Exhibit 10.1
STOCK PURCHASE AGREEMENT
DATED AS OF AUGUST 2, 2002
AMONG
UNIVERSITY HEALTH PLANS, INC.,
UNIVERSITY OF MEDICINE AND DENTISTRY OF NEW JERSEY
AND
CENTENE CORPORATION
TABLE OF CONTENTS
PAGE
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1. Purchase and Sale of the Shares..................................... 1
1.1. Purchase of the Shares from the Stockholder................... 1
1.2. Purchase Price for the Shares................................. 1
1.3. Closing....................................................... 2
2. Representations of the Stockholder.................................. 2
2.1. Organization.................................................. 3
2.2. Authorization................................................. 3
2.3. Non-Contravention............................................. 3
2.4. Title to Shares............................................... 3
2.5. Transfer of Shares............................................ 3
3. Representations of the Stockholder and the Company.................. 4
3.1. Organization.................................................. 4
3.2. Capitalization................................................ 4
3.3. Subsidiaries.................................................. 4
3.4. Authorization................................................. 4
3.5. Non-Contravention............................................. 5
3.6. Financial Statements.......................................... 5
3.7. Absence of Undisclosed Liabilities............................ 6
3.8. Litigation.................................................... 7
3.9. Insurance..................................................... 7
3.10. Assets........................................................ 7
3.11. Intellectual Property......................................... 8
3.12. Real Estate................................................... 9
3.13. Tax Matters................................................... 9
3.14. Books and Records............................................. 10
3.15. Contracts and Commitments..................................... 10
3.16. Compliance with Agreements and Laws........................... 12
3.17. Employee Relations............................................ 13
3.18. Employee Benefit Plans........................................ 14
3.19. Absence of Certain Changes or Events.......................... 15
3.20. Providers..................................................... 17
3.21. Members....................................................... 17
3.22. Commercial Business........................................... 17
3.23. Indebtedness to and from Officers, Directors and the
Stockholder.................................................. 17
3.24. Banking Facilities............................................ 18
3.25. Powers of Attorney and Suretyships............................ 18
3.26. Conflicts of Interest......................................... 18
3.27. Brokers....................................................... 18
4. Representations of the Buyer........................................ 18
4.1. Organization and Authority.................................... 18
4.2. Authorization................................................. 19
4.3. Non-Contravention............................................. 19
4.4. Investment Representation..................................... 19
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5. Pre-Closing Covenants............................................... 20
5.1. Access to Management, Properties and Records.................. 20
5.2. Confidentiality............................................... 20
5.3. Public Announcements.......................................... 21
5.4. Communications with Members and Providers..................... 21
5.5. Conduct of Business........................................... 21
5.6. Absence of Material Changes................................... 21
5.7. Delivery of Interim Financial Statements...................... 23
5.8. Compliance with Laws and Regulations.......................... 24
5.9. Provider Agreements........................................... 25
5.10. Employees..................................................... 25
5.11. Disposition of Commercial Business............................ 25
5.12. Exclusivity................................................... 26
5.13. Taxes......................................................... 26
5.14. Notices of Breaches........................................... 26
5.15. Notices and Consents.......................................... 26
5.16. Closing Efforts............................................... 27
5.17. Expenses...................................................... 27
6. Conditions to Obligations of the Buyer.............................. 28
6.1. Representations, Warranties and Covenants..................... 28
6.2. Investor Rights Agreement..................................... 28
6.3. Escrow Agreement.............................................. 28
6.4. Amended Organizational Documents.............................. 28
6.5. Provider Agreements........................................... 28
6.6. Employment Arrangements....................................... 28
6.7. Disposition of Commercial Business............................ 29
6.8. IBNR Certification............................................ 29
6.9. Medicaid Contract............................................. 29
6.10. Consents...................................................... 29
6.11. Indebtedness.................................................. 29
6.12. Adverse Proceedings........................................... 29
6.13. Opinions of Counsel........................................... 29
6.14. Management Contract........................................... 29
6.15. Closing Deliveries............................................ 30
7. Conditions to Obligations of the Stockholder and the Company........ 30
7.1. Representations, Warranties and Covenants..................... 30
7.2. Investor Rights Agreement..................................... 31
7.3. Escrow Agreement.............................................. 31
7.4. Fairness Opinion.............................................. 31
7.5. Consents...................................................... 31
7.6. Adverse Proceedings........................................... 31
7.7. Opinion of Counsel............................................ 31
7.8. Closing Deliveries............................................ 31
8. Price Reduction..................................................... 31
8.1. Damages....................................................... 32
8.2. Reduction Claims.............................................. 33
8.3. Survival of Representations and Warranties.................... 36
8.4. Limitations................................................... 36
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9. Post-Closing Agreements............................................. 37
9.1. Proprietary Information....................................... 37
9.2. Further Assurances............................................ 38
9.3. No Solicitation or Hiring of Former Employees................. 38
9.4. Non-Competition Agreement..................................... 38
10. Termination of Agreement............................................ 38
10.1. Termination by Lapse of Time.................................. 38
10.2. Termination by Agreement of the Parties....................... 39
10.3. Termination by Reason of Breach............................... 39
10.4. Availability of Remedies at Law............................... 39
11. General 39
11.1. Notices....................................................... 39
11.2. Successors and Assigns........................................ 40
11.3. Entire Agreement; Amendments.................................. 40
11.4. Severability.................................................. 40
11.5. Investigation of the Parties.................................. 40
11.6. Submission to Jurisdiction.................................... 40
11.7. Governing Law................................................. 41
11.8. Construction.................................................. 41
11.9. Counterparts.................................................. 41
Signatures................................................................ 42
EXHIBIT A. Form of Investor Rights Agreement........................... A-1
EXHIBIT B. Form of Escrow Agreement ................................... B-1
EXHIBIT C. Form of Opinion of Counsel for the Stockholder ............. C-1
EXHIBIT D. Form of Opinion of Counsel for the Company.................. D-1
EXHIBIT E. Form of Opinion of Counsel for the Buyer.................... E-1
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THIS STOCK PURCHASE AGREEMENT dated as of August 2, 2002 (this
"Agreement") is entered into among University Health Plans, Inc., a New Jersey
corporation with its principal office at 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxx,
Xxx Xxxxxx 00000 (the "Company"), University of Medicine and Dentistry of New
Jersey, a body corporate politic of the State of New Jersey created pursuant to
N.J.S.A. 18A:64G-1, et seq. with its principal office at 00 Xxxxxx Xxxxxx,
Xxxxxx, Xxx Xxxxxx 00000 (the "Stockholder"), and Centene Corporation, a
Delaware corporation with its principal office at 0000 Xxxxxxxxxx Xxxxxx, Xxxxx
000, Xx. Xxxxx, Xxxxxxxx 00000 (the "Buyer").
PRELIMINARY STATEMENT
A. The Stockholder owns 20 shares of the common stock, without par value
("Common Stock"), of the Company, which shares represent all of the issued and
outstanding shares of capital stock of the Company.
B. The Buyer desires to purchase, and the Stockholder desires to sell, 16
shares of Common Stock (the "Shares") for the consideration set forth below,
subject to the terms and conditions of this Agreement.
C. In connection with the purchase and sale of the Shares, the Buyer and
the Stockholder wish to enter into an Investor Rights Agreement providing for,
among other things, the exchange, on the third anniversary of the Closing Date
(as defined in Subsection 1.3), of the other four shares of Common Stock held by
the Stockholder for shares of common stock of Centene, all as contemplated by
this Agreement, including the Investor Rights Agreement to be entered into as of
the Closing Date in the form attached hereto as EXHIBIT A (the "Investor Rights
Agreement").
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES
1.1. PURCHASE OF THE SHARES FROM THE STOCKHOLDER. Subject to and
upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), the
Stockholder shall sell, transfer, convey, assign and deliver the Shares
to the Buyer, and the Buyer shall purchase, acquire and accept the Shares
from the Stockholder. At the Closing the Stockholder shall deliver to the
Buyer a certificate or certificates evidencing the Shares, duly endorsed
in blank or with a stock power duly executed by the Stockholder.
1.2. PURCHASE PRICE FOR THE SHARES
(a) The aggregate purchase price to be paid by the Buyer
for all of the Shares (the "Purchase Price") shall be equal to 80%
of the product of (i) $250.00 and (ii) the number of enrolled risk
members of the Company as reflected in the final enrollment data
provided by the New Jersey Division of Medical Assistance and
Health Services with respect to the Closing Date, subject to
adjustment pursuant to Subsections 6.1 and 6.8 (together, the
"Closing Adjustments") and subject to reduction after the Closing
Date pursuant to Section 8.
(b) The Purchase Price shall be payable in cash, by wire
transfers of immediately available funds, as follows:
(i) on the Closing Date (or, if the Closing Date is
not a business day, then the next succeeding
business day), the Buyer shall deliver to Fleet
Bank, N.A., as escrow agent (the "Escrow Agent"),
the sum of $5,500,000 to be held in an
interest-bearing escrow account (the "Escrow
Account") pursuant to the terms of an Escrow
Agreement in the form attached hereto as EXHIBIT B
(the "Escrow Agreement"), as a reserve to satisfy
any and all or part of any reduction in the
Purchase Price pursuant to Section 8; and
(ii) on the second business day following the date on
which the New Jersey Division of Medical
Assistance and Health Services provides the data
referred to in paragraph (a) of this Subsection
1.2 (but no earlier than the date of the payment
pursuant to the preceding clause (i)), (A) the
Buyer shall deliver to the Stockholder an amount
equal to the Purchase Price less (1) $5,500,000
and (2) the amount of the Closing Adjustments or
(B) in the event the Closing Adjustments exceed
an amount equal to the Purchase Price less
$5,500,000, then the Stockholder shall deliver to
the Buyer an amount equal to (1) the Closing
Adjustments less (2) the Purchase Price less
$5,500,000.
(c) In the event of an adjustment in the Purchase
Price as the result of one or both Closing Adjustments, the parties
agree that it is in their mutual best interests for the Buyer to
contribute to the Company an amount in cash equal to the aggregate
amount of the Closing Adjustments. The Buyer hereby agrees that (i)
to the extent a Closing Adjustment results in the payment of an
amount in cash to the Buyer by the Stockholder, the Stockholder
shall make such payment to the Company, on behalf of the Buyer and
in satisfaction of the Buyer's obligations under this paragraph (c)
with respect to such amount and (ii) to the extent a Closing
Adjustment results in a reduction in the Purchase Price but not a
payment of cash to the Buyer, the Buyer shall deliver to the Company
the amount of such Closing Adjustment in cash on the date of the
payment pursuant to paragraph (b) of this Subsection 1.2.
(d) As a condition to the Closing, the parties shall
agree upon, for purposes of calculating the amount of any Closing
Adjustment pursuant to Subsection 6.1 and for purposes of
determining certain Damages under Section 8, a procedure for the
preparation, by no later than the date of the payment pursuant to
clause (b)(ii) of this Subsection 1.2, of a mutually agreed upon
balance sheet, including the amount of premium receivable and other
receivable (the "Closing Receivables"), and related calculation of
net worth of the Company as of the Closing. The balance sheet
referred to in the preceding sentence shall be prepared in
accordance with the actuarial and accounting practices prescribed or
permitted by the State of New Jersey Department of Banking and
Insurance and, for the purposes of preparing such balance sheet, no
premium receivable with respect to a state supplemental delivery
payment shall be booked until an outcome (i.e., a live birth, still
birth or miscarriage occurring at the thirteenth week or greater of
gestation) has occurred.
1.3. CLOSING. The Closing shall take place as of 12:01 a.m.,
Eastern time, on the first calendar day of the calendar month that
immediately follows the calendar month in which the conditions set forth
in Sections 6 and 7 (other than delivery of items to be delivered at the
Closing and other than satisfaction of those conditions that by their
nature are to be satisfied at the Closing, it being understood that the
occurrence of the Closing shall remain subject to the delivery of such
items and the satisfaction or waiver of such conditions at the Closing)
are first satisfied or waived, or on such later date as may be mutually
agreed upon in writing by the parties. The date of the Closing, as so
determined, is referred to herein as the "Closing Date."
2. REPRESENTATIONS OF THE STOCKHOLDER. The Stockholder represents and
warrants to the Buyer that the statements contained in this Section 2 are true
and correct, except as expressly set forth in the disclosure schedule of the
Stockholder and the Company being delivered to the Buyer contemporaneously
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with the execution and delivery of this Agreement (the "Disclosure Schedule").
The Stockholder confirms that the information in the Disclosure Schedule
relating to exceptions to the statements contained in this Section 2 is arranged
in sections corresponding to the numbered subsections and lettered paragraphs of
this Section 2, and that the disclosure in any section of the Disclosure
Schedule shall qualify only such specifically enumerated subsection or paragraph
of this Agreement and any other paragraph of this Agreement to which an explicit
and clear cross-reference has been made.
2.1. ORGANIZATION. The Stockholder is a body corporate politic of
the State of New Jersey created pursuant to N.J.S.A. 18A:64G-1, et
seq. duly organized, validly existing and in good standing under the laws
of the State of New Jersey, and has all requisite power and authority
(corporate and other) to own its properties, to execute and deliver this
Agreement and the agreements contemplated herein, and to transfer, convey
and sell the Shares to the Buyer at the Closing. Certified copies of the
charter documents of the Stockholder, as amended to date, have been
previously delivered to the Buyer, are complete and correct, and no
amendments have been made thereto or have been authorized since the date
thereof.
2.2. AUTHORIZATION. The execution and delivery by the Stockholder
of this Agreement and the agreements provided for herein, and the
consummation by the Stockholder of all transactions contemplated
hereunder and thereunder by the Stockholder, have been duly authorized
by all requisite corporate or other action. This Agreement has been
duly executed by the Stockholder. This Agreement and all other
agreements and obligations entered into and undertaken in connection
with the transactions contemplated hereby to which the Stockholder is
a party constitute the valid and binding obligations of the
Stockholder, enforceable against the Stockholder in accordance with
their respective terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws relating to or affecting the
rights of creditors generally or by general equitable principles (the
"Enforceability Exception").
2.3. NON-CONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities
Act") and any applicable state securities laws, neither the execution and
delivery by the Stockholder of this Agreement or the agreements provided
for herein, nor the consummation by the Stockholder of the transactions
contemplated hereby or thereby, will (a) conflict with or violate the
provisions of any law, rule or regulation applicable to the Stockholder or
any of its properties or assets, (b) conflict with or violate the
provisions of the charter documents of the Stockholder, (c) require on the
part of the Stockholder any notice to or filing with, or permit,
authorization, consent or approval of, any court, arbitrator,
administrative agency or commission or other governmental or regulatory
authority, body, instrumentality or agency, domestic or foreign (each, a
"Governmental Entity"), (d) violate any judgment, decree, order or award
of any Governmental Entity by which the Stockholder or any of its
properties are bound, or (e) conflict with, result in breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any
party any right to terminate, modify or cancel, or require any notice,
consent or waiver under, any contract or instrument to which the
Stockholder is a party or by which it is bound or to which any of its
assets are subject.
2.4. TITLE TO SHARES. The Stockholder has good, valid and marketable
title to the Shares, free and clear of any and all covenants, conditions,
restrictions, voting trust arrangements, liens, charges, encumbrances,
options and adverse claims or rights whatsoever.
2.5. TRANSFER OF SHARES. Upon consummation of the purchase
contemplated hereby, the Buyer will acquire from the Stockholder good
and marketable title to the Shares, free and clear of all
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covenants, conditions, restrictions, voting trust arrangements, liens,
charges, encumbrances, options and adverse claims or rights whatsoever,
subject to the provisions of the Investor Rights Agreement.
