EXHIBIT 10NN
MGU
STOCK PURCHASE AGREEMENT
THIS AGREEMENT dated as of February 27, 1998, is among HealthPlan
Services, Inc. (the "Buyer"), and Provident Indemnity Life Insurance Company, a
Pennsylvania corporation (the "Seller").
WHEREAS, the Seller owns 26,000 shares of the capital stock of
Xxxxxxxxxx Management Corporation ("MGU"), $.10 par value (the "Shares"), which
constitute all of the issued and outstanding capital stock of MGU.
WHEREAS, MGU is a full service managing general underwriter.
WHEREAS, the Seller desires to sell and the Buyer desires to purchase
49% of the Shares and to issue and obtain a warrant to purchase an additional
31% of the Shares upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the payments provided for and the
covenants contained in this Agreement, the parties agree as follows:
1. SALE AND PURCHASE OF STOCK, WARRANT FOR STOCK
1.1 Sale and Purchase
Subject to the conditions set forth in this Agreement, at the Time of
Closing (as defined in Section 8.1), the Seller will sell and transfer to the
Buyer, and the Buyer will purchase from the Seller, 12,740 of the outstanding
Shares, constituting forty-nine (49%) percent thereof, free and clear of any
security interest, lien, claim, encumbrance, charge, pledge, or any other
restriction of any kind (the "Purchased Shares").
1.2 Warrant
Subject to the conditions set forth in this Agreement, at the Time of
Closing (as defined in Section 8.1), the Seller will issue to the Buyer, and the
Buyer will receive from the Seller, a warrant to purchase from the Seller for a
period of ten (10) years from the date thereof 8,060 of the outstanding Shares,
constituting thirty-one (31%) percent thereof at a price of $1.00 per share,
free and clear of any security interest, lien, claim, encumbrance, charge,
pledge, or any other restriction of any kind (the "Warrant").
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2. CONSIDERATION FOR THE PURCHASED SHARES
2.1 Amount of Consideration
As consideration for the Purchased Shares and the Warrant, the
Buyer will:
(a) pay to the Seller $4,000,000 in immediately available funds
at the Time of Closing; and
(b) enter into a Profit Sharing Agreement with the Seller as
described in Section 5.5.
The amount of consideration is subject to adjustment following the Time of
Closing as provided in Sections 2.2 through 2.5.
2.2 Working Capital Statement
As soon as practicable following the Time of Closing (and in no
event later than 45 days following the Time of Closing), the Seller will prepare
and deliver to the Buyer a statement showing the book value of the total assets
and the total liabilities of MGU as of the Time of Closing (the "Working Capital
Statement"). The Working Capital Statement will be based upon the books and
records of the Seller and MGU and prepared in accordance with the same
accounting principles and practices used in determining the total assets and the
total liabilities shown on the Closing Balance Sheet (as defined in Section
3.5), except as set forth on the Accounting Principles Schedule attached to this
Agreement as Exhibit 2.2. The Buyer will, at its expense, make available to the
Seller, any accounting, personnel and records of MGU required for the
preparation of the Working Capital Statement.
2.3 Review of Working Capital Statement
Following receipt of the Working Capital Statement, the Buyer
will be afforded a period of 21 days to review the Working Capital Statement. To
assist in any such review, the Seller will make available to the Buyer any work
sheets prepared in connection with the Working Capital Statement. At or before
the end of the 21 day review period, the Buyer will either (a) accept the
Working Capital Statement in its entirety, or (b) deliver to the Seller a
written notice setting forth a detailed explanation of those items in the
Working Capital Statement that the Buyer disputes (a Notice of Dispute). If the
Buyer does not deliver a Notice of Dispute to the Seller within the 21 day
review period, the Buyer will be deemed to have accepted the Working Capital
Statement in its entirety. If the Buyer delivers a Notice of Dispute in which it
disputes some, but not all, of the items in the Working Capital Statement, the
Buyer will be deemed to have accepted all of the items not disputed.
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2.4 Resolution of Disputes
Within a period of 14 days after the delivery of a Notice of
Dispute, the parties will attempt to resolve in good faith any disputed items.
If they are unable to do so, the remaining disputed items will be referred to
Price, Waterhouse LLP for resolution. The parties will share equally the cost of
the independent public accountants. The book value of the disputed items, as
determined by the independent public accountants, will be binding on the
parties.
2.5 Adjustment in Amount of Consideration
If the book value of total assets, less the book value of the
total liabilities, shown on the Working Capital Statement, after the resolution
of any dispute pursuant to Section 2.4 (the Working Capital) is negative, the
Seller will pay promptly to the Buyer an amount equal to the negative Working
Capital balance. If the Working Capital is positive, the Buyer will pay promptly
to the Seller an amount equal to the positive Working Capital balance.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER
When used in this Section 3, the phrase "to the knowledge of the Seller"
means the actual knowledge of, or the knowledge that would have been acquired
by, the executive officers of the Seller in the ordinary course of reasonably
performing their duties with the Seller. The Seller hereby represents and
warrants to the Buyer as follows:
3.1 Organization
Each of the Seller and MGU are corporations duly organized,
validly existing, and in good standing under the laws of the Commonwealth of
Pennsylvania. MGU does not have any ownership interest, or any obligation to
acquire an ownership interest, directly or indirectly, in any other corporation,
partnership, joint venture, or other entity.
