DEFM14A 1 d90621ddefm14a.htm DEFM14A DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(A) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                            Filed by a party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

 

 

 

LOGO

CHANGE HEALTHCARE INC.

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

  (2)  

Aggregate number of securities to which transaction applies:

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  (4)  

Proposed maximum aggregate value of transaction:

 

  (5)  

Total fee paid:

 

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount previously paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

March 5, 2021

Dear Fellow Stockholder:

You are cordially invited to attend a special meeting of the stockholders of Change Healthcare Inc. (“Change”) to be held at 3:30 p.m., Eastern Time on April 13, 2021 (the “Special Meeting”). Due to the public health impact of the COVID-19 outbreak and to support the health and well-being of our stockholders and other participants at the Special Meeting, the Special Meeting will be a virtual meeting of stockholders. You will be able to attend the Special Meeting, vote your shares electronically and submit your questions during the meeting via live audio webcast by visiting www.virtualshareholdermeeting.com/CHNG2021SM. To participate in the meeting, you must have your 16-digit control number that is shown on your proxy card or the instructions that accompanied your proxy materials. You will not be able to attend the Special Meeting in person. For purposes of attendance at the Special Meeting, all references in the accompanying proxy statement to “present in person” or “in person” will mean virtually present at the Special Meeting.

At the Special Meeting, stockholders will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of January 5, 2021 (as may be amended or modified from time to time in accordance with its terms, the “Merger Agreement”), by and among Change, UnitedHealth Group Incorporated (“UnitedHealth Group”) and Cambridge Merger Sub Inc. (“Merger Sub”). Subject to the terms and conditions of the Merger Agreement, Merger Sub will be merged with and into Change (the “Merger”) and Change will survive the Merger as a wholly-owned subsidiary of UnitedHealth Group.

If the Merger is completed, our stockholders will have the right to receive $25.75 in cash, without interest and subject to any applicable withholding taxes, for each share of common stock, par value $0.001 per share, of Change (“Change Common Stock”), other than Excluded Shares and Restricted Shares (each as defined in the accompanying proxy statement), that they own immediately prior to the effective time of the Merger, which represents a premium of approximately 41.17% over the $18.24 per share closing trading price of Change Common Stock on January 5, 2021, the last trading day prior to public announcement of the Merger. Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Change Common Stock entitled to vote thereon at the Special Meeting.

Change Common Stock is listed on Nasdaq Global Market (“NASDAQ”) under the symbol “CHNG”. The closing price of Change Common Stock on NASDAQ on March 4, 2021, the most recent practicable date prior to the date of the accompanying proxy statement, was $22.45 per share.

The board of directors of Change (the “Board”) has reviewed and considered the terms and conditions of the Merger and unanimously determined that the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Change and its stockholders and has unanimously declared advisable and approved the Merger Agreement and the consummation of the Merger and the other transactions contemplated thereby. The Board made its determination after consultation with its outside legal counsel and financial advisors and consideration of a number of factors more fully described in the accompanying proxy statement. The Board unanimously recommends that you vote “FOR” the proposal to adopt the Merger Agreement.

At the Special Meeting, stockholders will also be asked to vote on (i) a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid to Change’s named executive officers


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by Change based on or otherwise relating to the Merger, as required by the rules adopted by the U.S. Securities and Exchange Commission (“SEC”), and (ii) a proposal to adjourn the Special Meeting, from time to time, if necessary or appropriate, to solicit additional votes for the approval of the proposal to adopt the Merger Agreement if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement. The Board unanimously recommends that you vote “FOR” each of these proposals.

The Board is soliciting your proxy to ensure that a quorum is present, and that your shares are represented and voted, at the Special Meeting and any postponement or adjournment thereof.

If your shares are held in “street name,” you should instruct your broker, bank or other nominee how to vote your shares on each proposal in accordance with your voting instruction form.

The Merger cannot be completed unless Change stockholders adopt the Merger Agreement. Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the Special Meeting virtually, please submit a proxy to vote your shares as promptly as possible so that your shares may be represented and voted at the Special Meeting. If you attend the Special Meeting and vote electronically during the meeting, your vote by ballot will revoke any proxy previously submitted. If you fail to return your proxy or to attend the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote “AGAINST” the adoption of the Merger Agreement. Similarly, if you hold your shares in “street name” and fail to instruct your broker, bank or other nominee how to vote your shares, your shares will not be counted for purposes of determining whether a quorum is present and will have the same effect as a vote “AGAINST” the adoption of the Merger Agreement.

The obligations of Change, UnitedHealth Group and Merger Sub to complete the Merger are subject to the satisfaction or waiver of certain conditions. The accompanying proxy statement contains detailed information about Change, the Special Meeting, the Merger Agreement, the Merger, the proposals that stockholders are being asked to approve and related matters. A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement and incorporated therein by reference. We urge you to, and you should, read the proxy statement carefully and in its entirety, including the Merger Agreement and the other annexes and the documents referred to or incorporated by reference in the proxy statement. You may obtain additional information about Change from documents we have filed with the U.S. Securities and Exchange Commission.

If you have any questions or need assistance voting your shares of Change Common Stock, please contact Morrow Sodali LLC, our proxy solicitor, by calling (203) 658-9400, or toll-free at (800) 662-5200, or via email at CHNG.info@investor.morrowsodali.com.

Sincerely,

 

  
LOGO    LOGO
Howard Lance    Neil de Crescenzo
Chairman of the Board    President & Chief Executive Officer

Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the Merger, passed upon the merits of the Merger Agreement or the Merger or determined if the accompanying proxy statement is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated March 5, 2021 and, together with the enclosed form of proxy card, is first being mailed to Change stockholders on or about March 5, 2021.


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LOGO

424 Church Street, Suite 1400

Nashville, Tennessee 37219

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

DATE & TIME   

April 13, 2021 at 3:30 p.m., Eastern Time

 

ITEMS OF BUSINESS   

•  To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of January 5, 2021 (as may be amended or modified from time to time in accordance with its terms, the “Merger Agreement”), by and among Change Healthcare Inc. (“Change”), UnitedHealth Group Incorporated (“UnitedHealth Group”) and Cambridge Merger Sub Inc. (“Merger Sub”), pursuant to which Merger Sub will be merged with and into Change (such merger, the “Merger” and such proposal, the “Merger Proposal”); a copy of the Merger Agreement is attached to the accompanying proxy statement as Annex A and is incorporated therein by reference;

 

•  To consider and vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by Change to its named executive officers that is based on or otherwise relates to the Merger (the “Named Executive Officer Merger-Related Compensation Proposal”);

 

•  To consider and vote on a proposal to adjourn the special meeting of Change stockholders (the “Special Meeting”) from time to time, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Merger Proposal if there are insufficient votes at the time of the Special Meeting to approve the Merger Proposal (the “Adjournment Proposal”); and

 

•  To transact such other business as may properly be brought before the Special Meeting, or any adjournments or postponements of the Special Meeting, by or at the direction of the Change board of directors (the “Board”) with the consent of UnitedHealth Group.

 

RECORD DATE AND SHARES ENTITLED TO VOTE   

Only holders of record of our common stock, par value $0.001 per share (“Change Common Stock”), at the close of business on February 26, 2021 (the “Record Date”) are entitled to notice of, and to vote at, the Special Meeting and at any adjournment or postponement of the Special Meeting. Each share of Change Common Stock will be entitled to one vote.

 

VOTING BY PROXY    Your vote is very important, regardless of the number of shares you own. The Board is soliciting your proxy to ensure that a quorum is present, and that your shares are represented and voted, at the Special Meeting. For information on submitting your proxy over the Internet, by telephone or by mailing back the traditional proxy card (no extra postage


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is needed for the provided envelope if mailed in the U.S.), please see the attached proxy statement and enclosed proxy card. If you later decide to vote electronically during the Special Meeting, information on revoking your proxy prior to the Special Meeting is also provided.

 

RECOMMENDATIONS   

The Board unanimously recommends that you vote:

 

•  “FOR” the Merger Proposal;

 

•  “FOR” the Named Executive Officer Merger-Related Compensation Proposal; and

 

•  “FOR” the Adjournment Proposal.

 

APPRAISAL    Change stockholders who do not vote in favor of the Merger Proposal will have the right to seek appraisal of the fair value of their shares of Change Common Stock, as determined in accordance with Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”), if they deliver a demand for appraisal before the vote is taken on the Merger Agreement and comply with all the requirements of Delaware law, including Section 262 of the DGCL, which are summarized in the accompanying proxy statement. Section 262 of the DGCL is reproduced in its entirety in Annex C to the accompanying proxy statement and is incorporated therein by reference.

Due to the public health impact of the COVID-19 outbreak and to support the health and well-being of our stockholders and other participants at the Special Meeting, the Special Meeting will be a virtual meeting of stockholders. You will be able to attend the Special Meeting, vote your shares electronically and submit your questions during the meeting via live audio webcast by visiting www.virtualshareholdermeeting.com/CHNG2021SM. In order to participate in the meeting, you must have your 16-digit control number that is shown on your proxy card or the instructions that accompanied your proxy materials. You will not be able to attend the Special Meeting in person. For purposes of attendance at the Special Meeting, all references in the accompanying proxy statement to “present in person” or “in person” will mean virtually present at the Special Meeting.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SUBMIT A PROXY TO VOTE YOUR SHARES OF CHANGE COMMON STOCK OVER THE INTERNET OR BY TELEPHONE PURSUANT TO THE INSTRUCTIONS CONTAINED IN THESE MATERIALS OR COMPLETE, DATE, SIGN AND RETURN A PROXY CARD AS PROMPTLY AS POSSIBLE. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE SUBMITTED. IF YOU DO NOT SUBMIT YOUR PROXY OR ATTEND THE SPECIAL MEETING AND VOTE ELECTRONICALLY DURING THE SPECIAL MEETING, IT WILL HAVE THE SAME EFFECT AS A VOTE “AGAINST” THE MERGER PROPOSAL. IF YOU HOLD YOUR SHARES IN “STREET NAME” AND DO NOT INSTRUCT YOUR BROKER, BANK OR OTHER NOMINEE HOW TO VOTE YOUR SHARES, IT WILL HAVE THE SAME EFFECT AS A VOTE “AGAINST” THE MERGER PROPOSAL.

Your proxy may be revoked at any time before the vote at the Special Meeting by following the procedures outlined in the accompanying proxy statement.

If your shares are held by a broker, bank or other nominee and you wish to vote electronically during the Special Meeting, you must bring to the Special Meeting a proxy from the broker, bank or other nominee that holds your shares authorizing you to vote electronically during the Special Meeting. Please also bring to the Special Meeting your account statement evidencing your beneficial ownership of Change Common Stock as of the record date.


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The proxy statement of which this notice forms a part provides a detailed description of the Merger, the Merger Agreement, the Named Executive Officer Merger-Related Compensation Proposal and the Adjournment Proposal, and provides specific information concerning the Special Meeting. We urge you to read the proxy statement, including any documents incorporated therein by reference, and its annexes carefully and in their entirety. If you have any questions concerning the Merger or the proxy statement, would like additional copies of the proxy statement or need help voting your shares of Change Common Stock, please contact Morrow Sodali LLC, our proxy solicitor, by calling (203) 658-9400, or toll-free at (800) 662-5200, or via email at CHNG.info@investor.morrowsodali.com.

By Order of the Board of Directors,

 

LOGO

Carrie Ratliff

Corporate Secretary

March 5, 2021


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TABLE OF CONTENTS

 

     Page  

SUMMARY TERM SHEET

     1  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     13  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     23  

THE PARTIES TO THE MERGER

     25  

THE SPECIAL MEETING

     26  

THE MERGER PROPOSAL (PROPOSAL 1)

     32  

Structure of the Merger

     32  

What Stockholders Will Receive in the Merger

     32  

Treatment of Change Equity Awards

     32  

Effects on Change if the Merger Is Not Completed

     33  

Background of the Merger

     33  

Recommendation of the Board and Reasons for the Merger

     43  

Opinion of Change’s Financial Advisor

     48  

Certain Financial Projections

     55  

Interests of Change’s Executive Officers and Directors in the Merger

     58  

Financing of the Merger

     68  

Regulatory Approvals

     69  

Material U.S. Federal Income Tax Consequences of the Merger

     70  

Delisting and Deregistration of Change Common Stock

     70  

Appraisal Rights

     70  

THE MERGER AGREEMENT

     76  

CERTAIN ANCILLARY AGREEMENTS

     106  

ADVISORY VOTE ON NAMED EXECUTIVE OFFICER MERGER-RELATED COMPENSATION PROPOSAL (PROPOSAL 2)

     108  

ADJOURNMENT PROPOSAL (PROPOSAL 3)

     109  

MARKET PRICES OF CHANGE COMMON STOCK

     110  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     111  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     114  

FUTURE STOCKHOLDER PROPOSALS

     117  

MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS

     118  

WHERE YOU CAN FIND MORE INFORMATION

     119  

 

ANNEXES

  

Annex A—Agreement and Plan of Merger

     A-1  

Annex B—Opinion of Goldman Sachs

     B-1  

Annex C—Section  262 of the General Corporation Law of the State of Delaware

     C-1  

 

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SUMMARY TERM SHEET

This summary highlights information contained elsewhere in this proxy statement and may not contain all the information that is important to you with respect to the Merger and the other matters being considered at the Special Meeting. We urge you to read carefully the entirety of the remainder of this proxy statement, including the attached annexes, and the other documents to which we have referred you. For additional information on Change included in documents incorporated by reference into this proxy statement, see the section entitled “Where You Can Find More Information” beginning on page 119. We have included page references in this summary to direct you to a more complete description of the topics presented below.

All references to “Change,” the “Company,” “we,” “us,” or “our” in this proxy statement refer to Change Healthcare Inc., a Delaware corporation; all references to “UnitedHealth Group” refer to UnitedHealth Group Incorporated, a Delaware corporation; all references to “Merger Sub” refer to Cambridge Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of UnitedHealth Group that exists solely for the purpose of entering into the Merger Agreement and engaging in the transactions contemplated by the Merger Agreement; all references to “Change Common Stock” refer to the common stock, par value $0.001 per share, of Change; all references to the “Board” refer to the board of directors of Change; all references to the “Merger” refer to the merger of Merger Sub with and into Change with Change surviving as a wholly-owned subsidiary of UnitedHealth Group; unless otherwise indicated or as the context otherwise requires, all references to the “Merger Agreement” refer to the Agreement and Plan of Merger, dated as of January 5, 2021, by and among Change, UnitedHealth Group, and Merger Sub, as may be amended or modified from time to time in accordance with its terms, a copy of which is attached as Annex A to this proxy statement and which is incorporated by reference herein. Change, following the completion of the Merger, is sometimes referred to in this proxy statement as the “Surviving Corporation.”

The Parties

Change (see page 25)

Change Healthcare Inc. is a leading healthcare technology platform that provides data and analytics-driven solutions to improve clinical, financial, administrative, and patient engagement outcomes in the U.S. healthcare system. We offer a comprehensive suite of software, analytics, technology-enabled services and network solutions that drive improved results in the complex workflows of healthcare system payers and providers. Our solutions are designed to improve clinical decision making, simplify billing, collection and payment processes, and enable a better patient experience.

Change Common Stock is traded on Nasdaq Global Market (“NASDAQ”) under the ticker symbol “CHNG”. Change’s headquarters are located at 424 Church Street, Suite 1400, Nashville, Tennessee 37219 and our telephone number is (615) 932-3000. Our corporate web address is www.changehealthcare.com. The information provided on the Change website is not part of this proxy statement and is not incorporated in this proxy statement by reference or by any other reference to Change’s website provided in this proxy statement.

Additional information about Change is contained in our public filings with the U.S. Securities and Exchange Commission (the “SEC”), which filings are incorporated by reference herein. See the section entitled “Where You Can Find More Information.”

UnitedHealth Group (see page 25)

UnitedHealth Group is a diversified health care company, offering a diverse range of products and services through its two distinct business platforms: UnitedHealthcare, which provides health benefits, and Optum, which provides health services. Through UnitedHealthcare and Optum, in 2019, UnitedHealth Group processed nearly a trillion dollars in gross billed charges and UnitedHealth Group managed more than $250 billion in aggregate health care spending on behalf of the customers and consumers UnitedHealth Group serves.



 

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The principal executive offices of UnitedHealth Group are located at 9900 Bren Road East, Minnetonka, MN 55343, and its telephone number is (952) 936-1300. Shares of common stock of UnitedHealth Group are listed on the New York Stock Exchange under the symbol “UNH.”

Merger Sub (see page 25)

Merger Sub is a Delaware corporation that was formed solely for the purposes of entering into the Merger Agreement and engaging in the transactions contemplated by the Merger Agreement. Merger Sub is a direct, wholly-owned subsidiary of UnitedHealth Group and has not engaged in any business except for activities incidental to its formation and as contemplated by the Merger Agreement. Upon consummation of the Merger, Merger Sub will cease to exist and Change will survive the Merger as a wholly-owned subsidiary of UnitedHealth Group.

The principal executive offices of Merger Sub’s ultimate parent, UnitedHealth Group, are located at 9900 Bren Road East, Minnetonka, MN 55343, and its telephone number is (952) 936-1300.

The Special Meeting

Date, Time and Place (see page 26)

The special meeting of Change stockholders (the “Special Meeting”) is scheduled to be held on April 13, 2021 at 3:30 p.m., Eastern Time. Due to the public health impact of the COVID-19 outbreak and to support the health and well-being of our stockholders and other participants at the Special Meeting, the Special Meeting will be a virtual meeting of stockholders. You will be able to attend the Special Meeting, vote your shares electronically and submit your questions during the meeting via live audio webcast by visiting www.virtualshareholdermeeting.com/CHNG2021SM. In order to participate in the meeting, you must have your 16-digit control number that is shown on your proxy card or the instructions that accompanied your proxy materials. You will not be able to attend the Special Meeting in person.

Purpose of the Special Meeting (see page 26)

The Special Meeting is being held in order to consider and vote on the following proposals:

 

   

To adopt the Merger Agreement (the “Merger Proposal”).

 

   

To approve, on a non-binding, advisory basis, certain compensation that will or may be paid by Change to its named executive officers that is based on or otherwise relates to the Merger (the “Named Executive Officer Merger-Related Compensation Proposal”).

 

   

To adjourn the Special Meeting, from time to time, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Merger Proposal if there are insufficient votes at the time of the Special Meeting to approve the Merger Proposal (the “Adjournment Proposal”).

Stockholders may also be asked to transact such other business as may properly be brought before the Special Meeting, or any adjournments or postponements of the Special Meeting, by or at the direction of the Board with the consent of UnitedHealth Group.

The Board has reviewed and considered the terms and conditions of the proposed Merger. After consulting with its outside legal counsel and financial advisors and after consideration of various factors more fully described in this proxy statement, the Board unanimously determined that the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Change and its stockholders and unanimously declared advisable and approved the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement.



 

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The Board unanimously recommends that Change stockholders vote “FOR” the Merger Proposal, “FOR” the Named Executive Officer Merger-Related Compensation Proposal and “FOR” the Adjournment Proposal.

Change stockholders must vote to approve the Merger Proposal as a condition for the Merger to occur. If the Change stockholders fail to approve the Merger Proposal by the requisite vote, the Merger will not occur.

Record Date; Stockholders Entitled to Vote (see page 27)

Only holders of record of Change Common Stock at the close of business on February 26, 2021, the record date for the Special Meeting (the “Record Date”), will be entitled to notice of, and to vote at, the Special Meeting or any adjournments or postponements of the Special Meeting. Holders of record of Change Common Stock are entitled to one vote for each share of Change Common Stock they own of record at the close of business on the Record Date. At the close of business on the Record Date, 306,530,424 shares of Change Common Stock were issued and outstanding, held by approximately 88 holders of record.

Quorum (see page 27)

Under our bylaws, the presence at the Special Meeting, in person or by proxy, of the holders of record of a majority of the voting power of the shares of Change Common Stock issued and outstanding and entitled to vote at the Special Meeting will constitute a quorum. There must be a quorum for business to be conducted at the Special Meeting. Failure of a quorum to be represented at the Special Meeting will necessitate an adjournment or postponement of the Special Meeting and may subject Change to additional expense.

If you attend the Special Meeting or if you submit (and do not thereafter revoke) a proxy by duly executing and returning a proxy card or by telephone or through the Internet, even if you abstain from voting, your shares of Change Common Stock will be counted for purposes of determining whether a quorum is present at the Special Meeting. In the event that a quorum is not present at the Special Meeting or additional votes must be solicited to adopt the Merger Agreement, the meeting may be adjourned or postponed to solicit additional proxies.

Required Vote (see page 27)

Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Change Common Stock entitled to vote on such matter at the Special Meeting.

Approval of the Named Executive Officer Merger-Related Compensation Proposal (on a non-binding basis) requires the affirmative vote of the holders of a majority of the voting power of the shares of Change Common Stock present in person or represented by proxy at the Special Meeting and entitled to vote on such matter at the Special Meeting.

Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Change Common Stock present in person or represented by proxy at the Special Meeting and entitled to vote on such matter at the Special Meeting.

Voting at the Special Meeting (see page 29)

If your shares are registered directly in your name with our transfer agent, you are considered a “stockholder of record.” Stockholders of record can vote their shares of Change Common Stock in the following four ways: (i) by indicating your vote by completing, signing and dating the proxy card where indicated and by mailing or otherwise returning the card in the envelope that will be provided to you, (ii) by submitting your proxy by telephone by dialing the toll-free number 1-800-690-6903, (iii) by submitting your proxy over the Internet by



 

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going to www.proxyvote.com or (iv) by attending the Special Meeting and voting your shares electronically during the Special Meeting. Even if you plan to attend the Special Meeting, Change encourages you to submit a proxy in advance by Internet, telephone or mail so that your vote will be counted even if you later decide not to attend the Special Meeting.

If your shares are held by your broker, bank or other nominee, you are considered the beneficial owner of shares held in “street name” and you will receive a form from your broker, bank or other nominee seeking instruction from you as to how your shares should be voted. You should instruct your broker, bank or other nominee how to vote your shares on each proposal in accordance with your voting instruction form. If you beneficially own your shares and receive a voting instruction form, you can vote by following the instructions on your voting instruction form. Please refer to information from your bank, broker or other nominee on how to submit voting instructions. Stockholders who own their shares in “street name” are not able to vote at the Special Meeting unless they have a “legal proxy,” executed in their favor, from the stockholder of record (broker, bank or other nominee) giving them the right to vote the shares at the Special Meeting.

You may revoke your proxy at any time prior to the vote at the Special Meeting by (i) sending a written statement to that effect to our Corporate Secretary, (ii) voting again by Internet or telephone, (iii) submitting a properly signed proxy card with a later date, or (iv) attending the Special Meeting and voting your shares electronically during the Special Meeting. If you hold shares in street name, you may submit new voting instructions by contacting your bank, broker or other nominee. You may also change your vote or revoke your proxy in person at the Special Meeting if you obtain a “legal proxy,” executed in your favor, from the stockholder of record (broker, bank or other nominee) giving you the right to vote the shares at the Special Meeting.

Change recommends that you submit a proxy to vote your shares as soon as possible, even if you are planning to attend the Special Meeting, to ensure that your shares are represented and voted at the meeting and so that the vote count will not be delayed. Attendance at the Special Meeting will not, in and of itself, result in the revocation of a proxy or cause your shares of Change Common Stock to be voted.

Abstentions and Broker Non-Votes (see page 28)

At the Special Meeting, abstentions will be counted as present for purposes of determining whether a quorum exists. Abstaining from voting will have the same effect as a vote “AGAINST” the Merger Proposal, the Named Executive Officer Merger-Related Compensation Proposal and the Adjournment Proposal. If no instruction as to how to vote is given (including no instruction to abstain from voting) in an executed, duly returned and not revoked proxy, the proxy will have the same effect as a vote “FOR” the Merger Proposal, the Named Executive Officer Merger-Related Compensation Proposal and the Adjournment Proposal. Broker non-votes are shares held in “street name” by brokers, banks and other nominees that are present or represented by proxy at the Special Meeting, but with respect to which the broker, bank or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and such broker, bank or other nominee does not have discretionary voting power on such proposal. Because, under NASDAQ rules, brokers, banks and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a beneficial owner of shares of Change Common Stock held in “street name” does not give voting instructions to the broker, bank or other nominee, then such shares will not be counted as present in person or by proxy at the Special Meeting. As the vote to approve the Merger Proposal is based on the total number of shares of Change Common Stock outstanding at the close of business on the record date, not just the shares that are counted as present in person or by proxy at the Special Meeting, if you fail to issue voting instructions to your broker, bank or other nominee, it will have the same effect as a vote “AGAINST” the Merger Proposal.



 

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Solicitation of Proxies (see page 30)

The Board is soliciting your proxy, and Change will bear the cost of soliciting proxies. Change has engaged Morrow Sodali LLC (“Morrow”) to assist with the solicitation of proxies. Morrow will be paid approximately $30,000. Change will reimburse Morrow for reasonable out-of-pocket expenses and will indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, banks and other nominees to the beneficial owners of shares of Change Common Stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by Morrow or, without additional compensation, by certain of Change’s directors, officers and employees.

Adjournment (see page 30)

In addition to the Merger Proposal and the Named Executive Officer Merger-Related Compensation Proposal, Change stockholders are also being asked to approve the Adjournment Proposal, which will enable the adjournment of the Special Meeting for the purpose of soliciting additional votes in favor of the Merger Proposal if there are not sufficient votes at the time of the Special Meeting to approve the Merger Proposal. If a quorum is not present, the person presiding at the Special Meeting may adjourn the Special Meeting from time to time until a quorum is present. If the adjournment is for more than 30 days, or if, after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting. In addition, the Special Meeting could be postponed before it commences, subject to the terms of the Merger Agreement. If the Special Meeting is adjourned or postponed, stockholders who have already submitted their proxies will be able to revoke them at any time prior to the final vote on the proposals. If you return a proxy and do not indicate how you wish to vote on the Adjournment Proposal, your shares will be voted in favor of the Adjournment Proposal.

The Merger

The rights and obligations of the parties to the Merger Agreement are governed by the specific terms and conditions of the Merger Agreement and not by any summary or other information in this proxy statement. Therefore, the information in this proxy statement regarding the Merger Agreement and the Merger is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated herein by reference. We encourage you to read the Merger Agreement carefully and in its entirety because it is the principal legal agreement that governs the Merger.

Structure of the Merger (see page 32)

If the Merger is completed, then at the effective time of the Merger (the “Effective Time”), Merger Sub will merge with and into Change, the separate corporate existence of Merger Sub will cease and Change will survive the Merger as a wholly-owned subsidiary of UnitedHealth Group.

Merger Consideration (see page 32)

Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each share of Change Common Stock issued and outstanding immediately prior to the Effective Time (other than any (i) Restricted Shares (as defined below) and (ii) shares owned by (A) UnitedHealth Group, Merger Sub or any other wholly owned subsidiary of UnitedHealth Group, Change or any wholly owned subsidiary of Change (and, in each case, not held on behalf of third parties) or (B) stockholders who have properly made and not validly withdrawn or lost a demand for appraisal rights with respect to their shares (the shares referred to in this clause (ii), “Excluded Shares”)) will be automatically converted into the right to receive an amount in cash, without interest and subject to any applicable withholding taxes, equal to $25.75 (the “Per Share Merger Consideration”).



 

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Treatment of Change Equity Awards (see page 32)

At the Effective Time, Change equity-based awards outstanding immediately prior to the Effective Time will generally be subject to the following treatment:

 

   

each option to acquire shares of Change Common Stock (a “Change Option”), whether vested or unvested, will be converted into an option to purchase a number of shares of UnitedHealth Group common stock (“UnitedHealth Group Shares”) based on the equity award exchange ratio set forth in the Merger Agreement (the “Equity Award Exchange Ratio”), with the exercise price per share applicable to such Change Option adjusted by the Equity Award Exchange Ratio;

 

   

each outstanding restricted share of Change Common Stock subject to specified return-based vesting conditions (a “Restricted Share” and the “Exit-Vesting Conditions”, respectively) that fully vests at the Effective Time pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will automatically be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes (provided, that any Restricted Share that does not vest at the Effective Time pursuant to the applicable terms and conditions will be cancelled and forfeited for no consideration or payment);

 

   

each outstanding time-based and performance based Change restricted stock unit award (an “RSU”), whether vested or unvested, will be converted into a restricted stock unit denominated in UnitedHealth Group Shares (a “UnitedHealth Group RSU”) based on the Equity Award Exchange Ratio, with the number of UnitedHealth Group Shares subject to such UnitedHealth Group RSU equal to the product of (i) (A) in the case of a service-based RSU, the total number of shares subject to such RSU immediately prior to the Effective Time or (B) in the case of a performance-based RSU, the number of shares subject to such RSU award based on target performance multiplied by (ii) the Equity Award Exchange Ratio;

 

   

each outstanding RSU subject to the Exit-Vesting Conditions that fully vests at the consummation of the Merger pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will automatically be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes. If the Exit-Vesting Conditions are not satisfied in connection with the consummation of the Merger, any RSUs subject to the Exit-Vesting Conditions will be cancelled and forfeited at the Effective Time for no consideration or payment;

 

   

each outstanding Change stock appreciation right award (a “SAR”), whether vested or unvested, will be converted into a UnitedHealth Group stock appreciation right (a “UnitedHealth Group SAR”) denominated in a number of UnitedHealth Group Shares based on the Equity Award Exchange Ratio, with the strike price per share applicable to such SAR adjusted by the Equity Award Exchange Ratio (provided, that any SAR award subject to the Exit-Vesting Conditions that does not fully vest at the Effective Time pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will be cancelled and forfeited at the Effective Time for no consideration or payment); and

 

   

each Change deferred stock unit award (a “DSU”), whether vested or unvested, will be converted into a UnitedHealth Group deferred stock unit award (a “UnitedHealth Group DSU”) denominated in UnitedHealth Group Shares based on the Equity Award Exchange Ratio.

Change equity-based awards that convert into equity-based awards denominated in UnitedHealth Group Shares will generally be subject to the same terms and conditions (including, as applicable, vesting, exercise and settlement) as applied to such award prior to the Effective Time, except to the extent such terms and conditions are rendered inoperative by the Merger or with respect to such other changes that are necessary for the administration of the awards and that are not materially detrimental to the holder of the award.

Recommendation of the Board (see page 43)

The Board has reviewed and considered the terms and conditions of the proposed Merger. After consulting with its outside legal counsel and financial advisors and after consideration of various factors, the Board



 

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unanimously (i) approved and declared advisable the Merger Agreement and the consummation of the Merger and the other transactions contemplated thereby, (ii) determined that the terms of the Merger Agreement, the Merger and the other transactions contemplated thereby are advisable and fair to, and in the best interests of, Change and its stockholders, (iii) resolved that the adoption of the Merger Agreement be submitted to a vote of Change stockholders at the Special Meeting and (iv) recommended that Change stockholders vote to adopt the Merger Agreement (clause (iv) being the “Board Recommendation”). Certain factors considered by the Board in reaching its decision to adopt the Merger Agreement can be found in “The Merger Proposal (Proposal 1)—Recommendation of the Board and Reasons for the Merger” beginning on page 43.

The Board unanimously recommends that Change stockholders vote:

 

   

“FOR” the Merger Proposal;

 

   

“FOR” the Named Executive Officer Merger-Related Compensation Proposal; and

 

   

“FOR” the Adjournment Proposal.

Opinion of Change’s Financial Advisor (see page 48)

Opinion of Goldman Sachs & Co.

In connection with the Merger, on January 5, 2021, Goldman Sachs & Co. LLC (“Goldman Sachs”), Change’s financial advisor, delivered to the Board an oral opinion, which was subsequently confirmed in writing, as to the fairness, from a financial point of view and as of the date of the opinion, to the holders (other than UnitedHealth Group and its affiliates) of Change Common Stock of the Per Share Merger Consideration to be received by such holders. The full text of the written opinion, dated January 5, 2021, of Goldman Sachs, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this document and is incorporated by reference herein in its entirety. Goldman Sachs provided its opinion to the Board for the benefit and use of the Board (in its capacity as such) in connection with and for purposes of its evaluation of the Per Share Merger Consideration from a financial point of view. Goldman Sachs’ opinion does not address any other aspect of the Merger and no opinion or view was expressed as to the relative merits of the Merger in comparison to other strategies or transactions that might be available to Change or in which Change might engage or as to the underlying business decision of Change to proceed with or effect the Merger. Goldman Sachs’ opinion does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any related matter.

For further information, see the section of this proxy statement entitled “Opinion of Change’s Financial Advisor” beginning on page 48 and Annex B.

Interests of Change’s Executive Officers and Directors in the Merger (see page 58)

In considering the recommendation of the Board that you vote to approve the Merger Proposal, you should be aware that, aside from their interests as Change stockholders, Change’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of Change stockholders generally, which may create potential conflicts of interest. The Board was aware of these interests and considered them when it adopted the Merger Agreement and approved the Merger.

With regard to one of our directors, these interests relate to the accelerated vesting of time-based stock options.

With regard to our executive officers these interests include the following types of payments and benefits that may be triggered by or otherwise relate to the Merger, assuming the Merger occurred on September 30, 2021 and, where applicable, the executive’s employment was terminated by us without “cause” or, in some cases, by the executive for “good reason” on September 30, 2021:

 

   

for certain executives, a change in title;



 

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accelerated vesting of time-based vesting stock options and a portion of stock options subject to certain exit-vesting conditions;

 

   

cash severance payments and other termination benefits under the executives’ employment agreements, offer letters, or Change’s U.S. Executive Severance Benefit Guidelines, as applicable;

 

   

for certain executives, grants by UnitedHealth Group of sign-on grants of UnitedHealth Group stock options and restricted stock units and grants of UnitedHealth Group equity awards in 2022, as set forth in the executive’s employment agreement with UnitedHealth Group; and

 

   

for certain executives, extension of the change in control protection period applicable to Change equity awards converted into UnitedHealth Group equity awards in connection with the Merger, as set forth in the executive’s employment agreement with UnitedHealth Group.

In addition, pursuant to the terms of the Merger Agreement, Change’s directors and executive officers will be entitled to certain ongoing indemnification, expense advancement and insurance arrangements.

These interests are discussed in more detail in the section entitled “The Merger Proposal (Proposal 1)—Interests of Change’s Executive Officers and Directors in the Merger,” beginning on page 58 of this proxy statement.

Regulatory Approvals (see page 69)

As further discussed in the section entitled “Regulatory Approvals” starting on page 69, we cannot complete the Merger until certain antitrust approvals or exemptions are received from U.S. regulatory authorities.

While we have no reason to believe it will not be possible to complete the antitrust reviews in a timely manner, there is no certainty that the antitrust reviews will be completed within the period of time contemplated by the Merger Agreement or that the completion of such reviews would not be conditioned upon actions that would be materially adverse to Change or UnitedHealth Group, or that a regulatory challenge to the Merger will not be made.

Litigation Related to the Merger (see page 70)

On February 24, 2021, a putative class action, captioned Krueger v. Change Healthcare Inc., et al., 21-0152, was filed in the Chancery Court for Davidson County, Tennessee against Change and certain of its officers and directors (the “Individual Defendants”). The complaint contends that the Individual Defendants breached their fiduciary duties by allegedly agreeing to an unfair merger following what plaintiff characterizes as an unfair process. The complaint also alleges that the Individual Defendants failed to disclose certain information in the preliminary proxy statement. In addition, the complaint brings a claim against Change for purportedly aiding and abetting the foregoing alleged breaches. Change has not yet responded to the complaint. While Change believes that the putative class action is without merit and plans to vigorously defend itself against the claims, there can be no assurance that Change will prevail in the lawsuit.

Material U.S. Federal Income Tax Consequences of the Merger (see page 70)

The exchange of Change Common Stock for cash pursuant to the Merger generally will be a taxable transaction to holders of Change Common Stock for U.S. federal income tax purposes and may also be taxable under state and local and other tax laws. You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 114. The tax consequences of the Merger to you will depend on your particular circumstances. You should consult your tax advisors regarding the U.S. federal income tax consequences of the Merger to you in your particular circumstances, as well as tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.



 

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Appraisal Rights (see page 70)

Stockholders of Change are entitled to appraisal rights under the General Corporation Law of the State of Delaware (the “DGCL”) in connection with the Merger, provided that such stockholders comply with the requirements of Section 262 of the DGCL. If the Merger is completed, any stockholder of Change who does not vote in favor of the Merger Proposal and who otherwise complies with the requirements of Section 262 has the right to seek appraisal of his, her or its shares of Change Common Stock and to receive payment in cash for the “fair value” of his, her or its shares of Change Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value. The ultimate amount stockholders of Change receive in an appraisal proceeding may be less than, equal to or more than the amount a stockholder would have received under the Merger Agreement.

To exercise appraisal rights, a stockholder of Change must deliver a written demand for appraisal to Change before the vote is taken on the adoption of the Merger Agreement, must not vote, electronically during the Special Meeting or by proxy, in favor of the proposal to adopt the Merger Agreement and must continue to hold the shares of Change Common Stock of record from the date of making the demand for appraisal through the Effective Time. As such, merely voting against, abstaining or failing to vote on the proposal to adopt the Merger Agreement will not by itself preserve your right to appraisal under the DGCL. A stockholder’s failure to strictly comply with the procedures specified under the DGCL will result in the loss of such stockholder’s appraisal rights. See the section entitled “The Merger Proposal (Proposal 1)—Appraisal Rights” beginning on page 70 and the text of the DGCL appraisal rights statute reproduced in its entirety as Annex C to this proxy statement. Only a Change stockholder of record may submit a demand for appraisal. If you hold your shares of Change Common Stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee. In view of the complexity of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.

Expected Timing of the Merger

Assuming timely satisfaction of necessary closing conditions, including the approval by our stockholders of the Merger Proposal, the parties to the Merger Agreement expect to complete the Merger in the second half of 2021. However, the Merger is subject to antitrust and regulatory reviews and various other conditions, and it is possible that factors outside of the control of Change or UnitedHealth Group could result in the Merger being completed at a later time, or not at all. There may be a substantial amount of time between the Special Meeting and the completion of the Merger. We expect to complete the Merger promptly following the receipt of all required clearances and approvals and the satisfaction or, to the extent permitted, waiver of the other conditions to the consummation of the Merger.

Financing of the Merger (see page 68)

The consummation of the Merger is not subject to any financing conditions. UnitedHealth Group has represented to Change in the Merger Agreement that, as of the closing of the Merger, it will have available to it, or will cause Merger Sub to have available to it, funds sufficient to consummate the transactions contemplated by the Merger Agreement.

Non-Solicitation of Acquisition Proposals (see page 87)

During the period from the date of the Merger Agreement through the earlier of the closing of the Merger and the termination of the Merger Agreement (the “Interim Period”), except as expressly permitted by the



 

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Merger Agreement, Change, its subsidiaries and its and their respective representatives must not, directly or indirectly: (i) initiate, solicit, propose or knowingly encourage or otherwise knowingly facilitate any inquiry or the making of any proposal or offer that constitutes or would reasonably be expected to lead to an Acquisition Proposal (as defined below); (ii) engage in, continue or otherwise participate in any discussions or negotiations relating to any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal; (iii) provide any information or data concerning Change or its subsidiaries or access to Change’s or its subsidiaries’ properties, books and records to any third party in connection with any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal; (iv) otherwise knowingly facilitate any effort or attempt to make an Acquisition Proposal; or (v) agree or commit, in each case in a legally binding manner, to do any of the foregoing.

Notwithstanding the foregoing, prior to the time the Requisite Vote (as defined below) is obtained, in response to an unsolicited, bona fide written Acquisition Proposal that did not result from a material breach of the non-solicitation covenants contained in the Merger Agreement, Change may (i) provide information concerning Change and its subsidiaries in response to the third party making such Acquisition Proposal (provided that UnitedHealth Group also is provided such information and such third party executes a confidentiality agreement with terms not less restrictive in any material respect than the confidentiality agreement binding UnitedHealth Group and that treats any financing sources of such third party as “representatives” of such third party (a “Permitted Confidentiality Agreement”)) and (ii) engage or otherwise participate in any discussions or negotiations with such third party if, and only if, prior to taking any action described in clause (i) or clause (ii), the Board determines in good faith, after consultation with outside legal counsel and its financial advisor, based on the information then available, including the terms and conditions of such Acquisition Proposal and those of the Merger Agreement, that (A) such Acquisition Proposal either constitutes a Superior Proposal (as defined below) or could reasonably be expected to result in a Superior Proposal and (B) the failure to take such action would reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable law.

Except as expressly permitted by the Merger Agreement, the Board must not effect a Change of Recommendation (as defined below). In addition, except as expressly permitted by the Merger Agreement, the Board must not cause or permit Change or any of its subsidiaries to enter into an Alternative Acquisition Agreement (as defined below) or agree or commit, in each case in a legally binding manner, to do so.

Notwithstanding the foregoing, prior to the time the Requisite Vote is obtained, the Board may (i) effect a Change of Recommendation or (ii) cause Change to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal and terminate the Merger Agreement (any action described in clause (i) or (ii) being a “Fundamental Action”) if (A) an unsolicited, bona fide written Acquisition Proposal that did not result from a material breach of the non-solicitation covenants contained in the Merger Agreement is received by Change or an Intervening Event (as defined below) has occurred, and (B) the Board determines in good faith, after consultation with outside legal counsel and its financial advisor, based on the information then available, that (w) in the case of an Acquisition Proposal, such Acquisition Proposal constitutes a Superior Proposal and (x) a failure to effect a Fundamental Action in response to such Acquisition Proposal or Intervening Event, as applicable, would be inconsistent with the directors’ fiduciary duties under applicable law; provided, however, that no such Fundamental Actions may be taken unless and until: (I) Change has given UnitedHealth Group written notice at least four business days in advance (such notice period, the “Notice Period” and such notice, the “Notice”), which Notice must set forth in writing that the Board intends to consider whether to take such Fundamental Action and a reasonably detailed description of the basis therefor, and must also include, in the case of a Fundamental Action to enter into an Alternative Acquisition Agreement, the then-current draft of such agreement, and, in the case of an Intervening Event, a reasonably detailed description of such Intervening Event; (II) during the Notice Period, to the extent requested by UnitedHealth Group, Change must, and must cause its representatives to, negotiate in good faith with UnitedHealth Group to revise the Merger Agreement so that the condition set forth in clause (B) above would not be satisfied; and (III) at the end of the Notice Period, the Board



 

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has taken into account any revisions to the Merger Agreement proposed by UnitedHealth Group in writing and any other information offered by UnitedHealth Group in response to such Notice prior to the end of the Notice Period, and has thereafter determined in good faith, after consultation with outside legal counsel and its financial advisor, based on the information then available, that (y) in the case of an Acquisition Proposal, such Acquisition Proposal continues to constitute a Superior Proposal and (z) a failure to effect a Fundamental Action would continue to be inconsistent with the directors’ fiduciary duties under applicable law (provided that any amendment or modification to the economic or other material terms of any such Acquisition Proposal (if applicable) will require a new Notice and a new Notice Period (which, subsequent to the initial Notice Period, will be reduced to two business days rather than four business days)).

Conditions to the Closing of the Merger (see page 99)

The closing of the Merger is subject to certain conditions, including (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Change Common Stock entitled to vote on such matter at the Company Stockholders Meeting (such adoption, the “Requisite Vote”), (ii) the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), without, solely as relates to UnitedHealth Group’s obligation to consummate the Merger, the imposition of any Burdensome Condition (as defined below), (iii) the absence of other legal restraints, (iv) the accuracy of the parties’ respective representations and warranties contained in the Merger Agreement (subject to customary materiality thresholds), (v) the performance of the parties’ respective covenants contained in the Merger Agreement in accordance with the Merger Agreement in all material respects, (vi) solely as relates to UnitedHealth Group’s obligation to consummate the Merger, the absence of any Material Adverse Effect (as defined in the Merger Agreement) with respect to Change and (vii) solely as relates to UnitedHealth Group’s obligation to consummate the Merger, Change’s receipt of an opinion of counsel to the effect that the Merger and the transactions contemplated thereby will not affect the intended tax-free treatment of the March 2020 separation of PF2 SpinCo Inc. from McKesson Corporation and subsequent merger of PF2 SpinCo Inc. with and into Change, with Change as the surviving company.