3. REPRESENTATIONS OF THE STOCKHOLDER AND THE COMPANY. The Stockholder and
the Company represent and warrant to the Buyer that the statements contained in
this Section 3 are true and correct, except as expressly set forth in the
Disclosure Schedule. As set forth in Section 3 of the Disclosure Schedule,
certain of the statements in this Section 3 are, to the extent made by the
Stockholder, made only to the knowledge of the Stockholder; those statements are
not so qualified with respect to the Company. The Stockholder and the Company
confirm that the information in the Disclosure Schedule relating to exceptions
to the statements contained in this Section 3 is arranged in sections
corresponding to the numbered subsections and lettered paragraphs of this
Section 3, and that the disclosure in any section of the Disclosure Schedule
shall qualify only such specifically enumerated subsection or paragraph of this
Agreement and any other paragraph of this Agreement to which an explicit and
clear cross-reference has been made. As used herein, "Company MAE" shall mean
any material adverse change, event, circumstance or development with respect to,
or material adverse effect on, (i) the business, assets, liabilities,
capitalization, prospects, condition (financial or other), or results of
operations of the Company or (ii) the ability of the Company to operate its
Medicaid business after the Closing.
3.1. ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
Jersey, and has all requisite power and authority (corporate and other) to
own its properties, to carry on its business as now being conducted, to
execute and deliver this Agreement and the agreements contemplated herein,
and to consummate the transactions contemplated hereby and thereby. The
Company is not required, based on its ownership of property or the
character of its business, to be qualified to do business in any
jurisdiction other than the State of New Jersey. Certified copies of the
Certificate of Incorporation and Bylaws of the Company, as amended to
date, have been previously delivered to the Buyer, are complete and
correct, and no amendments have been made thereto or have been authorized
since the date thereof.
3.2. CAPITALIZATION. The Company's authorized capital stock consists
of 100 shares of Common Stock, without par value, of which 20 shares are
issued and outstanding and held of record and beneficially by the
Stockholder. All such issued and outstanding shares of Common Stock have
been duly and validly issued and are fully paid and non-assessable. There
are no outstanding (a) options, warrants or other rights to purchase from
the Company any capital stock of the Company, (b) securities convertible
into or exchangeable for shares of such stock, or (c) other commitments of
any kind for the issuance of additional shares of capital stock or
options, warrants or other securities of the Company. No shares of Common
Stock are held in the treasury of the Company.
3.3. SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association
or other business entity. The Company is not a participant in any joint
venture, partnership or similar arrangement.
3.4. AUTHORIZATION. Execution and delivery by the Company of this
Agreement and the agreements provided for herein, and the consummation by
the Company of all transactions contemplated hereunder and thereunder by
the Company, have been duly authorized by all requisite corporate action.
This Agreement has been duly executed by the Company. This Agreement and
all other agreements and obligations entered into and undertaken in
connection with the transactions contemplated hereby to which the Company
is a party constitute the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to the Enforceability Exception.
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3.5. NON-CONTRAVENTION. Neither the execution and delivery by the
Company of this Agreement or the agreements provided for herein, nor the
consummation by the Company of the transactions contemplated hereby and
thereby, will (a) conflict with or violate the provisions of any law, rule
or regulation applicable to the Company or any of its properties or
assets, except for any conflicts or violations that, in the aggregate, do
not and will not have a Company MAE, (b) conflict with or violate the
provisions of the Certificate of Incorporation or Bylaws of the Company,
(c) require on the part of the Company any notice to or filing with, or
any permit, authorization, consent or approval of, any Governmental
Entity, (d) violate any judgment, decree, order or award of any
Governmental Entity by which the Company or its properties are bound, or
(e) conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the
acceleration of obligations under, create in any party any right to
terminate, modify or cancel, or require any notice, consent or waiver
under, any contract or instrument to which the Company is a party or by
which it is bound or to which any of its assets are subject, except for
(i) any conflict, breach, default, acceleration, termination, modification
or cancellation which, individually or in the aggregate, would not have a
Company MAE and would not adversely affect the consummation of the
transactions contemplated hereby or (ii) any notice, consent or waiver the
absence of which, individually or in the aggregate, would not have a
Company MAE and would not adversely affect the consummation of the
transactions contemplated hereby.
3.6. FINANCIAL STATEMENTS
(a) The Stockholder or the Company has previously delivered
to the Buyer (i) the audited statutory statement of admitted
assets, liabilities and surplus of the Company as of, and the
audited statutory statements of income, changes in surplus, and
cash flows of the Company for the fiscal year ended, December 31,
2001 (collectively, the "Audited Statutory Financial Statements")
and (ii) the unaudited statutory statement of admitted assets,
liabilities and surplus of the Company as of, and the unaudited
statutory statements of income, changes in surplus, and cash
flows of the Company for the quarter ended, March 31, 2002
(collectively with the Audited Statutory Financial Statements,
the "Statutory Financial Statements"). The Audited Statutory
Financial Statements have been certified without qualification by
PricewaterhouseCoopers LLC, the Company's independent public
accountants. The Statutory Financial Statements have been
prepared in accordance with accounting practices prescribed or
permitted by the State of New Jersey Department of Banking and
Insurance applied on a basis consistent throughout the periods
covered, fairly present, in all material respects, the admitted
assets, liabilities and surplus as of the respective dates
thereof and the results of operations and cash flows of the
Company for the periods referred to therein, on the basis of the
accounting described in the respective notes thereto, and are
consistent with the books and records of the Company.
(b) The Stockholder or the Company has also previously
delivered to the Buyer (i) the unaudited balance sheet of the
Company as of, and the unaudited statements of operations and
cash flows of the Company for the fiscal years ended, December
31, 2001 and 2000 and (ii) the unaudited balance sheet of the
Company as of May 30, 2002, the unaudited balance sheet of the
Company as of June 30, 2002 (the "Current Balance Sheet") and the
unaudited statements of operations and cash flows of the Company
for the five-month period ended May 30, 2002 and six-month period
ended June 30, 2002 (the financial statements in clauses (i) and
(ii) of this paragraph (b) collectively being referred to as the
"Financial Statements"). The Financial Statements have been
prepared in accordance with United States generally accepted
accounting principles applied on a basis consistent throughout
the periods covered thereby, fairly present the financial
condition, results of operations and cash flows of the Company as
of the respective dates thereof and for the periods referred to
therein, and are consistent with
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the books and records of the Company, provided that the Financial
Statements referred to in clause (ii) above are subject to normal
recurring year-end adjustments (which will not be material) and do
not include all footnotes required by such generally accepted
accounting principles.
(c) The Stockholder or the Company has also previously
delivered to the Buyer the unaudited Medicaid financial reports by
rate cell grouping of the Company and for the six-month period ended
June 30, 2002 (the "Medicaid Financial Reports"). The Medicaid
Financial Reports have been prepared on a basis consistent
throughout the period covered thereby, fairly present the results of
operations of the Medicaid business of the Company for the six-month
period ended June 30, 2002, and are consistent with the books and
records of the Company.
(d) The reserves recorded in the accounting records of the
Company for medical benefits, losses, claims and expenses incurred
in connection with the Medicaid and commercial businesses of the
Company and any other reserves (i) were prepared in accordance with
the actuarial and accounting practices prescribed or permitted by
the State of New Jersey Department of Banking and Insurance, (ii)
make good and sufficient provisions for all insurance obligations of
the Company, (iii) to the best knowledge of the Company, meet the
requirements of any law, rule or regulation applicable to such
reserves and the requirements of the Permits (as defined in
paragraph (a) of Subsection 3.16), and (iv) are computed on the
basis of assumptions consistent with those used in computing the
corresponding reserves in the prior fiscal year. All payments to
and/or settlements with providers of any medical services have been
accounted for in the appropriate medical expense reserve account (by
category of medical expense) and have been reflected as a medical
expense of the Company.
(e) The Company has provided to Buyer true and correct
documentation, electronic and otherwise, of data representing all
medical claims (including all medical payments and/or settlements)
of the Company's business as of June 30, 2002. The Company has also
provided documentation, electronic and otherwise, that supports the
medical claims data provided. The medical claims data provided to
Buyer reflect any changes to the Company's business since its
inception that would materially affect total medical costs. All paid
medical claims and settlements of the Company's Medicaid business
since January 1, 2001 have been properly reflected as medical
expenses. All unpaid medical claims and settlements of the Company's
Medicaid business since January 1, 2001 have been properly reflected
as losses incurred but not reported for purposes of computing the
Company's claims payable and claims adjustment expenses, except to
the extent that any such unpaid medical claims and settlements do
not exceed $50,000 in amount, in the aggregate, in either the year
ended December 31, 2001 or the period subsequent to January 1, 2002.
(f) The amounts shown as accrued for current and deferred
income and other taxes in the Current Balance Sheet are sufficient
for the payment of all accrued and unpaid federal, state and local
income taxes, interest, penalties, assessments or deficiencies
applicable to the Company, whether disputed or not, for the six
months ended June 30, 2002 and all periods prior thereto.
3.7. ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
liability or obligation, secured or unsecured, whether accrued, absolute,
contingent, unasserted or otherwise, that is material to the condition
(financial or otherwise) of the assets, properties, business or prospects
of the Company, except as and to the extent (a) any such liability or
obligation is reflected and reserved against in the Current Balance Sheet
or (b) any such liability or obligation, other than a liability or
obligation
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arising under a Provider Agreement (as defined in clause (a)(ii) of
Subsection 3.15), either (i) was incurred in the ordinary course of
business after June 30, 2002 or (ii) did not exceed $25,000 in amount, in
the aggregate, in either the year ended December 31, 2001 or the period
subsequent to January 1, 2002.
3.8. LITIGATION. There is no action, suit, proceeding or
investigation to which the Company is a party (either as a plaintiff or
defendant) pending. To the knowledge of the Stockholder and the Company,
(a) no such action, suit, proceeding or investigation is threatened before
any Governmental Entity and (b) there is no basis for any such action,
suit or proceeding. There is no action, suit, proceeding or investigation
of which the Stockholder or the Company is aware pending or threatened
before any Governmental Entity that challenges the validity or propriety
of this Agreement or any action to be taken by the Stockholder or the
Company in connection with this Agreement. Neither the Company nor any
officer, director or employee of the Company has been permanently or
temporarily enjoined by any order, judgment or decree of any Governmental
Entity from engaging in or continuing any conduct or practice in
connection with the business, assets or properties of the Company. There
is not in existence on the date hereof any order, judgment or decree of
any Governmental Entity that has been properly served or of which the
Company or the Stockholder otherwise is aware enjoining or requiring the
Company or the Stockholder to take any action of any kind with respect to
the business, assets or properties of the Company.
3.9. INSURANCE. Section 3.9 of the Disclosure Schedule sets forth
a true, correct and complete list of all fire, theft, casualty, general
liability, workers compensation, business interruption, environmental
impairment, product liability, automobile and other insurance policies
maintained by the Company and of all life insurance policies maintained on
the lives of any of its employees, specifying the type of coverage, the
amount of coverage, the premium, the insurer and the expiration date of
each such policy (collectively, the "Insurance Policies") and all claims
made under such Insurance Policies since January 1, 2001. The Stockholder
and the Company have previously delivered to the Buyer true, correct and
complete copies of all Insurance Policies. The Insurance Policies are in
full force and effect and are in amounts of a nature that are adequate and
customary for the Company's business. All premiums due on the Insurance
Policies or renewals thereof have been paid, and there is no default by
the Company under the Insurance Policies. The Company has not received any
notice or other communication from any issuer of the Insurance Policies
since January 1, 2001 canceling or materially amending any of the
Insurance Policies, materially increasing any deductibles or retained
amounts thereunder, or materially increasing the annual or other premiums
payable thereunder, and, to the knowledge of the Stockholder and the
Company, no such cancellation, amendment or increase of deductibles,
retainages or premiums is threatened. The Company has no outstanding
claims or disputes with any insurance carrier regarding claims,
settlements or premiums, and the Company has not failed to give any notice
or present any claim under any Insurance Policy in due and timely fashion.
There are no outstanding requirements or recommendations by any issuer of
the Insurance Policies or by any Board of Fire Underwriters or other
similar body exercising similar functions or by any governmental authority
exercising similar functions that require or recommend any changes in the
conduct of the business of, or any repairs or other work to be done on or
with respect to any of the properties or assets of, the Company.
3.10. ASSETS. The Company has good and marketable title to all of
the assets (tangible or intangible) purported to be owned by the Company
and relating to, or used in, its business, free and clear of all liens,
leases, encumbrances, claims under bailment and storage agreements,
equities, conditional sales contracts, security interests, charges and
restrictions, except for liens, if any, for personal property taxes not
due. The Company owns or leases all tangible assets sufficient for the
conduct of its business as presently conducted and as presently proposed
to be conducted. Each such tangible asset is free from material defects,
has been maintained in accordance with normal
- 7 -
industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it
presently is used. Each item of equipment and other asset that the Company
has possession of pursuant to a lease agreement or other contractual
arrangement and relating to, or used in, its business is in such condition
that, upon its return to its lessor or owner under the applicable lease or
contract, the obligations of the Company to such lessor owner will have
been discharged in full.
3.11. INTELLECTUAL PROPERTY
(a) Section 3.11 of the Disclosure Schedule sets forth: (i) a
true, correct and complete list and, where appropriate, a
description of, all items of Intellectual Property owned by, or
used or useful in connection with the Medicaid business of, the
Company, including trade secrets, know-how, any other
confidential information of the Company, trade names, trademarks,
trade name and trademark registrations, copyrights and copyright
registrations, and applications for any of the foregoing but
excluding (A) rights under the Medicaid Contract and (B)
off-the-shelf software programs licensed by the Company pursuant
shrink wrap and similar licenses (the "Intellectual Property");
and (ii) a true, correct and complete list of all licenses or
similar agreements or arrangements to which the Company is a
party, either as licensee or licensor, with respect to the
Intellectual Property. The Company is the sole and exclusive
owner of all right, title and interest in and to the Intellectual
Property and all designs, permits, labels and packages used on or
in connection therewith, free and clear of all liens, security
interests, charges, encumbrances, equities or other adverse
claims. The Company has the right and authority to use, and to
continue to use after the Closing, the Intellectual Property in
connection with the conduct of its business in the manner
presently conducted, and such use or continuing use does not and
will not conflict with, infringe upon or violate any rights of
any other person, corporation or entity.
(b) The Company has not received any notice of, nor has any
knowledge of any basis for, a pleading or threatened claim,
interference action or other judicial or adversarial proceeding
against the Company that any of the operations, activities,
products, services or publications of the Company infringes or
will infringe any patent, trademark, trade name, copyright, trade
secret or other property right of a third party, or that it is
illegally or otherwise using the trade secrets, formulae or
property rights of others. There are no outstanding, nor to the
knowledge of the Stockholder or the Company, any threatened,
disputes or other disagreements with respect to any licenses or
similar agreements or arrangements described in Section 3.11 of
the Disclosure Schedule or with respect to infringement by a
third party of any of the Intellectual Property. Neither the
Company nor the Stockholder has any knowledge that any third
party is infringing, or will threaten to infringe, upon or
otherwise violate any of the Intellectual Property in which the
Company has ownership rights.
(c) The Intellectual Property owned or licensed by the
Company is sufficient to conduct the Company's business as presently
conducted. The Company has taken all steps reasonably necessary to
protect its right, title and interest in and to the Intellectual
Property and the continued use of the Intellectual Property.