3.2 Authority
MGU has all corporate power and authority necessary to conduct
its business as presently and ordinarily conducted. The Seller has the corporate
power and authority required to enter into and perform its obligations under
this Agreement, and the execution, delivery, and performance of this Agreement
have been duly authorized by all necessary corporate action on the part of the
Seller. Assuming the due authorization, execution, and delivery by the Buyer,
this Agreement is a valid and binding obligation of the Seller, enforceable
against it in accordance with its terms.
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3.3 Capitalization
The authorized capital stock of MGU consists of (a) 1,000,000
shares of common voting stock, $.10 par value, of which 26,000 shares are issued
and outstanding, and owned by the Seller, and (b) 5,000,000 shares of preferred
stock, $1.00 par value, Series I, none of which are outstanding. The Seller owns
all of the Shares free and clear of any security interest, lien, claim,
encumbrance, charge, pledge, or any other restriction of any kind. All of the
Shares are duly authorized, validly issued, fully paid, and non-assessable.
There are no outstanding warrants, options, or other rights to purchase, or
rights under debentures or other instruments for conversion into any Shares or
any other equity securities of MGU. There are no shareholders, voting trust, or
other agreements or understandings to which the Seller or MGU is a party or is
bound relating to the voting or disposition of any Shares. Except as set forth
herein, there are no other classes of shares of MGU authorized or outstanding.
Neither the authorized capital stock of MGU nor the issued and outstanding
shares of MGU will be changed without the prior written approval of the Buyer.
3.4 No Violation
The execution and delivery of this Agreement by the Seller does
not, and the performance by the Seller of its obligations under this Agreement
will not, result in any violation of or default under, or give rise to a right
of modification, termination, or acceleration of any obligation under any
provision of the charter or bylaws (or similar charter documents) of the Seller
or MGU; of any loan or credit agreement, mortgage, indenture, lease, or other
agreement or instrument to which the Seller or MGU is a party; of any permit,
license, judgment, order, or decree by which the Seller or MGU is bound; or, to
the knowledge of the Seller and MGU of any statute, ordinance, rule, or
regulation by which the Seller or MGU is bound; except, in each case for
matters:
(a) set forth in Section 3.4 of the Disclosure Schedule attached
as Exhibit 3.4 to this Agreement (the Disclosure Schedule); or
(b) that would not, individually or in the aggregate, have a
material adverse effect on the financial condition or the results of operations
of MGU or prevent the Seller from performing any of its material obligations
under this Agreement. No authorization, consent, or approval of, or filing with,
any government or governmental agency or instrumentality, whether federal,
state, or local (Governmental Entity), is necessary for the performance by the
Seller of its obligations under this Agreement.
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3.5 Financial Data
Except as set forth in Section 3.5 of the Disclosure Schedule,
the consolidated balance sheets of MGU as of the Effective Date, (the Closing
Balance Sheet) and the financial records of MGU for fiscal periods ending
December 31, 1995, 1996, and 1997, including revenue and expense details
(collectively the Financial Data) were derived from the books and records of the
Seller and MGU, have been prepared in accordance with generally accepted
accounting principles ("GAAP"), and fairly present the financial condition and
the results of operations of MGU at the dates and for the periods indicated. The
amounts reflected in the Financial Data (other than the Closing Balance Sheet)
are the same as the amounts used by the Seller in the preparation of Provident
American Corporation's audited consolidated financial statements for the years
ended December 31, 1995 and 1996.
3.6 No Material Adverse Change
There has been no material adverse change in the financial
condition or the results of operations of MGU since December 31, 1997.
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3.7 Tax Matters
Except as set forth in Section 3.7 of the Disclosure Schedule:
(a) all tax returns required to be filed by or on behalf of MGU
have been filed when due;
(b) the Seller or MGU has timely paid, withheld, or made
provision for the payment of all taxes shown as payable on those tax returns;
(c) the accruals and reserves for taxes, if any, shown in the
Closing Balance Sheet are adequate to cover all tax liabilities of MGU as of the
Timne of Closing;
(d) no extension of time has been granted for the payment of any
tax or the filing of any tax return by MGU;
(e) no extension or waiver of the limitation period has been
granted with respect to any tax return filed or to be filed by MGU;
(f) there are no pending or, to the knowledge of the Seller,
threatened claims against MGU or the Seller with respect to any tax owed by MGU;
and
(g) there are no liens for taxes upon the assets of MGU other
than liens for current taxes not yet due. For purposes of this Section 3.7, the
term "taxes" includes all federal, state, and local taxes, including income
employment, payroll and withholding, sales, use, ad valorem, transfer,
franchise, license, excise, property, or windfall profit taxes.
3.8 Service Agreement
Section 3.8 of the Disclosure Schedule contains the terms of the
existing Service Agreement between MGU and the Seller, pursuant to which the
Seller provides operation, administration, and management services to MGU.
3.9 Agreements with Customers/Reinsurance Carriers
Section 3.9 of the Disclosure Schedule contains true and complete
copies or contract identification forms of:
(a) the standard forms of contracts between MGU and its customers
and reinsurance carriers; and
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(b) each form of customer or reinsurance carrier contract that
varies from the standard form in any material respect (collectively, the
"Contracts").
Except as set forth in Section 3.9 of the Disclosure Schedule, MGU has not given
or received any oral or written notice(s) of default or termination(s) under any
of the Contracts. Except as set forth in Section 3.9 of the Disclosure Schedule,
to the knowledge of the Seller, none of the Contracts are terminable at the
option of the other party thereto as a result of the transaction contemplated by
this Agreement and there are no material disputes in respect of such contracts
which would likely result in the termination of any of the Contracts other than
in the ordinary course.