Termination of the Merger Agreement; Termination Fee (see page 101)

The Merger Agreement contains certain customary termination rights for Change and UnitedHealth Group, including (i) by mutual consent of the parties; (ii) by either party if (A) the Merger is not consummated on or before January 5, 2022 (subject to extension to April 5, 2022, under certain circumstances), (B) the Requisite Vote is not obtained at the Special Meeting or any adjournment or postponement thereof at which a vote on the adoption of the Merger Agreement is taken or (C) any law or order prohibiting the Merger has become final and non-appealable; (iii) by Change (A) in the event of a material uncured breach by UnitedHealth Group or Merger Sub of any of its representations, warranties or covenants in the Merger Agreement or (B) prior to the time the Requisite Vote is obtained, in order to enter into an alternative acquisition agreement with respect to a Superior Proposal; and (iv) by UnitedHealth Group (A) in the event of a material uncured breach by Change of any of its representations, warranties or covenants in the Merger Agreement or (B) prior to the time the Requisite Vote is obtained, if the Board has effected a Change of Recommendation or Change has materially breached its non-solicitation covenants contained in the Merger Agreement. Upon termination of the Merger Agreement under certain specified circumstances, Change will be required to pay to UnitedHealth Group a termination fee of $300,000,000.

Delisting and Deregistration of Change Common Stock (see page 98)

Prior to the closing of the Merger, Change will cooperate with UnitedHealth Group and use reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, necessary or advisable on its part under applicable law, including, the rules and policies of NASDAQ, to enable the delisting by the



 

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Surviving Corporation of the shares of Change Common Stock and (if requested by UnitedHealth Group) the 6.00% tangible equity units of Change listed on the NASDAQ under the trading symbol “CHNGU” (the “TEUs”) from NASDAQ and the deregistration of the shares under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (if requested by UnitedHealth Group) the TEUs under the Securities Act of 1933, as amended (the “Securities Act”), in each case, as promptly as practicable after the Effective Time, but in any event, in the case of the shares, no more than ten days thereafter.

Market Prices of Change Common Stock (see page 110)

On January 5, 2021, the last trading day prior to the public announcement of the proposed transaction, the closing price per share of Change Common Stock on NASDAQ was $18.24. The closing price of Change Common Stock on NASDAQ on March 4, 2021, the most recent practicable date prior to the filing of this proxy statement, was $22.45 per share. You are encouraged to obtain current market prices of Change Common Stock in connection with voting your shares of Change Common Stock.



 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following are brief answers to certain questions that you may have regarding the Merger, the Special Meeting and the proposals being considered at the Special Meeting. We urge you to carefully read the remainder of this proxy statement because the information in this section does not provide all of the information that might be important to you with respect to the Merger and the Special Meeting. Additional important information is also contained in the annexes attached to this proxy statement and the documents referred to or incorporated by reference into this proxy statement.

 

Q.

Why am I receiving these proxy materials?

 

A.

On January 5, 2021, Change entered into a merger agreement providing for the merger of Merger Sub with and into Change, pursuant to which Change will survive the Merger as a wholly-owned subsidiary of UnitedHealth Group. A copy of the Merger Agreement is attached to this proxy statement as Annex A and is incorporated by reference herein. In order to complete the Merger, Change stockholders must vote to adopt the Merger Agreement. The approval of the Merger Proposal by our stockholders is a condition to the consummation of the Merger. See the section entitled “The Merger Agreement—Closing Conditions” beginning on page 99. You are receiving this proxy statement in connection with the solicitation by the Board of proxies of Change stockholders in favor of the Merger Proposal.

You are also being asked to vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by Change to its named executive officers that is based on or otherwise relates to the Merger and on a proposal to adjourn the Special Meeting, from time to time, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Merger Proposal if there are insufficient votes at the time of the Special Meeting to approve the Merger Proposal.

This proxy statement, which you should read carefully and in its entirety, contains important information about the Merger, the Merger Agreement, the Special Meeting of our stockholders and the matters to be voted on thereat. The enclosed materials allow you to submit a proxy to vote your shares of Change Common Stock without attending the Special Meeting and to ensure that your shares are represented and voted at the Special Meeting.

Your vote is very important. Even if you plan to attend the Special Meeting, we encourage you to submit a proxy as soon as possible.

 

Q.

What is the proposed transaction?

 

A.

If the Merger Proposal is approved by Change stockholders and the other conditions to the consummation of the Merger contained in the Merger Agreement are satisfied or, to the extent permitted, waived, Merger Sub will merge with and into Change. Change will be the Surviving Corporation in the Merger and will become privately held as a wholly-owned subsidiary of UnitedHealth Group.

 

Q.

What will I receive in the Merger if it is completed?

 

A.

Under the terms of the Merger Agreement, if the Merger is completed, you will be entitled to receive $25.75 in cash, without interest and subject to any applicable withholding taxes, for each share of Change Common Stock you own, which represents a premium of approximately 41.17% over Change’s closing stock price on January 5, 2021. For example, if you own 100 shares of Change Common Stock, you will be entitled to receive $2,575.00 in cash in exchange for your shares, without interest and subject to any applicable withholding taxes. You will not be entitled to receive shares in the Surviving Corporation or in UnitedHealth Group.

 

Q.

Why is the Special Meeting being webcast online?

 

A.

Due to the public health impact of the COVID-19 outbreak and to support the health and well-being of our stockholders and other participants at the Special Meeting, the Special Meeting will be a virtual meeting of

 

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  stockholders held via a live audio webcast. The virtual meeting will provide the same rights of a physical meeting. Stockholders will be able to present questions online during the meeting through www.virtualshareholdermeeting.com/CHNG2021SM, providing our stockholders with the opportunity for meaningful engagement with Change.

 

Q.

How do I participate in the virtual meeting?

 

A.

To participate in the meeting, you must have your 16-Digit Control Number that is shown on your proxy card or the instructions that accompanied your proxy materials. You may access the Special Meeting by visiting www.virtualshareholdermeeting.com/CHNG2021SM. You will be able to submit questions during the meeting by typing in your question into the “ask a question” box on the meeting page. Should you require technical assistance, support will be available by dialing 1-800-449-0991 (U.S.) or 1-720-378-5962 (International) during the meeting; these telephone numbers will also be displayed on the meeting webpage.

 

Q.

Will I be able to participate in the virtual meeting on the same basis as I would be able to participate in a live meeting?

 

A.

The virtual meeting format for the Special Meeting will enable full and equal participation by all of our stockholders from any place in the world. We believe that holding the Special Meeting online will help support the health and well-being of our stockholders and other participants at the Special Meeting as we navigate the public health impact of COVID-19.

We designed the format of the virtual meeting to ensure that our stockholders who attend our Special Meeting will be afforded the same rights to participate as they would at a meeting attended physically and to enhance stockholder access, participation and communication through online tools. We will take the following steps to ensure such an experience:

 

   

providing stockholders with the ability to submit appropriate questions real-time via the meeting website, limiting questions to one question per stockholder unless time otherwise permits; and

 

   

answering as many questions submitted in accordance with the meeting rules of conduct as possible in the time allotted for the meeting without discrimination.

Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. Questions regarding personal matters, including those related to employment or service issues, are not pertinent to meeting matters and therefore will not be answered at the Special Meeting.

 

Q.

What if during the check-in time or during the meeting I have technical difficulties or trouble accessing the virtual meeting website?

 

A.

Should you require technical assistance, support will be available by dialing 1-800-449-0991 (U.S.) or 1-720-378-5962 (International) during the meeting; these telephone numbers will also be displayed on the meeting webpage. If there are any technical issues in convening or hosting the meeting, we will promptly post information to our website, including information on when the meeting will be reconvened.

 

Q.

What is a proxy?

 

A.

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of Change Common Stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Change Common Stock is called a “proxy card.”

 

Q.

What different methods can I use to vote?

 

A.

You can vote by any of the following methods:

 

   

At the Special Meeting – You may vote electronically at the meeting.

 

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By Internet—You may submit your proxy by going to www.proxyvote.com and by following the instructions on how to complete an electronic proxy card. You will need the 16-digit number included on your proxy card or the instructions that accompanied your proxy materials in order to vote by Internet.

 

   

By Telephone—You may submit your proxy by dialing 1-800-690-6903 and by following the recorded instructions. You will need the 16-digit number included on your proxy card or the instructions that accompanied your proxy materials in order to vote by telephone.

 

   

By Mail—You may vote by mail by indicating your vote by completing, signing and dating the proxy card where indicated and by mailing or otherwise returning the card in the envelope that will be provided to you. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity.

 

   

If your shares are held in the name of a bank, broker or other holder of record (also known as “street name”), you have the right to direct your bank, broker or other nominee on how to vote your shares by using the voting instruction form provided to you by them, or by following their instructions for voting through the internet or by telephone. In the alternative, you may vote at the meeting if you obtain a legal proxy from your bank, broker or other nominee and present it at the meeting. In order for your shares to be voted on all matters presented at the meeting, we urge all stockholders whose shares are held in street name by a bank, brokerage firm or other nominee to provide voting instructions to such record holder.

Internet and telephone voting facilities will close at 11:59 p.m., Eastern time, on April 12, 2021, for the voting of shares held by stockholders of record or held in street name.

Mailed proxy cards with respect to shares of record must be received no later than April 12, 2021.

 

Q.

What can I do if I change my mind after I vote my shares?

 

A.

You can change your vote by revoking your proxy at any time before your proxy is voted, in one of three ways:

 

   

submitting a later dated proxy (including a proxy submitted through the internet at www.proxyvote.com, by telephone or by proxy card);

 

   

notifying Change’s Corporate Secretary by email at corporatesecretary@changehealthcare.com that you are revoking your proxy; or

 

   

voting online at the Special Meeting.

If you are a beneficial owner of Change Common Stock held by a bank, broker or other nominee, you will need to contact the bank, broker or other nominee to revoke your proxy.

 

Q.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A.

If your shares are registered directly in your name with our registrar and transfer agent, EQ Shareowner Services, you are considered a “stockholder of record” with respect to those shares. If your shares are held in a bank or brokerage account, you are considered the “beneficial owner” of those shares.

 

Q.

What if I am a beneficial owner and do not give voting instructions to my broker? What is a broker non-vote?

 

A.

As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. Broker non-votes are shares held in “street name” by

 

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  brokers, banks and other nominees that are present or represented by proxy at the Special Meeting, but with respect to which the broker, bank or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and such broker, bank or other nominee does not have discretionary voting power on such proposal. Because, under NASDAQ rules, brokers, banks and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a beneficial owner of shares of Change Common Stock held in “street name” does not give voting instructions to the broker, bank or other nominee, then those shares will not be counted as present virtually or by proxy at the Special Meeting. As a result, it is expected that there will not be any broker non-votes in connection with any of the three proposals described in this proxy statement. The failure to issue voting instructions to your broker, bank or other nominee will have no effect on the outcome of the Named Executive Officer Merger-Related Compensation Proposal or Adjournment Proposal, assuming that a quorum exists. However, the vote to approve the Merger Proposal is based on the total number of shares of Change Common Stock outstanding at the close of business on the record date, not just the shares that are counted as present virtually or by proxy at the Special Meeting. As a result, if you fail to issue voting instructions to your broker, bank or other nominee, it will have the same effect as a vote “AGAINST” the Merger Proposal.

 

Q.

Will my shares held in “street name” or another form of record ownership be combined for voting purposes with shares I hold of record?

 

A.

No. Because any shares you may hold in “street name” will be deemed to be held by a different stockholder than any shares you hold of record, any shares held in “street name” will not be combined for voting purposes with shares you hold of record. Similarly, if you own shares in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card (or submit a proxy by telephone or through the Internet) for each of those shares because they are held in a different form of record ownership. Shares held by a corporation or business entity must be voted by an authorized officer of the entity. Shares held in an individual retirement account must be voted under the rules governing the account.

 

Q.

Who is soliciting my proxy? Who will pay for the cost of this proxy solicitation?

 

A.

The Board is soliciting your proxy, and Change will bear the cost of soliciting proxies. Change has engaged Morrow Sodali LLC (“Morrow”) to assist with the solicitation of proxies. Morrow will be paid approximately $30,000. Change will reimburse Morrow for reasonable out-of-pocket expenses and will indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, banks and other nominees to the beneficial owners of shares of Change Common Stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by Morrow or, without additional compensation, by certain of Change’s directors, officers and employees.

 

Q.

What matters will be voted on at the Special Meeting?

 

A.

At the Special Meeting, you will be asked to consider and vote on the following proposals:

 

   

the Merger Proposal;

 

   

the Named Executive Officer Merger-Related Compensation Proposal; and

 

   

the Adjournment Proposal.

Stockholders may also be asked to transact such other business as may properly be brought before the Special Meeting or any adjournments or postponements of the Special Meeting, by or at the direction of the Board with the consent of UnitedHealth Group.

 

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Q.

What is the position of the Board regarding the Merger?

 

A.

After consulting with its outside legal counsel and financial advisors and after consideration of various factors, the Board has unanimously (i) determined that it is advisable, fair to and in the best interests of Change and our stockholders for Change to enter into the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement, (ii) declared advisable and approved the Merger Agreement and the transactions contemplated by the Merger Agreement and (iii) resolved that the Merger Agreement be submitted to the Change stockholders for adoption thereby in accordance with applicable law, the Merger Agreement and the bylaws of Change at a special meeting of stockholders.

 

Q.

How does the Board recommend that I vote on the proposals?

 

A.

Change’s Board unanimously recommends that you vote:

 

   

“FOR” the Merger Proposal;

 

   

“FOR” the Named Executive Officer Merger-Related Compensation Proposal; and

 

   

“FOR” the Adjournment Proposal.

 

Q.

What vote is required to approve the Merger Proposal?

 

A.

The Merger Proposal will be approved if stockholders holding a majority of the outstanding shares of Change Common Stock entitled to vote on such matter at the Special Meeting affirmatively vote “FOR” the proposal.

 

Q.

What vote is required to approve the Named Executive Officer Merger-Related Compensation Proposal (on a non-binding, advisory basis) and the Adjournment Proposal?

 

A.

Each of the Named Executive Officer Merger-Related Compensation Proposal and the Adjournment Proposal will be approved if the holders of a majority in voting power of the shares of Change Common Stock present or represented by proxy at the Special Meeting entitled to vote on such matter affirmatively vote “FOR” each such proposal.

 

Q.

Do you expect the Merger to be taxable to Change stockholders?

 

A.

The exchange of Change Common Stock for cash in the Merger generally will be a taxable transaction for holders of Change Common Stock for U.S. federal income tax purposes and may also be taxable under state, local or other tax laws. You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 114. The tax consequences of the Merger to you will depend on your particular circumstances. You should consult your tax advisors regarding the U.S. federal income tax consequences of the Merger to you in your particular circumstances, as well as tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

 

Q.

What other effects will the Merger have on Change?

 

A.

If the Merger is completed, Change Common Stock will be delisted from NASDAQ and deregistered under the Exchange Act, and Change will no longer be required to file periodic reports with the SEC with respect to Change Common Stock, in each case in accordance with applicable law, rules and regulations. Following the completion of the Merger, Change Common Stock will no longer be publicly traded and you will no longer have any interest in Change’s future earnings or growth. In addition, each share of Change Common Stock you hold will represent only the right to receive $25.75 in cash, without interest and subject to any applicable withholding taxes. Change will also become a wholly-owned subsidiary of UnitedHealth Group at the Effective Time.

 

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Q.

When is the Merger expected to be completed?

 

A.

Assuming timely satisfaction of necessary closing conditions, including the approval by our stockholders of the Merger Proposal, the parties to the Merger Agreement expect to complete the Merger in the second half of 2021. However, Change cannot assure that the Merger will be completed by any particular date, if at all. Because the Merger is subject to a number of conditions, including the receipt of stockholder approval of the Merger Proposal and the receipt of certain other regulatory approvals and clearances, the exact timing of consummation of the Merger cannot be determined at this time and we cannot guarantee that the Merger will be completed.

 

Q.

What happens if the Merger is not completed?

 

A.

If the Merger Proposal is not approved by Change stockholders, or if the Merger is not completed for any other reason, Change stockholders will not receive any payment for their shares of Change Common Stock in connection with the Merger. Instead, Change will remain an independent public company and shares of Change Common Stock will continue to be listed and traded on NASDAQ. Change may be required to pay UnitedHealth Group a termination fee of $300,000,000 if the Merger Agreement is terminated under certain specified circumstances pursuant to the terms of the Merger Agreement. See the section entitled “The Merger Agreement—Termination Fee” beginning on page 103 for a discussion of the circumstances under which Change will be required to pay a termination fee.

 

Q.

How will our directors and executive officers vote on the Merger Proposal?

 

A.

Our current understanding is that the directors and executive officers of Change intend, as of the date of this proxy statement, to vote in favor of the Merger Proposal.

As of the record date for the Special Meeting, the directors and executive officers of Change owned, in the aggregate, 846,006 shares of Change Common Stock (not including any shares of our common stock deliverable upon exercise of or underlying any Change equity-based awards, which shares cannot be voted at the Special Meeting), representing less than 1% of the shares of Change Common Stock issued and outstanding on that date.

 

Q.

Do any of Change’s directors or executive officers have interests in the Merger that may differ from or be in addition to my interests as a stockholder?

 

A.

Yes. In considering the recommendation of the Board with respect to the Merger Proposal, you should be aware that our directors and executive officers may have interests in the Merger that may be different from, or in addition to, the interests of our stockholders generally. The Board was aware of and considered these differing interests, to the extent such interests existed at the time, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in unanimously recommending that the Merger Agreement be adopted by the Change stockholders. See the section entitled “The Merger Proposal (Proposal 1)—Interests of Change’s Executive Officers and Directors in the Merger.”

 

Q.

Why am I being asked to consider and vote on the Named Executive Officer Merger-Related Compensation Proposal?

 

A.

The SEC rules require Change to seek approval on a non-binding, advisory basis with respect to certain payments that will or may be made to Change’s named executive officers in connection with the Merger. Approval of the Named Executive Officer Merger-Related Compensation Proposal is not required to complete the Merger.

 

Q.

How many shares of Change Common Stock must be present to constitute a quorum for the meeting? What if there is no quorum?

 

A.

Under our bylaws, the presence at the Special Meeting, in person or by proxy, of the holders of a majority in voting power of the shares of Change Common Stock issued and outstanding at the close of business on the

 

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  record date will constitute a quorum. There must be a quorum for business to be conducted at the Special Meeting. If a quorum is not present, the person presiding at the Special Meeting may adjourn the Special Meeting from time to time until a quorum is present. Failure of a quorum to be present at the Special Meeting will necessitate an adjournment or postponement of the Special Meeting and may subject Change to additional expense. If the adjournment is for more than 30 days, or if, after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting. As of the close of business on the record date, there were 306,530,424 shares of Change Common Stock outstanding representing 306,530,424 votes. Accordingly, a sufficient number of shares of Change Common Stock representing at least 153,265,213 votes must be present or represented by proxy at the Special Meeting to constitute a quorum.

 

Q.

What if I abstain from voting on any proposal?

 

A.

If you attend the Special Meeting or if you submit (and do not thereafter revoke) a proxy by duly executing and returning a proxy card, by telephone or through the Internet, even if you abstain from voting, your shares of Change Common Stock will still be counted for purposes of determining whether a quorum is present at the Special Meeting, but will not be voted on the proposals. As a result, if you mark “ABSTAIN” on your proxy card or otherwise indicate that you are abstaining from voting when you submit your proxy by telephone or through the Internet, your abstention from voting will have the same effect as a vote “AGAINST” the Merger Proposal, the Named Executive Officer Merger-Related Compensation Proposal and the Adjournment Proposal.

 

Q.

Will my shares be voted if I do not sign and return my proxy card or vote by telephone or over the Internet or electronically during the Special Meeting?

 

A.

If you are a stockholder of record of Change and you do not electronically vote at the Special Meeting, sign and return your proxy card by mail, or submit your proxy by telephone or over the Internet, your shares will not be voted at the Special Meeting and will not be counted as present for purposes of determining whether a quorum exists. The failure to submit a proxy or otherwise vote your shares at the Special Meeting will have no effect on the outcome of the Named Executive Officer Merger-Related Compensation Proposal or the Adjournment Proposal, assuming that a quorum exists. However, the vote to approve the Merger Proposal is based on the total number of shares of Change Common Stock outstanding as of the close of business on the record date, not just the shares that are counted as present in person or by proxy at the Special Meeting. As a result, if you fail to submit a proxy or otherwise vote your shares electronically at the Special Meeting, it will have the same effect as a vote “AGAINST” the Merger Proposal.

You will have the right to receive the Merger consideration if the Merger Proposal is approved and the Merger is completed even if your shares are not voted at the Special Meeting. However, if your shares are not voted at the Special Meeting, it will have the same effect as a vote “AGAINST” the Merger Proposal.

 

Q.

Am I entitled to exercise appraisal rights under the DGCL instead of receiving the Merger consideration for my shares of Change Common Stock?

 

A.

Yes. If you are a record holder of Change Common Stock, you are entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the Merger if you comply with the requirements of Section 262 of the DGCL. See the section entitled “The Merger Proposal (Proposal 1)—Appraisal Rights” beginning on page 70. In addition, a copy of Section 262 of the DGCL is attached to this proxy statement as Annex C.

Failure to strictly comply with all procedures required by Section 262 of the DGCL will result in a loss of your right to appraisal. We encourage you to read these provisions carefully and in their entirety and, in view of their complexity, to promptly consult with your legal and financial advisors if you wish to pursue your appraisal rights in connection with the Merger.

 

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Q.

What happens if I sell my shares of Change Common Stock before the completion of the Merger?

 

A.

If you transfer your shares of Change Common Stock before the Merger is completed, you will lose your right to receive the Merger consideration or to exercise appraisal rights. In order to receive the Merger consideration, you must hold your shares of Change Common Stock through the completion of the Merger.

 

Q.

Should I send in my evidence of ownership now?

 

A.

No. After the Merger is completed, if you are a stockholder of record and hold your shares of Change Common Stock in certificated form or in book-entry form not through the Depository Trust Company (“DTC”), you will receive transmittal materials from the paying agent for the Merger with detailed written instructions for exchanging your shares of Change Common Stock for the consideration to be paid to former Change stockholders in connection with the Merger. If you are a stockholder of record and hold your shares of Change Common Stock in book-entry form through DTC, only if required by the paying agent, will you receive transmittal materials from the paying agent for the Merger with detailed written instructions for exchanging your shares of Change Common Stock for the consideration to be paid to former Change stockholders in connection with the Merger. If you are the beneficial owner of shares of Change Common Stock held in “street name,” you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of such shares.

 

Q.

What does it mean if I get more than one proxy card or voting instruction card?

 

A.

If your shares are registered differently or are held in more than one account, you will receive more than one proxy card or voting instruction card. Please complete and return all of the proxy cards or voting instruction cards you receive (or submit each of your proxies over the Internet or by telephone) to ensure that all of your shares are voted.

 

Q.

What is householding and how does it affect me?

 

A.

The SEC’s proxy rules permit companies and intermediaries, such as brokers, to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement to those stockholders. This process, which is commonly referred to as “householding,” provides cost savings for companies. While Change does not household, a number of brokerage firms with account holders who are Change stockholders household proxy materials, delivering a single set of proxy materials to multiple stockholders sharing an address, unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker. You can request, and Change will promptly deliver, a separate copy of the proxy statement by writing to our Corporate Secretary at our offices at 100 Airpark Center Drive East, Nashville, TN 37217 or by calling 615-932-3000.

 

Q.

What will the holders of outstanding Change equity awards receive in the Merger?

 

A.

At the Effective Time, Change equity-based awards outstanding immediately prior to the Effective Time will generally be subject to the following treatment:

 

   

each Change Option, whether vested or unvested, will be converted into an option to purchase a number of UnitedHealth Group Shares based on the Equity Award Exchange Ratio, with the exercise price per share applicable to such Change Option adjusted by the Equity Award Exchange Ratio;

 

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each outstanding Restricted Share subject to the Exit-Vesting Conditions that fully vests at the Effective Time pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes (provided, that any Restricted Share that does not vest at the Effective Time pursuant to the applicable terms and conditions will be cancelled and forfeited for no consideration or payment);

 

   

each outstanding time-based and performance-based RSU, whether vested or unvested, will be converted into a UnitedHealth Group RSU based on the Equity Award Exchange Ratio, with the number of UnitedHealth Group Shares subject to such UnitedHealth Group RSU equal to the product of (i) (A) in the case of a service-based RSU, the total number of shares subject to such RSU immediately prior to the Effective Time or (B) in the case of a performance-based RSU, the number of shares subject to such RSU award based on target performance multiplied by (ii) the Equity Award Exchange Ratio;

 

   

each outstanding RSU subject to the Exit-Vesting Conditions that fully vests at the consummation of the Merger pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will automatically be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes. If the Exit-Vesting Conditions are not satisfied in connection with the consummation of the Merger, any RSUs subject to the Exit-Vesting Conditions will be cancelled and forfeited at the Effective Time for no consideration or payment;

 

   

each outstanding SAR, whether vested or unvested, will be converted into a UnitedHealth Group SAR denominated in a number of UnitedHealth Group Shares based on the Equity Award Exchange Ratio, with the strike price per share applicable to such SAR adjusted by the Equity Award Exchange Ratio (provided, that any SAR award subject to the Exit-Vesting Conditions that does not fully vest at the Effective Time pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will be cancelled and forfeited at the Effective Time for no consideration or payment); and

 

   

each DSU, whether vested or unvested, will be converted into a UnitedHealth Group DSU denominated in UnitedHealth Group Shares based on the Equity Award Exchange Ratio.

Change equity-based awards that convert into equity-based awards denominated in UnitedHealth Group Shares will generally be subject to the same terms and conditions (including, as applicable, vesting, exercise and settlement) as applied to such award prior to the Effective Time, except to the extent such terms and conditions are rendered inoperative by the Merger or with respect to such other changes that are necessary for the administration of the awards and that are not materially detrimental to the holder of the award.

 

Q.

When will Change announce the voting results of the Special Meeting, and where can I find the voting results?

 

A.

Change intends to announce the preliminary voting results at the Special Meeting, and will report the final voting results of the Special Meeting in a Current Report on Form 8-K filed with the SEC within four business days after the meeting. All reports that Change files with the SEC are publicly available when filed.

 

Q:

Where can I find more information about Change?

 

A:

You can find more information about us from various sources described in the section entitled “Where You Can Find More Information” beginning on page 119 of this proxy statement.

 

Q:

Who can help answer my other questions?

 

A:

If you have questions about the Merger, require assistance in submitting your proxy or voting your shares, or need additional copies of this proxy statement or the enclosed proxy card, please contact Morrow, which

 

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  is acting as the proxy solicitor for Change in connection with the Merger, or the Change Healthcare Investor Relations Department.

Morrow Sodali LLC

470 West Avenue

Stamford, CT 06902

Telephone: (203) 658-9400 or (800) 662-5200 (toll-free)

Email: CHNG.info@investor.morrowsodali.com

or

Change Healthcare Investor Relations Department

Attention: Evan Smith

100 Airpark Center Drive East

Nashville, TN 37217

Telephone: 404-338-2225

Email: investor.relations@changehealthcare.com

If your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and businesses of Change. Some of these statements can be identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “could,” “should,” “may,” “plan,” “project,” “predict” and similar expressions. Change cautions readers of this communication that such “forward-looking statements,” including without limitation, those relating to the Merger being completed within the anticipated timeframe or at all, the realization of the expected benefits of the Merger, Change’s future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, wherever they occur in this communication or in other statements attributable to Change, are not guarantees of future performance, are necessarily estimates reflecting the judgment of Change’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the “forward-looking statements.”

Factors that could cause Change’s actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to, the risks detailed in our filings with the SEC, including in our most recent filings on Forms 10-K and 10-Q, factors and matters described or incorporated by reference in this proxy statement, and the following factors:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

   

the inability to complete the Merger due to the failure to obtain stockholder approval for the Merger or the failure to satisfy other conditions to the completion of the Merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the Merger;

 

   

risks related to disruption of management’s attention from Change’s ongoing business operations due to the Merger;

 

   

the effect of the announcement of the Merger on Change’s relationships with its customers, operating results and business generally;

 

   

the risk that the Merger will not be consummated in a timely manner, exceeding the expected costs of the Merger;

 

   

Change’s ability to retain or renew existing customers and attract new customers;

 

   

macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets;

 

   

uncertainty and risks related to the impact of the COVID-19 pandemic on the national and global economy, Change’s business, suppliers, customers and employees;

 

   

Change’s ability to connect a large number of payers and providers;

 

   

Change’s ability to provide competitive services and prices while maintaining its margins;

 

   

further consolidation in end-customer markets;

 

   

Change’s ability to effectively manage costs;

 

   

Change’s ability to effectively develop and maintain relationships with channel partners;

 

   

a decline in transaction volume in the U.S. healthcare industry;

 

   

Change’s ability to timely develop new services and the market’s willingness to adopt new services;

 

   

Change’s ability to maintain access to its data sources;

 

   

Change’s ability to maintain the security and integrity of its data;

 

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Change’s ability to make acquisitions and integrate the operations of acquired businesses;

 

   

government regulation and changes in the regulatory environment;

 

   

economic and political instability in the U.S. and international markets where Change operates;

 

   

risks related to international operations;

 

   

the ability of outside service providers and key vendors to fulfill their obligations to Change;

 

   

litigation or regulatory proceedings;

 

   

Change’s ability to protect and enforce its intellectual property, trade secrets and other forms of unpatented intellectual property;

 

   

Change’s ability to defend its intellectual property from infringement claims by third parties;

 

   

changes in local, state, federal and international laws and regulations, including related to taxation;

 

   

Change’s reliance on key management personnel;

 

   

Change’s ability to manage and expand its operations and keep up with rapidly changing technologies;

 

   

Change’s adoption of new, or amendments to existing, accounting standards;

 

   

losses against which Change does not insure;

 

   

Change’s ability to make timely payments of principal and interest on its indebtedness;

 

   

Change’s ability to satisfy covenants in the agreements governing its indebtedness;

 

   

Change’s ability to maintain liquidity, and other risks.

Consequently, all of the forward-looking statements that we make in this proxy statement are qualified by the information contained or incorporated by reference herein, including (1) the information contained under this caption, and (2) the information contained under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and information in our consolidated financial statements and notes thereto included in Change’s most recent Annual Report on Form 10-K filed with the SEC on June 4, 2020 and in Change’s Quarterly Report on Form 10-Q filed on February 4, 2021. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

Change’s forward-looking statements speak only as of the date of this communication or as of the date they are made. Change disclaims any intent or obligation to update any “forward-looking statement” made in this communication to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

 

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THE PARTIES TO THE MERGER

Change

Change Healthcare Inc.

424 Church Street, Suite 1400

Nashville, Tennessee 37219

(615) 932-3000

Change Healthcare Inc. is a leading healthcare technology platform that provides data and analytics-driven solutions to improve clinical, financial, administrative, and patient engagement outcomes in the U.S. healthcare system. We offer a comprehensive suite of software, analytics, technology-enabled services and network solutions that drive improved results in the complex workflows of healthcare system payers and providers. Our solutions are designed to improve clinical decision making, simplify billing, collection and payment processes, and enable a better patient experience.

Our common stock is traded on NASDAQ under the ticker symbol “CHNG”. Change’s headquarters are located at 424 Church Street, Suite 1400 Nashville, Tennessee 37219 and our telephone number is (615) 932-3000. Our corporate web address is www.changehealthcare.com. The information provided on the Change website is not part of this proxy statement and is not incorporated in this proxy statement by reference or by any other reference to Change’s website provided in this proxy statement.

Additional information about Change is contained in our public filings with the SEC, which filings are incorporated by reference herein. See the section entitled “Where You Can Find More Information.”

UnitedHealth Group

UnitedHealth Group Incorporated

9900 Bren Road East

Minnetonka, MN 55343

(952) 936-1300

UnitedHealth Group is a diversified health care company, offering a diverse range of products and services through its two distinct business platforms: UnitedHealthcare, which provides health benefits, and Optum, which provides health services. Through UnitedHealthcare and Optum, in 2019, UnitedHealth Group processed nearly a trillion dollars in gross billed charges and UnitedHealth Group managed more than $250 billion in aggregate health care spending on behalf of the customers and consumers UnitedHealth Group serves.

The principal executive offices of UnitedHealth Group are located at 9900 Bren Road East, Minnetonka, MN 55343, and its telephone number is (952) 936-1300. Shares of common stock of UnitedHealth Group are listed on the New York Stock Exchange under the symbol “UNH.”

Merger Sub

Cambridge Merger Sub Inc.

c/o UnitedHealth Group Incorporated

9900 Bren Road East

Minnetonka, MN 55343

(952) 936-1300

Merger Sub is a Delaware corporation that was formed solely for the purposes of entering into the Merger Agreement and engaging in the transactions contemplated by the Merger Agreement. Merger Sub is a direct, wholly-owned subsidiary of UnitedHealth Group and has not engaged in any business except for activities incidental to its formation and as contemplated by the Merger Agreement. Upon consummation of the Merger, Merger Sub will cease to exist and Change will survive the Merger as a wholly-owned subsidiary of UnitedHealth Group.

The principal executive offices of Merger Sub’s ultimate parent, UnitedHealth Group, are located at 9900 Bren Road East, Minnetonka, MN 55343, and its telephone number is (952) 936-1300.

 

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THE SPECIAL MEETING

This proxy statement is being provided to Change stockholders as part of a solicitation by the Board of proxies for use at the Special Meeting, to be held at the time and place specified below, and at any properly convened meeting following an adjournment or postponement of the Special Meeting.

Date, Time and Place

The special meeting of Change stockholders (the “Special Meeting”) is scheduled to be held on April 13, 2021 at 3:30 pm, Eastern Time. Due to the public health impact of the COVID-19 outbreak and to support the health and well-being of our stockholders and other participants at the Special Meeting, the Special Meeting will be a virtual meeting of stockholders. You will be able to attend the Special Meeting, vote your shares electronically and submit your questions during the meeting via live audio webcast by visiting www.virtualshareholdermeeting.com/CHNG2021SM. In order to participate in the meeting, you must have your 16-digit control number that is shown on your proxy card or the instructions that accompanied your proxy materials. You will not be able to attend the Special Meeting in person.

Purpose of the Special Meeting

At the Special Meeting, Change stockholders will be asked to consider and vote on the following proposals:

 

   

the Merger Proposal, which is further described in the sections entitled “The Merger Proposal (Proposal 1)” and “The Merger Agreement,” beginning on pages 32 and 76, respectively, and a copy of the Merger Agreement is attached to this proxy statement as Annex A and is incorporated herein by reference;

 

   

the Named Executive Officer Merger-Related Compensation Proposal, which is further described in the sections entitled “The Merger Proposal (Proposal 1)—Interests of Change’s Executive Officers and Directors in the Merger” and “Advisory Vote On Named Executive Officer Merger-Related Compensation Proposal (Proposal 2)” beginning on pages 58 and 108, respectively; and

 

   

the Adjournment Proposal, which is further described in the section entitled “Adjournment Proposal (Proposal 3)” beginning on page 109.

Stockholders may also be asked to transact such other business as may properly be brought before the Special Meeting, or any adjournments or postponements of the Special Meeting, by or at the direction of the Board with the consent of UnitedHealth Group.

The holders of a majority of the outstanding shares of Change Common Stock entitled to vote on the Merger Proposal must vote to adopt the Merger Agreement as a condition to the completion of the Merger. If the Change stockholders fail to approve the Merger Proposal, the Merger will not occur. The vote on the Named Executive Officer Merger-Related Compensation Proposal is a vote separate and apart from the vote to approve the Merger Proposal. Accordingly, a stockholder may vote to approve the Merger Proposal and vote not to approve the Named Executive Officer Merger-Related Compensation Proposal, and vice versa. Because the vote on the Named Executive Officer Merger-Related Compensation Proposal is only advisory in nature, it will not be binding on Change, UnitedHealth Group or the Surviving Corporation. Accordingly, because Change is contractually obligated to pay such merger-related compensation, the compensation will be payable, subject only to the conditions applicable thereto, if the Merger Proposal is approved, regardless of the outcome of the advisory vote.

Other than the matters described above, Change does not expect a vote to be taken on any other matters at the Special Meeting or any adjournment or postponement thereof, and Change has agreed in the Merger Agreement that no other matters (other than customary procedural matters) shall be brought before the Special

 

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Meeting without the consent of UnitedHealth Group. However, if any other matters are properly brought before the Special Meeting or any adjournment or postponement thereof for consideration, the holders of the proxies will have discretion to vote on such matters in accordance with their best judgment.

Recommendation of the Board

The Board has unanimously determined that the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Change and its stockholders and has unanimously approved and declared advisable the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement. The Board made its determination after consultation with its outside legal counsel and financial advisors and consideration of a number of factors more fully described in the section entitled “The Merger Proposal (Proposal 1)—Recommendation of the Board and Reasons for the Merger” beginning on page 43.

The Board unanimously recommends that Change stockholders vote “FOR” the Merger Proposal, “FOR” the Named Executive Officer Merger-Related Compensation Proposal and “FOR” the Adjournment Proposal.

Record Date; Stockholders Entitled to Vote

Only holders of record of Change Common Stock at the close of business on February 26, 2021, the record date for the Special Meeting (the “Record Date”), will be entitled to notice of, and to vote at, the Special Meeting and any adjournments or postponements of the Special Meeting.

Holders of record of Change Common Stock are entitled to one vote for each share of Change Common Stock they own of record at the close of business on the Record Date. At the close of business on the Record Date, 306,530,424 shares of Change Common Stock were issued and outstanding, held by approximately 88 holders of record.

Quorum

Under our bylaws, the presence at the Special Meeting, in person or by proxy, of the holders of record of a majority of the voting power of the shares of Change Common Stock issued and outstanding and entitled to vote at the Special Meeting will constitute a quorum. There must be a quorum for business to be conducted at the Special Meeting. Failure of a quorum to be represented at the Special Meeting will necessitate an adjournment or postponement of the Special Meeting and may subject Change to additional expense.

If you attend the Special Meeting or if you submit (and do not thereafter revoke) a proxy by duly executing and returning a proxy card or by telephone or through the Internet, even if you abstain from voting, your shares of Change Common Stock will be counted for purposes of determining whether a quorum is present at the Special Meeting. In the event that a quorum is not present at the Special Meeting or additional votes must be solicited to adopt the Merger Agreement, the meeting may be adjourned or postponed to solicit additional proxies.

Required Vote

Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Change Common Stock entitled to vote on such matter at the Special Meeting.

Approval of the Named Executive Officer Merger-Related Compensation Proposal (on a non-binding basis) requires the affirmative vote of the holders of a majority of the voting power of the shares of Change Common Stock present in person or represented by proxy at the Special Meeting and entitled to vote on such matter at the Special Meeting.

 

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Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Change Common Stock present in person or represented by proxy at the Special Meeting and entitled to vote on such matter at the Special Meeting.

Abstentions and Broker Non-Votes

An abstention occurs when a stockholder attends a meeting, in the case of the Special Meeting either virtually or by proxy, but abstains from voting. At the Special Meeting, abstentions will be counted as present for purposes of determining whether a quorum exists. Abstaining from voting will have the same effect as a vote “AGAINST” the Merger Proposal, the Named Executive Officer Merger-Related Compensation Proposal and the Adjournment Proposal.

If no instruction as to how to vote is given (including no instruction to abstain from voting) in an executed, duly returned and not revoked proxy, the proxy will have the same effect as a vote “FOR” the Merger Proposal, the Named Executive Officer Merger-Related Compensation Proposal and the Adjournment Proposal.

Broker non-votes are shares held in “street name” by brokers, banks and other nominees that are present or represented by proxy at the Special Meeting, but with respect to which the broker, bank or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and such broker, bank or other nominee does not have discretionary voting power on such proposal. Because, under NASDAQ rules, brokers, banks and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a beneficial owner of shares of Change Common Stock held in “street name” does not give voting instructions to the broker, bank or other nominee, then those shares will not be permitted under NASDAQ rules to be voted at the Special Meeting, and thus will not be counted as present in person or by proxy at the Special Meeting. The vote to approve the Merger Proposal is based on the total number of shares of Change Common Stock outstanding at the close of business on the record date, not just the shares that are counted as present in person or by proxy at the Special Meeting. As a result, if you fail to issue voting instructions to your broker, bank or other nominee, it will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the approval of the Named Executive Officer Merger-Related Compensation Proposal or the Adjournment Proposal.

Failure to Vote

If you are a stockholder of record and you do not sign and return your proxy card by mail or vote over the Internet, by telephone or electronically during the Special Meeting, your shares will not be voted at the Special Meeting, will not be counted as present in person or by proxy at the Special Meeting and will not be counted as present for purposes of determining whether a quorum exists.

As discussed above, under NASDAQ rules, brokers and other record holders do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement. Accordingly, if you are the beneficial owner of shares held in “street name” and you do not issue voting instructions to your broker, bank or other nominee, your shares will not be voted at the Special Meeting and will not be counted as present in person or by proxy at the Special Meeting or counted as present for purposes of determining whether a quorum exists.

A failure to vote will have no effect on the outcome of the Named Executive Officer Merger-Related Compensation Proposal or the Adjournment Proposal, assuming that a quorum exists. However, the vote to approve the Merger Proposal is based on the total number of shares of Change Common Stock outstanding at the close of business on the record date, not just the shares that are counted as present in person or by proxy at the Special Meeting. As a result, if you fail to vote your shares, it will have the same effect as a vote “AGAINST” the Merger Proposal.

 

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Voting by Change’s Directors and Executive Officers

At the close of business on the record date, directors and executive officers of Change were entitled to vote 846,006 shares of Change Common Stock (not including any shares of our common stock deliverable upon exercise of or underlying any Change equity-based awards, which shares cannot be voted at the Special Meeting), representing less than 1% of the shares of Change Common Stock issued and outstanding on that date. Our current understanding is that the directors and executive officers of Change intend, as of the date of this proxy statement, to vote in favor of the Merger Proposal, although none of Change’s directors and executive officers is obligated to do so.

Voting at the Special Meeting

If your shares are registered directly in your name with our transfer agent, you are considered a “stockholder of record.” Stockholders of record can vote their shares of Change Common Stock in the following four ways: (i) electronically at the meeting; (ii) by mail, by properly executing and returning the proxy card; (iii) electronically, according to the instructions set forth on the proxy card; or (iv) by telephone, according to the instructions set forth on the proxy card. Telephone and Internet facilities for the submission of a proxy to vote shares will be available 24 hours a day and will close at 11:59 p.m. Eastern Time on April 12, 2021. Proxy cards mailed with respect to shares held by stockholders of record or held in “street name” must be received no later than April 12, 2021 in order to be counted in the vote.

 

   

At the Special Meeting—You may vote electronically at the Special Meeting.

 

   

By Internet—You may submit your proxy by going to www.proxyvote.com and by following the instructions on how to complete an electronic proxy card. You will need the 16-digit number included on your proxy card or the instructions that accompanied your proxy materials in order to vote by Internet.

 

   

By Telephone—You may submit your proxy by dialing 1-800-690-6903 and by following the recorded instructions. You will need the 16-digit number included on your proxy card or the instructions that accompanied your proxy materials in order to vote by telephone.

 

   

By Mail—You may vote by mail by indicating your vote by completing, signing and dating the proxy card where indicated and by mailing or otherwise returning the card in the envelope that will be provided to you. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity.