(d) No officer, director, stockholder or employee of the
Company or the Stockholder, nor any spouse, child or other relative
or affiliate thereof, owns directly or indirectly, in whole or in
part, any of the Intellectual Property.
- 8 -
3.12. REAL ESTATE
(a) Section 3.12 of the Disclosure Schedule sets forth the
identity of the sole lease of real property to which the
Company is a party (the "Lease"). The Stockholder and the Company
have previously delivered to the Buyer a true, correct and
complete copy of the Lease and all amendments, modifications and
supplemental agreements thereto. The Lease is in full force and
effect, is valid, binding and enforceable against the Company in
accordance with its terms (subject to the Enforceability
Exception), and has not been modified or amended since the date
of delivery to the Buyer. Neither the Company nor the landlord
has delivered written notice to the other claiming that such
party is in default thereunder and that such default remains
uncured. To the knowledge of the Stockholder and the Company, no
event has occurred that would constitute a breach of or default
in the performance of any covenant, agreement or condition
contained in the Lease, nor has any event occurred that with the
passage of time or the giving of notice or both would constitute
such a breach or material default. The Company is not obligated
to pay any leasing or brokerage commission relating to the Lease
and, will not have any obligation to pay any leasing or brokerage
commission upon the renewal of the Lease. No construction,
alteration or other leasehold improvement work with respect to
the Lease remains to be paid for or to be performed by the
Company.
(b) The Company does not own any real property.
3.13. TAX MATTERS
(a) Within the times and in the manner prescribed by law,
the Company has filed all federal, state and local tax
returns and all tax returns for foreign countries, provinces and
other governing bodies having jurisdiction to levy taxes upon it
that are required to be filed. The Company has paid all taxes,
interest, penalties, assessments and deficiencies that have
become due or that have been claimed to be due, including income,
franchise, real estate, sales and withholding taxes. All tax
returns filed by the Company for the taxable years ending
December 31, 1995 through December 31, 2001 constitute complete
and accurate representations of the tax liabilities of the
Company for such years and accurately set forth all items (to the
extent required to be included or reflected in such returns)
relevant to its future tax liabilities, including the tax bases
of its properties and assets. The Company has not waived or
extended any applicable statute of limitations relating to the
assessment of federal, state, local or foreign taxes. No
examinations of the federal, state, local or foreign tax returns
of the Company is currently in progress nor threatened, and no
deficiencies have been asserted or assessed against the Company
as a result of any audit by the Internal Revenue Service or any
state or local taxing authority, and no such deficiency has been
proposed or threatened. The Company has never been (i) a member
of any consolidated group for federal or state income tax
purposes or (ii) a party to any tax sharing agreement or other
similar arrangements.
(b) The Company has not filed a consent pursuant to Section
341(f) of the Internal Revenue Code of 1954, as amended (the
"Code") relating to collapsible corporations nor has any such
corporation agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code). The Company has never
participated in or cooperated with an international boycott,
within the meaning of Section 999 of the Code, nor has any such
corporation had operations that are or may hereafter become
reportable under Section 999 of the Code. The Company does not
have any transaction subject to Treasury Regulation 1.1502-13 in
connection with deferred intercompany transactions. There are no
plans, arrangements, contracts or other agreements covering any
current or former employees of the Company that, considered
collectively, will,
- 9 -
or could reasonably be expected to, give rise directly or indirectly
to the payment of any amount that would not be deductible pursuant
to Section 280G or Section 162(m) of the Code.
(c) Section 3.13 of the Disclosure Schedule sets forth those
taxable years for which the tax returns of the Company have
been reviewed or audited by applicable federal, state, local and
foreign taxing authorities and those tax years for which said tax
returns have received clearances or other indications of approval
from applicable federal, state, local and foreign taxing
authorities. No issue or issues have been raised in connection
with any prior or pending review or audit of said federal, state,
local or foreign tax returns that the Stockholder reasonably
believes may be expected to be raised in the future by such
taxing authorities in connection with the audit or review of the
tax returns of the Company.
3.14. BOOKS AND RECORDS. The general ledgers and books of account
of the Company are in all material respects complete and correct and have
been maintained in accordance with good business practice and in
accordance with all applicable procedures required by laws and
regulations.
3.15. CONTRACTS AND COMMITMENTS
(a) Section 3.15 of the Disclosure Schedule contains a true,
complete and correct list and description of the following contracts
and agreements, whether written or oral:
(i) the agreement between the Company and the New
Jersey Department of Human Services, Division of
Medical Assistance and Health Services, including
all amendments, modifications and supplements
thereto (as so amended, modified and supplemented,
the "Medicaid Contract");
(ii) all loan agreements, indentures, mortgages and
guaranties to which the Company is a party or by
which the Company or any of its property is bound;
(iii) all pledges, conditional sale or title retention
agreements, security agreements, equipment
obligations, personal property leases and lease
purchase agreements to which the Company is a
party or by which the Company or any of its
property is bound;
(iv) all contracts, agreements, commitments or other
understandings or arrangements to which the
Company is a party or by which the Company or any
of its property is bound that (A) involve payments
or receipts by the Company of more than $50,000 in
the case of any single contract, agreement,
commitment, understanding or arrangement under
which full performance (including payment) has not
been rendered by all parties thereto or (B) may
materially adversely affect the condition
(financial or otherwise) or the properties,
assets, business or prospects of the Company;
(v) all collective bargaining agreements, employment
and consulting agreements, offer letters,
executive compensation plans, bonus plans,
deferred compensation agreements, pension plans,
retirement plans, severance agreements or
policies, change in control agreements, employee
stock option or stock purchase plans and group
life, health and accident insurance and other
employee benefit plans, agreements, arrangements
or commitments to which the Company is a party or
by which the Company or any of its property is
bound;
- 10 -
(vi) all contracts, agreements or other understandings
or arrangements between the Company and the
Stockholder or their respective affiliates;
(vii) all leases, whether operating, capital or
otherwise, under which the Company is lessor or
lessee;
(viii) all contracts, agreements or other arrangements
imposing a non-competition or non-solicitation
obligation on the Company or any of its employees;
and
(ix) any other material agreements or contracts entered
into by the Company.
As used herein, the term "Contracts" refers collectively to the
contracts and agreements described in the preceding clauses (i)
through (ix), and also includes all contracts and agreements
(collectively, the "Provider Agreements") with physicians, hospitals
and other providers of health care services that have contracted
directly or indirectly with the Company (collectively, "Providers")
to provide covered health care services to Medicaid beneficiaries
(collectively, the "Members") enrolled under the Medicaid Contract;
(b) Each Contract is a valid and binding agreement of the
Company, enforceable against the Company in accordance with
its terms (subject to the Enforceability Exception), and the
Company has no knowledge that any Contract is not a valid and
binding agreement of the other parties thereto.
(c) Each of the Provider Agreements and, subject to receipt
of the approval of the transactions contemplated hereby by
the New Jersey Department of Human Services, Division of Medical
Assistance and Health Services, the Medicaid Contract will
continue to be a valid and binding obligation of each party
thereto, enforceable against each such party in accordance with
its terms, subject in each case to the Enforceability Exception.
(d) The Company has fulfilled all material obligations
required pursuant to the Contracts to have been performed by
the Company, as the case may be, on its part prior to the date
hereof, and the Company, as the case may be, has no reason to
believe that it will not be able to fulfill, when due, all of its
obligations under the Contracts that remain to be performed after
the date hereof.
(e) The Company is not in breach of or default under any
Contract, and no event has occurred that with the passage of
time or giving of notice or both would constitute such a default,
result in a loss of rights or result in the creation of any lien,
charge or encumbrance, thereunder or pursuant thereto.
(f) There is no existing breach or default by any other
party to any Contract, and no event has occurred that with
the passage of time or giving of notice or both would constitute
a default by such other party, result in a loss of rights or
result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto.
(g) There are not, and since January 1, 2000 have not been,
any claims of a non-routine nature relating to the Company
by the Providers in excess of (i) $5,000 individually or (ii)
$100,000 in the aggregate in the year ended December 31, 2000,
the year ended December 31, 2001 or the period subsequent to
January 1, 2002.
(h) The Company has no written or oral contracts to perform
services that are expected to be performed at, or to result in, a
loss.
- 11 -
(i) The Company and the Stockholder have previously delivered
to the Buyer true, correct and complete copies of all Contracts.
3.16. COMPLIANCE WITH AGREEMENTS AND LAWS
(a) The Company has all requisite certificates of authority,
licenses, permits, consents, orders, approvals and certificates from
all Governmental Entities necessary to conduct its Medicaid business
and own and operate the assets relating to its Medicaid business
(collectively, the "Medicaid Permits"). Section 3.16 of the
Disclosure Schedule sets forth a true, correct and complete list of
all such Medicaid Permits, copies of which have previously been
delivered by the Company or the Stockholder to the Buyer. The
Company is not in violation of any federal law, rule, license,
decree, regulation or ordinance (including laws, rules, licenses,
decrees, regulations or ordinances of applicable Governmental
Entities) relating to its Medicaid business or the properties
relating to its Medicaid business. The Company is not in violation
of any state, local or foreign law, rule, license, decree,
regulation or ordinance (including laws, rules, licenses, decrees,
regulations or ordinances of applicable Governmental Entities)
relating to its Medicaid business or the properties relating to its
Medicaid business, except for any violation which, individually or
in the aggregate, would not have a Company MAE and would not
adversely affect the consummation of the transactions contemplated
hereby.
(b) The business of the Company as conducted since its
inception has not violated, and on the date hereof does not violate,
in any material respect, any federal, state, local or foreign laws,
regulations or orders (including any of the foregoing relating to
insurance, employment discrimination, occupational safety,
environmental protection, hazardous waste, conservation, or corrupt
practices, the enforcement of which would have a material adverse
effect on the results of operations, condition (financial or
otherwise), assets, properties business or prospects of the Company.
The Company has not had notice or communication from any federal,
state or local governmental or regulatory authority or otherwise
since its inception of any such violation or noncompliance. The
Company has filed all statements and reports, including any required
plan of corrective action in connection with a failure to maintain
the minimum required statutory surplus, with insurance regulatory
authority required by the law, regulations, licensing requirements
and orders administered or issued by such regulatory authorities. No
event has occurred with respect to any of the Medicaid Permits that
would have or has had a material adverse effect on the Medicaid
Contract. The Company has not, and none of its executive officers,
directors or employees (in their respective capacities as such) has,
engaged in any activity constituting fraud or abuse under the laws
relating to health care or insurance. Section 3.16 of the Disclosure
Schedule sets forth all examinations of the Company related to its
business conducted by any governmental entity and identifies by date
any correspondence between such a governmental entity and regarding
sanctions, conclusions made and/or corrective action required or
suggested based on such examination.
(c) The Company maintains the minimum statutory surplus
required in accordance with the written regulations of the State of
New Jersey Department of Banking and Insurance and under the terms
of the Medicaid Contract. The Company has no unfunded balance with
respect to the minimum insolvency deposits required in accordance
with the written regulations of the State of New Jersey Department
of Banking and Insurance and under the terms of the Medicaid
Contract. The Company has no unfunded balance with respect to the
minimum administrative deposits required in accordance with the
written regulations of the State of New Jersey Department of Banking
and Insurance and under the terms of the Medicaid Contract.
- 12 -
(d) The Company is not in violation of any federal, state,
county or municipal authority law, ruling, order, decree,
regulation, permit, or other environmental or hazardous waste
requirement applicable to the Company relating to health, safety,
pollution, hazardous waste, environmental or other similar matters,
that has not been entirely corrected and that has or will have a
material adverse impact on the transactions contemplated herein. The
Company has not received notice from any federal, state, county or
municipal authority alleging any such violation.
(e) For purposes of this Subsection 3.16, "hazardous waste"
means "hazardous waste" as defined in the Resource Conservation and
Recovery Act, as amended, 42 U.S.C.ss.6921 et seq., and the
regulations adopted pursuant thereto.
3.17. EMPLOYEE RELATIONS
(a) The Company is in compliance with all federal, state and
municipal laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, and is not
engaged in any unfair labor practice, and there are no arrears in
the payment of wages or social security taxes.
(b) None of the employees of the Company is represented by
any labor union, and the Company is not a party to any collective
bargaining agreement. There is no unfair labor practice complaint
against the Company pending before the National Labor Relations
Board or any state or local agency. There is no pending labor strike
or other material labor trouble affecting the Company (including any
organizational drive). There is no labor grievance pending against
the Company. There is no pending representation question respecting
the employees of the Company.
(c) The Company has no continuing obligation for health,
life, medical insurance or other similar fringe benefits to any
former employee of the Company.
(d) Section 3.17 of the Disclosure Schedule sets forth a
true, correct and complete list of all employees of the Company,
including the job descriptions and salary or wage rates of each
employee, showing separately for each such person the maximum
amounts paid or payable as salary and bonus payments for the fiscal
years ending December 31, 2001 and December 31, 2002, as well as the
amount of any accrued and unused vacation and other accrued and
unpaid benefits earned by such person. Section 3.17 of the
Disclosure Schedule also sets forth a true and complete listing of
the names of all employees to whom the Company has made severance or
similar payments since January 1, 2001 with respect to the
termination of the employment of those individuals, together with
the amount of such payments and a statement as to whether such
payments were made pursuant to a pre-existing contract, an agreement
entered into in connection with such termination, a corporate
policy, or otherwise. The Company has fewer than 100 employees, and
neither the Stockholder nor any other entity may be deemed an
employer of any of the Company's employees.
(e) There have been no complaints made by any Company
employee to any Governmental Entity of any violation of any law by
the Company any officer, director, employee or agent of the Company,
and neither the Stockholder nor the Company is aware of any basis
for such a complaint. There have been no complaints of harassment or
discrimination made by or against any employee of the Company, and
neither the Stockholder nor the Company is aware of any basis for
such a complaint.
- 13 -
3.18. EMPLOYEE BENEFIT PLANS
(a) Section 3.18 of the Disclosure Schedule contains a true,
correct and complete list of all pension, benefit, profit sharing,
retirement, deferred compensation, welfare, insurance, disability,
bonus, vacation pay, severance pay and other similar plans, programs
and agreements, whether reduced to writing or not, other than any
"multiemployer plan" as such term is defined in Section 4001(a)(3)
of ERISA, relating to the Company's employees, or maintained at any
time since June 30, 1999 by the Company or by any other member (as
used in this Subsection 3.18, a "Plan Affiliate") of any controlled
group of corporations, group of trades or businesses under common
control, or affiliated service group (as defined for purposes of
Section 414(b), (c) and (m), respectively, of the Internal Revenue
Code of 1986, as amended (the "Code")) (the "Employee Plans"), and
the Company has no obligations, contingent or otherwise, past or
present, under applicable law or the terms of any Employee Plan.
(b) With respect to all Employee Plans, the Company and its
Plan Affiliates are in compliance with the requirements prescribed
by any and all statutes, orders or governmental rules or regulations
currently in effect, including ERISA and the Code, applicable to
such Employee Plans, including all reporting, notice and disclosure
requirements. The Company and its Plan Affiliates have in all
respects performed all obligations required to be performed by them
under, and is not in violation in any respect of, and there has been
no default or violation by any other party with respect to, any of
the Employee Plans. Neither the Company nor any Plan Affiliate has
failed to pay any amounts due and owing as required by the terms of
any Employee Plan.
(c) There is no multiemployer plan to which the Company or
its Plan Affiliates contribute, are required to contribute, or have
ever been required to contribute, or to which any of the employees
are beneficiaries as a result of their employment with the Company.