3.10 Insurance
(a) Section 3.10 of the Disclosure Schedule sets forth a true and
correct list (indicating the insurer, the types and amounts of coverage, the
applicable deductible, and the expiration date) of all insurance policies or
binders of fire, liability, errors and omissions, vehicular, and other insurance
held by or on behalf of MGU (the Insurance Policies).
(b) Except as set forth in Section 3.10 of the Disclosure
Schedule: (i) to the knowledge of the Seller, the Insurance Policies are each in
full force and effect; (ii) neither MGU nor, to the knowledge of the Seller, is
the insurer in default of any material obligation under any of the Insurance
Policies; and (iii) MGU has not given nor received any notice(s) of default or
termination(s) under the Insurance Policies.
3.11 Employee Benefit Plans
(a) Identification - Section 3.11 of the Disclosure Schedule
lists: (i) all bonus, incentive, commission, deferred compensation, supplemental
retirement, medical disability, severance, stock option, stock purchase, and
other employee benefit plans or arrangements that are maintained, sponsored,
administered, or contributed to by MGU or in which current or former employees
of MGU participate; and (ii) all employment, executive compensation, severance,
consulting, or non-competition agreements with current or former employees of
MGU (together the "Employee Plans").
(b) Compliance; Contributions - Except as set forth in Section
3.11 of the Disclosure Schedule: (i) there has been no "prohibited transaction",
as defined in Section 406 of the Employee Retirement Income Security Act of
1974, as amended (ERISA) and Section 4975 of the Internal Revenue Code of 1986
as amended (the Code), with respect to any Employee Plan that is not exempt
under a class, individual, or statutory exemption; (ii) all of the Employee
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Plans are in material compliance with the applicable requirements of ERISA and
the Code, including without limitation, the reporting and disclosure
requirements of Title I of ERISA,and MGU has performed all material obligations
required to be performed by it under the terms of each of the Employee Plans;
(iii) each Employee Plan intended to qualify under Section 401(a) of the Code,
and each trust intended to qualify under Section 501(a) of the Code, does so
qualify; (iv) each Employee Plan which constitutes a "group health plan", as
defined in Section 5000(b)(1) of the Code, has, at all applicable times, been in
material compliance with the continuation of the coverage requirements contained
in Section 4980B(f) of the Code; (v) each fiduciary, as defined in Section 3(21)
of ERISA, of each Employee Plan has, at all applicable times, satisfied his
material obligations under Part IV of Title I of ERISA with respect to such
Employee Plan; (vi) all contributions required to be made to any Employee Plan
pursuant to Section 412 of the Code, or by the terms of the Employee Plan, have
been made; (vii) none of the Employee Plans constitutes a "multi-employer plan",
as defined in Section 3(37) of ERISA; (viii) no Employee Plan provides group
health benefits to either retired employees or to dependents of retired
employees (other than: A-coverage mandated by applicable law; B-death benefits
or retirement benefits under any "employee pension benefit plan" as that term is
defined in Section 3 (2) of ERISA; C-deferred compensation accrued on the books
of the Seller; or D-benefits the full cost of which is borne by the current or
former employee (or his or her beneficiary); (ix) there has been no "reportable
event" within the meaning of Section 4043 of ERISA, nor any event described in
Section 4062, 4063, 4064, 4069 or 4041 of ERISA with respect to any Employee
Plan that, individually or in the aggregate, is likely to result in a material
liability to MGU; and (x) with respect to each Employee Plan which is subject to
Title IV of ERISA, as of the Time of Closing, the fair market value of the
assets of each such Employee Plan equals or exceeds the liability for accrued
benefits, determined as if such Employee Plan were to be terminated as of the
Time of Closing.
3.12 Other Contracts and Commitments
Section 3.12 of the Disclosure Schedule identifies each of the
following contracts and commitments (collectively, the "Contracts") to which MGU
is a party or is bound (other than those referred to in Sections 3.8, 3.9, 3.10,
and 3.11):
(a) Contract with any sales agent or distributor of MGU that has
a term of more than one (1) year and cannot be terminated earlier by MGU on
notice of ninety (90) days or less;
(b) Brokerage or other agreement with any insurer or re-insurer;
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(c) Contract that: (i) entails the expenditure of more than
$10,000 in any year; or (ii) has a term of more than one (1) year and cannot be
terminated earlier by MGU on notice of ninety (90) days or less;
(d) Contract limiting the right of MGU to compete or do business
in any territory;
(e) Contract limiting the right of MGU to use trademarks, trade
names, or other proprietary rights;
(f) Contract or arrangement for financing or for the grant, as
security, of an interest in any of MGU's assets;
(g) Any other material contract not made in the ordinary course
of business.
Except as set forth in Section 3.12 of the Disclosure Schedule: (i) to the
knowledge of the Seller, all of the Contracts are in full force and effect; (ii)
neither MGU nor, to the knowledge of the Seller, no other party to the Contracts
is in default of any material obligation under any of the Contracts; and (iii)
MGU has not given nor received any notice (s) of default or termination(s) under
the Contracts.
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3.13 Litigation; Certain Liabilities
(a) Except as set forth in Section 3.13 of the Disclosure
Schedule, there is no action, proceeding, order, or investigation: (i) pending
against MGU before any court or other Governmental Entity; and/or (ii) to the
knowledge of the Seller, threatened against MGU before any court or other
Governmental Entity that, if adversely determined, would have a material adverse
effect on the financial condition or the results of operation of MGU or would
prohibit the completion of the transactions contemplated by this Agreement.
