affirmative vote of the holders of a majority of the issued and outstanding shares of Company Common Stock is the only vote
of the holders of any class or series of Company capital stock that, absent Section 251(h) of the DGCL, would have been necessary under the DGCL and the Company Certificate and Company Bylaws to adopt, approve or authorize this Agreement and to
consummate the First Merger.
(c) This Agreement has been duly and validly executed and delivered by the Company and, assuming this
Agreement constitutes the legal, valid and binding agreement of Parent, Purchaser and Merger Sub 2, this Agreement constitutes the legal, valid and binding agreement of the Company and is enforceable against the Company in accordance with its terms,
except as such enforcement may be subject to applicable bankruptcy, reorganization, insolvency, moratorium or other similar Laws affecting creditors rights generally and the availability of equitable relief (the
Enforceability
Exceptions
).
(d) Other than in connection with or in compliance with (i) the filing of the Certificates of Merger with the
Delaware Secretary, (ii) the filing of the Offer Documents, the Schedule 14D-9 and the Registration Statement (including the Offer Prospectus), with the SEC and any amendments or supplements thereto and declaration of effectiveness of the
Registration Statement, (iii) the Exchange Act, (iv) the Securities Act, (v) applicable state securities, takeover and blue sky laws, (vi) the rules and regulations of Nasdaq, (vii) the Hart-Scott-Rodino
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Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the
HSR Act
), (viii) the approvals set forth in
Section 4.3(d)
of the Company Disclosure Schedule (clauses (i) through (viii) collectively, the
Company Approvals
), and (ix) such other authorizations, consents, Orders, licenses, permits, approvals,
registrations, declarations and notice filings, the failure of which to be obtained would not reasonably be expected to have a Company Material Adverse Effect or prevent or materially impede, interfere with, hinder or delay the consummation of any
of the Transactions, no authorization, consent, Order, license, permit or approval of, or registration, declaration, notice or filing with, any Governmental Entity is necessary for the consummation by the Company of the Transactions, including the
Mergers.
(e) The execution and delivery by the Company of this Agreement does not, and (assuming the Company Approvals are obtained) the
consummation of the Transactions and compliance with the provisions hereof will not (i) result in any material loss, suspension, limitation or impairment of any right of the Company, any of its Subsidiaries or, to the knowledge of the Company,
any of the Facility Entities to own or use any assets required for the conduct of their business or result in any material violation of, or material default (with or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation, first offer, first refusal, modification or acceleration of any obligation or to the loss of a benefit under any material loan or guarantee of indebtedness or material credit agreement, note, bond, mortgage, indenture,
lease, agreement, Contract, instrument, permit, concession, franchise, right or license binding upon the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities or by which or to which any of their
respective properties, rights or assets of the Company or any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities are bound or subject, or result in the creation of any liens, claims, mortgages, encumbrances,
pledges, security interests, equities or charges of any kind (each, a
Lien
) other than Permitted Liens, in each case, upon the Company or any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities or
any of the material properties or assets of the Company or any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities, (ii) conflict with or result in any violation of any provision of the Company Organizational
Documents or the Organizational Documents of the Companys Subsidiaries, or, to the knowledge of the Company, any of the Organizational Documents of the Facility Entities or (iii) materially conflict with or materially violate any
applicable Laws to which the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities, or any of their properties or assets, is subject.
(f) The Company has not opted out of Section 251(h) of the DGCL in the Company Certificate.
Section 4.4
Reports and Financial Statements
.
(a) The Company has timely filed or furnished all forms, documents, certifications, statements and reports required to be filed or furnished by
it with the SEC since December 31, 2013 (all such documents and reports filed or furnished by the Company, including all exhibits, supplements or schedules thereto, the
Company SEC Documents
). As of their respective dates or,
if amended, as of the date of the last such amendment (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively), (i) the Company SEC Documents complied
in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act
), as the case may be, and the applicable rules and regulations promulgated
thereunder, and (ii) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state any 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. Since December 31, 2013, no executive officer of the Company has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the
Sarbanes-Oxley Act. As of the date of this Agreement, there are no outstanding or unresolved comments in any comment letters of the staff of the SEC received by the Company relating to the Company SEC Documents. No Subsidiary of the Company nor, to
the knowledge of the Company, any of the Facility Entities, is subject to the periodic reporting requirements of the Exchange Act or is subject to the periodic reporting requirements of any foreign Governmental Entity that performs a similar
function to that of the SEC or any applicable foreign securities Law of any exchange or quotation service.
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(b) (i) Each of the consolidated balance sheets included in or incorporated by reference
into the Company SEC Documents (including the related notes and schedules) presents fairly, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries and Facility Entities as of its date and
(ii) each of the Companys consolidated statements of operations and comprehensive loss, changes in stockholders equity and cash flows included in or incorporated by reference into the Company SEC Documents (including any related
notes and schedules) (such changes in stockholders equity and cash flows, together with the consolidated balance sheets referred to in clause (i) (and the related notes and schedules), the
Company Financial Statements
)
presents fairly, in all material respects, the results of operations and cash flows, as the case may be, of the Company and its consolidated Subsidiaries and Facility Entities for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments and the absence of notes), (iii) the Company Financial Statements (A) have been prepared from, and are in accordance with, the books and records of the Company and its consolidated
Subsidiaries and Facility Entities and (B) are in conformity with U.S. generally accepted accounting principles (
GAAP
) (except, in the case of the unaudited statements, subject to normal year-end audit adjustments and the
absence of notes) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto), and (iv) the Company Financial Statements have been prepared in accordance with and comply in all material
respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act. As of the date hereof, PricewaterhouseCoopers LLP has not resigned (or informed the Company that it intends
to resign) or been dismissed as independent public accountants of the Company.
(c) Neither the Company nor any of its Subsidiaries is a
party to, nor does it have any Contractual commitment to become a party to, any material off-balance sheet arrangements (as defined in Item 303(a) of Regulation S-K of the SEC).
(d) Since December 31, 2013, (i) none of the Company nor any Subsidiary of the Company nor, to the knowledge of the Company, any
Representative of the Company or any Subsidiary of the Company, has received any written complaint, allegation or claim regarding the accounting, internal accounting controls or auditing practices, procedures, methodologies or methods of the Company
or any Subsidiary of the Company or any complaint, allegation or claim, whether written or to a compliance hotline or similar reporting method, from employees of the Company or any Subsidiary of the Company regarding questionable accounting or
auditing matters with respect to the Company or any Subsidiary of the Company, and (ii) no attorney representing the Company or any Subsidiary of the Company, whether or not employed by the Company or any Subsidiary of the Company, has reported
evidence of a violation of securities Laws or breach of fiduciary duty by the Company, any Subsidiary of the Company or any of their respective Representatives to the Company Board of Directors or any committee thereof, or to the General Counsel or
Chief Executive Officer of the Company.
Section 4.5
Internal Controls and Procedures
. The Company
has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) sufficient to comply in
all material respects with all legal and accounting requirements applicable to the Company and each of its Subsidiaries and as otherwise required by Rule 13a-15 or 15d-5 under the Exchange Act. The Companys disclosure controls and procedures
are reasonably designed to ensure that all material information required to be disclosed by the Company in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the Companys management as appropriate to allow timely decisions regarding required disclosure and to make the certifications
required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. The Company, each Subsidiary of the Company and each of their officers and directors in their respective capacities as such are in material compliance with, and, since
December 31, 2013, have materially complied with the applicable provisions of Sarbanes-Oxley Act and the Exchange Act. Based on its most recent evaluation of internal controls over financial reporting prior to the date hereof, management of the
Company has disclosed to the Companys auditors and the audit committee of the Company Board of Directors (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting
that are reasonably likely to adversely affect in any material respect the Companys ability to
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report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over
financial reporting, and each such deficiency, weakness and fraud so disclosed to auditors, if any, has been disclosed to Parent prior to the date hereof.
Section 4.6
No Undisclosed Liabilities
. There are no Liabilities of the Company, any of its
Subsidiaries or, to the knowledge of the Company, any of the Facility Entities of any nature whatsoever (whether accrued, absolute, determined, contingent or otherwise and whether due or to become due), except for (a) Liabilities that are
reflected or reserved against on the consolidated balance sheet of the Company and its Subsidiaries included in its Quarterly Report on Form 10-Q for the nine-month period ended September 30, 2016 (including any notes thereto),
(b) Liabilities expressly contemplated by this Agreement or otherwise required to be incurred in connection with this Agreement or the Transactions, (c) Liabilities incurred in the ordinary course of business since September 30, 2016
and (d)
Liabilities that have not had and would not reasonably be expected to have a Company Material Adverse Effect.
Section 4.7
Compliance with Law; Permits
.
(a) The Company, its Subsidiaries, and, to the knowledge of the Company, the Facility Entities are,
and since December 31, 2013 have been, in compliance with all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, regulations, judgments, Orders, common laws or agency requirements of Governmental Entities
including Company Regulatory Agencies (collectively,
Laws
and each, a
Law
), and all such Laws by which their properties or assets are bound, except where such non-compliance would not reasonably be expected to
have a Company Material Adverse Effect. Since December 31, 2013, none of the Company, its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities has received any written notice or, to the knowledge of the Company, other
communication from any Governmental Entity, including, without limitation, any Company Regulatory Agency, regarding any actual or possible failure to comply with any applicable Law in any material respect.
(b) The Company, its Subsidiaries, and, to the knowledge of the Company, the Facility Entities (A) hold, and have at all times since
December 31, 2013 held, all franchises, grants, authorizations, licenses, permits, consents, certificates, approvals, exemptions, clearances, permissions, qualifications and registrations and Orders of all applicable Governmental Entities,
including Company Regulatory Agencies, necessary for the lawful operation of the businesses of the Company, its Subsidiaries, and the Facility Entities, respectively, including the ownership, operation and leasing of their respective properties and
assets (the
Company Permits
), and (B) have filed all tariffs, reports, notices and other documents with all applicable Governmental Entities, including Company Regulatory Agencies, and have paid all fees and assessments due
and payable, in each case in connection with such Company Permits, except, in the case of each of clause (A) and (B), as would not reasonably be expected to have a Company Material Adverse Effect. Except as would not reasonably be expected to
have a Company Material Adverse Effect, (i) all Company Permits are valid and in full force and effect, and are not subject to any administrative or judicial proceeding that would reasonably be expected to result in any modification,
termination or revocation thereof and, to the knowledge of the Company, no suspension or cancellation of any such Company Permit is threatened by a Governmental Entity in writing and (ii) the Company, each of its Subsidiaries, and, to the
knowledge of the Company, each of the Facility Entities is, and has at all times since December 31, 2013 been, in compliance with the terms, conditions and requirements of all Company Permits.
(c) None of the Company, any of its Subsidiaries, or, to the knowledge of the Company, the Facility Entities, nor any Representative acting on
behalf of the Company, its Subsidiaries, or, to the knowledge of the Company, the Facility Entities, has materially violated or is in material violation of the Foreign Corrupt Practices Act of 1977, as amended, or any other Law relating to bribery,
corruption or similar activities, nor has any such Person (i) used any funds of the Company, any of its Subsidiaries, or, to the knowledge of the Company, the Facility Entities for unlawful contributions, unlawful gifts, unlawful entertainment
or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic governmental officials or
A-21
employees or to foreign or domestic political parties or campaigns from funds of the Company, any of its Subsidiaries, or, to the knowledge of the Company, the Facility Entities;
(iii) established or maintained any unlawful fund of monies or other assets of the Company, any of its Subsidiaries or, to the knowledge of the Company, the Facility Entities; (iv) made any fraudulent entry on the books or records of the
Company, any of its Subsidiaries or, to the knowledge of the Company, the Facility Entities; (v) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any Person,
private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business to obtain special concessions for the Company, any of its Subsidiaries, or, to the knowledge of the Company, the
Facility Entities; or (vi) engaged in any transaction or dealing in property or interests in property of, received from or made any contribution of funds, goods or services to or for the benefit of, provided any payments or material assistance
to, or otherwise engaged in or facilitated any transactions with a Prohibited Person.
Section 4.8
Certain Regulatory Matters
.
(a) The operations, products, and services of the Company, its Subsidiaries, and, to the knowledge of
the Company, the Facility Entities, are and since December 31, 2013 have been (except with respect to (i) the Federal Health Care Program Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); (ii) the Federal False Claims Act,
31 U.S.C. §§ 3729-3733, and (iii) state anti-kickback, fee-splitting, self-referral and corporate practice of medicine Laws, each of which the Company, its Subsidiaries, and, to the knowledge of the Company, the Facility
Entities are and since December 31, 2011 have been), in material compliance with all applicable health care Laws, including the following federal and state Laws and all applicable regulations promulgated thereunder, relating to the regulation,
provision or administration of, or payment for, health care benefits, health care insurance coverage and health care products or services: (i) Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395hhh (the Medicare statute),
including specifically, the Federal Ethics in Patient Referrals Act, 42 U.S.C. § 1395nn; (ii) Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396v (the Medicaid statute) and state Medicaid Laws; (iii) TRICARE,
10 U.S.C. § 1071
et seq
.; (iv) the Federal Health Care Program Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); (v) the Federal False Claims Act, 31 U.S.C. §§ 3729-3733; (vi) the Federal Program
Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; (vii) the Federal Civil Monetary Penalties Law, 42 U.S.C. §§ 1320a-7a and 1320a-7b; (viii) state anti-kickback, fee-splitting, self-referral and corporate practice
of medicine Laws; (ix) workers compensation Laws; and (x) licensure, permit or authorization Laws relating to the regulation, provision, or administration of, or payment for, health care products or services (collectively
Health Care Laws
). Since December 31, 2013 (except with respect to (i) the Federal Health Care Program Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); (ii) the Federal False Claims Act,
31 U.S.C. §§ 3729-3733, and (iii) state anti-kickback, fee-splitting, self-referral and corporate practice of medicine Laws, each of which shall be since December 31, 2011), no notice has been received by the Company,
any of its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities, and no Actions are pending against the Company, any of its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities, alleging any
material breach or violation of, non-compliance with or default under any such Health Care Laws, other than any Actions filed under seal of which the Company has no knowledge.
(b) Except as set forth on
Section 4.8
of the Company Disclosure Schedule, to the knowledge of the Company, no Person has filed or
has made a non-frivolous threat to file, in the last six (6) years, a claim against the Company, any of its Subsidiaries, or any of the Facility Entities an Action under any federal or state whistleblower statute, including under the Federal
False Claims Act, 31 U.S.C. §§ 3729-3733.
(c) The Company and its Subsidiaries have provided Purchaser a copy of their current
compliance program materials. Since December 31, 2013, none of the Company, any of its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities have received any overpayments from, or owe any outstanding refunds to, any
Governmental Entity, or agent thereof, or private third-party payer that have not been returned in full to such Governmental Entity, agent thereof, or private third-party payer, respectively, other than overpayments and refunds that occur in the
ordinary course of business and that are not in excess of $10,000,000 in the aggregate. Except as set forth on
Section 4.8
of the Company Disclosure Schedule, since December 31, 2013, the Company,
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its Subsidiaries, and, to the knowledge of the Company, the Facility Entities have not been audited, surveyed or otherwise examined in connection with a contract with any Governmental Program or
any third party-payer program, other than audits, surveys or reviews that occur in the ordinary course of business and where the aggregate amount for which the Company, its Subsidiaries and the Facility Entities, in the aggregate, reasonably expect
to be liable is not in excess of $5,000,000. None of the Company, any of its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities have any outstanding health care reimbursement audits related to services provided by the
Company, any of its Subsidiaries, or the Facility Entities and conducted by any Governmental Entity, agent thereof, or other third-party payers where the aggregate amount for which the Company, its Subsidiaries and the Facility Entities, in the
aggregate, reasonably expect to be liable is in excess of $5,000,000.
(d) None of the Company, any of its Subsidiaries, or, to the
knowledge of the Company, any of the Facility Entities (i) is a party to an Order, individual integrity agreement, or corporate integrity agreement with any Governmental Entity, including the Office of Inspector General of the United States
Department of Health and Human Services, concerning compliance with Health Care Laws, (ii) has any reporting obligations pursuant to a settlement agreement entered into with any Governmental Entity related to Health Care Laws, or (iii) is
responding or, since December 31, 2013 has responded to, any search warrant, subpoena, criminal or civil investigative demand by or from any Governmental Entity relating to Health Care Laws.
(e) The Company, each of its Subsidiaries, and, to the knowledge of the Company, each of the Facility Entities requires that each health care
professional providing services on behalf of the Company, its Subsidiaries, or any of the Facility Entities, as applicable, be duly licensed (i) under the applicable Laws of each state or other jurisdiction in which such health care
professional practices and (ii) under the applicable Laws of each state or territory to the residents of which the health care professional provides services that require licensure in such state or territory. No health care professional
employed by the Company, any of its Subsidiaries, or any of the Facility Entities is, to the knowledge of the Company, under investigation by, or is not in good standing with, any Governmental Entity, including a medical board.
(f) None of the Company, any of its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities, nor any of their
Representatives acting on their behalf, respectively, has, since December 31, 2013, made an untrue statement of material fact or a fraudulent statement to any Governmental Entity, or failed to disclose a material fact required to be disclosed
to any Governmental Entity.
(g) Neither the Company, its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities,
nor any of their Representatives authorized to act on their behalf, respectively, including employees or contractors: (i) has been convicted of, formally charged with, or, to the knowledge of the Company, investigated for any crime or violation
or engaged in any conduct for which such Person would reasonably be expected to be excluded, suspended, or debarred from participating, or would be otherwise ineligible to participate, in any Governmental Programs; (ii) to the knowledge of the
Company, has engaged in any conduct that would reasonably be expected to subject such Person or entity to a civil monetary penalty or criminal penalty under Sections 1128A or 1128B of the Social Security Act or any similar Law; (iii) has been
convicted of or formally charged with, or to the knowledge of the Company, has been investigated for, any violation of Laws related to fraud, theft, embezzlement, breach of fiduciary responsibility, financial misconduct, or obstruction of an
investigation; or (iv) is excluded, suspended, or debarred from participation, or is otherwise ineligible to participate, in any Governmental Programs. The Company verifies on an ongoing, monthly basis that its and its Subsidiaries
employees and contractors are not excluded, suspended or debarred from participation, or otherwise ineligible to participate in, in any Governmental Programs.
(h) Since December 31, 2013, all reports, applications, documents, claims, permits and notices required to be filed, maintained or
furnished to any Governmental Entity pursuant to any Healthcare Laws by the Company, its Subsidiaries, and, to the knowledge of the Company, the Facility Entities have been so filed, maintained or furnished, except where failure to file, maintain or
furnish such reports, applications, documents, claims, permits or notices would not reasonably be expected to have a Company Material Adverse Effect. All such reports, applications, documents, claims, permits and notices were complete and accurate
in all material respects on the date filed (or were corrected in or supplemented by a subsequent filing filed prior to the date hereof).
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Section 4.9
Environmental Laws and Regulations
. Each of
the Company and its Subsidiaries, and, to the knowledge of the Company, each of the Facility Entities is, and for the past five years, has been in compliance with all applicable Environmental Laws, which compliance includes timely applying for,
obtaining, maintaining and complying with all Company Permits required under Environmental Laws for the operation of their respective businesses, except, in each case, as would not reasonably be expected to have a Company Material Adverse Effect.
There is no Order or Action relating to or arising from any actual or alleged noncompliance with, or liability under, Environmental Laws (including, without limitation, relating to or arising from the Release or threatened Release of, or exposure of
any Person to, any Hazardous Materials) that is pending against the Company or any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities or, to the knowledge of the Company, threatened against the Company, any of its
Subsidiaries or any of the Facility Entities that would be material to the Company. Neither the Company nor its Subsidiaries, nor, to the knowledge of the Company, the Facility Entities has caused or arranged for the Release, disposal,
transportation or treatment of any Hazardous Materials, and to the knowledge of the Company, there has been no Release of any Hazardous Materials, in either case, such that the Company or its Subsidiaries or the Facility Entities would reasonably be
expected to incur material liability. Neither the Company nor any of its Subsidiaries, nor, to the knowledge of the Company, any Facility Entity, has received any written notice of, or entered into, any Order involving uncompleted, outstanding or
unresolved material liabilities or material corrective or remedial obligations relating to or arising under Environmental Laws (including, without limitation, relating to or arising from the Release or threatened Release of, or exposure of any
Person to, any Hazardous Materials). The Company has made available to Parent copies of all material environmental assessments, reports, audits and other material documents in its possession or under its control that relate to Companys or any
Subsidiaries compliance with Environmental Laws or the environmental condition of any real property that Company or the Subsidiaries currently or formerly have owned, operated, or leased.
Section 4.10
Employee Benefit Plans
.
(a)
Section 4.10(a)
of the Company Disclosure Schedule sets forth a correct and complete list of each material Company Benefit
Plan. With respect to each material Company Benefit Plan, to the extent applicable, correct and complete copies of the following have been delivered or made available to Parent by the Company: (i) the Company Benefit Plan document (including
all current amendments and attachments thereto); (ii) written summaries of the material terms of such Company Benefit Plan if it is not in writing; (iii) all related trust documents; (iv) the most recent annual report (Form 5500)
filed with the Internal Revenue Service (the
IRS
); (v) the most recent determination, opinion or advisory letter from the IRS; (vi) the most recent summary plan description and any summary of material modifications
thereto; (vii) all material filings and communications received from or sent to any Governmental Entity since December 31, 2013; and (viii) the most recent actuarial valuation, if applicable.
(b) Except as has not had and would not reasonably be expected to have a Company Material Adverse Effect, (i) each Company Benefit Plan
has been established, operated and administered in all respects in accordance with its terms and the requirements of all applicable Laws, including ERISA and the Code, and (ii) all contributions required to be made to any Company Benefit Plan
by applicable Law or by any plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding such Company Benefit Plan, if any, have been timely made or paid in full or, to the extent not
required to be made or paid on or before the date hereof, have been fully reflected on the books and records of the Company and/or its Subsidiaries in accordance with GAAP.
(c)
Section 4.10(c)
of the Company Disclosure Schedule identifies each Company Benefit Plan that is intended to be qualified under
Section 401(a) of the Code (each, a
Qualified Plan
). The IRS has issued a favorable determination, opinion or advisory letter with respect to each Qualified Plan and its related trust, and such letter has not been revoked
(nor, to the knowledge of the Company and its Subsidiaries, has revocation been threatened), and there are no existing circumstances and no events have occurred that would reasonably be expected to adversely affect the qualified status of any
Qualified Plan or the related trust or materially increase the costs relating thereto. No trust funding any Company Benefit Plan is intended to meet the requirements of Section 501(c)(9) of the Code.
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(d) None of the Company, its Subsidiaries, any of the Facility Entities (to the knowledge of the
Company), nor any of their respective ERISA Affiliates has in the last six (6) years maintained, established, contributed to or been obligated to contribute to any plan that is (i) a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA or a plan that has two (2) or more contributing sponsors at least two (2) of whom are not under common control, within the meaning of Section 4063 of ERISA or (ii) subject to Title IV or
Section 302 of ERISA or Section 412, 430 or 4971 of the Code. No Company Benefit Plan is or has been a multiple employer welfare arrangement (as defined in Section 3(40) of ERISA).
(e) There are no pending or, to the knowledge of the Company and its Subsidiaries, threatened material claims (other than claims for benefits
in the ordinary course), lawsuits or arbitrations which have been asserted or instituted with respect to the Company Benefit Plans (including, for the avoidance of doubt, any claims, lawsuits or arbitrations relating to any fiduciaries thereof with
respect to their duties to the Company Benefit Plans or the assets of any of the trusts under any of the Company Benefit Plans). Except as would not reasonably be expected to result in material liability to the Company, any of its Subsidiaries or
any of the Facility Entities, (i) none of the Company, any of its Subsidiaries, any of the Facility Entities (to the knowledge of the Company) or any of their ERISA Affiliates has incurred (either directly or indirectly, including as a result
of any indemnification obligation) any Liability under or pursuant to Title I of ERISA or the penalty, excise Tax or joint and several Liability provisions of the Code relating to employee benefit plans, and (ii) no event, transaction or
condition has occurred or exists that could be expected to result in any such Liability to the Company, any of its Subsidiaries, any of the Facility Entities (to the knowledge of the Company), any of their ERISA Affiliates or, after the First
Effective Time, Parent or any of its Affiliates.
(f) None of the Company, any of its Subsidiaries or, to the knowledge of the Company, the
Facility Entities, sponsors or has any obligation with respect to any employee benefit plan that provides for any post-employment or post-retirement medical or death benefits (whether or not insured) with respect to former or current directors or
employees, or their respective beneficiaries or dependents, beyond their retirement or other separation from service (including any obligation with respect to any such employee benefit plan that the Company, any of its Subsidiaries or any of the
Facility Entities may have sponsored prior to the date hereof), except as required by Section 4980B of the Code or comparable U.S. state Laws.
(g) Except as set forth on
Section 4.10(g)
of the Company Disclosure Schedule, the consummation of the Transactions will not,
either alone or in combination with another event, (i) entitle any current or former employee, director, consultant or officer of the Company, any of its Subsidiaries or, to the knowledge of the Company, the Facility Entities to severance pay,
(ii) accelerate the time of payment or vesting, or increase the amount of compensation due to any such employee, director, consultant or officer, (iii) trigger any funding obligation under any Company Benefit Plan or impose any
restrictions or limitations on the Companys rights to amend, merge, terminate, or receive a reversion of material assets from any Company Benefit Plan, or (iv) result in any payment (whether in cash or property or the vesting of property)
to any disqualified individual (as such term is defined in Treasury Regulations Section 1.280G-1) that would, individually or in combination with any other such payment, constitute an excess parachute payment (as defined
in Section 280G(b)(1) of the Code). No Company Benefit Plan or other contract, agreement, plan or arrangement provides for the gross-up or reimbursement of Taxes under Section 4999 of the Code, Section 409A(a)(1)(B) of the Code, or
otherwise.
Section 4.11
Absence of Certain Changes or Events
.
(a) Other than in connection with the negotiation and execution of this Agreement, since December 31, 2015 through the date of this
Agreement, (x) the businesses of the Company, its Subsidiaries and, to the knowledge of the Company, the Facility Entities have been conducted in all material respects in the ordinary course of business and (y) none of the Company, any
Subsidiary of the Company or, to the knowledge of the Company, any Facility Entity has undertaken any action that if taken after the date of this Agreement would require Parents consent or otherwise constitute a breach pursuant to
Section 6.1(b)(vi)
,
(vii)
,
(viii)
,
(ix)
,
(x)
,
(xiv)
,
(xv)
,
(xvi)
or
(xvii)
.
(b) Since December 31, 2015, there has not been any fact, change, circumstance, event, occurrence or development that has had or would
reasonably be expected to have a Company Material Adverse Effect.
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Section 4.12
Investigations; Litigation
. Except as would
not be material to the Company and its Subsidiaries taken as a whole, or as set forth on
Section 4.12
of the Company Disclosure Schedule, (a) there is no Action pending (or, to the knowledge of the Company, threatened) by any
Governmental Entity with respect to the Company or any of its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities, or any of their respective properties, assets or businesses, (b) there is no Action or subpoena,
civil investigative demand or other request for information relating to potential violations of Law, in each case pending (or, to the knowledge of the Company, threatened) against the Company or any of its Subsidiaries, or, to the knowledge of the
Company, any of the Facility Entities, or any of their respective properties, assets or businesses and (c) there are no Orders of any Governmental Entity against the Company or any of its Subsidiaries or, to the knowledge of the Company, any of
the Facility Entities, any of their respective properties, assets or businesses.
Section 4.13
Information Supplied
. The information supplied by the Company for inclusion in the Offer Documents, the Schedule 14D-9 and the Registration Statement (including the Offer Prospectus) will not, at the time the Offer Documents, the Schedule
14D-9 and the Offer Prospectus (and any amendment or supplement thereto) are mailed to the stockholders of the Company or at the time the Registration Statement is declared effective by the SEC, or on the date that the Offer is consummated, 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 Schedule
14D-9 will comply in all material respects with the requirements of the Exchange Act and any other applicable federal securities Laws. The representations and warranties in this
Section 4.13
will not apply to statements or omissions
included or incorporated by reference in the Schedule 14D-9 based upon information supplied to the Company by Parent or Purchaser for inclusion therein.
Section 4.14
Tax Matters
. (a) Except as set forth in
Section 4.14(a)
of the Company
Disclosure Schedule, and, except as would not reasonably be expected to have a Company Material Adverse Effect:
(i) Each
of the Company and its Subsidiaries has prepared and timely filed (taking into account any valid extension of time within which to file) all Tax Returns required to be filed by it and all such Tax Returns are true, complete and accurate.
(ii) Each of the Company and its Subsidiaries has timely paid all Taxes required to be paid by it (whether or not shown on any
Tax Return), except for Taxes for which adequate reserves have been established, in accordance with GAAP, on the Company Financial Statements.
(iii) Each of the Company and its Subsidiaries has complied with all applicable Law relating to the payment, collection,
withholding and remittance of Taxes (including information reporting requirements), including with respect to payments made to or received from any employee, creditor, stockholder, customer or other third party.
(iv) No Tax Returns of the Company and its Subsidiaries have been examined, and neither the Company nor any of its Subsidiaries
has waived or extended any statute of limitations with respect to Taxes or agreed to any extensions of time with respect to a Tax assessment or deficiency.
(v) All assessments for Taxes due from the Company or any of its Subsidiaries with respect to completed and settled audits or
examinations or any concluded Action have been timely paid in full.
(vi) No deficiencies for Taxes have been claimed,
proposed or assessed by any Governmental Entity in writing against the Company or any of its Subsidiaries except for deficiencies which have been fully satisfied by payment, settled or withdrawn, and the Company and its Subsidiaries do not
reasonably expect any Taxing Authority to assess any additional Taxes with respect to any period for which a Tax Return has been filed.
(vii) There are no audits, examinations, investigations or other proceedings ongoing, pending, or threatened in respect of any
Taxes or Tax matters of the Company or any of its Subsidiaries.
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(viii) There are no Liens for Taxes on any of the assets of the Company or any of
its Subsidiaries other than statutory Liens for Taxes not yet due and payable, or for Taxes being contested in proper proceedings and for which there is a reserve in accordance with GAAP.
(ix) Neither the Company nor any of its Subsidiaries (A) is or has been a member of any affiliated, consolidated,
combined, unitary, group relief or similar group for purposes of filing Tax Returns or paying Taxes (other than a group the common parent of which is the Company), (B) is a party to any agreement or arrangement relating to the apportionment,
sharing, assignment, indemnification or allocation of any Tax or Tax asset (other than an agreement or arrangement solely between or among the Company and/or its Subsidiaries) or (C) has any Liability for Taxes of any Person (other than the
Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any analogous or similar provision of state, local or foreign Law), as transferee, successor, or otherwise.
(x) The charges, accruals and reserves for Taxes with respect to the Company and its Subsidiaries reflected on the Company
Financial Statements filed with the SEC prior to the date hereof are adequate, in accordance with GAAP, to cover all material Taxes payable by the Company and its Subsidiaries for all periods through the date of such Company Financial Statements and
such charges, accruals and reserves, as adjusted for the passage of time and ordinary course business operations through the Closing Date are adequate to cover all material Taxes payable by the Company and its Subsidiaries for all periods through
the Closing Date.