(d) No Employee Plan provides health or life insurance
benefits for retirees.
(e) The Company has previously delivered to the Buyer true,
correct and complete copies of all Employee Plans and all
agreements, including trust agreements and insurance contracts,
related to such Employee Plans.
(f) Each Employee Plan intended to qualify under Section
401(a) of the Code has been determined by the Internal Revenue
Service to so qualify, and the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section
501(a).
(g) Neither the Company nor any corporation or trade or
business (whether or not incorporated) that would be treated as a
member of the controlled group of the Company under Section
4001(a)(14) of ERISA would be liable for any amount pursuant to
Section 4062, 4063, 4064, 4068 or 4069 of ERISA if any of the
Employee Plans that are subject to Title IV of ERISA were to
terminate. All premiums or other payments required by the terms of
any group or individual insurance policies and programs maintained
by the Company and covering any present or former employees of the
Company with respect to all periods up to and including the Closing
Date have been fully paid for the length of the obligation. To the
extent not heretofore satisfied or accrued on the Current Balance
Sheet, the Stockholder shall be responsible for, and shall cause to
be paid without using any of the Company's assets, any welfare
benefits not fully covered by third-party insurance policies or
programs relating to claims incurred by present or former employees
of the Company on or before the Closing Date.
- 14 -
(h) There are no threatened or pending claims, suits or other
proceedings by present or former employees of the Company or its
affiliates, plan participants, beneficiaries or spouses of any of
the above, the Internal Revenue Service, the PBGC, or any other
person or entity involving any Employee Plan including claims
against the assets of any trust, involving any Employee Plan, or any
rights or benefits thereunder, other than ordinary and usual claims
for benefits by participants or beneficiaries including claims
pursuant to domestic relations orders.
(i) Section 3.18 of the Disclosure Schedule specifies those
Employee Plans that are to be continued by the Company following the
Closing Date and those that are to be terminated. At the Buyer's
election, the Company shall take any actions as may be necessary or
appropriate under all applicable laws and the terms of the Employee
Plans to establish the Buyer, or an affiliate of the Buyer, as
having all rights and obligations with respect to any of the
Employee Plans that are to be continued including rights with
respect to all annuity or insurance contracts that form a part of
any of such Employee Plans, together with all other Employee Plan
assets. The Company shall obtain as of the Closing Date any and all
consents from trustees required to effect any transfer of any
trust(s) related to such assumed Employee Plans to such trustee(s)
as may be appointed by the Buyer.
(j) Except as heretofore accrued on the Current Financial
Statements, there are no liabilities with respect to any Employee
Plan that relate to any period prior to the Closing Date, including
any taxes, accrued vacation or sick pay (whether or not vested),
accrued vacation, sick and personal leaves, employee policies,
employee benefit claims or liability to the Pension Benefit Guaranty
Corporation. Without limiting the foregoing and except as
contemplated hereby, no employees of the Company will be entitled to
any severance pay by reason of the consummation of the transactions
contemplated by this Agreement, and no severance pay will have
accrued prior to the Closing Date and will be payable to any
employees upon any subsequent termination of their employment after
the Closing Date.
3.19. ABSENCE OF CERTAIN CHANGES OR EVENTS
(a) Since June 30, 2002, the Company has not entered into any
transaction that is not in the usual and ordinary course of business
and, without limiting the generality of the foregoing, has not:
(i) authorized any declaration or payment of dividends
by the Company, or paid any such dividends, or
authorized any transfer of assets of any kind
whatsoever by the Company to the Stockholder with
respect to any shares of capital stock;
(ii) failed to pay any medical claim liability or
indebtedness when due, and all such claim
liabilities have been properly recorded in the
accounts of the Company, except for (A) any such
failure attributable to a claim contested by the
Company in good faith in the ordinary course of
business and (B) up to an aggregate of $25,000
assessed with respect to the period ending as of
the date hereof as penalties or interest
attributable to late payments by The TriZetto
Group, Inc., as third party administrator for the
Company;
(iii) incurred any material obligation or liability for
borrowed money;
(iv) discharged or satisfied any lien or encumbrance
or paid any obligation or liability other than
current liabilities reflected in the Current
Balance Sheet;
- 15 -
(v) mortgaged, pledged or subjected to lien, charge
or other encumbrance any of their respective
properties or assets;
(vi) sold or purchased, assigned or transferred any of
its tangible assets or cancelled any debts or
claims, except for (A) inventory sold and raw
materials purchased in the ordinary course of
business and (B) debts and claims settled with
Providers in the ordinary course of business and
consistent with clause (ii) above;
(vii) made any material amendment to or termination of
any Contract or done any act or omitted to do any
act that would cause the breach of any Contract;
(viii) suffered any losses of personal property, whether
insured or uninsured, and whether or not in the
control of the Company in excess of $50,000 in the
aggregate, or waived any rights of any value;
(ix) instituted, settled or agreed to settle, or
received notice of any, pending or threatened
litigation, action or proceeding before any
Governmental Entity;
(x) made any material change in the terms, status or
funding condition of any Employee Plan, as defined
in Subsection 3.18;
(xi) engaged any new employee;
(xii) made, or committed to make, any changes in the
compensation payable to any officer, director,
employee or agent of the Company, or any bonus
payment or similar arrangements made to or with
any of such officers, directors, employees or
agents, except to the extent of any such changes
that are made in the ordinary course of business
and are (A) in an amount less than six percent of
the compensation payable to such individual and
(B) in an amount less than $25,000 in the
aggregate;
(xiii) incurred any capital expenditure in excess of
$15,000 in any instance or $100,000 in the
aggregate;
(xiv) made any material alteration in the manner of
keeping the books, accounts or records of the
Company, or in the accounting practices therein
reflected, except as may be required by statutory
accounting principles, in which case the Company
or the Stockholder has promptly notified the Buyer
in writing of the nature of and reason for the
change; or
(xv) suffered any material adverse change in the
consolidated statutory results of operations,
condition (financial or otherwise), assets,
liabilities (whether absolute, accrued, contingent
or otherwise), business or prospects of the
Company.
(b) The Company has no knowledge of any existing or
threatened occurrence, event or development that, as far as can be
reasonably foreseen, could have a material adverse effect on the
business, properties, assets, condition (financial or otherwise) or
prospects of the Company.
(c) The Company has conducted its Medicaid business in a
commercially prudent manner, as a going concern and in the ordinary
course.
- 16 -
3.20. PROVIDERS. Section 3.20 of the Disclosure Schedule sets forth
a true, correct and complete list of (a) the names and addresses of
each of the Providers and (b) each monetary settlement or pending
settlement that exceeds $1,000 with a provider, including a Provider, and
that is not reflected in the claims incurred but not reported set forth in
the data referred to in the first sentence of paragraph (e) of Subsection
3.6. No Provider Agreement may be terminated pursuant to its terms upon
less than 90 days' notice. The Company uses good and reasonable efforts to
maintain good relations with all of its Providers, and the Company uses
reasonable business efforts to cause its accounts payable and other
payments owing to any Provider to be not more than 30 days in arrears. The
Stockholder and the Company have provided to the Buyer a true, correct and
complete copy of the standard weekly claims inventory report for the
Company, prepared by The TriZetto Group, Inc.
3.21. MEMBERS. Section 3.21 of the Disclosure Schedule describes
each written, pending and unresolved complaint received by the Company
from a Member and generally describes the nature and disposition of such
complaint.
3.22. COMMERCIAL BUSINESS. Notwithstanding anything herein to the
contrary:
(a) The Company has all requisite certificates of authority,
licenses, permits, consents, orders, approvals and certificates from
all Governmental Entities necessary to conduct its Commercial
Business (as defined in Subsection 5.11) and own and operate the
assets relating to its Commercial Business (collectively, the
"Commercial Permits"). Section 3.22 of the Disclosure Schedule sets
forth a true, correct and complete list of all such Commercial
Permits, copies of which have previously be delivered by the Company
or the Stockholder to the Buyer. The Company is not in violation of
any federal law, rule, license, decree, regulation or ordinance
(including laws, rules licenses, decrees, regulations or ordinances
of applicable Governmental Entities) relating to its Commercial
Business or the properties relating to its Commercial Business. The
Company is not in violation of any state, local or foreign law, rule
license, decree, regulation or ordinance (including laws, rules,
licenses, decrees, regulations or ordinances of applicable
Governmental Entities) relating to its Commercial Business or the
properties relating to its Commercial Business, except for any
violation which, individually or in the aggregate, would not have a
Company MAE and would not adversely affect the consummation of the
transactions contemplated hereby.
(b) All unpaid medical claims and settlements of the Commercial
Business since January 1, 2001 have been properly reflected as
losses incurred but not reported for purposes of computing the
Company's claims payable and claims adjustment expenses, except to
the extent that any such unpaid medical claims and settlements do
not exceed $50,000 in amount, in the aggregate, in either the year
ended December 31, 2001 or the period subsequent to January 1, 2002.
3.23. INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND THE
STOCKHOLDER
(a) The Company is not indebted, directly or indirectly, to
any of its officers or directors, to the Stockholder or to any
officers or directors of the Stockholder, or any affiliate of any
such person, in any amount whatsoever other than for salaries for
services rendered to the Company or reimbursable business expenses,
which salaries and expenses are reflected in the Current Financial
Statements or were incurred by the Company in the ordinary course of
business after June 30, 2002.
(b) Neither the Stockholder nor any such officer, director or
affiliate is indebted to the Company (including any amount payable
by the Stockholder with respect to a capital
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contribution) except for advances made to employees of the Company
in the ordinary course of business to meet reimbursable business
expenses anticipated to be incurred by such obligor.
3.24. BANKING FACILITIES. Section 3.23 of the Disclosure Schedule
sets forth a true, correct and complete list of:
(a) each bank, savings and loan or similar financial
institution in which the Company has an account or
safety deposit box and the numbers of the accounts or
safety deposit boxes maintained by the Company thereat;
and
(b) the names of all persons authorized to draw on each such
account or to have access to any such safety deposit box
facility, together with a description of the authority
(and conditions thereof, if any) of each such person
with respect thereto.
3.25. POWERS OF ATTORNEY AND SURETYSHIPS. The Company has no general
or special powers of attorney outstanding (whether as grantor or grantee
thereof) or any obligation or liability (whether actual, accrued,
accruing, continent or otherwise) as guarantor, surety, co-signer,
endorser, co-maker, indemnitor or otherwise in respect of the obligation
of any person, corporation, partnership, joint venture, association,
organization or other entity, except as endorser or maker of checks or
letters of credit, respectively, endorsed or made in the ordinary course
of business.
3.26. CONFLICTS OF INTEREST. Neither the Stockholder, any officer or
director of the Company or the Stockholder, nor any affiliate of any of
the foregoing, now has or within the last three years had, either
directly or indirectly:
(a) an equity or debt interest in any corporation,
partnership, joint venture, association, organization or
other person or entity that furnishes or during such
period furnished services to the Company, or otherwise
does or during such period did business with the
Company; or
(b) a beneficial interest in any contract, commitment or
agreement to which the Company is or was a party or
under which it is or was obligated or bound or to which
any of its properties may be or may have been subject,
other than contracts, commitments or agreements between
the Company and such persons in their capacities as
employees, officers or directors of the Company.
3.27. BROKERS. No person, firm or corporation has acted in the
capacity of broker or finder on behalf of the Company or the Stockholder
to bring about the negotiation of this Agreement. Xxxxxx Xxxxxx Partners
LLC may provide a fairness opinion to the Board of Directors of the
Company pursuant to Subsection 7.4, but has not undertaken any other
activities on behalf of the Company or the Stockholder in connection with
the negotiation of this Agreement.
4. REPRESENTATIONS OF THE BUYER. The Buyer represents and warrants to
the Stockholder as follows:
4.1. ORGANIZATION AND AUTHORITY. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority (corporate
and other) to own its properties and to carry on its business as now being
conducted. The Buyer has full power to execute and deliver this Agreement
and the agreements contemplated herein, and to consummate the transactions
contemplated hereby and thereby. Certified copies of the Certificate of
Incorporation and the Bylaws of the Buyer, as amended to date,
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have been previously delivered to the Stockholder, are complete and
correct, and no amendments have been made thereto or have been authorized
since the date thereof.
4.2. AUTHORIZATION. The execution and delivery of this Agreement
by the Buyer, and the agreements provided for herein, and the consummation
by the Buyer of the transactions contemplated hereby and thereby, have
been duly authorized by all requisite corporate action. This Agreement and
all such other agreements and written obligations entered into and
undertaken in connection with the transactions contemplated hereby
constitute the valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their respective terms, subject in
each case to the Enforceability Exception.
4.3. NON-CONTRAVENTION. Neither the execution and delivery of this
Agreement or the agreements provided for herein, nor the consummation by
the Buyer of the transactions contemplated hereby and thereby, will not
(a) conflict with or violate the provisions of any law, rule or regulation
applicable to the Buyer; (b) conflict with or violate the provisions of
the Buyer's Certificate of Incorporation or Bylaws; (c) require on the
part of the Buyer any notice to or filing with, or permit, authorization,
consent or approval of, any Governmental Entity, (d) violate any judgment,
decree, order or award of any Governmental Entity by which the Buyer or
its properties are bound, or (e) conflict with, result in breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any
party any right to terminate, modify or cancel, or require any notice,
consent or waiver under, any contract or instrument to which the Buyer is
a party or by which it is bound or to which any of its assets are subject,
except in any such case for (i) compliance with applicable requirements of
the Securities Act, any applicable state securities laws and the Exchange
Act, (ii) approval of the State of New Jersey Department of Banking and
Insurance and the New Jersey Department of Human Services, Division of
Medical Assistance and Health Services of the transactions contemplated
hereby, and (iii) consent of LaSalle Bank National Association, as lender
under the bank credit facility of the Buyer.
4.4. INVESTMENT REPRESENTATION. The Buyer is acquiring the Shares
from the Stockholder for the Buyer's own account for investment only and
not with a view to, or for sale in connection with, any distribution of
the Shares in violation of the Securities Act or any rule or regulation
thereunder. The Buyer has no present intention of distributing or selling
the Shares, and the Buyer has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing
for the disposition of the Shares. The Buyer is an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act. The Buyer has
had adequate opportunity to obtain from representatives of the Company
such information about the Company as is necessary for the Buyer to
evaluate the merits and risks of the Buyer's acquisition of the Shares
pursuant to this Agreement. The Buyer acknowledges that it has received
certain forward-looking information from the Stockholder or the Company in
connection with this Agreement and the transactions contemplated hereby.
The Buyer understands that neither the Company nor the Stockholder can
guarantee that the Company actually will achieve the plans, intentions or
expectations disclosed in such forward-looking statements and that the
Company's actual results could differ materially from the plans,
intentions and expectations disclosed in the forward-looking statements.
The Buyer has sufficient expertise in business and financial matters to be
able to evaluate the risks involved in the acquisition of the Shares
pursuant to the Agreement and to make an informed investment decision with
respect to such acquisition. The Buyer understands that (a) the Shares
have not been registered under the Securities Act and are "restricted
securities" within the meaning of Rule 144 under the Securities Act and
(b) the Shares cannot be sold, transferred or otherwise disposed of unless
they are subsequently registered under the Securities Act or an
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exemption from registration is then available. A legend substantially in
the following form will be placed on the certificate or certificates
representing the Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such registration
is not required."