(b) Except as set forth in Section 3.13 of the Disclosure
Schedule, to the knowledge of the Seller, there are no material facts,
circumstances or events caused by or relating to the conduct of the Business
that have occurred which if asserted against MGU and if adversely determined,
would have a material adverse effect on the financial condition or the results
of operation of MGU or would prohibit the completion of the transactions
contemplated by this Agreement.
3.14 Permits, Licenses. Etc.; Compliance with Laws
(a) Section 3.14 of the Disclosure Schedule sets forth all
permits, licenses, and other authorizations by a Governmental Entity that are
held by MGU. To the knowledge of the Seller, no other material permits,
licenses, or authorizations are required for the conduct of the business of MGU
as presently and ordinarily conducted.
(b) except as identified on Section 3.14 of the Disclosure
Schedule: (i) the operation of the business as presently conducted by MGU does
not violate in any material way any applicable order, law, ordinance, code, or
regulation, including but not limited to those relating to protection of the
environment, civil rights, equal employment opportunity, occupational health and
safety, and interstate commerce; and (ii) no investigation by any governmental
authorities asserting or alleging any violation of any such order, law,
ordinance, code, or regulation, is pending, or to the knowledge of the Seller,
threatened.
3.15 Labor Matters
MGU has no employees, and is operated in accordance with a
Service Agreement with the Seller as described on Section 3.8 of the Disclosure
Schedule.
3.16 Trade Name, Trademarks and Copyrights
Section 3.16 of the Disclosure Schedule sets forth a list of all
trade name, trademark, and copyright registrations of MGU. Except as set forth
in Section 3.16 of the Disclosure Schedule, neither the Seller nor MGU has
received written notice alleging that any of those trade names, trademarks, or
copyrights infringe upon the rights of others. Neither the Seller nor MGU own
any trade names, trademarks, copyrights, or other proprietary rights used in the
business as presently and ordinarily conducted.
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3.17 Banks
Section 3.17 of the Disclosure Schedule sets forth a list of all
savings, payroll, checking, and other bank accounts and safe deposit boxes
maintained by MGU, together with a list of all individuals having signatory
powers over such accounts or access to such safe deposit boxes.
3.18 Accounts Receivable
All of the accounts receivable recorded on the Closing Balance
Sheet are due and valid claims against account debtors for goods or services
delivered or rendered, and, to the knowledge of the Seller, are not subject to
any defenses, offsets, or counterclaims. All such accounts receivable arose in
the ordinary course of business, and are not subject to any prior assignment,
claim, lien, or security interest.
3.19 Minute Books
The corporate minute books of MGU, copies of which have been
provided to the Buyer, contain accurate records of all of the meetings and
actions of the shareholder and directors of MGU.
3.20 Finders
No finder or broker has acted on behalf of the Seller or MGU in
connection with the transactions contemplated by this Agreement other than whose
fee will be paid by the Seller.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
4.1 Organization
The Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Florida.
4.2 Authority
The Buyer has all corporate power and authority required to enter
into and perform its obligations under this Agreement and the execution,
delivery, and performance of this Agreement have been duly authorized by all
necessary corporate action on the part of the Buyer. Assuming the due
authorization, execution, and delivery by the Seller, this Agreement is a valid
and binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms.
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4.3 No Violation
The execution and delivery of this Agreement by the Buyer do not
and the performance by the Buyer of its obligations under this Agreement will
not, result in any violation of or default under, or give rise to a right of
modification, termination, or acceleration of any obligation under, any
provision of the charter or bylaws of the Buyer of any loan or credit agreement,
mortgage, indenture, lease, or other agreement or instrument to which the Buyer
is a party; of any permit, license, judgment, order, or decree by which the
Buyer is bound; or, to the knowledge of the Buyer, of any statute, ordinance,
rule, or regulation by which the Buyer is bound; except, in each case, for
matters that would not, individually or in the aggregate, have a material
adverse effect on the financial condition or the results of operations of the
Buyer or prevent the Buyer from performing any of its material obligations under
this Agreement. No authorization, consent, or approval of, or filing with, any
Governmental Entity is necessary for the performance by the Buyer of its
obligations under this Agreement.
4.4 Finders
No finder or broker has acted on behalf of the Buyer in
connection with the transactions contemplated by this Agreement.
5. COVENANTS
5.1 Operation of the Business Prior to the Time of Closing
From the date of this Agreement until the Time of Closing, the
Seller will cause MGU to operate the business as follows:
(a) Operate Business as Presently and Ordinarily Conducted - MGU
will continue to operate the business as presently and ordinarily conducted.
(b) Preserve Business Relationships - MGU will use all reasonable
efforts to preserve its existing relationships with suppliers, customers,
employees, and others having business relations with it.
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(c) Perform Material Obligations Under Contracts; Not Amend - MGU
agrees to perform all of its material obligations under all existing Contracts
and, subject to Section 5.5, will not amend, supplement or terminate any of the
same. MGU will not enter into any contract, agreement, or commitment that would
be listed on an updated Contracts List, or voluntarily incur a material
liability, without receiving the prior written consent of the Buyer.
(d) Maintain Books of Account - MGU will maintain its books of
account and records in the usual and ordinary manner and will not adopt any
material change in any method of accounting or accounting practice, except as
contemplated or required by GAAP.
(e) Maintain Corporate Organization - MGU will refrain from
taking any action that would cause any significant corporate action, including
but not limited to merger, consolidation, liquidation or sale of substantially
all of its assets, to occur, without receiving the prior written consent of the
Buyer.
(f) Maintain Assets - MGU will not sell, mortgage, pledge or
otherwise dispose of any material assets or properties other than in the
ordinary course of business.