If your shares are held in the name of a bank, broker or other holder of record (also known as “street name”), you have the right to direct your bank, broker or other nominee on how to vote your shares by using the voting instruction form provided to you by them, or by following their instructions for voting through the internet or by telephone. In the alternative, you may vote at the meeting if you obtain a legal proxy from your bank, broker or other nominee and present it at the meeting. In order for your shares to be voted on all matters presented at the meeting, we urge all stockholders whose shares are held in street name by a bank, brokerage firm or other nominee to provide voting instructions to such record holder.

Stockholders who are entitled to vote at the Special Meeting may attend the Special Meeting. To attend and participate in the meeting, you must have your 16-Digit Control Number that is shown on your proxy card or the instructions that accompanied your proxy materials. You may attend and access the Special Meeting by visiting www.virtualshareholdermeeting.com/CHNG2021SM. You will be able to submit questions during the meeting by typing in your question into the “ask a question” box on the meeting page. Should you require technical assistance, support will be available by dialing 1-800-449-0991 (U.S.) or 1-720-378-5962 (International) during the meeting; these telephone numbers will also be displayed on the meeting webpage.

 

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Revocation of Proxies

You can change or revoke your proxy at any time before the final vote at the Special Meeting. If you are the stockholder of record, you may change or revoke your proxy by:

 

   

submitting a later dated proxy (including a proxy submitted through the internet at www.proxyvote.com, by telephone or by proxy card);

 

   

notifying Change’s Corporate Secretary by email at corporatesecretary@changehealthcare.com that you are revoking your proxy; or

 

   

voting online at the Special Meeting.

If you are a beneficial owner of Change Common Stock held by a bank, broker or other nominee, you will need to contact the bank, broker or other nominee to revoke your proxy.

Solicitation of Proxies

The Board is soliciting your proxy, and Change will bear the cost of soliciting proxies. Change has engaged Morrow to assist with the solicitation of proxies. Morrow will be paid approximately $30,000. Change will reimburse Morrow for reasonable out-of-pocket expenses and will indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, banks and other nominees to the beneficial owners of shares of Change Common Stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by Morrow or, without additional compensation, by certain of Change’s directors, officers and employees.

Adjournment

In addition to the Merger Proposal and the Named Executive Officer Merger-Related Compensation Proposal, Change stockholders are also being asked to approve the Adjournment Proposal, which will enable the adjournment of the Special Meeting for the purpose of soliciting additional votes in favor of the Merger Proposal if there are not sufficient votes at the time of the Special Meeting to approve the Merger Proposal. If a quorum is not present, the person presiding at the Special Meeting may adjourn the Special Meeting from time to time until a quorum is present. If the adjournment is for more than 30 days, or if, after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting. In addition, the Special Meeting could be postponed before it commences, subject to the terms of the Merger Agreement. If the Special Meeting is adjourned or postponed, stockholders who have already submitted their proxies will be able to revoke them at any time prior to the final vote on the proposals. If you return a proxy and do not indicate how you wish to vote on the Adjournment Proposal, your shares will be voted in favor of the Adjournment Proposal.

The Board unanimously recommends a vote “FOR” the Adjournment Proposal, if necessary or appropriate, to solicit additional proxies.

Other Information

You should not send documents representing Change Common Stock with the proxy card. If the Merger is completed, the paying agent for the Merger will send you transmittal materials and instructions for exchanging your shares of Change Common Stock for the consideration to be paid to former Change stockholders in connection with the Merger.

 

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Questions

If you have more questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact Morrow Sodali LLC, our proxy solicitor, by calling (203) 658-9400, or toll-free at (800) 662-5200, or via email at CHNG.info@investor.morrowsodali.com.

 

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THE MERGER PROPOSAL

(PROPOSAL 1)

The discussion of the Merger in this proxy statement is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and hereby is incorporated by reference into this proxy statement.

Structure of the Merger

Subject to the terms and conditions of the Merger Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub will merge with and into Change, the separate corporate existence of Merger Sub will cease and Change will survive the Merger as a wholly-owned subsidiary of UnitedHealth Group.

What Stockholders Will Receive in the Merger

Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each share of Change Common Stock issued and outstanding immediately prior to the Effective Time (other than any (i) Restricted Shares and (ii) shares owned by (A) UnitedHealth Group, Merger Sub or any other wholly owned subsidiary of UnitedHealth Group, Change or any wholly owned subsidiary of Change (and, in each case, not held on behalf of third parties) or (B) stockholders who have properly made and not validly withdrawn or lost a demand for appraisal rights with respect to their shares (the shares referred to in this clause (B), “Dissenting Shares” and the shares referred to in this clause (ii), “Excluded Shares”)) will be automatically converted into the right to receive an amount in cash, without interest and subject to any applicable withholding taxes, equal to $25.75 (the “Per Share Merger Consideration”).

Treatment of Change Equity Awards

At the Effective Time, Change equity-based awards outstanding immediately prior to the Effective Time will generally be subject to the following treatment:

 

   

each Change Option, whether vested or unvested, will be converted into an option to purchase a number of UnitedHealth Group Shares based on the Equity Award Exchange Ratio, with the exercise price per share applicable to such Change Option adjusted by the Equity Award Exchange Ratio;

 

   

each outstanding Restricted Share subject to the Exit-Vesting Conditions that fully vests at the Effective Time pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes (provided, that any Restricted Share that does not vest at the Effective Time pursuant to the applicable terms and conditions will be cancelled and forfeited for no consideration or payment);

 

   

each outstanding RSU, whether vested or unvested, will be converted into a UnitedHealth Group RSU based on the Equity Award Exchange Ratio, with the number of UnitedHealth Group Shares subject to such UnitedHealth Group RSU equal to the product of (i) (A) in the case of a service-based RSU, the total number of shares subject to such RSU immediately prior to the Effective Time or (B) in the case of a performance-based RSU, the number of shares subject to such RSU award based on target performance multiplied by (ii) the Equity Award Exchange Ratio (provided, that any RSU subject to the Exit-Vesting Conditions that does not fully vest at the Effective Time pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will be cancelled and forfeited at the Effective Time for no consideration or payment);

 

   

each outstanding SAR, whether vested or unvested, will be converted into a UnitedHealth Group SAR denominated in a number of UnitedHealth Group Shares based on the Equity Award Exchange Ratio, with the strike price per share applicable to such SAR adjusted by the Equity Award Exchange Ratio (provided, that any SAR award subject to the Exit-Vesting Conditions that does not fully vest at the Effective Time pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will be cancelled and forfeited at the Effective Time for no consideration or payment); and

 

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each DSU, whether vested or unvested, will be converted into a UnitedHealth Group DSU denominated in UnitedHealth Group Shares based on the Equity Award Exchange Ratio.

Change equity-based awards that convert into equity-based awards denominated in UnitedHealth Group Shares will generally be subject to the same terms and conditions (including, as applicable, vesting, exercise and settlement) as applied to such award prior to the Effective Time, except to the extent such terms and conditions are rendered inoperative by the Merger or with respect to such other changes that are necessary for the administration of the awards and that are not materially detrimental to the holder of the award.

Effects on Change if the Merger Is Not Completed

If the Merger Proposal is not approved by Change stockholders or if the Merger is not completed for any other reason, Change stockholders will not receive any payment for their shares in connection with the Merger. Instead, Change will remain an independent public company and shares of Change Common Stock will continue to be listed and traded on NASDAQ. In addition, if the Merger is not completed, Change expects that management will operate Change’s business in a manner similar to that in which it is being operated today and that Change stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including, without limitation, risks related to the competitive industry in which Change operates and adverse economic conditions.

Furthermore, if the Merger is not completed, and depending on the circumstances that would have caused the Merger not to be completed, it is likely that the price of Change’s common stock will decline significantly. If that were to occur, it is uncertain when, if ever, the price of Change’s common stock would return to the price at which it trades as of the date of this proxy statement.

Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of Change Common Stock. If the Merger is not completed, the Board will continue to evaluate and review Change’s business operations, properties and capitalization, among other things, make such changes as are deemed appropriate, and continue to seek to identify strategic alternatives to enhance stockholder value. If the Merger Proposal is not approved by Change stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to Change will be offered or that Change’s business, prospects or results of operation will not be adversely impacted.

Further, upon termination of the Merger Agreement, under certain specified circumstances, Change may be required to pay a termination fee of $300,000,000 to UnitedHealth Group pursuant to the terms and conditions of the Merger Agreement. See the section entitled “The Merger Agreement—Termination Fee” beginning on page 103 for a discussion of the circumstances under which Change will be required to pay a termination fee.

Background of the Merger

The Board and Change management regularly review and assess Change’s business, strategies and objectives and regularly evaluate strategic opportunities and alternatives, including acquisitions, dispositions, other business combinations, strategic partnerships and other strategic transactions. This regular review and assessment has continued since Change completed its initial public offering in July 2019, and as part of this ongoing evaluation, the Board, together with Change’s management team and its outside advisors, have considered various potential opportunities to enhance stockholder value.

The Board and Change management have periodically interacted with representatives of UnitedHealth Group for a number of years in connection with regular business operations matters unrelated to a potential acquisition or other strategic transaction, as UnitedHealth Group is a customer of Change. In May 2020, representatives of UnitedHealth Group contacted representatives of Change to propose a meeting with Change to

 

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discuss not only the parties’ business relationship but also the possibility of exploring the merits of an acquisition transaction. On May 15, 2020, Neil de Crescenzo, President and Chief Executive Officer of Change, held a telephonic meeting with David S. Wichmann, the-then Chief Executive Officer of UnitedHealth Group and a then-member of the board of directors of UnitedHealth Group (the “UnitedHealth Group Board”), to discuss these matters. The discussion was exploratory in nature and did not address valuation or any other terms of a potential transaction. Mr. de Crescenzo informed Mr. Wichmann that he would report the conversation to Howard L. Lance, the independent Chairman of the Board, but did not otherwise discuss potential next steps. Following the meeting, Mr. de Crescenzo reported the details of the meeting to Mr. Lance.

On June 23, 2020, Mr. de Crescenzo, Fredrik Eliasson, Executive Vice President and Chief Financial Officer of Change, Mr. Wichmann and Stephen J. Hemsley, Chair of the UnitedHealth Group Board, held a meeting to further discuss the possibility of exploring the merits of UnitedHealth Group acquiring Change. Such meeting also included a general discussion of Change’s views of its capabilities and its strategic focus. The discussions were exploratory in nature and did not address valuation or any other terms of a potential transaction. Following the meeting, Mr. de Crescenzo reported the details of the meeting to Mr. Lance.

On August 13, 2020, Mr. de Crescenzo, Mr. Eliasson, Mr. Wichmann and John Rex, Executive Vice President and Chief Financial Officer of UnitedHealth Group, held a meeting to further discuss the possibility of exploring the merits of an acquisition transaction. In connection with this meeting, UnitedHealth Group further conveyed its views of the merits of combining the businesses of UnitedHealth Group and Change. Messrs. de Crescenzo and Eliasson responded by noting that they would again report this meeting to Mr. Lance and they also noted that, in their view, any offer made by UnitedHealth Group would need to be based on the historical trading prices of Change Common Stock from before the broad-based market dislocations in March 2020 due to COVID-19 (the per share closing trading price of Change Common Stock on the day of the meeting was $12.81, whereas the all-time high closing trading price of Change Common Stock prior to such dislocations was $17.26, recorded on January 21, 2020). These discussions did not otherwise address valuation or any other terms of a potential transaction.

On August 14, 2020, Messrs. de Crescenzo and Eliasson held a telephonic meeting with Mr. Lance, which was also attended by Neil P. Simpkins, a member of the Board and a senior managing director at The Blackstone Group Inc. (“Blackstone”) (investment funds managed by Blackstone are Change’s largest stockholder), and Loretta Cecil, Executive Vice President and General Counsel of Change, to summarize the August 13 meeting.

On September 25, 2020, after consulting with Mr. Lance, Messrs. de Crescenzo and Eliasson again met with Mr. Wichmann. During this meeting, Mr. Wichmann reported that UnitedHealth Group continued to evaluate the merits of exploring a potential acquisition of Change and the benefits that such a transaction could provide. The discussions did not address valuation or any other terms of a potential transaction, but Mr. Wichmann suggested that UnitedHealth Group may make a preliminary, non-binding proposal in October after further considering the matter with the UnitedHealth Group Board.

Following the meeting on September 25, 2020, Mr. de Crescenzo notified Mr. Lance of such meeting and they discussed, among other things, the possibility of engaging outside advisors to assist Change in preparing for the possibility of receiving a proposal from UnitedHealth Group. Messrs. Lance and de Crescenzo also briefed Mr. Simpkins on such meeting. Members of the Change management team then conferred with Simpson Thacher & Bartlett LLP (“Simpson Thacher”), which had advised Change on several matters in recent years (including Change’s IPO and Change’s acquisition of eRx Network), regarding the matters discussed in the abovementioned meetings, and engaged Simpson Thacher as outside counsel to assist it in connection with evaluating a potential transaction in the event UnitedHealth Group were to make a proposal. At or around this same time, as was discussed with Mr. Lance, members of management also contacted Goldman Sachs & Co. LLC (“Goldman Sachs”) regarding the possibility of Change engaging Goldman Sachs to assist in the evaluation of any potential proposal from UnitedHealth Group. Similar to Simpson Thacher, Goldman Sachs had advised Change on several matters in recent years. Pursuant to such outreach, members of Change management arranged

 

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for Goldman Sachs to present to the Board, at the Board’s regularly-scheduled meeting on October 22, 2020, regarding investor perspectives on Change, portfolio optimization alternatives and preliminary valuation considerations. In connection with such presentation, Change and Goldman Sachs executed a customary letter agreement pursuant to which Change will, under certain circumstances, indemnify Goldman Sachs for certain liabilities arising from Goldman Sachs’ presentation to the Board and other work related to the potential transaction.

On October 16, 2020, Messrs. de Crescenzo and Wichmann held a telephonic meeting, during which they agreed that they, along with Messrs. Lance and Eliasson, would hold an in-person meeting on October 19, 2020.

On October 19, 2020, Messrs. Lance, de Crescenzo, Eliasson and Wichmann held an in-person meeting. At this meeting, Mr. Wichmann indicated that the UnitedHealth Group Board had considered and discussed a potential acquisition of Change in depth and was fully supportive of, and committed to, pursuing such a transaction. In addition, in connection with such meeting, Mr. Wichmann provided the representatives of Change with a written, non-binding indication of interest (the “October 19 IOI”) proposing an acquisition of 100% of Change’s outstanding equity in exchange for $23.00 per share in cash. Mr. Wichmann confirmed that this offer had the full support of the UnitedHealth Group Board. Mr. Lance indicated to Mr. Wichmann that, although the Board believed that Change’s existing strategic plan was delivering value for the Change stockholders and that it was not exploring a potential sale, he would provide the Board with the October 19 IOI and discuss this meeting and the non-binding proposal with the Board at the Board’s upcoming regularly-scheduled meeting. The closing price per share of Change Common Stock on October 16, 2020, the last full trading day before Change’s receipt of the October 19 IOI, was $15.09.

On October 22, 2020, during a portion of the Board’s regularly-scheduled meeting, Mr. Lance provided the Board with a description of the discussions with UnitedHealth Group and summarized the terms of the October 19 IOI. Members of Change management and representatives of Goldman Sachs and Simpson Thacher were present for this portion of the meeting. Mr. de Crescenzo recapped various opportunities and risks inherent in Change’s current long range plan (the “LRP”), which was discussed with the Board in depth at an earlier portion of the meeting together with the key assumptions underlying the LRP. Representatives of Simpson Thacher reviewed with the Board, among other things, the Board’s fiduciary duties and responsibilities in connection with evaluating the October 19 IOI and any potential transaction with UnitedHealth Group. Representatives of Goldman Sachs then provided and discussed with the Board, among other things, (i) an analysis of Change’s recent stock price performance; (ii) a summary of certain financial projections based on the LRP prepared by the Change management team for Goldman Sachs; (iii) a preliminary valuation analysis of Change; (iv) an analysis of UnitedHealth Group’s offer contained in the October 19 IOI; and (v) an overview of considerations for evaluating whether to further engage with UnitedHealth Group, including other strategic alternatives or continuing as an independent public company, and the potential advantages and disadvantages of the various approaches discussed. Following these discussions, the Board determined to reflect on and consider the matters presented at this meeting, as well as obtain additional information from its advisors (with the Board requesting that Goldman Sachs present to the Board further in relation to Change’s valuation and projections), and reconvene for additional discussion before providing any substantive response to UnitedHealth Group.

On October 28, 2020, the Board held a telephonic meeting, at which members of Change management and representatives of Goldman Sachs and Simpson Thacher were present. As requested by the Board at its October 22, 2020 meeting, representatives of Goldman Sachs provided (i) an update on Goldman Sachs’ preliminary valuation analysis and financial projections, (ii) an analysis of historical acquisitions by UnitedHealth Group and (iii) an update on Goldman Sachs’ overview of considerations for further engagement by Change with UnitedHealth Group. Representatives of Simpson Thacher discussed, among other things, the competitive landscape and the regulatory review process that would arise in connection with a possible acquisition of Change by UnitedHealth Group. The Board then discussed possible next steps and the advantages and disadvantages of various potential responses to the October 19 IOI. Following this discussion, the Board met in executive session with representatives of Simpson Thacher to further discuss the matters presented. In

 

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addition, the Board discussed whether to formally engage Goldman Sachs as Change’s financial advisor in connection with the proposed transaction and reviewed the relationship disclosure letter provided by Goldman Sachs to the Board regarding potential conflicts of interest. Following such discussion, the Board determined to direct Messrs. Lance and Eliasson to negotiate an engagement letter with Goldman Sachs, which they did over the coming weeks. Following further discussion regarding the October 19 IOI, the Board determined that it was not prepared to engage with UnitedHealth Group at the valuation set forth in such letter and that UnitedHealth Group would have to significantly improve its offer in order for the Board to reconsider. The Board also discussed the importance of transaction certainty in the event UnitedHealth Group were to continue to seek a potential transaction. The Board then determined that Mr. Lance, together with Bansi Nagji, another independent member of the Board, should inform UnitedHealth Group of the Board’s determination and lead any further discussions that may take place with Mr. Wichmann regarding UnitedHealth Group’s interest in exploring an acquisition of Change.

On October 31, 2020, Messrs. Lance and Nagji held a telephonic meeting with Mr. Wichmann to inform him of the Board’s decision. Following a brief discussion, Mr. Wichmann thanked Messrs. Lance and Nagji for the Board’s consideration, reemphasized the strategic benefits that he and the UnitedHealth Group Board believed would result from a combination of the businesses of Change and UnitedHealth Group, and stated that UnitedHealth Group would further consider the Board’s response. Later on October 31, 2020, Messrs. Lance and Nagji reported to the rest of the Board on the meeting with Mr. Wichmann, including their impression that UnitedHealth Group appeared committed to pursuing a potential transaction further and that they believed Mr. Wichmann would seek to have further conversations on these matters.

On November 7, 2020, following outreach from Mr. Wichmann, Messrs. Lance and Nagji held a telephonic meeting with Mr. Wichmann. During the course of this meeting, Mr. Wichmann reaffirmed UnitedHealth Group’s interest in exploring the proposed transaction and his and the UnitedHealth Group Board’s continued belief that such a transaction would have a positive impact both for UnitedHealth Group and on improving the delivery of healthcare. Mr. Wichmann then delivered a revised non-binding offer from UnitedHealth Group, which increased the proposed per share consideration from $23.00 per share in cash to $25.30 per share in cash. Mr. Wichmann noted that the revised offer represented a significant premium to Change’s current market price (which had closed at $15.50 on November 6, 2020, the last trading day before such meeting). Mr. Wichmann confirmed that this offer had the full support of the UnitedHealth Group Board, and he also expressed UnitedHealth Group’s desire to immediately begin due diligence and to seek to enter into a definitive transaction agreement with Change by the end of December. Messrs. Lance and Nagji informed Mr. Wichmann that they would present UnitedHealth Group’s revised offer to the Board for discussion, along with the timeline proposed by Mr. Wichmann. In addition, Messrs. Lance and Nagji reiterated that, if Change were to further engage with UnitedHealth Group regarding a potential transaction, the parties would need to address transaction certainty and that, as a threshold matter, Change would expect the parties’ respective antitrust counsels to engage early in the process to assess any potential antitrust risks that an acquisition of Change by UnitedHealth Group could present.

On November 9, 2020, the Board held a telephonic meeting, at which members of Change management and representatives of Goldman Sachs and Simpson Thacher were present. Mr. Lance reported on the November 7 meeting, a summary of which had previously been provided to the Board. Representatives of Goldman Sachs then provided an analysis of UnitedHealth Group’s updated offer of $25.30 per share in cash, including the implied enterprise value, implied equity consideration and implied premium of such offer price to Change’s closing price per share on November 9, 2020 (which was $16.58) as well as across other measuring periods. Representatives of Goldman Sachs also presented and discussed with the Board: (i) a summary of recent developments since the October 28 Board meeting, including in relation to the recent public disclosure of Change’s financial results for the fiscal quarter ended September 30, 2020; and (ii) an overview of other potential parties that could be interested in pursuing an acquisition of Change and various strategic considerations that the Board should take into account in determining whether or not to contact any such other parties. The Board, together with the Change management team and representatives from Simpson Thacher and Goldman Sachs, then discussed the matters presented as well as the importance of certainty of closing in the event Change were to

 

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pursue a transaction with UnitedHealth Group. Following this discussion, the Board determined that, in light of the $25.30 per share offer, Change would not be prepared to further engage with UnitedHealth Group unless UnitedHealth Group both increased its offer price and more specifically addressed how it would be prepared to provide Change with a high degree of transaction certainty, which should include facilitating an outside counsel discussion regarding the parties’ current analysis of the potential antitrust review process in connection with the proposed transaction. The Board further determined that Messrs. de Crescenzo and Eliasson should offer to meet with Mr. Wichmann and Richard J. Mattera, Chief Development Officer of UnitedHealth Group, to present key highlights of the LRP and why the Board believed that the LRP supported the Board’s determination that UnitedHealth Group’s $25.30 per share offer was insufficient.

On November 12, 2020, Messrs. Lance and Nagji held a telephonic meeting with Messrs. Wichmann and Mattera to inform them of the Board’s decision, including the need for UnitedHealth Group to further increase its per share offer price and for there to be a discussion between the parties’ representatives on the potential antitrust process. Messrs. Lance and Nagji reported that, although the Board was open to evaluating a transaction in more depth, it needed to address these threshold matters before proceeding further or otherwise providing UnitedHealth Group with due diligence information, and offered the opportunity for Messrs. Wichmann and Mattera to meet with Messrs. de Crescenzo and Eliasson to review the LRP. Mr. Wichmann agreed that a meeting with Messrs. de Crescenzo and Eliasson would be welcomed and that representatives of Change and UnitedHealth Group should discuss the potential antitrust review process. While reiterating that the $25.30 per share offer was already at a significant premium to Change’s current market price per share (which closed at $15.90 on November 12, 2020), Mr. Wichmann noted that, following such meetings, he would further consider with the UnitedHealth Group Board the per share offer price.

Following such meeting, Change sent UnitedHealth Group a draft non-disclosure agreement (the “NDA”) to facilitate the sharing of information between the parties. The parties executed the NDA, which contained an employee “non-solicit” but not a “standstill”, effective as of November 14, 2020. In addition, on November 13, 2020, Simpson Thacher sent Sullivan & Cromwell LLP (“Sullivan & Cromwell”), outside corporate counsel to UnitedHealth Group, for further distribution to Hogan Lovells US LLP (“Hogan Lovells”), outside antitrust counsel to UnitedHealth Group, drafts of a clean team confidentiality agreement (the “CTA”) and joint defense and confidentiality agreement (the “JDA”). The CTA and the JDA were executed effective as of November 20, 2020. Also during the week of November 16, 2020, at the Board’s direction, Change engaged Cleary Gottlieb Steen & Hamilton LLP (“Cleary Gottlieb”) to provide additional antitrust advice to Change and the Board in connection with the possible transaction with UnitedHealth Group.

From November 15, 2020 through November 19, 2020, representatives of Change and UnitedHealth Group evaluated and discussed the potential antitrust review process. On November 15, 2020, representatives of Simpson Thacher and Sullivan & Cromwell held a telephonic meeting to discuss the level of efforts to which UnitedHealth Group would be prepared to commit in order to obtain antitrust approval of the proposed transaction, and on November 16, 2020, Sullivan & Cromwell sent Simpson Thacher a draft term sheet outlining UnitedHealth Group’s proposal regarding the scope of such efforts (such term sheet, the “Antitrust Efforts Proposal”), which representatives of Simpson Thacher and Sullivan & Cromwell further discussed through November 29, 2020. Also on November 16, 2020, Messrs. de Crescenzo and Eliasson held a meeting with Messrs. Wichmann, Rex and Mattera to discuss key elements of the LRP and answer related questions about Change’s business and prospects.

Following the various meetings earlier in the week, on November 20, 2020, Messrs. Wichmann, Mattera, Lance and Nagji held a telephonic meeting. Mr. Wichmann reported that UnitedHealth Group was prepared to further increase its proposed purchase price per share to $25.75 in cash. He noted that this was UnitedHealth Group’s best and final proposal and that the proposal was conditioned on certain funds affiliated with Blackstone agreeing to support the transaction. He further noted that UnitedHealth Group would send a revised Antitrust Efforts Proposal that would reflect a number of modifications requested by Change during the course of the week in an effort to provide greater transaction certainty to Change. Following such telephonic meeting, UnitedHealth

 

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Group sent Change an updated non-binding indication of interest letter (the “November 20 IOI”) proposing an acquisition of 100% of Change’s outstanding equity in exchange for $25.75 per share in cash. The November 20 IOI also contained a revised draft of the Antitrust Efforts Proposal. In the November 20 IOI, UnitedHealth Group requested that Change agree to a 45-day exclusivity period with respect to the negotiation and execution of a definitive acquisition agreement.

On November 23, 2020, the Board held a telephonic meeting, at which members of Change management and representatives of Goldman Sachs, Simpson Thacher and Cleary Gottlieb were present. Mr. Lance reported on the November 20 telephonic meeting with Messrs. Wichmann and Mattera, including that Mr. Wichmann stated that the $25.75 proposed price per share was UnitedHealth Group’s best and final offer. Representatives of Goldman Sachs provided (i) an analysis of UnitedHealth Group’s updated offer of $25.75 per share in cash, including the implied equity consideration, implied enterprise value and implied premium to Change Common Stock’s closing price per share on November 20, 2020 and other measuring periods, and (ii) an update on Goldman Sachs’ overview of considerations for further engagement by Change with UnitedHealth Group. During this discussion, representatives of Goldman Sachs noted that the updated offer constituted a strong valuation of Change. Representatives of Simpson Thacher and Cleary Gottlieb provided an overview of the Antitrust Efforts Proposal sent with the November 20 IOI and an update on the antitrust analysis being performed by the parties’ respective counsels. The Board discussed the matters presented, including whether to engage further with UnitedHealth Group and the advantages and disadvantages of contacting third parties to explore such third parties’ ability and willingness to make a proposal superior to that contained in the November 20 IOI. At the conclusion of such meeting, the Board determined that it would not be prepared to further explore a potential transaction with UnitedHealth Group unless UnitedHealth Group further strengthened its commitment to obtaining antitrust approval of the proposed transaction. In that regard, Mr. Lance, Mr. Nagji, Mr. Simpkins and Philip M. Pead, an independent member of the Board (like Messrs. Lance, Nagji and Simpkins), agreed to serve as an informal ad hoc committee (the “Ad Hoc Committee”) to work with the Change management team and advisors to revise the Antitrust Efforts Proposal in a manner that the Board viewed as more favorable to Change. The Board did not formally charter the Ad Hoc Committee or delegate decision-making authority to the Ad Hoc Committee, but rather formed the Ad Hoc Committee to facilitate Change’s revisions to the Antitrust Efforts Proposal on an expeditious basis. The Board also weighed the advantages and disadvantages of reaching out to potential third party buyers or merger partners, with input from Goldman Sachs and Simpson Thacher, and determined not to reach out to other potential third parties at such time due to, among other things, the Board’s belief, based on its experience and knowledge of the industry and advice from its outside advisors, that it was unlikely that a third party other than UnitedHealth Group would be willing and able to provide an offer better than that contained in the November 20 IOI. However, the Board determined to revisit engaging with third parties (and the associated advantages and disadvantages of doing so) regarding their interest in pursuing a potential transaction if the transaction process with UnitedHealth Group continued to progress.

Later on November 23, 2020 and then again on November 24, 2020, the Ad Hoc Committee met with the Change management team and advisors to discuss and create various improvements for Change with respect to the Antitrust Efforts Proposal, and to consider potential proposals by Change management to develop the parties’ existing commercial relationship.

On November 25, 2020, Messrs. Lance and Nagji held a telephonic meeting with Messrs. Wichmann and Mattera. Messrs. Lance and Nagji reported that the Board appreciated UnitedHealth Group’s proposal contained in the November 20 IOI, but that the Board was unanimous in its determination that the Antitrust Efforts Proposal in the November 20 IOI did not provide Change with what the Board viewed as the appropriate level of transaction certainty. Messrs. Lance and Nagji then discussed the areas in which Change believed the Antitrust Efforts Proposal warranted improvement and noted that, if the parties were able to reach agreement on the key terms of a revised Antitrust Efforts Proposal, the Board would be prepared to move forward with further engagement, including by authorizing Change to provide due diligence information to UnitedHealth Group. Following this meeting, also on November 25, 2020, Simpson Thacher sent Sullivan & Cromwell a revised draft of the Antitrust Efforts Proposal, which reflected the proposals referred to in the immediately preceding paragraph.

 

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On November 27, 2020, Messrs. Lance and Nagji held a telephonic meeting with Messrs. Wichmann and Mattera to discuss UnitedHealth Group’s views on Change’s November 25 draft of the Antitrust Efforts Proposal. Shortly thereafter, Sullivan & Cromwell sent Simpson Thacher a revised draft of the Antitrust Efforts Proposal.

On November 28 and 29, 2020, representatives of Sullivan & Cromwell and Simpson Thacher held various telephonic meetings regarding the Antitrust Efforts Proposal. In addition, on November 29, 2020, Messrs. Lance and Nagji held a telephonic meeting with Mr. Wichmann to discuss the Antitrust Efforts Proposal. On November 30, 2020, UnitedHealth Group sent Change an updated Antitrust Efforts Proposal.

Following receipt of the updated Antitrust Efforts Proposal, on November 30, 2020, the Board held a telephonic meeting, at which members of Change management and representatives of Goldman Sachs, Simpson Thacher and Cleary Gottlieb were present. Mr. Lance reported on the recent telephonic meetings with Mr. Wichmann since the last meeting of the Board. Representatives of Simpson Thacher and Cleary Gottlieb provided an overview of the updated Antitrust Efforts Proposal, including the various changes made to the proposal set forth in the November 20 IOI that were designed to enhance transaction certainty for Change and its stockholders. The Board discussed the matters presented, including whether to engage further with UnitedHealth Group on the basis of the proposed price per share of $25.75 in cash and the key terms set forth in the updated Antitrust Efforts Proposal. The Board also again, with input from Goldman Sachs and Simpson Thacher, discussed advantages and disadvantages of contacting third party buyers or merger partners to explore whether such third parties would have the ability and willingness to make a proposal superior to UnitedHealth Group’s current proposal. At the conclusion of such meeting, the Board determined that it was prepared to further explore a potential transaction with UnitedHealth Group on the basis discussed. In that regard, the Board authorized the management team and advisors to provide a reasonable amount of due diligence information to UnitedHealth Group and to begin negotiating the potential definitive agreements. The Board also, after weighing the advantages and disadvantages of reaching out to potential third party buyers or merger partners, reaffirmed its determination not to reach out to other potential third party buyers or merger partners at such time due to, among other things, the Board’s continued belief, based on its experience and knowledge of the industry and advice from its outside advisors, that it remained unlikely that a third party buyer other than UnitedHealth Group would be willing and have the ability to provide a superior offer.

Following the meeting of the Board on November 30, 2020, Messrs. Lance and Nagji contacted Mr. Wichmann to inform him of the Board’s decision. Thereafter, Mr. Wichmann sent Change an updated written, non-binding indication of interest (the “November 30 IOI”) on behalf of UnitedHealth Group proposing an acquisition of 100% of Change’s outstanding equity in exchange for $25.75 per share in cash and containing the final Antitrust Efforts Proposal as discussed among Simpson Thacher, Cleary Gottlieb and Sullivan & Cromwell. In the November 30 IOI, UnitedHealth Group again requested that Change agree to a 45-day exclusivity period with respect to the negotiation and execution of a definitive acquisition agreement, but Change declined such request and did not agree to exclusivity at any point in the transaction process.

On December 1, 2020, Change began to provide representatives of UnitedHealth Group and its outside legal counsel and other advisors with access to an online data room. From such date through January 5, 2021 (the date on which the parties executed the Merger Agreement), Change continued to populate the data room with materials in response to due diligence requests from UnitedHealth Group and its advisors. In addition, during the weeks of November 30, 2020, December 7, 2020 and December 14, 2020, members of Change management participated in a number of due diligence calls with representatives of UnitedHealth Group and its outside legal counsel and other advisors (collectively, the “Due Diligence Calls”). Also, at about the same time, Messrs. Lance and Nagji agreed with Mr. Wichmann that they would hold weekly telephonic meetings to update each other on the progress of discussions and address any key issues that arose.

On December 5, 2020, Sullivan & Cromwell sent Simpson Thacher a draft of the Merger Agreement and a draft of a support agreement (the “Support Agreement”) between UnitedHealth Group and certain investment

 

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funds affiliated with Blackstone (such funds, the “Support Agreement Parties”), to be entered into concurrently with the entry into the Merger Agreement. The draft of the Support Agreement provided for, among other things, a commitment and proxy by the Support Agreement Parties to vote all of the shares that they control (approximately 20% of the outstanding shares in Change) in favor of the Merger. Simpson Thacher provided the draft to Blackstone’s counsel in connection with the proposed transaction.

On December 10, 2020, following consultation with and sign-off from Messrs. Lance and Nagji, Change executed an engagement letter with Goldman Sachs, on terms and conditions consistent with the Board’s instructions during its October 28 meeting and subsequent discussions between members of management and Messrs. Lance and Nagji.

On December 11, 2020, representatives of Sullivan & Cromwell and Simpson Thacher held a telephonic meeting to discuss Sullivan & Cromwell’s December 5 draft of the Merger Agreement.

Later that day, the Board held a telephonic meeting, at which members of Change management and representatives of Goldman Sachs, Simpson Thacher and Cleary Gottlieb were present. Representatives of Goldman Sachs provided an update on the status of the due diligence being conducted by UnitedHealth Group and its advisors. Messrs. de Crescenzo and Eliasson then provided an overview of the Due Diligence Calls that had occurred to date and noted that they had been productive. Representatives of Simpson Thacher then provided a summary of the terms contained in Sullivan & Cromwell’s December 5 draft of the Merger Agreement (including those related to tax matters and the treatment of employee equity awards) and related considerations. Representatives of Simpson Thacher also summarized the proposed Support Agreement. The Board, with input from representatives of Goldman Sachs and Simpson Thacher, next discussed advantages and disadvantages of reaching out to other potential buyers or merger partners, including potential third parties identified by Goldman Sachs, and related considerations. After discussion of such advantages and disadvantages, the Board reaffirmed its determination not to reach out to other potential third party buyers or merger partners at such time due to, among other things, the Board’s continued belief, based on its experience and knowledge of the industry and advice from its outside advisors, that it remained unlikely that a third party other than UnitedHealth Group would be willing and be able to provide a superior offer, and the potential risks (such as leak risks) associated with approaching third parties. The Board also noted in this regard that Sullivan & Cromwell’s December 5 draft of the Merger Agreement provided for a set of “deal protections” that would allow Change to respond to unsolicited acquisition proposals from third parties and to terminate the Merger Agreement with UnitedHealth Group in order to enter into an alternative acquisition agreement with a third party providing for a superior proposal.

Following such discussion, the Board met in executive session, without Change management present. Mr. Lance noted that, during a recent update call he had with Messrs. Wichmann and Rex, Mr. Wichmann expressed interest in speaking with Mr. de Crescenzo about a potential post-closing employment role for Mr. de Crescenzo at UnitedHealth Group. Mr. Lance reported that he told Mr. Wichmann that UnitedHealth Group should not discuss this topic with Mr. de Crescenzo or other members of Change management until the Board provided its consent for UnitedHealth Group to do so. The Board then discussed the topic and determined that, based on the progress that the parties had made in negotiations on key transaction terms thus far (principally, price and provisions related to transaction certainty), the Board was prepared to provide its consent to UnitedHealth Group to reach out to Mr. de Crescenzo regarding potential post-Closing employment with UnitedHealth Group, provided that the Board would receive regular updates regarding the material terms of any such proposed arrangements with Mr. de Crescenzo or other members of Change’s senior management team. It was further determined that Mr. Lance would convey this approval to Mr. Wichmann at their next regularly-scheduled call, on December 18, 2020, so long as no negative developments on the progress of the transaction occurred before such meeting.

On December 13, 2020, Simpson Thacher sent Sullivan & Cromwell a revised draft of the Merger Agreement and on December 18, 2020, Simpson Thacher sent Sullivan & Cromwell an initial draft of an

 

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agreement pursuant to which Change and UnitedHealth Group would develop their commercial relationship between each other. During the weeks of December 14 and December 21, representatives of Simpson Thacher and Sullivan & Cromwell continued to negotiate and exchange drafts of the Merger Agreement, including provisions relating to (i) the termination fee payable by Change to UnitedHealth Group under certain circumstances, (ii) the pre-Closing restrictions on Change’s operation of its business, (iii) the treatment of Change employee equity awards in the Merger and (iv) the proposed treatment, in connection with the consummation of the Merger, of certain tax receivable agreements between Change and its subsidiaries, on the one hand, and certain investment funds affiliated with Blackstone (such funds, the “TRA Letter Agreement Parties”), on the other hand (such tax receivable agreements, the “Applicable TRAs”).

On December 18, 2020, Messrs. Lance and Nagji spoke with Messrs. Wichmann and Mattera as part of their regular update calls during the month of December. During this call, Messrs. Lance and Nagji informed Mr. Wichmann of the Board’s determination at this stage to permit discussions between Mr. Wichmann and Mr. de Crescenzo regarding potential post-Closing employment with UnitedHealth Group, should Mr. Wichmann want to have such discussions.

On December 22, 2020, Mr. de Crescenzo received a proposed employment agreement from UnitedHealth Group offering him employment with UnitedHealth Group following the Closing. Later that week, Mr. de Crescenzo notified Ms. Cecil of the receipt of such proposal and on December 26, 2020, at Ms. Cecil’s request, a representative of Simpson Thacher outlined in writing for Mr. de Crescenzo (copying Ms. Cecil, Mr. Lance and Mr. Nagji) guidelines for negotiating his employment agreement with UnitedHealth Group in parallel with UnitedHealth Group’s and Change’s negotiations concerning the potential transaction, which guidelines included that Mr. de Crescenzo must (i) keep the Board and representatives of Simpson Thacher apprised of any material developments and communications related to negotiations between himself and UnitedHealth Group regarding post-Closing employment and (ii) obtain approval from the Board prior to entering into any legally-binding agreement with UnitedHealth Group with respect thereto.

Between December 27, 2020 and January 4, 2021, Mr. de Crescenzo, represented by his counsel, and UnitedHealth Group engaged in negotiations with respect to his employment agreement. In addition, on December 29, 2020, UnitedHealth Group provided Mr. de Crescenzo with draft employment agreements for certain other members of Change’s executive leadership team, and between December 30, 2020 and January 4, 2021, counsel for those members of the executive leadership team engaged in negotiations with UnitedHealth Group with respect to the employment agreements. Representatives of Simpson Thacher participated in these discussions and periodically updated Mr. Lance throughout this period of time.

On December 28, 2020, Sullivan & Cromwell sent Simpson Thacher a draft of a letter agreement (the “TRA Letter Agreement”) that UnitedHealth Group requested that Change enter into with the TRA Letter Agreement Parties concerning the Applicable TRAs. UnitedHealth Group requested that Change enter into the TRA Letter Agreement concurrently with the entry into the Merger Agreement. The TRA Letter Agreement clarified the calculation methodology of early termination payments, as described under the already-existing terms of each Applicable TRA, that would be owed to the TRA Letter Agreement Parties if UnitedHealth Group, acting through Change as the Surviving Corporation, made an election following the Closing to terminate each Applicable TRA prior to its stated expiration date.

Also during this time, representatives of Sullivan & Cromwell and Simpson Thacher continued to negotiate the terms of the Merger Agreement and the ancillary agreements. On December 29, 2020, Sullivan & Cromwell sent Simpson Thacher a revised draft of the Merger Agreement providing for, among other things, a termination fee equal to approximately 3.50% of the equity value of the transaction. Later that day, Ropes & Gray LLP (“Ropes & Gray”), counsel to Blackstone, and Sullivan & Cromwell also exchanged drafts of the Support Agreement.

 

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On December 30, 2020, the Board held a telephonic meeting, at which members of Change management and representatives of Goldman Sachs, Simpson Thacher and Cleary Gottlieb were present. The Change management team and representatives of Goldman Sachs provided an update on the status of the due diligence being conducted by UnitedHealth Group and its advisors, noting that such diligence was substantially complete. Representatives of Simpson Thacher then discussed the status of various legal matters, including (i) a summary of the key terms of Mr. de Crescenzo’s proposed employment agreement and a discussion of UnitedHealth Group’s desire to reach out to certain other members of Change management regarding potential post-Closing employment arrangements, (ii) key remaining open items in the Merger Agreement (including those related to the treatment of Change employee equity awards in the Merger, the pre-Closing restrictions on Change’s operation of its business, the finalization of the antitrust efforts covenants and the termination fee payable by Change to UnitedHealth Group under certain circumstances), (iii) summaries and status updates regarding the ancillary agreements proposed to be entered into in connection with the entry into the Merger Agreement, and (iv) an update on the further antitrust analysis being performed by the parties’ respective counsels and other advisors. Following discussion, the Board concluded that Change’s management team and financial and legal advisors should continue to seek to finalize mutually acceptable transaction terms for presentation to and consideration by the Board.

During the period from December 30, 2020 through January 4, 2021, (i) representatives of Sullivan & Cromwell and Simpson Thacher continued to negotiate the terms of, and exchange drafts of, the Merger Agreement and the ancillary agreements and (ii) representatives of Sullivan & Cromwell and Ropes & Gray continued to negotiate the terms of, and exchange drafts of, the Support Agreement and the TRA Letter Agreement.

On January 4, 2021, the Board held a telephonic meeting, at which members of Change management and representatives of Goldman Sachs, Simpson Thacher and Cleary Gottlieb were present. Representatives of Simpson Thacher reviewed with the members of the Board their fiduciary duties under applicable law in connection with the proposed transaction. Representatives of Simpson Thacher also (i) provided an overview of the Merger Agreement and the other transaction documents, (ii) confirmed there were no further substantive updates to the antitrust analysis performed by the parties’ respective counsels and other advisors and (iii) provided a summary of the key terms of the proposed Change management employment agreements with UnitedHealth Group, including that of Mr. de Crescenzo. Representatives of Goldman Sachs reviewed with the Board Goldman Sachs’ financial analysis of the proposed transaction. Representatives of Simpson Thacher then reported that, shortly before the Board meeting, Mr. Wichmann had notified Mr. de Crescenzo that one of UnitedHealth Group’s subsidiaries was subject to an investigation by the U.S. Department of Justice and that a public announcement with respect to such investigation was expected shortly. Mr. Wichmann further provided that this information was being provided as a courtesy and that UnitedHealth Group did not believe the investigation was material to UnitedHealth Group or would be expected to have any impact on the potential transaction. Following discussion, the Board instructed Simpson Thacher and Cleary Gottlieb to seek additional information regarding the matter underlying the investigation and determined that the Board would reconvene to consider such additional information before it decided whether to approve the proposed transaction.