5. PRE-CLOSING COVENANTS. From and after the date hereof and until the
Closing Date:
5.1. ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS
(a) The Stockholder and the Company shall afford the
officers, attorneys, accountants and other authorized
representatives of the Buyer free and full access upon reasonable
notice and during normal business hours to all management personnel,
offices, properties, books and records of the Company, so that the
Buyer may have full opportunity to make such investigation as it
shall desire to make of the management, business, properties and
affairs of the Company, and the Buyer shall be permitted to make
abstracts from, or copies of, all such books and records. The
Stockholder and the Company shall furnish to the Buyer such
financial and operating data and other information as to the
business of the Company as the Buyer shall reasonably request.
Without limiting the foregoing, the Stockholder and the Company
shall furnish the Buyer with copies of drafts and executed
documents relating to the Company's proposed sale of the
Commercial Business as defined in Subsection 5.11.
(b) The Stockholder and the Company shall authorize the
release to the Buyer of all files pertaining to the business or
operations of the Company held by any federal, state, county or
local authorities, agencies or instrumentalities. The authorizations
of the Stockholder and the Company shall specifically waive all
previous claims of privilege or other restrictions, and in any case
where a release by a present or former employee of the Company is
necessary, the Stockholder and the Company shall exercise their best
efforts to obtain such a release.
5.2. CONFIDENTIALITY
(a) The Company and the Stockholder have furnished and will
continue to furnish the Buyer with certain information that is
either non-public, confidential or proprietary in nature and that
(i) is identified in writing as being proprietary and confidential,
(ii) is not already known to persons other than the Company, the
Stockholder, their representatives and third parties that have
entered into written non-disclosure agreements with the Company and
(iii) has not been independently developed by the Buyer. All such
information furnished to the Buyer, its directors, officers,
employees, agents or representatives, including attorneys,
accountants, consultants, potential lenders, investors and financial
advisors (collectively "representatives"), by the Company, the
Stockholder, or any of their respective representatives, and all
analyses, compilations, data, studies or other documents prepared by
the Buyer or its representatives containing or based in whole or in
part on any such furnished information or reflecting the Buyer's
review of, or interest in, the Company is hereinafter referred to as
"Information."
(b) Subject to the requirements of applicable law, the Buyer
hereby agrees to use the Information solely in connection with the
consummation of the transactions contemplated by this Agreement and
to transmit the Information only to those representatives of the
Buyer who need to know the Information.
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5.3. PUBLIC ANNOUNCEMENTS. No disclosures shall be made to third
parties, nor shall there be any general public pronouncements or other
general public communications, concerning this Agreement and the purchase
of the Shares by the Buyer without the consent of the Buyer, on one hand,
and the Company and the Stockholder on the other, except as may be
required by law, in which event the non-disclosing party shall be given
an opportunity to review in advance the proposed disclosure.
5.4. COMMUNICATIONS WITH MEMBERS AND PROVIDERS
(a) Unless instructed otherwise by the Buyer in writing, the
Company shall continue to provide managed healthcare services to
Members throughout the service areas covered by the Medicaid
Contract consistent with past practice.
(b) The Company shall be responsible for all communications
with Members and Providers, provided that the Buyer will provide the
Company with such assistance as may be reasonably requested by the
Company in connection with such communications.
5.5. CONDUCT OF BUSINESS. The Company shall operate its Medicaid
business diligently, in a commercially prudent manner and substantially in
the same manner as heretofore and shall not engage in any transaction in
respect to its Medicaid business that is either not in the ordinary course
or not consistent with past practice, or make or institute any unusual or
new methods of accounting or operation, except as agreed to in writing by
the Buyer. In connection with their obligations under Subsections 6.14 and
7.8, the Company and the Buyer shall use their Reasonable Best Efforts to
negotiate and agree upon the form of a management agreement (the
"Management Agreement") by no later than August 16, 2002 pursuant to which
the Buyer shall provide certain administrative and financial services to
the Company (such services, however, not to include actuarial, auditing,
legal or marketing services) in exchange for the fees provided for
therein. The fees under the Management Agreement shall consist of (a) a
fee, payable in monthly installments, of 12 percent of the gross revenues
of the Company per annum, (b) a fee of $1.50 per Member per month for
provision of the Buyer's NurseWise nurse triage services and (c) the
Buyer's customary fees for reinsurance provided by Bankers Reserve Life
Insurance Company of Wisconsin, a wholly owned subsidiary of the Buyer.
All of the property of the Company relating to, or used in, its Medicaid
business shall be used, operated, repaired and maintained in a normal
business manner consistent with past practice.
5.6. ABSENCE OF MATERIAL CHANGES. Except for transactions
contemplated or necessitated by this Agreement, the Company shall not,
without the prior written consent of the Buyer:
(a) amend or modify the terms upon which any of the
Providers are compensated or reimbursed;
(b) terminate any Provider Agreement, except for any
terminations in the ordinary course of business that do
not, in the aggregate, affect more than one percent of
the Members;
(c) terminate or amend any Medicaid Contract;
(d) fail to pay any medical claim liability or indebtedness
relating to the Company's Medicaid business when due or
improperly record such claim liabilities in the accounts
of the Company, except for (i) any such failure
attributable to a claim contested by the Company in good
faith in the ordinary course of business and (ii) up to
an aggregate of $25,000 per calendar month (or a portion
thereof) assessed as
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penalties or interest attributable to late payments by
The TriZetto Group, Inc., as third party administrator
for the Company;
(e) take any action to amend its Certificate of
Incorporation or Bylaws;
(f) issue any stock, bonds or other corporate securities or
grant any option or issue any warrant to purchase or
subscribe for any of such securities or issue any
securities convertible into such securities;
(g) incur any obligation or liability (absolute or
contingent), except current liabilities incurred,
obligations under any Provider Agreement and obligations
under the Contracts, or otherwise incurred in the
ordinary course of business up to $30,000 in the
aggregate;
(h) declare or make any payment or distribution to the
Stockholder with respect to its stock, or purchase or
redeem any shares of its capital stock;
(i) mortgage, pledge, or subject to any lien, charge or any
other encumbrance any of their respective assets or
properties;
(j) sell, assign, or transfer any of its assets, except in
the ordinary course of business;
(k) cancel any debts or claims, except in the ordinary
course of business;
(l) merge or consolidate with or into any corporation or
other entity;
(m) make, accrue or become liable for any bonus, profit
sharing or incentive payment, except for accruals under
existing plans, if any, or increase the rate of
compensation payable or to become payable by it to any
of its officers, directors or employees, other than
increases in the ordinary course of business consistent
with past practice;
(n) make any election or give any consent under the Code or
the tax statutes of any state or other jurisdiction or
make any termination, revocation or cancellation of any
such election or any consent or compromise or settle any
claim for past or present tax due;
(o) waive any rights of material value;
(p) modify, amend, alter or terminate any of its executory
contracts of a material value or that are material in
amount;
(q) take or permit any act or omission constituting a breach
or default under any contract, indenture or agreement by
which it or its properties are bound, except for any
acts or omissions that, in the aggregate, do not and
will not have a Company MAE;
(r) fail to (i) preserve the possession and control of its
assets and business, (ii) use its best efforts, to the
extent commercially reasonable ("Reasonable Best
Efforts"), to keep in faithful service its present
officers and key employees, except as agreed with the
Buyer, (iii) preserve the goodwill of its relationships
with Providers, Members, regulatory bodies, agents,
brokers and others having business relations with it,
and (iv) keep and preserve its Medicaid business
existing on the date hereof until the Closing Date;
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(s) fail to operate its business and maintain its books,
accounts and records in the customary manner and in the
ordinary and regular course of business and maintain in
good repair its business premises, fixtures, furniture
and equipment;
(t) enter into any lease, contract, agreement or
understanding, other than (i) those entered into in the
ordinary course of business calling for payments that in
the aggregate do not exceed $25,000 for each such lease,
contract, agreement or understanding or (ii) any
Provider Agreement;
(u) incur any capital expenditure in excess of $15,000 in
an instance or $100,000 in the aggregate;
(v) engage any new employee;
(w) materially alter the terms, status or funding condition
of any Employee Plan; or
(x) commit or agree to do any of the foregoing in the
future.
5.7. DELIVERY OF INTERIM FINANCIAL STATEMENTS
(a) As promptly as practicable following the last day of
each calendar month after the date hereof until the Closing Date,
and in any event within 20 days after the end of each such month,
the Stockholder or the Company shall deliver to the Buyer (i) an
unaudited balance sheet as of the end of such month, (ii) unaudited
statements of operations and cash flows for such month and for the
period from January 1, 2002 through the end of such month, and (iii)
a calculation of statutory net worth requirement for the period from
January 1, 2002 through the end of such month. Each set of unaudited
financial statements delivered pursuant to clauses (i) and (ii)
above shall be prepared in accordance with United States generally
accepted accounting principles applied on a basis consistent with
the periods covered by the Financial Statements, shall fairly
present the financial condition, results of operations and cash
flows of the Company as of the respective dates thereof and for the
periods referred to therein, shall be consistent in scope and format
with the Financial Statements as of, and for the period ended, May
31, 2002 and shall be consistent with the books and records of the
Company, provided that such unaudited financial statements may be
subject to normal recurring year-end adjustments (which shall not be
material) and need include only footnotes equivalent to those
contained in the Financial Statements. Each calculation of statutory
net worth requirement delivered pursuant to clause (iii) above shall
be certified by the chief financial officer of the Company to the
effect that such calculation has been prepared in conformity with
accounting practices prescribed or permitted by the State of New
Jersey Department of Banking and Insurance. No later than August 16,
2002, the Stockholder or the Company may provide to the Buyer an
unaudited balance sheet of the Company as of June 30, 2002, which
balance sheet, unless consented to in writing by the Buyer (which
consent shall not be unreasonably withheld), shall not be filed with
the State of New Jersey Division of Medical Assistance and Health
Services or any other Governmental Entity and shall not be used as
the basis for the calculation of the statutory net worth requirement
applicable to the Company as of such date. In the event the Buyer so
consents to such balance sheet, then, beginning as of the date of
such consent, such balance sheet shall constitute the "Current
Balance Sheet" for purposes of this Agreement.
(b) As promptly as practicable following the last day of each
calendar month after the date hereof until the Closing Date, and in
any event at least two business days before any filing thereof with
the State of New Jersey Department of Banking and Insurance, the
Stockholder or
- 23 -
the Company shall deliver to the Buyer a copy of any regulatory
filing to be made with the State of New Jersey Department of Banking
and Insurance, an unaudited statutory statement of admitted assets,
liabilities and surplus of the Company as of the end of such month
and unaudited statutory statements of income, changes in surplus and
cash flows for the period from January 1, 2002 through the end of
such month. Any such statutory financial statements shall be
prepared in accordance with accounting practices prescribed or
permitted by the State of New Jersey Department of Banking and
Insurance applied on a basis consistent with the periods covered by
the Statutory Financial Statements, fairly present, in all material
respects, the admitted assets, liabilities and surplus as of the
respective dates thereof and the results of operations and cash
flows of the Company for the periods referred to therein, on the
basis of the accounting described in the respective notes thereto,
and are consistent with the books and records of the Company.
(c) As promptly as practicable following the last day of each
calendar month after the date hereof until the Closing Date, and in
any event at least two business days before any filing thereof with
the State of New Jersey Division of Medical Assistance and Health
Services, the Stockholder or the Company shall deliver to the Buyer
a copy of the Medicaid Financial Reports and comparable financial
reports for the Commercial Business as of the end of such month and
for the period from July 1, 2002 through the end of such month. Any
such financial reports shall be prepared in accordance with
accounting practices prescribed or permitted by the State of New
Jersey Division of Medical Assistance and Health Services applied on
a basis consistent with the periods covered by the Medicaid
Financial Reports, fairly present the financial condition and
results of operations of the Medicaid business of the Company as of
the end of such month and for the period from July 1, 2002 through
the end of such month, and are consistent with the books and records
of the Company.
(d) As promptly as practicable following the last day of each
calendar week after the date hereof until the Closing Date, the
Stockholder or the Company shall deliver to the Buyer a true,
correct and complete copy of the standard weekly claims inventory
report for the Company, prepared by The TriZetto Group, Inc.,
summarizing those accounts payable and other payments owing by the
Company to any Provider that were more than 30 days in arrears as of
the last day of such calendar week, which report shall be consistent
in form and detail with the schedule described in the last sentence
of Subsection 3.20.
5.8. COMPLIANCE WITH LAWS AND REGULATIONS. The Company will comply
with all federal, state, local and foreign laws and regulations that
are applicable to it or to the conduct of its Medicaid business, except for
any non-compliance with state, local and foreign laws and regulations
which, individually or in the aggregate, would not have a Company MAE and
would not adversely affect the consummation of the transactions
contemplated hereby. The Company will perform and comply with all
contracts, commitments and obligations by which it is bound. The Company
shall maintain at all times from August 15, 2002 at least the minimum (a)
statutory surplus, (b) insolvency deposits and (c) administrative deposits,
each as required in accordance with the written regulations of the State of
New Jersey Department of Banking and Insurance and under the terms of the
Medicaid Contract. Each of the Buyer, the Company and the Stockholder shall
have the right to contact and confer with the Centers for Medicare and
Medicaid Services, the New Jersey Department of Human Services, Division of
Medical Assistance and Health Services, or any other regulatory authorities
having jurisdiction over the transactions contemplated hereby, and the
parties agree to use their Reasonable Best Efforts to comply with any laws
or regulations applicable to the transactions contemplated hereby and to
obtain any waivers, permits, consents, approvals or other authorizations
from any party, including Governmental Entities, required for the
transactions contemplated hereby.
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5.9. PROVIDER AGREEMENTS. The Stockholder and the Company shall use
their Reasonable Best Efforts to assist the Buyer in re-negotiating
Provider Agreements with any and all Providers identified by the Buyer
from time to time prior to the Closing Date.
5.10. EMPLOYEES. The Stockholder and the Company shall use their
Reasonable Best Efforts to assist the Buyer in obtaining affirmations from
those individuals identified under the heading "Specified Employees" in a
letter to be delivered by the Buyer to the Stockholder and the Company, by
no later than the earlier of August 16, 2002 and the second business day
before the Closing Date (the "Supplemental Letter"), that such individuals
intend to continue their employment with the Company for an indefinite
period following the Closing Date. The Stockholder and the Company shall
take such steps as are necessary in order to ensure that, as of the time
immediately before the Closing, individuals identified under the heading
"Specified Employees" in the Supplemental Letter constitute the only
employees of the Company. To the extent any severance or other payments
(other than for salaries earned in the ordinary course for services
rendered prior to the Closing Date) are, under applicable statutes or
rules, existing contracts, corporate policy or otherwise, necessary or
are, in the opinion of the Stockholder or the Company, desirable in
connection with the termination of the employment of one or more
individuals, those payments shall be made prior to the Closing by (a) the
Company up to the amount of $450,000 in the aggregate and (b) the
Stockholder (or made by the Company and reimbursed by the Stockholder) to
the extent those payments exceed $450,000 in the aggregate.