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(g) Preserve Capital Structure - MGU will not amend its Articles
of Incorporation or By-Laws without the prior written consent of the Buyer or
issue, or authorize the issuance of any additional shares of its capital stock
and/or securities or obligations convertible into shares of its capital stock or
issue or grant any option, warrant, or other right to purchase, any shares of
its capital stock or declare or pay any dividends or make any other
distributions in respect of its capital stock, except for dividends, if any,
prior to Time of Closing required to be made by MGU in respect of inter-company
accounts to be retained by the Seller or its affiliates in accordance with the
Accounting Principles Statement attached hereto as Exhibit 2.2.
(h) Maintain Insurance - MGU will maintain present insurance in
full force and effect, with policy limits and scope of coverage not less than is
now provided by its present insurance.
(i) Payroll - MGU will not increase the wages of any employee of
MGU.
5.2 Access to Premises and Records
Prior to the date hereof, the Seller has granted and has caused
MGU to grant to the Buyer, the opportunity to conduct investigations with
respect to the books, records, and financial and operating information relating
to, and the affairs and prospects of MGU and the business, and the Buyer has
availed itself of such opportunity. From the date of this Agreement until the
Time of Closing, the Seller will continue to:
(a) permit the Buyer and its representative(s) to review the
books and records relating to MGU and the business;
(b) furnish any additional financial and operating information
reasonably requested by the Buyer;
(c) cause MGU to permit authorized representative(s) of the
Buyer, at times agreed upon by both parties, to interview key officers and
employees of MGU; and
(d) cause MGU to permit authorized representative(s) of the
Buyer, at times agreed upon by both parties, to interview Customers and
reinsurance carriers that have relationships with MGU.
All of the Buyer's investigations will be conducted in a manner that does not
interfere with the conduct of the business. The Buyer agrees to treat the
information obtained in the course of this investigation as confidential and not
to use for its own benefit or the benefit of any other person (except in
connection with the consideration of this Agreement and the transactions
contemplated hereby) the documents and information furnished by the Seller.
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5.3 Best Efforts to Satisfy Conditions to Closing
The Buyer and the Seller will use all reasonable efforts to
satisfy the conditions to closing set forth in Sections 6 and 7.
5.4 Tax Matters
(a) The parties shall cooperate in connection with the filings of
all tax returns covering the period prior to the Closing and relating to MGU.
The Seller shall not destroy or permit the destruction of any books, records, or
files used in preparing the Returns without offering in writing, to deliver
those books, records, or files to the Buyer at the expense of the Buyer.
(b) Concurrently with the Closing, the Seller agrees that MGU
shall cease to be a party to any tax allocation agreement(s) in effect
immediately prior to the Closing and shall not have any further rights or
liabilities thereunder in respect of MGU.
(c) The Buyer and the Seller agree to make an election on Form
8023 pursuant to Section 338(h)(10) of the Code. The parties agree to report the
sale contemplated by this Agreement consistently with such election(s) on all
applicable returns.
5.5 Profit Sharing
The parties agree to share the net MGU income earned after the
Effective Date between the Buyer and the Seller at 80% and 20%, respectively.
For purposes hereof, the term "net MGU income" shall be defined as MGU fee
income plus MGU contingent profit commission from reinsurers (on 1998 and
subsequent treaty years) less all expenses (but excluding any indirect overhead
or related allocations of the Buyer or its affiliates), including expenses and
fees associated with the Administrative Support and Services Agreement and
Commercial Lease Agreement described in Section 9.1. Any MGU contingent profit
commissions received from reinsurers for 1997 and prior treaty years shall be
paid to the Seller. The Buyer agrees to remit the 20% share to the Seller
quarterly on the 30th day following the calendar quarter close. The Seller
agrees, to the extent that the Seller shares in the insurance risk with respect
to any stop loss insurance placed by MGU, to share equally the Seller's
underwriting profits on such insurance risk with the Buyer. The Seller agrees to
remit to the Buyer the 50% share quarterly on the 30th day following the
calendar quarter close.
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5.6 Compliance with Licensing Laws
The Seller hereby agrees that it will take all reasonable and necessary
steps required to obtain all appropriate and material permits, licenses, and
other authorizations by a Governmental Entity that should be held by MGU should
MGU not be under the majority control of the Seller. It is the intent of both
parties and a material requirement of the Buyer that the operation of the
business conducted by MGU not violate in any material way any applicable order,
law, ordinance, code, or regulation, including but not limited to those relating
to insurance or managing general underwriting licensing, once the Buyer obtains
the Purchased Shares and the additional shares available to it upon exercise of
the Warrant. Except as to those legal fees incurred by the Buyer in evaluating
MGU's licensing obligations, the Seller hereby guarantees and warrants that the
Seller shall take full financial responsibility for any and all expenses and
costs related to the initial licensing (1998) of MGU, as described in this
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Section 5.6. (The parties acknowledge that to the extent the Buyer receives an
allocation of income pursuant to Section 5.5 above for the period between the
Effective Date and the Closing Date, the Seller will not take such financial
responsibility.) The Seller understands that the Buyer may elect not to exercise
the Warrant until the Buyer is completely satisfied that MGU will be properly
licensed in each and every state in which MGU does business and that such
licenses will remain in effect once the Warrant is exercised. Therefore, the
Seller hereby guarantees and warrants to use its best efforts to acquire any and
all appropriate licensing necessary for MGU to allow the Buyer to exercise said
Warrant in a timely manner.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The Buyer's obligation to complete the transactions contemplated by this
Agreement is subject to the satisfaction at or before the Time of Closing of all
of the following conditions:
6.1 Performance of Agreements
The Seller has performed in all material respects all of the
obligations to be performed by it under this Agreement at or before the Time of
Closing.