(xi) No claim has been made within the past two (2) years in writing by a Taxing Authority in a
jurisdiction where the Company or any of its Subsidiaries has never filed Tax Returns asserting that the Company or any of its Subsidiaries is or may be subject to Taxes imposed by that jurisdiction.
(xii) All intercompany transactions between or among the Company and any of its Subsidiaries, or any of them, have occurred on
arms-length terms in compliance with the principles of Section 482 of the Code (or any similar provision of U.S. state, local, or foreign Tax Law), and the Company and its Subsidiaries have complied in all material respects with
applicable rules relating to transfer pricing (including the maintenance of contemporaneous documentation and the preparation of all required transfer pricing reports).
(xiii) (A) As of December 31, 2015, the consolidated federal income Tax Return group of which the Company is the
common parent had federal and state net operating loss carryforwards of at least $247,000,000, and (B) the net operating losses or other Tax attributes of the Company and each of its Subsidiaries, prior to giving effect to the transactions
contemplated by this Agreement, are not currently subject to any limitation under Sections 382, 383, or 384 of the Code, and will not be decreased in any material amount prior to the Closing.
(b) None of the Company or any of its Subsidiaries has been a controlled corporation or a distributing corporation
(within the meaning of Section 355(a)(1)(A) of the Code) in any distribution that was purported or intended to qualify for tax-free treatment under Section 355 of the Code (or any similar provision of state, local or foreign Law) occurring
during the two (2)-year period ending on the date hereof.
(c) None of the Company or any of its Subsidiaries has participated in any
listed transaction within the meaning of Treasury Regulations Section 1.6011-4(b)(2) (or any analogous or similar provision of state, local or foreign Law).
(d) Neither the Company nor any of its Subsidiaries is aware of the existence of any fact, or has taken or agreed to take any action, that
would reasonably be expected to prevent or impede the Offer and the Mergers, taken together, from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.15
Employment and Labor Matters
.
(a) Since December 31, 2013, (i) neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any Facility
Entity, is or has been, a party to any collective bargaining agreement, labor union
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contract, trade union agreement, or other similar agreement with a labor union or like organization (each, a
Collective Bargaining Agreement
), (ii) no employee is or has
been represented by a labor organization for purposes of collective bargaining with respect to the Company or any of its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities, and (iii) to the knowledge of the Company,
there have been no activities or proceedings of any labor or trade union or other like organization to organize any employees of the Company, any of its Subsidiaries or the Facility Entities. No Collective Bargaining Agreement is being negotiated by
the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities. Since December 31, 2013, there has been no strike, lockout, slowdown, or work stoppage against the Company or any of its Subsidiaries, or,
to the knowledge of the Company, any of the Facility Entities, pending or, to the knowledge of the Company, threatened, that may interfere in any material respect with the respective business activities of the Company, any of its Subsidiaries, or
any of the Facility Entities.
(b) Except as has not had and would not reasonably be expected to have a Company Material Adverse Effect,
(i) there is no pending charge or complaint against the Company or any of its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities, by the National Labor Relations Board or any comparable Governmental Entity, and
(ii) none of the Company nor any of its Subsidiaries, nor, to the knowledge of the Company, any of the Facility Entities, is a party, or otherwise bound by, any consent decree with, or citation by, any Governmental Entity relating to employees
or employment practices. Except as has not had and would not reasonably be expected to have a Company Material Adverse Effect, (i) the Company and its Subsidiaries, and, to the knowledge of the Company, the Facility Entities, have complied with
all applicable Laws regarding employment and employment practices (including anti-discrimination), terms and conditions of employment and wages and hours (including classification of employees and independent contractors, and equitable pay
practices) and other laws in respect of any reduction in force (including notice, information and consultation requirements), and (ii) no claims relating to non-compliance with the foregoing are pending or, to the knowledge of the Company,
threatened. Except as has not had and would not reasonably be expected to have a Company Material Adverse Effect, (i) there are no outstanding assessments, penalties, fines, Liens, charges, surcharges, or other amounts due or owing by the
Company pursuant to any workplace safety and insurance/workers compensation Laws, and the Company and its Subsidiaries, and, to the knowledge of the Company, the Facility Entities, have not been reassessed under such Laws since
December 31, 2013, and (ii) there are no claims that may affect the accident cost experience of the Company or its Subsidiaries, or, to the knowledge of the Company, any of the Facility Entities.
Section 4.16
Intellectual Property
.
(a)
Section 4.16(a)
of the Company Disclosure Schedule sets forth a complete and accurate list of all Company Registered
Intellectual Property, indicating for each such item the registration or application number, owner and filing jurisdiction. Each item of Company Registered Intellectual Property is valid, enforceable, subsisting and in full force in all material
respects. All necessary registration, maintenance and renewal fees currently due and owing in connection with Company Registered Intellectual Property have been paid.
(b) Except as set forth in
Section 4.16(b)
of the Company Disclosure Schedule, the Company, a Subsidiary of the Company or a
Facility Entity is the exclusive owner, free of any exclusive license or Lien (other than a Permitted Lien), of each item of Intellectual Property used by the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility
Entities or material to the business of the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities, other than Intellectual Property that is licensed to or held for use by the Company, any of its
Subsidiaries or any of the Facility Entities pursuant to a valid and enforceable written license agreement or other agreement and Intellectual Property that is available generally to the public or may otherwise be used without the requirement of a
license, in each case free and clear of any exclusive licenses or Liens, except Permitted Liens. Such Intellectual Property comprises all Intellectual Property used by or material to the business of the Company, each of its Subsidiaries and, to the
knowledge of the Company, any of the Facility Entities as currently conducted.
(c) No Company Intellectual Property is subject to any
proceeding to which the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities is a party or outstanding Order,
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which proceeding or Order are materially affecting or could materially affect the use thereof by or rights therein of the Company, any of its Subsidiaries or any of the Facility Entities.
(d) Except as set forth in
Section 4.16(d)
of the Company Disclosure Schedule, there are no amounts currently owed by the Company,
any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities to any employee, contractor or other Person in consideration for the development for or acquisition by the Company, such Subsidiary or any of the Facility
Entities of any material Company Intellectual Property, other than salaries paid to employees in the ordinary course of business.
(e)
Neither (i) the operations or business of the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities as conducted since December 31, 2013 or as currently conducted, including the products or
services of the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities, nor (ii) the Company Intellectual Property owned by the Company, any of its Subsidiaries or, to the knowledge of the Company,
any of the Facility Entities infringe, misappropriate or violate any Intellectual Property rights of any third party, nor are there any pending, or to the knowledge of the Company, threatened claims or Actions with respect to any of the foregoing.
To the knowledge of the Company, no Person is infringing, misappropriating or violating any Company Intellectual Property that is owned by (or purported to be owned by) or exclusively licensed to the Company, any of its Subsidiaries or any of the
Facility Entities, and no such claims have been made by the Company, any of its Subsidiaries or any of the Facility Entities since December 31, 2013 with respect to (x) Company Registered Intellectual Property, or (y) other Company
Intellectual Property that is material to the business of the Company or its Subsidiaries.
(f) The Company, each of its Subsidiaries and,
to the knowledge of the Company, each of the Facility Entities has at all times taken commercially reasonable steps to protect their respective rights in and the confidentiality, integrity and security of all material confidential and proprietary
information of the Company, any of its Subsidiaries or its Facility Entities and any trade secret or confidential information of third parties that was provided to or held by the Company, its Subsidiaries or the Facility Entities subject to
obligations of confidentiality and is used, stored or transmitted by the Company, any of its Subsidiaries or, to the knowledge of the Company, any of the Facility Entities.
(g) Except as set forth in
Section 4.16(g)
of the Company Disclosure Schedule, the Company, each of its Subsidiaries and, to the
knowledge of the Company, each of the Facility Entities has required each Representative employed or engaged by the Company, such Subsidiary of the Company or such Facility Entity (as applicable) who contributed to the discovery or development of
any material Intellectual Property for or on behalf of the Company, such Subsidiary of the Company or such Facility Entity to execute a written and enforceable instrument of assignment in favor of the Company, such Subsidiary of the Company or such
Facility Entity as assignee that assigns to the Company, such Subsidiary of the Company or such Facility Entity all of such Representatives right, title and interest in and to such Intellectual Property, to the extent not already owned by them
by operation of Law.
(h) The Company, each of its Subsidiaries and, to the knowledge of the Company, each of the Facility Entities has
sufficient rights to use all material Software, information technology systems, information technology equipment, and associated documentation used or held for use in connection with the operation of the Companys, such Subsidiarys or
such Facility Entitys business (as applicable) as presently conducted (the
IT Assets
). The IT Assets operate and perform in all material respects in accordance with their documentation and functional specifications and
otherwise as required in connection with the operation of the Companys, each of its Subsidiaries and, to the knowledge of the Company, each of the Facility Entities business. The IT Assets have not materially malfunctioned or
failed since December 31, 2013 and the Company and its Subsidiaries have taken commercially reasonable steps to protect the integrity and security of the IT Assets from, and, to the knowledge of the Company, the IT Assets do not contain, any
viruses, bugs or other devices or effects that could enable or assist any Person to access without authorization the IT Assets or otherwise significantly adversely affect the functionality of the IT Assets, except as disclosed in their
documentation.
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Section 4.17
Property
.
(a) The Company or one or more of its Subsidiaries has good and marketable fee simple title to all land, together with all buildings,
structures, fixtures, and improvements located thereon and all easements, rights of way, and appurtenances relating thereto, owned by the Company or any of its Subsidiaries (the
Owned Real Property
) free and clear of any Liens
other than Permitted Liens.
Section 4.17(a)
of the Company Disclosure Schedule contains a correct and complete list by address of the Owned Real Property. Neither the Company nor any of its Subsidiaries: (i) lease or grant any
Person the right to use or occupy all or any part of the Owned Real Property; (ii) has granted any Person an option, right of first offer, or right of first refusal to purchase such Owned Real Property or any portion thereof or interest
therein; or (iii) has received written notice of any pending, and to the knowledge of the Company threatened, condemnation proceeding affecting any material Owned Real Property or any material portion thereof or material interest therein.
Neither the Company nor any of its Subsidiaries is a party to any agreement or option to purchase any real property or interest therein.
(b) Either the Company or a Subsidiary of the Company has a good and valid leasehold interest in each lease, sublease and other agreement under
which the Company or any of its Subsidiaries, as applicable, uses or occupies or has the right to use or occupy any real property (such material property subject to a lease, sublease or other real property agreement either (x) requiring
leasehold payments in excess of $500,000 annually or (y) for a location at which the Company or a Subsidiary of the Company provides health care services, collectively, the
Leased Real Property
and such leases, subleases and
other agreements are, collectively, the
Real Property Leases
), in each case, free and clear of all Liens other than any Permitted Liens.
Section 4.17(b)
of the Company Disclosure Schedule sets forth a true, correct and
complete list of the Leased Real Property (except for the Leased Real Property for a location at which the Company or a Subsidiary of the Company provides health care services), including the address, tenant, landlord, date of lease of all leases,
subleases, licenses and similar agreements, and all amendments thereto. Except as would not reasonably be expected to have a Company Material Adverse Effect, each Real Property Lease of the Company or a Subsidiary of the Company, (i) is a valid
and binding obligation of the Company or the Subsidiary of the Company that is party thereto and, to the knowledge of the Company, of each other party thereto, and is in full force and effect, subject to the Enforceability Exceptions, (ii) is
not subject to uncured default on the part of the Company or its Subsidiary or, to the knowledge of the Company, any other party thereunder, and (iii) is not subject to any event that has occurred or circumstance that exists which, with the
giving of notice, the passage of time, or both, would constitute a breach or default by the Company or any of its Subsidiaries or, to the knowledge of the Company, any other party, under any such Real Property Lease. Neither the Company nor any of
its Subsidiaries is currently subleasing, licensing or otherwise granting any Person any right to use or occupy any material Leased Real Property. True and complete copies of all Real Property Leases of the Company or a Subsidiary of the Company
(except for Real Property Leases for a location at which the Company or a Subsidiary of the Company provides health care services) have been made available to Parent and Purchaser.
(c) The Company and each Subsidiary of the Company, and, to the knowledge of the Company, any of the Facility Entities, has good and valid
title to, or valid rights by lease, license, other agreement or otherwise to use, all assets and properties (in each case, tangible and intangible) necessary to enable the Company and each of its Subsidiaries and the Facility Entities to conduct
their business as currently conducted, except where the failure to have good and valid title or valid rights would not reasonably be expected to have a Company Material Adverse Effect.
Section 4.18
Insurance
. Except as would not reasonably be expected to have a Company Material Adverse
Effect: (a) the Company and its Subsidiaries, and each Facility Entity to the knowledge of the Company, maintain insurance with reputable insurers or otherwise sufficient self-insurance programs in such amounts and against such risks as the
management of the Company has in good faith determined to be prudent and appropriate; (b) all insurance policies maintained by or on behalf of the Company, any of its Subsidiaries, or any of the Facility Entities to the knowledge of the
Company, as of the date of this Agreement are in full force and effect and all premiums due on such policies have been paid by the Company, its Subsidiaries or, to the knowledge of the Company, the Facility Entities; (c) neither the Company nor
any of its Subsidiaries, nor any
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Facility Entity to the knowledge of the Company, is in breach or default under such policies; and (d) neither the Company nor any of its Subsidiaries has, and no Facility Entity to the
knowledge of the Company has, received any written notice of termination or cancellation or denial of coverage with respect to any insurance policy since December 31, 2013 that in the case of such termination or cancellation has not been
replaced or superseded by materially similar or more favorable coverage.
Section 4.19
Opinion of
Financial Advisor
. The Company Board of Directors has received the oral opinion of J.P. Morgan Securities LLC, to be confirmed by delivery of a written opinion to the effect that, as of the date hereof and subject to the assumptions,
limitations, qualifications and other matters considered in the preparation thereof, the Transaction Consideration to be paid to the holders of Company Common Stock entitled to receive Transaction Consideration pursuant to this Agreement is fair
from a financial point of view to such holders, and such opinion has not been withdrawn, modified or revoked as of the date hereof. The Company shall, promptly following the execution of this Agreement by all Parties, furnish an accurate and
complete copy of said opinion to Parent solely for informational purposes, and it is agreed and understood that such written opinion was delivered for the information and assistance of the Company Board of Directors.
Section 4.20
Material Contracts
.
(a) Except for this Agreement, Contracts filed as exhibits to the Company SEC Documents or as set forth in
Section 4.20
of the
Company Disclosure Schedule, as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or bound by:
(i) any material contract (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC);
(ii) any Contract between the Company or any Subsidiary of the Company, on the one hand, and any officer, director or Affiliate
(other than a wholly owned Subsidiary of the Company) of the Company (or of any Subsidiary of the Company) or any of their respective associates or immediate family members (as such terms are defined in Rule 12b-2 and Rule
16a-1 of the Exchange Act), on the other hand, including (but not limited to) any Contract pursuant to which the Company or any Subsidiary of the Company has an obligation to indemnify such officer, director, Affiliate or family member but in each
case excluding any Company Benefit Plans;
(iii) any Contract that requires or is reasonably likely to require annual or
one time payments or delivery of goods, services, materials, Intellectual Property or other assets from third parties to the Company and its Subsidiaries of at least $5,000,000, in each case that is not terminable for convenience by the Company or
its Subsidiaries on ninety (90) days notice or less and that is not a Contract of a type that is described in another subsection of this
Section 4.20(a)
;
(iv) any Contract that requires or is reasonably likely to require annual or one-time payments or delivery of goods, services,
materials, Intellectual Property or other assets from the Company and its Subsidiaries to third parties of at least $5,000,000, in each case that is not terminable for convenience by the Company or its Subsidiaries on ninety (90) days
notice or less and that is not a Contract of a type that is described in another subsection of this
Section 4.20(a)
;
(v) any Contract that imposes any restriction on the right or ability of the Company or any of its Subsidiaries to compete in
any material respect (or that following the First Effective Time will restrict the ability of Parent and its Subsidiaries (other than the Company and its Subsidiaries) to compete) with any other Person in any line of business or geographic region or
that contains any standstill or similar agreement that has not expired or terminated and pursuant to which the Company or its Subsidiaries has agreed not to acquire or dispose of the securities of another Person;
(vi) any Contract that obligates the Company or its Subsidiaries in any material respect (or following the First Effective
Time, obligates Parent or its Subsidiaries (other than the Company and its Subsidiaries)) to conduct business with any third party on a preferential or exclusive basis or which contains most favored nation covenants that are material to
the Company and its Subsidiaries;
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(vii) any Collective Bargaining Agreement to which the Company or any of its
Subsidiaries is a party;
(viii) any agreement relating to Indebtedness of the Company or any of its Subsidiaries having an
outstanding principal amount in excess of $5,000,000, including any guarantees of Indebtedness of any other Person and excluding trade payables arising in the ordinary course of business;
(ix) any Contract that grants any right of first refusal, right of first offer or similar right to a third party (including
stockholders of the Company) with respect to any material assets, rights or properties of the Company and its Subsidiaries that is (A) triggered by or exercisable in connection with the execution, delivery or performance of this Agreement or
the Transactions, (B) exercisable at a date certain or is subject to similar time-based vesting of rights, (C) currently exercisable or (D) material and, to the knowledge of the Company, is likely to be triggered or become
exercisable;
(x) any Contract that provides for the acquisition or disposition of any assets (other than acquisitions or
dispositions of assets in the ordinary course of business) or business (whether by merger, sale of stock, sale of assets or otherwise) and that contains outstanding obligations of the Company or any of its Subsidiaries as of the date of this
Agreement in excess of $5,000,000 or that are otherwise material;
(xi) (A) any joint venture, partnership or limited
liability company agreement or other similar Contract relating to the formation, creation, operation, management or control of any joint venture, partnership or limited liability company that is material, and (B) any strategic alliance,
collaboration, co-promotion or research and development project Contract that is material;
(xii) any Contract that by its
terms limits or restricts the ability of the Company or any of its Subsidiaries (A) to make distributions or declare or pay dividends in respect of their capital stock, partnership interests, membership interests or other equity interests, as
the case may be, or (B) to make loans to the Company or any of its Subsidiaries;
(xiii) any Contract that obligates
the Company or any of its Subsidiaries to make any loans, advances or capital contributions to, or investments in, any Person, except for any such Contract that is entered into in the ordinary course of business;
(xiv) any Contract that provides for indemnification by the Company or any of its Subsidiaries of any other Person, except for
any such Contract that is entered into in the ordinary course of business;
(xv) any Contract with the Centers for Medicare
and Medicaid Services;
(xvi) any Contract relating to the voting or control of Company Common Stock or the election of
directors of the Company; and
(xvii) any Contract (A) granting the Company or any of its Subsidiaries any right to
use any rights under any Intellectual Property, other than off the shelf software that has not been modified for use by the Company or any of its Subsidiaries and does not exceed a cost to the Company or any of its Subsidiaries of
$100,000 annually, (B) pursuant to which the Company or any of its Subsidiaries grants any third person the right to use any rights under any Intellectual Property (other than non-exclusive licenses to Intellectual Property granted in the
ordinary course of business), or (C) restricting the right of the Company or any of its Subsidiaries to use, register, transfer, license or enforce any Company Intellectual Property.
All contracts of the types referred to in this
Section 4.20
(whether or not set forth on
Section 4.20
of the Company Disclosure
Schedule) are referred to herein as
Company Material Contracts
. The Company has made available to Parent prior to the date of this Agreement a complete and correct copy of each Company Material Contract as in effect on the date of
this Agreement.
(b) Neither the Company nor any Subsidiary of the Company is in breach of or default under the terms of any Company
Material Contract and, to the knowledge of the Company, no other party to any Company Material Contract is in breach of or default under the terms of any Company Material Contract and, since December 31, 2013, no event has occurred or not
occurred through the Companys or any of its Subsidiaries action or inaction
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or, to the knowledge of the Company, through the action or inaction of any third party, that with notice or the lapse of time or both would constitute a breach of or default under the terms of
any Company Material Contract, in each case, except as has not had and would not reasonably be expected to have a Company Material Adverse Effect. Each Company Material Contract is a valid and binding obligation of the Company or the Subsidiary of
the Company that is party thereto and, to the knowledge of the Company, of each other party thereto, and is in full force and effect, subject to the Enforceability Exceptions. There are no material disputes pending or, to the knowledge of the
Company, threatened with respect to any Company Material Contract. Neither the Company nor any of its Subsidiaries has received any written notice of the intention of any other party to any Company Material Contract to terminate for default,
convenience or otherwise any Company Material Contract.
Section 4.21
Privacy and Data Security
.
(a) Each of the Companys and its Subsidiaries, and to the knowledge of the Company each Facility Entitys, receipt,
collection, use, disclosure, processing, storage, disposal and security of Personal Information has, since December 31, 2013, materially complied, and materially complies, with (i) any Contracts to which the Company or any Subsidiary or
Facility Entity is a party, (ii) applicable Information Privacy and Security Laws, (iii) to the extent applicable, PCI DSS, and (iv) all required consents and authorizations from individuals that apply to the Companys or any of
its Subsidiaries or Facility Entities receipt, access, use and disclosure of such individuals Personal Information. Except as has not had and would not reasonably be expected to have a Company Material Adverse Effect, the Company
and each of its Subsidiaries has, and each Facility Entity to the knowledge of the Company has, all necessary authority, consents and authorizations to receive, access, use and disclose the Personal Information in the Companys or any of its
Subsidiaries or Facility Entities possession or under its control in connection with the operation of the Company or any Subsidiary or Facility Entity. Except as set forth in
Section 4.21(a)
of the Company Disclosure
Schedule, the Company and each of its Subsidiaries has, and each Facility Entity to the knowledge of the Company has, since December 31, 2013, (y) posted its Notice of Privacy Practices as that term is defined under HIPAA (
HIPAA
Notice of Privacy Practices
) and (z) except as has not had and would not be reasonably expected to have a Company Material Adverse Effect, complied with its HIPAA Notice of Privacy Practices and any other privacy policies it has
provided to individuals or made publicly available on its website(s).
(b) Except as has not had and would not reasonably be expected to
have a Company Material Adverse Effect, since December 31, 2013, each of the Company and each of its Subsidiaries has, and each Facility Entity to the knowledge of the Company has, entered into a Contract that addresses the provisions for
business associate contracts if and as required by 45 C.F.R. § 164.504(e) or § 164.314(a), as amended (
Business Associate Contracts
), with the applicable third party in each instance where (i) the
Company or its Subsidiaries or Facility Entities (as the case may be) acts as a Business Associate to that third party or (ii) the Company or its Subsidiaries or Facility Entities (as the case may be) provides protected health information (as
defined in 45 C.F.R. § 160.103) to that third party, or that third party otherwise acts as a Business Associate to Company or any of its Subsidiaries or Facility Entities, in each case as required by, and in material conformity with, HIPAA and
the applicable Business Associate Contracts to which the Company or its Subsidiaries or Facility Entities is a party.
(c) Except as has
not had and would not reasonably be expected to have a Company Material Adverse Effect or otherwise disclosed in
Section 4.21(c)
of the Company Disclosure Schedule, there has been no (i) data security breach of any IT Assets of the
Company, its Subsidiaries or, to the knowledge of the Company, a Facility Entity that store, process, protect, transmit or maintain Personal Information, (ii) any unauthorized access, control, use, modification or destruction of such IT Asset
or (iii) unauthorized access, use, acquisition or disclosure of any Personal Information, in the case of each of clauses (i) through (iii) with respect to Personal Information that is owned, used, stored, or controlled by or on behalf
of the Company or any of its Subsidiaries, or to the knowledge of the Company any of its Facility Entities, in a manner not authorized by the Company or a Subsidiary or Facility Entity, as applicable, including any unauthorized access, use, or
disclosure of Personal Information that would constitute a breach for which notification to individuals or Governmental Entities is required under any applicable Information Privacy and Security Laws.
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(d) Except as has not had and would not reasonably be expected to have a Company Material Adverse
Effect or otherwise disclosed in
Section 4.21(d)
of the Company Disclosure Schedule, each of the Company and each of its Subsidiaries has, and each Facility Entity to the knowledge of the Company has responded to and mitigated each known
Security Incident (as defined in 45 C.F.R. § 164.304) related to any IT Assets or Personal Information transmitted, processed, maintained, stored or otherwise available on or through any IT Assets.
(e) Neither the Company nor any of its Subsidiaries, nor any Facility Entity to the knowledge of the Company, (i) is, to the knowledge of
the Company, under investigation by any Governmental Entity for a violation of any applicable Information Privacy and Security Laws; (ii) has received since December 31, 2013 any written notices or audit requests from a Governmental Entity
relating to any such violations that remain open or pending or, with respect to those that are closed, are material, other than those set forth in
Section 4.21(e)
of the Company Disclosure Schedule; or (iii) is subject to any Order,
nor, to the knowledge of the Company, is any such Order pending or threatened, relating to the Companys or any of its Subsidiaries or Facility Entities processing of Personal Information processed by the Company or its Subsidiaries
or Facility Entities.
(f) Except as would not reasonably be expected to have a Company Material Adverse Effect, the consummation of the
transactions contemplated hereby is not prohibited by the Companys, each of its Subsidiaries, and to the knowledge of the Company, each of its Facility Entities, applicable HIPAA Notice of Privacy Practices, as defined above.
(g) The Company has performed a security risk assessment that meets the standards set forth at 45 C.F.R. § 164.308(a)(1)(ii)(A),
including an assessment as described at 45 C.F.R. § 164.306(d)(3), taking into account factors set forth in 45 C.F.R. § 164.306(a)(c) and updated periodically as required by 45 C.F.R. § 164.316(b)(2)(iii)
(collectively, the
Security Risk Assessment
). Unless set forth in
Section 4.21(g)
of the Company Disclosure Schedule, the Company has addressed the security safeguards sufficient to reduce any reasonably
anticipated and material threats and deficiencies identified in its current Security Risk Assessment to a reasonable and appropriate level to comply with 45 C.F.R. § 164.306(a).
Section 4.22
Affiliate Transactions
. There are not and have not been within the last three
(3) years any transactions, or series of related transactions, agreements, arrangements or understandings that would be required to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act that have not been
disclosed in the Company SEC Documents filed prior to the date hereof.
Section 4.23
Finders or
Brokers
. Except for J.P. Morgan Securities LLC, neither the Company nor any of its Subsidiaries has employed any investment banker, broker or finder in connection with the Transactions who would be entitled to any fee or any commission in
connection with or upon consummation of the Offer or the Mergers. The Company has made available to Parent a true, correct and complete copy of any engagement letter or other Contract between the Company and J.P. Morgan Securities LLC relating to
the Transactions.
Section 4.24
State Takeover Statutes
. Assuming the accuracy of the
representations and warranties of Parent and the Merger Subs set forth in
Section 5.14
, the Company Board of Directors has taken all action necessary to render inapplicable to this Agreement and the Tender and Support Agreement and the
transactions contemplated hereby and thereby all applicable state anti-takeover statutes or regulations (including Section 203 of the DGCL), business combination, control share acquisition, fair price,
moratorium and any similar provisions in the Company Certificate (including Article XIII of the Company Certificate) or Company Bylaws. The Company is not party to a stockholder rights agreement, poison pill or similar
anti-takeover agreement or plan that will be triggered by the Transactions.
Section 4.25
DGCL
251(h)
. The Company has not taken, or authorized or permitted any Representatives of the Company to take, any action that would render Section 251(h) of the DGCL inapplicable to the First Merger.
Section 4.26
No Other Representations
. Except for the representations and warranties contained in this
Article IV or in any certificates delivered by the Company pursuant to paragraph (E)(4) of Annex A, each of
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Parent, Purchaser and Merger Sub 2 acknowledges that neither the Company nor any person on behalf of the Company makes any other express or implied representation or warranty (and hereby
disclaims any such other representation or warranty) with respect to the Company or any of its Subsidiaries or in connection with the Transactions or with respect to any information provided or made available to Parent or the Merger Subs or any of
their respective Representatives in connection with the Transactions. The Parties agree that no provision of this Agreement is intended to eliminate or limit Parents, Purchasers and Merger Sub 2s available remedies with respect to
fraud.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBS
Except as disclosed in the publicly available Parent SEC Documents filed or furnished to the SEC (including the exhibits and schedules
thereto) since December 31, 2013 and prior to the date hereof (without giving effect to any amendment thereof filed with or furnished to the SEC on or after the date of this Agreement and excluding any disclosures set forth in any such Parent
SEC Document that is in any risk factor section, or in any other section to the extent they are forward-looking statements or are similarly non-specific, predictive, cautionary or forward-looking in nature), where the relevance of the information to
a particular representation or warranty is reasonably apparent on the face of such disclosure, Parent and the Merger Subs jointly and severally represent and warrant to the Company as follows:
Section 5.1
Organization
.
(a) Each of Parent and Purchaser is a corporation, and Merger Sub 2 is a limited liability company, in each case, duly incorporated or
organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate or limited liability company power and authority to own, lease and operate its properties and assets and to carry on its
business as presently conducted. Each of (i) Parents Subsidiaries is a legal entity duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or
similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and (ii) Parent and its Subsidiaries is duly qualified to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such approvals or qualification necessary, except in the case of each of clauses (i) and (ii) where the failure to be so
organized, in existence or qualified or to have such power, authority or approvals or be in good standing, has not had and would not reasonably be expected to have a Parent Material Adverse Effect or prevent or materially delay the consummation of
the Transactions.
(b) Parent has made available to the Company prior to the date of this Agreement a true and complete copy of
Parents certificate of incorporation and bylaws (the
Parent Organizational Documents
). The Parent Organizational Documents are in full force and effect and Parent is not in violation of its provisions.