5.11. DISPOSITION OF COMMERCIAL BUSINESS. The Company shall use its
Reasonable Best Efforts to transfer and dispose of the assets and
liabilities of the commercial line of business currently conducted by the
Company (the "Commercial Business"), a complete list of the assets and
liabilities of which is set forth in Section 5.11 of the Disclosure
Schedule, prior to the Closing Date. The Company shall not, without the
prior written consent of the Buyer, sell, convey, transfer or otherwise
dispose of any assets other than those listed in Section 5.11 of the
Disclosure Schedule in connection with the sale of the Commercial
Business, except for (a) a sale of the Commercial Business in accordance
with the terms of the letter of intent related thereto dated July 9, 2002,
a true, complete and copy of which has been provided by the Stockholder to
the Buyer, and (b) a sale or sales of a portion of the assets of the
Commercial Business in the ordinary course of business. The Company or the
Stockholder shall provide to the Buyer a copy of any agreement that the
Company or the Stockholder proposes to enter into in connection with the
sale of the Commercial Business, together with an estimated, pro forma
balance sheet with respect to the Commercial Business giving effect to
such proposed sale as of the proposed sale date, not less than five
business days prior to the execution of any such agreement. The Company
and the Stockholder shall provide to the Buyer such assurances as the
Buyer shall, in its sole discretion, deem sufficient that the Company and
the Stockholder have made provision, acceptable to the Buyer, (a) for all
of the obligations and liabilities of the Commercial Business, including a
guarantee (the "Guarantee") by the Stockholder of all medical claims for
services rendered in connection with the Commercial Business prior to such
sale, (b) against any diminution of the assets, or increase in the
liabilities, of the Commercial Business, as such assets and liabilities
are reflected in the unaudited balance sheet with respect to the
Commercial Business as of June 30, 2002 previously delivered by the
Stockholder or the Company to the Buyer, provided that no Guarantee shall
be required pursuant to this clause (b) unless the aggregate amount of any
such diminutions in assets and increases in liabilities exceeds $50,000,
or (c) against any impairment of the ability of the Company to continue to
conduct its Medicaid business consistent in all material respects with the
conduct of such business as of the date hereof. Not less than five
business days following the execution of the agreement for the sale of the
Commercial Business, the Company or the Stockholder shall deliver to the
Buyer a final balance sheet with respect to the Commercial Business as of
the date of such closing. In connection with such transfer and disposition
of the Commercial Business, the Company shall terminate its
- 25 -
arrangements for the provision of commercial insurance to students of the
Stockholder. In addition, the parties shall use their Reasonable Best
Efforts to negotiate and agree upon the form of the Guarantee by no later
than the fifth business day following the execution of the agreement for
the sale of the Commercial Business. The Stockholder shall reimburse the
Company for any expenses incurred by the Company after the date hereof in
connection with the transfer and disposition of the Commercial Business,
including the termination of such arrangements with students of the
Stockholder, in excess of $100,000 in the aggregate.
5.12. EXCLUSIVITY. Except in connection with the disposition of the
Commercial Business, none of the Company, the Stockholder or their
respective officers, directors, employees, representatives and agents
shall, directly or indirectly, (a) initiate, solicit, encourage or
otherwise facilitate any inquiry, proposal, offer or discussion with any
party (other than the Buyer) concerning any merger, reorganization,
consolidation, recapitalization, business combination, liquidation,
dissolution, share exchange, sale of stock, sale of material assets or
similar business transaction involving the Company, (b) furnish any
non-public information concerning the business, properties or assets of
the Company to any party (other than the Buyer) or (c) engage in
discussions or negotiations with any party (other than the Buyer)
concerning any such transaction. If the Company or the Stockholder
receives any inquiry, proposal or offer of the nature described in the
preceding sentence, the Company shall, within one business day after such
receipt, notify the Buyer of such inquiry, proposal or offer, including
the identity of the other party and the terms of such inquiry, proposal or
offer.
5.13. TAXES. The Company will duly and timely file all reports or
returns required to be filed with federal, state, local and foreign
authorities and will promptly pay or make adequate provision for all
federal, state, local and foreign taxes, assessments and governmental
charges levied or assessed upon it or any of its properties (unless
contesting such in good faith and adequate provision has been made
therefor), including any taxes, assessments and governmental charges
relating to the period from January 1, 2002 to the Closing Date.
5.14. NOTICES OF BREACHES
(a) From the date of this Agreement until the Closing, the
Company shall promptly deliver to the Buyer supplemental information
concerning events or circumstances occurring subsequent to the date
hereof which would ender any representation, warranty or statement
in this Agreement or the Disclosure Schedule inaccurate or
incomplete at any time after the date of this Agreement until the
Closing. No such supplemental information shall be deemed to avoid
or cure any misrepresentation or breach of warranty or constitute an
amendment of any representation, warranty or statement in this
Agreement or the Disclosure Schedule.
(b) From the date of this Agreement until the Closing, the
Buyer shall promptly deliver to the Company in a manner satisfactory
in form and substance supplemental information concerning events or
circumstances occurring subsequent to the date hereof which would
render any representation or warranty in this Agreement inaccurate
or incomplete at any time after the date of this Agreement until the
Closing. No such supplemental information shall be deemed to avoid
or cure any misrepresentation or breach of warranty or constitute an
amendment of any representation or warranty in this Agreement.
5.15. NOTICES AND CONSENTS
(a) The Company and the Stockholder shall use their
Reasonable Best Efforts to obtain, at their expense, all waivers,
permits, consents, approvals or other authorizations from
Governmental Entities, and to effect all registrations, filings and
notices with or to
- 26-
Governmental Entities, as may be required for such parties to
consummate the transactions contemplated by this Agreement and to
otherwise comply with all applicable laws and regulations in
connection with the consummation of the transactions contemplated by
this Agreement, as are required to be listed in the Disclosure
Schedule. The Company and the Stockholder shall use their reasonable
best efforts to obtain, at their expense, all such waivers, consents
or approvals from third parties other than Governmental Entities,
and to give all such notices to third parties, as are required to be
listed in the Disclosure Schedule.
(b) The Buyer shall use its Reasonable Best Efforts to
obtain, at its expense, all waivers, permits, consents, approvals or
other authorizations from Governmental Entities, and to effect all
registrations, filings and notices with or to Governmental Entities,
as may be required for it to consummate the transactions
contemplated by this Agreement and to otherwise comply with all
applicable laws and regulations in connection with the consummation
of the transactions contemplated by this Agreement, as are required
by Subsection 4.3. The Buyer shall use its Reasonable Best Efforts
to obtain, at its expense, all such waivers, consents or approvals
from third parties other than Governmental Entities, and to give all
such notices to third parties, as are required pursuant to
Subsection 4.3.
5.16. CLOSING EFFORTS. Each of the parties shall use its Reasonable
Best Efforts to take all actions and to do all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement, including using its reasonable best efforts to ensure that (i)
its representations and warranties remain true and correct in all material
respects through the Closing Date and (ii) the conditions to the
obligations of the other parties to consummate the sale of the Shares to
the Buyer are satisfied.
5.17. EXPENSES
(a) Except as otherwise expressly provided herein, the Buyer
will pay all fees and expenses (including legal, accounting and
broker's fees and other costs and expenses) incurred by it in
connection with the transactions contemplated hereby.
(b) Except as otherwise expressly provided herein, the
Stockholder will pay all fees and expenses (including legal,
accounting and broker's fees and other costs and expenses) incurred
by it or the Company in connection with the transactions
contemplated hereby. The Stockholder shall be responsible for
payment of all sales or transfer taxes arising out of the conveyance
of the Shares. The fees and expenses of Xxxxxxx Xxxxxx & Green,
P.C., special counsel to the Company, in connection with this
transaction shall be paid at the Closing by (i) the Company up to
the amount of $50,000 and (ii) the Stockholder (or paid by the
Company and reimbursed by the Stockholder) to the extent those
payments exceed $50,000. Any transfer taxes and fees payable to any
Governmental Entity to obtain any necessary authorizations, consents
and approvals shall be borne equally by the Buyer and the
Stockholder.
(c) In the event that legal proceedings are commenced by
the Buyer against the Stockholder (or the Company, if the
transactions contemplated hereby are not consummated), or by the
Stockholder against the Buyer, in connection with this Agreement or
the transactions contemplated hereby, the party or parties that do
not prevail in such proceedings shall pay the reasonable attorneys'
fees and other costs and expenses, including investigation costs,
incurred by the prevailing party in such proceedings.
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6. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer
under this Agreement are subject to the fulfillment, at the Closing Date, of the
following conditions precedent, each of which may be waived in writing in the
sole discretion of the Buyer:
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) Except for any changes permitted by the terms hereof or
consented to in writing by the Buyer, the representations and
warranties of the Stockholder and the Company (including paragraph
(e) of Subsection 3.6 and paragraph (c) of Subsection 3.16) shall be
true on and as of the Closing Date as though such representations
and warranties were made on and as of such date, except to the
extent such representations and warranties are specifically made as
of a particular date, (in which case such representations and
warranties shall be true and correct as of such date), provided that
if paragraph (c) of Subsection 3.16 shall not be true on and as of
the Closing Date as though such representation was made on and as of
such date (giving effect to the statutory and contractual
requirements in effect as of such date, including any binding
written determination by a Governmental Entity to decrease the
minimum balances and deposits referenced therein), the Purchase
Price shall be reduced by the lesser of (i) $3,700,000 or (ii) the
total amount that the Company would be required to fund in order to
comply with such paragraph (c) of Subsection 3.16. In the event that
the total amount contemplated by clause (ii) of the immediately
preceding sentence exceeds $4,700,000, the Buyer, in its discretion,
may determine not to proceed with the Closing. The Stockholder and
the Company shall have performed and complied with all terms,
conditions, covenants, obligations, agreements and restrictions
required by this Agreement to be performed or complied with by each
of them prior to or at the Closing Date.
(b) At the Closing, the Stockholder shall have delivered to
the Buyer a certificate signed by the Senior Vice President,
Administration and Finance of the Stockholder as to the
Stockholder's compliance with paragraph (a) of this Subsection 6.1.
At the Closing, the Company shall have delivered to the Buyer a
certificate signed by the President and Chief Executive Officer of
the Company as to the Company's compliance with paragraph (a) of
this Subsection 6.1.
6.2. INVESTOR RIGHTS AGREEMENT. The Stockholder and the Company
shall have entered into the Investor Rights Agreement with the Buyer.
6.3. ESCROW AGREEMENT. The Stockholder and the Escrow Agent
shall have entered into the Escrow Agreement.
6.4. AMENDED ORGANIZATIONAL DOCUMENTS. The Bylaws of the Company
shall have been amended and restated, effective immediately upon or
immediately after the Closing and in a form reasonably acceptable to
the Buyer, to the effect set forth under the heading "Amended and
Restated Bylaws" in the Supplemental Letter.
6.5. PROVIDER AGREEMENTS. The Company and each of the Providers
identified under the heading "Providers" in the Supplemental Letter shall
have entered into agreements amending or replacing their existing Provider
Agreements, which new agreements shall be satisfactory in form and
substance to the Buyer.
6.6. EMPLOYMENT ARRANGEMENTS. On or prior to the Closing Date,
(a) each individual listed in the Supplemental Letter under the heading
"Employment Agreements" shall have entered into an employment agreement
with the Company in the form agreed upon by such individual and the Buyer
prior to the date hereof and (b) at least 70% of the individuals listed in
the Supplemental
- 28 -
Letter under the heading "Specified Employees" shall have advised the
Buyer of their intention to continue their employment with the
Company for an indefinite period following the Closing Date.
6.7. DISPOSITION OF COMMERCIAL BUSINESS. The Company shall have
disposed of the Commercial Business and shall have delivered the Guarantee
to the Buyer; which Guarantee shall be satisfactory to the Buyer in form
and substance. Such disposition shall not, in the reasonable judgment of
the Buyer, have impaired the ability of the Company to continue to conduct
its Medicaid business consistent in all material respects with the conduct
of such business as of the date hereof.
6.8. IBNR CERTIFICATION. On the Closing Date, the Buyer shall
have received a certification of the National Healthcare Office of
PricewaterhouseCoopers LLP confirming that all medical claims of the
Company's Medicaid business and Commercial Business have been properly
reflected as losses incurred but not reported for the purposes of
computing the Company's claims payable and claims adjustment expenses,
provided that if such Office is unable to deliver such certification, the
Buyer, in its discretion, may determine to waive the preceding condition
and, as consideration therefor, the Purchase Price shall be reduced by the
amount that such Office certifies the Company has failed to properly
reflect in claims payable and claims adjustment expenses with respect to
its Medicaid business.
6.9. MEDICAID CONTRACT. The Buyer shall have received such
assurances, as the Buyer shall, in its sole discretion, deem sufficient
that neither the sale of the Shares as contemplated hereby nor any other
actions contemplated hereby will materially affect any of the Company's
rights under the Medicaid Contract.
6.10. CONSENTS. The Stockholder and the Company shall have
obtained at their own expense (and shall have provided copies to the Buyer
of) all of the waivers, permits, consents, approvals or other
authorizations referred to in paragraph (a) Subsection 5.15 that are
required on the part of the Company or the Stockholder, consents and
approvals of all lenders, lessors, Governmental Entities and other third
parties whose authorization, consent or approval is required in order for
the Stockholder and the Company to consummate the transactions
contemplated hereby, and for the Buyer to operate the Company's Medicaid
business, including those set forth in Section 3.5 of the Disclosure
Schedule.
6.11. INDEBTEDNESS. Any indebtedness described in paragraph (b)
of Subsection 3.23 shall have been paid to the Company.
6.12. ADVERSE PROCEEDINGS. No action or proceeding by or before
any Governmental Entity shall have been instituted or threatened by any
governmental body or person whatsoever that shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or
that might affect the right of the Buyer to own the Shares or to own or
operate the business of the Company after the Closing.
6.13. OPINIONS OF COUNSEL. The Buyer shall have received (a) an
opinion of counsel to the Stockholder, which counsel shall be reasonably
acceptable to the Buyer, dated as of the Closing Date, substantially in
the form attached hereto as EXHIBIT C and (b) an opinion of Xxxxxxx Xxxxxx
& Green, P.C., special counsel to the Company, dated as of the Closing
Date, in substantially the form attached hereto as EXHIBIT D.
6.14. MANAGEMENT AGREEMENT. The Company shall have entered into
the Management Agreement, satisfactory to the Buyer in form and substance.
- 29 -
6.15. CLOSING DELIVERIES. The Buyer shall have received at or
prior to the Closing such additional documents, instruments or certificates
as the Buyer may reasonably request including:
(a) the stock certificate representing the Shares, duly
endorsed in accordance withSubsection 1.1 of this
Agreement;
(b) such certificates of the Company's officers and of the
Stockholder's officers and such other documents
evidencing satisfaction of the conditions specified in
this Section 6 as the Buyer shall reasonably request;
(c) a certificate of the Secretary of State of the State of
New Jersey as to the legal existence and good
standing (including tax) of the Company in New Jersey;
(d) certificates of the Secretary of the Company and of the
Stockholder attesting to the incumbency of the Company's
officers, the authenticity of the resolutions
authorizing the transactions contemplated by this
Agreement, and the authenticity and continuing validity
of the charter documents delivered pursuant to
Subsection 3.1;
(e) where required by the applicable Lease, estoppel
certificates from each Lessor from whom the Company
leases real or personal property consenting to the
acquisition of the Shares by the Buyer and the other
transactions contemplated hereby, and representing that
there are no outstanding claims against the Company
under such Lease;
(f) where required by the applicable Lease, estoppel
certificates from each tenant to whom the Company leases
real property consenting to the acquisition of the
Shares by the Buyer and the other transactions
contemplated hereby, and representing that there are no
outstanding claims against the Company under such Lease;
(g) certificates of appropriate governmental officials in
each state in which the Company is required to qualify
to do business as a foreign corporation as to the due
qualification and good standing (including tax) of the
Company in each such jurisdiction;
(h) written resignations of all directors and officers of
the Company, other than as set forth in under the
heading "Continuing Directors and Officers" in the
Supplemental Letter; and
(i) the original corporate minute books of the Company and
all corporate seals.
7. CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDER AND THE COMPANY. The
obligations of the Stockholder and the Company under this Agreement are subject
to the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of the
Stockholder:
7.1. REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations and warranties of the Buyer in
this Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such
date, except for any changes consented to in writing by the
Stockholder. The Buyer shall have performed and complied with all
terms, conditions, covenants, obligations,
- 30 -
agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
(b) At the Closing, the Buyer shall have delivered to the
Stockholder a certificate signed by the President and Chief
Executive Officer of the Buyer as to the Buyer's compliance with
paragraph (a) of this Subsection 7.1.
7.2. INVESTOR RIGHTS AGREEMENT. The Buyer shall have entered
into the Investor Rights Agreement with the Stockholder and the Company.
7.3. ESCROW AGREEMENT. The Buyer and the Escrow Agent shall
have entered into the Escrow Agreement with the Stockholder.
7.4. FAIRNESS OPINION. The Board of Directors of the Company
shall have received, by no later than the earlier of the Closing Date and
August 15, 2002, an opinion of Xxxxxx Xxxxxx Partners LLC to the effect
that the consideration to be received by the Stockholder in connection
with the sale of the Shares is fair to the Stockholder from a financial
point of view.
7.5. CONSENTS. The Buyer shall have obtained at its own expense
(and shall have provided copies thereof to the Company or the Stockholder)
all of the waivers, permits, consents, approvals or other authorizations,
and effected all of the registrations, filings and notices, referred to in
paragraph (b) of Subsection 5.15 that are required on the part of the
Buyer.
7.6. ADVERSE PROCEEDINGS. No action or proceeding by or before
any Governmental Entity shall have been instituted or threatened by any
governmental body or person whatsoever that shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or
that might affect the right of the Stockholder to transfer the Shares.
7.7. OPINION OF COUNSEL. The Stockholder shall have received an
opinion of Xxxx and Xxxx LLP, counsel to the Buyer, dated as of the
Closing Date, in substantially the form attached hereto as EXHIBIT E.
7.8. MANAGEMENT AGREEMENT. The Buyer shall have entered into the
Management Agreement, satisfactory to the Stockholder and the Company in
form and substance.
7.9. CLOSING DELIVERIES. The Stockholder shall have received at
or prior to the Closing such additional documents, instruments or
certificates as the Buyer may reasonably request, including:
(a) such certificates of the Buyer's officers and such other
documents evidencing satisfaction of the conditions
specified in this Section 7 as the Stockholder shall
reasonably request;
(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing
(including tax) of the Buyer in Delaware; and
(c) a certificate of the Secretary of the Buyer attesting to
the incumbency of the Buyer's officers, the authenticity
of the resolutions authorizing the transactions
contemplated by this Agreement, and the authenticity and
validity of charter documents.
8. PRICE REDUCTION
- 31 -
8.1. DAMAGES. After the Closing, the Stockholder shall repay
or cause to be repaid to the Buyer, in the manner and subject to the terms
and limitations set forth in this Section 8, a portion of the Purchase
Price (a "Price Reduction") in the event the Buyer or the Company incurs,
suffers or is subject to any claims, damages, losses, liabilities, costs
and expenses (including settlement costs and any legal, accounting or
other expenses for investigating or defending any actions or threatened
actions) (collectively, the "Damages") in connection with each and all of
the following:
(a) all obligations or liabilities of the Company arising or
accruing under the Medicaid Contract or any contract
relating to or involving the Commercial Business to the
extent such obligations or liabilities arise or accrue
as of or prior to the time of the Closing and have not
been reflected as losses incurred but not reported for
purposes of computing the Company's claims payable and
claims adjustment expenses (as adjusted to give effect
to any reduction in the Purchase Price pursuant to
Subsection 6.8), including (i) any medical claims
incurred under any Provider Agreement for services
rendered to Members as of or prior to the time of the
Closing, (ii) any medical claims incurred under any
contract or agreement with a physician, hospital or
other healthcare service provider for services rendered
to members or customers of the Commercial Business as of
or prior to the time of the Closing, (iii) any claims of
Members who are hospitalized as of or prior to the time
of the Closing through the date of discharge of such
Members and (iv) any claims of members or customers of
the Commercial Business who are hospitalized as of or
prior to the time of the Closing through the date of
discharge of such members or customers;
(b) any (i) breach, as of the date of this Agreement or as
of the Closing Date, of any representation or warranty
of the Stockholder or the Company contained in this
Agreement or any other agreement or instrument furnished
by the Stockholder or the Company to the Buyer pursuant
to this Agreement, (ii) write-off by the Company, prior
to the date that is six months after the Closing Date,
of any portion of the Closing Receivables in accordance
with the normal practice of the Buyer and its
subsidiaries and with generally accepted accounting
principles, provided that Damages shall be deemed to
accrue under this clause (ii) only after the date that
is three months after the Closing Date, or (iii) failure
to collect, prior to the date that is five business days
before the first anniversary of the Closing Date, any of
the Closing Receivables, other than those written-off as
contemplated by the preceding clause (ii);
(c) any failure to perform any covenant or agreement of the
Stockholder or the Company contained in this Agreement
(including Subsections 5.10 and 5.11) or any agreement
or instrument furnished by the Stockholder or the
Company to the Buyer pursuant to this Agreement;
(d) any failure of the Stockholder to have good, valid and
marketable title to the Shares, free and clear of any
and all covenants, conditions, restrictions, voting
trust arrangements, liens, charges, encumbrances,
options and adverse claims or rights whatsoever; or
(e) any claim by a former stockholder of the Company, or any
other person or entity, seeking to assert, or based
upon: (i) ownership or rights to ownership of any shares
of stock of the Company; (ii) any rights of a
stockholder, including preemptive rights; (iii) any
rights under the Certificate of Incorporation or Bylaws
of the
- 32 -
Company; or (iv) any claim that his, her or its shares
were wrongfully repurchased by the Company.
8.2. REDUCTION CLAIMS
(a) If the Buyer is entitled, or seeks to assert rights,
to a Price Reduction pursuant to this Section 8, it shall give
written notification to the Stockholder of the commencement of any
suit or proceeding by a person or entity other than a party hereto
for which a reduction is sought (a "Third Party Action"). Such
notification shall be given within 20 days after receipt by the
Buyer of notice of such Third Party Action, and shall describe in
reasonable detail (to the extent known by the Buyer) the facts
constituting the basis for such Third Party Action and the amount of
the claimed damages; provided, however, that no delay or failure on
the part of the Buyer in so notifying the Stockholder shall relieve
the Stockholder of any obligation to reduce the Purchase Price
hereunder except to the extent of any damage or liability caused by
or arising out of such failure. Within 20 days after delivery of
such notification, the Stockholder may, upon written notice thereof
to the Buyer, assume control of the defense of such Third Party
Action with counsel reasonably satisfactory to the Buyer; provided
that (i) the Stockholder may only assume control of such defense if
(A) it acknowledges in writing to the Buyer that any damages, fines,
costs or other liabilities that may be assessed against the Buyer in
connection with such Third Party Action constitute Damages for which
the Buyer shall be entitled to a Price Reduction pursuant to this
Section 8 and (B) the ad damnum is less than or equal to the amount
of Damages for which the Purchase Price is to be reduced pursuant to
this Section 8 and (ii) the Stockholder may not assume control of
the defense of a Third Party Action involving criminal liability or
in which equitable relief is sought against the Buyer. If the
Stockholder does not, or is not permitted under the terms hereof to,
so assume control of the defense of a Third Party Action, the Buyer
shall control such defense. The party not controlling the defense of
the Third Party Action (the "Non-controlling Party") may participate
in such defense at its own expense. The party controlling such
defense (the "Controlling Party") shall keep the Non-controlling
Party advised of the status of such Third Party Action and the
defense thereof and shall consider in good faith recommendations
made by the Non-controlling Party with respect thereto. The
Non-controlling Party shall furnish the Controlling Party with such
information as it may have with respect to such Third Party Action
(including copies of any summons, complaint or other pleading which
may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same)
and shall otherwise cooperate with and assist the Controlling Party
in the defense of such Third Party Action. The fees and expenses of
counsel to the Buyer with respect to a Third Party Action shall be
considered Damages for purposes of this Agreement if (i) the Buyer
controls the defense of such Third Party Action pursuant to the
terms of this paragraph (a) of Subsection 8.2 or (ii) the
Stockholder assumes control of such defense and the Buyer reasonably
concludes that the Stockholder and the Buyer have conflicting
interests or different defenses available with respect to such Third
Party Action. The Stockholder shall not agree to any settlement of,
or the entry of any judgment arising from, any Third Party Action
without the prior written consent of the Buyer, which shall not be
unreasonably withheld, conditioned or delayed; provided that the
consent of the Buyer shall not be required if the Stockholder agrees
in writing to pay any amounts payable pursuant to such settlement or
judgment and such settlement or judgment includes a complete release
of the Buyer from further liability and has no other adverse effect
on the Buyer. The Buyer shall not agree to any settlement of, or the
entry of any judgment arising from, any such Third Party Action
without the prior written consent of the Stockholder, which shall
not be unreasonably withheld, conditioned or delayed.
- 33 -
(b) In order to seek a Price Reduction pursuant to this
Section 8, the Buyer shall deliver to the Stockholder and the Escrow
Agent written notification (a "Claim Notice") that contains (i) a
description of the Damages incurred or reasonably expected to be
incurred by the Buyer or the Company and the amount of such Damages
(the "Claimed Amount"), to the extent then known, (ii) a statement
that the Buyer is entitled to a Price Reduction pursuant to this
Section 8 for such Damages and a reasonable explanation of the basis
therefor, and (iii) a demand for payment in the amount of such
Damages.
(c) Within 20 days after delivery of a Claim Notice (unless
such Claim Notice is delivered pursuant to paragraph (a) of
Subsection 8.1, in which case within two business days after
delivery of such Claim Notice), the Stockholder shall deliver to the
Buyer a written response (the "Response") in which the Stockholder
shall: (i) agree that the Buyer is entitled to receive a Price
Reduction equal to the Claimed Amount, in which case the Stockholder
and the Buyer shall deliver to the Escrow Agent, within three days
following the delivery of the Response, a written notice executed by
both parties instructing the Escrow Agent to distribute the Claimed
Amount from the Escrow Account to the Buyer or the Company, as
contemplated by paragraph (g) of this Subsection 8.2; (ii) agree
that the Buyer is entitled to receive a Price Reduction equal to a
part (the "Agreed Amount"), but not all, of the Claimed Amount, in
which case the Stockholder and the Buyer shall deliver to the Escrow
Agent, within three days following the delivery of the Response, a
written notice executed by both parties instructing the Escrow Agent
to distribute the Agreed Amount from the Escrow Account to the Buyer
or the Company, as contemplated by paragraph (g) of this Subsection
8.2; or (iii) dispute that the Buyer is entitled to receive a Price
Reduction for any of the Claimed Amount.
(d) During the 30-day period following the delivery of a
Response that reflects a dispute by the Stockholder of its liability
for a Price Reduction for all or a part of the Claimed Amount (a
"Dispute"), the Stockholder and the Buyer shall use good faith
efforts to resolve the Dispute. If the Dispute is not resolved
within such 30-day period, the Stockholder and the Buyer shall
discuss in good faith the submission of the Dispute to binding
arbitration, and if the Stockholder and the Buyer agree in writing
to submit the Dispute to such arbitration, then the provisions of
paragraph (e) of this Subsection 8.2 shall become effective with
respect to such Dispute. The provisions of this paragraph (d) shall
not obligate the Stockholder and the Buyer to submit to arbitration
or any other alternative dispute resolution procedure with respect
to any Dispute, and in the absence of an agreement by the
Stockholder and the Buyer to arbitrate a Dispute, such Dispute shall
be resolved in a state or federal court sitting in the State of New
Jersey, in accordance with Subsection 11.6. The Stockholder and the
Buyer shall deliver to the Escrow Agent, promptly following the
resolution of the Dispute (whether by mutual agreement, arbitration,
judicial decision or otherwise), a written notice executed by both
parties instructing the Escrow Agent as to the amount that shall be
distributed to the Buyer or the Company, as contemplated by
paragraph (g) of this Subsection 8.2 (which notice shall be
consistent with the terms of the resolution of the Dispute).
(e) If, as set forth in paragraph (d) of this Subsection
8.2, the Buyer and the Stockholder agree to submit any Dispute to
binding arbitration, the arbitration shall be conducted by a single
arbitrator (the "Arbitrator") in accordance with the Commercial
Rules in effect from time to time and the following provisions:
(i) In the event of any conflict between the
Commercial Rules in effect from time to time and the
provisions of this Agreement, the provisions of this
Agreement shall prevail and be controlling.
- 34 -
(ii) The parties shall commence the arbitration by
jointly filing a written submission with the Newark, New
Jersey office of the American Arbitration Association in
accordance with Commercial Rule 5 (or any successor
provision).
(iii) No depositions or other discovery shall be
conducted in connection with the arbitration.
(iv) Not later than 30 days after the conclusion of
the arbitration hearing, the Arbitrator shall prepare and
distribute to the parties a writing setting forth the
arbitral award and the Arbitrator's reasons therefor. Any
award rendered by the Arbitrator shall be final, conclusive
and binding upon the parties, and judgment thereon may be
entered and enforced in any court of competent jurisdiction
(subject to Subsection 11.6), provided that the Arbitrator
shall have no power or authority to (x) award damages in
excess of the portion of the Claimed Amount that is subject
to such Dispute, (y) award multiple, consequential, punitive
or exemplary damages, or (z) grant injunctive relief,
specific performance or other equitable relief.
(v) The Arbitrator shall have no power or authority,
under the Commercial Rules or otherwise, to (x) modify or
disregard any provision of this Agreement, including the
provisions of paragraph (e) of this Subsection 8.3, or (y)
address or resolve any issue not submitted by the parties.
(vi) In connection with any arbitration proceeding
pursuant to this Agreement, each party shall bear its own
costs and expenses, except that the fees and costs of the
American Arbitration Association and the Arbitrator, the
costs and expenses of obtaining the facility where the
arbitration hearing is held, and such other costs and
expenses as the Arbitrator may determine to be directly
related to the conduct of the arbitration and appropriately
borne jointly by the parties (which shall not include any
party's attorneys' fees or costs, witness fees (if any),
costs of investigation and similar expenses) shall be shared
equally by the Buyer and the Stockholder.
(f) Notwithstanding the other provisions of this Subsection
8.2, if a third party asserts (other than by means of a lawsuit)
that the Buyer is liable to such third party for a monetary or
other obligation that may constitute or result in Damages for which
the Buyer may be entitled to a Price Reduction pursuant to this
Section 8, and the Buyer reasonably determines that it has a
valid business reason to fulfill such obligation, then (i) the
Buyer shall be entitled to satisfy such obligation, without
prior notice to or consent from the Stockholder, (ii) the Buyer may
subsequently make a claim for a Price Reduction in accordance with
the provisions of this Section 8, and (iii) the Buyer shall be
reimbursed, in accordance with the provisions of this Section 8,
for any such Damages for which it is entitled to a Price Reduction
pursuant to this Section 8 (subject to the right of the Stockholder
to dispute the Buyer's entitlement to a Price Reduction, or the
amount for which the Buyer is entitled to a Price Reduction, under
the terms of this Section 8).