On January 5, 2021, representatives of Simpson Thacher and Cleary Gottlieb discussed with representatives of UnitedHealth Group, including its outside counsel, the matter underlying the investigation. The matter discussed by the parties on January 4 and 5, 2021 is the matter that led to the announcement by the U.S. Department of Justice on January 7, 2021 that Surgical Care Affiliates (a subsidiary of UnitedHealth Group) was being indicted for alleged U.S. labor-market collusion with respect to conduct prior to UnitedHealth Group’s acquisition of Surgical Care Affiliates in 2017.

On the evening of January 5, 2021, the Board reconvened for a telephonic meeting. Members of Change management and representatives of Goldman Sachs, Simpson Thacher and Cleary Gottlieb were present. Representatives of Simpson Thacher and Cleary Gottlieb reported to the Board on their discussions with representatives of UnitedHealth Group regarding the matter underlying the pending U.S. Department of Justice investigation into conduct by Surgical Care Affiliates. Representatives of Goldman Sachs then reviewed with the Board Goldman Sachs’ financial analysis of the proposed transaction, as of January 5, 2021, and delivered to the Board Goldman Sachs’ oral opinion, which was subsequently confirmed by delivery of a written opinion of

 

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Goldman Sachs dated January 5, 2021, to the effect that, as of that date, the $25.75 in cash per share to be paid to the holders (other than UnitedHealth Group and its affiliates) of shares of Change Common Stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. At the conclusion of the meeting, the Board met in executive session, during which Mr. Simpkins noted, as previously reported to the Board, that neither of the Support Agreement Parties had a need to sell its shares in the near-term, that their objective had been and continued to be for Change to pursue whatever strategy the Board believed would maximize Change’s value for all of Change’s stockholders, and that each believed that the proposed transaction would, in fact, maximize Change’s value for all of Change’s stockholders. Representatives of Simpson Thacher also reviewed with the Board the relationship between Simpson Thacher and Blackstone and its affiliates.

Following the foregoing discussions, at its January 5, 2021 meeting, the Board unanimously approved and declared advisable the Merger Agreement and determined that the Merger is advisable and fair to, and in the best interests of, Change and its stockholders, and further resolved to submit the Merger Agreement for adoption by Change’s stockholders at a meeting of Change’s stockholders and recommended that Change’s stockholders adopt the Merger Agreement at such meeting.

Following such Board meeting, on the evening of January 5, 2021, Change and UnitedHealth Group executed the Merger Agreement and the relevant parties executed the other documentation related to the proposed transaction. In addition, concurrently with the execution of the Merger Agreement, the following members of Change’s executive leadership team entered into new employment agreements with UnitedHealth Group, with each agreement contingent and effective upon the closing of the Merger: Mr. de Crescenzo; Kris Joshi, Executive Vice President and President, Network Solutions; Steven Martin, Executive Vice President of Enterprise Technology; August Calhoun, Executive Vice President and President, Sales and Operations; Thomas Laur, Executive Vice President and President, Technology Enabled Solutions; and W. Thomas McEnery, Executive Vice President and Chief Marketing Officer. The material terms and conditions of these employment agreements are described under “Interests of Change’s Executive Officers and Directors in the Merger”.

On the morning of January 6, 2021, prior to the start of the trading day, Change and UnitedHealth Group issued a joint press release announcing the proposed transaction.

Recommendation of the Board and Reasons for the Merger

The Board unanimously recommends that you vote “FOR” the Merger Proposal.

At a meeting of the Board held on January 5, 2021, the Board, acting with the advice of its outside legal counsel and financial advisors, unanimously (i) approved and declared advisable the Merger Agreement and the other transaction agreements and the consummation of the Merger and the other transactions contemplated thereby, (ii) determined that the terms of the Merger Agreement and the other transaction agreements are advisable and fair to, and in the best interests of, Change and its stockholders, (iii) resolved that the adoption of the Merger Agreement be submitted to the Change stockholders at the Special Meeting and (iv) recommended that the Change stockholders vote to adopt the Merger Agreement.

When you consider the Board’s recommendation, you should be aware that Change’s directors and executive officers may have interests in the Merger that may be different from, or in addition to, the interests of Change stockholders generally. These interests are described in the section entitled “The Merger Proposal (Proposal 1)—Interests of Change’s Executive Officers and Directors in the Merger.”

Factors the Board Considered Supporting Approval of the Merger.

In the course of reaching its decision to recommend that you vote “FOR” the proposal to adopt the Merger Agreement, the Board consulted with Change’s senior management and its financial and legal advisors, reviewed

 

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a significant amount of information and considered a number of factors that it believed supported its decision, including, among others, the following (not necessarily in order of relative importance):

 

   

Per Share Merger Consideration. The Board considered the $25.75 per share in cash to be paid in relation to (i) the Board’s estimate of the current and future value of Change as an independent entity and (ii) the market prices of Change Common Stock as described in the bullet immediately below.

 

   

Premium. The Board considered that the $25.75 per share in cash represents a premium of approximately:

 

   

41.17% over the $18.24 per share closing trading price of Change Common Stock on January 5, 2021 (the last trading day prior to the public announcement of the proposed transaction);

 

   

36.75% over the $18.83 per share closing price of Change Common Stock on December 22, 2020 (when shares of Change Common Stock closed at their all-time high prior to the January 6, 2021 public announcement of the transaction); and

 

   

98.08% over the $13.00 per share initial public offering price of Change Common Stock.

 

   

Cash consideration. The Board considered the fact that the Per Share Merger Consideration would be paid solely in cash, which enables Change’s stockholders to realize value that has been created at Change while eliminating long-term business and execution risk.

 

   

Strategic alternatives. The Board considered the potential values, benefits, risks and uncertainties facing Change’s stockholders associated with possible strategic alternatives to the proposed transaction, and the timing and likelihood of accomplishing such alternatives. In particular, the Board considered the potential stockholder value based on the LRP that could be expected to be generated from remaining an independent public company, the possibility of being acquired by a buyer other than UnitedHealth Group, and the possibility of disposing of certain business lines of Change, as well as the potential benefits, risks and uncertainties associated with such alternatives. Based on the foregoing, the Board considered that none of these options, on a risk-adjusted basis, was reasonably likely to create value for Change’s stockholders greater than the Per Share Merger Consideration.

 

   

Risks associated with continued independence. While the Board remained supportive of the LRP and optimistic about Change’s prospects on a standalone basis, it also considered the risks associated with Change continuing to operate as a standalone company, including the potential execution risks associated with the LRP, the achievability of meeting financial projections, the potential risk associated with the possibility that, even if the LRP were successfully executed, the market may not reflect such execution in Change’s stock price, and the potential risks posed by changes to laws, regulations and other requirements affecting Change’s business and industry. For an additional discussion of risks facing Change, see “Where You Can Find More Information” beginning on page 119 of this proxy statement.

 

   

Fairness opinion. The Board considered the financial analyses presented by representatives of Goldman Sachs at the Board’s meeting on January 5, 2021, as well as the oral opinion of Goldman Sachs (which was subsequently confirmed in writing by delivery of Goldman Sachs’ written opinion, dated January 5, 2021) to the Board to the effect that, as of that date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Goldman Sachs in preparing its opinion, the $25.75 in cash per share to be paid to the holders of shares of Change Common Stock (other than UnitedHealth Group and its affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. Such fairness opinion and the financial analyses related thereto is more fully described in “The Merger Proposal (Proposal 1)—Opinion of Change’s Financial Advisor” and the full text of the opinion is attached to this proxy statement as Annex B.

 

   

Negotiations with UnitedHealth Group. The Board considered the extensive, arms-length discussions Change and its legal counsel had with UnitedHealth Group, including the negotiations over price and

 

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other key terms that were led by Messrs. Lance and Nagji, each an independent member of the Board. In this regard, the Board considered that UnitedHealth Group increased its proposed offer price per share from $23.00 per share to $25.30 per share, and then again from $25.30 per share to $25.75 per share, and the Board’s belief that the $25.75 per share price represented the highest price per share that UnitedHealth Group was willing to pay.

 

   

Considerations regarding other potential buyers. With the assistance of Goldman Sachs and management, the Board considered on numerous occasions whether potential buyers other than UnitedHealth Group were likely to offer to acquire Change. For a variety of reasons, the Board concluded that it was unlikely that another buyer would do so in the near term, particularly at a per share price greater than $25.75 per share.

 

   

With the assistance of Goldman Sachs, the Board considered that, in recent years, there had been no proactive interest from other potential buyers leading up to Change’s initial public offering in 2019 or following the time that it was publicly known that McKesson was interested in exiting its position in Change Healthcare LLC.

 

   

The Board also considered it unlikely that, were another potential buyer to express interest in acquiring Change, such potential buyer could move as quickly as UnitedHealth Group, as UnitedHealth Group had been considering the potential transaction for many months, and an acquisition of a business as large as Change is complex and time consuming even for buyers with significant M&A experience.

 

   

Potential Synergies. The Board believed that a merger between Change and UnitedHealth Group is likely to generate significant synergy value for UnitedHealth Group, which the Board believed contributed to UnitedHealth Group’s willingness and ability to increase its offer price to $25.75 per share. The Board did not believe that a transaction with another strategic buyer would generate comparable synergy value and, in turn, this also reinforced the Board’s view that another strategic buyer would be unlikely to offer greater than $25.75 per share.

 

   

Transaction size. With the assistance of Goldman Sachs and management, the Board evaluated the overall size of the transaction, and concluded it was unlikely that a private equity firm would be able to complete the transaction because the equity investment required would likely be too large to absorb. This reinforced the Board’s view that a financial buyer would be unlikely to offer greater than $25.75 per share, or move as quickly as UnitedHealth Group due to the time it would take a financial buyer to arrange both equity and debt financing from multiple sources.

 

   

No financing condition. The Board considered that the Merger is not subject to a financing condition or a reverse termination fee of the type commonly used in private equity transactions, and that UnitedHealth Group represented to Change in the Merger Agreement that it will have sufficient financial resources at the Closing to pay the aggregate Per Share Merger Consideration and to consummate the Merger. Related to the foregoing, Change has a right to specifically enforce UnitedHealth Group’s obligations under the Merger Agreement.

 

   

UnitedHealth Group’s capabilities. The Board considered that UnitedHealth Group is a creditworthy entity with substantial assets, and considered UnitedHealth Group’s reputation in the healthcare industry, its financial capacity to complete an acquisition of this size and complexity and its prior track record of completing large and complex acquisitions, which the Board believed supported the conclusion that a transaction with UnitedHealth Group could be successfully completed.

 

   

Board’s independence and comprehensive review process. The Board considered the fact that the Board consists of a majority of independent directors who approved the transaction following extensive discussions with Change’s management team, financial advisers and outside legal counsel, and also took into consideration the financial expertise and prior industry experience held by a number of directors.

 

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Merger Agreement. The Board considered, in consultation with its legal counsel and other advisors, the terms of the Merger Agreement, including:

 

   

the customary nature of the Merger Agreement’s (i) representations, warranties, covenants and agreements, (ii) closing conditions, (iii) termination rights and (iv) other provisions;

 

   

the definition of “Material Adverse Effect” having a number of customary exceptions;

 

   

Change having a customary amount of flexibility to conduct its business in the ordinary course during the pre-Closing period, including the ability to take commercially reasonable actions in response to laws, directives and guidance issued in response to COVID-19;

 

   

Change’s right, subject to certain limitations contained in the Merger Agreement, to respond to unsolicited acquisition proposals from third parties and to terminate the Merger Agreement in order to enter into an alternative acquisition agreement with a third party providing for a superior proposal, provided that Change concurrently pays UnitedHealth Group the required termination fee;

 

   

the Board’s right, subject to certain limitations contained in the Merger Agreement, to change the Board Recommendation in response to a superior proposal or an intervening event, subject to the requirement that Change pays UnitedHealth Group the required termination fee if UnitedHealth Group terminates the Merger Agreement as a result of such change of the Board Recommendation; and

 

   

the Board’s belief that Change’s obligation to pay UnitedHealth Group a termination fee of $300,000,000 in the circumstances described above, and in certain other circumstances described below under “The Merger Agreement—Termination Fee”, is reasonable in the context of comparable transactions, and its further belief that a fee of such size would not be a meaningful deterrent to other potential acquirors making alternative acquisition proposals.

 

   

Antitrust efforts framework. The Board considered, in consultation with its legal counsel and other advisors, the framework that the parties negotiated regarding UnitedHealth Group’s obligation, subject to certain limitations contained in the Merger Agreement, to use its reasonable best efforts to obtain antitrust clearance of the Merger, including by proposing divestitures and behavioral remedies to governmental antitrust entities. In this regard, the Board noted that the parties and their respective legal counsel and other advisors engaged early in the transaction process to assess any potential antitrust issues that an acquisition of Change by UnitedHealth Group could present. As a result of such initial engagement, the parties heavily negotiated the Antitrust Efforts Proposal (the terms of which were ultimately reflected in definitive documentation), which gave the Board confidence that the parties had negotiated an antitrust efforts framework that would enable them to obtain antitrust clearance of the Merger.

 

   

Stockholders’ ability to reject the Merger. The Board considered the fact that the Merger is subject to approval by the holders of a majority of the shares of Change Common Stock, and that stockholders would be able to reject the Merger.

 

   

Appraisal rights. The Board considered the fact that stockholders who do not vote for the adoption of the Merger Agreement and who follow certain prescribed procedures will have the right to dissent from the Merger and demand appraisal of the fair value of their shares under the DGCL.

 

   

Likelihood of consummation. The Board considered the likelihood that the Merger would be completed, in light of, among other things, the conditions to the Merger and the absence of a financing condition, the relative likelihood of obtaining required antitrust approvals (in light of UnitedHealth Group’s obligations to seek to obtain such approvals, described above under the bullet entitled “Antitrust efforts framework”), and the remedies available to Change under the Merger Agreement.

 

   

Blackstone’s involvement and support. The Board considered that the Support Agreement Parties, which collectively are Change’s largest stockholder, have committed to vote for the Merger and

 

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otherwise support the transaction. The Board also considered the comments of Mr. Simpkins at the January 5, 2021 Board meeting to the effect that neither of the Support Agreement Parties had a need to sell its shares in the near-term, that their objective has been and continued to be for Change to pursue whatever strategy the Board believed would maximize Change’s value for all of Change’s stockholders, and that each believed that the proposed transaction would, in fact, maximize Change’s value for all of Change’s stockholders.

Other Factors Considered by the Board.

In the course of reaching its decision, the Board also considered a number of potentially negative factors with respect to the Merger and the other transactions contemplated by the Merger Agreement, including, among others, the following (not necessarily in order of relative importance):

 

   

No participation in future gains. The Board considered the fact that Change will no longer exist as an independent public company and stockholders will forgo any future increase in Change’s value that might result from our earnings or possible growth as an independent company. The Board was optimistic about Change’s prospects on a standalone basis, but concluded that the premium reflected in the Per Share Merger Consideration constituted fair compensation for the loss of the potential stockholder benefits that could reasonably be expected to be realized by the LRP, particularly on a risk-adjusted basis.

 

   

Antitrust and other regulatory risk. The Board considered the risk that antitrust and other regulatory approvals may be delayed, conditioned or denied, and the risk that the applicable governmental entities may seek to impose unfavorable terms or conditions, or otherwise fail to grant, such approvals. In this regard, the Board particularly considered the risk that remedies sought by governmental antitrust entities would constitute a “Burdensome Condition”, in which case UnitedHealth Group would not be required to agree to such remedies (see “The Merger Agreement—Efforts to Complete the Merger—Antitrust Matters”). The Board also considered the fact that UnitedHealth Group will not be required to pay Change an “antitrust termination fee” in the event that the Merger is not completed due to a failure to obtain antitrust clearance.

 

   

Risks associated with announcement and pendency of the merger. The Board considered the risk that the announcement and pendency of the Merger may cause substantial harm to relationships with our employees, customers, vendors or strategic partners or may divert management and employee attention away from the day-to-day operation of our business. The Board also considered our ability to attract and retain key personnel while the proposed transaction is pending and the potential adverse effects on our financial results as a result of that disruption, as well as the possibility of any suit, action or proceeding in respect of the Merger Agreement or the transactions contemplated thereby.

 

   

Risks associated with a failure to consummate the Merger. The Board considered the fact that there can be no assurance that all conditions to the parties’ obligations to consummate the Merger will be satisfied, and as a result there can be no assurance that the Merger will be completed, even if the adoption of the Merger Agreement is approved by Change’s stockholders. The Board considered that, if the Merger is not completed, (i) Change will have incurred significant risk, transaction expenses and opportunity costs, including the possibility of disruption to our operations, diversion of management and employee attention, employee attrition and a potentially negative effect on our business and customer relationships, (ii) depending on the circumstances that caused the Merger not to be completed, the price of Change Common Stock could decline, potentially significantly, and (iii) the market’s perception of Change’s prospects could be adversely affected.

 

   

Restrictions on the operation of Change’s business. The Board considered the restrictions on the conduct of Change’s business prior to the completion of the Merger, including restrictions on realizing certain business opportunities or taking certain actions with respect to Change’s operations we may otherwise take absent the pending Merger. In that regard, the Board considered that such interim period

 

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restrictions likely would prohibit Change from disposing of certain business lines, which potential dispositions the Board had been evaluating concurrently with engaging in negotiations with UnitedHealth Group.

 

   

Potential differing interests of directors and executive officers. The Board considered that, aside from their interests as Change stockholders, Change’s directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of other Change stockholders generally. See “The Merger Proposal (Proposal 1)—Interests of Change’s Executive Officers and Directors in the Merger” beginning on page 58 of this proxy statement. However, the Board considered as a positive factor the fact that members of management who executed employment agreements with UnitedHealth Group concurrently with the execution of the Merger Agreement did not begin negotiating those employment agreements with UnitedHealth Group until after the Board gave its express permission for them to do so.

 

   

Non-solicitation covenants. The Board considered the fact that the Merger Agreement precludes Change from soliciting alternative acquisition proposals and provides UnitedHealth Group with customary “matching” rights prior to Change terminating the Merger Agreement to accept a superior proposal.

 

   

Termination fee. The Board considered the possibility that the $300,000,000 termination fee payable to UnitedHealth Group in certain circumstances might have the effect of discouraging alternative acquisition proposals or reducing the price of such proposals.

 

   

Tax treatment. The Board considered the fact that any gains arising from the receipt of the Per Share Merger Consideration would generally be taxable to Change stockholders that are U.S. holders for U.S. federal income tax purposes.

 

   

Stockholder litigation. The Board considered the impact on Change of potential stockholder litigation in connection with the Merger.

While the Board considered potentially positive and potentially negative factors, including those described above, the Board ultimately concluded that, overall, the potentially positive factors outweighed the potentially negative factors. Accordingly, the Board unanimously determined that the Merger, Merger Agreement and the other transactions contemplated thereby are advisable, fair to and in the best interests of Change and its stockholders.

The foregoing discussion is intended to be illustrative and is not intended to be an exhaustive list of the information and factors considered by the Board in its consideration of the Merger, but includes the material factors considered by the Board in that regard. In view of the number and variety of factors and the amount of information considered, the Board did not find it practicable to, nor did it attempt to, quantify, or otherwise assign specific or relative weights to, the specific factors considered in reaching its determinations and recommendations. In addition, each individual member of the Board applied his or her own personal business judgment to the process and may have given different weight to different factors. Based on the totality of the information presented, the Board collectively reached the unanimous decision to approve and declare advisable, fair to and in the best interests of Change and its stockholders, the Merger, the Merger Agreement and the other transactions contemplated thereby in light of the factors described above and other factors that the members of the Board felt were appropriate.

Portions of this explanation of Change’s reasons for the Merger and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Opinion of Change’s Financial Advisor

Goldman Sachs rendered its opinion to the Board that, as of January 5, 2021 and based upon and subject to the factors and assumptions set forth therein, the $25.75 in cash per share of Change Common Stock to be paid to

 

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the holders (other than UnitedHealth Group and its affiliates) of shares of Change Common Stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated January 5, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. Change’s stockholders are encouraged to read the opinion carefully in its entirety. The following is a summary of Goldman Sachs’ opinion and the methodology that Goldman Sachs used to render its opinion. The summary is qualified in its entirety by reference to the full text of the opinion.

Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of Change Common Stock should vote with respect to the Merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

   

the Merger Agreement;

 

   

the annual report to stockholders and the Annual Report on Form 10-K of Change for the fiscal year ended March 31, 2020;

 

   

Change’s Registration Statement on Form S-1;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Change;

 

   

certain other communications from Change to its stockholders;

 

   

certain publicly available research analyst reports for Change;

 

   

certain internal financial analyses and forecasts for the tax assets of Change prepared by management of Change, as approved for Goldman Sachs’ use by Change, which are referred to as the “Tax Attribute Projections” and are described further below under “Certain Financial Projections”; and

 

   

certain internal financial analyses and forecasts for Change prepared by its management, as approved for Goldman Sachs’ use by Change, which are referred to as the “Projections” and are described further below under “Certain Financial Projections”.

Goldman Sachs also held discussions with members of the senior management of Change regarding their assessment of the past and current business operations, financial condition and future prospects of Change; reviewed the reported price and trading activity for Change Common Stock; compared certain financial and stock market information for Change with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the Healthcare Information Technology and Information Services industries and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering this opinion, Goldman Sachs, with Change’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with Change’s consent that the Projections and the Tax Attribute Projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Change. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Change or any of its subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation

 

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of the Merger will be obtained without any adverse effect on Change or on the expected benefits of the Merger in any way meaningful to its analysis. Goldman Sachs has also assumed that the Merger will be consummated on the terms set forth in the Merger Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion does not address the underlying business decision of Change to engage in the Merger or the relative merits of the Merger as compared to any strategic alternatives that may be available to Change; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, Change or any other alternative transaction. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of the date of the opinion, of the $25.75 in cash per share of Change Common Stock to be paid to holders (other than UnitedHealth Group and its affiliates) of shares of Change Common Stock pursuant to the Merger Agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the Merger Agreement or the Merger or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Merger, including, the fairness of the Merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of Change; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Change, or class of such persons, in connection with the Merger, whether relative to the $25.75 in cash per share of Change Common Stock to be paid to the holders (other than UnitedHealth Group and its affiliates) of shares of Change Common Stock pursuant to the Merger Agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the prices at which the shares of Change Common Stock will trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on Change, UnitedHealth Group or the Merger, or as to the impact of the Merger on the solvency or viability of Change or UnitedHealth Group, or the ability of Change or UnitedHealth Group to pay their respective obligations when they come due. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

Summary of Material Financial Analyses

The following is a summary of the material financial analyses delivered by Goldman Sachs to the Board in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 5, 2021, the last trading day before the announcement of the Merger, and is not necessarily indicative of current market conditions.

Historical Stock Trading Analysis

Goldman Sachs analyzed the consideration to be paid to holders of shares of Change Common Stock pursuant to the Merger Agreement in relation to the closing price per share of Change Common Stock on January 5, 2021, the closing price per share of Change Common Stock on November 20, 2020, which was the date that UnitedHealth Group delivered a revised indication of interest to Change, November 9, 2020, which was the date that the Board met to discuss the UnitedHealth Group revised offer delivered to Change on November 7, 2020, October 16, 2020, which was the last full trading day before UnitedHealth Group delivered its initial indication of interest to Change, the volume weighted average price (VWAP) per share for the 30-day periods

 

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ended January 5, 2021, November 20, 2020, November 9, 2020 and October 16, 2020 and the highest and lowest prices per share of Change Common Stock during the 52-week period ended January 5, 2021.

This analysis indicated that the price per share of Change Common Stock to be paid the holders of Change Common Stock pursuant to the Merger Agreement represented:

 

   

a premium of 41.2% based on the closing price of $18.24 per share on January 5, 2021;

 

   

a premium of 49.8% based on the closing price of $17.19 per share on November 20, 2020;

 

   

a premium of 55.3% based on the closing price of $16.58 per share on November 9, 2020;

 

   

a premium of 70.6% based on the closing price of $15.09 per share on October 16, 2020;

 

   

a premium of 41.0% based on the VWAP for the 30-day period ended January 5, 2021 of $18.26;

 

   

a premium of 64.1% based on the VWAP for the 30-day period ended November 20, 2020 of $15.69;

 

   

a premium of 71.1% based on the VWAP for the 30-day period ended November 9, 2020 of $15.05;

 

   

a premium of 76.8% based on the VWAP for the 30-day period ended October 16, 2020 of $14.57;

 

   

a premium of 36.7% based on the highest price per share of Change Common Stock during the 52-week period ended January 5, 2021 of $18.83; and

 

   

a premium of 275.4% based on the lowest price per share of Change Common Stock during the 52-week period ended January 5, 2021 of $6.86.

Illustrative Discounted Cash Flow Analysis

Using the Projections, Goldman Sachs performed an illustrative discounted cash flow analysis on Change. Using discount rates ranging from 6.75% to 7.75%, reflecting estimates of Change’s weighted average cost of capital, Goldman Sachs discounted to present value as of November 30, 2020 (i) estimates of unlevered free cash flow for Change for the period from fiscal year 2021 (ending March 31, 2021) through fiscal year 2030 (ending March 31, 2030) as reflected in the Projections, (ii) the Tax Attribute Projections and (iii) a range of illustrative terminal values for Change, which were calculated by applying perpetuity growth rates ranging from 1.25% to 2.25% to the terminal year estimate of free cash flow to be generated by Change of $826 million as reflected in the Projections (which analysis implied exit terminal year EBITDA multiples ranging from 8.5x to 12.4x). Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including the company’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. The illustrative range of perpetuity growth rates was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account the Projections and market expectations regarding the long-term growth of Change’s end markets and the long-term real growth of gross domestic product and inflation. Goldman Sachs derived ranges of illustrative enterprise values (EV) (defined as equity value plus net debt) for Change by adding the ranges of present values it derived as described above. Goldman Sachs then subtracted net debt ($4.873 billion), as provided by management of Change, from the range of illustrative EVs it derived for Change to calculate an illustrative range of implied equity values for Change. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted shares of Change, as provided by the management of Change and using the treasury stock method, to derive a range of illustrative present values per share of Change Common Stock ranging from $20.72 to $32.55.

Illustrative Present Value of Future Share Price Analysis

Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of Change Common Stock. For this analysis, Goldman Sachs used the Projections for each of the fiscal

 

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years 2021 to 2024. Goldman Sachs first calculated the implied EV of Change as of December 31 for each of the calendar years 2021 to 2023, by multiplying the one-year forward adjusted earnings before interest, taxes, depreciation and amortization, adjusted to exclude non-recurring items and stock-based compensation (Adjusted EBITDA) as of such date (using the Projections) by an illustrative range of multiples of 9.5x to 11.5x. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical trading data for Change and one year forward EBITDA multiples for Change. To derive illustrative implied equity values per share of Change Common Stock, Goldman Sachs then subtracted the amount of Change’s projected net debt as of December 31, 2021, 2022, and 2023, respectively, as provided by management of Change, from the range of implied EVs. Goldman Sachs then divided these implied equity values by the number of fully diluted shares of Change Common Stock, as provided by management of Change and using the treasury stock method, to determine implied equity values per share of Change Common Stock as of December 31, 2021, 2022, and 2023. Goldman Sachs then discounted these implied equity values per share to November 30, 2020 using a discount rate of 7.5%, reflecting an estimate of Change’s cost of equity. Goldman Sachs derived such discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally.

This analysis resulted in a range of implied present values of $16.84 to $27.35 per share of Change Common Stock.

Selected Precedent Transactions Analysis

Goldman Sachs analyzed certain publicly available information relating to the following selected transactions in the Healthcare Information Technology and Information Services industries since August 2008:

 

Closing Date

  

Acquiror

  

Target

  

EV/LTM

Multiple

August 2008    Apax Partners    The TriZetto Group, Inc.    14.4x
November 2011    Blackstone    Emdeon Inc.    11.2x
June 2012    Veritas Capital    Truven Health Analytics    9.6x
August 2012    Roper Industries, Inc.    Sunquest Information Systems, Inc.    12.6x
November 2014    Cognizant Technology Solutions Corp.    TriZetto Corp.    14.2x
February 2016    Pamplona Capital Management    MedAssets, Inc.    11.5x
April 2016    IBM    Truven Health Analytics    17.0x
June 2016    Veritas Capital    Verisk Analytics, Inc. Healthcare Division    10.1x
October 2016    Quintiles    IMS Health, Inc.    14.4x
September 2017    Internet Brands    WebMD Health Corp.    12.3x
November 2017    Optum    The Advisory Board Company    14.1x
August 2018    Verscend Technologies, Inc.    Cotiviti Holdings, Inc.    18.0x
February 2019    Veritas Capital and Elliott    Athenahealth Inc.    15.2x
August 2019    HealthEquity, Inc.    WageWorks, Inc.    13.6x
October 2020    Churchill Capital Corp III    MultiPlan, Inc.    15.3x

 

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For each of the selected transactions, Goldman Sachs used publicly available information to calculate and compare the EV for the target represented by the consideration payable in the transaction as a multiple of the EBITDA of the target for the last twelve-month (LTM) period preceding the announcement of the transaction. While none of the target companies in the selected transactions are directly comparable to Change and none of the selected transactions are directly comparable to the Merger, the target companies in the selected transactions are companies with certain operations that, for the purposes of analysis, may be considered similar to certain operations and end markets of Change.

The results of this analysis are summarized as follows:

 

     EV/LTM Adjusted
EBITDA Range
   EV/LTM Adjusted
EBITDA Median

Selected Transactions

   9.6x to 18.0x    14.1x

Based on its professional judgment and experience and taking into account the analysis of the selected transactions discussed above, Goldman Sachs then applied an illustrative range of multiples of 10.0x to 18.0x to the Adjusted EBITDA of Change for the LTM period ended November 30, 2020, as provided by management of Change, to calculate a range of implied EVs for Change. Goldman Sachs then subtracted net debt, as provided by management of Change, from the range of EVs to determine a range of implied equity values for Change. Goldman Sachs then divided these equity values by the number of fully diluted shares of Change, as provided by management of Change and using the treasury stock method.

This analysis resulted in a range of implied equity values per share of Change Common Stock of $12.50 to $34.13.

Precedent Premia Paid Analysis

Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for the certain transactions announced from January 1, 2011 through December 31, 2020, involving a public company in the United States health care industry and based in the United States as the target where the disclosed enterprise value for each transaction was in excess of $5,000,000,000, excluding transactions in the biotech industry. For the entire period, using publicly available information, Goldman Sachs calculated the average and median premiums of the price paid in the identified transactions (including identified all-cash transactions) relative to the target’s last undisturbed closing stock price prior to announcement of the transaction. This analysis indicated an average premium of 27.5% in all identified transactions across the period and a median premium of 27.1% in all identified transactions across the period and an average premium of 30.9% in the identified all-cash transactions across the period and a median premium of 33.7% in the identified all-cash transactions across the period. Using this analysis, and based on its professional judgment and experience, Goldman Sachs applied a reference range of illustrative premiums of 20% to 70% to the closing price per share of Change Common Stock of $18.24 as of January 5, 2021.

This analysis resulted in a range of implied equity values per share of Change Common Stock of $21.89—$31.01.

General—Goldman Sachs

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Change or UnitedHealth Group or the Merger.

 

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Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the Board as to the fairness from a financial point of view, as of the date of the opinion, to the holders (other than UnitedHealth Group and its affiliates) of the outstanding shares of Change Common Stock of the $25.75 in cash per share of Change Common Stock to be paid to such holders pursuant to the Merger Agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Change, UnitedHealth Group, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecasts.

The consideration of $25.75 in cash per share of Change Common Stock was determined through arm’s-length negotiations between Change and UnitedHealth Group and was approved by the Board. Goldman Sachs provided advice to Change during these negotiations. Goldman Sachs did not, however, recommend any specific form or amount of consideration to Change or the Board or that any specific form or amount of consideration constituted the only appropriate consideration for the Merger.

As described above, Goldman Sachs’ opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the Merger Agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B.

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of Change, UnitedHealth Group, any of their respective affiliates and third parties, including Blackstone, a significant stockholder of Change, or any currency or commodity that may be involved in the Merger. Goldman Sachs acted as financial advisor to Change in connection with, and participated in certain of the negotiations leading to, the Merger. Goldman Sachs has provided certain financial advisory and/or underwriting services to Change and/or its affiliates from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as lead left bookrunner with respect to Change’s add-on offering of its subsidiaries’ 5.75% Unsecured Notes due 2025 (aggregate principal amount $325,000,000) in April 2020; and a joint lead book-running manager with respect to a public offering of 42,857,142 Shares by Change and Change’s concurrent offering of 5,000,000 of its 6.00% tangible equity units in June 2019. During the two year period ended January 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Change and/or its affiliates of approximately $23 million. Goldman Sachs has also provided certain financial advisory and/or underwriting services to UnitedHealth Group and/or its affiliates from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as a joint bookrunner with respect to the public offering of UnitedHealth Group’s 1.25% Notes due 2026, 2% Notes due 2030, 2.75% Notes due 2040, 2.9% Notes due 2050 and 3.125% Notes due 2060 (aggregate principal amount $5,000,000,000) in May 2020; and as a joint bookrunner with respect to the public offering of UnitedHealth Group’s 2.375% Notes due 2024, 2.875% Notes due 2029, 3.5% Notes due 2039, 3.7% Notes due 2049 and 3.875% Notes due 2059 (aggregate principal amount $5,500,000,000) in July 2019. During the two year period ended January 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to UnitedHealth Group and/or its affiliates of approximately $4.1 million. Goldman Sachs also has provided certain financial advisory and/or underwriting services to Blackstone and/or its affiliates from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to Rothesay Life plc, a portfolio company of funds associated with Blackstone, with respect to the sale of Blackstone’s equity interest in

 

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October 2020; as financial advisor to Blackstone Group LP, an affiliate of Blackstone, with respect to its investment in Cryoport, Inc. in October 2020; as a joint bookrunner with respect to a follow-on public offering of the equity of TradeWeb LLC, a portfolio company of funds associated with Blackstone in April 2020; as a bookrunner with respect to the term loan B facility (aggregate principal amount $1,800,000,000) and the 4.75% secured notes due 2027 (aggregate principal amount $375,000,000) issued by the Michaels Companies, Inc., a portfolio company of funds associated with Blackstone, in September 2020; as lead arranger with respect to the floating rate securitization (aggregate principal amount $630,000,000) entered into by Blackstone Real Estate Advisors, an affiliate of Blackstone, in August 2020; as left lead bookrunner with respect to a public offering of 4.25% Notes due 2026 (aggregate principal amount $750,000,000) by Blue Yonder Group, Inc., a portfolio company of funds associated with Blackstone, in July 2020; as lead arranger for London Stock Exchange Group plc, a portfolio company of funds associated with Blackstone, with respect to its bridge financing completed in November 2019; and as lead arranger for Global Education Management Systems Limited, a portfolio company of funds associated with Blackstone, with respect to the bank and bond financing (aggregate principal amount $1,650,000,000) completed in July 2019. During the two year period ended January 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Blackstone and/or its affiliates and portfolio companies of approximately $185.6 million, as determined by Goldman Sachs based on its books and records. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to Change, UnitedHealth Group, Blackstone and their respective affiliates and, as applicable, portfolio companies, for which its Investment Banking Division may receive compensation. Affiliates of Goldman Sachs also may have co-invested with Blackstone and their respective affiliates from time to time and may have invested in limited partnership units of respective affiliates of Blackstone from time to time and may do so in the future.

The Board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. Pursuant to a letter agreement, dated December 10, 2020, Change engaged Goldman Sachs to act as its financial advisor in connection with the Merger. The engagement letter between Change and Goldman Sachs provides for a transaction fee that is estimated, based on the information available as of the date of announcement of the Merger, at approximately $73 million, all of which is contingent upon consummation of the Merger. In addition, Change has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Certain Financial Projections

In our press releases announcing quarterly or annual earnings, Change has from time to time publicly provided certain projections as to our future financial performance. Change does not otherwise, as a matter of course, publicly disclose projections as to our future financial performance. However, Change management prepared certain non-public, unaudited financial projections as described below, which we refer to as the “Projections,” and provided the Projections to the Board in connection with the Board’s evaluation of the proposed transaction, and to Change’s financial advisor, Goldman Sachs, and also provided a portion of the Projections to UnitedHealth Group as described below. At the direction and with the approval of Change management, Goldman Sachs relied on the Projections in performing its financial analysis and for purposes of its opinion summarized above under “Opinion of Change’s Financial Advisor”.

The Projections were developed for internal use and for use by our financial advisor, and were not prepared with a view toward public disclosure and do not necessarily comply with U.S. Generally Accepted Accounting Principles (“GAAP”), published guidelines of the SEC regarding projections, forward-looking statements or the use of non-GAAP measures, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts. The Projections were prepared by, and are the responsibility of, Change’s management. Our independent registered public accounting firm has not audited, reviewed, examined, compiled or applied any agreed-upon procedures with respect to the Projections, and does not express an opinion or any form of assurance related thereto. The Projections and summaries of the

 

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Projections are not being included in this proxy statement to influence any Change stockholder’s decision whether to vote in favor of the Merger Proposal or any of the other proposals to be voted on at the Special Meeting, but are being included because they were made available to the Board and our financial advisor, and later, a portion of the Projections was made available to UnitedHealth Group, for their respective evaluation of the proposed transaction. The Projections are not intended to be considered as public guidance of our financial performance.

The Projections, while presented with numerical specificity, necessarily were based on numerous estimates, variables and assumptions that are inherently subjective and uncertain and many of which are beyond our control. Because the Projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year. The assumptions upon which the Projections were based necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. The Projections also reflect assumptions as to certain business decisions that are subject to change. Furthermore, the Projections do not take into account any circumstances or events occurring after the date they were prepared, including the public announcement of the proposed transaction or Change’s compliance with its covenants under the Merger Agreement. The Projections do not take into account the possible financial and other effects on Change of the Merger and do not attempt to predict or suggest future results of the Surviving Corporation. The Projections do not give effect to any of the Merger, the impact of negotiating or executing the Merger Agreement, the expenses that may be incurred in connection with consummating the Merger, any synergies that may be achieved following the Merger, the effect on Change of any business or strategic decision or action that has been or will be taken as a result of the Merger Agreement having been executed, or the effect of any business or strategic decisions or actions that may have been taken if the Merger Agreement had not been executed. Further, the Projections do not take into account the effect of any possible failure of the Merger to occur. Important factors that may affect actual results and result in the Projections not being achieved include, but are not limited to, the risk factors described in our annual report on Form 10-K for the fiscal year ended March 31, 2020, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, the Projections may be affected by our ability to achieve strategic goals, objectives and targets over the applicable period. The Projections are forward-looking statements. For information on factors that may cause our future financial results to materially vary, see the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 23 of this proxy statement.

The Projections were prepared in good faith and on a reasonable basis based on the best information available to the preparers at the time of their preparation. However, there can be no assurance that the Projections will be realized, and actual results may vary materially from those shown. The inclusion of the Projections in this proxy statement should not be regarded as an indication that we or any of our affiliates, advisors, including Goldman Sachs, or other representatives considered or consider the Projections to be material or predictive of actual future events, and they should not be relied upon as such. Neither we nor any of our affiliates, advisors, officers, directors or other representatives can give any assurance that actual results will not differ from the Projections and none of them undertakes any obligation to update or otherwise revise or reconcile the Projections to reflect circumstances existing after the respective dates on which they were prepared or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Projections are shown to be in error. We do not intend to make publicly available any update or other revision to the Projections, except as otherwise required by law. Neither we nor any of our affiliates, advisors, officers, directors or representatives has made or makes any representation to any Change stockholder or any other person regarding our ultimate performance compared to the information contained in the Projections or that the Projections will be achieved. We have made no representation to UnitedHealth Group in the Merger Agreement or otherwise concerning the accuracy or reliability of the Projections.

Certain of the measures included in the Projections may be considered non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Change may not

 

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be comparable to similarly titled amounts used by other companies. The non-GAAP financial measures were relied upon by Goldman Sachs for purposes of its financial analysis and opinion and by the Board in connection with its consideration of the proposed transaction. Financial measures provided to a financial advisor in connection with a business combination transaction are excluded from the definition of non-GAAP financial measures and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Reconciliations of non-GAAP financial measures were not relied upon by Goldman Sachs for purposes of its financial analysis and opinion or by the Board in connection with its consideration of the proposed transaction. Accordingly, we have not provided a reconciliation of the financial measures.

The following table sets forth a summary of the Projections and certain historical financial information for comparison purposes. Dollar totals are in millions and fiscal years end on March 31. The Projections for fiscal years 2021 through 2023 with respect to “Solutions Revenue”, “Adjusted EBITDA” and “Unlevered Free Cash Flow” (the “LRP Projections”) were prepared by management as part of the Board-approved LRP, independent of Change’s evaluation of the proposed transaction with UnitedHealth Group. The Projections for fiscal years 2024 through 2030 with respect to “Solutions Revenue”, “Adjusted EBITDA” and “Unlevered Free Cash Flow” are not part of the LRP but were prepared by management and approved by the Board as extrapolations of the LRP Projections for purposes of the valuation analyses conducted by Goldman Sachs. The Projections with respect to “Net Impact to Cash Flows from Tax Attributes” were prepared by management in the ordinary course, independent of Change’s evaluation of the proposed transaction with UnitedHealth Group. Change provided a portion of the LRP Projections (but not any of the other Projections) to UnitedHealth Group in connection with UnitedHealth Group’s evaluation of the proposed transaction.

 

    2019A(5)     2020A(5)     2021E     2022E     2023E     2024E     2025E     2026E     2027E     2028E     2029E     2030E  

Line Item

                       

Revenue:

                       

Software and Analytics

  $ 1,579     $ 1,613     $ 1,548     $ 1,669     $ 1,779     $ 1,886     $ 1,999     $ 2,112     $ 2,224     $ 2,334     $ 2,441     $ 2,545  

Network Solutions

    557       589       703       785       817       878       944       1,012       1,080       1,150       1,220       1,290  

Technology-Enabled Services

    1,006       979       867       967       1,029       1,080       1,134       1,187       1,238       1,287       1,333       1,377  

Corporate Eliminations

    (105     (105     (99     (108     (112     (125     (133     (141     (150     (159     (168     (179

Purchase Accounting Adjustment

    —         —         (129     (8     —         —         —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Solutions Revenue(1)

  $ 3,043     $ 3,075     $ 2,889     $ 3,305     $ 3,512     $ 3,719     $ 3,944     $ 4,169     $ 4,393     $ 4,612     $ 4,826     $ 5,033  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA(2):

                       

Software and Analytics

  $ 519     $ 566     $ 530     $ 590     $ 647     $ 695     $ 747     $ 789     $ 831     $ 872     $ 912     $ 951  

Network Solutions

    317       332       355       381       398       433       470       504       538       572       607       642  

Technology-Enabled Services

    99       98       3       79       101       111       122       128       133       139       144       148  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Adjusted EBITDA

  $ 935     $ 996     $ 888     $ 1,051     $ 1,146     $ 1,239     $ 1,339     $ 1,420     $ 1,502     $ 1,583     $ 1,663     $ 1,741  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unlevered Free Cash Flow(3):

                       

(+) D&A

    N/A       N/A     $ 578     $ 662     $ 674     $ 713     $ 757     $ 800     $ 843     $ 885     $ 926     $ 965  

(-) CapEx

    N/A       N/A       (235     (249     (263     (279     (296     (313     (329     (346     (362     (377

(-) Change in NWC

    N/A       N/A       72       (14     (18     (18     (20     (20     (20     (19     (19     (18

(+) Non-Cash Other Expenses

    N/A       N/A       —         23       23       25       26       28       29       30       32       33  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Unlevered Free Cash Flow

    N/A       N/A     $ 434     $ 573     $ 646     $ 704     $ 765     $ 814     $ 863     $ 912     $ 960     $ 1,008  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Impact to Cash Flows from Tax Attributes(4)

    N/A       N/A     $ 14.6     $ 30.9     $ 62.8     $ 42.3     $ (35.0   $ (17.7   $ (2.9   $ (8.3   $ (0.9   $ (2.6

 

(1)

As used here, “Solutions Revenue” has the same meaning as in Change’s SEC filings.