Section 5.2
Capitalization
. The authorized capital stock of Parent consists of 3,000,000,000 shares of
common stock, par value $0.01 per share (the
Parent Common Stock
), and 10,000,000 shares of preferred stock, par value $0.001 per share (the
Parent Preferred Stock
). As of September 30, 2016,
(i) 951,940,888 shares of Parent Common Stock were issued and outstanding, (ii) no shares of Parent Common Stock were held in treasury, (iii) no shares of Parent Preferred Stock were issued or outstanding, (iv) 78,189,328 shares
of Parent Common Stock were reserved for issuance under the Parent Stock Plans in respect of outstanding and future awards (any such awards, collectively,
Parent Stock Awards
), (v) 37,771,677 shares of Parent Common Stock
were issuable upon the exercise of outstanding options and stock appreciation rights, (vi) 717,831 shares of Parent Common Stock were subject to outstanding performance-based restricted stock units under the Parent Stock Plans (assuming, if
applicable, achievement of all performance goals at maximum level), (vii) 5,736,468 shares of Parent Common Stock were subject to outstanding restricted stock units under the Parent Stock Plans and (viii) no other shares of capital stock
or other voting securities of Parent were issued, reserved for issuance or outstanding. Except as set forth in this
Section 5.2
, there are no outstanding subscriptions, options, warrants,
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calls, convertible securities, exchangeable securities, preemptive rights, stock appreciation rights, redemption rights, repurchase rights, or other similar rights, agreements or commitments to
which Parent or any of its Subsidiaries is a party (A) obligating Parent or any of its Subsidiaries to (1) issue, transfer, exchange, sell or register for sale any shares of capital stock or other equity interests of Parent or any
Subsidiary of Parent or securities convertible into or exchangeable for such shares or equity interests, (2) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or
arrangement, (3) redeem or otherwise acquire any such shares of capital stock or other equity interests, (4) provide a material amount of funds to, or make any material investment (in the form of a loan, capital contribution or otherwise)
in, any Subsidiary (other than a wholly owned Subsidiary of Parent) or (5) make any payment to any Person the value of which is derived from or calculated based on the value of Parent Common Stock or Parent Preferred Stock (other than in
connection with Parent benefit plans and other employee or contractor compensation arrangements), or (B) granting any preemptive or antidilutive or similar rights with respect to any security issued by Parent or its Subsidiaries. Neither Parent
nor any of its Subsidiaries has outstanding any bonds, debentures, notes or other indebtedness, the holders of which have the right to vote (or which are convertible or exchangeable into or exercisable for securities having the right to vote) with
the stockholders of Parent on any matter. There are no voting trusts or other agreements or understandings to which Parent or any of its Subsidiaries is a party with respect to the voting or registration of the capital stock or other equity interest
of Parent or any of its Subsidiaries. Since September 30, 2016 through the date hereof, Parent has not issued any shares of its capital stock (other than in connection with the exercise, settlement or vesting of Parent Stock Awards in
accordance with their respective terms).
Section 5.3
Corporate Authority Relative to this Agreement;
No Violation
.
(a) No vote of holders of capital stock of Parent is necessary, pursuant to applicable Law, the Parent Organizational
Documents, pursuant to New York Stock Exchange rules or otherwise, to approve this Agreement, the issuance of any Parent Common Stock to be exchanged for Company Common Stock pursuant to
Article I
or
Article II
or the
Transactions, including the Offer and the Mergers. Each of Parent, Purchaser and Merger Sub 2 has the requisite corporate or limited liability company power and authority to execute and deliver this Agreement and to consummate the Transactions,
including the Offer and the Mergers. The execution, delivery and performance of this Agreement by Parent and the Merger Subs and the consummation by each of them of the Transactions, including the Offer and the Mergers, have been duly and validly
authorized by all necessary corporate or comparable action on the part of Parent and the Merger Subs, and, except as set forth in
Section 5.3(b)
, no other corporate or comparable action on the part of any of Parent, Purchaser or Merger
Sub 2 is necessary to authorize the execution and delivery by Parent and the Merger Subs of this Agreement and the consummation of the Transactions, including the Offer and the Mergers, subject to, in the case of the First Merger, the adoption of
this Agreement by Merger Sub 2 as the sole stockholder of Purchaser. The board of directors of Parent has approved this Agreement and the Transactions contemplated hereby, including the Offer and the Mergers, and the performance by it of its
covenants and agreements contained herein. The board of directors or manager, as applicable, of each of the Merger Subs has unanimously (i) determined that the terms of the Transactions, including the Offer and the Mergers are fair to, and in
the best interests of, such Merger Sub and its stockholder or member, as applicable, (ii) determined that it is in the best interest of such Merger Sub to enter into, and declared advisable, this Agreement, (iii) approved the execution and
delivery, by such Merger Sub, of this Agreement (including the agreement of merger, as such term is used in Section 251 of the DGCL), the performance by such Merger Sub of its covenants and agreements contained herein and the consummation of
the Transactions, including the Offer and the Mergers, upon the terms and subject to the conditions contained herein, and (iv) in the case of Purchaser, resolved to recommend that Merger Sub 2, as the sole stockholder of Purchaser, approve the
adoption of this Agreement and the transactions contemplated hereby, including, without limitation, the First Merger. This Agreement has been duly and validly executed and delivered by Parent and the Merger Subs and, assuming this Agreement
constitutes the legal, valid and binding agreement of the Company, this Agreement constitutes the legal, valid and binding agreement of Parent and the Merger Subs and is enforceable against Parent and the Merger Subs in accordance with its terms,
except as such enforcement may be subject to the Enforceability Exceptions.
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(b) Other than in connection with or in compliance with (i) the filing of the Certificates
of Merger with the Delaware Secretary, (ii) the filing of the Offer Documents, the Schedule 14D-9 and the Registration Statement (including the Offer Prospectus) with the SEC and any amendments or supplements thereto and declaration of
effectiveness of the Registration Statement, (iii) the Exchange Act, (iv) the Securities Act, (v) applicable state securities, takeover and blue sky laws, (vi) the rules and regulations of the New York Stock Exchange,
(vii) the HSR Act (clauses (i) through (vii) collectively, the
Parent Approvals
), and (viii) such other authorizations, consents, Orders, licenses, permits, approvals, registrations, declarations and notice
filings, the failure of which to be obtained would not reasonably be expected to have a Parent Material Adverse Effect, no authorization, consent, Order, license, permit or approval of, or registration, declaration, notice or filing with, any
Governmental Entity is necessary for the consummation by Parent or the Merger Subs of the Transactions, including the Mergers.
(c) The
execution and delivery by Parent and the Merger Subs of this Agreement does not, and (assuming the Parent Approvals are obtained) the consummation of the Transactions and compliance with the provisions hereof will not (i) result in any loss or
suspension, limitation or impairment of any right of Parent or any of its Subsidiaries to own or use any assets required for the conduct of their business or result in any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation, first offer, first refusal, modification or acceleration of any obligation or to the loss of a benefit under any material loan, guarantee of indebtedness or credit agreement, note, bond,
mortgage, indenture, lease, agreement, Contract, instrument, permit, concession, franchise, right or license binding upon Parent or any of its Subsidiaries or by which or to which any of their respective material properties, rights or assets are
bound or subject, or result in the creation of any Liens other than Permitted Liens, in each case, upon any of the properties or assets of Parent or any of its Subsidiaries, (ii) conflict with or result in any violation of any provision of the
Parent Organizational Documents or the Organizational Documents of any Subsidiary of Parent, or (iii) materially conflict with or materially violate any applicable Laws to which Parent or any of its Subsidiaries, is subject.
(d) Prior to the Acceptance Time, Parent will have taken all necessary action to permit it to issue the number of shares of Parent Common Stock
required to be issued in connection with Purchasers obligations pursuant to
Article I
and Parents obligations pursuant to
Article III
. Such Parent Common Stock, when issued, will be validly issued, fully paid and
nonassessable, and no stockholder of Parent will have any preemptive right, right of subscription, right of purchase or similar right in respect thereof. Such Parent Common Stock, when issued, and the offering thereof, will be registered under the
Securities Act and the Exchange Act and registered or exempt from registration under any applicable state securities or blue sky Laws.
Section 5.4
Reports and Financial Statements
.
(a) Parent and each of its Subsidiaries has timely filed or furnished all forms, documents, certifications, statements and reports required to
be filed or furnished by it with the SEC since December 31, 2013 (all such documents and reports filed or furnished by Parent or any of its Subsidiaries, including all exhibits, supplements or schedules thereto, the
Parent SEC
Documents
). As of their respective dates or, if amended, as of the date of the last such amendment (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings,
respectively), (i) the Parent SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations promulgated
thereunder, and (ii) none of the Parent SEC Documents contained any untrue statement of a material fact or omitted to state any 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. Since December 31, 2013, no executive officer of Parent has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley
Act. As of the date of this Agreement, there are no outstanding or unresolved comments in any comment letters of the staff of the SEC received by Parent relating to the Parent SEC Documents.
(b) (i) Each of the consolidated balance sheets included in or incorporated by reference into Parent SEC Documents (including the related
notes and schedules) presents fairly, in all material respects, the consolidated financial position of Parent and its consolidated Subsidiaries as of its date and (ii) each of Parents consolidated
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statements of operations and comprehensive loss, changes in stockholders equity and cash flows included in or incorporated by reference into the Parent SEC Documents (including any related
notes and schedules) (such changes in stockholders equity and cash flows, together with the consolidated balance sheets referred to in clause (i) (and the related notes and schedules), the
Parent Financial Statements
)
presents fairly, in all material respects, the results of operations and cash flows, as the case may be, of Parent and its consolidated Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments and the absence of notes), (iii) the Parent Financial Statements (A) have been prepared from, and are in accordance with, the books and records of Parent and its consolidated Subsidiaries and (B) are in conformity
with GAAP (except, in the case of the unaudited statements, subject to normal year-end audit adjustments and the absence of notes) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto)
and (iv) the Parent Financial Statements have been prepared in accordance with and comply in all material respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities
Act. As of the date hereof, Deloitte and Touche LLP has not resigned (or informed Parent that it intends to resign) or been dismissed as independent public accountants of Parent.
(c) Neither Parent nor any of its Subsidiaries is a party to, nor does it have any Contractual commitment to become a party to, any material
off-balance sheet arrangements (as defined in Item 303(a) of Regulation S-K of the SEC).
(d) Since December 31,
2013, (i) none of Parent nor any Subsidiary of Parent nor, to the knowledge of Parent, any Representative of Parent or any Subsidiary of Parent, has received any written complaint, allegation or claim regarding the accounting, internal
accounting controls or auditing practices, procedures, methodologies or methods of Parent or any Subsidiary of Parent or any complaint, allegation or claim, whether written or to a compliance hotline or similar reporting method, from employees of
Parent or any Subsidiary of Parent regarding questionable accounting or auditing matters with respect to Parent or any Subsidiary of Parent, and (ii) no attorney representing Parent or any Subsidiary of Parent, whether or not employed by Parent
or any Subsidiary of Parent, has reported evidence of a violation of securities Laws or breach of fiduciary duty by Parent, any Subsidiary of Parent or any of their respective Representatives to Parent board of directors or any committee thereof, or
to the General Counsel or Chief Executive Officer of Parent.
Section 5.5
Internal Controls and
Procedures
. Parent has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange
Act) sufficient to comply in all material respects with all legal and accounting requirements applicable to the Company and each of its Subsidiaries and as otherwise required by Rule 13a-15 or 15d-5 under the Exchange Act. Parents disclosure
controls and procedures are reasonably designed to ensure that all material information required to be disclosed by Parent in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the Companys management as appropriate to allow timely decisions regarding required disclosure and to make the
certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. Parent, each Parent Subsidiary and each of their officers and directors in their respective capacities as such are in material compliance with, and, since
December 31, 2013, have materially complied with the applicable provisions of the Sarbanes-Oxley Act and the Exchange Act. Based on its most recent evaluation of internal controls over financial reporting prior to the date hereof, management of
Parent has disclosed to Parents auditors and the audit committee of Parent board of directors (a) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are
reasonably likely to adversely affect in any material respect Parents ability to report financial information and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in
Parents internal control over financial reporting, and each such deficiency, weakness and fraud so disclosed to auditors, if any, has been disclosed to the Company prior to the date hereof.
Section 5.6
No Undisclosed Liabilities
. There are no Liabilities of Parent or any of its
Subsidiaries of any nature whatsoever (whether accrued, absolute, determined, contingent or otherwise and whether due or to
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become due), except for (a) Liabilities that are reflected or reserved against on the consolidated balance sheet of Parent and its Subsidiaries included in its Quarterly Report on Form 10-Q
for the nine months ended September 30, 2016 (including any notes thereto), (b) Liabilities expressly contemplated by this Agreement or otherwise required to be incurred in connection with this Agreement or the Transactions;
(c) Liabilities incurred in the ordinary course of business since September 30, 2016 and (d) Liabilities that have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
Section 5.7
Compliance with Law
. Parent and its Subsidiaries are, and since December 31, 2013
have been, in compliance with all applicable Laws and all such Laws by which their respective properties or assets are bound, except where such non-compliance would not reasonably be expected to have a Parent Material Adverse Effect. Since
December 31, 2013, neither Parent nor any of its Subsidiaries has received any written notice or, to the knowledge of Parent, other communication from any Governmental Entity regarding any actual or possible failure to comply with any
applicable Law in any material respect.
Section 5.8
Absence of Certain Changes or Events
.
(a) Other than in connection with the negotiation and execution of this Agreement, since December 31, 2015 through the date of this
Agreement, the businesses of Parent and its Subsidiaries have been conducted in all material respects in the ordinary course of business.
(b) Since December 31, 2015, there has not been any fact, change, circumstance, event, occurrence or development that has had or would
reasonably be expected to have a Parent Material Adverse Effect.
Section 5.9
Investigations;
Litigation
. Except as would not be material to Parent and its Subsidiaries taken as whole, (a) there is no Action pending (or, to the knowledge of Parent, threatened) by any Governmental Entity with respect to Parent or any of its
Subsidiaries or any of their respective properties, assets or businesses, (b) there is no Action or subpoena, civil investigative demand or other request for information relating to potential violations of Law, in each case pending (or, to the
knowledge of Parent, threatened) against Parent or any of its Subsidiaries or any of their respective properties, assets or businesses, and (c) there are no Orders of any Governmental Entity against Parent or any of its Subsidiaries or any of
their respective properties, assets or businesses.
Section 5.10
Information Supplied
. The
information supplied by Parent for inclusion in the Offer Documents, the Schedule 14D-9 and the Registration Statement (including the Offer Prospectus) will not, at the time the Offer Documents, the Schedule 14D-9 and the Offer Prospectus (and any
amendment or supplement thereto) are mailed to the stockholders of the Company or at the time the Registration Statement is declared effective by the SEC, or on the date that the Offer is consummated, 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 Offer Documents, the Offer Prospectus and the
Registration Statement will comply in all material respects with the requirements of the Exchange Act and the Securities Act and any other applicable federal securities Laws. The representations and warranties in this
Section 5.10
will
not apply to statements or omissions included or incorporated by reference in the Offer Documents, the Schedule 14D-9 and the Registration Statement (including the Offer Prospectus) based upon information supplied to Parent or Purchaser by the
Company for inclusion therein.
Section 5.11
Finders or Brokers
. Neither Parent nor any of
Parents Subsidiaries has employed any investment banker, broker or finder in connection with the Transactions who would be entitled to any fee or any commission in connection with or upon consummation of the Offer or the Mergers.
Section 5.12
Sufficiency of Funds
. Parent will have as of the Acceptance Time and the First
Effective Time, sufficient funds to consummate the Offer, First Merger, and the other Transactions contemplated hereby on the terms and subject to the conditions set forth herein.
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Section 5.13
Merger Subs
. The authorized capital
stock of Purchaser consists solely of 100 shares of common stock, par value $0.01 per share, 100 shares of which are validly issued and outstanding. All of the issued and outstanding capital stock of Purchaser is, and at the Acceptance Time (if any)
and immediately prior to the First Effective Time will be, owned by Merger Sub 2 (free and clear of all Liens other than Permitted Liens). All of the issued and outstanding equity interest of Merger Sub 2 are, and at the Acceptance Time (if any),
First Effective Time and Second Effective Time will be, owned by Parent or a direct or indirect wholly-owned Subsidiary of Parent (free and clear of all Liens other than Permitted Liens). Since their respective dates of incorporation or
organization, Purchaser and Merger Sub 2 have not carried on any business nor conducted any operations other than the execution of this Agreement, the performance of their respective obligations hereunder and matters ancillary thereto.
Section 5.14
Ownership of Company Common Stock
. As of and for the three (3) years prior to
the date of this Agreement, neither Parent nor any of its Subsidiaries (nor any of their respective affiliates or associates (as such terms are defined in Section 203 of the DGCL)) owns or owned
(as such terms are defined in Section 203 of the DGCL) any shares of Company Common Stock or other securities convertible into, exchangeable into or exercisable for shares of Company Common Stock. Other than the Tender and Support Agreement,
there are no voting trusts or other agreements or understanding to which Parent or any of its Subsidiaries is a party with respect to the voting of the capital stock or other equity interest of the Company or any of its Subsidiaries.
Section 5.15
Tax Matters
. Neither Parent nor any of its Subsidiaries is aware of the existence of
any fact, or has taken or agreed to take any action, that would reasonably be expected to prevent or impede the Offer and the Mergers, taken together, from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
Section 5.16
No Other Representations
. Except for the representations and warranties
contained in this
Article V
, the Company acknowledges that none of Parent or the Merger Subs nor any person on behalf of Parent or the Merger Subs makes any other express or implied representation or warranty (and hereby disclaims any such
other representation or warranty) with respect to Parent or the Merger Subs or any of their respective Subsidiaries or in connection with the Transactions or with respect to any information provided or made available to the Company or any of its
Representatives in connection with the Transactions. The Parties agree that no provision of this Agreement is intended to eliminate or limit the Companys available remedies with respect to fraud.
ARTICLE VI COVENANTS AND AGREEMENTS
Section 6.1
Conduct of Business
.
(a) During the period from the date hereof until the earlier of the First Effective Time and the termination of this Agreement in accordance
with its terms, except (i) as may be required by applicable Law, (ii) with the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed), (iii) as may be required or expressly permitted
(but for this
Section 6.1
) by this Agreement or (iv) as set forth in
Section 6.1
of the Company Disclosure Schedule, the business of the Company and its Subsidiaries shall be conducted in all material respects in the
ordinary course and, to the extent consistent with the foregoing, the Company and its Subsidiaries shall use their respective commercially reasonable efforts to maintain and preserve the Companys business organization intact, keep available
the services of key employees and maintain its relationships with Government Entities and partners, health systems, health plans, medical groups, payors, customers, suppliers, distributors and licensors having significant business dealings with the
Company and its Subsidiaries, and the Company and its Subsidiaries shall not consent to allow any Facility Entity to take any action inconsistent with the foregoing;
provided
,
however
, that no action taken by the Company or its
Subsidiaries with respect to matters specifically addressed by clauses (i) through (xxii) of
Section 6.1(b)
shall be deemed a breach of this sentence unless such action would constitute a breach of such other provision.
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(b) During the period from the date hereof until the earlier of the First Effective Time and the
termination of this Agreement in accordance with its terms, except (1) as may be required by applicable Law, (2) with the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed), (3) as
may be required or expressly permitted by this Agreement, or (4) as set forth in
Section 6.1(b)
of the Company Disclosure Schedule, the Company and its Subsidiaries shall not, and shall not consent to allow any Facility Entity, to:
(i) (x) amend or otherwise change the Company Organizational Documents, (y) amend or otherwise change the
Organizational Documents of the Companys Subsidiaries in any material respect or (z) amend or otherwise change the Organizational Documents of any Facility Entity;
(ii) split, combine or reclassify any of its capital stock;
(iii) make, declare or pay any dividend, or make any other distribution on, or redeem, purchase or otherwise acquire, any
shares of its capital stock, or any other securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital
stock (except (A) dividends paid by any direct or indirect wholly owned Subsidiaries of the Company to the Company or to any other wholly owned direct or indirect Subsidiary of the Company, respectively, (B) dividends paid by any Facility
Entity in the ordinary course of business in accordance with its respective Organizational Documents, (C) the acceptance of shares of Company Common Stock as payment for the exercise price of Company Options or for withholding Taxes incurred in
connection with the exercise of Company Options or the vesting or settlement of Company RSU Awards outstanding as of the date hereof in accordance with past practice and the terms of the Company Stock Plans, (D) in connection with the ESPP in
accordance with its terms, or (E) the repurchase of shares of Company Common Stock in connection with a forfeiture of Company Stock Awards or the termination of a Company Stock Award holders position with the Company);
(iv) grant any Company Stock Awards or other equity-based awards or interests, or grant any individual, corporation or other
entity any right to acquire any shares of its capital stock, in each case, other than as permitted under Section 6.1
(b)(xiii)
;
(v) issue, sell, deliver, pledge, dispose of, encumber, grant or otherwise permit to become outstanding any additional shares
of its capital stock or securities convertible or exchangeable into, or exercisable for, any shares of its capital stock or any options, warrants, or other rights of any kind to acquire any shares of its capital stock, except (A) pursuant to
the exercise of Company Options or the settlement of Company RSU Awards outstanding as of the date hereof in accordance with their terms, (B) in connection with the ESPP in accordance with its terms, or enter into any agreement, understanding
or arrangement with respect to the sale or voting of its capital stock or equity interests, (C) by a wholly owned Subsidiary of the Company to or in favor of the Company or another wholly owned Subsidiary of the Company, and (D) except as
permitted by Section 6.1(b)(xiii);
(vi) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization with respect to the Company, any of its material Subsidiaries or any material Facility Entity;
(vii) incur, assume, acquire, endorse, guarantee or otherwise become liable for any Indebtedness for borrowed money (other than
the assumption, endorsement, guarantee of or other Liability for any existing Indebtedness for borrowed money of another Subsidiary of the Company) or issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt
securities (directly, contingently or otherwise), except for (A) Indebtedness for borrowed money in an aggregate principal amount not to exceed $10,000,000 outstanding at any time, (B) any Indebtedness for borrowed money among the Company
and its wholly owned Subsidiaries or among wholly owned Subsidiaries of the Company, (C) incurring, assuming, acquiring, endorsing or guaranteeing any existing Indebtedness of any acquisition target in connection with any transaction permitted
by
Section 6.1(b)(x)
, or (D) Indebtedness for borrowed money incurred in the ordinary course of business under an existing credit facility (as in effect on the date hereof);
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provided
that any such Indebtedness with respect to borrowed money incurred, assumed, acquired, endorsed, guaranteed or for which the Company or any of its Subsidiaries otherwise becomes
liable under this
Section 6.1(b)(vii)
(other than clause (C)) shall not be subject to any material prepayment penalty;
(viii) make any loans or advances to any other Person in excess of $1,000,000 in the aggregate, except for (x) loans or
advances among the Company and any of its Subsidiaries, in each case, in the ordinary course of business, and (y) advances to directors or employees in the ordinary course of business to cover costs and expenses incurred in their respective
capacities as such;
(ix) (A) sell, transfer, lease, rent, license, assign, abandon, mortgage, encumber or otherwise
dispose of any of its properties, legal entities or assets to any Person other than sales, transfers, leases, rents, licenses, assignments, abandonments, mortgages, encumbrances or dispositions (x) in the ordinary course of business consistent
with past practice, (y) on an intercompany basis among the Company and its Subsidiaries, or (z) mortgages or encumbrances on properties, legal entities or properties that are not material or (B) cancel, release or assign any material
Indebtedness of any such Person owed to it, in the case of each of clause (A) and clause (B) other than Permitted Liens;
(x) (A) acquire (whether by merger or consolidation, acquisition of stock or assets or by formation of a joint venture or
otherwise) any other Person for consideration in excess of $5,000,000 in any transaction or series of related transactions or any material assets or properties of any other Person, or (B) make any material investment in any other Person either
by purchase of stock or securities, contributions to capital, property transfers or purchase of property or assets of any Person other than (x) a wholly owned Subsidiary of the Company or (y) as required by the terms of any Contract in
effect as of the date of this Agreement (other than letters of intent);
(xi) make any capital expenditures in excess of
its 2017 capital expenditure budget as disclosed to Parent prior to the date hereof;
provided
,
however
, subject to prior consultation with Parent, that the Company and its Subsidiaries shall be permitted to make emergency capital
expenditures in any commercially reasonable amount that the Company reasonably determines is necessary to maintain its ability to operate its businesses in the ordinary course of business;
(xii) except in the ordinary course of business, (x) terminate, materially amend, or waive any material right under, any
Company Material Contract or (y) enter into any contract that would constitute a Company Material Contract if it were in effect on the date of this Agreement;
(xiii) except as required by applicable Law or the terms of any Company Benefit Plan, or as set forth in
Section 6.1(b)(xiii)
of the Company Disclosure Schedule, as in effect on the date of this Agreement, and except as required or permitted by this Agreement, (A) establish, adopt, enter into, amend or terminate any Collective
Bargaining Agreement or Company Benefit Plan (including, but not limited to, any employment, change-in-control, retention, severance, compensation or similar agreement or arrangement) or any plan that would be a Company Benefit Plan if in effect on
the date hereof (including, but not limited to, any employment, change-in-control, retention, severance, compensation or similar agreement or arrangement) except for establishing, adopting, entering into, or amending any Company Benefit Plan as may
be required to implement any action otherwise permitted under this
Section 6.1(b)(xiii)
, (B) increase in any manner the compensation (including severance, change-in-control and retention compensation) or benefits of any of the
current or former directors, officers, employees, partners, consultants, independent contractors or other service providers of the Company or its Subsidiaries, in each case other than in the ordinary course of business, (C) pay or award, or
commit to pay or award, any bonuses or incentive compensation (including equity-based incentive compensation or retention bonuses), (D) accelerate any rights or benefits, other than in the ordinary course of business and consistent with past
practice, (E) establish or fund any rabbi trust or other funding arrangement in respect of any Company Benefit Plan, (F) grant or amend any Company Stock Awards or other equity-based awards, or (G) hire, or terminate (other than for
cause) the employment or services of, any officer, employee, independent contractor or consultant who has annualized base compensation greater than $300,000;
provided
,
that
, the Company may establish terms and conditions for the
payment of cash bonuses in respect of 2017 to the extent that the bonus targets, metrics, degree of
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attainability and reliance on subjective performance criteria are substantially comparable to such awards made in calendar year 2016 (with reasonable adjustments to account for changes in
business objectives) and are reflected at 100% of target payout in the Companys 2017 budget provided to Purchaser in connection with the Transactions;
(xiv) implement or adopt any change in its financial accounting principles, practices or methods, other than as may be required
by GAAP or applicable Law, each as concurred with by the Companys independent registered public accountants;
(xv)
settle or compromise any Action, except for settlements or compromises that (A) with respect to the payment of monetary damages, involve monetary remedies with a value not in excess of $1,000,000 (net of any amounts covered by insurance or
reserved for in the most recent balance sheet included in the Company Financial Statements as of the date hereof), individually or in the aggregate or (B) do not impose any material restriction on the Companys business or the businesses
of its Subsidiaries;
(xvi) except in the ordinary course of business, make, change or revoke any material Tax election,
change or adopt any annual Tax accounting period or adopt or change any material method of Tax accounting, file any amended Tax Return, enter into any closing agreement within the meaning of Section 7121 of the Code (or any
analogous or similar provision of state, local or foreign Law), request any Tax ruling from any Taxing Authority, settle or compromise any material Tax Liability or any audit, examination or other proceeding relating to a material amount of Taxes,
or surrender any claim for a material refund of Taxes;
(xvii) enter into any new line of business;
(xviii) other than in the ordinary course of business consistent with past practice, reduce the amount of insurance coverage or
fail to renew or replace any existing insurance policies;
(xix) amend any material Company Permit in a manner that
adversely impacts the ability to conduct its business, or terminate or allow to lapse any material Company Permits in a manner that adversely impacts its ability to conduct its business;
(xx) cancel or allow to lapse or otherwise abandon any material Company Intellectual Property;
(xxi) amend or modify the engagement letter of the Companys financial advisor in a manner that increases the fee or
commission payable by the Company or any of its Subsidiaries; or
(xxii) agree to take or authorize, or make any binding
commitment to take, any of the foregoing actions that are prohibited pursuant to this
Section
6.1(b)
.
Section 6.2
Access
.
(a) For purposes of furthering the Transactions, the Company shall upon reasonable advance notice, afford Parent and its Representatives (at
Parents and its Representatives sole cost and expense) reasonable access during normal business hours, throughout the period prior to the First Effective Time, in a manner that does not unreasonably interfere with the business of the
Company or any of its Subsidiaries or Facility Entities, to its and its Subsidiaries and Facility Entities personnel, properties, contracts, books and records, Tax Returns, Representatives, accountant work papers, permits, licenses and
any report, schedule or other document filed or received by it pursuant to the requirements of applicable Law, and, during such period, the Company shall, and shall cause its Subsidiaries to, and shall use reasonable efforts to cause its Facility
Entities to, without limitation to the preceding obligations, make available to Parent subject to the same terms and conditions all other information concerning its business, properties and personnel as Parent may reasonably request. Notwithstanding
the foregoing, the Company shall not be required to provide access to or make available to any person any document or information that, in the reasonable judgment of the Company, (i) would violate any of its obligations with respect to any
applicable Law or Order, (ii) would violate any of its material obligations with respect to confidentiality or the terms of any Contract (provided that the Company will use reasonable best efforts to provide, or allow such access or disclosure
to, any such document or information) or (iii) is subject to
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any attorney-client or work-product privilege (provided that the Company will use reasonable best efforts to allow such access or disclosure in a manner that does not result in loss or waiver of
such privilege, including, but not limited to, entering into appropriate common interest or similar agreements). All requests for access or information made pursuant to this
Section 6.2(a)
shall be directed to an executive officer or
other person designated by the Company.
(b) No investigation by Parent or its Representatives shall affect or be deemed to modify or waive
the representations and warranties of the Company set forth in this Agreement. No rights under this
Section 6.2
can be exercised by Parent or any of its Representatives to prepare for, or otherwise in connection with, any Action relating
to this Agreement or to provide Parent or any of its Representatives access to any of the Facility Entities that is greater than the access the Company has historically had to such Facility Entity.
(c) The Parties hereto hereby agree that all information provided to them or their respective Representatives in connection with this Agreement
and the consummation of the Transactions shall be governed in accordance with the confidentiality agreement, dated December 18, 2016 (the
Confidentiality Agreement
), between the Company and Parent.
Section 6.3
No Solicitation
.
(a) The Company shall and shall cause each of its Subsidiaries and its and their respective officers, directors, managers and employees and
shall instruct and cause its and its Subsidiaries respective agents, financial advisors, investment bankers, attorneys and accountants (such officers, directors, managers, employees, agents, financial advisors, investment bankers, attorneys
and accountants in their capacity as such, collectively,
Representatives
): (i) to immediately cease and cause to be terminated any solicitation, discussions or negotiations with any Persons (other than Parent and its
Representatives) that are ongoing with respect to a Company Takeover Proposal and (ii) not to, directly or indirectly through intermediaries, (A) solicit, initiate, knowingly encourage (including by way of furnishing non-public information
relating to the Company or any of its Subsidiaries) or knowingly facilitate any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Takeover Proposal, (B) conduct,
engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other Person any information in connection with, or for the purpose of knowingly encouraging or knowingly facilitating, a Company Takeover
Proposal (other than, solely in response to an unsolicited inquiry, to refer the inquiring Person to this
Section 6.3
and to limit its conversation or other communication exclusively to such referral), (C) approve, endorse,
recommend or enter into, or propose to approve, endorse, recommend or enter into, any letter of intent, term sheet, acquisition agreement, merger agreement, joint venture agreement or similar document, agreement, commitment or agreement in principle
(whether written, oral, binding or non-binding) with respect to a Company Takeover Proposal, (D) amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of the Company or any
of its Subsidiaries, (E) approve any transaction involving the Company or any of its Subsidiaries under or any third party (other than Parent or Purchaser) becoming an interested stockholder of the Company or any of its Subsidiaries
under, Section 203 of the DGCL or Article XIII of the Company Certificate (except a transaction involving Parent, Purchaser or their Affiliates) or (F) resolve to do any of the foregoing.