6.2 Representations and Warranties
The representations and warranties made by the Seller in this
Agreement are true in all material respects at and as of the Time of Closing as
though those representations and warranties had been made at and as of the Time
of Closing.
6.3 No Injunction
No temporary restraining order or preliminary or final injunction
prohibiting the completion of the transactions contemplated by this Agreement
has been issued and is in effect. No action, suit, proceeding, order, or
investigation is pending or threatened before any court of Governmental Entity
that, if adversely determined, would have a material adverse affect on the
financial condition or the results of operations of MGU or would materially
impair the ability of the Buyer, after the Time of Closing, to operate the
business as presently and ordinarily conducted.
6.4 Documents Delivered
The Seller has delivered to the Buyer all of the documents
required under Section 8.2.
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7. CONDITIONS TO OBLIGATIONS OF THE SELLER
The Seller's obligation to complete the transactions contemplated by
this Agreement is subject to the satisfaction at or before the Time of Closing
of all of the following conditions:
7.1 Performance of Agreements
The Buyer has performed in all material respects all of the
obligations to be performed by it under this Agreement at or before the Time of
Closing.
7.2 Representations and Warranties
The representations and warranties made by the Buyer in this
Agreement are true in all material respects at and as of the Time of Closing as
though those representations and warranties had been made at and as of the Time
of Closing.
7.3 No Injunction
No temporary restraining order or preliminary or final injunction
prohibiting the completion of the transactions contemplated by this Agreement
has been issued and is in effect.
7.4 Documents
The Buyer has delivered to the Seller all of the documents
required under Section 8.3.
7.5 Policy Sales and Servicing and Management Agreement
The Policy Sales and Servicing and Management Agreement dated as
of January 1, 1992 shall be terminated as of the time of closing.
8. THE CLOSING
8.1 Time and Location
The Closing will take place at the offices of Health Plan
Services, Inc. in Tampa, Florida or at such other place and time as the parties
may agree (the Time of Closing).
8.2 Deliveries by the Seller
At the Closing, the Seller will deliver or cause to be delivered
to the Buyer the following:
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(a) Certificates, dated not more than 30 days prior to the Time
of Closing from the appropriate authorities in the Commonwealth of Pennsylvania
attesting to the existence and good standing of the Seller and MGU,
respectively.
(b) Within thirty (30) days after the Time of Closing, Certified
copies of resolutions adopted by the Board of Directors of the Seller approving
the execution, delivery, and performance of this Agreement by the Seller.
(c) An Officer's Certificate of the Seller, signed by the
President of the Seller, substantially in the form of Exhibit 8.2(c).
(d) An Opinion of Counsel to the Seller substantially in the form
of Exhibit 8.2(d).
(e) Resignation of such of the directors and officers of MGU as
are requested by Buyer.
(f) A Certificate or Certificates for the Purchased Shares, duly
endorsed for transfer to the Buyer or accompanied by duly executed stock powers,
so as to transfer to the Buyer the Purchased Shares, free and clear of any
security interest, lien, claim, encumbrance, charge, pledge, or any other
restriction of any kind.
(g) A warrant in the form attached hereto as Exhibit 8.2(g).
8.3 Deliveries by the Buyer
At the Closing, the Buyer will deliver or cause to be delivered
to the Seller the following:
(a) A certificate dated not more than 30 days prior to the Time
of Closing, from the appropriate authority in the State of Florida attesting to
the existence and good standing of the Buyer.
(b) Certified copies of resolutions adopted by the Board of
Directors of the Buyer approving the execution, delivery and performance of this
Agreement by the Buyer.
(c) An Officer's certificate of the Buyer, signed by the Chief
Executive Officer or the Chief Financial Officer of the Buyer, substantially in
the form of Exhibit 8.3(c).
(d) An Opinion of the Buyer's Counsel substantially in the form
of Exhibit 8.3(d).
(e) $4,000,000 in immediately available funds, as provided in
Section 2.1.
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8.4 Further Assurances
Each of the parties agrees that it will from time to time after
the date of this Agreement, execute and deliver such other documents and
instruments and take such other actions as may be reasonably requested by the
other parties to carry out the transactions contemplated by this Agreement.
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9. AGREEMENTS AFTER CLOSING
9.1 Administrative Support and Services Agreement; Commercial
Lease Agreement
Within thirty (30) days after the Time of Closing, Seller and MGU will enter
into an Administrative Support and Services Agreement and a Commercial Lease
Agreement with respect to the offices presently being utilized by MGU in the
office building owned by the Seller, on terms mutually agreeable to the parties.
9.2 Right of First Refusal
Except as provided in the Warrant, no shareholder of MGU shall
transfer any of the Shares without first giving written notice thereof to the
other shareholder. The written notice shall contain a full description of the
terms and conditions of the transfer of the Shares, including the purchase price
per Share and other consideration per Share offered in connection with the
transfer and the identity of the parties-in-interest which are involved. The
non-offering shareholder shall have ninety (90) days after the date of such
notice to purchase all or any portion of the Shares offered for sale upon the
terms and conditions set forth in the notice. If the non-offering shareholder
fails to purchase the Shares within the time specified, the offering shareholder
shall be permitted to transfer the Shares in accordance with the terms and
conditions of the notice. If all of the Shares are not purchased pursuant to the
terms set forth in the notice, the unpurchased shares shall again become subject
to the restrictions contained herein.