(2)

“Adjusted EBITDA” means net income (loss) before net interest expense, income tax provision (benefit), depreciation and amortization, as adjusted to exclude the impact of certain items that are not reflective of Change’s core operations. As disclosed in Change’s Form 10-Q for the quarter ended December 31, 2020

 

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  (including Exhibit 99.1 thereto), during the first quarter of fiscal year 2021, Change’s management decided to allocate all administrative and certain other corporate expenses to Change’s respective reportable segments. Such methodology differs from that used by Change Healthcare LLC in prior years, including fiscal years 2019 and 2020. In connection with such change in methodology, the financial results of Change Healthcare LLC’s reportable segments for fiscal years 2019 and 2020 were recast to reflect the allocation of administrative and corporate expenses as described above, and were disclosed in Exhibit 99.1 to Change’s Form 10-Q for the quarter ended December 31, 2020. Such recast results were included in the historical comparison financial information provided to Goldman Sachs along with the Projections, and are shown in the table above under “Adjusted EBITDA”. Change Healthcare LLC is a wholly owned subsidiary of Change.
(3)

“Unlevered Free Cash Flow” assumes net operating profit after-tax, plus depreciation and amortization, less capital expenditures and increases in net working capital, plus other non-cash items.

(4)

“Net Impact to Cash Flows from Tax Attributes” means the aggregate net cash flow impact of tax attributes of Change, and is comprised of net operating losses, which have been incurred or are expected to be on November 30 in respect of the then-current fiscal year (e.g., incurred on November 30, 2020 in respect of the fiscal year ending March 31, 2021), and payments under the tax receivable agreements filed as Exhibits 10.2 through 10.7 to Change’s Form 10-K for the fiscal year ended March 31, 2020, which payments are made on July 15 in respect of the most recently completed fiscal year (e.g., payments made on July 15, 2021 in respect of the fiscal year ending March 31, 2021).

(5)

Results shown for fiscal years 2019 and 2020 are for Change Healthcare LLC.

Interests of Change’s Executive Officers and Directors in the Merger

In considering the recommendation of the Board that you vote to approve the Merger Proposal, you should be aware that, aside from their interests as Change stockholders, Change’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of Change stockholders generally, which may create potential conflicts of interest. These interests are described in more detail below, and with respect to the named executive officers of Change, are quantified in the “Golden Parachute Compensation” table below. The Board was aware of these interests and considered them when it adopted the Merger Agreement and approved the Merger.

Indemnification; Directors’ and Officers’ Insurance

Pursuant to the terms of the Merger Agreement, Change’s directors and executive officers will be entitled to certain ongoing indemnification, expense advancement and insurance arrangements. See the section entitled “The Merger Agreement—Indemnification; Directors’ and Officers’ Insurance” beginning on page 94 for a description of such ongoing arrangements.

Treatment of Outstanding Equity Awards

At the Effective Time, Change equity-based awards outstanding immediately prior to the Effective Time will generally be subject to the following treatment:

 

   

Each Change stock option, whether vested or unvested, will automatically be converted into an option to purchase a number of shares of UnitedHealth Group common stock (“UnitedHealth Group Shares”) equal to the product (with the result rounded down to the nearest whole share) of (1) the number of shares of Change common stock subject to such Change stock option immediately prior to the Effective Time multiplied by (2) the Equity Award Exchange Ratio. The Equity Award Exchange Ratio is the quotient of (a) the Per Share Merger Consideration divided by (b) the volume weighted average of the closing sale prices per UnitedHealth Group Share for the five full consecutive trading days ending on and including the third business day prior to the Closing. The exercise price per UnitedHealth Group Share after the conversion will be equal to the quotient (with the result rounded up to the nearest whole cent) of (i) the exercise price per share of Change Common Stock of such Change stock option immediately prior to the Effective Time divided by (ii) the Equity Award Exchange Ratio. Any

 

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unvested time-based stock options granted prior to Change’s IPO in July 2019 will vest in full at the Closing pursuant to the terms and conditions as in effect as in effect as of the date of the Merger Agreement. Any unvested stock options subject to vesting conditions based upon receipt of cash proceeds upon disposition of a certain percentage of shares by certain stockholders of Change at a specified weighted average price per share (the “Exit-Vesting Stock Option Conditions”) will vest in three equal installments, with the first installment vesting at the Closing of the Merger and the second and third installments vesting on each of the first and second anniversaries of the Closing, respectively.

 

   

Each Change restricted share subject to vesting conditions based upon receipt of cash proceeds by certain stockholders of Change at a weighted average price per share that (1) is at least equal to a specified weighted average price per share set forth in the applicable award agreement or (2) results in an annual internal rate of return at the level set forth in the applicable award agreement (the “Exit-Vesting Conditions”) that fully vests at the consummation of the Merger pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will automatically be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes. If the Exit-Vesting Conditions are not satisfied in connection with the Merger, these restricted shares will be cancelled and forfeited at the Effective Time for no consideration or payment. We anticipate that the Exit-Vesting Conditions will be fully satisfied prior to, or in connection with, the Merger.

 

   

Each Change restricted stock unit award that vests based on continued service (an “RSU”) will automatically be converted into an RSU denominated in UnitedHealth Group Shares, with the number of UnitedHealth Group Shares subject to such UnitedHealth Group RSU equal to the product of (1) the total number of Change shares subject to such RSU immediately prior to the Closing multiplied by (2) the Equity Award Exchange Ratio.

 

   

Each Change restricted stock unit award that vests based on performance conditions (a “PSU”) will automatically be converted into an RSU denominated in UnitedHealth Group Shares, with the number of UnitedHealth Group Shares subject to such UnitedHealth Group RSU equal to the product of (1) the number of Change shares subject to such RSU based on target performance multiplied by (2) the Equity Award Exchange Ratio. These RSUs will vest based on continued service through the end of the original performance period.

 

   

Each Change RSU subject to the Exit-Vesting Conditions that fully vests at the consummation of the Merger pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will automatically be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes. If the Exit-Vesting Conditions are not satisfied in connection with the consummation of the Merger, any RSUs subject to the Exit-Vesting Conditions will be cancelled and forfeited at the Effective Time for no consideration or payment. We anticipate that the Exit-Vesting Conditions will be fully satisfied prior to, or in connection with, the Merger.

 

   

Each Change stock appreciation right award (a “SAR”), whether vested or unvested, will automatically be converted into a stock appreciation right denominated in a number of UnitedHealth Group Shares equal to (1) the product (rounded down to the nearest whole number) of (a) the total number of Change shares subject to such SAR immediately prior to the Effective Time multiplied by (b) the Equity Award Exchange Ratio, (2) at an exercise price per share (rounded up to the nearest whole cent) equal to (a) the exercise price per share of the Change shares subject to such SAR immediately prior to the Effective Time divided by (b) the Equity Award Exchange Ratio.

 

   

Each Change SAR subject to the Exit-Vesting Conditions that fully vests at the consummation of the Merger pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will automatically be converted into a SAR denominated in a number of UnitedHealth Group Shares equal to (1) the product (rounded down to the nearest whole number) of (a) the total number of Change shares subject to such SAR immediately prior to the Effective Time multiplied by (b) the Equity Award Exchange Ratio, (2) at an exercise price per share (rounded up to the nearest whole cent) equal to (a) the exercise price per share of the Change shares subject to such SAR immediately prior to the

 

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Effective Time divided by (b) the Equity Award Exchange Ratio. If the Exit-Vesting Conditions are not satisfied in connection with the consummation of the Merger, any Change SAR award subject to the Exit-Vesting Conditions will be cancelled and forfeited at the Effective Time for no consideration or payment. We anticipate that the Exit-Vesting Conditions will be fully satisfied prior to, or in connection with, the Merger.

 

   

Each deferred stock unit (a “DSU”), whether vested or unvested, will automatically be converted into a DSU denominated in a number of UnitedHealth Group Shares equal to the product (rounded down to the nearest whole number) of (1) the total number of Change Shares subject to such DSU immediately prior to the consummation of the Merger multiplied by (2) the Equity Award Exchange Ratio. DSUs are only held by our non-employee Directors.

Change equity-based awards that convert into equity-based awards denominated in UnitedHealth Group Shares will generally be subject to the same terms and conditions (including, as applicable, vesting, exercise and settlement) as applied to such award immediately prior to the Effective Time, except to the extent such terms and conditions are rendered inoperative by the Merger or with respect to such other changes that are necessary for the administration of the awards and that are not materially detrimental to the holder of the award.

The foregoing equity-based award treatment is subject to the terms of any employment or individual award agreement providing for accelerated vesting upon a change in control of Change. In particular, the terms of these equity-based awards provide that awards held by an employee of Change will become fully vested if, during the 12-month period following the Effective Time, the employee’s employment is terminated by the Company without “cause” (or, with respect to selected employees, including our executive officers, if the employee’s employment is terminated as a result of resignation by the employee for “good reason”).

Summary Tables

Non-Employee Directors. The table below sets forth, for each Change non-employee director, the number of Change stock options, Change SARs and Change RSUs or DSUs held by such non-employee directors as of February 26, 2021, the latest practicable date prior to the filing of this proxy statement. The table below also sets forth the estimated value, per non-employee director, of such equity awards at the Effective Time, with such amounts calculated by multiplying the number of shares subject to the Change stock options, Change SARs and Change RSUs or DSUs by $25.75, less the applicable exercise price in the case of the Change stock options and Change SARs. The table below does not include Change PSUs because no such awards are held by Change’s non-employee directors. The amounts in the table do not attempt to forecast any additional equity award grants, issuances or forfeitures that may occur prior to the completion of the Merger and do not reflect any Change equity or other incentive awards that are expected to vest in accordance with their terms prior to September 30, 2021, the assumed closing date of the Merger solely for purposes of this transaction-related compensation disclosure. All share and unit numbers have been rounded to the nearest whole number.

Director Equity Summary Table

 

Non-Employee Directors

   SAR
Awards
(#) (1)
     SAR
Awards
($) (1)
     Stock
Options
(#) (2)
     Stock
Options
($) (2)
     RSU/DSU
Awards
(#) (3)
     RSU/DSU
Awards
($) (3)
     Estimated
Total Value
of Change
Equity
Awards ($)
 

Howard L. Lance

     206,882      $ 2,791,519        75,596      $ 830,155        14,486      $ 373,015      $ 3,994,689  

Nella Domenici

     —          —          —          —          14,486      $ 373,015      $ 373,015  

Nicholas L. Kuhar

     —          —          —          —          —          —          —    

Diana McKenzie

     —          —          —          —          25,912      $ 667,234      $ 667,234  

Bansi Nagji

     —          —          —          —          14,486      $ 373,015      $ 373,015  

Philip M. Pead

     11,439      $ 290,207        60,428      $ 727,619        25,912      $ 667,234      $ 1,685,060  

Phillip W. Roe

     11,439      $ 290,207        60,428      $ 552,057        25,912      $ 667,234      $ 1,509,498  

Neil P. Simpkins

     —          —          —          —          —          —          —    

Robert J. Zollars

     —          —          31,600      $ 213,616        25,912      $ 667,234      $ 880,850  

 

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(1)

As of February 26, 2021, Messrs. Lance, Pead and Roe held 132,243, 11,439 and 11,439 vested SARs, respectively. As of February 26, 2021, Mr. Lance held 74,639 unvested SARs of which 63,200 unvested SARs are subject to Exit-Vesting Conditions. We anticipate that the SARs subject to Exit-Vesting Conditions will vest prior to, or in connection with, the Merger.

(2)

As of February 26, 2021, Mr. Lance held 46,768 unvested time-based stock options and Messrs. Lance, Pead and Roe each held 28,828, unvested stock options subject to certain Exit-Vesting Stock Option Conditions, respectively. The time-based stock options will vest in connection with the Merger pursuant to the terms and conditions in effect as of the date of the Merger Agreement. One-third (1/3) of the stock options subject to Exit-Vesting Stock Option Conditions will vest in connection with the Merger.

(3)

Mr. Lance holds RSUs and the remaining non-employee directors hold DSUs. As of February 26, 2021, Mr. Lance held 14,486 vested RSUs, and Messrs. Pead, Roe and Zollars and Ms. McKenzie held 11,426 vested DSUs and 14,486 unvested DSUs, respectively. On or about the first anniversary of Change’s equity award grants made in calendar year 2020, Change expects to make grants of RSUs or DSUs to non-employee directors with an aggregate grant date value of up to $1.2 million, which will vest on the earlier of the first anniversary of the grant date or the Effective Time and will be converted into RSUs or DSUs denominated in UnitedHealth Group Shares as described in – “Treatment of Outstanding Equity Awards” above. Change also expects to pay annual cash retainers and other compensation to non-employee directors in an amount consistent with past practice until the Effective Time.

Executive Officers; Vested Awards. The tables below set forth, for each Change executive officer, the number and value of vested Change equity awards held by such executive officer as of February 26, 2021, the latest practicable date prior to the filing of this proxy statement. The first table sets forth the number and estimated value, per executive officer, of vested Change stock options and Change SARs at the Effective Time, with such amounts calculated by multiplying the number of shares subject to the Change stock options and Change SARs by $25.75, less the applicable exercise price. The amounts in the tables do not attempt to forecast any additional equity award grants, issuances or forfeitures that may occur prior to September 30, 2021, the assumed closing date of the Merger solely for purposes of this transaction-related compensation disclosure. All share and unit numbers have been rounded to the nearest whole number and all dollar amounts are shown on a pre-tax basis.

Executive Officer Vested SARs and Stock Options Summary Table

 

Executive Officers

   Vested
SARs
(#) (1)
     Vested
SARs
($) (1)
     Vested
Stock
Options
(#) (2)
     Vested
Stock Options
($) (2)
 

Neil E. de Crescenzo*

     314,595      $ 7,981,275        1,630,184      $ 19,490,805  

Fredrik Eliasson

     —          —          347,600      $ 2,349,776  

Loretta A. Cecil

     —          —          153,102      $ 1,034,970  

Kriten Joshi

     72,070      $ 1,828,416        500,780      $ 5,275,344  

Thomas Laur

     —          —          135,880      $ 918,549  

Roderick H. O’Reilly

     —          —          322,320      $ 2,178,883  

August Calhoun

     —          —          94,800      $ 640,848  

W. Thomas McEnery

     22,879      $ 580,440        151,667      $ 1,451,355  

Linda Whitley-Taylor

     —          —          313,748      $ 2,938,346  

Steven Martin

     —          —          —          —    

 

*

Also a director.

Executive Officers; Unvested Awards. The tables below set forth, for each Change executive officer, the number and value of unvested Change equity awards held by such executive officer as of February 26, 2021, the latest practicable date prior to the filing of this proxy statement. The first table sets forth the number and estimated value, per executive officer, of unvested Change stock options at the Effective Time, with such amounts calculated

 

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by multiplying the number of shares subject to the Change stock options by $25.75, less the applicable exercise price. The second table sets forth the number and estimated value, per executive officer, of unvested Change RSUs and Change PSUs at the Effective Time, with such amounts calculated by multiplying the number of shares subject to the Change RSUs and Change PSUs by $25.75. The amounts in the tables do not attempt to forecast any additional equity award grants, issuances or forfeitures that may occur prior to the completion of the Merger and do not reflect any Change equity or other incentive awards that are expected to vest in accordance with their terms prior to September 30, 2021, the assumed closing date of the Merger solely for purposes of this transaction-related compensation disclosure. All share and unit numbers have been rounded to the nearest whole number.

Executive Officer Unvested Stock Options Summary Table

 

Executive Officers

   Unvested
Stock
Options
(#) (1)
     Unvested
Stock
Options
($) (1)
 

Neil E. de Crescenzo*

     932,200      $ 6,301,672  

Fredrik Eliasson

     1,042,800      $ 7,049,328  

Loretta A. Cecil

     279,186      $ 1,887,297  

Kriten Joshi

     237,000      $ 1,602,120  

Thomas Laur

     407,640      $ 2,755,646  

Roderick H. O’Reilly

     644,640      $ 4,357,766  

August Calhoun

     284,400      $ 1,922,544  

W. Thomas McEnery

     138,250      $ 934,570  

Linda Whitley-Taylor

     138,250      $ 934,570  

Steven Martin

     —          —    

 

*

Also a director.

(1)

265,967, 85,320, 49,771, and 49,771 unvested stock options subject to Exit-Vesting Stock Option Conditions are expected to vest in connection with the Merger for Messrs. de Crescenzo, Joshi and McEnery and Ms. Whitley-Taylor, respectively.

Executive Officer Unvested Restricted Shares, RSUs and PSUs Table

 

Executive Officers

  Unvested
Restricted
Shares

(#) (1)
    Unvested
Restricted
Shares

($) (1)
    Unvested
RSUs
(#) (2)
    Unvested
RSUs
($) (2)
    Unvested
PSUs
(#)
    Unvested
PSUs
($)
    Estimated
Total Value
of Unvested

RSUs and
PSUs
($)
 

Neil E. de Crescenzo*

    272,550     $ 7,018,163       477,038     $ 12,283,729       419,363     $ 10,798,597     $ 30,100,489  

Fredrik Eliasson

    —         —         194,608     $ 5,011,156       188,561     $ 4,855,446     $ 9,866,602  

Loretta A. Cecil

    —         —         67,010     $ 1,725,508       67,527     $ 1,738,820     $ 3,464,328  

Kriten Joshi

    76,314     $ 1,965,086       98,851     $ 2,545,413       80,514     $ 2,073,236     $ 6,583,735  

Thomas Laur

    —         —         80,841     $ 2,081,656       80,514     $ 2,073,236     $ 4,154,892  

Roderick H. O’Reilly

    —         —         84,736     $ 2,181,952       85,707     $ 2,206,955     $ 4,388,907  

August Calhoun

    —         —         80,841     $ 2,081,656       80,514     $ 2,073,236     $ 4,154,892  

W. Thomas McEnery

    49,242     $ 1,267,982       84,163     $ 2,167,197       67,527     $ 1,738,820     $ 5,173,999  

Linda Whitley-Taylor

    32,888     $ 846,866       73,733     $ 1,898,625       66,142     $ 1,703,157     $ 4,448,648  

Steven Martin

    —         —         208,718     $ 5,374,489       45,888     $ 1,181,616     $ 6,556,105  

 

*

Also a director.

(1)

We anticipate that all restricted shares (which are subject to Exit-Vesting Conditions) will vest prior to, or in connection with, the Merger.

(2)

64,327, 18,011, 17,154, and 7,762 unvested RSUs are expected to vest in connection with the Merger for Messrs. de Crescenzo, Joshi and McEnery and Ms. Whitley-Taylor , respectively.

 

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Employment Agreement with Neil de Crescenzo

Change previously entered into an employment agreement with Neil de Crescenzo. If Mr. de Crescenzo’s employment is terminated without “cause” by Change or by Mr. de Crescenzo for “good reason,” or in the event of death or “disability” (as such terms are defined in Mr. de Crescenzo’s employment agreement), in addition to certain accrued amounts, Mr. de Crescenzo will be entitled to receive the following payments, subject to execution and non-revocation of a release of claims in favor of Change:

 

  i.

twenty four months of base salary continuation;

 

  ii.

an amount equal to two times his annual target bonus, payable over twenty four months; and

 

  iii.

a lump sum cash amount equal to the portion of the health insurance premium that Change would have paid for active employees with similar coverage for a period of 18 months.

Offer Letters

Change previously entered into an offer letter with each of Messrs. Eliasson, Laur, Calhoun and O’Reilly. Pursuant to their offer letters, Messrs. Eliasson and Calhoun will receive severance benefits in accordance with the Change Healthcare LLC U.S. Executive Severance Benefit Guidelines (the “Executive Severance Guidelines”) in place at the time of separation from employment. However, upon a termination without “cause” (as such term is defined in the Executive Severance Guidelines) or, in the case of Mr. Eliasson, for “good reason” (as such term is defined in the HCIT Holdings, Inc. 2009 Equity Incentive Plan, Messrs. Eliasson and Calhoun are entitled, at a minimum, to the severance benefits currently set forth in the Executive Severance Guidelines. The Executive Severance Guidelines are described in further detail in the section entitled “Executive Severance Guidelines” below.

Change also entered into an offer letter to Mr. O’Reilly on December 22, 2020, which sets forth the terms of Mr. O’Reilly’s employment and compensation in connection with the transfer of Mr. O’Reilly’s employment from the United States to Canada as of January 1, 2021. Pursuant to his offer letter, Mr. O’Reilly’s severance is generally governed by the terms and conditions of the Executive Severance Guidelines, with any changes necessary to comply with British Columbia law. Accordingly, Mr. O’Reilly is eligible to receive, upon a termination without “cause” (as defined in the Executive Severance Guidelines):

 

   

A payment equal to twelve months of annualized remuneration;

 

   

Continued coverage under Change’s medical, dental and prescription drug plans during the twelve months following termination; and

 

   

If Mr. O’Reilly is terminated upon a “change in control” (as defined in the Executive Severance Guidelines) or within twelve months following a “change in control”, one times incentive compensation bonus target.

Mr. O’Reilly is not entitled to continue participation in any bonus or any other incentive compensation or fringe benefit plans (including equity plans) following termination of his employment, other than as specifically set forth above and as mandated by the British Columbia Employment Standards Act (as amended).

Executive Severance Guidelines.

Our other executive officers (including Messrs. Eliasson and Calhoun pursuant to their offer letters) are eligible for severance benefits upon a change in control under the Executive Severance Guidelines. Under the Executive Severance Guidelines, the executive becomes entitled to the following termination payments and benefits if (a) his or her employment is terminated by Change without “cause” or (b) he/she terminates his or her employment for “good reason” (each as defined in the Executive Severance Guidelines):

 

   

a lump sum cash severance payment equal to (i) one times annual base salary as of the date of termination and (ii) one times the incentive compensation bonus target; and

 

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a lump sum cash payment of the employer portion of COBRA insurance benefits for 12 months.

In addition, pursuant to the terms of the underlying equity award agreements, upon a termination (x) by Change or UnitedHealth Group without cause or (y) for specified groups (including the executive officers), in the case of executive officers, by the executive officer for good reason, in either case, within the 12-month period following a change in control, the equity awards (other than the equity awards subject to the Exit-Vesting Conditions) will vest in full.

Please see the “Golden Parachute Compensation” section below for a quantification of the amounts each executive officer would be eligible to receive under his employment agreement, offer letter or the Executive Severance Guidelines (or subsequent employment agreement with UnitedHealth Group), as applicable.

Additional Equity Grants/ Modifications to 2019 PSUs

Change expects to make 2021 annual grants of long-term incentive awards prior to the Closing. The annual grants will be in the form of RSUs and will be subject to substantially the same terms as the current outstanding RSUs, including conversion into UnitedHealth Group RSUs in connection with the Merger as described in – “Treatment of Outstanding Equity Awards” above. For our executive officers, the grant date fair value of these awards will not exceed: $7,200,000 for Mr. de Crescenzo; $3,900,000 for Mr. Eliasson; $1,500,000 for each of Messrs. O’Reilly, Laur, Joshi, Calhoun and Martin and $1,200,000 for each of Ms. Cecil, Ms. Whitley-Taylor and Mr. McEnery.

UnitedHealth Group has agreed to make certain equity awards to employees of Change upon completion of the Merger. For our executive officers, the grant date fair value of these awards is set forth below under “New Employment Agreements”.

Change expects to amend the terms of the Change PSUs granted in 2019 such that they will vest on July 2, 2022 instead of July 2, 2023.

New Employment Agreements

UnitedHealth Group has entered into new employment agreements with each of Messrs. de Crescenzo, Calhoun, Joshi, Laur, Martin, and McEnery (the “New Employment Agreements”), which will become effective at the Effective Time. As of the date of this proxy statement, UnitedHealth Group has not entered into employment agreements or retention agreements with Messrs. Eliasson and O’Reilly or Msses. Cecil and Whitley-Taylor; while no such agreement, arrangement or understanding exists to our knowledge as of the date of this proxy statement, prior to the consummation of the Merger these individuals may enter into such arrangements, or they may enter into other related arrangements depending on what role, if any, they maintain with Change following consummation of the Merger. As of the date of this proxy statement, to our knowledge, none of our other executive officers has entered into any agreement, arrangement or understanding with UnitedHealth Group or any of its subsidiaries regarding employment with, or the right to purchase or participate in the equity of, UnitedHealth Group or Change. Although no such agreement, arrangement or understanding exists to our knowledge as of the date of this proxy statement, certain of our other executive officers may, prior to the completion of the Merger, enter into new arrangements with UnitedHealth Group or its subsidiaries regarding employment following the consummation of the Merger.

Pursuant to the terms of the New Employment Agreements, UnitedHealth Group has agreed that:

 

   

Neil de Crescenzo will become Chief Executive Officer of OptumInsight, a business unit of UnitedHealth Group;

 

   

Kriten Joshi will become the Chief Executive Officer of Network Solutions, a business unit of UnitedHealth Group;

 

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Thomas Laur will become Chief Executive Officer of Technology Enabled Solutions, a business unit of UnitedHealth Group;

 

   

August Calhoun will retain his position as Change’s Executive Vice President, Sales and Operations;

 

   

Steven Martin will retain his position as Change’s Executive Vice President, Enterprise Technology; and

 

   

Thomas McEnery will retain his position as Change’s Executive Vice President, Corporate Affairs and Chief Marketing Officer.

The New Employment Agreements also provide for:

 

   

base salary and target incentive bonus at levels that are consistent with the executive’s current base salary and target incentive bonus, (except for Mr. de Crescenzo, whose new base salary is $1,000,000 and target incentive bonus is $1,750,000);

 

   

an initial sign-on grant of non-qualified stock options with a grant date fair value of $2,250,000 for Mr. de Crescenzo, $500,000 for Messrs. Joshi, Laur, Calhoun and Martin and $375,000 for Mr. McEnery;

 

   

an initial sign-on grant of restricted stock units with a grant date fair value of $2,250,000 for Mr. de Crescenzo, $500,000 for Messrs. Joshi, Laur, Calhoun and Martin and $375,000 for Mr. McEnery;

 

   

a long-term incentive equity award for 2022 with a target grant date fair value of $7,250,000 for Mr. de Crescenzo, $1,250,000 for Messrs. Joshi, Laur, Calhoun and Martin and $1,000,000 for Mr. McEnery;

 

   

upon a termination by UnitedHealth Group or Change without “cause” or by the executive for “good reason” (each as defined in the New Employment Agreements), severance benefits of:

 

   

100% of base salary for Messrs. McEnery, Joshi and Laur or 200% of base salary for Messrs. de Crescenzo, Calhoun and Martin;

 

   

an amount equal to actual bonus for two most recent calendar years, provided that if termination takes place within two years of the Merger, such amount will be two times target bonus (for Messrs. de Crescenzo, Calhoun and Martin), or one year of target bonus if termination occurs within 1 year of the effective date (for Messrs. McEnery, Joshi, and Laur);

 

   

lump sum cash payment of $12,000 for COBRA continuation benefit costs; and

 

   

outplacement services; and

 

   

Change equity awards that have been converted into UnitedHealth Group Equity Awards will fully vest upon a termination of employment by UnitedHealth Group or Change without “cause” or for a resignation by the executive for “good reason” within 24 months following the Closing (for Messrs. de Crescenzo, Calhoun and Martin) or 12 months following the Closing (for Messrs. McEnery, Joshi and Laur). These awards will also fully vest upon a termination of employment by reason of death or disability at any time.

280G Mitigation Actions

Change may take certain actions before the Effective Time to mitigate the amount of potential “excess parachute payments” for “disqualified individuals” (each as defined in Section 280G of the U.S. Internal Revenue Code of 1986, as amended). As of the date of this proxy statement, Change has not yet approved any specific actions to mitigate the expected impact of Section 280G of the Code on Change and any disqualified individuals. No executive officer is entitled to receive gross-ups or tax reimbursements from Change with respect to any potential excise taxes.

Golden Parachute Compensation

In accordance with Item 402(t) of Regulation S-K, the tables below present the estimated amounts of compensation that each named executive officer could receive that are based on or otherwise relate to the

 

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Merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the Merger-related compensation which will or may become payable to Change’s named executive officers. This Merger-related compensation is subject to a non-binding advisory vote of common stockholders, as set forth in Proposal 2 in this proxy statement. See the section entitled “Advisory Vote on Named Executive Officer Merger-Related Compensation Proposal (Proposal 2)” beginning on page 108.

The amounts set forth below have been calculated assuming (i) the Merger is consummated on September 30, 2021 (the last practicable date determined in accordance with Item 402(t) of Regulation S-K), (ii) the Change equity awards outstanding as of February 26, 2021 (without any vesting between February 26, 2021 and September 30, 2021) and (iii) each named executive officer experiences a qualifying termination of employment as of the same date, immediately following completion of the Merger and properly executed any required releases and complied with all requirements (including any applicable restrictive covenants) necessary in order to receive the payments and benefits. The amounts indicated below are estimates of amounts that would be payable to the named executive officers, and the estimates are based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement. Some of the assumptions are based on information not currently available and, as a result the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below. The amounts set forth below do not include the initial sign-on equity awards that UnitedHealth Group has committed to grant to certain named executive officers following the closing of the Merger, which are being paid pursuant to bona fide post-closing employment arrangements. All dollar amounts set forth below have been rounded to the nearest whole number and are reflected on a pre-tax basis.

Golden Parachute Compensation (1)

 

Named Executive Officer

  Cash (2)     Equity (3)     Pension/
NQDC
(4)
    Perquisites/
Benefits
(5)
    Tax
Reimbursement
(6)
    Other     Total
(7)
 

Neil de Crescenzo
President and
Chief Executive Officer

  $ 5,500,000     $ 32,196,602       —       $ 12,000       —         —       $ 37,708,602  

Fredrik Eliasson
Executive Vice
President and CFO

  $ 1,202,500     $ 14,376,781       —       $ 27,531       —         —       $ 15,606,812  

Kriten Joshi
Executive Vice President, and President Network Solutions

  $ 834,134     $ 7,609,724       —       $ 12,000       —         —       $ 8,455,858  

Thomas Laur
Executive Vice President and President, Technology Enabled Services

  $ 925,000     $ 5,875,107       —       $ 12,000       —         —       $ 6,800,107  

Roderick O’Reilly
Executive Vice President and President, Software Analytics (8)

  $ 981,103     $ 7,320,013       —       $ 3,220       —         —       $ 8,304,336  

 

(1)

Certain amounts reflected in this table related to time-based stock options granted prior to Change’s IPO in July 2019 are attributable to single-trigger arrangements (i.e., vesting of the amounts is triggered by the change in control that will occur upon completion of the Merger). All other amounts reflected in the table are attributable to double-trigger arrangements (i.e., the amounts are triggered by the change in control that will occur upon completion of the Merger and a subsequent qualifying termination of the officer’s employment).

(2)

Amounts reflect the cash severance benefits that would be payable upon a change in control in a lump-sum under the New Employment Agreements entered into with each of Messrs. de Crescenzo, Joshi and Laur or

 

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  under the Executive Severance Guidelines, assuming an involuntary termination by UnitedHealth Group or Change without “cause” or a resignation by the named executive officer for “good reason” immediately following the consummation of the Merger. These amounts are subject to the execution of a release of claims in favor of UnitedHealth Group or Change, as applicable. In addition, the named executive officer is required to comply with non-competition and non-solicitation restrictive covenants (two years in the case of Mr. de Crescenzo and one year in the case of Messrs. Joshi and Laur). The cash severance benefits equal (a) with respect to Mr.de Crescenzo, the sum of (i) a lump sum cash severance payment equal to two times Mr. de Crescenzo’s annual base salary as of the date of termination, and (ii) two years of annual bonus based on target performance, (b) with respect to Messrs. Joshi, Laur and Eliasson, the sum of (i) a lump sum cash severance payment equal to ones times the named executive officer’s annual base salary as of the date of termination and (ii) one year of annual bonus based on target performance and (c) with respect to Mr. O’Reilly, the sum of (i) a lump sum cash payment equal to 12 months of annualized remuneration and (ii) one times incentive compensation bonus based on target performance.

 

Name

   Cash
Severance
($)
     Target
Bonus
($)
     Total
($)
 

Neil de Crescenzo

     2,000,000        3,500,000        5,500,000  

Fredrik Eliasson

     650,000        552,500        1,202,500  

Kriten Joshi

     450,883        383,251        834,134  

Thomas Laur

     500,000        425,000        925,000  

Roderick O’Reilly

     530,326        450,777        981,103  

 

(3)

For each named executive officer, the amounts in this column represent the value of (i) restricted share awards subject to the Exit-Vesting Conditions (which are expected to be met prior to, or in connection with, the Merger) and (ii) unvested stock options, unvested RSUs and unvested PSUs held by each named executive officer subject to “double trigger” vesting upon the named executive officer’s qualifying termination during the 12 months (or, in the case of Mr. de Crescenzo, 24 months) following the completion of the Merger. Pursuant to the terms of the New Employment Agreements entered into with Messrs. de Crescenzo, Joshi and Laur, equity awards granted to such named executive officers will become fully vested if (a) within 12 months after a change in control (24 months in the case of Mr. de Crescenzo) of Change, (i) the executive’s employment is terminated by Change without cause or (ii) the executive officer terminates his employment for good reason or (b) a termination by reason of death or disability. In addition, pursuant to the terms of the underlying award agreements, equity awards granted to Messrs. Eliasson and O’Reilly will become fully vested if within 12 months after a change in control of Change, (i) the executive’s employment is terminated by Change without cause or (ii) the executive officer terminates his employment for good reason.

 

     Unvested
Options
(#) (A)
     Unvested
Options

($) (A)
     Total ($)  

Neil de Crescenzo

     750,500        5,073,380        5,073,380  

Fredrik Eliasson

     869,000        5,874,440        5,874,440  

Kriten Joshi

     237,000        1,602,120        1,602,120  

Thomas Laur

     339,700        2,296,372        2,296,372  

Roderick O’Reilly

     523,770        3,540,685        3,540,685  

 

(A)

The amounts in this column include, for Messrs. de Crescenzo, Eliasson, Joshi, Laur and O’Reilly, 23,700, 173,800, 9,480, 67,940, and 40,290 unvested time-based stock options and 726,800, 695,200, 227,520, 271,760, 483,480 unvested stock options subject to the Exit-Vesting Stock Option Conditions, respectively. At the closing of the Merger, (i) all outstanding stock options will be converted into stock options denominated in UnitedHealth Group Shares based on the Equity Award Exchange Ratio, (ii) the applicable exercise price will be adjusted based on the Equity Award Exchange Ratio, (iii) the unvested time-based stock options will vest in full pursuant to the terms and conditions as in effect as of the date of the Merger

 

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  Agreement and (iv) one-third (1/3) of the unvested stock options currently subject to the Exit-Vesting Stock Option Conditions will vest.

 

     Unvested
RSUs

(#) (B)
     Unvested
RSUs
($) (B)
     Unvested
PSUs
(#) (C)
     Unvested
PSUs

($) (C)
     Unvested
Restricted
Shares

(#) (D)
     Unvested
Restricted
Shares

($) (D)
     Total ($)  

Neil de Crescenzo

     361,416        9,306,462        419,363        10,798,597        272,550        7,018,163        27,123,222  

Fredrik Eliasson

     141,627        3,646,895        188,561        4,855,446              8,502,341  

Kriten Joshi

     76,477        1,969,283        80,514        2,073,236        76,314        1,965,086        6,007,604  

Thomas Laur

     58,466        1,505,500        80,514        2,073,236              3,578,735  

Roderick O’Reilly

     61,063        1,572,372        85,707        2,206,955              3,779,328  

 

(B)

The amounts in this column include, for Messrs. de Crescenzo, Eliasson, Joshi, Laur and O’Reilly, 297,089, 141,627, 58,466, 58, 466 and 61,063 unvested time-based RSUs, respectively and for Messrs. de Crescenzo and Joshi, 64,327 and 18,011 unvested RSUs subject to the Exit-Vesting Conditions, respectively. At the closing of the Merger, the RSUs will be converted into RSUs denominated in UnitedHealth Group Shares based on the Equity Award Exchange Ratio. Time-based stock-settled RSUs granted in connection with Change’s initial public offering will either vest 25% on August 1 of each of 2022 and 2023 or 100% on August 1, 2023. The final 33% tranche of time-based cash-settled RSUs granted in connection with Change’s initial public offering will vest on August 1, 2022. The stock-settled RSUs granted in 2020 will either vest 1/3 on June 17 of 2022, 2023 and 2024 or 25% on June 17 of 2022, 2023 and 2024.

(C)

At the closing of the Merger, the PSUs will be converted into time-based RSUs denominated in UnitedHealth Group Shares based on target performance and the Equity Award Exchange Ratio. The PSUs are subject to continued employment through the end of the applicable performance period. Pursuant to the current terms, the 2019 PSUs vest on July 2, 2023 and the 2020 PSUs vest on a determination date after March 31, 2023. Change expects to amend the terms of the PSUs, such that the PSUs granted in 2019 will vest on July 2, 2022 instead of July 2, 2023.

(D)

The restricted shares subject to the Exit-Vesting Conditions are expected to vest prior to or in connection with the closing of the Merger and automatically be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes.

(4)

None of the named executive officers are eligible to receive any nonqualified deferred compensation plan enhancements upon a change in control or termination following a change in control. Change does not maintain any defined benefit pension benefit plans for its employees in the United States or Canada.

(5)

Under the terms of Messrs. de Crescenzo’s, Joshi’s and Laur’s New Employment Agreements, each is eligible to receive a lump sum of $12,000 to offset the cost of COBRA continuation benefits and outplacement services in an amount determined by UnitedHealth Group. Under the terms of the Executive Severance Guidelines, Mr. Eliasson is eligible to receive a lump sum cash payment of the employer portion of COBRA insurance benefits for 12 months. Under the terms of Mr. O’Reilly’s employment agreement, he is entitled to continued coverage on the Canadian medical, dental and prescription drug plans on the same terms as active employees during the 12 month period following a termination of employment.

(6)

None of the named executive officers are eligible to receive an excise tax gross up.

(7)

The Executive Severance Guidelines provide that the change in control severance benefits are subject to reduction to avoid the imposition of excise taxes under Section 4999 of the Code in the event such reduction would result in a better after-tax result for the executive. The amounts in the tables above do not reflect any possible reductions under that provision.

(8)

The amounts other than equity values in the table above for Mr. O’Reilly were converted from Canadian to U.S. dollars, as applicable, using an exchange rate of $0.78830, as in effect on February 26, 2021.

Financing of the Merger

The consummation of the Merger is not subject to any financing conditions. UnitedHealth Group has represented to Change in the Merger Agreement that, as of the closing of the Merger, it will have available to it,

 

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or will cause Merger Sub to have available to it, funds sufficient to consummate the transactions contemplated by the Merger Agreement.

Regulatory Approvals

HSR Approval

Under the HSR Act, the parties cannot complete the Merger until they have given notification of and furnished information to the U.S. Department of Justice (the “DOJ”) and the U.S. Federal Trade Commission (the “FTC”) regarding the Merger, and until the applicable waiting period (and any extension thereof) has expired or has been terminated. On January 19, 2021, the parties filed a Notification and Report Form under the HSR Act. On February 12, 2021, UnitedHealth Group, in consultation with Change, voluntarily withdrew its Notification and Report Form, effective as of February 18, 2021, in order to provide the DOJ and FTC with additional time to review the transaction. On February 22, 2021, UnitedHealth Group re-filed its Notification and Report Form. Accordingly, the waiting period under the HSR Act will expire on March 24, 2021, unless earlier terminated or extended by a request for additional information and documentary material from the DOJ or FTC. At any time before or after consummation of the Merger, the DOJ or FTC, or any state, could take such action under antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of Change or UnitedHealth Group or their respective subsidiaries. Private parties may also seek to take legal action under antitrust laws against to prevent the Merger under certain circumstances.

Healthcare Regulatory Notifications

Pursuant to health care laws and regulations, or pursuant to certain licenses, license applications or contracts of certain of Change’s subsidiaries, applicable governmental and regulatory authorities may require certain notifications of, or other filings in connection with, the Merger from UnitedHealth Group’s or Change’s regulated businesses or entities. To provide any such notices, UnitedHealth Group or the applicable UnitedHealth Group subsidiary, and in some instances Change or the applicable Change regulated entity, as the case may be, will file statements or other notices, as required by applicable health care laws or regulations or the Change regulated entities’ licenses, license applications or contracts.

General

Each of UnitedHealth Group and Change must use its reasonable best efforts to take all actions necessary or advisable on its part under the Merger Agreement and applicable law to consummate the transactions contemplated by the Merger Agreement as promptly as reasonably practicable after the date of the Merger Agreement (and, in any event, no later than the Outside Date (as defined below)), including making all required filings with governmental entities and seeking all required consents from third parties. In addition to such general efforts, each of UnitedHealth Group and Change must cooperate with each other and use its reasonable best efforts to take all actions necessary or advisable with respect to all antitrust laws to consummate the transactions contemplated by the Merger Agreement, including preparing and submitting documentation to (i) effect the expirations of all waiting periods under applicable antitrust law and (ii) make with and obtain from, as applicable, any governmental antitrust entity, all filings and consents necessary or advisable under antitrust law in order to consummate the transactions contemplated by the Merger Agreement.

While we have no reason to believe it will not be possible to obtain regulatory approvals in a timely manner, there is no certainty that these approvals will be obtained within the period of time contemplated by the Merger Agreement, if at all.

The approval of any regulatory application or completion of regulatory review merely implies the satisfaction of certain regulatory criteria, which do not include review of the Merger from the standpoint of the

 

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adequacy of the consideration to be received by Change stockholders. Further, regulatory approvals or reviews do not constitute an endorsement or recommendation of the Merger.

Litigation Related to the Merger

On February 24, 2021, a putative class action, captioned Krueger v. Change Healthcare Inc., et al., 21-0152, was filed in the Chancery Court for Davidson County, Tennessee against Change and certain of its officers and directors (the “Individual Defendants”). The complaint contends that the Individual Defendants breached their fiduciary duties by allegedly agreeing to an unfair merger following what plaintiff characterizes as an unfair process. The complaint also alleges that the Individual Defendants failed to disclose certain information in the preliminary proxy statement. In addition, the complaint brings a claim against Change for purportedly aiding and abetting the foregoing alleged breaches. Change has not yet responded to the complaint. While Change believes that the putative class action is without merit and plans to vigorously defend itself against the claims, there can be no assurance that Change will prevail in the lawsuit.

Material U.S. Federal Income Tax Consequences of the Merger

The exchange of Change Common Stock for cash in the Merger generally will be a taxable transaction to holders of Change Common Stock for U.S. federal income tax purposes and may also be taxable under state and local and other tax laws. In general, a U.S. holder (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 114) whose shares of Change Common Stock are converted into the right to receive cash in the Merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and the U.S. holder’s adjusted tax basis in such shares at the time of the exchange. Gain or loss will be determined separately for each block of shares of Change Common Stock (i.e., shares of Change Common Stock acquired at the same cost in a single transaction). The determination of the actual tax consequences of the Merger to a holder of Change Common Stock will depend on the holder’s specific situation.

The tax consequences of the Merger to you will depend on your particular circumstances. You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 114 and consult your tax advisors regarding the U.S. federal income tax consequences of the Merger to you in your particular circumstances, as well as tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

Delisting and Deregistration of Change Common Stock

Prior to the closing of the Merger, Change will cooperate with UnitedHealth Group and use reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, necessary or advisable on its part under applicable law, including, the rules and policies of NASDAQ, to enable the delisting by the Surviving Corporation of the shares of Change Common Stock and (if requested by UnitedHealth Group) the TEUs from NASDAQ and the deregistration of the shares under the Exchange Act and (if requested by UnitedHealth Group) the TEUs under the Securities Act, in each case, as promptly as practicable after the Effective Time, but in any event, in the case of the shares, no more than ten days thereafter.