(b) The Company shall, and shall cause its Subsidiaries to, promptly request any Person that has executed a confidentiality or non-disclosure
agreement in connection with any actual or potential Company Takeover Proposal that remains in effect as of the date of this Agreement to return or destroy all confidential information in the possession of such Person or its Representatives. The
Company shall, within twenty-four (24) hours of the date hereof, terminate access by any third party to any data room (virtual or actual) containing any of the Companys confidential information.
(c) Notwithstanding anything to the contrary contained in this Agreement, if at any time after the date of this Agreement and prior to the
Acceptance Time, the Company or any of its Representatives, receives a bona fide written Company Takeover Proposal from any Person that did not result from a breach of this
Section 6.3
and if the Company Board of Directors determines in
good faith, after consultation with its independent financial
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advisor and outside legal counsel, that such Company Takeover Proposal constitutes or is reasonably likely to lead to a Company Superior Proposal and that the failure to take such action would be
inconsistent with the directors fiduciary duties under applicable Law, then the Company, its Subsidiaries and their respective Representatives may, (i) furnish information with respect to the Company, its Subsidiaries and the Facility
Entities to the Person who has made such Company Takeover Proposal, including non-public information, if the Company receives from such Person an executed confidentiality agreement containing terms that are not materially less restrictive to the
other party than those contained in the Confidentiality Agreement (such confidentiality agreement, an
Acceptable Confidentiality Agreement
);
provided
that the Company shall promptly (but in no event later than twenty-four
(24) hours) deliver a copy of any Acceptable Confidentiality Agreement that it enters into to Parent;
provided
further that the Company shall concurrently with the delivery to such Person make available to Parent any non-public
information concerning the Company or any of its Subsidiaries that is provided or made available to such Person or its Representatives unless such non-public information has been previously provided to Parent and (ii) engage in or otherwise
participate in discussions or negotiations with the Person making such Company Takeover Proposal and its Representatives regarding such Company Takeover Proposal. The Company shall promptly (and in any event within twenty-four (24) hours)
notify Parent and the Merger Subs if the Company commences furnishing non-public information or commences discussions or negotiations as provided in this
Section 6.3(c)
.
(d) The Company shall promptly (and in no event later than twenty-four (24) hours after receipt) notify Parent in writing in the event
that the Company or any of its Representatives receives a Company Takeover Proposal or a request for information relating to the Company or its Subsidiaries that contemplates a Company Takeover Proposal, including the identity of the Person making
the Company Takeover Proposal and the material terms and conditions thereof (including an unredacted copy of such Company Takeover Proposal or, where such Company Takeover Proposal is not in writing, a description of the terms thereof). The Company
shall promptly (and in no event later than twenty-four (24) hours after receipt) provide to Parent copies of any proposals, indications of interest and/or draft agreements relating to such Company Takeover Proposal. The Company shall provide
Parent with at least two (2) Business Days prior written notice of any meeting of the Company Board of Directors (or such lesser notice as is provided to members of the Company Board of Directors) at which the Company Board of Directors
is reasonably expected to consider any Company Takeover Proposal. The Company agrees that it and its Subsidiaries will not enter into any agreement with any Person subsequent to the date of this Agreement that prohibits the Company from providing
any information to Parent in accordance with, or otherwise complying with, this
Section 6.3
.
(e) The Company Board of
Directors shall not (i)(A) unless a Company Adverse Recommendation Change has been made in compliance with this
Section 6.3,
fail to include the Company Recommendation in the Schedule 14D-9 or the Offer Prospectus when disseminated
to the Companys stockholders, (B) change, qualify, withhold, withdraw or modify (or authorize or publicly propose to change, qualify, withhold, withdraw or modify), in any such case in a manner adverse to Parent, the Company
Recommendation, (C) publicly recommend a tender offer or exchange offer (other than the Offer), (D) adopt, approve or recommend, or publicly propose to adopt, approve or recommend, to stockholders of the Company a Company Takeover
Proposal, (E) make any public statement inconsistent with the Company Recommendation, or (F) if a Company Takeover Proposal shall have been publicly announced or disclosed, either fail to recommend against such Company Takeover Proposal or
fail to reaffirm the Company Recommendation promptly following a written request by Parent to do so and in any event on or prior to the later of (x) the fifth (5th) Business Day prior to the then-scheduled Expiration Date of the Offer (if
the then-scheduled Expiration Date cannot be extended in accordance with Section 1.1
(c)(ii)
), or (y) the tenth (10th) Business Day after the Company Takeover Proposal shall have been publicly announced or disclosed, but in any
event at least one (1) Business Day prior to such scheduled Expiration Date) (any action described in this clause (i) being referred to as a
Company Adverse Recommendation Change
), or (ii) authorize, cause or permit
the Company or any of its Subsidiaries to enter into any letter of intent, memorandum of understanding, agreement (including an acquisition agreement, merger agreement, joint venture agreement or other agreement) or agreement in principle with
respect to any Company Takeover Proposal (other than an Acceptable Confidentiality Agreement) (a
Company Acquisition Agreement
).
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(f) Notwithstanding anything to the contrary contained in this Agreement, prior to the Acceptance
Time, but not after, the Company Board of Directors may, in respect of a bona fide, written Company Superior Proposal that did not result from a breach of this
Section 6.3
, (1) make a Company Adverse Recommendation Change or
(2) terminate this Agreement in accordance with
Section 8.1(f)
in order to enter into a definitive agreement for such Company Superior Proposal, in either case if and only if, prior to taking such action, the Company Board of
Directors has determined in good faith, after consultation with its independent financial adviser and outside legal counsel, that the failure to take such action would be inconsistent with the directors fiduciary duties under applicable Law;
provided
,
however
, that, prior to taking either such action, (w) the Company has given Parent at least five (5) Business Days prior written notice of its intention to take such action, including the terms and conditions
of and the basis for such action, and the identity of the Person making, any such Company Superior Proposal and has contemporaneously provided to Parent a copy of the Company Superior Proposal or any proposed Company Acquisition Agreements and a
copy of any related financing commitments in the Companys possession (or, in each case, if not provided in writing to the Company, a written summary of the terms thereof), (x) the Company has negotiated, and has caused its Representatives
to negotiate, in good faith with Parent during such five (5) Business Day period, to the extent Parent wishes to negotiate, concerning any revisions to the terms of this Agreement proposed by Parent, and (y) following the end of such five
(5) Business Days notice period, the Company Board of Directors shall have determined, after consultation with its independent financial advisor and outside legal counsel, and giving due consideration to the revisions to the terms of this
Agreement to which Parent has committed in writing, that the Company Superior Proposal would nevertheless continue to constitute a Company Superior Proposal (assuming the revisions committed to by Parent in writing were to be given effect) and that
the failure to take such action would be inconsistent with the directors fiduciary duties under applicable Law, and (z) in the event of any change to any of the financial terms (including the form, amount and timing of payment of
consideration) or any other material terms of such Company Superior Proposal, the Company shall, in each case, have delivered to Parent an additional notice consistent with that described in clause (w) above of this proviso and a new notice
period under clause (w) of this proviso shall commence (except that the five (5) Business Day notice period referred to above shall instead be equal to two (2) Business Days) during which time the Company shall be required to comply
with the requirements of this
Section 6.3(f)
anew with respect to such additional notice, including clauses (w) through (z) above of this proviso. Notwithstanding anything to the contrary contained herein, neither the Company
nor any of its Subsidiaries shall enter into any Company Acquisition Agreement unless this Agreement has been terminated in accordance with its terms and the Termination Fee has been paid in the manner provided in
Section 8.3
.
(g) Notwithstanding anything to the contrary contained in this Agreement, other than in connection with a Company Takeover Proposal, the
Company Board of Directors may, at any time prior to, but not after, the Acceptance Time, make a Company Adverse Recommendation Change in response to an Intervening Event if, prior to taking such action, the Company Board of Directors has determined
in good faith, after consultation with its independent financial advisor and outside legal counsel, that the failure to take such action would be inconsistent with the directors fiduciary duties under applicable Law,
provided
,
however
, that, prior to taking such action, (i) the Company has given Parent at least five (5) Business Days prior written notice of its intention to take such action, and specifying in reasonable detail the Intervening Event
and the potential reasons that the Company Board of Directors is proposing to effect a Company Adverse Recommendation Change, (ii) the Company has negotiated, and has caused its Representatives to negotiate, in good faith with Parent during
such five (5) Business Day period, to the extent Parent wishes to negotiate, to enable Parent to propose revisions to the terms of this Agreement such that it would cause the Company Board of Directors to not make such Company Adverse
Recommendation Change, and (iii) following the end of such five (5) Business Days period, the Company Board of Directors shall have considered in good faith any revisions to the terms of this Agreement to which Parent has committed in
writing, and shall have determined, after consultation with its independent financial advisor and outside legal counsel (assuming the revisions committed to by Parent in writing were to be given effect), that the failure to make a Company Adverse
Recommendation Change would be inconsistent with the directors fiduciary duties under applicable Law.
(h) Nothing contained in this
Section 6.3
shall prohibit the Company or the Company Board of Directors from complying with its disclosure obligations under United States federal or state Law with regard to a
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Company Takeover Proposal, including (i) taking and disclosing to the stockholders of the Company a position contemplated by Rule 14e-2(a)(2)-(3) or Rule 14d-9 promulgated under the
Exchange Act or (ii) making any stop, look and listen communication to the stockholders of the Company pursuant to Rule 14d-9(f) under the Exchange Act if, in either case, the Company Board of Directors determines in good faith,
after consultation with outside legal counsel, that the failure to do so would be inconsistent with the directors fiduciary duties under applicable Law or obligations of the Company or the Company Board of Directors under applicable federal
securities Law;
provided
,
however
, that in any event the Company Board of Directors shall not make or resolve to make a Company Adverse Recommendation Change except in accordance with
Section 6.3(e)
,
Section 6.3(f)
or
Section 6.3(g)
, as applicable or otherwise take, agree or resolve to take any action prohibited or governed by this
Section 6.3
except in accordance with this
Section 6.3
.
Section 6.4
Employee Matters
.
(a) Prior to the First Effective Time, the Company will, and will cause its Subsidiaries to, and from and after the First Effective Time,
Parent will, and will cause the First Surviving Corporation or the Surviving Company, as applicable, to honor, in accordance with their terms, including any right to amend or terminate, all existing employment and severance agreements between the
Company or any of its Subsidiaries and any officer, director or employee of the Company or any of its Subsidiaries, but excluding any officers, directors or employees that primarily work at a (i) Facility Entity or (ii) a provider of
health care services.
(b) Effective as of the First Effective Time and until the one (1) year anniversary of the First Effective
Time, Parent shall provide, or shall cause the First Surviving Corporation or the Surviving Company, as applicable, to provide, to each employee of the Company or its Subsidiaries who continues to be employed by Parent or the First Surviving
Corporation or the Surviving Company, as applicable, or any of their Subsidiaries following the First Effective Time, but excluding any officers, directors or employees that primarily work at a (i) Facility Entity or (ii) a provider of
health care services (the
Continuing Employees
), (i) base salary or base wage, bonus and incentive opportunities (excluding any equity based compensation awards, the ESPP, and any retention bonuses or special one-time
payments) no less favorable than those provided to such Continuing Employees immediately prior to the First Effective Time and (ii) employee benefits including retirement and welfare benefits (excluding equity based compensation awards and the
ESPP) that are, in the aggregate, no less favorable than those provided to such Continuing Employees immediately prior to the First Effective Time or, in Parents discretion, are substantially comparable to those made available similarly
situated employees of Parent and its Subsidiaries.
(c) Following the First Effective Time, Parent shall, or shall cause the Surviving
Company to, cause any employee benefit plans sponsored or maintained by Parent or the Surviving Company or their Subsidiaries in which the Continuing Employees are eligible to participate following the Closing Date to (1) waive any pre-existing
conditions or limitations, actively-at-work requirements and eligibility waiting periods under any welfare plans of Parent or its Subsidiaries (except, that such waiver shall not apply to Parents employee supplemental life insurance election
options, with or without Accidental Death and Dismemberment, of (i) one times or two times salary for coverage greater than $500,000 or (ii) three times or four times salary, to the extent such evidence of insurability is required under
Contract by Parents employee supplemental life insurance); and (2) give each Continuing Employee service credit for such Continuing Employees employment with the Company and its Subsidiaries (as well as service with any predecessor
employer of the Company or any such Subsidiary, to the extent service with the predecessor employer is recognized by the Company or such Subsidiary) prior to the First Effective Time for all purposes including level of benefits (including severance
benefits), vesting, benefit accrual, and eligibility to participate under each applicable Parent benefit plan, as if such service had been performed with Parent, except for any employee benefit plans that are frozen or grandfathered as of the First
Effective Time, for purposes of qualifying for subsidized early retirement benefits (including retirement treatment under the Parent Stock Plans), or for benefit accrual under defined benefit pension plans, or to the extent it would result in a
duplication of benefits.
(d) If requested by Parent in writing delivered to the Company not less than ten (10) Business Days before
the anticipated First Effective Time, the Company Board of Directors (or the appropriate committee thereof) shall adopt
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resolutions and take such corporate action as is reasonably necessary to terminate the Companys 401(k) plans (collectively, the
Company 401(k) Plan
), effective as of the
day prior to the First Effective Time. Following the First Effective Time, and as soon as reasonably practicable following Parents receipt of a favorable determination letter from the IRS on the termination of the Company 401(k) Plan, which
Parent shall request as soon as reasonably practicable following the First Effective Time, the assets thereof shall be distributed to the participants, and Parent shall take any and all actions as may be required, including amendments to the Company
401(k) Plan and/or Parents applicable 401(k) plan (the
Parent 401(k) Plan
) to permit the Continuing Employees who are then actively employed to make rollover contributions of eligible rollover distributions
(within the meaning of Section 401(a)(31) of the Code), in the form of cash, shares of Parent Common Stock, notes (in the case of loans) or a combination thereof in an amount equal to the full account balance distributed to such Continuing
Employee from the Company 401(k) Plan to the Parent 401(k) Plan.
(e) Nothing in this Agreement shall confer upon any Continuing Employee
or other service provider any right to continue in the employ or service of Parent, the Surviving Company or any Affiliate of Parent, or shall interfere with or restrict in any way the rights of Parent, the Surviving Company or any of their
Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of any Continuing Employee at any time for any reason whatsoever, with or without cause. Without limiting any of the obligations in
Section 6.4(a)
and
Section 6.4(b)
, in no event shall the terms of this Agreement be deemed to (i) establish, amend, or modify any Company Benefit Plan or any employee benefit plan as defined in
Section 3(3) of ERISA, or any other benefit plan, program, agreement or arrangement maintained or sponsored by Parent, the Surviving Company, the Company or any of their Subsidiaries (including, after the Closing Date, the Company and its
Subsidiaries) or Affiliates; or (ii) alter or limit the ability of Parent, the Surviving Company or any of their Subsidiaries (including, after the Closing Date, the Company and its Subsidiaries) or Affiliates to amend, modify or terminate any
Company Benefit Plan or any other compensation or benefit or employment plan, program, agreement or arrangement after the Closing Date. Notwithstanding any provision in this Agreement to the contrary, nothing in this
Section 6.4
shall
create any third party beneficiary rights in any Continuing Employee or current or former service provider of the Company or its Affiliates (or any beneficiaries or dependents thereof).
(f) Prior to making any widely distributed written or orally binding communications to the Continuing Employees pertaining to material
compensation or benefit matters that are affected by the transactions contemplated by this Agreement, the Company shall use commercially reasonable efforts to provide Parent with a copy of the intended communication and a reasonable period of time
to review and comment on the communication, and shall consider any such comments in good faith.
(g) The Company shall provide Parent with
an update to
Section 4.2(h)
of the Company Disclosure Schedule within three (3) Business Days prior to the anticipated Acceptance Time, to reflect any changes occurring between the date of this Agreement and the applicable date of
delivery of such updated schedule.
(h) Notwithstanding anything to the contrary in this Agreement or the terms applicable to the Company
Stock Awards issued under the 2013 Omnibus Long-Term Incentive Plan providing for accelerated vesting in the event of certain terminations following a Change in Control, as such term is defined in the agreements governing any such awards, the
Company and Parent agree, and shall take all necessary actions to amend the terms of such awards, conditioned upon the occurrence of the First Effective Time, to provide that the period following such a Change in Control during which an
individuals award becomes fully vested in the event of certain terminations as provided for therein shall be extended from two (2) years to four (4) years.
Section 6.5
Regulatory Approvals; Efforts
.
(a) Prior to the Closing, Parent, the Merger Subs and the Company shall use their respective reasonable best efforts to consummate the Offer
and the Mergers and make effective the Mergers as soon as practicable, including (i) the prompt preparation and filing of all forms, registrations, applications and notices required to be filed under applicable Law to consummate the Offer and
the Mergers (including the Registration Statement, the Offer Documents, the Schedule 14D-9 and the Offer Prospectus), (ii) the satisfaction of the conditions to consummating the Offer and the Mergers, (iii) taking all actions necessary to
as soon as practicable obtain (and
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cooperating with each other in obtaining (including through the provision of information required for any health regulatory or other permits, licenses, consents and approvals)), any consent,
waiver, authorization, Order or approval of, or any exemption by, any third party, including any Governmental Entity (which actions shall include furnishing all information and documentary material required under the HSR Act) required to be obtained
or made by Parent, the Merger Subs, the Company or any of their respective Subsidiaries in connection with the Offer or the Mergers or the taking of any action contemplated by this Agreement, and (iv) the execution and delivery of any
reasonable additional instruments necessary to consummate the Offer and the Mergers and to fully carry out the purposes of this Agreement.
(b) Parent and the Company shall each keep the other reasonably apprised of the status of matters relating to the completion of the Offer and
the Mergers and work cooperatively in connection with obtaining all required consents, waivers, authorizations, Orders or approvals of, or any exemptions by, any Governmental Entity undertaken pursuant to the provisions of this
Section 6.5
. In that regard, prior to the Closing, each Party shall promptly consult with the other Parties to this Agreement with respect to and provide any reasonable information and assistance as the other Parties may reasonably
request with respect to (and, in the case of correspondence, provide the other Parties (or their counsel) copies of) all notices, submissions, or filings made by such Party with any Governmental Entity or any other information supplied by such Party
to, or correspondence with, a Governmental Entity in connection with this Agreement and the Offer and the Mergers. Each Party to this Agreement shall promptly inform the other Parties to this Agreement, and if in writing, furnish the other Parties
with copies of (or, in the case of oral communications, advise the other Parties orally of) any communication from or to any Governmental Entity regarding the Offer and the Mergers, and afford the other Parties a reasonable opportunity to review and
discuss in advance, and reasonably consider the views of the other Parties in connection with, any proposed communication with any such Governmental Entity. The Parties agree that it is Parents sole right to devise the strategy for all
filings, notifications, submissions and communications in connection with any filing, notice, petition, statement, registration, submission of information, application or similar filing with a Governmental Entity subject to this
Section 6.5
, so long as such strategy complies with the terms and conditions of this Agreement. If any Party to this Agreement or any Representative of such Parties receives a request for additional information or documentary material
from any Governmental Entity with respect to the Offer or the Mergers, then such Party will use reasonable best efforts to make, or cause to be made, as promptly as reasonably practicable and after reasonable consultation with the other Parties to
this Agreement, an appropriate response to such request. To the extent permitted by Law, each Party shall furnish the other Parties with copies of all correspondence, filings and communications (and memoranda setting forth the substance thereof)
between it and any such Governmental Entity with respect to this Agreement and the Offer and the Mergers, and furnish the other Parties with such reasonable information and assistance as the other Parties may reasonably request in connection with
its preparation of necessary filings or submissions of information to any such Governmental Entity;
provided
,
however
, that Parent and the Company may, as each deems advisable and necessary, reasonably designate any competitively
sensitive material provided to the other under this
Section 6.5
as Antitrust Counsel Only Material. Such materials and the information contained therein shall be given only to the outside antitrust counsel of the recipient
and will not be disclosed by such outside counsel to employees, officers or directors of the recipient unless express permission is obtained in advance from the source of the materials (Parent or the Company, as the case may be) or its legal
counsel. Notwithstanding anything to the contrary contained in this
Section 6.5
, materials provided pursuant to this
Section 6.5
may be redacted (i) to remove references concerning the valuation of the Company and the
Offer or the Mergers or other confidential information, and (ii) as necessary to address reasonable privilege concerns.
(c) The
Company and Parent will each request early termination of the waiting period with respect to the Offer and the Mergers under the HSR Act. The Company and Parent shall use reasonable best efforts to file, as promptly as practicable, but in any event
no later than five (5) Business Days after the date of this Agreement, all notifications required under the HSR Act. In the event that the Parties receive a request for information or documentary material pursuant to the HSR Act (a
Second Request
), the Parties will use their respective reasonable best efforts to respond to such Second Request as promptly as practicable or as otherwise agreed by the Company and Parent, and counsel for both Parties will
closely cooperate during the entirety of any such Second Request review process.
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Section 6.6
Takeover Statutes
. None of Parent, the
Company and their respective Subsidiaries shall take any action that would cause the Transactions or the Tender and Support Agreement, to be subject to requirements imposed by any takeover statute. If any moratorium, control share
acquisition, fair price, supermajority, affiliate transactions or business combination statute or regulation or other similar state anti-takeover Laws and regulations may become, or may purport
to be, applicable to the Offer, the Mergers or any other Transactions, or the Tender and Support Agreement, each of the Company and Parent and their respective boards of directors, or in the case of Merger Sub 2, its manager, shall grant such
approvals and take such actions as are reasonably necessary so that the transactions contemplated hereby and by the Tender and Support Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the transactions contemplated hereby and by the Tender and Support Agreement.
Section 6.7
Public Announcements
. Unless a Company Adverse Recommendation Change has occurred,
the Parties shall consult with one another prior to issuing, and provide each other with the opportunity to review and comment upon, any public announcement, statement or other disclosure with respect to this Agreement or the Transactions and shall
not issue any such public announcement or statement prior to such consultation, except as may be required by Law or by the rules and regulations of the New York Stock Exchange or Nasdaq; provided that each of the Company and Parent may make any
public statements in response to questions by the press, analysts, investors or analyst or investor calls, so long as such statements are not inconsistent with previous statements made jointly by the Company and Parent (or made by one Party after
having consulted with the other Party). In addition, unless a Company Adverse Recommendation Change has occurred, the Company shall, to the extent reasonably practicable, consult with Parent regarding the form and content of any public disclosure of
any material developments or matters involving the Company, including earnings releases and regulatory matters, reasonably in advance of publication and release. The Company and Parent agree to issue a joint press release announcing the execution
and delivery of this Agreement.
Section 6.8
Indemnification and Insurance
.
(a) From and after the First Effective Time, each of the First Surviving Corporation and the Surviving Company shall, and Parent shall cause
the First Surviving Corporation and the Surviving Company to, indemnify and hold harmless, to the fullest extent permitted or otherwise contemplated by the Company Organizational Documents (or Organizational Documents of the Companys
Subsidiaries), each present and former director and officer of the Company and any of its Subsidiaries and any other Person entitled to indemnification under the Company Organizational Documents or organizational documents of the Companys
Subsidiaries (in each case, solely when acting in such capacity) (collectively, together with their respective heirs, executors and administrators, the
Company Indemnified Parties
) against any documented costs or expenses
(including documented attorneys fees), judgments, fines, losses, claims, damages or Liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising
out of or related to the fact that such Person is or was a director or officer of the Company or any of its Subsidiaries and pertaining to matters existing or occurring or actions or omissions taken at or prior to the First Effective Time, including
(i) the Transactions, and (ii) actions to enforce this
Section 6.8
, and each of the First Surviving Corporation and the Surviving Company shall, and Parent shall cause the First Surviving Corporation and the Surviving Company
to, also advance expenses to the Company Indemnified Parties as incurred to the fullest extent permitted or otherwise contemplated by the Company Organizational Documents (or Organizational Documents of the Companys Subsidiaries); provided
that the Company Indemnified Party to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined by a final and nonappealable judicial determination that such Company Indemnified Party is not entitled to
indemnification.
(b) All rights to indemnification and exculpation from Liabilities for acts or omissions occurring at or prior to the
First Effective Time and rights to advancement of expenses relating thereto now existing in favor of any Company Indemnified Party or as provided in the Company Organizational Documents (or Organizational Documents of the Companys
Subsidiaries) or any indemnification agreements in existence as of the date hereof
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between such Company Indemnified Party and the Company or any of its Subsidiaries that are set forth on
Section 6.8(b)
of the Company Disclosure Schedule, shall survive the
Transactions and shall continue in full force and effect in accordance with their terms, and shall not be amended, repealed or otherwise modified for a period of six (6) years after the First Effective Time in any manner that would adversely
affect the rights thereunder of such Company Indemnified Parties, except as required by applicable Law.
(c) Prior to the First Effective
Time, the Company shall and, if the Company is unable to, the Surviving Company shall promptly following the First Effective Time, obtain and fully pay the premium for the extension of the directors and officers liability coverage of the
Companys existing directors and officers insurance policies for a claims reporting or discovery period of at least six (6) years from and after the First Effective Time from an insurance carrier with the same or better credit
rating as the Companys current insurance carrier with respect to directors and officers liability insurance (
D&O Insurance
) with terms, conditions, retentions and limits of liability that are no less
favorable in the aggregate to the Company Indemnified Parties than the Companys existing policies. If neither the Company nor the Surviving Company obtains such a tail insurance policy as of the First Effective Time, then, for a
period of six (6) years after the First Effective Time, the Surviving Company shall cause to be maintained in effect the D&O Insurance in place as of the date hereof with terms, conditions, retentions and limits of liability that are no
less favorable in the aggregate to the Company Indemnified Parties than those provided in the Companys existing policies as of the date hereof (provided that the Surviving Company may substitute therefor policies with a substantially
comparable insurer of similar national reputation that have at least the same coverage and amounts as the D&O Insurance in place on the date hereof and containing terms, conditions, retentions and limits of liability which are no less
favorable in the aggregate to the Company Indemnified Parties than those of the D&O Insurance in place on the date hereof) with respect to claims arising from facts or events, or actions or omissions, which occurred or are alleged to have
occurred at or before the First Effective Time;
provided
,
however
, that the Surviving Company shall not be obligated to make annual premium payments for such insurance to the extent such premiums exceed 200% of the premiums paid in
2016 by the Company for such insurance (the
Premium Cap
), and if such premiums for such insurance would at any time exceed the Premium Cap, then the Surviving Company shall cause to be maintained policies of insurance which, in
the Surviving Companys good faith determination, provide the maximum coverage available at an annual premium equal to the Premium Cap.
(d) The rights of each Company Indemnified Party pursuant to this
Section 6.8
shall be in addition to, and not in limitation of,
any other rights such Company Indemnified Party may have under the Company Organizational Documents (or Company Subsidiary Organizational Documents) or under any applicable Contracts or Law.
(e) If Parent or the Surviving Company or any of their respective successors or assigns (i) consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfer all or substantially all of its properties and assets to any individual, corporation or other entity,
then, and in each such case, proper provisions shall be made so that the successors and assigns of Parent or the Surviving Company shall assume all of the obligations set forth in this
Section 6.8
.
(f) The provisions of this
Section 6.8
shall survive the First Effective Time and are intended to be for the benefit of, and shall
be enforceable by, each Company Indemnified Party and his or her heirs and representatives. The Company Indemnified Parties are expressly intended as third party beneficiaries of this
Section 6.8
.
Section 6.9
Control of Operations
. Without in any way limiting any Partys rights or
obligations under this Agreement, the Parties understand and agree that (a) nothing contained in this Agreement shall give Parent or the Company, directly or indirectly, the right to control or direct the other Partys operations (or the
operations of the other Partys Subsidiaries) prior to the First Effective Time and (b) prior to the First Effective Time, each of the Company and Parent shall exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its operations.
Section 6.10
Section 16 Matters
. Prior to
the First Effective Time, Parent and the Company shall take all such steps as may be required to cause any dispositions of Company Common Stock (including derivative
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securities with respect to Company Common Stock) or acquisitions of shares of Parent Common Stock (including derivative securities with respect to Parent Common Stock) resulting from the
Transactions by each Person who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company (including any director designated by any such Person and including any Person to the extent deemed a
director by deputization) or will become subject to such reporting requirements with respect to Parent, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 6.11
Transaction Litigation
. The Company shall give Parent the opportunity to participate
in the defense or settlement of any stockholder Action against the Company or its directors or executive officers relating to the Transactions, including the Offer and the Mergers. The Company agrees that it shall not settle or offer to settle any
Action commenced prior to or after the date of this Agreement against the Company or its directors, executive officers or similar persons by any stockholder of the Company relating to this Agreement, the Offer, the Mergers, or the other Transactions
without the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed to the extent that such settlement only requires (A) the issuance of additional disclosure and/or (B) the payment of
money if the amount of money to be paid in connection with such settlement does not materially exceed any insurance proceeds that the Company reasonably expects to receive with respect to such Action and any deductible in respect thereof. Each of
Parent and the Company shall notify the other promptly (and in any event within 48 hours) of the commencement of any such stockholder Action of which it has received notice.
Section 6.12
Exchange Matters
.
(a) Parent shall file a supplemental listing application (or such other form as may be required) with the New York Stock Exchange with respect
to the shares of Parent Common Stock to be issued in connection with the Offer (if the Acceptance Time occurs) and the First Merger and such other shares of Parent Common Stock to be reserved for issuance in connection with the Offer (if the
Acceptance Time occurs) and the First Merger to be approved for listing on the New York Stock Exchange subject to official notice of issuance, prior to the Acceptance Time.
(b) The Company shall cooperate with Parent and use reasonable best efforts to take, or cause to be taken, all actions reasonably necessary,
proper or advisable on its part under applicable Laws and rules and policies of Nasdaq to enable the delisting of the Company Common Stock from Nasdaq and the termination of its registration under the Exchange Act, in each case, as promptly as
practicable after the First Effective Time, provided that such delisting and termination shall not be effective until after the First Effective Time.
Section 6.13
Rule 14d-10 Matters
. The Parties acknowledge that certain payments have been made or
are to be made and certain benefits have been granted or are to be granted according to employment compensation, severance and other employee benefit plans of the Company, including the Company Benefit Plans (collectively, the
Arrangements
) to certain holders of shares of Company Common Stock and holders of Company Stock Awards. The Compensation Committee of the Company Board of Directors (the
Compensation Committee
) (a) at a
meeting to be held prior to the Acceptance Time, will duly adopt resolutions approving as an employment compensation, severance or other employee benefit arrangement within the meaning of Rule 14d-10(d)(1) under the Exchange Act
(i) each Arrangement presented to the Compensation Committee on or prior to the date hereof, (ii) the treatment of the Company Stock Awards, as applicable, in accordance with the terms set forth in this Agreement, and (iii) the
applicable terms of
Section 6.4
and
Section 6.8
, and (b) will take all other actions necessary to satisfy the requirements of the non-exclusive safe harbor under Rule 14d-10(d)(2) under the Exchange Act with respect to
the foregoing arrangements. The Company represents and warrants that each member of the Compensation Committee is an independent director in accordance with the requirements of Rule 14d-10(d)(2) under the Exchange Act.