9.3 Director of MGU
As of the Time of Closing, and until such time that either party
is no longer a shareholder of MGU, the Board shall consist of three (3)
directors. Both parties agree that two (2) directors of the Board, including the
Chairman shall be appointed by Buyer and one (1) director of the Board shall be
appointed by the Seller. A director may only be removed from the Board by the
appointing party upon written notice. Vacancies on the Board shall be filled by
the party appointing the director whose death, removal or resignation gives rise
to the vacancy. The Buyer and the Seller shall each appoint their respective
directors at each annual meeting of the shareholders to hold office for a term
expiring at the next succeeding annual meeting of the shareholders. Directors
may serve an unlimited number of successive terms. All directors shall hold
office for the term for which they are appointed and until their successors
shall have been duly appointed. Seller agrees to cooperate as necessary if the
Articles of Incorporation or By-Laws need amended to reflect the obligations set
forth in this Section 9.3.
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10. TERMINATION
This Agreement may be terminated on or before the Time of Closing:
(a) by the mutual written consent of the Seller and the Buyer;
(b) by the Buyer, if there has been a material violation or
breach by the Seller of any of the representations, warranties, or covenants
made by the Seller in this Agreement that has not been waived in writing by the
Buyer and has not been or cannot be cured by the Seller at or before the Time of
Closing;
(c) by the Seller if there has been a material violation or
breach by the Buyer of any of the representations, warranties, or covenants made
by the Buyer in this Agreement that has not been waived in writing by the Seller
and has not or cannot be cured by the Buyer at or before the Time of Closing; or
(d) by the Seller or the Buyer in the event the Closing has not
occurred by February 28, 1998; provided that, if the Closing has not occurred
due to a violation or breach of the representations, warranties, or covenants
made in this Agreement by the Seller or by the Buyer, those parties or that
party, as the case may be, may not terminate this Agreement under this clause
(d).
If this Agreement is terminated pursuant to this Section 10 and the transactions
contemplated hereby are not consummated as described herein, this Agreement
shall become null and void and of no further force and effect, and no party
shall have any liability or obligation to any other party, except for the
provisions of Section 5.2 relating to the obligation of the Buyer to keep
confidential, to return, and not to use certain information and data obtained by
it from MGU and the the Seller, the provisions of Section 13.1 relating to
expenses and the provisions of Section 13.11 relating to publicity.
11. SURVIVAL PROVISIONS/INDEMNIFICATION
11.1 Survival of Representations and Warranties
The representations and warranties made by the Seller and the
Buyer in this Agreement will survive the Time of Closing and investigation or
inquiry made by either of them. However, any claim for the incorrectness or
breach of these representations or warranties must be brought within the
following periods:
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(a) with respect to the representations and warranties in
Sections 3.1, 3.2, 3.3, 4.1 and 4.2, without limitation as to time;
(b) with respect to the representations and warranties in Section
3.7, prior to the lapse of time specified in the applicable statutes of
limitation;
(c) with respect to all representations and warranties not
referred to in clause (a) or (b) of this Section 11.1, within a period of 18
months following the Time of Closing.
11.2 Survival of Other Obligations
The obligations of the parties set forth in Sections 8.4, 9.1,
9.2, and 9.3 shall survive the time of Closing and continue until the
termination of the Profit Sharing Agreement described in Section 5.5 hereof.
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11.3 Indemnification by the Seller
Subject to Sections 11.1 and 11.5, the Seller will indemnify the
Buyer for any loss, cost, liability, or expense (including reasonable attorney
fees) that may be incurred by the Buyer as a result of:
(a) the incorrectness of any of the representations or warranties
made by the Seller in this Agreement; or
(b) the breach of any of the covenants made by the Seller in this
Agreement.
(c) any and all claims or losses incurred as a result of any and
all acts or omissions of the Seller or MGU pertaining to the business of the
Seller or MGU prior to the Time of Closing.
11.4 Indemnification by the Buyer
Subject to Sections 11.1 and 11.5, the Buyer will indemnify the
Seller for any loss, cost, liability, or expense (including reasonable attorney
fees) that may be incurred by the Seller as a result of:
(a) the incorrectness of any of the representations or warranties
made by the Buyer in this Agreement, or
(b) the breach of any of the covenants made by the Buyer in this
Agreement.
(c) any and all claims or losses incurred as a result of any and
all acts or omissions of the Buyer prior to the Time of Closing.
11.5 Notice and Defense of Claims
A party claiming indemnification under this Section 11 (the
Asserting Party) will give prompt written notice of the claim to the xxxxx from
whom indemnification is being sought (the "Indemnifying Party") of the nature
and basis of the claim. If the claim for indemnification arises out of a claim,
action, or proceeding by a third party (a Third Party Claim), the Indemnifying
Party may elect to assume the defense of the Third Party Claim at its own
expense with counsel selected by the Indemnifying Party. If the Indemnifying
Party assumes the defense of the Third Party Claim, the Indemnifying Party will
not be liable for any fees or expenses of counsel for the Asserting Party
incurred in connection with the Third Party Claim. If the Indemnifying Party
does not assume the defense of the Third Party Claim, the Asserting Party will
have the right to defend and settle the Third Party Claim. The Asserting Party
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and the Indemnifying Party will cooperate in the defense of any claim, action,
or proceeding covered by this Section 11.5. The Asserting Party will make
available to the Indemnifying Party all records and other materials reasonably
required by the Indemnifying Party for use in contesting the Third Party Claim.