Appraisal Rights

If the Merger is completed, Change stockholders will be entitled to appraisal rights under Section 262 of the DGCL, provided that they strictly comply with the requirements of Section 262 of the DGCL.

Under the DGCL, if you do not wish to accept the Per Share Merger Consideration of $25.75 provided for in the Merger Agreement and if the Merger is completed, you have the right to seek appraisal of your shares of Change Common Stock and to receive payment in cash for the “fair value” of your shares of Change Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as

 

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determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value, provided that you strictly comply with the requirements of Section 262 of the DGCL. The “fair value” of your shares of Change Common Stock as determined by the Delaware Court of Chancery may be more or less than, or the same as, the $25.75 per share that you are otherwise entitled to receive under the terms of the Merger Agreement. These rights are known as appraisal rights. Change stockholders who do not vote in favor of the Merger Proposal and who properly demand appraisal for their shares in compliance with the provisions of Section 262 of the DGCL and who do not thereafter fail to perfect, validly withdraw or otherwise lose such appraisal rights will be entitled to appraisal rights. Strict compliance with the statutory procedures in Section 262 of the DGCL is required. Failure to timely and properly comply with the statutory requirements will result in the loss of your appraisal rights.

This section is intended only as a brief summary of certain provisions of the Delaware statutory procedures that a stockholder must follow in order to demand and perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and the law pertaining to appraisal rights under the DGCL, and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex C to this proxy statement and is incorporated into this proxy statement by reference. The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262 of the DGCL. All references in Section 262 of the DGCL and in this summary to a “stockholder” or a “holder” are to the record holder of the shares of Change Common Stock as to which appraisal rights are asserted.

Under Section 262 of the DGCL, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation must, not less than 20 days before the meeting, notify each of its stockholders who were stockholders of record on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights will be available. A copy of Section 262 of the DGCL must be included with such notice. This proxy statement constitutes Change’s notice to our stockholders that appraisal rights are available in connection with the Merger and the full text of Section 262 of the DGCL is attached to this proxy statement as Annex C, in compliance with the requirements of Section 262 of the DGCL. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 of the DGCL contained in Annex C. Failure to comply timely and properly with the requirements of Section 262 of the DGCL will result in the loss of your appraisal rights under the DGCL. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Change Common Stock, Change believes that if a stockholder is considering exercising such rights, such stockholder should seek the advice of legal and financial advisors.

Any stockholder wishing to demand appraisal of his, her or its shares of Change Common Stock must deliver to Change at the address in the next paragraph below a written demand for appraisal of his, her or its shares of Change Common Stock before the vote is taken to approve the Merger Proposal, which written demand must reasonably inform us of the identity of the stockholder and that the stockholder intends to demand appraisal of his, her or its shares of Change Common Stock. A stockholder’s failure to deliver to Change the written demand for appraisal prior to the taking of the vote on the Merger Proposal at the Special Meeting of stockholders will result in the loss of appraisal rights. A stockholder seeking to perfect appraisal rights must not vote or submit a proxy in favor of the Merger Proposal. A stockholder who submits a proxy and who wishes to exercise appraisal rights must either submit a proxy containing instructions to vote “AGAINST” the Merger Proposal or abstain from voting on the Merger Proposal. Voting against or abstaining from voting or failing to vote on the Merger Proposal by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL. The written demand for appraisal must be in addition to and separate from any proxy or vote on the Merger Proposal. A stockholder seeking to exercise appraisal rights must hold of record the shares of Change Common Stock on the date the written demand for appraisal is made and must continue to hold of record the shares of Change Common Stock through the Effective Time. A stockholder will lose his, her or its appraisal rights if the stockholder transfers the shares for which it is seeking appraisal rights before the Effective Time.

 

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All demands for appraisal should be addressed to Change Healthcare Inc., Attention: General Counsel, 100 Airpark Center Drive East, Nashville, Tennessee 37217, and may also be submitted via email to corporatesecretary@changehealthcare.com. All demands for appraisal must be delivered to Change before the vote is taken to approve the Merger Proposal at the Special Meeting, and must be executed by, or on behalf of, the record holder of the shares of Change Common Stock.

Only a holder of record of shares of Change Common Stock is entitled to demand an appraisal of the shares registered in that holder’s name. Accordingly, a demand for appraisal must be executed by or on behalf of the record stockholder. The demand should set forth, fully and correctly, the record stockholder’s name as it appears in the transfer agent’s records and in the case of uncertificated shares, should specify the stockholder’s mailing address and the number of shares registered in the stockholder’s name. The demand must state that the stockholder intends to demand appraisal of the stockholder’s shares in connection with the Merger. The demand cannot be made by the beneficial owner if he, she or it is not also the stockholder of record of such shares of Change Common Stock. A beneficial owner of shares of Change Common Stock held in “street name” who wishes to exercise appraisal rights should take such actions as may be necessary to ensure that a timely and proper demand for appraisal is made by the record holder of the shares. The beneficial holder must have the applicable stockholder of record, such as a bank, brokerage firm or other nominee, submit the required demand in respect of those shares of Change Common Stock. If the shares are held through a brokerage firm, bank or other nominee that in turn holds the shares through a central securities depository nominee, a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as the record stockholder. If you hold your shares of Change Common Stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee and obtaining notice of the Effective Time.

If shares of Change Common Stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal must be made in that capacity. If the shares of Change Common Stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand must be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner or owners. A stockholder of record, such as a bank, brokerage firm or other nominee, who holds shares of Change Common Stock as a nominee for others, may exercise his, her or its right of appraisal with respect to the shares of Change Common Stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares of Change Common Stock as to which appraisal is sought. Where no number of shares of Change Common Stock is expressly mentioned, the demand will be presumed to cover all shares of Change Common Stock held in the name of the stockholder of record. If a stockholder holds shares of Change Common Stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as stockholder of record. Stockholders who hold their shares in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers or other nominees to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

Within 10 days after the Effective Time, the Surviving Corporation must give notice of the date that the Merger became effective to each of Change’s record stockholders who has submitted a demand in compliance with Section 262 of the DGCL and who did not vote in favor of the Merger Proposal. At any time within 60 days after the Effective Time, any stockholder who has not commenced an appraisal proceeding or joined a proceeding as a named party may withdraw the stockholder’s demand for appraisal and accept the consideration specified by the Merger Agreement for that stockholder’s shares of Change Common Stock by delivering to the Surviving Corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of Change, as the

 

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Surviving Corporation. Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however that the foregoing will not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the consideration specified by the Merger Agreement within 60 days after the Effective Time. If a petition for appraisal is filed and the Surviving Corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s right to appraisal in accordance with the proviso in the immediately preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only payment of the “fair value” of such stockholder’s shares of Change Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value. The fair value of the shares of Change Common Stock determined in any such appraisal proceeding could be less than, equal to or more than the consideration offered pursuant to the Merger Agreement.

Within 120 days after the Effective Time, but not thereafter, either the Surviving Corporation or any stockholder who has complied with the requirements of Section 262 of the DGCL and is entitled to appraisal rights under Section 262 of the DGCL may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of Change Common Stock held by all such stockholders. Upon the filing of the petition by a stockholder, service of a copy of such petition will be made upon the Surviving Corporation. None of UnitedHealth Group, Merger Sub or Change, as the Surviving Corporation, has any obligation to file such a petition or has any present intention to file such a petition, and holders should not assume that any of the foregoing will file a petition. If a petition for appraisal is not timely filed, then the right to appraisal will cease. Accordingly, it is the obligation of the holders of Change Common Stock to initiate all necessary petitions to perfect their appraisal rights in respect of shares of Change Common Stock within the time prescribed in Section 262 of the DGCL and the failure of a stockholder to file such a petition within the period specified in Section 262 of the DGCL will result in the loss of appraisal rights.

Any stockholder who has properly complied with the requirements of Section 262 of the DGCL and who did not vote in favor of the Merger Proposal is, within 120 days after the Effective Time, entitled upon written request to receive from the Surviving Corporation a statement setting forth the aggregate number of shares of Change Common Stock not voted in favor of the Merger Proposal and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be given within 10 days after such written request has been received by the Surviving Corporation or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A person who is the beneficial owner of shares of Change Common Stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal or request from the Surviving Corporation such statement.

If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to the Surviving Corporation, then the Surviving Corporation will be obligated, within 20 days after receiving service of a copy of the petition, to file with the Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares of Change Common Stock and with whom agreements as to the value of their shares of Change Common Stock have not been reached by Change, as the Surviving Corporation. After notice to stockholders who have demanded appraisal from the Register in Chancery, if such notice is ordered by the Delaware Court of Chancery, the Delaware Court of Chancery will conduct a hearing upon the petition and determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to the appraisal rights provided by Section 262 of the DGCL. Notwithstanding the foregoing, upon application by the Surviving Corporation or any stockholder entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial on the appraisal prior to final determination of the stockholders entitled to an appraisal. The Delaware Court of

 

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Chancery may require stockholders who have demanded payment for their shares of Change Common Stock and who hold shares of Change Common Stock in certificated form to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings; and if any stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder. In addition, the Delaware Court of Chancery will dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares of Change Common Stock entitled to appraisal exceeds 1% of the outstanding shares of Change Common Stock, or (2) the value of the consideration provided in the Merger for such total number of shares of Change Common Stock exceeds $1,000,000.

The Delaware Court of Chancery will then conduct an appraisal proceeding to determine the fair value of the shares of Change Common Stock as of the Effective Time exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. When the fair value has been determined, the Delaware Court of Chancery will direct the payment of such value, together with interest, if any, on the amount so determined to be the fair value by the Surviving Corporation to the stockholders entitled thereto. Payment will be so made to holders of shares represented by certificates upon surrender to the Surviving Corporation of the certificates representing such stock and, in the case of holders of uncertificated stock, forthwith. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the Surviving Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest will accrue thereafter as provided herein only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time.

You should be aware that an investment banking opinion as to the fairness from a financial point of view of the consideration to be received in a sale transaction, such as the Merger, is not an opinion as to fair value under Section 262 of the DGCL. Although we believe that the Per Share Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Per Share Merger Consideration. Moreover, none of UnitedHealth Group, Merger Sub or Change, as the Surviving Corporation, anticipates offering more than the Per Share Merger Consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262 of the DGCL, the “fair value” of a share of Change Common Stock is less than or equal to the Merger consideration. In determining “fair value,” the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.”

Costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable in the circumstances. Upon the application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal

 

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proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts used in the appraisal proceeding, to be charged pro rata against the value of all shares of Change Common Stock entitled to appraisal. Any stockholder who demanded appraisal rights will not, after the Effective Time, be entitled to vote shares of Change Common Stock subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares of Change Common Stock, other than with respect to payment as of a record date prior to the Effective Time. If no petition for appraisal is filed within 120 days after the Effective Time, or if the stockholder otherwise fails to perfect, validly withdraws or otherwise loses such holder’s right to appraisal, then the right of that stockholder to appraisal will cease and that stockholder’s shares of Change Common Stock will be deemed to have been converted at the Effective Time into the right to receive the $25.75 per share cash payment (without interest and subject to any applicable withholding taxes) for his, her or its shares of Change Common Stock pursuant to the Merger Agreement.

Failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL will result in the loss of a stockholder’s appraisal rights.

In view of the complexity of Section 262 of the DGCL, Change stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors. To the extent there are any inconsistencies between the foregoing summary and Section 262 of the DGCL, Section 262 of the DGCL will govern.

 

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THE MERGER AGREEMENT

The following discussion sets forth the material provisions of the Merger Agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the Merger Agreement and not by this discussion, which is summary by nature. This discussion is not complete and is qualified in its entirety by reference to the complete text of the Merger Agreement. You are encouraged to read the Merger Agreement carefully and in its entirety, as well as this proxy statement and any documents incorporated by reference herein, before making any decisions regarding the Merger. This section is not intended to provide you with any factual information about us. Such information can be found elsewhere in this proxy statement and in the public filings we make with the SEC, as described in the section entitled “Where You Can Find More Information,” beginning on page 119.

The Merger

Upon the terms and subject to the conditions of the Merger Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub will merge with and into Change, the separate corporate existence of Merger Sub will cease, and Change will continue as the surviving corporation and a wholly-owned subsidiary of UnitedHealth Group. The Merger will have the effects set forth in the Merger Agreement and the relevant provisions of the DGCL.

Closing and Effectiveness of the Merger

The closing of the Merger (the “Closing”) will take place by remote communication and by the exchange of signatures by electronic transmission or, if or to the extent such exchange is not practicable or the parties otherwise agree in writing, at a Closing to be held at the offices of Sullivan & Cromwell LLP, 125 Broad Street, New York, New York 10004, at 9:00 a.m. (New York time) on the third business day following the satisfaction or waiver of the conditions to Closing described below under “Closing Conditions” (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at the Closing) or at such other date, time and place as Change and UnitedHealth Group may agree in writing.

As promptly as practicable following the Closing, but on the Closing Date, the parties will cause a certificate of merger relating to the Merger to be duly executed and filed with the Secretary of State of the State of Delaware as provided in Section 251 of the DGCL. The Merger will become effective at the time the certificate of merger with respect to the Merger is executed and filed with the Secretary of State of the State of Delaware or at such later time as UnitedHealth Group and Change agree upon in writing and specify in the certificate of merger so executed and filed.

Effect of the Merger on Change Common Stock

At the Effective Time, each share of Change Common Stock issued and outstanding immediately prior to the Effective Time (other than any Restricted Shares and Excluded Shares) will be automatically converted into the right to receive the Per Share Merger Consideration. From and after the Effective Time, each such share that became entitled to receive the Per Share Merger Consideration pursuant to the Merger (each, an “Eligible Share”) will cease to be outstanding, will be cancelled and will cease to exist and will thereafter only represent the right to receive the Per Share Merger Consideration. At the Effective Time, each Excluded Share will cease to be outstanding, will be cancelled without payment of any consideration therefor and will cease to exist, subject to any rights that stockholders holding Dissenting Shares may have with respect to such Dissenting Shares. Appraisal rights are discussed in detail above under “The Merger Proposal (Proposal 1)—Appraisal Rights”.

Exchange Procedures

At or prior to the Effective Time, UnitedHealth Group will deposit with a paying agent an amount in cash sufficient in the aggregate to provide all funds necessary for the paying agent to make payments in respect of the

 

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Eligible Shares (such cash, the “Exchange Fund”). Pursuant to a paying agent agreement to be entered into prior to the Closing, the paying agent will act as the paying agent for the payment and delivery of the Per Share Merger Consideration and invest the Exchange Fund, if and as directed by UnitedHealth Group.

As promptly as practicable after the Effective Time (but in any event within five business days thereafter), the paying agent will mail or otherwise provide each holder of record of Eligible Shares that are (i) represented by a certificate or (ii) book-entry shares not held, directly or indirectly, through DTC notice advising such holders of the effectiveness of the Merger, which notice will include (A) appropriate transmittal materials (including a customary letter of transmittal) specifying that delivery will be effected, and risk of loss and title to the certificates or such book-entry shares will pass only upon delivery of the certificates (or affidavits of loss in lieu of the certificates) or the surrender of such book-entry shares to the paying agent (which will be deemed to have been effected upon the delivery of a customary “agent’s message” with respect to such book-entry shares or such other reasonable evidence, if any, of such surrender as the paying agent may reasonably request pursuant to the terms and conditions of the paying agent agreement), as applicable, and (B) instructions for effecting the surrender of the certificates (or affidavits of loss in lieu of the certificates) or such book-entry shares to the paying agent in exchange for the Per Share Merger Consideration that such holder is entitled to receive as a result of the Merger.

With respect to book-entry shares held, directly or indirectly, through DTC, the parties will cooperate to establish procedures with the paying agent, DTC, DTC’s nominees and such other necessary or desirable third-party intermediaries to ensure that the paying agent will transmit to DTC or its nominees as promptly as practicable after the Effective Time, upon surrender of Eligible Shares held of record by DTC or its nominees in accordance with DTC’s customary surrender procedures and such other procedures as agreed by the parties, the paying agent, DTC, DTC’s nominees and such other necessary or desirable third-party intermediaries, the Per Share Merger Consideration which the beneficial owners thereof are entitled to receive as a result of the Merger.

Upon surrender to the paying agent of Eligible Shares that (i) are represented by a certificate, by physical surrender of such certificate (or affidavits of loss in lieu of the certificate) together with the letter of transmittal, duly completed and executed, and such other documents as may be reasonably required by the paying agent in accordance with the terms of the materials and instructions provided by the paying agent, (ii) are book-entry shares not held through DTC, by book-receipt of an “agent’s message” by the paying agent in connection with the surrender of book-entry shares (or such other reasonable evidence, if any, of surrender with respect to such book-entry shares, as the paying agent may reasonably request pursuant to the terms and conditions of the paying agent agreement), in each case of the foregoing clauses (i) and (ii), pursuant to such materials and instructions as contemplated by the second paragraph of this section entitled “Exchange Procedures”, and (iii) are book-entry shares held, directly or indirectly, through DTC, in accordance with DTC’s customary surrender procedures and such other procedures as agreed by the parties, the paying agent, DTC, DTC’s nominees and such other necessary or desirable third-party intermediaries, the holder of the Eligible Shares represented by such certificate or book-entry share will be entitled to receive in exchange therefor, and UnitedHealth Group will cause the paying agent to pay and deliver, out of the Exchange Fund, as promptly as practicable to such holders, an amount in cash in immediately available funds (after giving effect to any required tax withholdings) equal to the product obtained by multiplying (A) the number of Eligible Shares represented by such certificates (or affidavits of loss in lieu of the certificates) or such book-entry shares by (B) the Per Share Merger Consideration, and each certificate so surrendered will forthwith be cancelled.

In the event of a transfer of ownership of any Eligible Shares represented by a certificate that is not registered in the stock transfer books or ledger of Change or if the consideration payable is to be paid in a name other than that in which the certificate or certificates surrendered or transferred in exchange therefor are registered in Change’s stock transfer books or ledger, a check for any cash to be exchanged upon due surrender of any such certificate or certificates (or affidavits of loss in lieu of the certificate) may be issued by the paying agent to such a transferee if the certificate or certificates is or are (as applicable) properly endorsed and otherwise in proper form for surrender and presented to the paying agent, accompanied by all documents required to

 

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evidence and effect such transfer and to evidence that any applicable transfer taxes have been paid or are not applicable, in each case, in form and substance, reasonably satisfactory to UnitedHealth Group and the paying agent. Payment of the Per Share Merger Consideration with respect to book-entry shares will only be made to the person or entity in whose name such book-entry shares are registered in the stock transfer books or ledger of Change.

From and after the Effective Time, Change’s stock transfer books will be closed, and thereafter there will be no transfers of shares on the stock transfer books or ledger of Change. The Per Share Merger Consideration paid in accordance with the terms of the Merger Agreement will be deemed to have been delivered and paid in full satisfaction of all rights pertaining to any Eligible Shares. From and after the Effective Time, the holders of shares outstanding immediately prior to the Effective Time will, subject to the rights of any holders of Dissenting Shares with respect to such Dissenting Shares, cease to have any rights with respect to such shares or as stockholders of Change except the right to receive the Per Share Merger Consideration, without interest thereon, into which the shares have been converted. If, after the Effective Time, any certificate or acceptable evidence of a book-entry share is presented to the Surviving Corporation, UnitedHealth Group or the paying agent for transfer, it will be cancelled and exchanged for the cash amount in immediately available funds to which the holder thereof is entitled to receive as a result of the Merger.

Any portion of the Exchange Fund (including any interest and other income resulting from any investments thereof (if any)) that remains unclaimed by the holders of Eligible Shares for 270 days from and after the Closing Date will be delivered to UnitedHealth Group or the Surviving Corporation, as determined by UnitedHealth Group. Any holder of Eligible Shares who has not theretofore complied with the procedures, materials and instructions contemplated by the Merger Agreement will thereafter look only to the Surviving Corporation as a general creditor thereof for such payments (after giving effect to any required tax withholdings) in respect thereof. None of the Surviving Corporation, UnitedHealth Group, the paying agent or any other person or entity will be liable to any former holder of shares or Change equity awards for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

In the event any certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person or entity claiming such certificate to be lost, stolen or destroyed and, if required by UnitedHealth Group or the paying agent pursuant to the paying agent agreement or otherwise, the posting by such person or entity of a bond in customary amount and upon such terms as may be reasonably required by UnitedHealth Group or the paying agent pursuant to the paying agent agreement or otherwise as indemnity against any claim that may be made against it or the Surviving Corporation with respect to such certificate, the paying agent will, in exchange for such certificate, issue a check in the amount (after giving effect to any required tax withholdings) equal to the product obtained by multiplying (i) the number of Eligible Shares represented by such lost, stolen or destroyed certificate by (ii) the Per Share Merger Consideration.

Each of UnitedHealth Group, the Surviving Corporation and the paying agent (and any of their respective affiliates) will be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Merger Agreement to any person or entity such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any other applicable tax law. To the extent that amounts are so withheld, such withheld amounts (i) will be remitted to the applicable governmental entity, and (ii) will be treated for all purposes of the Merger Agreement as having been paid to the person or entity in respect of which such deduction and withholding was made.    

Treatment of Change Equity Awards

At the Effective Time, Change equity-based awards outstanding immediately prior to the Effective Time will generally be subject to the following treatment:

 

   

Each Change Option, whether vested or unvested, will automatically be converted into an option to purchase a number of UnitedHealth Group Shares equal to the product (with the result rounded down

 

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to the nearest whole share) of (1) the number of shares of Change common stock subject to such Change Option immediately prior to the Effective Time multiplied by (2) the Equity Award Exchange Ratio. The Equity Award Exchange Ratio is the quotient of (a) the Per Share Merger Consideration divided by (b) the volume weighted average of the closing sale prices per UnitedHealth Group Share for the five full consecutive trading days ending on and including the third business day prior to the Closing. The exercise price per UnitedHealth Group Share after the conversion will be equal to the quotient (with the result rounded up to the nearest whole cent) of (i) the exercise price per share of Change Common Stock of such Change Option immediately prior to the Effective Time divided by (ii) the Equity Award Exchange Ratio. Any unvested time-based stock options will vest in full at the Closing. Any stock options subject to vesting conditions based upon receipt of cash proceeds upon disposition of a certain percentage of shares by certain stockholders of Change at a weighted average price per share that is at least equal to a specified weighted average price per share set forth in the applicable award agreement will roll over into time-based stock options denominated in UnitedHealth Group Shares, and will vest in three equal installments at the Effective Time, the first anniversary of the Effective Time and the second anniversary of the Effective Time, respectively.

 

   

Each Restricted Share subject to vesting conditions based upon receipt of cash proceeds by certain stockholders of Change at a weighted average price per share that (1) is at least equal to a specified weighted average price per share set forth in the applicable award agreement or (2) results in an annual internal rate of return at the level set forth in the applicable award agreement (the “Exit-Vesting Conditions”) that fully vests at the consummation of the Merger pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will automatically be converted into the right to receive the Per Share Merger Consideration, less any withholding taxes (provided, that if the Exit-Vesting Conditions are not satisfied in connection with the Merger, the Restricted Shares will be cancelled and forfeited at the Effective Time for no consideration or payment). We anticipate that the Exit-Vesting Conditions will be fully satisfied prior to, or in connection with, the Merger.

 

   

Each RSU, whether vested or unvested, will automatically be converted into a UnitedHealth Group RSU based on the Equity Award Exchange Ratio, with the number of UnitedHealth Group Shares subject to such UnitedHealth Group RSU equal to the product of (1) (a) in the case of a service-based RSU, the total number of shares subject to such RSU immediately prior to the Closing or (b) in the case of a performance-based RSU, the number of shares subject to such RSU based on target performance multiplied by (2) the Equity Award Exchange Ratio.

 

   

Each RSU subject to the Exit-Vesting Conditions that fully vests at the consummation of the Merger pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will automatically be converted into a UnitedHealth Group RSU based on the Equity Award Exchange Ratio, with the number of UnitedHealth Group Shares subject to such UnitedHealth Group RSU equal to the product of (1) the total number of shares subject to such RSU immediately prior to the Closing multiplied by (2) the Equity Award Exchange Ratio (provided, that if the Exit-Vesting Conditions are not satisfied in connection with the consummation of the Merger, any RSUs subject to the Exit-Vesting Conditions will be cancelled and forfeited at the Effective Time for no consideration or payment). We anticipate that the Exit-Vesting Conditions will be fully satisfied prior to, or in connection with, the Merger.

 

   

Each SAR, whether vested or unvested, will automatically be converted into a UnitedHealth Group SAR denominated in a number of UnitedHealth Group Shares equal to (1) the product (rounded down to the nearest whole number) of (a) the total number of shares subject to such SAR immediately prior to the Effective Time multiplied by (b) the Equity Award Exchange Ratio, (2) at an exercise price per share (rounded up to the nearest whole cent) equal to (a) the exercise price per share of the shares subject to such SAR immediately prior to the Effective Time divided by (b) the Equity Award Exchange Ratio.

 

   

Each SAR subject to the Exit-Vesting Conditions that fully vests at the consummation of the Merger pursuant to its terms and conditions as in effect as of the date of the Merger Agreement will

 

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automatically be converted into a SAR denominated in a number of UnitedHealth Group Shares equal to (1) the product (rounded down to the nearest whole number) of (a) the total number of shares subject to such SAR immediately prior to the Effective Time multiplied by (b) the Equity Award Exchange Ratio, (2) at an exercise price per share (rounded up to the nearest whole cent) equal to (a) the exercise price per share of the shares subject to such SAR immediately prior to the Effective Time divided by (b) the Equity Award Exchange Ratio (provided, that if the Exit-Vesting Conditions are not satisfied in connection with the consummation of the Merger, any SAR award subject to the Exit-Vesting Conditions will be cancelled and forfeited at the Effective Time for no consideration or payment). We anticipate that the Exit-Vesting Conditions will be fully satisfied prior to, or in connection with, the Merger.

 

   

Each DSU, whether vested or unvested, will automatically be converted into a UnitedHealth Group DSU denominated in a number of UnitedHealth Group Shares equal to the product (rounded down to the nearest whole number) of (1) the total number of shares subject to such DSU immediately prior to the consummation of the Merger multiplied by (2) the Equity Award Exchange Ratio. DSUs are only held by our non-employee directors.

Change equity-based awards that convert into equity-based awards denominated in UnitedHealth Group Shares will generally be subject to the same terms and conditions (including, as applicable, vesting, exercise and settlement) as applied to such award immediately prior to the Effective Time, except to the extent such terms and conditions are rendered inoperative by the Merger or with respect to such other changes that are necessary for the administration of the awards and that are not materially detrimental to the holder of the award.

The foregoing equity-based award treatment is subject to the terms of any employment or individual award agreement providing for accelerated vesting upon a change in control of Change. In particular, the terms of these equity-based awards provide that awards held by an employee of Change will become fully vested if, during the 12-month period following the Effective Time, the employee’s employment is terminated by the Company without “cause” (or, with respect to selected employees, including our executive officers, if the employee’s employment is terminated as a result of the resignation by the employee for “good reason”).

Representations and Warranties

The Merger Agreement contains representations and warranties made by Change to UnitedHealth Group and Merger Sub, on the one hand, and by UnitedHealth Group and Merger Sub to Change, on the other hand. Such representations and warranties (i) were made solely for the benefit of the parties to the Merger Agreement; (ii) are subject to limitations agreed upon by the parties; (iii) are not intended to be treated as categorical statements of fact, but rather as a way of allocating contractual risk among the parties; (iv) may be subject to standards of materiality applicable to the parties that differ from what might be viewed as material to stockholders; (v) are qualified by (A) information in confidential disclosure schedules delivered to UnitedHealth Group by Change concurrently with the execution and delivery of the Merger Agreement (the “Change Disclosure Letter”), which contain information that modify, qualify and create exceptions to the representations and warranties set forth in the Merger Agreement, and (B) information contained in Change’s SEC reports on or after October 26, 2018 until the date of the Merger Agreement and UnitedHealth Group’s SEC reports on or after March 31, 2017 until the date of the Merger Agreement; and (vi) were made only as of the date of the Merger Agreement or such other date or dates as may be specified in the Merger Agreement. Accordingly, investors and others should not rely on the representations and warranties, or any descriptions thereof, as characterizations of the actual state of facts or condition of Change, UnitedHealth Group or any of their respective subsidiaries or affiliates.

Change’s representations and warranties relate to, among other things:

 

   

Corporate organization, existence and good standing; corporate power and authority to own or lease assets and conduct business; qualification to conduct business; organizational documents; jurisdictions in which qualified to do business;

 

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Capitalization; absence of voting debt securities; registered securities; employee equity awards; ownership of subsidiaries; validity of securities issued; absence of preemptive and similar rights;

 

   

Corporate power and authority to enter into the Merger Agreement and consummate the Merger; due execution of the Merger Agreement; enforceability of the Merger Agreement;

 

   

Approval of the Merger Agreement by the Board; making of Board Recommendation by the Board; receipt of the fairness opinion of Goldman Sachs;

 

   

Absence of governmental filings, notices and consents;

 

   

Absence of conflicts with organizational documents, applicable laws and contracts with third parties;

 

   

Compliance with laws and absence of governmental investigations; validity of licenses; absence of violations of anti-corruption, anti-bribery, sanctions and similar laws;

 

   

Timeliness and accuracy of SEC reports, including financial statements included therein;

 

   

Disclosure controls and procedures and internal control over financial reporting;

 

   

Financial statements, absence of undisclosed liabilities and absence of off-balance sheet arrangements;

 

   

Absence of litigation and governmental orders;

 

   

Absence of certain changes, including any Material Adverse Effect (as defined below), since March 31, 2020;

 

   

Material contracts;

 

   

Material customers and material vendors;

 

   

Employee benefits;

 

   

Labor matters;

 

   

Environmental matters;

 

   

Tax matters;

 

   

Real property;

 

   

Intellectual property, information technology and data security;

 

   

HIPAA compliance;

 

   

FDA compliance;

 

   

Compliance with healthcare laws;

 

   

Insurance;

 

   

Inapplicability of takeover statutes;

 

   

Absence of brokers or finders; and

 

   

Absence of other representations and warranties.

Certain of Change’s representations and warranties are qualified as to “materiality” or “Material Adverse Effect”. “Material Adverse Effect” means any result, condition, event, change, development, circumstance, fact or effect that, individually or taken together with any other events, changes, developments, circumstances, facts or effects, (i) would, or would reasonably be expected to, prevent, materially delay or materially impair the ability of Change or any of its subsidiaries to consummate the transactions contemplated by the Merger Agreement, or (ii) would have, or would reasonably be expected to have, a materially adverse effect on the condition (financial or otherwise), properties, assets, liabilities (contingent or otherwise), business operations or

 

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results of operations of Change and its subsidiaries (taken as a whole); provided, however, that solely for purposes of this clause (ii), none of the following, either alone or in combination, will constitute a Material Adverse Effect or be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur:

(a) results, conditions, events, changes, developments, circumstances, facts or effects in or with respect to the economy, credit, capital, securities or financial markets (including changes in interest rates or currency exchange rates) or political, regulatory or business conditions in the geographic markets in which Change or any of its subsidiaries operate or their products or services are sold, in each case, occurring after the date of the Merger Agreement;

(b) results, conditions, events, changes, developments, circumstances, facts or effects that generally affect other participants in Change’s or its subsidiaries’ industry or industries, in each case, occurring after the date of the Merger Agreement and only to the extent also occurring in the applicable geographic markets in which Change or any of its subsidiaries operate or where their products or services are sold;

(c) the negotiation, execution, performance, public announcement or pendency of the Merger Agreement or the transactions contemplated thereby, or any result, condition, event, change, development, circumstance, fact or effect resulting therefrom, including any loss of employees, customers or revenue to the extent arising from the identity of UnitedHealth Group as the acquiror of Change (provided, that this clause (c) 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 party’s obligations thereunder or the consummation of the transactions contemplated by the Merger Agreement);

(d) any term, condition, obligation, requirement, limitation, prohibition, remedy, sanction or other action imposed upon UnitedHealth Group, Change or any of their respective subsidiaries in connection with effecting the expiration of any waiting period (and any extension thereof) under any antitrust law applicable to the consummation of the transactions contemplated by the Merger Agreement or obtaining from a governmental antitrust entity any consent, approval, permit or authorization, in each case in accordance with and to the extent contemplated by the Merger Agreement;

(e) changes in GAAP or in any applicable law, in each case, occurring after the date of the Merger Agreement;

(f) any failure by Change to meet any internal or public projections or forecasts or estimates of revenues or earnings; provided that any event, change, development, circumstance, fact or effect underlying such failure (unless otherwise excluded by clauses (a), (b), (c), (d), (e), (g) or (h)) may be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur;

(g) acts of war (whether or not declared), sabotage, terrorism, military or para-military actions or the escalation of any of the foregoing (other than any cyberattack targeted principally at Change or any of its subsidiaries), any weather event or natural disaster, or any outbreak of illness, pandemic (including COVID-19) or other public health event, in each case, occurring after the date of the Merger Agreement, and any results, conditions, events, changes, developments, circumstances, facts or effects resulting therefrom; or

(h) any actions or non-actions (1) expressly required to be taken or expressly required to be not taken by Change or any of its subsidiaries pursuant to the Merger Agreement (except for any obligation to operate in the ordinary course of business), (2) taken or not taken by Change or any of its subsidiaries at UnitedHealth Group’s written request or (3) taken or not taken by Change or any of its subsidiaries to the extent such actions or non-actions are required by applicable law. Notwithstanding the foregoing, with respect to clauses (a), (b), (e) and (g) above, such events, changes, developments, circumstances, facts or effects (as the case may be) will be taken into account in determining whether a “Material Adverse Effect” has occurred or would reasonably be

 

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expected to occur to the extent, and only to the extent, that they disproportionately adversely affect Change and its subsidiaries (taken as a whole) relative to healthcare industry peer companies of Change and its material subsidiaries.

UnitedHealth Group’s and Merger Sub’s representations and warranties relate to, among other things:

 

   

Corporate organization, existence and good standing; corporate power and authority to own or lease assets and conduct business; qualification to conduct business; organizational documents;

 

   

Capitalization of Merger Sub;

 

   

Corporate power and authority to enter into the Merger Agreement and consummate the Merger; due execution of the Merger Agreement; enforceability of the Merger Agreement;

 

   

Absence of governmental filings, notices and consents;

 

   

Absence of conflicts with organizational documents, applicable laws and contracts with third parties;

 

   

Absence of litigation and governmental orders;

 

   

Sufficiency of funds;

 

   

Absence of brokers or finders;

 

   

Ownership of Change Common Stock;

 

   

Absence of certain arrangements with Change stockholders, directors or officers;

 

   

Accuracy of information supplied for this proxy statement;

 

   

The representation letter described below under “Cooperation Regarding Tax Matters”; and

 

   

Absence of other representations and warranties.

Certain of UnitedHealth Group’s and Merger Sub’s representations and warranties are qualified as to “materiality” or by exceptions related to the absence of any circumstances which would or would reasonably be expected to prevent, materially delay or materially impair the ability of UnitedHealth Group or Merger Sub to consummate the transactions contemplated by the Merger Agreement.

The representations and warranties of the parties in the Merger Agreement will not survive the Closing or the termination of the Merger Agreement, as applicable; provided that, except as described in clause (iii) of the last paragraph under “Termination Fee” below, the foregoing will not relieve any party of any liability for its fraud or knowing and intentional breach of the Merger Agreement.

Conduct of Business Pending the Merger

The Merger Agreement provides for certain restrictions on the conduct of Change’s and its subsidiaries’ respective businesses during the Interim Period.

During the Interim Period, except (1) as UnitedHealth Group otherwise approves in writing (such approval not to be unreasonably withheld, conditioned or delayed), (2) as otherwise expressly contemplated or required by the Merger Agreement, (3) as required by applicable law, (4) as set forth in the Change Disclosure Letter or (5) for commercially reasonable actions as reasonably required to comply with or implement COVID-19 Measures (as defined below), Change and its subsidiaries must conduct their respective businesses in the ordinary course of business and use their respective reasonable best efforts to conduct their respective businesses in accordance with applicable law and maintain their respective businesses and assets and relations and goodwill with governmental entities, customers, suppliers, licensors, licensees, distributors, creditors, lessors, employees, agents and business associates.

 

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Without limiting the foregoing, during the Interim Period, except (I) as otherwise expressly contemplated or required by the Merger Agreement, (II) as required by applicable law, (III) as approved in writing by UnitedHealth Group (such approval not to be unreasonably withheld, conditioned or delayed, except that UnitedHealth Group may withhold, condition or delay approval of actions contemplated by clauses (iii) or (iv) below in its sole discretion), (IV) as set forth in the Change Disclosure Letter or (V) for commercially reasonable actions in deviation of the prohibitions set forth in clauses (xii) (subject to certain additional restrictions set forth in the Merger Agreement) or (xvii) below to the extent reasonably required to comply with or implement COVID-19 Measures, Change and its subsidiaries must not:

(i) adopt or publicly propose any change in Change’s organizational documents (other than to correct scrivener’s errors or immaterial or ministerial amendments);

(ii) (A) merge or consolidate Change or any of its subsidiaries with any other entity, except for any such transactions among wholly owned subsidiaries, or (B) solely with respect to Change and its wholly owned subsidiaries, restructure, reorganize, recapitalize or completely or partially liquidate or dissolve (provided, that Change may effect or cause to be effected the actions referred to in this clause (ii) to the extent they involve only Change’s wholly owned subsidiaries and are reasonably required to be undertaken to effectuate transactions otherwise permitted under clauses (iii) or (iv) below);

(iii) acquire, directly or indirectly, by merger, consolidation, acquisition of stock or assets or otherwise, any business, entity or assets from any other entity or person with a fair market value or purchase price in excess of $30,000,000 in any individual transaction or series of related transactions or $75,000,000 in the aggregate, in each case, including any amounts or value reasonably expected to be paid in connection with a future earn-out, purchase price adjustment, release of “holdback” or similar contingent payment obligation;

(iv) transfer, sell, lease to a third party, divest, abandon, allow to expire, license to a third party, outsource to a third party or otherwise dispose of, or grant any encumbrance (other than any permitted encumbrance) upon, any properties or assets (tangible or intangible, including any intellectual property rights), product lines or businesses of Change or any of its subsidiaries, including capital stock of any of its subsidiaries, except (A) other than with respect to intellectual property rights and outsourcing, in connection with services provided in the ordinary course of business, (B) expiration, abandonment or sales of obsolete or unused assets in the ordinary course of business, (C) sales, leases, licenses, outsourcing or other dispositions of assets with a fair market value not in excess of $10,000,000 individually or $25,000,000 in the aggregate, (D) with respect to licenses of intellectual property rights, non-exclusive grants of licenses in the ordinary course of business and (E) the grant of encumbrances to secure indebtedness permitted by clause (ix) below;

(v) issue, sell, pledge, dispose of, grant, transfer, lease to a third party, license to a third party, guarantee, encumber or enter into any contract or other agreement, understanding or arrangement (whether oral or written) with respect to the voting of, any shares of capital stock of Change (including, for the avoidance of doubt, shares) or of any of its subsidiaries, securities convertible or exchangeable into or exercisable for any such shares of capital stock, or any options, warrants or other rights of any kind to acquire any such shares of capital stock or such convertible or exchangeable securities (other than (A) proxies or voting agreements solicited by or on behalf of Change in order to obtain the Requisite Vote and any other votes or consents required at the Special Meeting or in connection with any annual meeting of Change’s stockholders) or (B) issuances (1) by a wholly owned subsidiary of Change to Change or another wholly owned subsidiary of Change, (2) solely with respect to shares of capital stock of Change’s non-wholly owned subsidiaries, in connection with joint ventures, minority investments, venture capital investments or similar transactions permitted by clause (iii) above or clause (vi) below, (3) in respect of Change equity awards and issuances under Change’s stock plans in the ordinary course of business or (4) pursuant to Change’s employee stock purchase plan in accordance with its terms and subject to other provisions contained in the Merger Agreement);

(vi) make any loans, advances, guarantees or capital contributions to or investments in any entity or person (other than (A) to or from Change and any of its wholly owned subsidiaries or (B) for indemnification or

 

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advancements to any directors, officers or other fiduciaries of Change or any of its subsidiaries pursuant to any of their respective organizational documents or any contracts with such entities or persons, in either case in effect as of the date of the Merger Agreement) outside the ordinary course of business in excess of $10,000,000 individually or $40,000,000 in the aggregate;

(vii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (including with respect to Change, for the avoidance of doubt, shares), except for cash dividends paid by any subsidiary to Change or to any other subsidiary of Change;

(viii) solely with respect to Change and its material subsidiaries, reclassify, split, combine, subdivide or redeem, purchase or otherwise acquire or offer to redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock (provided, that Change may effect or cause to be effected the actions referred to in this clause (viii) to the extent they involve only Change’s wholly owned subsidiaries and are reasonably required to be undertaken to effectuate transactions otherwise permitted under clauses (iii) or (iv) above);

(ix) assume, guarantee, issue or incur any indebtedness (including the issuance of any debt securities or any warrants or other rights to acquire any debt security) or enter into any hedging agreements, except for (subject, in each case, to clause (xii) below) (A) (1) indebtedness for borrowed money or evidenced by bonds, debentures, notes or similar instruments, in each case in the ordinary course of business up to $75,000,000, and (2) other indebtedness in the ordinary course of business up to $25,000,000, (B) drawdowns under the Credit Agreement (as defined below), (C) guarantees of indebtedness of its wholly owned subsidiaries otherwise incurred in compliance with the interim operating covenants, (D) indebtedness between Change and any of its wholly owned subsidiaries or between one wholly owned subsidiary of Change and another wholly owned subsidiary of Change, (E) hedging agreements entered into in the ordinary course of business and not for speculative purposes, (F) extensions or renewals of any outstanding indebtedness in the ordinary course of business or (G) refinancings or replacements of any outstanding indebtedness on terms that are substantially similar to the terms of such outstanding indebtedness or are otherwise more favorable to Change and its subsidiaries; provided, that any indebtedness assumed, guaranteed, issued or incurred by Change or any of its subsidiaries or for which Change or any of its subsidiaries otherwise becomes liable under this clause (ix) must permit prepayment at any time without penalty of any kind;

(x) make or authorize any payment of, or accrual or commitment for, capital expenditures, except in the ordinary course of business;

(xi) enter into any contract that would have been a “material contract” (as defined under the Merger Agreement) had it been entered into prior to the date of the Merger Agreement, other than contracts entered into in the ordinary course of business;

(xii) other than in the ordinary course of business, but subject to certain additional restrictions set forth in the Merger Agreement, (A) terminate or fail to renew any material contract (other than expirations of any such contract in accordance with its terms), (B) amend, modify, supplement or waive, or assign, convey, encumber or otherwise transfer in whole or in part, rights or interests pursuant to or in, any material contract (other than assignments between or among Change or any of its wholly owned subsidiaries that would not be adverse to UnitedHealth Group), or (C) enter into any contract that would have been a material contract had it been entered into prior to the date of the Merger Agreement;

(xiii) cancel, modify or waive any debts or claims held by or owed to Change or any of its subsidiaries having in each case a value in excess of $5,000,000 individually or $20,000,000 in the aggregate;

(xiv) other than with respect to transaction litigation, appraisal proceedings or tax disputes, which are separately addressed by the Merger Agreement, settle or compromise any legal proceeding for an amount in

 

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excess of $20,000,000 individually or $40,000,000 in the aggregate during any calendar year, or which would reasonably be expected to (A) prevent, materially delay or materially impair the consummation of the transactions contemplated by the Merger Agreement, (B) impose any material restriction on the operations of Change or its material subsidiaries or (C) involve any criminal liability or any admission of material fault by Change or any of its subsidiaries;

(xv) make any changes with respect to accounting policies, procedures, methods, principals or practices, except as required by changes in GAAP or applicable law;

(xvi) make, change or revoke any material tax election, change an annual tax accounting period, adopt or change any tax accounting method, file any amended material tax return, enter into any closing agreement with respect to material taxes, settle any material tax claim, audit, assessment or dispute, surrender any right to claim a refund of a material amount of taxes, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of any material tax or take any action which would be reasonably expected to (A) affect the “intended tax free treatment” (as such term is used below under “Closing Conditions— Conditions Benefitting UnitedHealth Group and Merger Sub”), or (B) render any part of the Tax Opinion (as defined below) or any tax representation letter issued by Change or UnitedHealth Group in connection with the Tax Opinion inaccurate or untrue in other than de minimis respects;

(xvii) except as required pursuant to the terms of any Chang employee benefit plan in effect as of the date of the Merger Agreement, (A) increase in any manner the compensation or consulting fees, bonus, pension, welfare, fringe or other benefits, severance or termination pay of any current or former employee (whether full- or part-time and, including any officer), director or independent contractor (who is a natural person) of Change or any of its subsidiaries (each, a “Change Employee”), (B) become a party to, establish, adopt, amend, commence participation in or terminate any employee benefit plan, (C) grant any new awards, or amend or modify the terms of any outstanding awards, under any employee benefit plan, (D) take any action to accelerate the vesting or lapsing of restrictions or payment, or fund or in any other way secure the payment, of compensation or benefits under any employee benefit plan, (E) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any employee benefit plan that is required by applicable law to be funded or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP, (F) forgive any loans or issue any loans to any Change Employee (other than routine travel or other business advances issued in the ordinary course of business), (G) hire any employee or engage any independent contractor (who is a natural person) with an annual salary or wage rate or consulting fees in excess of $300,000 or (H) terminate the employment or service of any Change Employee with an annual salary or wage rate or consulting fees in excess of $300,000 other than for cause;

(xviii) become a party to, establish, adopt, amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, labor organization, works council or similar organization;

(xix) enter into any new line of business, other than new lines of business that are natural evolutions of, extensions to, or expansions of, the businesses of Change and its subsidiaries conducted as of the date of the Merger Agreement, in each case, that would not require Change or its subsidiaries to make expenditures or incur liabilities greater than $15,000,000, individually, or $75,000,000, in the aggregate, in connection with any such new line of business); provided, that any such evolution, extension or expansion would not reasonably be expected to prevent, materially delay or materially impair the consummation of the transactions contemplated by the Merger Agreement;

(xx) amend or modify the engagement letter of Change’s financial advisor (or grant any discretionary fee or any comparable additional fee thereunder) in a manner that increases the fee or commission payable by Change or any of its subsidiaries;

 

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(xxi) other than in the ordinary course of business, take any action which would reasonably be expected to result in any material increase in the amount of Tax Benefit Payments (as defined in each applicable TRA (as defined below)) to be paid or expected to be paid under any TRA for any taxable year ending prior to or including the Closing Date compared to the amount of Tax Benefit Payments for such TRA that is reflected for such taxable year in the financial statements included in Change’s Form 10-K for the fiscal year ended March 31, 2020; or

(xxii) in a legally binding manner, agree or commit to do any of the foregoing.