Section 6.14
Certain Tax Matters
. Each of the Company and Parent shall use its reasonable best
efforts to obtain the opinions of counsel referenced in paragraph (E)(5) and (E)(6) of Annex A, including by executing and delivering customary tax representation letters to each such counsel in form and substance reasonably
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satisfactory to such counsel. None of the Parties shall (and each Party shall cause its respective Subsidiaries not to) knowingly take any action (or fail to take any reasonable action) which
action (or failure to act) would reasonably be expected to prevent or impede the Offer and the Mergers, taken together, from qualifying as a reorganization within the meaning of Section 368(a) of the Code. The Parties intend to
report and, provided the above referenced opinions of counsel are received, except to the extent otherwise required by Law, shall report, for federal income tax purposes, the Offer and the Mergers, taken together, as a reorganization
within the meaning of Section 368(a) of the Code.
Section 6.15
Additional
Agreements
. In case at any time after the First Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Company with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the Parties to the First Merger or the Second Merger, the officers of the Surviving Company shall be authorized to, in the name and on behalf of the Company, execute and deliver such deeds, bills of
sale, assignment or assurances and take all such other action as may be necessary in connection therewith.
Section 6.16
Advice of Changes
. The Company and Parent shall each as promptly as practicable
advise the other Party of (a) any notice or other written communication received from any counterparty to a material Contract with regard to any action, consent, approval or waiver that is required to be taken or obtained with respect to such
Contract in connection with the consummation of the Transactions (and provide a copy thereof), or (b) any notice or other written communication from any other Person alleging that the consent of such Person is or may be required in connection
with the Transactions (and provide a copy thereof). The Company shall notify Parent as promptly as practicable of any written notice or other written communication from any party to any Company Material Contract to the effect that such party has
terminated or intends to terminate or otherwise materially adversely modify its relationship with the Company or any Subsidiary of the Company as a result of the Transactions.
Section 6.17
Agreements Concerning Parent and the Merger Subs
.
(a) Parent shall cause the Merger Subs, the First Surviving Corporation and the Surviving Company to perform their respective obligations under
this Agreement and to consummate the Transactions upon the terms and subject to the conditions set forth in this Agreement.
(b) Parent
hereby guarantees payment, performance and discharge by Purchaser, Merger Sub 2, the First Surviving Corporation and the Surviving Company of, and the compliance by Purchaser, Merger Sub 2, the First Surviving Corporation and the Surviving Company
with, all of their respective covenants, agreements, obligations and undertakings under this Agreement in accordance with the terms of this Agreement. Parent shall, immediately following execution of this Agreement, approve this Agreement in its
capacity as (i) sole stockholder of Purchaser and (ii) sole member of Merger Sub 2, in each case in accordance with applicable Law and the articles of incorporation and bylaws (or other applicable organizational documents) of such Merger
Sub.
(c) During the period from the date of this Agreement through the Second Effective Time, the Merger Subs shall not engage in any
activity of any nature except for activities related to or in furtherance of the Offer and the Mergers.
Section 6.18
Resignations
. The Company shall use its reasonable best efforts to cause to be
delivered to Parent resignations executed by each director of the Company in office as of immediately prior to the First Effective Time and effective upon the First Effective Time.
Section 6.19
Debt Matters
.
(a) From and after the date of this Agreement, and through the earlier of the Closing and the date on which this Agreement is terminated in
accordance with
Article VIII
, the Company shall, and shall cause each of its Subsidiaries and each of its and their Representatives to, use its respective commercially reasonable efforts to provide all cooperation as may be reasonably
requested by Parent to assist Parent in any repayment of the
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Companys debt obligations at or following the Closing, including in each case taking all customary actions as may be necessary or desirable to effect any such transactions.
(b) In no event shall this Section 6.19 (a) require the Company or any of its Subsidiaries to agree to or to pay any fees, incur or
reimburse any costs or expenses, or make any payment, prior to the occurrence of the Closing or otherwise incur any liability or give any indemnities prior to the occurrence of the Closing, (b) require the Company or any of its Subsidiaries to
take any action that would reasonably be expected to conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, the Organizational Documents of the Company or any of its Subsidiaries,
any applicable laws or any Contract, (c) require the Company or any of its Subsidiaries to execute or deliver any certificate, document, instrument or Contract that is effective prior to the Closing or agree to any change or modification of any
existing certificate, document, instrument or Contract that is effective prior to the Closing (other than customary payoff letters), (d) require the Company or any of its Subsidiaries or their respective Representatives to enter into, execute
or deliver any Contract, or agree to any change or modification to any Contract, that is effective prior to the occurrence of the Closing or that would be effective if the Closing does not occur, or (e) require cooperation to the extent it
would unreasonably disrupt or interfere with the conduct of the business or operations of the Company or its Subsidiaries.
(c) Parent will
indemnify, defend and hold harmless the Company and its Subsidiaries and its and their Representatives from and against any and all liabilities, obligations, losses, damages, claims, costs, expenses, awards, judgments and penalties suffered or
incurred by any of them in connection with any actions taken at the request of Parent pursuant to this
Section 6.19
.
ARTICLE VII CONDITIONS TO THE MERGERS
Section 7.1
Conditions to Each Partys Obligation to Effect the Mergers
. The respective
obligations of each Party to effect the Mergers shall be subject to the fulfillment (or waiver by the Company and Parent, to the extent permissible under applicable Law) on or prior to the Closing Date of the following conditions:
(a)
Purchase of Shares of Company Common Stock
. Purchaser shall have accepted for payment and paid for all of the shares of Company
Common Stock validly tendered and not properly withdrawn in the Offer.
(b)
No Legal Prohibition
. No injunction, whether
temporary, preliminary or permanent, by any court or other tribunal of competent jurisdiction shall have been entered and shall continue to be in effect, and no Law shall have been adopted or be effective, in each case that restrains, enjoins,
prevents, prohibits or makes illegal the consummation of the Mergers.
ARTICLE VIII TERMINATION
Section 8.1
Termination or Abandonment
. Notwithstanding anything in this Agreement to the contrary,
this Agreement may be terminated and the Offers and the Mergers may be abandoned at any time prior to the Acceptance Time, only as follows, and subject to any required authorizations of the Company Board of Directors or the board of directors of
Purchaser to the extent required by the DGCL, as applicable:
(a) by the mutual written consent of the Company and Parent;
(b) (i) by either the Company or Parent, if the Offer shall have terminated or expired in accordance with its terms (subject to the rights
and obligations of Parent and Purchaser to extend the Offer pursuant to
Section 1.1(c)(ii)
) without the Minimum Condition having been satisfied and the other Offer Conditions having been satisfied or waived by Parent;
(c) by either the Company or Parent if the Acceptance Time shall not have occurred on or prior to 12:01 a.m., New York City time, on
July 7, 2017 (such date, or as it may be extended pursuant to this
Section 8.1(c)
, the
End Date
);
provided
,
however
, that if all of the Offer Conditions, other than the condition set forth in
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paragraph (E)(8) of
Annex A
, shall have been satisfied or waived (other than the Minimum Condition and those conditions which by their terms cannot be satisfied prior to the Acceptance
Time), and the Offer shall not have been terminated theretofore, the End Date may be extended one or more times to 12:01 a.m., New York City time, on the date that is ten (10) Business Days following the then-current End Date at the election of
Parent by delivery of written notice to the Company prior to the then-current End Date; provided, further, that Parent may only exercise such an extension up to a maximum of two (2) times;
(d) by either the Company or Parent if an Order by a Governmental Entity of competent jurisdiction shall have been issued permanently
restraining, enjoining or otherwise prohibiting the consummation of the Offer or either Merger and such Order shall have become final and nonappealable;
provided
,
however
, that the right to terminate this Agreement under this
Section 8.1(d)
shall not be available to a Party if such Order (or such Order becoming final and nonappealable) was due to the material breach of such Party of any covenant or other agreement of such Party set forth in, this Agreement;
(e) by the Company (provided that the Company is not then in breach of any representation, warranty, covenant or other agreement contained
herein such that any Offer Condition set forth in paragraph (E)(2) or (E)(3) of
Annex A
would not be satisfied) if: (A)(1) Parent or either Merger Sub shall have breached or failed to perform in any material respect any of their
covenants or other agreements contained in this Agreement, or (2) any of the representations and warranties of Parent and the Merger Subs contained in
Article V
shall have become inaccurate, in each case which breach or inaccuracy,
individually or when aggregated with other breaches or inaccuracies, would reasonably be expected to have a Parent Material Adverse Effect; and (B) the relevant breaches, failures to perform or inaccuracies referred to in clause (A) of
this
Section 8.1(e)
is or are either not curable or is not cured by the earlier of (x) the End Date and (y) the date that is thirty (30) calendar days following written notice from the Company to Parent describing such
breach or failure or inaccuracy in reasonable detail;
(f) by the Company, prior to the Acceptance Time, in accordance with
Section 6.3(f)
in order to enter into a definitive agreement providing for a Company Superior Proposal either concurrently with or immediately following such termination, provided that (i) the Company has complied with its
obligations contained in (A)
Section 6.3(f)
, and (B) the remaining provisions of
Section 6.3
with respect to such Company Superior Proposal in all material respects and (ii) immediately prior to or concurrently
with (and as a condition to) the termination of this Agreement, the Company pays to Parent the Termination Fee in the manner provided in
Section 8.3(a)
;
(g) by Parent (provided that Parent is not then in breach of any representation, warranty, covenant or other agreement contained herein such
that any Offer Condition would not be satisfied), if (A) the Company shall have breached or failed to perform any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform,
if it occurred or was continuing to occur at the Acceptance Time, would result in a failure of an Offer Condition set forth in paragraph (E)(2) or (E)(3) of
Annex A
, and (B) the relevant breaches, failures to perform or inaccuracies
referred to in clause (A) of this
Section 8.1(g)
is or are not curable or is not cured by the earlier of (x) the date that is thirty (30) days following written notice from Parent to the Company describing such breach or
failure in reasonable detail and (y) the End Date; and
(h) by Parent if, prior to the Acceptance Time, (i) a Company Adverse
Recommendation Change shall have occurred; provided that Parents right to terminate this Agreement pursuant to this clause (h)(i) shall expire at 11:59 p.m., New York City time, on the last Business Day of the first extension of the Offer made
by Parent in accordance with
Section 1.1(c)
following the Company Adverse Recommendation Change, or (ii) the Company shall have materially violated or materially breached its obligations under
Section 6.3
.
Section 8.2
Effect of Termination
. In the event of termination of this Agreement pursuant to and in
accordance with
Section 8.1
, this Agreement shall terminate and become void and of no effect (except that the Confidentiality Agreement and the provisions of this
Section 8.2
,
Section 8.3
and
Article IX
, and the agreements of the Company, Parent and the Merger Subs contained in the last sentence of
Section 1.1(c)(iii)
shall survive any termination), and there shall be no other Liability on the part of the Company,
on the one hand, or Parent or the
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Merger Subs, on the other hand, to the other except (i) as provided in
Section 8.3
or (ii) Liability arising out of or resulting from fraud, intentional misrepresentation or
willful breach of this Agreement occurring prior to termination (in which case the aggrieved Party shall be entitled to all rights and remedies available at law or in equity).
Section 8.3
Termination Fee
.
(a) (i) If this Agreement is terminated by the Company pursuant to and in accordance with
Section 8.1(f)
, the Company shall pay to
Parent the Termination Fee, by wire transfer (to an account designated by Parent) in immediately available funds immediately prior to or concurrently with such termination.
(ii) If this Agreement is terminated by Parent pursuant to and in accordance with
Section 8.1(h)
, the Company shall
pay to Parent the Termination Fee, by wire transfer (to an account designated by Parent) in immediately available funds within two (2) Business Days after such termination;
provided
that if the Company terminates this Agreement pursuant
to
Section 8.1(b)
or
Section 8.1(c)
at any time at which Parent would have been entitled to terminate this Agreement pursuant to
Section 8.1(h)(i)
, this Agreement shall be deemed terminated pursuant to
Section 8.1(h)(i)
for purposes of this
Section 8.3(a)(ii)
.
(iii) If (A) a Pre-Termination
Takeover Proposal Event shall have occurred at any time following the date of this Agreement and thereafter this Agreement is terminated by Parent or the Company pursuant to
Section 8.1(b)
or
Section 8.1(c)
or by Parent
pursuant to
Section 8.1(g)
and (B) at any time on or prior to the twelve (12) month anniversary of such termination, the Company or any of its Subsidiaries enters into a definitive agreement with respect to any transaction
included within the definition of Company Takeover Proposal that is subsequently consummated (whether within such twelve (12) month period or thereafter) or consummates any transaction included within the definition of Company Takeover Proposal
(a
Company Takeover Transaction
) (whether or not involving the same Company Takeover Proposal as that which was the subject of the Pre-Termination Takeover Proposal Event), then the Company shall pay Parent the Termination Fee, by
wire transfer (to an account designated by Parent) in immediately available funds upon the consummation of such Company Takeover Transaction; provided, that in the event that the Termination Fee is payable pursuant to this
Section 8.3(a)(iii)
as a result of a termination of this Agreement by Parent pursuant to
Section 8.1(g)
, then the Termination Fee payable hereunder shall be offset by the amount of any damages recovered by Parent as a result
of the relevant breaches, failures to perform or inaccuracies;
provided
that for the purposes of this
Section 8.3(a)(iii)
, all references in the definition of Company Takeover Proposal to fifteen percent (15%) shall
instead be references to fifty percent (50%).
(b) For purposes of this
Section 8.3
, a
Pre-Termination
Takeover Proposal Event
shall be deemed to occur if (i) a Company Takeover Proposal shall have been made directly to the Companys stockholders or otherwise publicly announced or publicly disclosed, or (ii) a bona fide third
party or group shall have made, or disclosed its or their intention to make, a Company Takeover Proposal, directly or through an intermediary, to any member of the Company Board of Directors, and in each case of clauses (i) and (ii), such
Company Takeover Proposal shall not have been withdrawn in good faith at least five (5) Business Days prior to such termination;
provided
that for purposes of this
Section 8.3(b)
, all references in the definition of Company
Takeover Proposal to fifteen percent (15%) shall instead be references to fifty percent (50%).
(c)
Termination Fee
shall mean a cash amount equal to $90,000,000.
(d) The parties agree that if this Agreement is
terminated in accordance with any provision under which payment of the Termination Fee is required hereunder, then, except in the case of fraud, intentional misrepresentation or other willful breach occurring prior to such termination, upon receipt
of such payment by Parent, (i) the payment of such Termination Fee in accordance with this
Section 8.3
, shall be the sole and exclusive remedy of Parent and the Merger Subs for any loss suffered as a result of any breach of any
covenant or agreement in this Agreement or the failure of the Transactions to be consummated, and (ii) none of the Company, its Subsidiaries or any of their respective former, current or future stockholders, directors, officers, Affiliates,
agents or other Representatives shall have any further Liability of any kind for any reason arising out of or in connection with the Transactions.
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(e) Each of the Parties hereto acknowledges that the Termination Fee is not intended to be a
penalty, but rather is liquidated damages in a reasonable amount that will compensate Parent in the circumstances in which such Termination Fee is due and payable and which do not involve fraud, intentional misrepresentation or other willful breach,
for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the Transactions, which amount would otherwise be impossible to
calculate with precision. In no event shall Parent be entitled to more than one payment of the full Termination Fee in connection with a termination of this Agreement pursuant to which such Termination Fee is payable.
(f) Each of the Company, Parent, Purchaser and Merger Sub 2 acknowledges that the agreements contained in this
Section 8.3
are an
integral part of the Transactions, and that, without these agreements, the Company, Parent, Purchaser and Merger Sub 2 would not enter into this Agreement. Accordingly, if the Company fails to pay in a timely manner any amount due pursuant to
Section 8.3(a)
, and, in order to obtain such payment, Parent or either Merger Sub commences a suit that results in a judgment against the Company for the amounts set forth in this
Section 8.3
or any portion thereof, then
(i) the Company shall reimburse Parent for all costs and expenses (including disbursements and reasonable fees of counsel) incurred in in connection with the collection under and enforcement of this
Section 8.3
and (ii) the
Company shall pay to Parent interest on such amount from and including the date payment of such amount was due to but excluding the date of actual payment at the prime rate set forth in The Wall Street Journal in effect on the date such payment was
required to be made plus two percent (2%).
ARTICLE IX MISCELLANEOUS
Section 9.1
No Survival of Representations and Warranties
. None of the representations,
warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the First Merger; provided, that this
Section 9.1
shall not limit any covenant or agreement of the Parties
which by its terms contemplates performance or compliance in whole or in part after the First Effective Time or otherwise expressly by its terms survives the First Effective Time.
Section 9.2
Expenses
. Except as set forth in
Section 8.3
, whether or not the Offer
and the Mergers are consummated, all costs and expenses incurred in connection with the Offer, the Mergers, this Agreement and the other Transactions shall be paid by the Party incurring or required to incur such expenses;
provided
,
however
, that Parent, on the one hand, and the Company, on the other hand, shall be responsible for the payment of fifty percent (50%) of any filings fees under the HSR Act.
Section 9.3
Counterparts; Effectiveness
. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the
Parties and delivered (by telecopy, electronic delivery or otherwise) to the other Parties. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (
.pdf
)
form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.
Section 9.4
Governing Law
. This Agreement, and all claims or causes of action (whether at Law, in
contract or in tort or otherwise) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance hereof, shall be governed by and construed in accordance with the laws of the State of Delaware, without
giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.
Section 9.5
Jurisdiction; Specific Enforcement
. The Parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed, in accordance with their specific terms or
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were otherwise breached. It is accordingly agreed that, in addition to any other remedy that may be available to it, including monetary damages, each of the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement (including the obligation of the Parties to consummate the transactions contemplated by this Agreement and the
obligation of Parent and the Merger Subs to pay, and the Companys stockholders right to receive, the aggregate consideration payable to them pursuant to the transactions contemplated by this Agreement, in each case in accordance with the
terms and subject to the conditions of this Agreement) exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a
particular matter, any state or federal court within the State of Delaware). In the event that any action is brought in equity to enforce the provisions of this Agreement, no Party shall allege, and each Party hereby waives the defense or
counterclaim, that there is an adequate remedy at law. The Parties further agree that no Party to this Agreement shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy
referred to in this
Section 9.5
and each Party irrevocably waives any objection to the imposition of such relief or any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument. In
addition, each of the Parties hereto irrevocably agrees that any legal suit, action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this
Agreement and the rights and obligations arising hereunder brought by the other Party hereto or its successors or assigns, shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within
the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware). Each of the Parties hereto hereby irrevocably submits with regard to any
such suit, action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or the
Transactions in any court other than the aforesaid courts. Each of the Parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any suit, action or proceeding with respect to
this Agreement, (i) any claim that it is not personally subject to the jurisdiction of the above named courts, (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) to the fullest extent permitted by applicable Law, any claim
that (A) the suit, action or proceeding in such court is brought in an inconvenient forum, (B) the venue of such suit, action or proceeding is improper or (C) this Agreement, or the subject matter hereof, may not be enforced in or by
such courts. To the fullest extent permitted by applicable Law, each of the Parties hereto hereby consents to the service of process in accordance with
Section 9.7
;
provided
,
however
, that nothing herein shall affect the
right of any Party to serve legal process in any other manner permitted by Law.
Section 9.6
WAIVER OF
JURY TRIAL
. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (a) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (c) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (d) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
Section 9.6
.
Section 9.7
Notices
. All notices and other communications hereunder shall be in writing in one of
the following formats and shall be deemed given (a) upon actual delivery if personally delivered to the Party to be notified; (b) when sent, when sent by email or facsimile by the Party to be notified; provided, however, that notice given
by email or facsimile shall not be effective unless (i) such notice specifically states that it is being delivered pursuant to this
Section 9.7
and either (ii)(A) a duplicate copy of such email or facsimile notice is
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promptly given by one of the other methods described in this
Section 9.7
or (B) the receiving Party delivers a written confirmation of receipt for such notice either by email
(excluding out of office replies) or facsimile or any other method described in this
Section 9.7
, or (c) when delivered if sent by a courier (with confirmation of delivery); in each case to the Party to be notified at
the following address:
To Parent or the Merger Subs:
c/o UnitedHealth Group Incorporated
9900 Bren Road East
Minnetonka,
MN 55343
Attention: Chief Legal Officer
Fax: (952) 936-3007
Email:
richard.mattera@uhg.com
with a copy (which shall not constitute notice) to:
Hogan Lovells US LLP
1601
Wewatta Street, Suite 900
Denver, CO 80202
Attn: Timothy R. Aragon, Esq.
Facsimile: (303) 899-7333
Email: timothy.aragon@hoganlovells.com
To the Company:
Surgical Care
Affiliates, Inc.
569 Brookwood Village, Suite 901,
Birmingham, AL 35209
Attn:
General Counsel
Facsimile: (205) 439-4929
Email: rsharff@scasurgery.com
with a copy to (which shall not constitute notice):
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY
10006
Attn: Paul J. Shim, Esq.
James E. Langston, Esq.
Facsimile: (212) 225 3999
Email: pshim@cgsh.com
jlangston@cgsh.com
or to such other address as any Party shall specify by written notice so given. Any Party to this Agreement may notify any other Party of any changes to the
address or any of the other details specified in this paragraph; provided, however, that such notification shall only be effective on the date specified in such notice or five (5) Business Days after the notice is given, whichever is later.
Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver.
Section 9.8
Assignment; Binding Effect
. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by any of the Parties without the prior written consent of the other Parties;
provided
,
however
, that, prior to the commencement (as
such term is defined for purposes of Rule 14d-2 promulgated under the Exchange Act) of the Offer, Parent may designate, by written notice to the Company, another wholly-owned Subsidiary to be a Merger Sub in lieu of either entity that is a Merger
Sub as of the date hereof, in which event all references herein to such Merger Sub shall be deemed references to such other Subsidiary, except that all representations and warranties made herein
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with respect to such Merger Sub as of the date of this Agreement shall be deemed representations and warranties made with respect to such other Subsidiary as of the date of such designation;
provided
,
further
, that any such assignment or designation shall not, and would not reasonably be expected to, impede or delay the consummation of any Transaction, prevent or impede the Offer and the Mergers, taken together, from
qualifying as a reorganization within the meaning of Section 368(a) of the Code or otherwise materially impede the rights of the stockholders of the Company under this Agreement. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this
Section 9.8
shall be null and void.
Section 9.9
Severability
. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction (a) shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement and
(b) shall not, solely by virtue thereof, be invalid or unenforceable in any other jurisdiction. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, the Parties shall
negotiate in good faith to determine a suitable and equitable provision to be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision.
Section 9.10
Entire Agreement
. This Agreement together with the exhibits hereto, schedules and
annexes hereto (including the Company Disclosure Schedule) and the Confidentiality Agreement constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, between the Parties, or any of them,
with respect to the subject matter hereof and thereof, and except as provided by
Section 9.13
, this Agreement is not intended to grant standing to any Person other than the Parties hereto.
Section 9.11
Amendments; Waivers
. At any time prior to the Acceptance Time, any provision of this
Agreement may be amended or waived, but only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company, Parent, Purchaser and Merger Sub 2 or, in the case of a waiver, by the Party waiving such provision. At
any time and from time to time prior to the Acceptance Time, either the Company, on the one hand, or Parent and Merger Subs, on the other hand, may, to the extent permissible by applicable Law and except as otherwise set forth herein,
(a) extend the time for the performance of any of the obligations or other acts of Parent or Merger Subs, in the case of an extension by the Company, or of the Company, in the case of an extension by Parent and Merger Subs, as applicable,
(b) waive any inaccuracies in the representations and warranties made to such Party contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or conditions for the benefit of any
such Party contained herein. Notwithstanding the foregoing, no failure or delay by any Party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further
exercise of any other right hereunder.
Section 9.12
Headings
. Headings of the Articles and
Sections of this Agreement are for convenience of the Parties only and shall be given no substantive or interpretive effect whatsoever. The table of contents to this Agreement is for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 9.13
No Third-Party
Beneficiaries
. Except (a) as provided in
Section 6.8
, or (b) for the right of holders of shares of Company Common Stock, after the First Effective Time, to receive the aggregate consideration payable pursuant to
Article III
of this Agreement, which rights set forth in clauses (a) and (b) of this
Section 9.13
are hereby expressly acknowledged and agreed by Parent and the Merger Subs, each of Parent, Purchaser, Merger Sub 2
and the Company agrees that their respective representations, warranties, covenants and agreements set forth herein are solely for the benefit of the other Parties hereto, in accordance with and subject to the terms of this Agreement, and this
Agreement is not intended to, and does not, confer upon any Person other than the Parties hereto and their respective successors and permitted assigns any rights or remedies hereunder, including the right to rely upon the representations and
warranties set forth herein. The Parties further agree that
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the rights of third party beneficiaries under
Section 6.8
and clause (b) of the first sentence of this
Section 9.13
shall not arise unless and until the First
Effective Time occurs. The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties.
Section 9.14
Interpretation
. When a reference is made in this Agreement to an Article, Section or
Annex, such reference shall be to an Article, Section or Annex of this Agreement unless otherwise indicated. Whenever the words include, includes or including are used in this Agreement, they shall be deemed to be
followed by the words without limitation. The words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, unless the context otherwise requires. The word since when used in this Agreement in reference to a date shall be deemed to be inclusive of such date. All terms defined in this Agreement shall have
the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter genders of such term. References in this Agreement to specific laws or to specific provisions of laws shall include all rules and regulations promulgated thereunder, and any statute
defined or referred to herein or in any agreement or instrument referred to herein shall mean such statute as from time to time amended, modified or supplemented, including by succession of comparable successor statutes. Each of the Parties has
participated in the drafting and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the Parties, and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement. Any agreement or instrument referred to herein or in any agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented, including by waiver or consent and references to all attachments thereto and instruments incorporated therein. References to dollars or $ shall mean United
States dollars. Any reference to days means calendar days unless Business Days are expressly specified. References to written or in writing include in electronic form. When used in
Article IV
or
Section 6.1
in relation to the Company or its Subsidiaries, the word material shall be deemed to mean material to the Company and its Subsidiaries taken as a whole and when used in Article V in relation to Parent
or its Subsidiaries, shall be deemed to mean material to Parent and its Subsidiaries taken as a whole.
Section 9.15
Definitions
.
(a)
Certain Specified Definitions
. As used in this Agreement:
(i)
Action
means any legal or administrative proceeding, claim, suit, arbitration, mediation, charge,
complaint, litigation or similar action.
(ii)
Affiliate
means as to any Person, any other Person that,
directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For this purpose, control (including, with its correlative meanings, controlled by and under common control
with) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract
or otherwise. For the avoidance of doubt, in no event shall TPG Partners V, L.P., TPG FOF V-A, L.P., TPG FOF V-B, L.P. or any of their respective investment vehicles or portfolio companies or any of their respective affiliated
investment fund or any portfolio company of such affiliated investment funds, be considered an Affiliate of the Company or any of its Subsidiaries.
(iii)
Business Day
means any day other than a Saturday, Sunday or any other day on which the SEC or
commercial banks in New York, New York are authorized or required by Law to close.
(iv)
Company Benefit
Plan
means each employee benefit plan, program, policy, agreement or arrangement, including pension, retirement, supplemental retirement, profit-sharing, deferred compensation, stock option, change in control, retention, employment, equity
or equity-based compensation, stock purchase, employee stock ownership, severance pay, vacation, bonus or other incentive plans, medical,
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retiree medical, vision, dental or other health plans, life insurance plans, and each other compensatory or employee benefit plan or fringe benefit plan, including any employee benefit
plan as that term is defined in Section 3(3) of ERISA, whether or not subject to ERISA, in each case, whether oral or written, funded or unfunded, or insured or self-insured, maintained by the Company, any Subsidiary or, to the knowledge
of the Company, any of the Facility Entities, or to which the Company, any Subsidiary or, to the knowledge of the Company, any of the Facility Entities contributes or is obligated to contribute or might otherwise have or reasonably be expected to
have any Liability, including, for the avoidance of doubt, for the benefit of, or in respect of, employees outside of the United States.
(v)
Company Intellectual Property
means any and all Intellectual Property that is owned by (or purported to
be owned by) the Company, any Subsidiary of the Company or, to the knowledge of the Company, any of the Facility Entities.
(vi)
Company Material Adverse Effect
means any condition, fact, change, circumstance, event, occurrence,
development or effect (each, an
Effect
) that individually or in the aggregate has had or would reasonably be expected to have a material adverse effect on the financial condition, business or results of operations of the Company
and its Subsidiaries, taken as a whole;
provided
,
however
, that no Effect arising from or relating to any of the following shall be taken into account in determining whether there has been or would reasonably be expected to be a
Company Material Adverse Effect:
(A) political or economic conditions, or securities, credit, financial or other capital
markets conditions;
(B) any condition or changes generally affecting the Companys industry or industries;
(C) any decline in the market price or trading volume of the shares of Company Common Stock on Nasdaq or a change in the credit
rating of the Company or any of its Subsidiaries (provided that the exception in this clause (C) shall not prevent or otherwise affect a determination that any change, effect or development underlying such decline or change has resulted in a
Company Material Adverse Effect);
(D) any failure, in and of itself, by the Company or any of its Subsidiaries to meet any
internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period (provided that the exception in this clause (D) shall not prevent or otherwise affect
a determination that any change, effect or development underlying such failure has resulted in or contributed to a Company Material Adverse Effect);
(E) the execution and delivery of this Agreement, the performance by any Party of its obligations hereunder and consummation of
the Transactions or the public announcement or pendency of the Offer or the Mergers or any of the other transactions contemplated by this Agreement, including the impact thereof on the relationships, contractual or otherwise, of the Company or any
Subsidiary of the Company with customers, suppliers, distributors, employees or any other third party (provided that this clause (E) shall not apply to any representation or warranty to the extent such representation or warranty addresses the
consequences resulting from the execution and delivery of this Agreement, the performance of a Partys obligations hereunder or the consummation of the transactions contemplated hereby);
(F) changes or proposed changes in GAAP or in applicable Laws or the enforcement or interpretation thereof;
(G) the outbreak or escalation of hostilities, any acts of war, sabotage, terrorism or military actions, or any escalation or
worsening of any such hostilities, acts of war, sabotage, terrorism or military actions threatened or underway as of the date of this Agreement;
(H) any action taken at the request of Parent, Purchaser or Merger Sub 2 in accordance with this Agreement;
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(I) the identity of, or any facts or circumstances relating to, Parent, either
Merger Sub or any of their respective Affiliates; or
(J) any matter set forth specifically in
Section 9.15(a)(vi)(J)
of the Company Disclosure Schedule;
(vii) except, in the case of any of clauses (A),
(B), (F) or (G) to the extent that any Effect has a disproportionate adverse effect on the Company and its Subsidiaries, taken as a whole, relative to the adverse effect that it has on other participants in the Companys industry or
industries.