(g) It is understood that, pursuant to the provisions of
Subsection 8.1, a Price Reduction may result from Damages that are
incurred by or attributable to the Company and that result in
economic harm to the Buyer solely as the result of its status as a
stockholder of the Company. In such an event, the parties agree
that it is in their mutual best interests for the repayment of any
such Price Reduction to be made to the Company, rather than the
Buyer. In no event shall any reduction in the amount of any Damages
or any Price Reduction and Damages be made to reflect the fact that
the Buyer owns less than all of the outstanding capital stock of
the Company.
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8.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties that are covered by agreements in
paragraphs (a) and (b) of Subsection 8.1 shall (a) survive the Closing and
(b) shall expire one year after the Closing Date. If the Buyer delivers to
the Stockholder, before expiration of a representation or warranty, either
a Claim Notice based upon a breach of such representation or warranty, or a
notice that, as a result of a legal proceeding instituted by or written
claim made by a third party, the Buyer reasonably expects to incur Damages
for which it is entitled to a Price Reduction under this Section 8 based
upon a breach of such representation or warranty (an "Expected Claim
Notice"), then the applicable representation or warranty shall survive
until, but only for purposes of, the resolution of the matter covered by
such notice. If the legal proceeding or written claim with respect to which
an Expected Claim Notice has been given is definitively withdrawn or
resolved in favor of the Buyer, the Buyer shall promptly so notify the
Stockholder; and if the Buyer has delivered a copy of the Expected Claim
Notice to the Escrow Agent and funds have been retained in the Escrow
Account after the Termination Date (as defined in the Escrow Agreement)
with respect to such Expected Claim Notice, the Stockholder and the Buyer
shall promptly deliver to the Escrow Agent a written notice executed by
both parties instructing the Escrow Agent to distribute such retained funds
to the Stockholder in accordance with the terms of the Escrow Agreement.
The rights to a Price Reduction set forth in this Section 8 shall not be
affected by (i) any investigation conducted by or on behalf of the Buyer or
any knowledge acquired (or capable of being acquired) by the Buyer, whether
before or after the date of this Agreement or the Closing Date, with
respect to the inaccuracy or noncompliance with any representation,
warranty, covenant or obligation which is the subject of a Price Reduction
hereunder or (ii) any waiver by the Buyer of any closing condition relating
to the accuracy of representations and warranties or the performance of or
compliance with agreements and covenants.
8.4. LIMITATIONS
(a) Notwithstanding anything to the contrary herein:
(i) the aggregate Price Reduction for Damages under
this Section 8 shall not exceed the amount of
funds contained in the Escrow Account;
(ii) no Price Reduction shall be made under this
Section 8 with respect to a claim pursuant to
clause (i) of paragraph (b) of Subsection 8.1
(other than a claim relating to a breach of the
representations and warranties set forth in
Subsections 2.4, 2.5 and 3.2) unless and until the
aggregate Damages with respect to claims pursuant
to clause (i) of paragraph (b) of Subsection 8.1
(other than as aforesaid) exceed $1,000,000;
(iii) the Price Reduction for Damages under clause (iii)
of paragraph (b) of Subsection 8.1 shall be
reduced to the extent that any Closing Receivables
that were the subject of a Price Reduction under
clause (ii) of such paragraph (b) are subsequently
collected prior to the fifth business day
preceding the first anniversary of the Closing
Date; and
(iv) the aggregate Price Reduction for Damages under
clauses (ii) and (iii) of paragraph (b) of
Subsection 8.1 (as adjusted pursuant to the
preceding clause (iii)) shall not exceed an amount
equal to 25 percent of the total Closing
Receivables.
For purposes solely of determining the amount of Damages pursuant to this
Section 8 (and not for purposes of determining the existence of a breach
of a representation or warranty), all representations and warranties of
the Stockholder and the Company in Sections 2 and 3 shall be
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construed as if the terms "Company MAE," "material" and variations thereof
were omitted from such representations and warranties.
(b) The Escrow Agreement shall be the exclusive means for the
Buyer to collect any Damages for which it is entitled to a Price
Reduction under this Section 8.
(c) Except with respect to claims based on fraud, after the
Closing, the rights of the Buyer under this Section 8 and the Escrow
Agreement shall be the exclusive remedy of the Buyer with respect to
claims against the Stockholder or the Company resulting from or
relating to any misrepresentation, breach of warranty or failure to
perform any covenant or agreement contained in this Agreement.
(d) The Stockholder shall not have any right of contribution
against the Company with respect to any breach by the Company of any
of its representations, warranties, covenants or agreements. The
amount of the Price Reduction recoverable by the Buyer under this
Section 8 with respect to a Price Reduction shall be reduced by (i)
any proceeds received by the Buyer or the Company, with respect to
the Damages to which the Price Reduction relates, from an insurance
carrier and (ii) the amount of any tax savings actually realized by
the Buyer or the Company, for the tax year in which Damages were
incurred, which are clearly attributable to the Damages to which
such Price Reduction relates (net of any increased tax liability
that may result from the receipt of the indemnity payment or any
insurance proceeds relating to such Damages).
9. POST-CLOSING AGREEMENTS. The Stockholder agrees that from and after
the Closing Date:
9.1. PROPRIETARY INFORMATION
(a) The Stockholder and each of its affiliates (as such term
is defined in the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder) (individually, an
"Affiliate" and collectively "Affiliates") shall hold in confidence
and shall use their Reasonable Best Efforts to have all officers,
directors and personnel who continue after the Closing to be
employed by such Stockholder or any Affiliate thereof to hold in
confidence all knowledge and information of a secret or confidential
nature with respect to the business of the Company and not to
disclose, publish or make use of the same without the consent of the
Buyer, except to the extent that such information shall have become
public knowledge other than by breach of this Agreement by the
Stockholder.
(b) If (i) the employment of an officer, director or other
employee of the Stockholder or any Affiliate thereof, to whom secret
or confidential knowledge or information concerning the business of
the Company has been disclosed, is terminated and (ii) such
individual is subject to an obligation to maintain such knowledge or
information in confidence after such termination, the Stockholder
shall, upon request by the Buyer, take all reasonable steps at its
expense to enforce such confidentiality obligation in the event of
an actual or threatened breach thereof. Any legal counsel retained
by the Stockholder in connection with any such enforcement or
attempted enforcement shall be selected by the Stockholder, but
shall be subject to the approval of the Buyer, which approval shall
not be unreasonably withheld.
(c) The Stockholder agrees that the remedy at law for any
breach of this Subsection 9.1 would be inadequate and that the Buyer
shall be entitled to injunctive relief in addition to any other
remedy it may have upon breach of any provision of this Subsection
9.1.
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9.2. FURTHER ASSURANCES. At any time and from time to time after
the Closing, at the Buyer's request and without further consideration,
the Stockholder shall promptly execute and deliver such instruments of
sale, transfer, conveyance, assignment and confirmation, and take all such
other action as the Buyer may reasonably request, more effectively to
transfer, convey and assign to the Buyer, and to confirm the Buyer's title
to, the Shares, to assist the Buyer in exercising all rights with respect
thereto and to carry out the purpose and intent of this Agreement.
9.3. NO SOLICITATION OR HIRING OF FORMER EMPLOYEES. Except as
provided by law, for a period of one year after the Closing Date,
neither the Stockholder nor any Affiliate thereof shall (a) solicit or
otherwise induce any individual identified under the heading "Specified
Employees" in the Supplemental Letter to terminate his or her employment or
with the Buyer (or the Company) or to become an employee of the Stockholder
or and Affiliate thereof or (b) hire any individual identified under the
heading "Specified Employees" in the Supplemental Letter.
9.4. NON-COMPETITION AGREEMENT
(a) For a period of five years after the Closing Date, the
Stockholder shall not engage directly or indirectly in the
ownership, management or operation of any health insurance or health
benefit program, including any health maintenance organization,
health care preferred provider organization or traditional indemnity
program, offered to Medicaid beneficiaries through the State of New
Jersey Medicaid managed care program or to beneficiaries through the
Children's Health Insurance Program authorized under Title XXI of
the Social Security Act, as amended, in the State of New Jersey (a
"Competing Business"). Notwithstanding the foregoing, during such
period the Stockholder shall be permitted to acquire, or make
investments in, entities that constitute a Competing Business,
provided that (i) the gross revenues of such entities' Competing
Businesses are not material in the aggregate to Buyer, as Buyer's
business is then conducted, and (ii) the Medicaid memberships of
those entities' Competing Businesses in the Service Areas are not
material in the aggregate to Buyer, as Buyer's business is then
conducted.
(b) The parties hereto agree that the duration and
geographic scope of the non-competition provision set forth in this
Subsection 9.4 are reasonable. In the event that any court of
competent jurisdiction determines that the duration or the
geographic scope, or both, are unreasonable and that such provision
is to that extent unenforceable, the parties hereto agree that the
provision shall remain in full force and effect for the greatest
time period and in the greatest area that would not render it
unenforceable. The parties intend that this non-competition
provision shall be deemed to be a series of separate covenants, one
for each and every county of each and every state of the United
States of America and each and every political subdivision of each
and every country outside the United States of America where this
provision is intended to be effective. The Stockholder agrees that
damages are an inadequate remedy for any breach of this provision
and that the Buyer shall, whether or not it is pursuing any
potential remedies at law, be entitled to equitable relief in the
form of preliminary and permanent injunctions without bond or other
security upon any actual or threatened breach of this
non-competition provision.
10. TERMINATION OF AGREEMENT
10.1. TERMINATION BY LAPSE OF TIME. This Agreement shall terminate
at 5:00 p.m., Eastern Time, on January 1, 2003, if the transactions
contemplated hereby have not been consummated, unless such date is
extended by the written consent of the Company, the Buyer and the
Stockholder.
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10.2. TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be
terminated by the mutual written agreement of the parties hereto. In
the event of such termination by agreement, the Buyer shall have no further
obligation or liability to the Stockholder or the Company under this
Agreement, and the Stockholder shall have no further obligation or
liability to the Buyer under this Agreement.
10.3. TERMINATION BY REASON OF BREACH. This Agreement may be
terminated by the Stockholder, if at any time prior to the Closing
there shall occur a breach of any of the representations, warranties or
covenants of the Buyer or the failure by the Buyer to perform any condition
or obligation hereunder, and may be terminated by the Buyer, if at any time
prior to the Closing there shall occur a breach of any of the
representations, warranties or covenants of the Stockholder or the Company
or the failure of the Stockholder or the Company to perform any condition
or obligation hereunder. In addition, the Stockholder may terminate this
Agreement on or before August 16, 2002, in the event that Xxxxxx Xxxxxx
Partners LLC advises the Company that it will be unable to deliver the
opinion contemplated by Subsection 7.4.
10.4. AVAILABILITY OF REMEDIES AT LAW. In the event this Agreement
is terminated by the Buyer or the Stockholder pursuant to the provisions
of this Section 10, the parties hereto shall have available to them all
remedies afforded to them by applicable law.
11. GENERAL
11.1. NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request,
demand, claim or other communication hereunder shall be deemed duly
delivered four business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day after
it is sent for next business day delivery via a reputable nationwide
overnight courier service, in each case to the intended recipient as set
forth below:
To the Company: University Health Plans, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: President
To the Buyer: Centene Corporation
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: President and Chief
Executive Officer
With a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
To the Stockholder: University of Medicine and
Dentistry of New Jersey
00 Xxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Senior Vice President,
Administration and Finance
With a copy to: Xxxxxxx Xxxxxx & Green, P.C.
0000 00xx Xxxxxx, XX, Xxxxx 000
- 00 -
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxx
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary
mail or electronic mail), but no such notice, request, demand, claim or
other communication shall be deemed to have been duly given unless and
until it actually is received by the party for whom it is intended. Any
party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
11.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Buyer, on the one hand, and the
Stockholder and the Company, on the other hand, may not assign their
respective obligations hereunder without the prior written consent of the
other party; provided, however, that the Buyer may assign this Agreement,
and its rights and obligations hereunder, to a wholly owned subsidiary of
the Buyer. Any assignment in contravention of this provision shall be void.
No assignment shall release the Buyer, the Stockholder or the Company from
any obligation or liability under this Agreement.
11.3. ENTIRE AGREEMENT; AMENDMENTS
(a) This Agreement, the Disclosure Schedules, all Exhibits
hereto, and all agreements and instruments to be delivered by the
parties pursuant hereto represent the entire understanding and
agreement between the parties hereto (including the Supplemental
Letter) with respect to the subject matter hereof and supersede all
prior oral and written and all contemporaneous oral negotiations,
commitments and understandings between such parties. The Disclosure
Schedule and the Exhibits attached hereto are hereby incorporated as
integral parts of this Agreement.
(b) This Agreement may be amended only with the written
consent of each of the parties. No waiver of any right or remedy
hereunder shall be valid unless the same shall be in writing and
signed by the party giving such waiver. No waiver by any party with
respect to any condition, default or breach of covenant hereunder
shall be deemed to extend to any prior or subsequent condition,
default or breach of covenant hereunder or affect in any way any
rights arising by virtue of any prior or subsequent such occurrence.
11.4. SEVERABILITY. Any provision of this Agreement that is invalid,
illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of
this Agreement invalid, illegal or unenforceable in any other jurisdiction.
11.5. INVESTIGATION OF THE PARTIES. All representations and
warranties contained herein that are made to the best knowledge of a
party shall require that such party make reasonable investigation and
inquiry with respect thereto to ascertain the correctness and validity
thereof.
11.6. SUBMISSION TO JURISDICTION. Each party (a) submits to the
jurisdiction of any state or federal court sitting in Essex County,
New Jersey in any action or proceeding arising out of or relating to this
Agreement (including any action or proceeding for the enforcement of any
arbitral award made in connection with any arbitration of a Dispute
hereunder), (b) agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court, (c) waives any
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claim of inconvenient forum or other challenge to venue in such court, (d)
agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court and (e) waives any right it may have to a
trial by jury with respect to any action or proceeding arising out of or
relating to this Agreement; provided in each case that, solely with respect
to any arbitration of a Dispute, the Arbitrator shall resolve all threshold
issues relating to the validity and applicability of the arbitration
provisions of this Agreement, contract validity applicability of statutes
of limitations and issue preclusion, and such threshold issues shall not be
heard or determined by such court.
11.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
11.8. CONSTRUCTION
(a) The language used in this Agreement shall be deemed to
be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any
party.
(b) The headings of the Sections and Subsections of this
Agreement are included only for convenience and shall not affect the
meaning or interpretation of this Agreement.
(c) References herein to Sections and Subsections shall
mean such Sections and Subsections of this Agreement, except as
otherwise specified. The words "herein" and "hereof" and other words
of similar import refer to this Agreement as a whole and not to any
particular part of this Agreement. The word "including" as used
herein shall not be construed so as to exclude any other thing not
referred to or described.
(d) In computing any period of time under this Agreement,
the day from which the designated period of time begins to run
shall not be included; the last day of the period so computed shall
be included, unless it is not a business day, in which event the
period shall run until the end of the next day that is a business
day. For purposes of this Agreement, the term "business day" shall
mean the day that is not a Saturday, a Sunday or a statutory or
civic holiday in either the State of Missouri or the State of
New Jersey.
(e) If the provisions of any Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions
of this Agreement shall prevail.
11.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same document.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
UNIVERSITY HEALTH PLANS, INC.
By: /s/ Xxxxxxxxx X. XxXxxx
--------------------------------------------
Name: Xxxxxxxxx X. XxXxxx
Title: President and Chief Executive Officer
UNIVERSITY OF MEDICINE AND DENTISTRY
OF NEW JERSEY
By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Senior Vice President
CENTENE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
- 42 -