During the Interim Period, prior to Change or any of its subsidiaries taking any actions due to COVID-19 Measures in accordance with the Merger Agreement, which actions would reasonably be expected to be material to Change and its subsidiaries, taken as a whole, or constitute material deviations (measured with respect to Change and its subsidiaries, taken as a whole) from the ordinary course of business, Change must, to the extent reasonably practicable, provide advance notice to, and reasonably consult in good faith with, UnitedHealth Group with respect thereto.

In addition to the foregoing, without UnitedHealth Group’s prior written consent, during the Interim Period, Change and its subsidiaries may not avail themselves of any government grants, tax holidays, loans or other tax benefits or relief related to COVID-19, including a loan under the paycheck protection program or relief pursuant to Sections 2301 or 2302 of the CARES Act or any similar applicable federal, state or local law, except that Change and its subsidiaries may avail themselves of such government grants, tax holidays, loans or other tax benefits or relief as they have already availed themselves of prior to the date of the Merger Agreement and are set forth in the Change Disclosure Letter.

“COVID-19 Measures” means any quarantine, “shelter in place,” “stay at home,” social distancing, shut down, closure, sequester, safety or other law, directive, guidelines or recommendations by any governmental entity (in the case of recommendations, widely followed by Change’s and its subsidiaries’ peer companies) or bona fide industry group widely followed by Change’s and its subsidiaries’ healthcare industry peer companies in response to COVID-19.

Non-Solicitation Covenants

During the Interim Period, except as expressly permitted by the Merger Agreement, Change must not, and must cause its subsidiaries and its and its subsidiaries’ officers, directors, employees, financial advisors, investment bankers and legal counsel not to, and must use its reasonable best efforts to cause its and its subsidiaries’ other representatives not to, directly or indirectly: (i) initiate, solicit, propose or knowingly encourage or otherwise knowingly facilitate any inquiry or the making of any proposal or offer that constitutes or would reasonably be expected to lead to an Acquisition Proposal (as defined below); (ii) engage in, continue or otherwise participate in any discussions or negotiations relating to any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal; (iii) provide any information or data concerning Change or its subsidiaries or access to Change’s or its subsidiaries’ properties, books and records to any third party in connection with any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal; (iv) otherwise knowingly facilitate any effort or attempt to make an Acquisition Proposal; or (v) agree or commit, in each case in a legally binding manner, to do any of the foregoing.

Notwithstanding the foregoing, prior to the time the Requisite Vote is obtained, in response to an unsolicited, bona fide written Acquisition Proposal that did not result from a material breach of the non-solicitation covenants contained in the Merger Agreement, Change may (i) provide information concerning Change and its subsidiaries in response to the third party making such Acquisition Proposal (provided that UnitedHealth Group also is provided such information and such third party executes a Permitted Confidentiality Agreement) and (ii) engage or otherwise participate in any discussions or negotiations with such third party if,

 

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and only if, prior to taking any action described in clause (i) or clause (ii), the Board determines in good faith, after consultation with outside legal counsel and its financial advisor, based on the information then available, including the terms and conditions of such Acquisition Proposal and those of the Merger Agreement, that (A) such Acquisition Proposal either constitutes a Superior Proposal (as defined below) or could reasonably be expected to result in a Superior Proposal and (B) the failure to take such action would reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable law.

Change must promptly (but, in any event, within 24 hours) give notice to UnitedHealth Group if, after the date of the Merger Agreement, (i) any written inquiries, proposals or offers with respect to an Acquisition Proposal or that would reasonably be expected to lead to an Acquisition Proposal are received by Change or any of its subsidiaries or any of its or their officers, directors, employees, financial advisors, investment bankers and legal counsel or, to Change’s knowledge, any of its or their respective other representatives, (ii) any information concerning Change or its subsidiaries or access to Change’s or its subsidiaries’ properties, books and records in connection with any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal is requested in writing by any third party that, to the knowledge of Change, is reasonably likely to make or is considering making an Acquisition Proposal, or (iii) the Board makes a determination to begin providing information to or to begin engaging in discussions or negotiations with any third party regarding any Acquisition Proposal, setting forth in such notice the name of the third party, a description of the material terms and conditions of any such Acquisition Proposal or inquiry, proposal or offer and the scope of such request (including, if applicable, correct and complete copies of any such Acquisition Proposals, Permitted Confidentiality Agreements, inquiries, proposals or offers, in each case to the extent then available), and thereafter must keep UnitedHealth Group reasonably informed, on a reasonably current basis (and, in any event, within 24 hours after any material changes), of the status and material terms and conditions of any such Acquisition Proposals, inquiries, proposals or offers or requests (including any material amendments or modifications thereto) and the status of any such discussions or negotiations.

Except as expressly permitted by the Merger Agreement, the Board must not (i) fail to include the Board Recommendation in this proxy statement; (ii) withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify) the Board Recommendation in a manner adverse to UnitedHealth Group; (iii) with respect to an Acquisition Proposal initiated through a tender or exchange offer pursuant to Rule 14d-2 under the Exchange Act, take any action or make any recommendation or public statement in connection therewith other than an unequivocal recommendation against such offer; (iv) following the public disclosure of an Acquisition Proposal, fail to publicly reaffirm the Board Recommendation as promptly as reasonably practicable (but in any event within three business days) after receipt of any written request to do so from UnitedHealth Group; (v) publicly approve or publicly recommend, or publicly declare advisable, any Acquisition Proposal or other proposal that would reasonably be expected to lead to an Acquisition Proposal or publicly approve or publicly recommend, or publicly declare advisable or publicly propose to enter into, any Alternative Acquisition Agreement; or (vi) agree or commit, in each case in a legally binding manner, to do any of the foregoing (together with any of the actions set forth in the foregoing clauses (i), (ii), (iii), (iv) and (v), a “Change of Recommendation”). In addition, except as expressly permitted by the Merger Agreement, the Board must not cause or permit Change or any of its subsidiaries to enter into an Alternative Acquisition Agreement or agree or commit, in each case in a legally binding manner, to do so.

Notwithstanding the foregoing, prior to the time the Requisite Vote is obtained, the Board may (i) effect a Change of Recommendation or (ii) cause Change to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal and terminate the Merger Agreement (any action described in clause (i) or (ii) being a “Fundamental Action”) if (A) an unsolicited, bona fide written Acquisition Proposal that did not result from a material breach of the non-solicitation covenants contained in the Merger Agreement is received by Change or an Intervening Event (as defined below) has occurred, and (B) the Board determines in good faith, after consultation with outside legal counsel and its financial advisor, based on the information then available, that (w) in the case of an Acquisition Proposal, such Acquisition Proposal constitutes a Superior Proposal and (x) a failure to effect a Fundamental Action in response to such Acquisition Proposal or Intervening Event, as applicable, would be

 

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inconsistent with the directors’ fiduciary duties under applicable law; provided, however, that no such Fundamental Actions may be taken unless and until: (I) Change has given UnitedHealth Group written notice at least four business days in advance (such notice period, the “Notice Period” and such notice, the “Notice”), which Notice must set forth in writing that the Board intends to consider whether to take such Fundamental Action and a reasonably detailed description of the basis therefor, and must also include, in the case of a Fundamental Action to enter into an Alternative Acquisition Agreement, the then-current draft of such agreement, and, in the case of an Intervening Event, a reasonably detailed description of such Intervening Event; (II) during the Notice Period, to the extent requested by UnitedHealth Group, Change must, and must cause its representatives to, negotiate in good faith with UnitedHealth Group to revise the Merger Agreement so that the condition set forth in clause (B) above would not be satisfied; and (III) at the end of the Notice Period, the Board has taken into account any revisions to the Merger Agreement proposed by UnitedHealth Group in writing and any other information offered by UnitedHealth Group in response to such Notice prior to the end of the Notice Period, and has thereafter determined in good faith, after consultation with outside legal counsel and its financial advisor, based on the information then available, that (y) in the case of an Acquisition Proposal, such Acquisition Proposal continues to constitute a Superior Proposal and (z) a failure to effect a Fundamental Action would continue to be inconsistent with the directors’ fiduciary duties under applicable law (provided that any amendment or modification to the economic or other material terms of any such Acquisition Proposal (if applicable) will require a new Notice and a new Notice Period (which, subsequent to the initial Notice Period, will be reduced to two business days rather than four business days)).

In addition, none of the non-solicitation covenants contained in the Merger Agreement will prohibit Change from (i) disclosing a position contemplated by Rule 14d-9, Rule 14e-2(a)(2) or (3) or Item 1012(a) of Regulation M-A under the Exchange Act or (ii) making any “stop, look and listen” communication or similar communication of the type contemplated by Rule 14d-9(f) under the Exchange Act.

During the Interim Period, Change must not terminate, amend or otherwise modify or waive any provision of any confidentiality, “standstill” or similar agreement to which Change or any of its subsidiaries is a party with respect to any Acquisition Proposal or any class of equity securities of Change or its subsidiaries; provided that Change will be permitted to terminate, amend or otherwise modify, waive or fail to enforce any provision of any such agreement if the Board determines in good faith, after consultation with its outside legal counsel, based on the information then available, that the failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law.

Under the Merger Agreement:

 

   

“Acquisition Proposal” means any proposal, offer, inquiry or indication of interest relating to (a) a merger, joint venture, partnership, exclusive license, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, spin-off, share exchange, plan of arrangement, business combination or any other similar transaction involving Change or any of its subsidiaries or (b) an acquisition by any third party that, in each of clauses (a) and (b), if consummated would result in any third party directly or indirectly, in one or a series of related transactions, acquiring beneficial ownership of or becoming the beneficial owner of 15% or more of: (i) the total voting power or any class of equity securities of Change or any of its material subsidiaries; or (ii) the consolidated net revenues, net income or total assets of Change as of the date of such proposal, offer, inquiry or indication of interest (it being understood that total assets include equity securities of subsidiaries of Change), in each of the foregoing clauses (a) and (b) of this definition, other than the transactions contemplated by the Merger Agreement.

 

   

“Alternative Acquisition Agreement” means, other than a Permitted Confidentiality Agreement, any acquisition agreement, merger agreement, arrangement agreement, option agreement, joint venture agreement, partnership agreement, license agreement, legally binding letter of intent, legally binding memorandum of understanding, agreement in principle or any other similar legally binding agreement or document relating to any Acquisition Proposal.

 

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“Intervening Event” means any event, change, development, circumstance, fact or effect with respect to or impacting Change and its subsidiaries or the business of Change and its subsidiaries that (a) is unknown to or not reasonably foreseeable by the Board as of the execution and delivery of the Merger Agreement (or, if known or reasonably foreseeable, the magnitude or material consequences of which were not known or reasonably foreseeable by the Board as of the execution and delivery of the Merger Agreement), and (b) first becomes known to the Board after the execution and delivery of the Merger Agreement and any time prior to the time the Requisite Vote is obtained; provided that any event, change, development, circumstance, fact or effect (i) that involves or relates to an Acquisition Proposal or a Superior Proposal (which, for purposes of this definition, will be read without reference to any percentages set forth in the definitions of “Acquisition Proposal” and “Superior Proposal”) or any inquiry or communications or matters relating thereto, (ii) resulting from a breach of the Merger Agreement by Change or (iii) resulting, in and of itself, from any event, change, development, circumstance or fact after the execution and delivery of the Merger Agreement in the market price or trading volume of the shares of Change Common Stock, individually or in the aggregate, will not be deemed to constitute an Intervening Event.

 

   

“Superior Proposal” means an unsolicited and bona fide written Acquisition Proposal that if consummated would result in a third party, other than UnitedHealth Group or any of its subsidiaries, acquiring beneficial ownership of or becoming the beneficial owner of, directly or indirectly, more than 50% of the: (a) total voting power of the equity securities of Change and its subsidiaries (or of the surviving entity in a Merger involving Change or the resulting, direct or indirect, parent of Change or such surviving entity); or (b) consolidated net revenues, net income or total assets (it being understood that total assets include equity securities of subsidiaries of Change) that, in either case, the Board has determined in good faith, after consultation with outside legal counsel and its financial advisor, (i) if consummated, would result in a transaction more favorable to Change’s stockholders than the transactions contemplated by the Merger Agreement (after taking into account any revisions to the terms and conditions of the Merger Agreement proposed by UnitedHealth Group pursuant to the “matching rights” set forth in the non-solicitation covenants contained in the Merger Agreement and taking into account the time expected to be required to consummate such Acquisition Proposal, any legal, financial, regulatory and approval requirements, the sources, availability and terms of any financing, financing market conditions and the existence of a financing contingency, the likelihood of termination, the timing of closing, and the identity of the third party making the proposal) and (ii) is reasonably expected to be consummated on the terms proposed (after taking into account any legal, financial, regulatory and approval requirements, the sources, availability and terms of any financing, financing market conditions and the existence of a financing contingency, the likelihood of termination, the timing of closing, and the identity of the third party making the proposal and any other aspects considered relevant by the Board).

Special Meeting

Change must (i) hold the Special Meeting as promptly as reasonably practicable after this proxy statement is in final form and (ii) cause a vote upon the adoption of the Merger Agreement to be taken at the Special Meeting. Change may not postpone, recess or adjourn the Special Meeting without UnitedHealth Group’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed). However, Change may, after prior notice to and consultation with UnitedHealth Group, postpone, recess or adjourn the Special Meeting (A) to the extent, in the good faith judgment of the Board (after consultation with Change’s outside legal counsel), required by applicable law or necessary to ensure that any required supplement or amendment to this proxy statement is delivered to the stockholders of Change for the amount of time required by applicable law in advance of the Special Meeting, (B) if Change reasonably believes there will be insufficient shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Special Meeting or (C) to solicit additional proxies to obtain the Requisite Vote; provided, that in no event may the Special Meeting be postponed, recessed or adjourned pursuant to clauses (B) and (C), taken together, more than ten business days

 

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in connection with any one postponement, recess or adjournment or more than an aggregate of thirty days from the originally scheduled meeting date. Change must use reasonable best efforts to obtain the Requisite Vote, including by soliciting proxies in support of such vote.

Efforts to Complete the Merger

General

Each of UnitedHealth Group and Change must use its reasonable best efforts to take all actions necessary or advisable on its part under the Merger Agreement and applicable law to consummate the transactions contemplated by the Merger Agreement as promptly as reasonably practicable after the date of the Merger Agreement (and, in any event, no later than the Outside Date (as defined below)), including making all required filings with governmental entities and seeking all required consents from third parties.

Antitrust Matters

In addition to the general efforts described above, each of UnitedHealth Group and Change must cooperate with each other and use its reasonable best efforts to take all actions necessary or advisable with respect to all antitrust laws to consummate the transactions contemplated by the Merger Agreement, including preparing and submitting documentation to (i) effect the expirations of all waiting periods under applicable antitrust law and (ii) make with and obtain from, as applicable, any governmental antitrust entity, all filings and consents necessary or advisable under antitrust law in order to consummate the transactions contemplated by the Merger Agreement.

In furtherance of the foregoing, the Merger Agreement requires the parties to take specific actions in order to obtain antitrust approval. On January 19, 2021, as required by the Merger Agreement, the parties filed a Notification and Report Form under the HSR Act. The Merger Agreement further requires each of the parties to take the following actions: (i) the prompt provision to governmental antitrust entities of non-privileged information and documents requested by such entities or that are necessary, proper or advisable to permit consummation of the transactions contemplated by the Merger Agreement; (ii) the prompt use of its reasonable best efforts to comply with certain additional obligations set forth in the Change Disclosure Letter; (iii) the prompt use of its reasonable best efforts to defend through litigation on the merits any claim asserted in any legal proceeding by any governmental antitrust entity (or any third party making a claim under any antitrust law) seeking to delay, restrain, prevent, enjoin or otherwise prohibit consummation of the transactions contemplated by the Merger Agreement; (iv) the prompt use of its reasonable best efforts to take all necessary or reasonably proper or advisable steps to remove any injunction or other order entered in any legal proceeding that would reasonably be expected to delay or otherwise prohibit the consummation of the transactions contemplated by the Merger Agreement; (v) the proffer and agreement by UnitedHealth Group of its willingness to dispose of, or hold separate pending such disposition, assets, operations, rights, product lines, licenses, businesses or interests therein of Change, UnitedHealth Group or any of their respective subsidiaries, which UnitedHealth Group may present to the applicable governmental antitrust entity in one or more proposals over time but not later than October 5, 2021, if such action would be necessary or reasonably proper or advisable so as to permit the consummation of the transactions contemplated by the Merger Agreement prior to the Outside Date; and (vi) the proffer and agreement by UnitedHealth Group of its willingness to effect any other obligation, remedy or other action with respect to the business and operations of Change, UnitedHealth Group or any of their respective subsidiaries, which UnitedHealth Group may present to the applicable governmental antitrust entity in one or more proposals over time but not later than October 5, 2021, if such action would be necessary or reasonably proper or advisable so as to permit the consummation of the transactions contemplated by the Merger Agreement prior to the Outside Date.

Notwithstanding the foregoing, (i) in no event will (a) any party or any of its subsidiaries be required to agree to any term, remedy, or other action imposed, required or requested by a governmental antitrust entity in

 

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connection with effecting (y) the expiration of any waiting period under applicable antitrust law or (z) a governmental antitrust entity’s grant of any consent or other authorization, in each case necessary or advisable in order to consummate the transactions contemplated by the Merger Agreement, that is not conditioned upon the consummation of the transactions contemplated by the Merger Agreement or (b) Change or any of its subsidiaries agree with a governmental antitrust entity to any term, remedy, or other action in connection with the expiration of any such waiting period or obtaining of any such consent or other authorization without the prior written consent of UnitedHealth Group (which consent may be withheld in UnitedHealth Group’s sole discretion); and (ii) nothing will require UnitedHealth Group or any of its subsidiaries, in order to effect the expiration of any waiting periods under applicable antitrust law or the obtaining from any governmental antitrust entity of any consent or other authorization to consummate the transactions contemplated by the Merger Agreement, to agree to any Burdensome Condition (as defined below).

Change must agree, if reasonably requested by UnitedHealth Group so as to permit the expiration or termination of the applicable waiting periods under the HSR Act or the receipt of any other consent under any other applicable antitrust law, to effect and agree to any divestiture, holding separate or other similar arrangement with respect to, or other disposition of or restriction on, any assets, operations, rights, product lines, licenses, businesses or interests therein of Change and its subsidiaries that is conditioned on the occurrence of the Closing.

UnitedHealth Group and Change will jointly direct all matters (including with respect to process, strategy and communications) with any governmental antitrust entity; provided that in the event of any conflict or disagreement between UnitedHealth Group and Change with respect to strategy regarding any matter with a governmental antitrust entity, UnitedHealth Group will have the right to direct the matter that is the cause of any such conflict or disagreement, acting reasonably and in good faith.

Each of the parties must not acquire any business, entity or assets if such transaction would reasonably be expected to (i) impose any material delay in the obtaining of, or materially increase the risk of not obtaining, any consent from any governmental antitrust entity required in connection with the transactions contemplated by the Merger Agreement, (ii) materially increase the risk of any governmental antitrust entity promulgating any order that makes unlawful or materially delays the consummation of the transactions contemplated by the Merger Agreement or (iii) materially increase the risk of the parties not being able to remove any such order described in the preceding clause (ii).

“Burdensome Condition” means any term, condition, obligation, requirement, limitation, prohibition, remedy, sanction or other action imposed upon UnitedHealth Group, Change or any of their respective subsidiaries in connection with effecting the expiration of any waiting period (and any extension thereof) under any antitrust law applicable to the consummation of the transactions contemplated by the Merger Agreement or obtaining from a governmental antitrust entity any consent, approval, permit or authorization, in each case necessary in order to consummate the transactions contemplated by the Merger Agreement, that would either (a) impose any requirement to sell, license, assign, transfer, divest, hold separate or otherwise dispose of, before or after the Closing, any assets or businesses of UnitedHealth Group, Change or any of their respective affiliates generating, individually or in the aggregate, greater than $650,000,000 in annual revenue from third parties (measured based on the 12 calendar month period immediately prior to such term, condition, obligation, requirement, limitation, prohibition, remedy, sanction or other action being imposed by such governmental antitrust entity), or (b) individually or in the aggregate with all other such terms, conditions, obligations, requirements, limitations, prohibitions, remedies, sanctions or other actions, reasonably be expected to result in a material adverse effect on the business, operations, financial condition or results of operations of Change and its subsidiaries, taken as a whole, or UnitedHealth Group and its subsidiaries, taken as a whole (assuming for purposes of such analysis that the UnitedHealth Group and its subsidiaries were the same size as, and had the same financial and operating metrics as, Change and its subsidiaries, taken as a whole).

 

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Employee Benefits

UnitedHealth Group has agreed that the employees of Change and its subsidiaries at the Effective Time who continue to remain employed with Change or any of its subsidiaries (“Continuing Employees”) will, during the period commencing at the Effective Time and ending on the one-year anniversary of the Effective Time (the “Continuation Period”), be provided with (i) base salary or base wage and target annual cash bonus opportunities that are, in each case, no less favorable than those provided to each such Continuing Employee immediately prior to the Effective Time and (ii) employee benefits, including pension and welfare benefits (but excluding equity and long-term incentive compensation and any retention or transaction bonus payments) that are no less favorable in the aggregate to those provided to the Continuing Employees immediately prior to the Effective Time or, in UnitedHealth Group’s discretion, are substantially comparable to those made available to similarly situated employees of UnitedHealth Group and its subsidiaries.

UnitedHealth Group will (i) cause any pre-existing conditions or limitations and eligibility waiting periods under any welfare plans of UnitedHealth Group or its affiliates to be waived with respect to the Continuing Employees and their eligible dependents, (ii) give each Continuing Employee credit for the plan year in which the Continuing Employee is first eligible to enroll in a UnitedHealth Group plan providing welfare benefits towards applicable deductibles and annual out-of-pocket limits for expenses incurred prior to the Effective Time for which payment has been made in respect of such Continuing Employee and their eligible dependents to the same extent such credit was given under the analogous Change benefit plan during the calendar year in which the Continuing Employee first becomes eligible to enroll in such UnitedHealth Group plan and (iii) give each Continuing Employee service credit for such Continuing Employee’s employment with Change and its subsidiaries for purposes of vesting, benefit accrual and eligibility to participate under each applicable UnitedHealth Group benefit plan, as if such service had been performed with UnitedHealth Group, except for benefit accrual under defined benefit pension plans, for purposes of qualifying for subsidized early retirement benefits, to the extent it would result in a duplication of benefits and for purposes of eligibility for retirement vesting under UnitedHealth Group’s equity plans.

Prior to the Effective Time, if requested by UnitedHealth Group in writing, to the extent permitted by applicable law and the terms of the applicable plan or arrangement, Change will (i) cause to be amended Change’s benefit plans to the extent necessary to provide that no employees of UnitedHealth Group and its subsidiaries will commence participation therein following the Effective Time unless the Surviving Corporation or such subsidiary explicitly authorizes such participation and (ii) cause Change’s 401(k) plan to be terminated effective immediately prior to the Effective Time. In the event that UnitedHealth Group requests that Change’s 401(k) plan be terminated, Change will provide UnitedHealth Group with evidence that such plan has been terminated not later than the Effective Time. All resolutions adopted or executed in connection with the termination of Change’s 401(k) plan will be subject to UnitedHealth Group’s reasonable prior review and comment, and Change will consider any such comments in good faith.

If requested by UnitedHealth Group in writing delivered to Change not less than 10 business days prior to the Effective Time (with such request to be made only in the event UnitedHealth Group does not request that Change’s 401(k) plan be terminated in the manner described above), the Board will take any actions (including, if applicable, adopting resolutions) as are reasonably necessary to delegate plan administration authority for any Change benefit plans that are qualified or non-qualified retirement plans to UnitedHealth Group’s Employee Benefits Plans Administrative Committee and to delegate investment authority for such plans to UnitedHealth Group’s Employee Benefit Plans Investment Committee, with such delegation to be effective as of the Effective Time and contingent upon the occurrence of the Effective Time. To the extent such delegation of authority described in the preceding sentence is requested by UnitedHealth Group, Change will provide UnitedHealth Group with evidence of such delegation not later than the Effective Time. All resolutions adopted or executed in connection with the delegation described above will be subject to UnitedHealth Group’s reasonable prior review and comment.

 

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Prior to making any written communications intended for broad based distribution to any Change Employee pertaining to compensation or benefits matters that are affected by the transactions contemplated by the Merger Agreement, Change will provide UnitedHealth Group with a copy of the intended communication, UnitedHealth Group will have a reasonable period of time to review and comment on the communication and Change will consider any such comments in good faith.

Without limiting the generality of the first paragraph under this section entitled “Employee Benefits”, from and after the Effective Time, UnitedHealth Group will, or will cause its subsidiaries, including the Surviving Corporation, to, assume and honor Change’s and its subsidiaries’ employment, severance, retention, cash incentive compensation and termination plans, policies, programs, agreements and arrangements in effect as of immediately prior to the Effective Time, in each case, in accordance with their terms as in effect immediately prior to the Effective Time (including those terms with respect to a “qualifying termination” in Change’s then-applicable annual incentive bonus plan); provided, however, that, notwithstanding the foregoing, to the extent elected by Change prior to the Closing Date, UnitedHealth Group will provide Continuing Employees with severance payments and benefits under the general severance plans, policies or programs of UnitedHealth Group during the Continuation Period.

Change will be permitted to determine in good faith the amounts payable under its annual cash incentive program for the fiscal year in which the Closing Date occurs based on actual performance through the Closing Date, and UnitedHealth Group will cause such amounts to be paid to the Continuing Employees on the earliest of (i) the date Change has historically paid such amounts in the ordinary course of business; (ii) the date UnitedHealth Group pays annual cash bonuses in the ordinary course of business; and (iii) the date on which the applicable Continuing Employee is otherwise entitled to receive payment under the applicable annual cash incentive program; provided that the aggregate amount of such bonus payments will not exceed the amount accrued by Change for accounting purposes through the Closing Date. For the balance of the calendar year in which the Closing Date occurs, Continuing Employees will participate in an annual cash incentive program sponsored by UnitedHealth Group, and such bonuses will be paid to the Continuing Employees in accordance with the terms of UnitedHealth Group’s program on the date UnitedHealth Group pays annual cash bonuses in the ordinary course of business, pro-rated to reflect the portion of the calendar year following the Closing Date during which the Continuing Employees participated in such program.

Nothing set forth in the Merger Agreement is intended to (i) be treated as an amendment of any particular Change benefit plan, (ii) prevent UnitedHealth Group, the Surviving Corporation or any of their affiliates from amending or terminating any of their benefit plans or, after the Effective Time, any Change benefit plan in accordance with their terms, (iii) prevent UnitedHealth Group, the Surviving Corporation or any of their affiliates, after the Effective Time, from terminating the employment of any Continuing Employee, or (iv) create any third-party beneficiary rights in any employee of Change or any of its subsidiaries, any beneficiary or dependent thereof, or any collective bargaining representative thereof, with respect to the compensation, terms and conditions of employment or benefits that may be provided to any Continuing Employee by UnitedHealth Group, the Surviving Corporation or any of their affiliates or under any benefit plan which UnitedHealth Group, the Surviving Corporation or any of their affiliates may maintain.

Indemnification; Directors’ and Officers’ Insurance

From and after the Effective Time, to the fullest extent that Change would have been permitted under applicable law and Change’s organizational documents in effect as of the date of the Merger Agreement, UnitedHealth Group must, and must cause the Surviving Corporation to, (i) indemnify, defend and hold harmless the Indemnified Parties (as defined below) against any and all judgments, fines, losses, claims, damages, costs of settlement, liabilities and reasonable and documented costs and expenses (including reasonable and documented attorneys’ fees) incurred in connection with, arising out of or otherwise related to any legal proceeding, which proceeding is in connection with, arising out of or otherwise related to matters existing or occurring at or prior to the Effective Time or relating to the enforcement of any such Indemnified Party’s indemnification rights under

 

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the Merger Agreement, whether asserted or claimed prior to, at or after the Effective Time, and (ii) advance expenses as incurred by the Indemnified Parties; provided that any person or entity to whom expenses are so advanced provides an undertaking to repay such advances if it is ultimately determined by final and nonappealable adjudication by the Chosen Courts (as defined below) that such person or entity is not entitled to such advanced expenses.

Prior to the Effective Time, Change will obtain and fully pay the premium for “tail” insurance policies for the extension of (i) the directors’ and officers’ liability coverage of Change’s existing directors’ and officers’ insurance policies and (ii) Change’s existing fiduciary liability insurance policies (collectively, “D&O Insurance”), in each case for a claims reporting or discovery period of six years following the Effective Time with respect to any claim related to matters existing or occurring at or prior to the Effective Time from Change’s D&O Insurance carriers as of the date of the Merger Agreement or one or more insurance carriers with the same or better credit rating as such carriers with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as Change’s existing policies. Change will use reasonable best efforts to obtain such “tail” policies as promptly as practicable following the date of the Merger Agreement. If Change for any reason fails to obtain such “tail” insurance policies as of the Effective Time, the Surviving Corporation will purchase comparable D&O Insurance for such six-year “tail” period with terms, conditions, retentions and limits of liability that are at least as favorable as provided in Change’s existing policies as of the date of the Merger Agreement with respect to the pre-Closing period and from an insurance carrier with the same or better credit rating as Change’s D&O Insurance carrier as of the date of the Merger Agreement, in each case providing coverage with respect to any matters existing or occurring at or prior to the Effective Time; provided, however, that, with respect to any D&O Insurance purchased in the manner described above, in no event will the annual cost of such D&O Insurance during such six-year “tail” period exceed 300% of the current aggregate annual premium paid by Change for such purpose; and provided further, that if the cost of such insurance coverage exceeds such amount, Change or the Surviving Corporation (as applicable) will obtain a policy with the greatest coverage available for a cost not exceeding such amount. From and after the Effective Time, UnitedHealth Group will cause such “tail” insurance policies (whether purchased by Change prior to the Effective Time or the Surviving Corporation or UnitedHealth Group following the Effective Time) to be maintained in full force and effect, each for its full term, and honor all obligations thereunder.

Any Indemnified Party wishing to claim indemnification, upon learning of any legal proceeding for which indemnification may be available, must promptly notify UnitedHealth Group thereof in writing, but the failure to so notify will not relieve UnitedHealth Group or the Surviving Corporation of any obligation or liability it may have to such Indemnified Party except to the extent such failure materially prejudices the indemnifying party. In the event of any such proceeding: (i) UnitedHealth Group or the Surviving Corporation will have the right to assume the defense thereof, with the legal counsel selected by UnitedHealth Group or the Surviving Corporation being reasonably satisfactory to the Indemnified Party (it being understood and agreed that by electing to assume the defense thereof, neither UnitedHealth Group nor the Surviving Corporation will be deemed to have waived any right to object to the Indemnified Party’s entitlement to indemnification with respect thereto or assumed any obligation or liability with respect thereto), except that if UnitedHealth Group or the Surviving Corporation elects not to assume such defense or legal counsel for the Indemnified Party advises that there are issues which raise conflicts of interest between UnitedHealth Group or the Surviving Corporation and the Indemnified Party, the Indemnified Party may retain legal counsel satisfactory to them, and UnitedHealth Group or the Surviving Corporation will pay all reasonable and documented fees and expenses of such legal counsel for the Indemnified Party promptly following the receipt of statements therefor; provided, however, that UnitedHealth Group and the Surviving Corporation will be obligated to pay for only one law firm (in addition to one local counsel if reasonably necessary) for all Indemnified Parties in any jurisdiction unless the use of one law firm for such Indemnified Parties would present a conflict of interest under applicable standards of professional conduct on any significant issue between the positions of any two or more Indemnified Parties, in which case the fewest number of law firms necessary to avoid conflicts of interest will be used; (ii) the Indemnified Parties will cooperate in the defense of any such matter if UnitedHealth Group or the Surviving Corporation elects to assume such defense, and UnitedHealth Group and the Surviving Corporation will cooperate in the defense of any such

 

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matter if UnitedHealth Group or the Surviving Corporation elects not to assume such defense; (iii) the Indemnified Parties will not be liable or have any obligation for any settlement effected without their prior written consent if UnitedHealth Group or the Surviving Corporation elects to assume such defense and UnitedHealth Group and the Surviving Corporation will not be liable or have any obligation for any settlement effected without their prior written consent if UnitedHealth Group or the Surviving Corporation elects not to assume such defense; and (iv) UnitedHealth Group and the Surviving Corporation will not have any obligation or liability to any Indemnified Party if it is ultimately determined by final and nonappealable adjudication by the Chosen Courts that the indemnification of such Indemnified Party is prohibited by applicable law.

If UnitedHealth Group or the Surviving Corporation or any of their respective successors or permitted assigns (i) consolidates with or merges into any other entity and is not the continuing or surviving entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person or entity, then, and in each such case, proper provisions will be made so that the successors and permitted assigns of UnitedHealth Group or the Surviving Corporation will assume all the obligations described above.

The foregoing provisions are intended to be for the benefit of, and from and after the Effective Time will be enforceable by, each of the Indemnified Parties and their respective heirs, executors, beneficiaries or representatives, who will be third-party beneficiaries of such provisions, and such provisions will be binding on all successors and assigns of UnitedHealth Group, Merger Sub and Change.

The rights of the Indemnified Parties under the Merger Agreement are in addition to, and not in lieu of, any rights such Indemnified Parties may have under the organizational documents of Change or any of its subsidiaries, or under any applicable contracts or laws. In furtherance thereof, except as may be required by applicable law, UnitedHealth Group and the Surviving Corporation have agreed that all indemnification, exculpation, expense advancement and similar rights for acts or omissions occurring at or prior to the Effective Time as existing as of the date of the Merger Agreement in favor of any Indemnified Party as provided in the organizational documents of Change and its subsidiaries or in any contract between such Indemnified Party and Change or any of its subsidiaries and made available to UnitedHealth Group will survive the Merger and continue in full force and effect, and will not be amended, repealed or otherwise modified in any manner that would adversely affect any right thereunder of any such Indemnified Party.

“Indemnified Parties” means, collectively, (i) each present and former (determined as of the Effective Time) director or officer of Change or any of its subsidiaries (or other individuals performing similar functions), in each case when acting in such capacity; (ii) each person or entity who served, as of or prior to the Effective Time, at Change’s request as a director, officer, member, trustee or fiduciary of another corporation, limited liability company, partnership, joint venture, trust, pension or other employee benefit plan or enterprise; and (iii) the respective heirs, executors and administrators of the persons and entities referred to in clauses (i) and (ii).

Financing Cooperation

At UnitedHealth Group’s request, Change will take customary actions to cause (i) the redemption of all outstanding Senior Notes (as defined below) at the Closing or (ii) if the Senior Notes will not be redeemed in full at the Closing, the satisfaction and discharge of the Senior Notes Indenture (as defined below) at the Closing.

Change will also (i) furnish to the agent under the Credit Agreement at least three business days prior to the Closing a prepayment notice in respect of the termination of all outstanding commitments and prepayment of all outstanding loans under the Credit Agreement and (ii) deliver to UnitedHealth Group, at least two business days prior to the Closing, an executed pay-off letter in customary form acceptable to UnitedHealth Group with respect to the Credit Agreement, which pay-off letter will provide that upon receipt from or on behalf of the borrowers thereunder of the pay-off amount set forth in the pay-off letter, (a) the Indebtedness incurred pursuant to the Credit Agreement and instruments related thereto will be satisfied, and all obligations of the secured parties terminated (other than those that customarily survive in pay-off letters and expressly contemplated to survive

 

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under the Credit Agreement), (b) all encumbrances relating to the assets, rights and properties of Change or any of its subsidiaries granted pursuant to the Credit Agreement will be released and terminated without any further action by the secured parties and (c) Change or its designee will be entitled to file documents, financing statements and other instruments to reflect the release of such Encumbrances.

At UnitedHealth Group’s request, Change will take all actions reasonably requested by UnitedHealth Group (other than exercising any Early Mandatory Settlement Right (under and as defined in the Purchase Contract Agreement (as defined below)) or effecting any discharge or defeasance under the Senior Amortizing Notes Indenture (as defined below), in each case, such that such settlement, discharge or defeasance would take effect prior to the Closing) with respect to the TEUs (as defined below), including: (i) delivering any notice, information, certificate or other document to UnitedHealth Group, the Purchase Contract Agent (as defined in the Purchase Contract Agreement) or the Trustee (as defined in the Senior Amortizing Notes Indenture), and obtaining an opinion of counsel with respect to any such action, to ensure that the Merger and the other transactions contemplated hereby do not result in an event of default or other violation of the Purchase Contract Agreement or the Senior Amortizing Notes Indenture; (ii) entering into, or cooperating with UnitedHealth Group to enable UnitedHealth Group or one of its subsidiaries to enter into, a new supplemental agreement (with respect to the Purchase Contract Agreement) and/or supplemental indenture (with respect to the Senior Amortizing Notes Indenture); (iii) cooperating with UnitedHealth Group in seeking amendments or consents with respect to the Purchase Contract Agreement and/or the Senior Amortizing Notes Indenture that would be effective at the Closing; (iv) taking all steps reasonably necessary to cause the TEUs to be deregistered under the Securities Act and delisted from the NASDAQ; and (v) to the extent the Closing occurs after June 30, 2021, taking all other actions, other than the payment of amounts required to satisfy and discharge the Senior Amortizing Notes Indenture and the payment of any fees and expenses relating to the satisfaction and discharge, including those of the Trustee under the Senior Amortizing Notes Indenture (except to the extent such amounts have been provided by UnitedHealth Group or Merger Sub to Change at the Closing), and prepare all other documents as may be necessary to cause, at UnitedHealth Group’s discretion, the satisfaction and discharge of the Senior Amortizing Notes Indenture at the Closing.

Under the Merger Agreement:

 

   

“Credit Agreement” means the Credit Agreement, dated as of March 1, 2017, by and among Change Healthcare Intermediate Holdings, LLC, Change Healthcare Holdings, LLC and each of the other borrowers and guarantors party thereto, the lenders party thereto from time to time and Bank of America, N.A., as administrative agent, collateral agent, swing line lender and L/C issuer.

 

   

“Purchase Contract Agreement” means the Purchase Contract Agreement, dated as of July 1, 2019, between Change and U.S. Bank N.A., as purchase contract agent, as trustee and as attorney-in-fact for the holders of from time to time as provided therein, relating to the purchase contract component of the TEUs.

 

   

“Senior Amortizing Notes Indenture” means the Indenture, dated as of July 1, 2019, between Change and U.S. Bank N.A., as trustee, as amended by the First Supplemental Indenture, dated as of July 1, 2019, between Change and U.S. Bank N.A, relating to the amortizing notes component of the TEUs.

 

   

“Senior Notes” means the 5.75% Senior Notes due 2025, issued pursuant to the terms of the Senior Notes Indenture.

 

   

“Senior Notes Indenture” means the Indenture, dated as of February 15, 2017, by and among Change Healthcare Holdings, LLC, Change Healthcare Finance, Inc. and Wilmington Trust, National Association as trustee, registrar and paying agent.

 

   

“TEUs” means the 6.00% tangible equity units of Change listed on the NASDAQ under the trading symbol, “CHNGU”.

 

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TRA Terminations

Change and/or certain of its subsidiaries are obligors under the tax receivable agreements filed as Exhibits 10.2 through 10.7 to Change’s Form 10-K for the fiscal year ended March 31, 2020 (the “TRAs”). Prior to the Closing, in consultation with and at the direction of UnitedHealth Group, Change will use reasonable best efforts to take such actions as may be necessary or appropriate to terminate, as of the date of and immediately following the Closing (but contingent on the Closing), the TRAs on the terms and subject to the conditions set forth therein (such terminations, the “TRA Terminations”). During the Interim Period, UnitedHealth Group and Change will cooperate in good faith to prepare drafts of such TRA Terminations that can be delivered to each party to the TRAs. Thereafter, Change will provide UnitedHealth Group with the opportunity to participate in any substantive communications with such parties related to the TRA Terminations and UnitedHealth Group will direct all such communications in its reasonable discretion to the extent related to the TRA Terminations, including all negotiations and discussions relating to the TRA Terminations. Without UnitedHealth Group’s prior written consent (which may be withheld in UnitedHealth Group’s sole discretion), Change may not enter into any TRA Termination or supplement, amend or otherwise modify any TRA or TRA Termination.