(viii)
Company Registered Intellectual Property
means any and all Intellectual Property
that is the subject of an application or registration with any Governmental Entity at any time that is owned by the Company, any Subsidiary of the Company or, to the knowledge of the Company, any Facility Entity.
(ix)
Company Regulatory Agency
means any Governmental Entity that regulates the business of the Company or
its facilities, including, without limitation, the Centers for Medicare and Medicaid Services.
(x)
Company Stock
Plans
means the 2016 Omnibus Long-Term Incentive Plan, 2013 Omnibus Long-Term Incentive Plan, Management Equity Incentive Plan and Directors and Consultants Equity Incentive Plan and any applicable award agreements granted under any of the
foregoing, collectively.
(xi)
Company Superior Proposal
means a written Company Takeover Proposal (but
substituting 50% for all references to 15% in the definition of such term) that the Company Board of Directors determines in good faith, after consultation with its outside financial advisor and outside legal counsel, taking
into account the timing, likelihood of consummation, legal, financial, regulatory and other aspects of such Company Takeover Proposal, including the identity of the third party making such Company Takeover Proposal and financing terms thereof, and
such other factors as the Company Board of Directors considers to be appropriate, and taking into account any revisions to the terms of this Agreement to which Parent has committed in writing in response to such Company Takeover Proposal in
accordance with
Section 6.3(f)
of this Agreement, is more favorable to the stockholders of the Company from a financial point of view than the Transactions.
(xii)
Company Takeover Proposal
means any unsolicited bona fide inquiry, proposal, indication of interest or
offer from any Person (other than Parent, Purchaser or any of their Affiliates) to the Company or any of its Representatives relating to (A) a merger, consolidation, business combination, recapitalization, binding share exchange, liquidation,
dissolution, joint venture or other similar transaction involving the Company or any of its Subsidiaries that would result in such other Person acquiring (x) beneficial ownership of fifteen percent (15%) of more of the outstanding Company
Common Stock or securities of the Company representing more than fifteen percent (15%) of the voting power of the Company or (y) fifteen percent (15%) or more of the consolidated assets, net revenues or net income of the Company and
its Subsidiaries, (B) any acquisition, in one transaction or a series of related transactions, of the beneficial ownership of or the right to acquire beneficial ownership, directly or indirectly, of fifteen percent (15%) or more of the
outstanding Company Common Stock or securities of the Company representing more than fifteen percent (15%) of the voting power of the Company, (C) any acquisition (including the acquisition of stock in any Subsidiary of the Company), in
one transaction or a series of related transactions, of assets or businesses of the Company or its Subsidiaries, including pursuant to a joint venture, representing fifteen percent (15%) or more of the consolidated assets, net revenues or net
income of the Company and its Subsidiaries or (D) any tender offer or exchange offer or any other similar transaction or series of transactions that if consummated would result in any Person directly or indirectly acquiring beneficial ownership
or the right to acquire beneficial ownership of fifteen percent (15%) or more of the outstanding Company Common Stock or securities of the Company representing more than fifteen percent (15%) of the voting power of the Company.
(xiii)
Contract
means any contract, note, bond, mortgage, indenture, loan or credit agreement, debenture,
deed of trust, license agreement, lease, agreement, arrangement, commitment or other instrument or obligation that is legally binding, whether written or oral.
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(xiv)
Environmental Law
means any applicable Law relating to
the protection, regulation, preservation or restoration of the environment (including air, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or any exposure to or
Release of, or the management of (including the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production or disposal of) any Hazardous Materials.
(xv)
ERISA
means, the Employee Retirement Income Security Act of 1974.
(xvi)
ERISA Affiliate
means, with respect to any entity, trade or business, any other entity, trade or
business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is,
or was at the relevant time, a member of the same controlled group as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
(xvii)
Facility Entity
means any partnership, corporation, association, trust or other form of legal entity
which operates a provider of health care services, (a) the equity or other ownership interests of which are directly or indirectly held by (I) the Company or any of its Subsidiaries and (II) any other Person, and (b) whose
results were not presented on a consolidated basis with the Company, but rather as a noncontrolling interest, on its financial statements for the quarter ended September 30, 2016 as included in the Company SEC Documents and will not be
presented on a consolidated basis with the Company, but rather as a noncontrolling interest, on its financial statements for the year ended December 31, 2016.
(xviii)
Governmental Entity
means any federal, state or local, domestic, foreign, multinational or
transnational government, court, agency, commission, authority, bureau, board, official, political subdivision, tribunal or other governmental instrumentality.
(xix)
Governmental Programs
means, collectively, the Medicare and Medicaid programs set forth in Titles
XVIII and XIX of the Social Security Act, and federal health care programs as defined in 42 U.S.C. §1320a-7b(f).
(xx)
Hazardous Materials
means any wastes, substances, radiation, or materials (whether solids, liquids or
gases): (A) which are hazardous, toxic, infectious, explosive, radioactive, carcinogenic, or mutagenic; (B) which are or become defined as pollutants, contaminants, hazardous materials, hazardous
wastes, hazardous substances, chemical substances, radioactive materials, solid wastes, or other similar designations in, or otherwise subject to regulation under, any Environmental Laws;
(C) which contain without limitation polychlorinated biphenyls (PCBs), toxic mold, methyl-tertiary butyl ether (MTBE), asbestos or asbestos-containing materials, lead-based paints, urea-formaldehyde foam insulation, or petroleum or petroleum
products (including, without limitation, crude oil or any fraction thereof); or (D) which pose a hazard to human health, safety, natural resources, employees, or the environment.
(xxi)
HIPAA
means collectively the Health Insurance Portability and Accountability Act of 1996 and its
implementing regulations, as amended and supplemented by the Health Information Technology for Clinical Health Act of the American Recovery and Reinvestment Act of 2009, Pub. Law No. 111-5 and its implementing regulations, when each is
effective and as each is amended from time to time.
(xxii)
Indebtedness
means, as of any time with
respect to any Person, any obligations (including, without limitation, principal, premium, accrued interest, reimbursement or indemnity obligations, bonds, financing arrangements, prepayment and other penalties, breakage fees, sale or liquidity
participation amounts, commitment and other fees and related expenses) (A) with respect to indebtedness of such Person, in respect of borrowed money, issued in substitution for or exchange of borrowed money, or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof), including factoring arrangements or asset securitizations; (B) representing foreign exchange contracts, interest rate and currency swap
arrangements or any other arrangements designed to provide protection against fluctuations in interest or currency rates; (C) representing obligations to pay the deferred purchase price of goods and services (including any potential future
earnout, indemnification, purchase
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price adjustment, release of holdback or similar payment, but excluding trade payables incurred in the ordinary course of business); (D) representing obligations under leases
required in accordance with GAAP to be recorded as capital leases; and (E) any guarantee of any such obligations described in clauses (A) through (D) of this definition by such person.
(xxiii)
Information Privacy and Security Laws
means all Laws concerning the privacy or security of Personal
Information, including in each case to the extent relating to the privacy or security of Personal Information, HIPAA, the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act, the Fair and Accurate Credit Transaction Act, Section 5 of the
Federal Trade Commission Act as it applies to the receipt, access, use, disclosure, and security of Personal Information, the CAN-SPAM Act, Childrens Online Privacy Protection Act, state data breach notification laws, state data security laws,
state social security number protection laws, any healthcare Laws pertaining to privacy or data security and any applicable Laws concerning requirements for website and mobile application privacy policies and practices, or Laws concerning any
outbound communications (including e-mail marketing, telemarketing and text messaging) and data tracking.
(xxiv)
Intellectual Property
means all intellectual property rights in all jurisdictions worldwide, whether registered or unregistered, including all rights in, to and under: (A) all patents and applications therefor, and utility
models, and all reissues, divisionals, renewals, extensions, provisionals, reexaminations, continuations and continuations-in-part of any of the foregoing and all rights in any of the foregoing provided by international treaties and conventions;
(B) all inventions (whether patentable or not and whether or not reduced to practice), invention disclosures, confidential proprietary information, know-how, trade secrets; (C) all works of authorship, copyrights (registered or
unregistered), copyrightable works, mask works, databases and data collections, copyright registrations and registrations, renewals and applications of any of the foregoing; (D) all industrial designs and any registrations, renewals and
applications therefor or thereof throughout the world; (E) all Software; and (F) all domain names, trade names, trademarks, service marks and names, brand names, logos, trade dress, common law trademarks and service marks, including all
goodwill of the business symbolized thereby or associated therewith, and registrations and renewals for or of any of the foregoing.
(xxv)
Intervening Event
means a material event, development or change in circumstances with respect to the
Company and its Subsidiaries, taken as a whole, that occurred or arose after the date of this Agreement, which (a) was unknown to and was not reasonably foreseeable by, the Company Board of Directors as of or prior to the date of this Agreement
and (b) becomes known to or by the Company Board of Directors prior to the Acceptance Time;
provided
,
however
that none of the following will constitute, or be considered in determining whether there has been, an Intervening
Event: (i) the receipt, existence of or terms of a Company Takeover Proposal or any inquiry, request, proposal or discussion that could reasonably be expected to lead to a Company Takeover Proposal or any matter relating thereto or consequence
thereof, (ii) changes in the market price or trading volume of the shares of Company Common Stock on Nasdaq; (iii) the fact that the Company or its Subsidiaries have exceeded or met in and of itself (or the failure of Parent to meet in and
of itself) any internal or published projections, forecasts or predictions in respect of revenues, earnings or other financial or operating performance for any period ending on or after the date hereof and (iv) changes in the market price or
trading volume of the shares of Parent Common Stock on the New York Stock Exchange (provided, however, that the underlying causes of such change or fact shall not be excluded by clauses (ii), (iii) or (iv)).
(xxvi)
knowledge
means with respect to the Company, its Subsidiaries, and the Facility Entities, the
knowledge, after reasonable due inquiry (which the Parties agree does not require specific inquiry of the Facility Entities), of the individuals listed in
Section 9.15(a)(xxvi)
of the Company Disclosure Schedule.
(xxvii)
Liability
means any and all fines, penalties, awards, costs and expenses (including attorneys and
other professionals fees), debts, liabilities, commitments, duties, obligations and responsibilities of any kind and description, whether known or unknown, unliquidated or fixed, contingent or absolute, matured or unmatured, accrued or not
accrued, determined or determinable, secured or unsecured, disputed or
A-65
undisputed, subordinated or unsubordinated, monetary or non-monetary, direct or indirect or otherwise, whether due or to become due, and regardless of when asserted or whether it is accrued or
required to be accrued or disclosed pursuant to GAAP.
(xxviii)
Order
means any formal charge, order,
writ, permit, license, injunction, judgment, decree, ruling, determination, directive, award or settlement of any Governmental Entity or any arbitrator, whether civil, criminal or administrative.
(xxix)
Parent Material Adverse Effect
means any Effect that individually or in the aggregate has had or
would reasonably be expected to (A) prevent or materially impede, materially interfere with or materially delay the consummation by Parent or the Merger Subs of the Transactions or (B) have a material adverse effect on the financial
condition, business or results of operations of Parent and its Subsidiaries, taken as a whole;
provided
,
however
, that no Effect arising from or relating to any of the following shall be taken into account in determining whether there
has been or would reasonably be expected to be a Parent Material Adverse Effect:
(A) political or economic conditions, or
securities, credit, financial or other capital markets conditions;
(B) any condition or changes generally affecting
Parents industry or industries;
(C) any decline in the market price or trading volume of the shares of Parent Common
Stock on the New York Stock Exchange or a change in the credit rating of Parent or any of its Subsidiaries (provided that the exception in this clause (C) shall not prevent or otherwise affect a determination that any change, effect or
development underlying such decline or change has resulted in a Parent Material Adverse Effect);
(D) any failure, in and
of itself, by Parent or any of its Subsidiaries to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period (provided that the exception
in this clause (D) shall not prevent or otherwise affect a determination that any change, effect or development underlying such failure has resulted in or contributed to a Parent Material Adverse Effect);
(E) the execution and delivery of this Agreement, the performance by any Party of its obligations hereunder and consummation of
the Transactions or the public announcement or pendency of the Offer or the Mergers or any of the other transactions contemplated by this Agreement, including the impact thereof on the relationships, contractual or otherwise, of Parent or any
Subsidiary of Parent with customers, suppliers, distributors, employees or any other third party (provided that this clause (E) shall not apply to any representation or warranty to the extent such representation or warranty addresses the
consequences resulting from the execution and delivery of this Agreement, the performance of a Partys obligations hereunder or the consummation of the transactions contemplated hereby);
(F) changes or proposed changes in GAAP or in applicable Law or the enforcement or interpretation thereof;
(G) the outbreak or escalation of hostilities, any acts of war, sabotage, terrorism or military actions, or any escalation or
worsening of any such hostilities, acts of war, sabotage, terrorism or military actions threatened or underway as of the date of this Agreement;
(H) any action taken at the request of the Company or any of its Subsidiaries in accordance with this Agreement; or
(I) the identity of, or any facts or circumstances relating to, the Company, its Subsidiaries or any of their respective
Affiliates;
except, in the case of any of clauses (A), (B), (F) or (G) to the extent that any Effect has a disproportionate
adverse effect on Parent and its Subsidiaries, taken as a whole, relative to the adverse effect that it has on other participants in Parents industry or industries.
A-66
(i)
Parent Stock Plans
means the UnitedHealth Group
Incorporated 2011 Stock Incentive Plan (as amended and restated in 2015), the Catamaran Corporation Third Amended and Restated Long-Term Incentive Plan, as amended, the Catalyst Health Solutions, Inc. 2006 Stock Incentive Plan, as amended, the
Amended and Restated UnitedHealth Group Incorporated Executive Incentive Plan (2009 Statement), effective as of December 31, 2008, as amended, the Amended and Restated UnitedHealth Group Incorporated 2008 Executive Incentive Plan, effective as
of December 31, 2008, as amended and any applicable award agreements granted under any of the foregoing, collectively.
(ii)
Parent Trading Price
means the volume weighted average of the closing sale prices per share of Parent
Common Stock on the New York Stock Exchange, as reported in the New York City edition of The Wall Street Journal (or, if not reported thereby, as reported in another authoritative source) on each of the five (5) full consecutive trading days
ending on and including the third (3
rd
) business day prior to the Expiration Date.
(iii)
PCI DSS
means the Payment Card Industry Data Security Standard, issued by the Payment Card Industry
Security Standards Council, as may be revised from time to time.
(iv)
Permitted Lien
means (A) any
Lien for Taxes not yet due or delinquent or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in the applicable financial statements in accordance with GAAP,
(B) vendors, mechanics, materialmens, carriers, workers, landlords, repairmens, warehousemens, construction and other similar Liens arising or incurred in the ordinary and usual course of business
and consistent with past practice or with respect to Liabilities that are not yet due and payable or, if due, are not delinquent or are being contested in good faith by appropriate proceedings and for which adequate reserves (based on good faith
estimates of management) have been set aside for the payment thereof, (C) Liens imposed or promulgated by applicable Law or any Governmental Entity with respect to real property, including zoning, building or similar restrictions,
(D) applicable zoning, building or similar Laws, codes, ordinances and state and federal regulations which are not violated by the current use or occupancy of the applicable real property or the operation of the Companys, its
Subsidiaries or a Facility Entitys business thereon, (E) pledges or deposits in connection with workers compensation, unemployment insurance, and other social security legislation, (F) defects, irregularities or
imperfections of title which do not materially interfere with, or materially impair the use of, the property or assets subject thereto or (G) Liens that constitute non-exclusive licenses to Intellectual Property granted in the ordinary course
of business.
(v)
Person
means an individual, corporation, limited liability company, partnership,
association, trust, unincorporated organization, joint venture, other entity or group (as defined in the Exchange Act), including a Governmental Entity.
(vi)
Personal Information
means any information that (A) identifies or relates to an individual person
including information that alone or in combination with other information held by Company or any of its Subsidiaries can be used to identify, contact, or precisely locate an individual person or can be linked to an individual person, including,
without limitation, name, address, telephone number, health information (including protected health information (as defined in 45 C.F.R. § 160.103)), social security number, drivers license number, government issued identification number,
any financial account numbers or log-in information, Internet Protocol addresses or other persistent device identifiers, or any other data that can be used to identify, contact, or precisely locate an individual; or (B) any information that is
governed, regulated or protected by any of the Information Privacy and Security Laws that are expressly listed in the definition of Information Privacy and Security Laws set forth in
Section 9.15(a)(xxiii)
; or (C) any information
that is covered by the PCI DSS.
(vii)
Prohibited Person
means (A) an entity that has been
determined by a competent authority to be the subject of a prohibition on such conduct of any Law, regulation, rule or executive order administered by OFAC; (B) the government, including any political subdivision, agency or instrumentality
thereof, of any country against which the United States maintains comprehensive economic sanctions or embargoes; (C) any individual or entity that acts on behalf of or is owned or controlled by a government of a country
A-67
against which the United States maintains comprehensive economic sanctions or embargoes; (D) any individual or entity that has been identified on the OFAC Specially Designated Nationals and
Blocked Persons List (Appendix A to 31 C.F.R. Ch. V), as amended from time to time, or fifty percent (50%) or more of which is owned, directly or indirectly, by an such individual or entity; or (E) any individual or entity that has been
designated on any similar list or order published by a Governmental Entity in the United States.
(viii)
Release
means any release, spill, emission, discharge, seepage, escaping, leaking, pumping, pouring, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into or upon the indoor or outdoor
environment including the air, soil, improvements, surface water, groundwater, the sewer, septic system, storm drain, publicly owned treatment works, or waste treatment, storage, or disposal systems.
(ix)
Software
means any and all software and computer programs in both machine-readable form and
human-readable form, including all data files, application programming, user interfaces, source code, object code and operating systems, and related documentation.
(x)
Subsidiaries
means, with respect to the Company and any of its Subsidiaries, except as set forth on
Section 9.15(a)(xxxix)
of the Company Disclosure Schedule: any corporation, partnership, association, trust or other form of legal entity (A) whose results were presented on a consolidated basis with the Company on its financial
statements for the quarter ended September 30, 2016 as included in the Company SEC Documents or will be presented on a consolidated basis with the Company on its financial statements for the year ended December 31, 2016 (B) which more
than fifty percent (50%) of the voting power of the outstanding voting securities are directly or indirectly owned by such Person or (C) such Person or any Subsidiary of such Person is a general partner; and with respect to any other
Person, any corporation, partnership, association, trust or other form of legal entity of which (i) more than fifty percent (50%) of the voting power of the outstanding voting securities are directly or indirectly owned by such Person or
(ii) such Person or any Subsidiary of such Person is a general partner.
(xi)
Tax
or
Taxes
means any and all federal, state, local or foreign taxes, imposts, levies, duties, fees or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, and other taxes of any kind whatsoever, including any
and all interest, penalties, additions to tax or additional amounts imposed by any Governmental Entity with respect thereto.
(xii)
Tax Return
means any return, report, information return, claim for refund, election, estimated tax
filing or declaration or similar filing (including any attached schedules, supplements and additional or supporting material) filed or required to be filed with respect to Taxes, including any amendments thereof.
(xiii)
Taxing Authority
means, with respect to any Tax, the Governmental Entity that imposes such Tax, and
the agency (if any) charged with the collection, assessment or administration of such Tax.
Section 9.16
Scheduled Matters
. Notwithstanding anything in this Agreement to the contrary, in no event shall the exercise by the applicable counterparty of any right arising under any of the Contracts set forth on
Section 9.15(a)(vi)(J)
of the Company Disclosure Schedule in connection with the transactions contemplated by this Agreement or the failure to obtain the consent of any such counterparty required to be obtained under any such Contract constitute a breach by the Company or
any of its Subsidiaries of any representation, warranty covenant or other agreement contained in this Agreement, result in the failure of any Offer Condition or condition set forth in
Article VII
or give rise to any right of termination
under
Article VIII
.
A-68
Index of Defined Terms
|
|
|
|
|
Term
|
|
Section
|
|
Acceptable Confidentiality Agreement
|
|
|
Section 6.3(c)
|
|
Acceptance Time
|
|
|
Section 1.1(d)
|
|
Agreement
|
|
|
Preamble
|
|
Alternative Cash Consideration
|
|
|
Section 1.1(a)
|
|
Alternative Stock Consideration
|
|
|
Section 1.1(a)
|
|
Appraisal Provisions
|
|
|
Section 3.1(c)
|
|
Arrangements
|
|
|
Section 6.13
|
|
associates
|
|
|
Section 4.20(a)(ii)
|
|
Book-Entry Shares
|
|
|
Section 3.1(a)
|
|
Business Associate Contracts
|
|
|
Section 4.21(b)
|
|
Cancelled Shares
|
|
|
Section 3.1(a)(ii)
|
|
Cash Consideration
|
|
|
Section 1.1(a)
|
|
Certificate
|
|
|
Section 3.1(a)
|
|
Certificates of Merger
|
|
|
Section 2.3
|
|
Closing
|
|
|
Section 2.2
|
|
Closing Date
|
|
|
Section 2.2
|
|
Code
|
|
|
Recitals
|
|
Collective Bargaining Agreement
|
|
|
Section 4.15(a)
|
|
Company
|
|
|
Preamble
|
|
Company 401(k) Plan
|
|
|
Section 6.4(d)
|
|
Company Acquisition Agreement
|
|
|
Section 6.3(e)
|
|
Company Adverse Recommendation Change
|
|
|
Section 6.3(e)
|
|
Company Approvals
|
|
|
Section 4.3(d)
|
|
Company Board of Directors
|
|
|
Recitals
|
|
Company Bylaws
|
|
|
Section 4.1(b)
|
|
Company Certificate
|
|
|
Section 4.1(b)
|
|
Company Common Stock
|
|
|
Recitals
|
|
Company Disclosure Schedule
|
|
|
Article IV
|
|
Company Financial Statements
|
|
|
Section 4.4(b)
|
|
Company Indemnified Parties
|
|
|
Section 6.8(a)
|
|
Company Material Contracts
|
|
|
Section 4.20(a)
|
|
Company Option
|
|
|
Section 3.3(a)
|
|
Company Performance Share Award
|
|
|
Section 3.3(c)
|
|
Company Permits
|
|
|
Section 4.7(b)
|
|
Company Preferred Stock
|
|
|
Section 4.2(a)
|
|
Company Recommendation
|
|
|
Recitals
|
|
Company RSU Award
|
|
|
Section 3.3(b)(i)
|
|
Company SEC Documents
|
|
|
Section 4.4(a)
|
|
Company Stock Awards
|
|
|
Section 3.3(d)
|
|
Company Takeover Transaction
|
|
|
Section 8.3(a)(iii)
|
|
Compensation Committee
|
|
|
Section 6.13
|
|
Confidentiality Agreement
|
|
|
Section 6.2(c)
|
|
Continuing Employees
|
|
|
Section 6.4(b)
|
|
D&O Insurance
|
|
|
Section 6.8(c)
|
|
Delaware Secretary
|
|
|
Section 2.3
|
|
DGCL
|
|
|
Recitals
|
|
Dissenting Shares
|
|
|
Section 3.1(c)
|
|
Dissenting Stockholder
|
|
|
Section 3.1(c)
|
|
A-69
|
|
|
|
|
DLLCA
|
|
|
Recitals
|
|
Effect
|
|
|
Section 9.15(a)(vii)
|
|
End Date
|
|
|
Section 8.1(c)
|
|
Enforceability Exceptions
|
|
|
Section 4.3(c)
|
|
Equity Award Conversion Ratio
|
|
|
Section 3.3(a)
|
|
ESPP
|
|
|
Section 3.3(e)
|
|
Exchange Act
|
|
|
Section 1.1(a)
|
|
Exchange Agent
|
|
|
Section 3.2(a)
|
|
Exchange Fund
|
|
|
Section 3.2(b)
|
|
Exchanged Amounts
|
|
|
Section 3.2(c)
|
|
Expiration Date
|
|
|
Section 1.1(c)(i)
|
|
Final Offering
|
|
|
Section 3.3(e)
|
|
First Certificate of Merger
|
|
|
Section 2.3
|
|
First Effective Time
|
|
|
Section 2.3
|
|
First Merger
|
|
|
Recitals
|
|
First Surviving Corporation
|
|
|
Section 2.1
|
|
Fractional Share Cash Amount
|
|
|
Section 1.1(e)
|
|
GAAP
|
|
|
Section 4.4(b)
|
|
Health Care Laws
|
|
|
Section 4.8(a)
|
|
HIPAA Notice of Privacy Policies
|
|
|
Section 4.21(a)
|
|
HSR Act
|
|
|
Section 4.3(d)
|
|
immediate family
|
|
|
Section 4.20(a)(ii)
|
|
IRS
|
|
|
Section 4.10(a)
|
|
IT Assets
|
|
|
Section 4.16(h)
|
|
Law
|
|
|
Section 4.7(a)
|
|
Laws
|
|
|
Section 4.7(a)
|
|
Leased Real Property
|
|
|
Section 4.17(b)
|
|
Letter of Transmittal
|
|
|
Section 3.2(c)
|
|
Lien
|
|
|
Section 4.3(e)
|
|
material contract
|
|
|
Section 4.20(a)(i)
|
|
Maximum Stock Consideration
|
|
|
Section 1.1(a)
|
|
Merger Sub 2
|
|
|
Preamble
|
|
Merger Subs
|
|
|
Preamble
|
|
Mergers
|
|
|
Recitals
|
|
Minimum Cash Consideration
|
|
|
Section 1.1(a)
|
|
Nasdaq
|
|
|
Section 1.1(c)(ii)
|
|
Offer
|
|
|
Recitals
|
|
Offer Conditions
|
|
|
Section 1.1(a)
|
|
Offer Documents
|
|
|
Section 1.2(a)(i)
|
|
Offer Prospectus
|
|
|
Section 1.2(b)
|
|
Organizational Documents
|
|
|
Section 4.1(b)
|
|
Owned Real Property
|
|
|
Section 4.17(a)
|
|
Parent
|
|
|
Preamble
|
|
Parent 401(k) Plan
|
|
|
Section 6.4(d)
|
|
Parent Approvals
|
|
|
Section 5.3(b)
|
|
Parent Common Stock
|
|
|
Section 5.2
|
|
Parent Financial Statements
|
|
|
Section 5.4(b)
|
|
Parent Organizational Documents
|
|
|
Section 5.1(b)
|
|
Parent Performance Share Award
|
|
|
Section 3.3(c)
|
|
Parent Preferred Stock
|
|
|
Section 5.2
|
|
Parent SEC Documents
|
|
|
Section 5.4(a)
|
|
Parent Stock Awards
|
|
|
Section 5.2
|
|
A-70
|
|
|
|
|
Parent Stock-Based RSU
|
|
|
Section 3.3(b)(i)
|
|
Parties
|
|
|
Preamble
|
|
Party
|
|
|
Preamble
|
|
pdf
|
|
|
Section 9.3
|
|
Premium Cap
|
|
|
Section 6.8(c)
|
|
Pre-Termination Takeover Proposal Event
|
|
|
Section 8.3(b)
|
|
Purchaser
|
|
|
Preamble
|
|
Purchaser Common Stock
|
|
|
Section 3.1(a)(iii)
|
|
Qualified Plan
|
|
|
Section 4.10(c)
|
|
Real Property Leases
|
|
|
Section 4.17(b)
|
|
Registration Statement
|
|
|
Section 1.2(b)
|
|
Representatives
|
|
|
Section 6.3(a)
|
|
Sarbanes-Oxley Act
|
|
|
Section 4.4(a)
|
|
Schedule TO
|
|
|
Section 1.2(a)(i)
|
|
SEC
|
|
|
Section 1.1(c)(ii)
|
|
Second Certificate of Merger
|
|
|
Section 2.3
|
|
Second Effective Time
|
|
|
Section 2.3
|
|
Second Merger
|
|
|
Recitals
|
|
Second Request
|
|
|
Section 6.5(c)
|
|
Securities Act
|
|
|
Section 1.2(b)
|
|
Security Risk Assessment
|
|
|
Section 4.21(g)
|
|
Stock Consideration
|
|
|
Section 1.1(a)
|
|
Surviving Company
|
|
|
Section 2.1
|
|
Tender and Support Agreement
|
|
|
Recitals
|
|
Termination Fee
|
|
|
Section 8.3(c)
|
|
Transaction Consideration
|
|
|
Section 1.1(a)
|
|
Transactions
|
|
|
Recitals
|
|
[SIGNATURE PAGE FOLLOWS]
A-71
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and
delivered as of the date first above written.
|
|
|
UNITEDHEALTH GROUP INCORPORATED
|
|
|
By:
|
|
/s/ David S. Wichmann
|
Name:
|
|
David S. Wichmann
|
Title:
|
|
President
|
|
|
|
SPARTAN MERGER SUB 1, INC.
|
|
|
By:
|
|
/s/ David S. Wichmann
|
Name:
|
|
David S. Wichmann
|
Title:
|
|
Chief Executive Officer
|
|
|
|
SPARTAN MERGER SUB 2, LLC
|
|
|
By:
|
|
/s/ David S. Wichmann
|
Name:
|
|
David S. Wichmann
|
Title:
|
|
Chief Executive Officer
|
|
|
|
SURGICAL CARE AFFILIATES, INC.
|
|
|
By:
|
|
/s/ Andrew P. Hayek
|
Name:
|
|
Andrew P. Hayek
|
Title:
|
|
Chairman, President and Chief Executive Officer
|
[Signature Page to Agreement and Plan of Reorganization]
A-72
ANNEX A
Conditions to the Offer
Notwithstanding any other term of the Offer, but subject to the terms and conditions of this Agreement, Purchaser shall not be required to,
and Parent shall not be required to cause Purchaser to, accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchasers obligation to pay for or return
tendered shares of Company Common Stock promptly after termination or withdrawal of the Offer), pay for any shares of Company Common Stock validly tendered pursuant to the Offer (and not properly withdrawn prior to the Expiration Date and
theretofore accepted for payment or paid for) in the event that, at the Expiration Date:
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(A)
|
any waiting period (and extensions thereof) applicable to the Offer and the Mergers under the HSR Act shall not have expired or been terminated;
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(B)
|
there shall not have been validly tendered and not withdrawn in accordance with the terms of the Offer a number of shares of Company Common Stock that, together with the shares of Company Common Stock (if any) then
owned by Parent, Purchaser and Parents other Subsidiaries, represents at least a majority of all then outstanding shares of Company Common Stock (the
Minimum Condition
) (excluding, for purposes of determining whether a
sufficient number of shares have been tendered in the Offer to satisfy the Minimum Condition, shares of Company Common Stock tendered pursuant to guaranteed delivery procedures that have not yet been received, as such term is defined in
Section 251(h) of the DGCL, by the depositary for the Offer pursuant to such procedures);
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(C)
|
the Registration Statement shall not have been declared effective by the SEC under the Securities Act or a stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC or
proceedings for that purpose shall have been initiated or threatened by the SEC;
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(D)
|
the shares of Parent Common Stock to be issued in the Offer and the First Merger shall not have been approved for listing on the New York Stock Exchange, subject to official notice of issuance (provided that Parent
shall not be entitled to invoke this condition if it has not complied in all material respects with
Section 6.12
);
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(E)
|
any of the following shall have occurred and continue to exist as of the Expiration Date:
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(1)
|
an injunction, whether temporary, preliminary or permanent, by any court or other tribunal of competent jurisdiction shall have been entered and shall continue to be in effect, or a Law shall have been adopted or be
effective, in each case that prohibits or makes illegal the consummation of the Offer or the Mergers;
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(2)
|
any of the representations and warranties of the Company set forth in (i)
Article IV
(other than
in
Section 4.1(a)
, the first four sentences of
Section 4.1(b)
, the first two sentences of
Section 4.2(a)
; clauses (A), (B) and (E) of
Section 4.2(b)(i)
,
Section 4.2(d
),
Section 4.3(a)
,
(b)
and
(c)
,
Section 4.11(b)
,
Section 4.23
, and
Section 4.25
) shall not be true and correct both at and as of the date of this Agreement and at and as of the
Expiration Date as though made at and as of the Expiration Date, other than for failures to be so true and correct (without regard to materiality, Company Material Adverse Effect and similar qualifiers contained in such representations
and warranties) that have not had and would not reasonably be expected to have a Company Material Adverse Effect, (ii)
Section 4.1(a)
, the first two sentences of
Section 4.1(b)
, the first two sentences of
Section 4.2(a)
, clauses (A), (B) and (E) of
Section 4.2(b)(i)
, and
Section 4.11(b)
shall not be true and correct at and as of the date of this Agreement and at and as of the Expiration Date as though
made at and as of the Expiration Date, except for any
de minimis
inaccuracies, or (iii) the third and fourth sentences of
Section 4.1(b)
,
Section 4.2(d)
,
Section 4.3(a)
,
(b)
and
(c)
,
Section 4.23
and
Section 4.25
shall not be true and correct in all material respects at and as of the date of this Agreement and at and as of the Expiration Date as though made at and as of the
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A-73
|
Expiration Date;
provided
,
however
, that representations and warranties that are made as of a particular date or period need be true and correct (in the manner set forth in clauses
(i), (ii) and (iii) as applicable) only as of such date or period;
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(3)
|
the Company shall have failed to perform and comply in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by it prior to the Expiration Date;
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(4)
|
the Company shall have failed to deliver to Parent a certificate, dated the Expiration Date and signed by its Chief Executive Officer or another senior officer, certifying to the effect that the conditions set forth in
paragraphs (E)(2) and (E)(3) of this
Annex A
have been satisfied;
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(5)
|
the Company shall not have received a written opinion from Cleary Gottlieb Steen & Hamilton LLP, in form and substance reasonably satisfactory to the Company, dated as of the Expiration Date, to the effect
that, on the basis of certain facts, representations and assumptions set forth or referred to in such opinion, the Offer and the Mergers, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the
Code;
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(6)
|
Parent shall not have received a written opinion from Hogan Lovells US LLP, in form and substance reasonably satisfactory to Parent, dated as of the Expiration Date, to the effect that, on the basis of certain facts,
representations and assumptions set forth or referred to in such opinion, the Offer and the Mergers, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code;
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(7)
|
this Agreement shall have been terminated in accordance with its terms; or
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(8)
|
the Company shall have failed to obtain all consents, authorizations, waivers and approvals and to make all filings, applications and notices, in each case, with respect to certificates of need and licenses to operate
as an ambulatory surgery center or a hospital, as the case may be, required to be obtained by the Company pursuant to applicable Health Care Laws in order to consummate the Transactions with respect to more than 6% of all facilities that provide
health care services that are operated or managed by the Company, any of its Subsidiaries or any Facility Entity.