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12. COVENANT NOT TO COMPETE
Until the earlier of five (5) years after the Time of Closing, or one
year from the date when Seller owns no shares of MGU, the Seller will not and
will cause its affiliates not to, act as a managing general underwriter; except
that, this Section 12 will not prohibit the Seller or any of its affiliates from
owning not more than five (5%) percent of the outstanding shares of any
corporation whose shares are traded on a national securities exchange or in the
over-the-counter market.
13. MISCELLANEOUS PROVISIONS
13.1 Expenses
Except as otherwise expressly provided in this Agreement, the
Seller will pay all fees and expenses:
(a) incurred by the Seller, whether before or after the Time of
Closing, in connection with the transactions contemplated by this Agreement; or
(b) incurred by MGU prior to the Time of Closing in connection
with the transactions contemplated by this Agreement.
The Buyer will pay all fees and expenses:
(a) incurred by the Buyer, whether before or after the Time of
Closing, in connection with the transactions contemplated by this Agreement; or
(b) incurred by MGU after the Time of Closing in connection with
the transactions contemplated by this Agreement.
13.2 Retention of Records
For a period of six (6) years following the Time of Closing, the
Buyer will cause MGU to retain and provide the Seller with copies of and
reasonable access to, all accounting and other records required by the Seller
for purposes of the preparation of tax returns, or response to any inquiry or
audit by taxing authorities, or the defense of any claim, action, or proceeding
relating to MGU or the business.
13.3 Waiver and Amendment
Any provision of this Agreement may be waived in writing by the
party that is entitled to the benefit of that provision. This Agreement may be
amended or supplemented at any time, although no such amendment or supplement
will be effective unless it is in writing and signed by all of the parties.
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13.4 Entire Agreement; No Rights or Remedies to Other Persons;
Assignment
This Agreement, including the Exhibits to this Agreement:
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(a) constitutes the entire Agreement among the parties on its
subject matter and supersedes all prior agreements, both written and oral;
(b) is not intended to confer any rights or remedies upon any
individual or organization other than the parties; and
(c) may not be assigned by either the Seller or MGU, by operation
of law or otherwise, without the prior written consent of the Buyer.
13.5 Governing Law
The interpretation, validity, and enforcement of this Agreement
will be governed by the laws of the State of Florida.
13.6 Notices
All notices and other communications under this Agreement must be
in writing and will be deemed to be given:
(a) when delivered in person;
(b) when sent by facsimile with confirmation of receipt;
(c) one day after being sent by overnight courier; or
(d) five (5) business days after being sent by registered or
certified mail (return receipt requested), addressed in each case as follows:
If to Buyer: HealthPlan Services, Inc.
0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxx
Facsimile Number: 813/287-6629
If to Seller: Provident Indemnity Life
Insurance Company
0000 XxXxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Facsimile Number: 000-000-0000
Any party may change the address or facsimile number to which notices or other
communications are to be given by furnishing the other party with written notice
of the change.
13.7 Dispute Resolution
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Except with respect to the disputed matters referred to for
resolution pursuant to Section 2.4, any dispute concerning this Agreement,
including but not limited to its existence, validity, interpretation, and
performance or non-performance, arising before or after termination or
expiration of this Agreement, shall be settled as follows:
(a) Negotiation - The parties shall in good faith attempt to
resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between senior executives of the Seller and the Buyer
(collectively, the Executives). Any party may give the other party written
notice of any dispute not resolved in the ordinary course of business. Within
twenty (20) days after delivery of said notice, the Executives shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within sixty (60) days of the
disputing party's notice, or if the parties fail to meet within twenty (20)
days, either party may initiate arbitration of the controversy or claim as
provided hereinafter. If an Executive intends to be accompanied at a meeting by
an attorney, the other Executive shall be given at least three (3) working days'
notice of such intention and may also be accompanied by an attorney. All
negotiations pursuant to this Section 13.7(a) shall be confidential, privileged,
and inadmissible in arbitration or legal proceeding and shall be treated as
compromise and settlement negotiations for purposes of the Federal Rules of
Evidence.
(b) Rights and Remedies Available to the Parties in Law or in
Equity. In the event that the parties are unable to resolve a dispute by
non-binding means as provided in Section 13.7(a) above, each party shall be free
to pursue all rights and remedies available to the party.
(c) Fees. Each party shall pay its own fees and expenses in
connection with the resolution of any dispute, except that in the event that the
dispute is resolved by a final, unappealable judgment of a court having
competent jurisdiction, the losing party shall pay reasonable attorneys' fees
and costs of the prevailing party.
13.8 Headings
The headings contained in this Agreement are for reference
purposes only and are not intended to affect the meaning or interpretation of
this Agreement.
13.9 Counterparts
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This Agreement may be executed in two or more counterparts, each
of which will be considered one and the same agreement and will become effective
when one counterpart has been signed by each of the parties and delivered to the
other party. The parties agree that documents executed by facsimile shall be
acceptable in this transaction, and the signatures thereof shall have the same
force and effect as original signatures.
13.10 Severability
The invalidity of any provision or provisions of this Agreement
will not affect the validity of any other provision(s) of this Agreement, which
will remain in full force and effect.
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13.11 Publicity
No press releases or other public disclosure, either written or
oral, of the transactions contemplated by this Agreement will be made by any
party without first consulting with the other party.
13.12 Effective Date
This Agreement shall be effective as of January 1, 1998 (the
"Effective Date").
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BUYER:
HEALTH PLAN SERVICES, INC.
By:____________________________
Xxxxxxx X. Xxxxxx
Title: Senior Vice President and
Chief Counsel
SELLER:
PROVIDENT INDEMNITY LIFE INSURANCE
COMPANY
By:___________________________
Xxxxx X. Xxxxxx
Title: President