Cooperation Regarding Tax Matters

Each of UnitedHealth Group and Change must use its reasonable best efforts to deliver to Change’s tax counsel a representation letter, dated as of the Closing Date and substantially in the applicable form set forth in Change Disclosure Letter, which representation letter will be relied upon by such tax counsel in order to provide the Tax Opinion at the Closing. UnitedHealth Group and Change have agreed that if either party cannot deliver such representation letter in such agreed form, they will use reasonable best efforts to agree to amendments, modifications, supplements or replacements of the representation letter that would permit delivery of such modified letter and, accordingly, permit such tax counsel to provide the Tax Opinion at the Closing. In connection with the satisfaction of the Tax Opinion closing condition, the parties have further agreed that if Change is unable to obtain a Tax Opinion as contemplated by such closing condition, the parties will cooperate with Change’s tax counsel in good faith, including by making necessary amendments, modifications, supplements or replacements of their representation letters and providing other materials reasonably requested by such tax counsel, such that Change would be able to obtain a replacement Tax Opinion, dated as of the Closing Date, in form and substance reasonably satisfactory to UnitedHealth Group and that complies with Section 9(c)(iv) of the Tax Matters Agreement, dated as of March 9, 2020, by and among Change, McKesson Corporation, PF2 SpinCo Inc., Change Healthcare LLC and Change Healthcare Holdings, LLC.

Delisting and Deregistration

Prior to the Closing Date, Change will cooperate with UnitedHealth Group and use reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, necessary or advisable on its part under applicable law, including, the rules and policies of NASDAQ, to enable the delisting by the Surviving Corporation of the shares of Change Common Stock and (if requested by UnitedHealth Group) the TEUs from NASDAQ and the deregistration of the shares under the Exchange Act and (if requested by UnitedHealth Group) the TEUs under the Securities Act, in each case, as promptly as practicable after the Effective Time, but in any event, in the case of the shares, no more than ten days thereafter. In connection therewith, UnitedHealth Group will use reasonable best efforts to (a) assist in enabling Change or NASDAQ to be in a position to promptly file and cause the Surviving Corporation or NASDAQ to file with the SEC a Form 25 on the Closing Date and (b) cause the Surviving Corporation to file a Form 15 on the first business day that is at least ten days after the date the Form 25 is filed (such period between the Form 25 and the Form 15 filing dates, the “Delisting Period”).

Upon UnitedHealth Group’s determination that the Surviving Corporation may be required to file any quarterly or annual reports pursuant to the Exchange Act during the Delisting Period, Change will deliver to UnitedHealth Group at least five business days prior to the Closing Date a draft of any such reports required to be filed during the Delisting Period, which is sufficiently developed such that it can be timely filed and when filed

 

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will not 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 made therein, in the light of the circumstances under which they were made, not misleading and comply in all material respects with the provisions of applicable law.

Other Covenants

The Merger Agreement contains other customary covenants, including those:

 

   

Relating to the preparation, clearance and dissemination of this proxy statement;

 

   

Requiring Merger Sub’s sole stockholder to approve the Merger Agreement;

 

   

Requiring the parties to keep each other reasonably apprised of notifications from governmental entities and other third parties regarding the Merger;

 

   

Requiring Change to provide UnitedHealth Group and its representatives with information regarding, and access to, Change’s business, properties, assets and personnel;

 

   

Relating to public announcements and other communications;

 

   

Requiring Change to take actions to eliminate or minimize the effects of any takeover statutes that become applicable to the Merger;

 

   

Relating to coordination between the parties regarding transaction litigation; and

 

   

Relating to Section 16 matters.

Closing Conditions

Mutual Conditions

The respective obligations of each party to effect the Closing is subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions:

 

   

The Requisite Vote will have been obtained;

 

   

The waiting period (and any extension thereof) applicable to the consummation of the transactions contemplated by the Merger Agreement under the HSR Act will have expired or been earlier terminated; and

 

   

No governmental entity will have enacted or entered any order (whether temporary, preliminary or permanent) that is in effect, and no other law will have been enacted, enforced, issued, promulgated, entered or adopted and be effective, in each case, that enjoins, restrains, prohibits, prevents or makes illegal the consummation of the transactions contemplated by the Merger Agreement (each, a “Legal Restraint”).

Conditions Benefitting UnitedHealth Group and Merger Sub

The obligations of UnitedHealth Group and Merger Sub to effect the Closing are also subject to the satisfaction or waiver by UnitedHealth Group at or prior to the Closing Date of the following conditions:

 

   

Each of Change’s representations and warranties relating to (i) organization, good standing and qualification, (ii) certain matters regarding capital structure, (iii) corporate authority, approval of the Merger Agreement and receipt of Goldman Sachs’ fairness opinion, (iv) certain tax matters, (v) the inapplicability of takeover statutes and (vi) the absence of brokers and finders that (a) is qualified by “materiality”, “Material Adverse Effect” or similar qualifiers shall be true and correct in all respects as of the date of this Agreement and as of the Closing as though made as of the Closing (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of

 

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time, in which case such representation and warranty must be so true and correct as of such particular date or period of time) and (b) is not qualified by “materiality”, “Material Adverse Effect” or similar qualifiers shall be true and correct in all material respects as of the date of this Agreement and as of the Closing as though made as of the Closing must be true and correct in all material respects as of the date of the Merger Agreement and as of the Closing as though made as of the Closing (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty must be so true and correct as of such particular date or period of time);

 

   

Each of Change’s representations and warranties relating to (i) certain matters regarding capital structure and (ii) the absence of a Material Adverse Effect must be true and correct in all respects (other than, with respect to the representations and warranties covered by clause (i), any inaccuracies that, individually or in the aggregate, are de minimis) as of the date of the Merger Agreement and as of the Closing as though made as of the Closing (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty must be so true and correct as of such particular date or period of time);

 

   

Each of Change’s other representations and warranties, without giving effect to any “materiality” or “Material Adverse Effect” qualifiers or qualifiers of similar import set forth therein, must be true and correct as of the date of the Merger Agreement and as of the Closing as though made as of the Closing (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty must be so true and correct as of such particular date or period of time), except for any failure of any such representation and warranty to be so true and correct that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 

   

Change must have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing;

 

   

Since the date of the Merger Agreement, there must not have occurred any Material Adverse Effect;

 

   

UnitedHealth Group must have received a certificate duly executed on behalf of Change by an executive officer of Change certifying that the conditions described in the five immediately preceding bullets have been satisfied;

 

   

The waiting period (and any extension thereof) applicable to the consummation of the transactions contemplated by the Merger Agreement under the HSR Act must have expired or been earlier terminated without the imposition of any Burdensome Condition; and

 

   

Change must have received an opinion of counsel, dated as of the Closing Date, to the effect that the Merger and the transactions contemplated thereby will not affect the intended tax-free treatment of the March 2020 separation of PF2 SpinCo Inc. from McKesson Corporation and subsequent merger of PF2 SpinCo Inc. with and into Change, with Change as the surviving company (the “Tax Opinion”); provided that this condition will be deemed satisfied if: (i) as a result of any amendments, modifications, supplements or replacements described above under “Cooperation Regarding Tax Matters”, Change is able to receive a replacement Tax Opinion, dated as of the Closing Date, in the manner described above under “Cooperation Regarding Tax Matters”; (ii) UnitedHealth Group has failed to deliver to Change’s tax counsel certain specified representations contained in its representation letter described above under “Cooperation Regarding Tax Matters” and such failure causes Change to be unable to receive a replacement Tax Opinion described above under “Cooperation Regarding Tax Matters”, unless such failure to deliver any such representation is primarily caused by an intentional act or intentional failure to act on the part of Change or any of its Authorized Representatives (as such term is defined in UnitedHealth Group’s representation letter); or (iii) an intentional act or intentional failure to act on the part of UnitedHealth Group or any of its Authorized Representatives is the primary cause of Change being unable to deliver its representation letter

 

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described above under “Cooperation Regarding Tax Matters”, and such inability of Change to deliver such letter primarily causes Change to be unable to receive a replacement Tax Opinion.

Conditions Benefitting Change

The obligation of Change to effect the Closing is also subject to the satisfaction or waiver by Change at or prior to the Closing of the following conditions:

 

   

Each of UnitedHealth Group’s and Merger Sub’s representations and warranties, without giving effect to any “materiality” qualifiers or qualifiers of similar import set forth therein, must be true and correct in all material respects as of the date of the Merger Agreement and as of the Closing as though made as of the Closing (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty must be true and correct in all material respects as of such particular date or period of time), except for any failure of any such representations and warranties to be so true and correct that would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the ability of UnitedHealth Group or Merger Sub to consummate the transactions contemplated by the Merger Agreement;

 

   

Each of UnitedHealth Group and Merger Sub must have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing; and

 

   

Change must have received a certificate duly executed on behalf of UnitedHealth Group and Merger Sub by an executive officer of UnitedHealth Group and Merger Sub certifying that the conditions described in the two immediately preceding bullets have been satisfied.

Termination

The Merger Agreement may be terminated at any time before the Effective Time, whether before or after the Requisite Vote has been obtained (except as otherwise expressly noted below), as follows:

 

   

By mutual written consent of the parties;

 

   

By either Change or UnitedHealth Group if:

 

   

the transactions contemplated by the Merger Agreement have not been consummated by 5:00 p.m. (New York time) on January 5, 2022 (the “Outside Date”); provided, however, that if the conditions described in (i) the second bullet under “Closing Conditions—Mutual Conditions” above, (ii) the third bullet under “Closing Conditions—Mutual Conditions” above (in connection with a Legal Restraint of a governmental antitrust entity) or (iii) the penultimate bullet under “Closing Conditions—Conditions Benefitting UnitedHealth Group and Merger Sub” above have not been satisfied or, to the extent permitted by applicable law, waived on or prior to the Outside Date but all other conditions to Closing have been satisfied or, to the extent permitted by applicable law, waived (except for those conditions that by their nature are to be satisfied at the Closing), the Outside Date may be extended by either Change or UnitedHealth Group (in each case, acting in its sole discretion) to a time and date not beyond 5:00 p.m. (New York time) on April 5, 2022 by providing a written notice thereof to the other prior to 5:00 p.m. (New York time) on January 5, 2022 and such time and date, as so extended, will be the “Outside Date” for all purposes of the Merger Agreement; provided, further, that this termination right will not be available to Change or UnitedHealth Group if it (or Merger Sub, in the case of an attempted termination by UnitedHealth Group) has breached in any material respect any covenant or agreement set forth in the Merger Agreement and such breach has proximately caused the occurrence of the failure of a condition to the Closing to occur on or prior to the Outside Date;

 

   

the Requisite Vote has not been obtained at the Special Meeting or at any postponement, recess or adjournment thereof taken in accordance with the Merger Agreement, in each case at which a vote

 

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on the adoption of the Merger Agreement was taken (such failure to obtain the Requisite Vote at such a meeting, a “Vote-Down”, and the termination trigger described in this bullet, the “Vote-Down Trigger”); or

 

   

if any governmental entity has enacted or entered any order, or enacted, enforced, issued, promulgated, entered or adopted any other law that, in either such case, enjoins, restrains, prohibits, prevents or makes illegal the consummation of the transactions contemplated by the Merger Agreement and such order or other law has become final and non-appealable, whether before or after the Requisite Vote has been obtained; provided that this termination right will not be available to Change or UnitedHealth Group if it (or Merger Sub, in the case of an attempted termination by UnitedHealth Group) has breached in any material respect any covenant or agreement set forth in the Merger Agreement and such breach relates to its obligations pursuant to the covenants described above under “Efforts to Complete the Merger—Antitrust Matters” or otherwise has proximately caused the occurrence of the failure of a condition to the Closing to occur;

 

   

By Change:

 

   

if there has been a breach of any representation, warranty, covenant or agreement made by UnitedHealth Group or Merger Sub set forth in the Merger Agreement such that the conditions described in the first or second bullets under “Closing Conditions—Conditions Benefitting Change” above would not be satisfied were the Closing then to occur (and such breach is not curable prior to the Outside Date, or if curable prior to the Outside Date, has not been cured within the earlier of (i) 30 days after the giving of written notice thereof by Change to UnitedHealth Group and Merger Sub describing such breach in reasonable detail and stating Change’s intention to terminate the Merger Agreement and abandon the transactions contemplated by the Merger Agreement and (ii) three business days prior to the Outside Date), whether before or after the Requisite Vote has been obtained; provided that this termination right will not be available to Change if it is then in breach in any material respect of any covenant or agreement set forth in the Merger Agreement and such breach would cause the failure of a condition to the Closing to occur; or

 

   

at any time prior to the time the Requisite Vote is obtained, in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal in compliance with the non-solicitation covenants contained in the Merger Agreement; provided, however, that Change has concurrently with such termination paid or caused to be paid to UnitedHealth Group the Termination Fee (as defined below) and Change has not materially breached the non-solicitation covenants contained in the Merger Agreement in respect of such Acquisition Proposal (such termination trigger, the “Superior Proposal Trigger”);

 

   

By UnitedHealth Group:

 

   

if there has been a breach of any representation, warranty, covenant or agreement made by Change set forth in the Merger Agreement such that the conditions in the first or second bullets under “Closing Conditions—Conditions Benefitting UnitedHealth Group and Merger Sub” above would not be satisfied were the Closing then to occur (and such breach is not curable prior to the Outside Date, or if curable prior to the Outside Date, has not been cured within the earlier of (i) 30 days after the giving of written notice thereof by UnitedHealth Group to Change describing such breach in reasonable detail and stating UnitedHealth Group’s intention to terminate the Merger Agreement and abandon the transactions contemplated by the Merger Agreement and (ii) three business days prior to the Outside Date), whether before or after the Requisite Vote has been obtained; provided that this termination right will not be available to UnitedHealth Group if either UnitedHealth Group or Merger Sub is then in breach in any material respect of any covenant or agreement set forth in the Merger Agreement and such breach would cause the failure of a condition to the Closing to occur (such termination trigger, the “Change Breach Trigger”); or

 

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at any time prior to the time the Requisite Vote is obtained, if (i) the Board has effected a Change of Recommendation or (ii) Change has materially breached the non-solicitation covenants contained in the Merger Agreement (such termination trigger, the “Change of Recommendation/Non-Solicitation Breach Trigger”).

Except to the extent described under “Termination Fee” below, in the event the Merger Agreement is terminated in the manner described above, the Merger Agreement will become void and of no effect with no liability to any person or entity on the part of any party (or any of its affiliates or its or their respective representatives); provided, however, except as described under “Termination Fee” below, no such termination will relieve any party of any liability or damages to any other party resulting from its fraud or knowing and intentional breach of the Merger Agreement.

Termination Fee

In the event the Merger Agreement is terminated:

 

   

by either Change or UnitedHealth Group pursuant to the Vote-Down Trigger or by UnitedHealth Group pursuant to the Change Breach Trigger and, in either such case:

 

   

any person or entity has publicly announced an Acquisition Proposal for the first time after the date of the Merger Agreement and such Acquisition Proposal has not been withdrawn without qualification (1) prior to the Vote-Down, with respect to termination pursuant to the Vote-Down Trigger, or (2) prior to the date of such termination, with respect to termination pursuant to the Change Breach Trigger; provided that for purposes of this bullet, an Acquisition Proposal made by any person or entity will not be deemed to have been “withdrawn” if, within 12 months after such termination, Change or any of its subsidiaries has entered into a definitive Alternative Acquisition Agreement with respect to such Acquisition Proposal, or has consummated any Acquisition Proposal (or the Board has approved or recommended to Change’s stockholders or otherwise not opposed any Acquisition Proposal) made by or on behalf of such person or entity or any of its affiliates; and

 

   

within 12 months after such termination, Change or any of subsidiaries has entered into a definitive Alternative Acquisition Agreement with respect to, or the Board has approved or recommended to Change’s stockholders or otherwise not opposed, any Acquisition Proposal that is later consummated (regardless of whether or not such consummation happens prior to or following the end of such 12 month period) (provided, that solely for purposes of this bullet and the immediately preceding bullet, the term “Acquisition Proposal” will have the meaning set forth above under “Non-Solicitation Covenants”, except that the reference to “15%” in such definition will be replaced with a reference to “50%”), then Change must pay or cause to be paid to UnitedHealth Group an amount equal to $300,000,000 (the “Termination Fee”) by wire transfer of immediately available funds concurrently with the consummation of such Acquisition Proposal;

 

   

by UnitedHealth Group pursuant to the Change of Recommendation/Non-Solicitation Breach Trigger, then Change must pay or cause to be paid to UnitedHealth Group the Termination Fee by wire transfer of immediately available funds within three business days following the date of such termination; or

 

   

by Change pursuant to the Superior Proposal Trigger, then Change must pay or cause to be paid to UnitedHealth Group the Termination Fee by wire transfer of immediately available funds concurrently with such termination of the Merger Agreement.

The Merger Agreement provides that (i) in no event will Change be required to pay the Termination Fee on more than one occasion; (ii) the agreements described above are an integral part of the transactions contemplated by the Merger Agreement and that, without those agreements, the other parties would not enter into the Merger Agreement and accordingly, if Change fails to promptly pay or cause to be paid the Termination Fee as and when

 

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due, and, in order to obtain such amount, UnitedHealth Group commences a legal proceeding that results in a judgment against Change for the Termination Fee, Change must pay or cause to be paid to UnitedHealth Group its costs and expenses (including attorneys’ fees) in connection with such proceeding, together with interest on the Termination Fee, at the prime rate published in The Wall Street Journal for the relevant date such amount was required to be made from such date through the date of payment; and (iii) in the event that the Termination Fee becomes payable by Change pursuant to the penultimate bullet immediately above as a result of termination by UnitedHealth Group in connection with Change having materially breached the non-solicitation covenants contained in the Merger Agreement, and is paid or caused to be paid by Change, the Termination Fee will be UnitedHealth Group’s and Merger Sub’s sole and exclusive remedy for monetary damages against Change and its affiliates pursuant to the Merger Agreement or otherwise and, upon payment of the Termination Fee (plus any amounts due under clause (ii) immediately above), none of Change or any of its affiliates will have any further monetary liability or obligation arising out of or related to the Merger Agreement or the transactions contemplated thereby; provided, however, that this clause (iii) will not apply in the event that the Merger Agreement is terminated other than by UnitedHealth Group in connection with Change having materially breached the non-solicitation covenants contained in the Merger Agreement.

Expenses

Whether or not the transactions contemplated by the Merger Agreement are consummated, all costs, fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement, including all costs, fees and expenses of its representatives, will be paid by the party incurring such cost, fee or expense, except as otherwise expressly provided in the Merger Agreement. Notwithstanding the foregoing, UnitedHealth Group will be responsible for and will pay all filing fees pursuant to antitrust laws.

Amendment; Waiver

Subject to the provisions of applicable law, at any time prior to the Effective Time, the Merger Agreement may be amended or otherwise modified only by a written instrument duly executed and delivered by each of the parties; provided, that the Merger Agreement may not be amended or otherwise modified at any time following the Effective Time. The conditions to each of the respective parties’ obligations to consummate the transactions contemplated by the Merger Agreement are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law; provided, however, that any such waiver will only be effective if made in a written instrument duly executed and delivered by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege under the Merger Agreement or under applicable law will operate as a waiver thereof and, except as otherwise expressly provided in the Merger Agreement, no single or partial exercise thereof will preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

Governing law and Venue; Submission to Jurisdiction; Selection of Forum; Waiver of Trial by Jury

The Merger Agreement and all matters and transactions contemplated thereby or related thereto will be deemed to be made in and in all respects will be interpreted, construed and governed by and in accordance with the laws of the State of Delaware without regard to the conflicts of laws provisions, rules or principles thereof (or any other jurisdiction) to the extent that such provisions, rules or principles would direct a matter to another jurisdiction.

Each of the parties has agreed that it: (i) will bring any legal proceeding in connection with, arising out of or otherwise relating to the Merger Agreement, any instrument or other document delivered pursuant to the Merger Agreement or the transactions contemplated by the Merger Agreement exclusively in the Chosen Courts (as defined below); and (ii) solely in connection with such proceedings, (A) irrevocably and unconditionally submits to the exclusive jurisdiction of the Chosen Courts, (B) irrevocably waives any objection to the laying of venue in

 

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any such proceeding in the Chosen Courts, (C) irrevocably waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party, (D) agrees that mailing of process or other papers in connection with any such proceeding in the manner provided in the Merger Agreement or in such other manner as may be permitted by applicable law will be valid and sufficient service thereof and (E) will not assert as a defense any matter or claim waived by the foregoing clauses (A) through (D) or that any order issued by the Chosen Courts may not be enforced in or by the Chosen Courts. “Chosen Courts” means the Court of Chancery of the State of Delaware, or if such court finds it lacks subject matter jurisdiction, the Superior Court of the State of Delaware (Complex Commercial Division); provided that if subject matter jurisdiction over the matter that is the subject of the applicable proceeding is vested exclusively in the U.S. federal courts, such proceeding will be heard in the U.S. District Court for the District of Delaware.

Each party has further acknowledged and agreed that any controversy which may be connected with, arise out of or otherwise relate to the Merger Agreement, any instrument or other document delivered pursuant to the Merger Agreement or the transactions contemplated by the Merger Agreement is expected to involve complicated and difficult issues, and therefore each party has irrevocably and unconditionally waived to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any proceeding, directly or indirectly, connected with, arising out of or otherwise relating to the Merger Agreement, any instrument or other document delivered pursuant to the Merger Agreement or the transactions contemplated by the Merger Agreement.

Specific Performance

Each of the parties has acknowledged and agreed that the rights of each party to consummate the transactions contemplated by the Merger Agreement are special, unique and of extraordinary character and that if for any reason any of the provisions of the Merger Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or damage would be caused for which money damages would not be an adequate remedy. Accordingly, each party has agreed that, in addition to any other available remedies a party may have in equity or at law, each party will be entitled to enforce specifically the terms and provisions of the Merger Agreement and to obtain an order enforcing compliance with the provisions of the Merger Agreement in the Chosen Courts without necessity of posting a bond or other form of security.

 

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CERTAIN ANCILLARY AGREEMENTS

Support Agreement

The following summary describes certain material provisions of the Support Agreement. The representations, warranties, covenants and agreements described below and included in the Support Agreement were made only for purposes of the Support Agreement as of specific dates, were solely for the benefit of the parties to the Support Agreement and may be subject to important qualifications and limitations.

As a condition and inducement to UnitedHealth Group’s entry into the Merger Agreement, concurrently with the entry into the Merger Agreement, UnitedHealth Group and the Support Agreement Parties entered into the Support Agreement. Pursuant to the Support Agreement, each Support Agreement Party agreed, among other things, not to transfer any shares of Change Common Stock (and any securities convertible, exercisable or exchangeable for, or rights to purchase or acquire, Change Common Stock) that such Support Agreement Party owns, beneficially (as defined in Rule 13d-3 under the Exchange Act) or of record as of the date of the Support Agreement, and any additional shares of Change Common Stock (and any securities convertible, exercisable or exchangeable for, or rights to purchase or acquire, Change Common Stock) that such Support Agreement Party may acquire beneficial (as defined in Rule 13d-3 under the Exchange Act) or record ownership of after the date of the Support Agreement (such shares, collectively, the “Covered Shares”), other than with the prior written consent of UnitedHealth Group.

The Support Agreement Parties also agreed to vote (or cause to be voted), in person or by proxy, or deliver a written consent (or cause a consent to be delivered) with respect to, all Covered Shares owned (beneficially or of record) by such Support Agreement Party, (i) in favor of the adoption of the Merger Agreement and the approval of the Merger and the other transactions contemplated by the Merger Agreement, and (ii) against (A) any action or agreement that would reasonably be expected to result in any condition to the consummation of the Merger not being satisfied, (B) any Acquisition Proposal or any action with the intention to further any Acquisition Proposal, (C) any stock purchase agreement, any merger, consolidation, business combination, tender offer, exchange, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation, winding up or similar extraordinary transaction involving Change (other than the Merger Agreement), and (D) any proposal or action that would reasonably be expected to materially delay, materially postpone or materially adversely affect consummation of the Merger and the other transactions contemplated by the Merger Agreement.

Solely in the event of a failure by a Support Agreement Party to act in accordance with such Support Agreement Party’s obligation as to voting pursuant to the Support Agreement prior to the earliest to occur of (i) the Effective Time, (ii) such date and time as the Merger Agreement is terminated pursuant to its terms and (iii) the time the Support Agreement is terminated upon the mutual written agreement of UnitedHealth Group and each Support Agreement Party (the earliest to occur of clauses (i), (ii) and (iii), the “Expiration Time”), such Support Agreement Party has also granted UnitedHealth Group an irrevocable proxy coupled with an interest to vote the Covered Shares, or grant a consent or approval in respect of the Covered Shares owned (beneficially or of record) by a Support Agreement Party, as provided for in the Support Agreement. The irrevocable proxy will terminate automatically upon the termination of the Support Agreement.

The Support Agreement will terminate upon the earliest to occur of (i) the Expiration Time and (ii) any material change to the terms of the Merger without the prior written consent of the Support Agreement Parties that (A) reduces the Per Share Merger Consideration (other than certain adjustments in compliance with the Merger Agreement), (B) changes the form of consideration payable in the Merger or (C) extends the Outside Date (other than a certain extension of the Outside Date provided for in the Merger Agreement).

Change is not a party to the Support Agreement.

 

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TRA Letter Agreement

The following summary describes certain material provisions of the TRA Letter Agreement. The representations, warranties, covenants and agreements described below and included in the TRA Letter Agreement were made only for purposes of the TRA Letter Agreement as of specific dates, were solely for the benefit of the parties to the TRA Letter Agreement and may be subject to important qualifications and limitations.

Change and/or certain of its subsidiaries are obligors under the Applicable TRAs, pursuant to which Change has agreed to make certain payments with respect to realized tax savings, which vary depending upon a number of factors, including the amount and timing of the taxable income Change generates in the future and the tax rate then applicable. Concurrently with the entry into the Merger Agreement, UnitedHealth Group, Change and the TRA Letter Agreement Parties entered into the TRA Letter Agreement pursuant to which, among other matters, UnitedHealth Group will direct Change, pursuant to the terms of the Merger Agreement, to exercise Change’s right, in connection with the Closing, to terminate each of the Applicable TRAs by making the respective early termination payments specified under each Applicable TRA, pursuant to the applicable discount rate set forth in each Applicable TRA and the methodology set forth in the TRA Letter Agreement, in accordance with the terms of each such Applicable TRA. The TRA Letter Agreement will terminate upon the valid termination of the Merger Agreement.

 

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ADVISORY VOTE ON NAMED EXECUTIVE OFFICER MERGER-RELATED

COMPENSATION PROPOSAL

(PROPOSAL 2)

In accordance with Section 14A of the Exchange Act, Change is providing its stockholders with the opportunity to cast a non-binding, advisory vote on the compensation that will be paid or may become payable to the named executive officers of Change in connection with the Merger, the value of which is set forth in the table entitled “Golden Parachute Compensation” on page 66. This proposal, commonly known as “say-on-golden parachutes”, is referred to in this proxy statement as the Named Executive Officer Merger-Related Compensation Proposal. As required by Section 14A of the Exchange Act, Change is asking its stockholders to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to Change’s named executive officers in connection with the Merger, as disclosed under “The Merger Proposal (Proposal 1)—Interests of Change’s Executive Officers and Directors in the Merger—Potential Merger-Related Payments to Named Executive Officers,” including the table, associated footnotes and narrative discussion, is hereby APPROVED.”

The vote on the Named Executive Officer Merger-Related Compensation Proposal is a vote separate and apart from the vote on the Merger Proposal. Accordingly, you may vote to approve the Merger Proposal and vote not to approve the Named Executive Officer Merger-Related Compensation Proposal, and vice versa. Because the vote to approve the Named Executive Officer Merger-Related Compensation Proposal is only advisory in nature, it will not be binding on Change, UnitedHealth Group or the Surviving Corporation. Accordingly, because Change is contractually obligated to pay such merger-related compensation, the compensation will be paid or payable, subject only to the conditions applicable thereto, if the Merger Proposal is approved, regardless of the outcome of the advisory vote.

Approval of the Named Executive Officer Merger-Related Compensation Proposal (on a non-binding basis) requires the vote of the holders of a majority in voting power of the shares of Change Common Stock present in person or represented by proxy at the Special Meeting. Abstentions will have the same effect as a vote “AGAINST” the Named Executive Officer Merger-Related Compensation Proposal, but the failure to vote your shares will have no effect on the outcome of the proposal. Broker non-votes, if any, will have no effect on the outcome of the Named Executive Officer Merger-Related Compensation Proposal. If you sign and return a proxy and do not indicate how you wish to vote on the executive officer merger-related compensation proposal, your shares will be voted in favor of the proposal.

The Board unanimously recommends that the Change stockholders vote “FOR” the Named Executive Officer Merger-Related Compensation Proposal.

 

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ADJOURNMENT PROPOSAL

(PROPOSAL 3)

Change stockholders are being asked to approve a proposal that will give us authority from the stockholders to adjourn the Special Meeting for the purpose of soliciting additional proxies in favor of the Merger Proposal if there are insufficient votes at the time of the Special Meeting to approve the Merger Proposal. If a quorum is not present, the person presiding at the Special Meeting may adjourn the Special Meeting from time to time until a quorum is present.

In addition, the Board could postpone the Special Meeting before it commences, subject to the terms of the Merger Agreement. If the Special Meeting is adjourned or postponed, stockholders who have already submitted their proxies will be able to revoke them at any time prior to the final vote on the proposals. If the adjournment is for more than 30 days, or if, after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting.

Approval of the Adjournment Proposal requires the vote of the holders of a majority in voting power of the shares of Change Common Stock present in person or represented by proxy at the Special Meeting. Abstentions will have the same effect as a vote “AGAINST” the Adjournment Proposal, but the failure to vote your shares will have no effect on the outcome of the proposal, assuming that a quorum exists. Broker non-votes, if any, will have no effect on the outcome of the Adjournment Proposal. If you sign and return a proxy and do not indicate how you wish to vote on the Adjournment Proposal, your shares will be voted in favor of the Adjournment Proposal. Change does not intend to call a vote on this proposal if the Merger Proposal has been approved at the Special Meeting.

The Board unanimously recommends that the Change stockholders vote “FOR” the Adjournment Proposal.

 

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MARKET PRICES OF CHANGE COMMON STOCK

Market Information

Change Common Stock trades on NASDAQ under the symbol “CHNG”. As of February 26, 2021, there were 306,530,424 shares of Change Common Stock outstanding. The following table shows the high and low closing sales price of Change Common Stock for the periods indicated, as reported on NASDAQ.

 

     Common Stock Price  
         High              Low      

FY 2021

     

Through March 4, 2021

   $ 24.14      $ 18.24  

Quarter ended December 31, 2020

   $ 18.83      $ 14.10  

Quarter ended September 30, 2020

   $ 14.95      $ 10.00  

Quarter ended June 30, 2020

   $ 12.81      $ 8.80  

FY 2020

     

Quarter ended March 31, 2020

   $ 17.26      $ 6.86  

Quarter ended December 31, 2019

   $ 16.39      $ 11.77  

Quarter ended September 30, 2019

   $ 15.20      $ 11.50  

Quarter ended June 30, 2019

   $ 15.00      $ 14.60  

The closing sales price of Change Common Stock on NASDAQ on March 4, 2021, the latest practicable date before the printing of this proxy statement, was $22.45 per share. The closing trading price of Change Common Stock on NASDAQ on January 5, 2021, the last trading day prior to public announcement of the Merger, was $18.24 per share. You are urged to obtain current market quotations for Change Common Stock on NASDAQ when considering whether to approve the Merger Proposal.

Holders

At the close of business on February 26, 2021, 306,530,424 shares of Change Common Stock were issued and outstanding, held by approximately 88 holders of record.

Dividends

We have not paid any cash dividends on our common stock during the periods presented. We do not intend to pay cash dividends to our common stockholders for the foreseeable future and intend to retain earnings, if any, for future operation and expansion of our business. Under the terms of the Merger Agreement, from the date of the Merger Agreement until the earlier of the Effective Time and the termination of the Merger Agreement, we may not declare or pay dividends to our stockholders without UnitedHealth Group’s written consent.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table and accompanying footnotes below show information regarding the beneficial ownership of Change Common Stock as of February 26, 2021 by: (i) each person who is known by us to own beneficially more than 5% of Change Common Stock, (ii) each director (who was serving as a director as of that date) and nominee for director, (iii) each named executive officer, and (iv) all current directors and executive officers as a group.

This information has been provided by each of the directors, executive officers and nominees at the request of Change or derived from statements filed with the SEC pursuant to Section 13(d) or 13(g) of the Exchange Act. Beneficial ownership of securities as shown below has been determined in accordance with applicable guidelines issued by the SEC and includes the possession, directly or indirectly, through any formal or informal arrangement, either individually or in a group, of voting power (which includes the power to vote, or to direct the voting of, such security) and/or investment power (which includes the power to dispose of, or to direct the disposition of, such security). Shares of Change Common Stock underlying options that are currently exercisable or exercisable within 60 days are considered outstanding and beneficially owned by the person holding the options for the purposes of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Holders of RSUs and PSUs granted under the 2019 Omnibus Incentive Plan have the right to direct the voting of the shares underlying those RSUs and PSUs only once the holder becomes the record owner of the underlying shares. As of February 26, 2021, 306,530,424 shares of Change Common Stock were outstanding.

Except as otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment power with respect to the securities listed.

 

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Name

   Shares
Beneficially
Owned as of
February 26,
2021
    Number of Shares
Subject to
Options
Exercisable as of
February 26, 2021
(or which become
exercisable within
60 days of this
date)
     Number of
RSUs that
Vest
within 60
Days of
February 26,
2021
     Total      Percent
of Class
 

Blackstone

     59,620,253 (1)      —          —          59,620,253        19.5

The Vanguard Group

     19,903,169 (2)      —          —          19,903,169        6.3

Clarkston Capital Partners, LLC

     19,292,375 (3)      —          —          19,292,375       
6.3

Named Executive Officers and Directors:

             

Neil de Crescenzo

     198,872       1,811,884        —          2,010,756        *  

Fredrik Eliasson

     182,101 (4)      521,400        —          703,501        *  

Kriten Joshi

     123,872       557,660        —          681,532        *  

Thomas Laur

     6,116       203,820        —          209,936        *  

Roderick O’Reilly

     9,034       443,190        —          452,224        *  

Howard Lance

     197,234       158,921        —          356,155        *  

Nella Domenici

     —         —          —          —          *  

Nicholas Kuhar

     —         —          —          —          *  

Diana McKenzie

     11,426       —          —          11,426        *  

Bansi Nagji

     10,000       —          —          10,000        *  

Philip Pead

     73,362       57.900        —          73,420        *  

Phillip Roe

     11,426       57,900        —          69,326        *  

Neil Simpkins

     —         —          —          —          *  

Robert Zollars

     11,426       29,072        —          40,498        *  

All Executive Officers and Directors as a Group (19 persons)

     846,006       4,644,591        38,462        5,529,059        *  

 

*

Less than 1%

(1)

Reflects 59,040,668 shares directly held by BCP Summit Holdings L.P., 5,434 shares directly held by BFIP Summit Holdings L.P. and 574,151 shares directly held by GSO COF Facility LLC (together with BCP Summit Holdings L.P. and BFIP Summit Holdings L.P., the “Blackstone Funds”). The general partner of BCP Summit Holdings L.P. is BCP Summit Holdings GP L.L.C. The general partner of BFIP Summit Holdings L.P. is BFIP Summit Holdings GP L.L.C. The sole member of BCP Summit Holdings GP L.L.C. is Blackstone Management Associates VI L.L.C. The sole member of Blackstone Management Associates VI L.L.C. is BMA VI L.L.C. The managing member of BMA VI L.L.C. is Blackstone Holdings III L.P. The sole member of BFIP Summit Holdings GP L.L.C. is BCP VI Side-by-Side GP L.L.C. The sole member of BCP VI Side-by-Side GP L.L.C. is Blackstone Holdings III L.P. The general partner of Blackstone Holdings III L.P. is Blackstone Holdings III GP L.P. The general partner of Blackstone Holdings III GP L.P. is Blackstone Holdings III GP Management L.L.C. The sole member of Blackstone Holdings III GP Management L.L.C. is The Blackstone Group Inc. The collateral manager of GSO COF Facility LLC is Blackstone Alternative Credit Advisors LP (f/k/a GSO Capital Partners LP). GSO Advisor Holdings L.L.C. is the special limited partner of Blackstone Alternative Credit Advisors LP with the investment and voting power over the securities beneficially owned by Blackstone Alternative Credit Advisors LP. The sole member of GSO Advisor Holdings L.L.C. is Blackstone Holdings I L.P. The general partner of Blackstone Holdings I L.P. is Blackstone Holdings I/II GP L.L.C. The sole member of Blackstone Holdings I/II GP L.L.C. is The Blackstone Group Inc. The sole holder of the Class C common stock of The Blackstone Group Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each of the entities described in this footnote and Mr. Schwarzman may be deemed to beneficially own the shares beneficially owned by the Blackstone Funds directly or indirectly controlled by it or him, but each disclaims beneficial ownership of such shares (other than the Blackstone Funds to the extent of their direct holdings). The address of Mr. Schwarzman and each of the other entities listed in this footnote (other than GSO COF

 

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  Facility LLC and Blackstone Alternative Credit Advisors LP) is c/o The Blackstone Group Inc., 345 Park Avenue, New York, New York 10154. The address of GSO COF Facility LLC and Blackstone Alternative Credit Advisors LP is c/o Blackstone Alternative Credit Advisors LP, 345 Park Avenue, New York, New York 10154. As of July 1, 2020, Blackstone entities have pledged, hypothecated or granted security interests in 59,046,102 of the shares of Change Common Stock held by them pursuant to a margin loan agreement with customary default provisions. In the event of a default under the margin loan agreement, the secured parties may foreclose upon any and all shares of Change Common Stock pledged to them and may seek recourse against the borrower.
(2)

Based solely on a Schedule 13G filed by The Vanguard Group on February 10, 2021, reflects shared voting power over 174,069 shares, sole dispositive power over 19,546,681 shares, and shared dispositive power over 356,488 shares. The business address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.

(3)

Based solely on a Schedule 13G filed by Clarkston Capital Partners, LLC, Clarkston Companies, Inc., Modell Capital LLC, Jeffrey A. Hakala, Gerald W. Hakala and Jeremy J. Modell on February 16, 2021, reflects shared voting and dispositive power over 19,292,375 shares. The business address of each of the above is 91 West Long Lake Road, Bloomfield Hills, MI 48304.

(4)

140,000 shares are held by a trust, of which Mr. Eliasson and his spouse are trustees.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The following is a summary of the material U.S. federal income tax consequences of the Merger to “U.S. holders” and “non-U.S. holders” (in each case, as defined below) of Change Common Stock whose shares of common stock are converted into the right to receive cash in the Merger. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable U.S. Treasury regulations, judicial authority, administrative interpretations, and administrative rulings in effect as of the date of this proxy statement, all of which may change, possibly with retroactive effect. This summary is general in nature and does not purport to be a complete analysis of all potential tax effects of the Merger.

This discussion addresses only the consequences of the exchange of shares of Change Common Stock held as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). It does not consider the effect of the Medicare tax on net investment income or any applicable state, local or foreign income tax laws, or of any non-income tax laws. In addition, this discussion does not address all aspects of U.S. federal income tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules, such as:

 

   

a bank, insurance company, or other financial institution;

 

   

a tax-exempt organization;

 

   

a governmental agency or instrumentality;

 

   

a retirement plan, individual retirement account or other tax-deferred account;

 

   

an entity or arrangement treated for U.S. federal income tax purposes as a partnership, S corporation or other pass-through entity (or an investor in such an entity or arrangement);

 

   

a real estate investment trust or regulated investment company;

 

   

a dealer or broker in stocks and securities or currencies;

 

   

a trader in securities that elects mark-to-market treatment;

 

   

a holder of shares subject to the alternative minimum tax provisions of the Code;

 

   

a holder of shares that received the shares through the exercise of an employee stock option, through a tax qualified retirement plan or otherwise as compensation;

 

   

a U.S. holder that has a functional currency other than the U.S. dollar;

 

   

a “controlled foreign corporation,” “passive foreign investment company,” or corporation that accumulates earnings to avoid U.S. federal income tax;

 

   

a holder of shares that exercises appraisal rights;

 

   

a foreign pension fund and its affiliates;

 

   

a holder that holds shares as part of a hedge, straddle, constructive sale, conversion or other integrated transaction;

 

   

a U.S. expatriate; or

 

   

a holder that owns (or is treated as owning) shares of UnitedHealth Group.

If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds Change Common Stock, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding Change Common Stock and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of the Merger to them.

 

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Please consult your own tax advisor regarding the consequences of the Merger to you in light of your particular circumstances under the Code and the laws of any other taxing jurisdiction.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Change Common Stock that is:

 

   

an individual citizen or resident of the United States;

 

   

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

   

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

A “non-U.S. holder” means a beneficial owner of Change Common Stock that is not a U.S. holder.

U.S. Holders

General. The exchange of Change Common Stock for cash in the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of Change Common Stock are converted into the right to receive cash in the Merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of merger consideration received with respect to such shares under the Merger Agreement and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for such shares. Gain or loss will be determined separately for each block of shares of Change Common Stock (i.e., shares of Change Common Stock acquired at the same cost in a single transaction). If a U.S. holder acquired different blocks of shares of Change Common Stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of shares of Change Common Stock that it holds.

Such gain or loss generally will be treated as long-term capital gain or loss if the U.S. holder has held the shares of Change Common Stock for more than one year at the time of the Effective Time. Long-term capital gains of non-corporate U.S. holders (including individuals) are generally eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

Information Reporting and Backup Withholding. Information reporting and backup withholding (currently at a rate of 24%) may apply to payments made in connection with the Merger. Backup withholding will not apply, however, to a U.S. holder of Change Common Stock who (1) furnishes a correct taxpayer identification number (“TIN”), certifies that such holder is not subject to backup withholding on Internal Revenue Service (“IRS”) Form W-9 (or appropriate successor form) included in the transmittal materials that such holder will receive, and otherwise complies with all applicable requirements of the backup withholding rules; or (2) provides proof that such holder is otherwise exempt from backup withholding. Backup withholding is not an additional tax, and any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the IRS in a timely manner. The IRS may impose a penalty upon any taxpayer that fails to provide the correct TIN.

 

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Non-U.S. Holders

General. A non-U.S. holder’s receipt of cash in exchange for shares of Change Common Stock pursuant to the Merger generally will not be subject to U.S. federal income tax unless:

 

   

the gain, if any, on such shares is “effectively connected” with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to the non-U.S. holder’s permanent establishment in the United States);

 

   

the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the exchange of shares of Change Common Stock for cash pursuant to the Merger and certain other conditions are met; or

 

   

we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes and certain other conditions are met.

A non-U.S. holder described in the first bullet point immediately above will generally be subject to regular U.S. federal income tax on any gain realized as if the non-U.S. holder were a U.S. holder. If such non-U.S. holder is a foreign corporation, it may also be subject to a “branch profits tax” equal to 30% of its effectively connected earnings and profits (or such lower rate as may be specified by an applicable income tax treaty). An individual non-U.S. holder described in the second bullet point immediately above will be subject to tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on any gain realized, which may be offset by U.S.-source capital losses recognized in the same taxable year, even though the individual is not considered a resident of the United States.

Generally, a corporation is a “United States real property holding corporation” if the fair market value of its “United States real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business (all as determined for U.S. federal income tax purposes). We believe we are not and do not anticipate becoming a United States real property holding corporation for U.S. federal income tax purposes.

Information Reporting and Backup Withholding. Information reporting and backup withholding will generally apply to payments made pursuant to the Merger to a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a non-U.S. holder and satisfies certain other requirements, or otherwise establishes an exemption. Copies of applicable information returns reporting such payments and any withholding may also be made available to the tax authorities in the non-U.S. holder’s country in which such holder resides under the provisions of an applicable treaty or agreement. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a U.S. broker or a non-U.S. broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. A