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A-74
Annex B
EXECUTION VERSION
TENDER AND SUPPORT AGREEMENT
This TENDER AND SUPPORT AGREEMENT (this
Agreement
), dated as of January 7, 2017, is entered into by and among
UnitedHealth Group Incorporated, a Delaware corporation (
Parent
), Spartan Merger Sub 1, Inc., a Delaware corporation and indirect wholly owned subsidiary of Parent (
Purchaser
), and each of the persons set forth
on
Schedule A
hereto (each, a
Stockholder
). All terms used but not otherwise defined in this Agreement shall have the respective meanings ascribed to such terms in the Merger Agreement (as defined below).
WHEREAS, as of the date hereof, each Stockholder is the record and beneficial owner (as defined in Rule
13d-3
under the Exchange Act) of the number of shares of common stock, par value $0.01 per share of Surgical Care Affiliates, Inc., a Delaware corporation (the
Company
) (the
Company
Common Stock
), set forth opposite such Stockholders name on
Schedule A
(all such shares set forth on
Schedule A
next to the Stockholders name, in addition to any shares of Company Common Stock issued to or
otherwise acquired or owned by such Stockholder after the date of this Agreement, being referred to herein as the
Subject Shares
);
WHEREAS, concurrently with the execution hereof, the Company, Parent, Purchaser and Spartan Merger Sub 2, LLC, a Delaware limited liability
company and direct wholly owned subsidiary of Parent (
Merger Sub 2
, and together with Purchaser, the
Merger Subs
), are entering into an Agreement and Plan of Reorganization, dated as of the date hereof (as it
may be amended from time to time, the
Merger Agreement
), which provides, among other things, for Purchaser to commence a tender offer to purchase (subject to the Offer Conditions) all of the issued and outstanding shares of
Company Common Stock and, following completion of the Offer, the merger of Purchaser with and into the Company (the
First Merger
) upon the terms and subject to the conditions set forth in the Merger Agreement; and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, and as an inducement and in consideration for Parent and the
Merger Subs to enter into the Merger Agreement, each Stockholder, severally and not jointly, and on such Stockholders own account with respect to the Subject Shares, has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of Parent and Purchaser represent and warrant to each Stockholder that:
Section 1.01
Authority; Binding Agreement
. Each of Parent and Purchaser is a duly organized and validly existing corporation in
good standing under the Laws of the state of Delaware. All of the issued and outstanding capital stock of Purchaser is owned directly by Parent. Each of Parent and Purchaser has all requisite entity power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Purchaser have been duly and validly authorized by all necessary corporate action on the
part of each of Parent and Purchaser, and no other corporate proceedings on the part of Parent and Purchaser are necessary to authorize this Agreement. This Agreement has been duly and validly executed and delivered by Parent and Purchaser and,
assuming the due authorization, execution and delivery by each Stockholder, constitutes the legal, valid and binding obligation of each of Parent and Purchaser, enforceable against each of Parent and Purchaser in accordance with its terms, except as
enforceability may be limited by the Enforceability Exceptions.
Section 1.02
Non-Contravention
. Neither the
execution and delivery of this Agreement by Parent and Purchaser nor the consummation of the transactions contemplated hereby nor compliance by Parent and Purchaser with any provisions herein will: (a) violate, contravene or conflict with or
result in any breach of any provision of the certificate of incorporation or bylaws (or other similar governing documents) of Parent and Purchaser; (b) require any consent, approval, authorization or permit of, or filing with or notification
to, any supranational, national, foreign, federal, state or local government or subdivision thereof, or governmental, judicial, legislative, executive, administrative or regulatory authority on the part of Parent and Purchaser, except for compliance
with the applicable requirements of the Securities Act, the Exchange Act or any other United States federal securities laws and the rules and regulations promulgated thereunder; (c) violate, conflict with, or result in a breach of any
provisions of, or require any consent, waiver or approval or result in a default or loss of a benefit (or give rise to any right of termination, cancellation, modification or acceleration or any event that, with the giving of notice, the passage of
time or otherwise, would constitute a default or give rise to any such right) under any of the terms, conditions or provisions of any Contract to which Parent or Purchaser is a party or by which Parent or Purchaser or any of their respective assets
or properties are bound; or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or Purchaser or by which Parent or Purchaser any of their respective assets or properties are bound, except, in the
case of each of clauses (a) through (d), as would not reasonably be expected to have, a material adverse effect on the ability of either Parent or Purchaser to perform its respective obligations hereunder or to consummate the transactions
contemplated hereby on a timely basis.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder represents and warrants, on its own account with respect to the Subject Shares, to Parent and Purchaser as to itself, that:
Section 2.01
Authority; Binding Agreement
. Such Stockholder is duly organized and validly existing in good standing under the
Laws of the jurisdiction in which it is incorporated or constituted and the consummation of the transactions contemplated hereby are within such Stockholders entity powers and have been duly authorized by all necessary entity actions on the
part of such Stockholder, and such Stockholder has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by
such Stockholder and, assuming the due authorization, execution and delivery by Parent and Purchaser, constitutes a valid and binding obligation of such Stockholder enforceable against such Stockholder in accordance with its terms, except as such
enforceability may be limited by the Enforceability Exceptions.
Section 2.02
Non-Contravention
. Neither the execution and delivery of this Agreement by such Stockholder nor the consummation of the transactions contemplated hereby nor compliance by such Stockholder with any
provisions herein will: (a) violate, contravene or conflict with or result in any breach of any provision of the certificate of incorporation or bylaws (or other similar governing documents) of such Stockholder; (b) require any consent,
approval, authorization or permit of, or filing with or notification to, any supranational, national, foreign, federal, state or local government or subdivision thereof, or governmental, judicial, legislative, executive, administrative or regulatory
authority on the part of such Stockholder, except for compliance with the applicable requirements of the Securities Act, the Exchange Act or any other United States federal securities laws and the rules and regulations promulgated thereunder;
(c) violate, conflict with, or result in a breach of any provisions of, or require any consent, waiver or approval or result in a default or loss of a benefit (or give rise to any right of termination, cancellation, modification or acceleration
or any event that, with the giving of notice, the passage of time or otherwise, would constitute a default or give rise to any such right) under any of the terms, conditions or provisions of any Contract to which such Stockholder is a party or by
which such Stockholders Subject Shares are bound; (d) result (or, with the giving of notice, the passage of time or otherwise, would result) in the creation or imposition of any Lien on any of such Stockholders Subject Shares; or
(e) violate any order,
B-2
writ, injunction, decree, statute, rule or regulation applicable to such Stockholder or by which any of such Stockholders Subject shares are bound, except, in the case of each of clauses
(a) through (e), as would not reasonably be expected to have, a material adverse effect on the ability of such Stockholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
Section 2.03
Subject Shares
. Such Stockholder is the record and beneficial owner (as defined in Rule
13d-3
under the Exchange Act) of the Subject Shares listed on
Schedule A
opposite such Stockholders name, and, except to the extent of any Subject Shares acquired after the date hereof (which shall
become Subject Shares upon that acquisition), as of the date hereof, such Subject Shares constitute all of the shares of Company Common Stock or other securities of the Company of which such Stockholder is the record or beneficial owner (as defined
in Rule
13d-3
under the Exchange Act). Other than as set forth on
Schedule A
, as of the date of this Agreement, such Stockholder does not own any options to purchase or otherwise acquire any securities
of the Company or have any interest in or voting rights with respect to any other securities of the Company. Such Stockholder has good and marketable title to all such Subject Shares free and clear of any Liens, proxies, voting trusts or agreements,
options, rights, understandings or arrangements or any other encumbrances or restrictions whatsoever on title, transfer or exercise of any rights of a stockholder in respect of such Subject Shares (collectively,
Encumbrances
),
except for any such Encumbrance that may be imposed pursuant to (a) this Agreement and (b) any applicable restrictions on transfer under the Securities Act or any state securities law (collectively,
Permitted
Encumbrances
). Except pursuant to this Agreement, no other Person has any contractual or other right or obligation to purchase or otherwise acquire any of such Stockholders Subject Shares.
Section 2.04
Voting Power
. Such Stockholder has full voting power with respect to all such Stockholders Subject Shares, and
full power of disposition, full power to issue instructions with respect to the matters set forth herein and full power to agree to all of the matters set forth in this Agreement, in each case with respect to all such Stockholders Subject
Shares. None of such Stockholders Subject Shares are subject to any stockholders agreement, proxy, voting trust or other agreement or arrangement with respect to the voting of such Subject Shares that would prevent such Stockholder from
complying with its obligations under this Agreement, except as provided hereunder.
Section 2.05
Reliance
. Such Stockholder
has had the opportunity to review the Merger Agreement and this Agreement with counsel of such Stockholders own choosing. Such Stockholder understands and acknowledges that Parent and the Merger Subs are entering into the Merger Agreement in
reliance upon such Stockholders execution, delivery and performance of this Agreement.
Section 2.06
No Litigation
. With
respect to such Stockholder, as of the date hereof, there are no Actions pending against, or, to the knowledge of such Stockholder, threatened in writing against such Stockholder or any of such Stockholders properties or assets (including the
Subject Shares) that would reasonably be expected to have a material adverse effect on the ability of such Stockholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
ARTICLE III
AGREEMENT
TO TENDER
Section 3.01
Tender of Subject Shares
. Subject to the terms of this Agreement (including,
Section
5.01
), each Stockholder hereby agrees that, pursuant to and in accordance with the terms of the Offer, it shall (a) validly tender, or cause to be tendered, into the Offer no later than fifteen
(15) Business Days after the commencement of the Offer, all of such Stockholders Subject Shares free and clear of all Encumbrances (other than Permitted Encumbrances), and (b) not withdraw, or cause to be withdrawn, its Subject
Shares from the Offer, unless and until (x) the Expiration Date, or (y) this Agreement shall have been terminated in accordance with
Section
5.01
. Each Stockholder shall (i) deliver, or cause to be delivered,
to the depositary designated in the Offer (A) a letter
B-3
of transmittal with respect to such Stockholders Subject Shares complying with the terms of the Offer, (B) a certificate or certificates representing the Subject Shares or an
agents message (or such other evidence, if any, of transfer as the depositary designated in the Offer may reasonably request) in the case of a book-entry transfer of any Subject Shares and (C) all other documents or
instruments reasonably required to be delivered by stockholders of the Company pursuant to the terms of the Offer, and/or (ii) instruct such Stockholders broker or such other Person that is the holder of record of such Stockholders
Subject Shares beneficially owned by such Stockholder to tender such Subject Shares pursuant to and in accordance with the terms of the Offer.
Section 3.02
Other Obligations
. Subject to the terms of this Agreement (including
Section
5.01
), each
Stockholder hereby agrees that, during the time this Agreement is in effect, to the extent that any of such Stockholders Subject Shares have not been purchased in the Offer, at any annual or special meeting of the stockholders of the Company,
however called, including any adjournment or postponement thereof, such Stockholder shall, in each case to the fullest extent that such Stockholders Subject Shares are entitled to vote thereon: (a) appear at each such meeting or otherwise
cause all such Subject Shares to be counted as present thereat for purposes of determining a quorum; and (b) be present (in person or by proxy) and vote, or cause to be voted, all of its Subject Shares, (i) against any action, proposal,
transaction or agreement that would reasonably be expected to (A) result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement, or of any Stockholder
contained in this Agreement or (B) result in any of the conditions set forth in Annex A of the Merger Agreement not being satisfied on or before the End Date; (ii) against any agreement or arrangement related to or in furtherance of any
Company Takeover Proposal; (iii) against any other action, agreement or transaction the consummation of which would reasonably be expected to materially impede, materially interfere with, or materially delay consummation of the Transactions by
the Company (including the Offer or the Mergers), including (x) any extraordinary corporate transaction, such as a merger, acquisition, sale, consolidation or other business combination involving the Company (other than the Mergers); (y) a
sale, lease, license or transfer of a material amount of assets of the Company or any reorganization, recapitalization, extraordinary dividend or liquidation of the Company; or (z) any change in the present capitalization of the Company or any
amendment or other change to the Company Organizational Documents, in the case of each of clauses (x), (y) and (z), solely to the extent the Company is prohibited from taking such action pursuant to the Merger Agreement); and (iv) in favor of
(A) the adoption and approval of the Merger Agreement and the transactions contemplated thereunder, (B) any proposal to adjourn or postpone the meeting to a later date, if there are not sufficient votes for the adoption and approval of the
Merger Agreement and the transactions contemplated thereby on the date on which such meeting is held, and (C) any other matter necessary for consummation of the Transactions, which is considered at any such meeting of stockholders.
Section 3.03
Proxy
. Each Stockholder, revoking (or causing to be revoked) any proxies that it has heretofore granted, hereby
irrevocably appoints Parent, and any other Person designated by Parent, as
attorney-in-fact
and proxy for and on behalf of such Stockholder, for and in the name, place
and stead of such Stockholder, to (a) attend any and all stockholder meetings of the Company with respect to the matters set forth in
Section
3.02
; and (b) vote, express consent or dissent with respect to the
Subject Shares in accordance with the provisions of
Section
3.02
at any such meeting. The foregoing proxy shall be deemed coupled with an interest, is irrevocable and shall not be terminated by operation of law or upon the
occurrence of any other event other than the termination of this Agreement pursuant to
Section
5.01
. Each Stockholder hereby affirms that the irrevocable proxy set forth in this
Section
3.03
is
given in connection with and granted in consideration of and as an inducement to Parent and Purchaser entering into the Merger Agreement and that such irrevocable proxy is given to secure the obligations of such Stockholder under
Section
3.02
hereof. Parent agrees not to exercise the proxy granted herein for any purpose other than the purposes describe in this Agreement.
B-4
ARTICLE IV
ADDITIONAL COVENANTS
Each
Stockholder hereby covenants and agrees that until the termination of this Agreement:
Section 4.01
No Transfer; No Inconsistent
Arrangements
. Except as provided hereunder or under the Merger Agreement, from and after the date hereof and until this Agreement is terminated, such Stockholder shall not, direct or indirectly, (i) create or permit to exist any
Encumbrance, other than Permitted Encumbrances, on any of such Stockholders Subject Shares, (ii) transfer, sell, assign, gift, hedge, pledge or otherwise dispose of (whether by sale, liquidation, dissolution, dividend or distribution), or
enter into any derivative arrangement with respect to (collectively,
Transfer
), any of such Stockholders Subject Shares, or any right or interest therein (or consent to any of the foregoing), (iii) enter into any Contract,
option or other agreement, arrangement or understanding with respect to any Transfer of such Stockholders Subject Shares or any right or interest therein, (iv) grant or permit the grant of any proxy,
power-of-attorney
or other authorization or consent in or with respect to any such Stockholders Subject Shares, (v) deposit or permit the deposit of any of such Stockholders Subject Shares
into a voting trust or enter into a voting agreement or arrangement with respect to any of such Stockholders Subject Shares or (vi) take or permit any of their respective Representatives to take other action that would in any way
materially restrict, limit or interfere with the performance of such Stockholders obligations hereunder or the transactions contemplated hereby or otherwise make any representation or warranty of such Stockholder herein untrue or incorrect in
any material respect. Any action taken in violation of the foregoing sentence shall be null and void ab initio and such Stockholder agrees that any such prohibited action may and should be enjoined. In furtherance of this Agreement, concurrently
herewith, each Stockholder shall, and hereby authorizes the Company and its counsel to, notify the Companys transfer agent that there is a stop transfer order with respect to all of such Stockholders Subject Shares and that this
Agreement places limits on the voting and transfer of such Subject Shares, in each case, prior to the termination of this Agreement. If any involuntary Transfer of any or all of such Stockholders Subject Shares shall occur (including, if
applicable, a sale by such Stockholders trustee in any bankruptcy, or a sale to a purchaser at any creditors or court sale), the transferee (which term, as used herein, shall include any and all transferees and subsequent transferees or
the initial transferee) shall take and hold such Subject Shares subject to all of the restrictions, liabilities and rights under this Agreement, which shall continue in full force and effect until termination of this Agreement. Notwithstanding the
foregoing, any Stockholder may Transfer Subject Shares to one or more partners or members of such Stockholder or to an affiliated entity under common control with such Stockholder or to any trustee or beneficiary of the trust,
provided
, that
such a Transfer shall be permitted only if, as a precondition, the transferee of such Subject Shares agrees in writing, to accept such Subject Shares subject to the terms of this Agreement and to be bound by the terms of this Agreement and to agree
and acknowledge that such person shall constitute a Stockholder for all purposes of this Agreement.
Section 4.02
Appraisal
Right
s
. Each Stockholder hereby (a) agrees not to make a written demand or file a petition for appraisal, and hereby waives and agrees not to exercise any appraisal rights or dissenters rights pursuant to Section 262 of
the DGCL or otherwise in respect of such Stockholders Subject Shares that may arise in connection with the Offer and the First Merger, and (b) agrees not to commence or participate in, and to take all actions necessary to opt out of any
class in any class action with respect to, any claim, derivative or otherwise, against the Company and its successors relating to the negotiation, execution or delivery of this Agreement or the Merger Agreement, including any claim
(x) challenging the validity of or seeking to enjoin the operation of, any provision of this Agreement, or (y) alleging any breach of any fiduciary duty of the Company Board of Directors in connection with the negotiation, execution and
delivery of the Merger Agreement or the consummation of the transactions contemplated thereby, including, without limitation, the First Merger.
Section 4.03
Documentation and Information
. Such Stockholder consents to and hereby authorizes Parent and Purchaser to publish and
disclose in all documents and schedules filed with the SEC, and any press release or other disclosure document that Parent or Purchaser reasonably determines to be necessary in connection with the Offer, the First Merger and any other transactions
contemplated by the Merger Agreement, such Stockholders
B-5
identity and ownership of the Subject Shares, the existence of this Agreement and the nature of such Stockholders commitments and obligations under this Agreement, and such Stockholder
acknowledges that Parent and Purchaser may file this Agreement or a form hereof with the SEC or with any other Governmental Entity. Such Stockholder agrees to promptly give Parent any information it may reasonably require for the preparation of any
such disclosure documents, and such Stockholder agrees to promptly notify Parent of any required corrections with respect to any written information supplied by such Stockholder specifically for use in any such disclosure document, if and to the
extent that any such information shall have become false or misleading in any material respect.
Section 4.04
Adjustments
. In
the event of any stock split, stock dividend or distribution, merger, reclassification, combination, exchange of shares or the like of the capital stock of the Company affecting the Subject Shares, the term Subject Shares shall be deemed
to refer to and include such shares, as well as all such stock dividends and distributions and any securities into which or for which any or all of such shares may be changed or exchanged or which are received in such transaction.
Section 4.05
No Solicitation
. Each Stockholder shall and shall cause each of its Representatives: (a) to immediately cease
and cause to be terminated any solicitation, discussions or negotiations by such Stockholder or its Representatives with any Persons (other than Parent and its Representatives) that are ongoing with respect to a Company Takeover Proposal and
(b) not to, directly or indirectly through intermediaries, (i) solicit, initiate, knowingly encourage (including by way of furnishing
non-public
information relating to the Company or any of its
Subsidiaries) or knowingly facilitate any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Takeover Proposal, (ii) conduct, engage in, continue or otherwise
participate in any discussions or negotiations regarding, or furnish to any other Person any information in connection with, or for the purpose of knowingly encouraging or knowingly facilitating, a Company Takeover Proposal (other than, solely in
response to an unsolicited inquiry, to refer the inquiring Person to this
Section
4.05
and to limit its conversation or other communication exclusively to such referral), and (iii) approve, endorse, recommend or enter
into, or propose to approve, endorse, recommend or enter into, any letter of intent, term sheet, acquisition agreement, merger agreement, joint venture agreement or similar document, agreement, commitment or agreement in principle (whether written,
oral, binding or
non-binding)
with respect to a Company Takeover Proposal. Each Stockholder shall, and shall cause its Representatives to, promptly request any Person that has executed a confidentiality or
non-disclosure
agreement with such Stockholder in connection with any actual or potential Company Takeover Proposal that remains in effect as of the date of this Agreement to return or destroy all confidential
information in the possession of such Person or its Representatives.
Section 4.06
Notice of Acquisitions, Proposals Regarding
Prohibited Transactions
. Each Stockholder hereby agrees to notify Parent as promptly as practicable (and in any event no later than 24 hours after receipt) (a) of the number of any additional shares of Company Common Stock or other
securities of the Company of which Stockholder acquires beneficial ownership on or after the date hereof, and (b) in the event that such Stockholder or any of its Representatives receives a Company Takeover Proposal or a request for information
relating to the Company or its Subsidiaries that contemplates a Company Takeover Proposal, including the identity of the Person making the Company Takeover Proposal and the material terms and conditions thereof and an unredacted copy of such Company
Takeover Proposal. Each Stockholder will keep Parent informed on a reasonably current basis of material developments with respect to any such Company Takeover Proposal. Each Stockholder shall promptly (and in no event later than 24 hours after
receipt) provide to Parent copies of any indications of interest and/or draft agreements received by such Stockholder or its Representatives relating to such Company Takeover Proposal.
B-6
ARTICLE V
MISCELLANEOUS
Section 5.01
Termination
. This Agreement shall terminate automatically with respect to each Stockholder, without any notice or
other action by any person, upon the first to occur of (a) the termination of the Merger Agreement in accordance with its terms, (b) the First Effective Time, (c) the entry into any amendment or modification to the Merger Agreement
that results in a decrease in, or change in the form of the Transaction Consideration (other than, in the case of a change in the form of the Transaction Consideration, the election of Parent to pay either (i) the Minimum Cash Consideration and
the Maximum Stock Consideration or (ii) the Alternative Cash Consideration and the Alternative Stock Consideration in accordance with Section 1.1(a) of the Merger Agreement), (d) the date the Offer shall have terminated or the Expiration Date
shall have occurred, in each case without acceptance for payment of the Subject Shares pursuant to the Offer or (e) the mutual written consent of Parent and such Stockholder. Upon termination of this Agreement, no party shall have any further
obligations or liabilities under this Agreement;
provided
,
however
, that (x) the provisions of this
Article V
shall survive any termination of this Agreement and (y) nothing set forth in this
Section
5.01
shall relieve any party from liability for any breach of this Agreement prior to termination hereof.
Section 5.02
Expenses
. All fees and expenses incurred in connection herewith and the transactions contemplated hereby shall be
paid by the party incurring such fees and expenses, whether or not the Offer or the Mergers are consummated.
Section 5.03
Entire
Agreement
. This Agreement, together with
Schedule A
, constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject
matter hereof, and except as provided by
Section
5.10
, this Agreement is not intended to grant standing to any Person other than the parties hereto.
Section 5.04
Amendments and Waivers
. Any provision of this Agreement may be amended or waived, but only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by the party waiving such provision. At any time and from time to time prior to the Acceptance Time, either party may, to the
extent permissible by applicable Law and except as otherwise set forth herein, (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements for the benefit of any such party contained herein. Notwithstanding the foregoing, no failure or
delay by any party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.
Section 5.05
Assignment; Binding Effect
. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, in whole or in part, by operation of Law or otherwise, by any of the parties without the prior written consent of the other parties;
provided
, that (x) Parent or Purchaser may assign any of their respective rights and
obligations to any Person to whom the Merger Agreement is assigned in accordance with
Section
9.8
thereof, but no such assignment shall relieve Parent or Purchaser, as the case may be, of its obligations hereunder and
(y) the Stockholder may assign its rights and obligations to any Person to whom the Subject Shares are transferred in accordance with
Section
4.01
. This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this
Section
5.05
shall be null and void.
Section 5.06
Notices
. All notices and other communications hereunder shall be in writing in one of the following formats and shall
be deemed given (a) upon actual delivery, if personally delivered to the party to be notified; (b) when sent, when sent by email or facsimile, by the party to be notified; provided, however, that notice given by email or facsimile shall
not be effective unless (i) such notice specifically states that it is being delivered pursuant to this
Section
5.06
and either (ii)(A) a duplicate copy of such email or facsimile notice is
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promptly given by one of the other methods described in this
Section
5.06
or (B) the receiving party delivers a written confirmation of receipt for such notice
either by email (excluding out of office replies) or facsimile or any other method described in this
Section
5.06
; or (c) when delivered if sent by a courier (with confirmation of delivery); in each case to
the party to be notified at (x) in the case of any notice to Parent or Purchaser, to the address, facsimile number or email address set forth in
Section
9.7
of the Merger Agreement and (y) if to a Stockholder, to
such Stockholders address, facsimile number or email address set forth opposite such Stockholders name on
Schedule A
hereto, or to such other address, facsimile number or email address as such party may hereafter specify for such
purpose by written notice to Parent delivered in accordance with this
Section
5.06
.
Section 5.07
Jurisdiction; Specific Enforcement
. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed, in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that, in addition to any other remedy that may be available to it, including monetary damages, each of the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular
matter, any state or federal court within the State of Delaware). In the event that any action is brought in equity to enforce the provisions of this Agreement, no party shall allege, and each party hereby waives the defense or counterclaim, that
there is an adequate remedy at law. The parties further agree that no party to this Agreement shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in
this
Section
5.07
and each party irrevocably waives any objection to the imposition of such relief or any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument. In
addition, each of the parties hereto irrevocably agrees that any Action with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights
and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or,
if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware). Each of the parties hereto hereby irrevocably submits with regard to any such Action for itself and
in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any Action relating to this Agreement or the transactions contemplated hereby in any court other than
the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any suit, action or proceeding with respect to this Agreement, (i) any claim
that it is not personally subject to the jurisdiction of the above named courts, (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) to the fullest extent permitted by applicable law, any claim that (A) the Action in such court is
brought in an inconvenient forum, (B) the venue of such Action is improper or (C) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. To the fullest extent permitted by applicable law, each of the
parties hereto hereby consents to the service of process in accordance with
Section
5.06
;
provided
,
however
, that nothing herein shall affect the right of any party to serve legal process in any other manner
permitted by law.
Section 5.08
WAIVER
OF JURY TRIAL
. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (a) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (c) EACH PARTY MAKES
THIS WAIVER VOLUNTARILY AND (d) EACH PARTY HAS BEEN
B-8
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 5.08
.
Section 5.09
Governing Law
. This Agreement, and all claims or causes of action (whether at Law, in contract or in tort or
otherwise) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance hereof, shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any
choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.
Section 5.10
No Third-Party Beneficiaries
. Each of the parties agrees that its respective representations, warranties, covenants
and agreements set forth herein are solely for the benefit of the other parties hereto, in accordance with and subject to the terms of this Agreement, and, except as otherwise set forth herein, this Agreement is not intended to, and does not, confer
upon any Person other than the parties hereto and their respective successors and permitted assigns any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein. The representations and
warranties in this Agreement are the product of negotiations among the parties and are for the sole benefit of the parties.
Section 5.11
Counterparts; Effectiveness
. This Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by telecopy,
electronic delivery or otherwise) to the other parties. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf) form, or by any other electronic means intended
to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.
Section 5.12
Severability
. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction
(a) shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement and (b) shall not, solely by virtue
thereof, be invalid or unenforceable in any other jurisdiction. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, the parties shall negotiate in good faith to determine a
suitable and equitable provision to be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision.
Section 5.13
No Agreement Until Executed
. This Agreement shall not be effective unless and until (i) the Company Board of
Directors has approved the Merger Agreement, (ii) the Merger Agreement is executed by all parties thereto and (iii) this Agreement is executed by all parties hereto.
Section 5.14
Headings
. Headings of the Articles and Sections of this Agreement are for convenience of the parties only and shall
be given no substantive or interpretive effect whatsoever.
Section 5.15
Interpretation
. When a reference is made in this
Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. Whenever the words include, includes or including are used in this Agreement, they
shall be deemed to be followed by the words without limitation. The words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, unless the context otherwise requires. The word since when used in this Agreement in reference to a date shall be deemed to be inclusive of such date. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. References
B-9
in this Agreement to specific laws or to specific provisions of laws shall include all rules and regulations promulgated thereunder, and any statute defined or referred to herein or in any
agreement or instrument referred to herein shall mean such statute as from time to time amended, modified or supplemented, including by succession of comparable successor statutes. Each of the parties has participated in the drafting and negotiation
of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue
of authorship of any of the provisions of this Agreement. Any agreement or instrument referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or
supplemented, including by waiver or consent and references to all attachments thereto and instruments incorporated therein. References to $ shall mean United States dollars. Any reference to days means calendar days unless Business Days
are expressly specified. References to written or in writing include in electronic form.
Section 5.16
Stockholder Obligation Several and Not Joint
. The obligations of each Stockholder hereunder shall be several and not joint, and no Stockholder shall be liable for any breach of the terms of this Agreement by any other Stockholder.
Section 5.17
Stockholder Capacity
. No person executing this Agreement who is or becomes during the term hereof a director or
officer of the Company, nor any director, officer, employee or Affiliate of a Stockholder who is an officer or director of the Company, shall be deemed to make any agreement or understanding in this Agreement in such persons capacity as a
director or officer of the Company. Each Stockholder is entering into this Agreement solely in such Stockholders capacity as the record holder of Subject Shares and nothing herein shall be construed to prohibit, limit or otherwise affect any
Stockholder or any director, officer, employee or Affiliate of a Stockholder who is an officer or director of the Company, from taking (or refraining from taking) any action in such persons capacity as a director or officer of the Company or
otherwise fulfilling the obligations of such office (including the performance of obligations required by the fiduciary obligations of such Stockholder or any director, officer, employee or Affiliate of such Stockholder acting in his or her capacity
as an officer or director of the Company).
Section 5.18
Non-Recourse Parties
. All Actions (whether in contract or in tort, at
law or in equity) that may be based upon, arise out of or relate to this Agreement or the Merger Agreement, or the negotiation, execution or performance of this Agreement or the Merger Agreement (including any representation or warranty made in or
in connection with this Agreement or the Merger Agreement or as an inducement to enter into this Agreement or the Merger Agreement), may be made only against the entities that are expressly identified as parties hereto or thereto, as applicable. No
(A) former, current and future direct or indirect holders of any equity, general or limited partnership or limited liability company interest, controlling persons, management companies, portfolio companies, financing sources, incorporators,
directors, officers, employees, agents, attorneys, Affiliates, members, managers, general or limited partners, stockholders, representatives, successors or assignees of a Stockholder, or (B) any former, current or future direct or indirect
holders of any equity, general or limited partnership or limited liability company interest, controlling persons, management companies, portfolio companies, financing sources, incorporators, directors, officers, employees, agents, attorneys,
Affiliates, members, managers, general or limited partners, stockholders, Representatives, successors or assignees of any of the Persons described in clause (A) above (but in all cases excluding any of the foregoing who has served, who
currently serves or who serves in the future, as a director of the Company) (each, a
Stockholder Related Party
), shall have any Liability (whether in contract or in tort, in law or in equity, or based upon any theory that seeks to
impose liability of an entity party against its owners or affiliates) for any obligations or Liabilities arising under, in connection with or related to this Agreement or the Merger Agreement or any transactions contemplated hereby or thereby or for
any claim based on, in respect of, or by reason of this Agreement, the Merger Agreement, the transactions contemplated hereby or thereby or the negotiation or execution hereof or thereof, as applicable. The Stockholder Related Parties are expressly
intended as third party beneficiaries of this provision of this Agreement.
B-10
Section 5.19
Registration Rights Agreement
. Each Stockholder that is a party to the
Registration Rights Agreement, dated November 4, 2013, among Surgical Care Affiliates, Inc., TPG Partners V, L.P., TPG FOF
V-A,
L.P. and TPG FOF
V-B,
L.P. (the
Registration Rights Agreement
) hereby agrees that (a) until this Agreement is terminated such Stockholder will not exercise any of its rights without the express prior written consent of Parent;
provided
, that
notwithstanding the foregoing, each Stockholder shall be permitted to exercise its rights under Section 3.9 of the Registration Rights Agreement with respect to any claim made prior to the First Effective Time, which rights shall survive until
the resolution of the claims related thereto and (b) other than with respect to any claim made prior to the First Effective Time as contemplated in the proviso in clause (a) of this
Section
5.19
, which shall
survive until such time as such claim shall have been resolved under the Registration Rights Agreement, without any further or additional action by any of the parties, the Company, Parent, the Merger Subs and such Stockholder shall have no further
rights, obligations or duties in respect of one another under the Registration Rights Agreement or in respect thereof.
Section 5.20
Further Assurances
. From time to time and without additional consideration, each of the parties hereto shall execute and deliver such additional instruments, and shall take such further actions, as may be reasonably necessary or advisable to
effect the actions and consummate the transactions contemplated by this Agreement.
B-11
[
Signature Pages Follow
]
B-12
The parties are executing this Agreement on the date set forth in the introductory clause.
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UNITEDHEALTH GROUP INCORPORATED
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|
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By:
|
|
/s/ David S. Wichmann
|
|
|
Name: David S. Wichmann
|
|
|
Title: President
|
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|
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SPARTAN MERGER SUB 1, INC.
|
|
|
By:
|
|
/s/ David S. Wichmann
|
|
|
Name:
|
|
David S. Wichmann
|
|
|
Title:
|
|
Chief Executive Officer
|
[
Signature Page to Tender
and Support Agreement
]
B-13
|
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|
TPG PARTNERS V, L.P.
|
By:
|
|
TPG GenPar V, L.P.,
|
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|
its general partner
|
By:
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TPG GenPar V Advisors, LLC,
|
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its general partner
|
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|
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By:
|
|
/s/ Michael LaGatta
|
|
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Name:
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|
Michael LaGatta
|
|
|
Title:
|
|
Vice President
|
|
TPG FOF
V-A,
L.P.
|
By:
|
|
TPG GenPar V, L.P.,
|
|
|
its general partner
|
By:
|
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TPG GenPar V Advisors, LLC,
|
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|
its general partner
|
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|
|
|
|
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By:
|
|
/s/ Michael LaGatta
|
|
|
Name:
|
|
Michael LaGatta
|
|
|
Title:
|
|
Vice President
|
|
TPG FOF
V-B,
L.P.
|
By:
|
|
TPG GenPar V, L.P.,
|
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its general partner
|
By:
|
|
TPG GenPar V Advisors, LLC,
|
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its general partner
|
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By:
|
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/s/ Michael LaGatta
|
|
|
Name:
|
|
Michael LaGatta
|
|
|
Title:
|
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Vice President
|
[
Signature Page to Tender and Support Agreement
]
B-14
SCHEDULE A
|
|
|
|
|
Name of Stockholder
|
|
Stockholder Address
|
|
Shares of Company
Common Stock
|
TPG Partners V, L.P.
|
|
301 Commerce Street
Suite 3300
Fort Worth, TX 76102
Attention: Adam Fliss
Email: afliss@tpg.com
Fax:
415-438-1349
|
|
12,099,306
|
TPG FOF
V-A,
L.P.
|
|
301 Commerce Street
Suite 3300
Fort Worth, TX 76102
Attention: Adam Fliss
Email: afliss@tpg.com
Fax:
415-438-1349
|
|
31,652
|
TPG FOF
V-B,
L.P.
|
|
301 Commerce Street
Suite 3300
Fort Worth, TX 76102
Attention: Adam Fliss
Email: afliss@tpg.com
Fax:
415-438-1349
|
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25,522
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B-15
Annex C
January 7, 2017
The Board
of Directors
Surgical Care Affiliates, Inc.
510 Lake Cook
Road, Suite 400
Deerfield, IL 60015
Members of the Board
of Directors:
You have requested our opinion as to the fairness, from a financial point of view, of the Transaction Consideration (as defined below) to be
paid to the to the holders of common stock, par value $0.01 per share (the Company Common Stock), of Surgical Care Affiliates, Inc. (the Company) entitled to receive Transaction Consideration pursuant to the Agreement and
Plan of Reorganization, dated as of January 7, 2017 (the Agreement), by and among the Company, UnitedHealth Group Incorporated (the Acquiror), Spartan Merger Sub 2, LLC, a direct wholly-owned subsidiary of the Acquiror
(Merger Sub 2), and Spartan Merger Sub 1, Inc., a direct wholly-owned subsidiary of Merger Sub 2 and an indirect wholly-owned subsidiary of the Acquiror (Purchaser), to such holders. Pursuant to the Agreement, Purchaser will
commence an exchange offer to acquire all outstanding shares of the Company Common Stock (the Exchange Offer), entitling the exchanging holder to receive the Transaction Consideration for each share of Company Common Stock so exchanged
upon the terms and subject to the conditions set forth in the Agreement. Following completion of the Exchange Offer, Purchaser will merge with and into the Company, with the Company surviving such merger (the First Merger), and
immediately following the first merger, the Company will merge with and into Merger Sub 2, with Merger Sub 2 surviving the merger (the second merger, together with the First Merger, the Mergers, and, together with the Exchange Offer, the
Transactions). In connection with the First Merger, each outstanding share of Company Common Stock issued and outstanding prior to the effective time of the First Merger (other than Cancelled Shares (as defined in the Agreement) and
Dissenting Shares (as defined in the Agreement)) will be converted into the right to receive the Transaction Consideration. In connection with the Agreement, certain stockholders of the Company affiliated with TPG Capital, L.P. (collectively with
their affiliates, the Related Party) are entering into an agreement pursuant to which, among other things, such persons will agree to tender shares of Company Common Stock owned by them into the Exchange Offer and vote shares of Company
Common Stock owned by them in favor of adoption of the Agreement if a vote is required to effect the First Merger pursuant to the General Corporation Law of the State of Delaware. The Transaction Consideration means either (i) (x) $11.40
per share in cash (the Minimum Cash Consideration) and (y) a number of shares of common stock, par value $0.01 per share, of the Acquiror (Acquiror Common Stock) equal to $57.00 minus the Minimum Cash Consideration,
divided by the volume weighted average of the closing sale prices per share of Acquiror Common Stock on the New York Stock Exchange on each of the five (5) full consecutive trading days ending on and including the third (3rd) business day prior
to the date of the closing of the Mergers (the Acquiror Trading Price), or (ii) (x) an amount in cash per share greater than the Minimum Cash Consideration and not to exceed $27.93 (the Alternative Cash Consideration)
and (y) a number of shares of Acquiror Common Stock equal to $57.00 minus the Alternative Cash Consideration, divided by the Acquiror Trading Price. The form of the Transaction Consideration will be determined by an election of the Acquiror to
be made no later than 5:00 p.m., New York City time, on the tenth business day prior to the expiration of the Exchange Offer.
In connection with
preparing our opinion, we have (i) reviewed the Agreement; (ii) reviewed certain publicly available business and financial information concerning the Company and the Acquiror and the industries in which they operate; (iii) compared
the proposed financial terms of the Transactions with the publicly available financial terms of certain transactions involving companies we deemed relevant and the consideration paid for such companies; (iv) compared the financial and operating
performance of the Company and the Acquiror with publicly available information concerning certain other companies we deemed relevant and reviewed the current
and historical market prices of the Company Common Stock and Acquiror Common Stock and certain publicly traded securities of such other companies; (v) reviewed certain internal financial
analyses and forecasts prepared by the management of the Company relating to its business; and (vi) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this
opinion.
In addition, we have held discussions with certain members of the management of the Company with respect to certain aspects of the Transactions,
and the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, the effects of the Transactions on the financial condition and future prospects of the Company, and certain
other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed the accuracy and completeness
of all information that was publicly available or was furnished to or discussed with us by the Company or otherwise reviewed by or for us. We have not independently verified any such information or its accuracy or completeness and, pursuant to our
engagement letter with the Company, we did not assume any obligation to undertake any such independent verification. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the
solvency of the Company or the Acquiror under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to us or derived therefrom, we have assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate.
We express no view as to such analyses or forecasts or the assumptions on which they were based. We have also assumed that the Transactions and the other transactions contemplated by the Agreement will qualify as a tax-free reorganization for United
States federal income tax purposes, and will be consummated as described in the Agreement. We have also assumed that the representations and warranties made by the Company and the Acquiror in the Agreement and the related agreements are and will be
true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material
governmental, regulatory or other consents and approvals necessary for the consummation of the Transactions will be obtained without any adverse effect on the Company or the Acquiror or on the contemplated benefits of the Transactions.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, of the Transaction
Consideration to be paid in the proposed Transactions to the holders of Company Common Stock entitled to receive Transaction Consideration pursuant to the Agreement, and we express no opinion as to the fairness of any consideration to be paid in
connection with the Transactions to the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transactions. Furthermore, we express no opinion with
respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transactions, or any class of such persons relative to the Transaction Consideration to be paid in the proposed Transactions to the
holders of Company Common Stock entitled to receive Transaction Consideration pursuant to the Agreement or with respect to the fairness of any such compensation
.
We are expressing no opinion herein as to the price at which the Company Common
Stock or Acquiror Common Stock will trade at any future time.
We have acted as financial advisor to the Company with respect to the proposed Transactions
and will receive a fee from the Company for our services, a substantial portion of which will become payable only if the proposed Transactions are consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out
of our engagement. During the two years preceding the date of this letter, we and our affiliates have had commercial or investment banking relationships with the Company, the Acquiror and the Related Party, for which we and such affiliates have
received customary compensation. With respect to the Company, such services
C-2
during such period have included acting as joint lead arranger and joint bookrunner with respect to its term
loan B and revolving credit facility closed March 2015 and as sole bookrunner and sole lead arranger with respect to the increase of the said term loan B
facility closed October 2016; as joint bookrunner with respect to its bond offering closed March 2015; and as joint bookrunner with respect to its equity offering closed March 2015. With respect to the Acquiror, such services during such period have
included acting as joint lead arranger and bookrunner with respect to its revolving credit facility closed April 2015 and joint lead arranger and bookrunner with respect to its term loan A facility closed April 2015; as joint bookrunner with respect
to its bond offerings closed December 2016 and July 2015, respectively; and as financial advisor on its acquisition of Catamaran Corporation closed July 2015. With respect to the Related Party, such services during such period have included acting
as joint lead arranger and bookrunner with respect to its syndicated credit facilities closed October 2015 and August 2016 respectively. In addition, our commercial banking affiliate is an agent bank and a lender under outstanding credit facilities
of the Company and the Acquiror, for which it receives customary compensation or other financial benefits. In addition, we and our affiliates hold, on a proprietary basis, less than 1% of each of the Company Common Stock and the Acquiror Common
Stock. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of the Company or the Acquiror for our own
account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities or other financial instruments.
On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Transaction Consideration to be paid in the proposed
Transactions to the holders of Company Common Stock entitled to receive Transaction Consideration pursuant to the Agreement is fair, from a financial point of view, to such holders.
The issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities LLC. This letter is provided to the Board of
Directors of the Company (in its capacity as such) in connection with and for the purposes of its evaluation of the Transactions. This opinion does not constitute a recommendation to any shareholder of the Company as to whether such shareholder
should tender its shares into the Exchange Offer or how such shareholder should vote with respect to the Transactions or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for
any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full in any proxy or information statement mailed to shareholders of the Company but may not otherwise be disclosed publicly in any manner without our
prior written approval.
Very truly yours,
J.P. MORGAN
SECURITIES LLC
C-3
ANNEX D
DIRECTORS AND EXECUTIVE OFFICERS OF UNITEDHEALTH GROUP AND THE OFFEROR
The name, current principal occupation or employment and material occupations, positions, offices or employment for the past five years of
each director and executive officer of UnitedHealth Group and the Offeror are set forth below. The current business address of each director and executive officer is c/o UnitedHealth Group Incorporated, UnitedHealth Group Center, 9900 Bren Road
East, Minnetonka, Minnesota 55343, and the current business telephone number of each director and executive officer is (952)
936-1300.
David S. Wichmann, in addition to his position with UnitedHealth Group, is the Chief Executive Officer of the Offeror and the sole executive
officer and director of the Offeror.
Each person listed below is a citizen of the United States of America, except that Rodger Lawson is
a citizen of the United Kingdom and Glenn Renwick is a citizen of New Zealand. During the past five years, none of the directors and executive officers of UnitedHealth Group or the Offeror listed below has been convicted or a party to any criminal,
judicial or administrative proceeding specified in Item 1003(c) of Regulation M-A.
Directors and Executive Officers of UnitedHealth Group
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Name/Age
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Title
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Present Principal Occupation and Five-Year Employment
History
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Stephen J. Hemsley,
63
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Chief Executive Officer and Director
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Mr. Hemsley is Chief Executive Officer of UnitedHealth Group, has served in that capacity since November 2006, and has been a member of the Board of Directors since February 2000. From May 1999 to November 2014, Mr. Hemsley also
served as President of UnitedHealth Group.
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John F. Rex,
55
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Executive Vice President and Chief Financial Officer
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Mr. Rex is Executive Vice President and Chief Financial Officer of UnitedHealth Group and has served in that capacity since June 2016. From March 2012 to June 2016, Mr. Rex served as Executive Vice President and Chief Financial
Officer of Optum. Prior to joining Optum in 2012, Mr. Rex spent over a decade at JP Morgan, a global financial services firm, and its predecessors, concluding his tenure as a Managing Director.
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David S. Wichmann, 53
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President
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Mr. Wichmann is President of UnitedHealth Group. Mr. Wichmann has served as President of UnitedHealth Group since November 2014. From January 2011 to June 2016, Mr. Wichmann also served as Chief Financial Officer. From April 2008
to November 2014, Mr. Wichmann served as Executive Vice President of UnitedHealth Group and President of UnitedHealth Group Operations.
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Larry C. Renfro,
62
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Vice Chairman
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Mr. Renfro is Vice Chairman of UnitedHealth Group and Chief Executive Officer of Optum. Mr. Renfro has served as Vice Chairman of UnitedHealth Group since November 2014 and Chief Executive Officer of Optum since July 2011. From
January 2011 to July 2011, Mr. Renfro served as Executive Vice President of UnitedHealth Group.
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D-1
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Name/Age
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Title
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Present Principal Occupation and Five-Year Employment
History
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Marianne D. Short,
64
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Executive Vice President and Chief Legal Officer
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Ms. Short is Executive Vice President and Chief Legal Officer of UnitedHealth Group and has served in that capacity since January 2013. Prior to joining UnitedHealth Group, Ms. Short served as the Managing Partner at Dorsey &
Whitney LLP, an international law firm, from January 2007 to December 2012.
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D. Ellen Wilson,
58
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Executive Vice President, Human Capital
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Ms. Wilson is Executive Vice President, Human Capital of UnitedHealth Group and has served in that capacity since June 2013. From January 2012 to May 2013, Ms. Wilson served as Chief Administrative Officer of Optum. Prior to
joining Optum, Ms. Wilson served for 17 years at Fidelity Investments concluding her tenure there as head of Human Resources.
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Thomas E. Roos,
43
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Senior Vice President and Chief Accounting Officer
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Mr. Roos is Senior Vice President and Chief Accounting Officer of UnitedHealth Group and has served in that capacity since August 2015. Prior to joining UnitedHealth Group, Mr. Roos was a Partner at Deloitte & Touche LLP, an
independent registered accounting firm, from September 2007 to August 2015.
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William C. Ballard,
75
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Director
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Mr. Ballard served as Of Counsel to Bingham Greenebaum Doll LLP (formerly Greenebaum Doll & McDonald PLLC), a law firm in Louisville, Kentucky, from 1992 until 2008. In 1992, Mr. Ballard retired from Humana, Inc., a company
operating managed health care facilities, after serving with Humana in various roles for 22 years, including as the Chief Financial Officer and a director. In the past five years, he also served as a director of Welltower, Inc. (formerly Health Care
REIT, Inc.).
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Richard. T. Burke,
72
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Director
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Mr. Burke is Chair of the Board of Directors of UnitedHealth Group, has been a member of our Board since 1977, and was CEO of UnitedHealthcare, Inc., our predecessor corporation, until 1988. From 1995 until 2001, Mr. Burke was
the owner, CEO and Governor of the Phoenix Coyotes, a National Hockey League team. Mr. Burke currently serves as a director of Meritage Homes Corporation.
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Robert J. Darretta,
69
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Director
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Mr. Darretta is the retired Vice Chair of the board of directors, CFO and member of the executive committee of Johnson & Johnson, a health care products company. Mr. Darretta served as CFO and a member of the executive
committee from 1997 to 2007 and as Vice Chair from 2004 to 2007. Mr. Darretta joined Johnson & Johnson in 1968. Mr. Darretta currently serves as a trustee for certain Putnam mutual
funds.
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D-2
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Name/Age
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Title
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Present Principal Occupation and Five-Year Employment
History
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Timothy P. Flynn,
60
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Director
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Mr. Flynn was the Chairman of KPMG International (KPMG), a global professional services organization that provides audit, tax, and advisory services, from 2007 until his retirement in October 2011. From 2005 until
2010, he served as Chairman and from 2005 to 2008 as Chief Executive Officer of KPMG LLP in the U.S., the largest individual member firm of KPMG. Prior to serving as Chairman and CEO of KPMG LLP, Mr. Flynn was Vice Chairman, Audit and Risk Advisory
Services, with operating responsibility for Audit, Risk Advisory and Financial Advisory Services practices. Mr. Flynn has served as a member of the board of directors of JPMorgan Chase & Co. since 2012, a member of the Board of
Directors of Alcoa since November 2012 and a member of the board of directors of Wal-Mart Stores, Inc. since 2012. He served as a member of the board of directors of The Chubb Corporation from September 2013 until its acquisition in January 2016. He
has been a director of the International Integrated Reporting Council since September 2015, and he previously served as a trustee of the Financial Accounting Standards Board, a member of the World Economic Forums International Business
Council, and was a founding member of The Prince of Wales International Integrated Reporting Committee.
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Michele J. Hooper,
64
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Director
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Ms. Hooper is President and CEO of The Directors Council, a private company she co-founded in 2003 that works with corporate boards to increase their independence, effectiveness and diversity. She was President and CEO of
Voyager Expanded Learning, a developer and provider of learning programs and teacher training for public schools, from 1999 until 2000. Prior to that, she was President and CEO of Stadtlander Drug Company, Inc., a provider of disease-specific
pharmaceutical care, from 1998 until Stadtlander was acquired in 1999. Ms. Hooper is a nationally recognized corporate governance expert. Ms. Hooper currently serves as a director of PPG Industries, Inc.
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Roger A. Lawson,
69
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Director
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Mr. Lawson currently serves as the executive chair of the board of directors of E*TRADE Financial Corporation, a financial services company, and has served in that capacity since September 2016. Mr. Lawson previously served
as chair of the board of E*TRADE from 2014 to 2016. Prior to joining E*TRADE, Mr. Lawson was President of Fidelity, a mutual fund and financial services company, from 2007 to 2010. Prior to joining Fidelity, Mr. Lawson was Vice Chairman of
Prudential Financial from 2002 to 2007 where he was responsible for the International Operating Division and for Global Marketing Communications. Mr. Lawson served as Executive Vice President of Prudential from 1996 to 2002. Prior to joining
Prudential, Mr. Lawson was President and CEO of VanEck Global from 1994 to 1996. Mr. Lawson was Managing Director and Partner-in-Charge of Private Global Banking and Mutual Funds at Bankers Trust from 1992 to 1994. Mr. Lawson was a Managing Director
and CEO at Fidelity Investments-Retail from 1985 to 1991, and President and CEO at Dreyfus Service Corporation from 1982 to 1985.
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D-3
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Name/Age
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Title
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Present Principal Occupation and Five-Year Employment
History
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Glenn M. Renwick,
60
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Director
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Mr. Renwick is the executive chair of the board of directors of The Progressive Corporation, an auto insurance holding company, and has served in that capacity since July 2016. Mr. Renwick previously served as chair of the board
of Progressive from 2013 to 2016 and as President and CEO of Progressive from 2001 to 2016. Before being named President and CEO in 2001, Mr. Renwick served as
CEO-Insurance
Operations and Business Technology
Process Leader at Progressive from 1998 to 2000. Prior to that, he led Progressives Consumer Marketing group and served as President of various divisions within Progressive. Mr. Renwick joined Progressive in 1986 as Auto Product Manager for
Florida. Mr. Renwick also currently serves as a director of Fiserv, Inc.
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Kenneth I. Shine, M.D., 81
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Director
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Dr. Shine has been Professor of Medicine at the Dell Medical School within the University of Texas System (the UT System), which consists of nine academic campuses and six health institutions, since June 2015. He
served as the Special Advisor to the Chancellor for Health Affairs of the UT System from September 2013 to June 2015, as Executive Vice Chancellor for Health Affairs of the UT System from 2003 to September 2013, and as interim Chancellor of the
UT System from 2008 to February 2009. Dr. Shine served as President of the Institute of Medicine at the National Academy of Sciences from 1992 until 2002. From 1993 until 2003, Dr. Shine served as a Clinical Professor of Medicine at the
Georgetown University School of Medicine. From 1971 until 1992, Dr. Shine served in several positions at the University of California at Los Angeles School of Medicine, with his final position being Dean and Provost, Medical Sciences, and he
continues to hold the position of Professor of Medicine Emeritus. Dr. Shine also served as Chair of the Council of Deans of the Association of American Medical Colleges from 1991 until 1992 and as President of the American Heart Association from
1985 until 1986. He is a nationally recognized cardiologist.
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Gail R. Wilensky, Ph.D., 72
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Director
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Dr. Wilensky has been a senior fellow at Project HOPE, an international health foundation, since 1993. From 2008 to 2009, Dr. Wilensky was President of the Department of Defense Health Board and chaired its sub-committee on
health care delivery. From 2006 to 2008, Dr. Wilensky co-chaired the Department of Defense Task Force on the Future of Military Health Care. During 2007 she also served as a commissioner on the Presidents Commission on Care for Americas
Returning Wounded Warriors. From 2001 to 2003, she was the Co-Chair of the Presidents Task Force to Improve Health Care for our Nations Veterans. From 1997 to 2001, she was also Chair of the Medicare Payment Advisory Commission. From
1992 to 1993, Dr. Wilensky served as the Deputy Assistant to President George H. W. Bush for policy development, and from 1990 to 1992, she was the Administrator of the Health Care Financing Administration (now known as the Centers for Medicare and
Medicaid Services) directing the Medicaid and Medicare programs for the United States. Dr. Wilensky is a nationally recognized health care economist. Dr. Wilensky currently serves as a director of Quest Diagnostics Incorporated.
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D-4
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Delaware General Corporation Law.
The registrant is incorporated under the laws of Delaware. Section 145(a) of the General
Corporation Law of the State of Delaware (the Delaware General Corporation Law) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the persons conduct was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the persons conduct was unlawful.
Section 145(b) of the Delaware General Corporation Law states that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys fees)
actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the Delaware Court of Chancery or such other court shall deem proper.
Section 145(c) of the Delaware General Corporation
Law provides that, to the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by such person in connection therewith.
Section 145(d) of the Delaware General Corporation Law states that any indemnification under subsections (a) and (b) of
Section 145 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of Section 145. Such determination shall be made with respect to a person who is a director or officer at the time of
such determination (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, (2) by a committee of such directors designated by majority vote of such directors, even
though less than a quorum, (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (4) by the shareholders.
Section 145(f) of the Delaware General Corporation Law states that the indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any
II-1
bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in such persons official capacity and as to action in another capacity while holding such
office.
Section 145(g) of the Delaware General Corporation Law provides that a corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity or arising out of such persons status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of Section 145.
Section 145(j) of the Delaware General
Corporation Law states that the indemnification and advancement of expenses provided by, or granted pursuant to, Section 145 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
Certificate of
Incorporation
. The registrants Certificate of Incorporation provides that, to the fullest extent permissible under the Delaware General Corporation Law, the registrants directors shall not be personally liable to the registrant or
its shareholders for monetary damages for breach of fiduciary duty as a director, except that a director shall be liable to the extent provided by applicable law (1) for breach of the directors duty of loyalty to the registrant or its
shareholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) pursuant to Section 174 of the Delaware General Corporation Law regarding the unlawful payment of
dividends or stock redemptions or repurchases or (4) for any transaction from which the director derived an improper personal benefit.
Bylaws
. The registrants Bylaws provide that the registrant shall indemnify and hold harmless, to the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, because he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the registrant or, while a director or officer of the registrant, is or was serving at the
request of the registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys fees) reasonably incurred by such person.
The registrants Bylaws provide that the
registrant shall advance to indemnified persons expenses incurred in defending any such proceedings, subject to an obligation to repay amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further
right to appeal that such indemnified person is not entitled to be indemnified for such expenses under the registrants Bylaws or otherwise.
Indemnification Agreements
. The registrant has entered into an indemnification agreement with each of its directors and executive
officers, which provides, among other things, that the registrant will indemnify each such person to the fullest extent permitted by law, subject to certain conditions, against all expenses and certain other amounts actually and reasonably incurred
by such person in connection with proceedings in which such person is involved, or is threatened to become involved, because such person is or was a director or officer of the registrant, by reason of any action or inaction on the part of such
person, or by reason of the fact that such person is or was serving at the request of the registrant as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other enterprise. The indemnification agreement also
requires the registrant, under certain circumstances, to advance expenses incurred by such person in connection with the investigation, defense, settlement or appeal of any such proceedings.
II-2
Other Insurance
. The registrant maintains directors and officers liability
insurance which covers certain liabilities and expenses of the registrants directors and officers and covers the registrant for reimbursement of payments to the registrants directors and officers in respect of such liabilities and
expenses.
Item 21. Exhibits and Financial Statement Schedules.
A list of exhibits filed with this registration statement is contained in the index to exhibits, which is incorporated by reference into this
Item 21.
Item 22. Undertakings.
(a)
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The undersigned registrant hereby undertakes:
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(1)
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to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
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(i)
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to include any prospectus/offer to exchange required by Section 10(a)(3) of the Securities Act;
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(ii)
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to reflect in the prospectus/offer to exchange any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus/offer to exchange filed with the SEC pursuant to Rule 424(b) promulgated under the
Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration
statement; and
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(iii)
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to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
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(2)
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that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and
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(3)
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to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
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(b)
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The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrants annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange of 1934 (the Exchange Act) (and, where applicable, each filing of an employee benefit plans annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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(c)
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The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus/offer to
exchange, to each person to whom the prospectus/offer to exchange is sent or given, the latest annual report to security holders that is incorporated by reference in the offer to exchange and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the offer to
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exchange, to deliver, or cause to be delivered to each person to whom the prospectus/offer to exchange is sent or given, the latest quarterly report that is specifically incorporated by reference
in the prospectus/offer to exchange to provide such interim financial information.
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(1)
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The undersigned registrant hereby undertakes that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other Items of the applicable form.
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(2)
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That every prospectus (i) that is filed pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
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(e)
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Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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(f)
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The undersigned registrant hereby undertakes to respond to requests for information that are incorporated by reference into the registration statement, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request.
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(g)
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The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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