EXHIBIT 2.06
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment"),
dated as of February 1, 1999, is entered into by and between WELLPOINT HEALTH
NETWORKS INC., a Delaware corporation ("Seller"), and FREMONT INDEMNITY
COMPANY, a California corporation ("Purchaser").
RECITALS
A. Seller and Purchaser have previously entered into that certain Stock
Purchase Agreement, dated as of July 29, 1998, as amended by the First
Amendment thereto (collectively, the "Agreement"), pursuant to which Seller
sold all of the issued and outstanding capital stock of Fremont Specialty
Services, Inc., a California corporation (formerly know as UNICARE Specialty
Services, Inc.) ("UNICARE"), to Purchaser.
B. The Agreement provided, among other things, that Seller was to have
delivered to Purchaser certain closing financial statements not later than
the close of business on November 13, 1998, and that Purchaser and, if so
desired by Purchaser, Purchaser's independent accountants, would be permitted
until the close of business on January 29, 1999 to examine certain financial
and accounting books, records, work papers and reconciliations referenced in
the Agreement.
C. Seller and Purchaser now desire to amend the Agreement to (i) extend
the period during which Purchaser and its independent accountants may examine
the financial and accounting books, records, work papers and reconciliations
referenced in the Agreement and (ii) reflect the payment by Seller to
Purchaser described in Section 2 below, and Exhibit A, attached hereto and by
this reference incorporated herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
1. Section 2.2.2 of the Agreement is hereby amended in its entirety to
read as follows:
"2.2.2 POST-CLOSING ADJUSTMENT TO INITIAL PURCHASE PRICE. The Initial
Purchase Price shall be subject to adjustment after the Closing in
accordance with the following procedure:
(a) CLOSING FINANCIAL STATEMENTS. No later than the close
of business on November 13, 1998, Seller shall deliver to Purchaser (i) an
audited UNICARE Balance Sheet as of the Closing Date (the "Closing UNICARE
Balance Sheet") as reported on by PricewaterhouseCoopers LLP (who shall be
engaged by Seller), (ii) an audited Company Balance Sheet as of the Closing
Date as reported on by PricewaterhouseCoopers LLP (the "Closing Company
Balance Sheet"), (iii) an audited STAT to GAAP reconciliation between the
Closing UNICARE Balance Sheet and the UNICARE column on the Closing Company
Balance Sheet as reported on by PricewaterhouseCoopers LLP (the
"Reconciliation") and (iv) an audited UNICARE Income Statement for the period
from January 1, 1998 though the Closing Date as
reported on by PricewaterhouseCoopers LLP. The "Closing Purchase Price"
shall equal the statutory surplus of UNICARE as set forth on the Closing
UNICARE Balance Sheet computed in accordance with and adjusted in the manner
set forth in clause (1)(d) of SCHEDULE 2.2.1(b). The expenses of
PricewaterhouseCoopers LLP incurred in preparing the financial statements
referenced in this Section 2.2.2(a) shall be paid by Purchaser, provided that
such expenses shall not exceed $75,000 in the aggregate.
Purchaser, and, if so desired by Purchaser and at
Purchaser's expense, Purchaser's independent accountant shall be permitted
from not later than the start of business on January 11, 1999 until the close
of business on March 26, 1999 to examine, and Seller shall make readily
available, the books and records of Seller associated with the Business, the
Company and the Company Subsidiaries as of the date of this Agreement, and
any work papers and reconciliations prepared by Seller, the Company, the
Company Subsidiaries or PricewaterhouseCoopers LLP in the preparation of the
Closing UNICARE Balance Sheet or the Closing Company Balance Sheet. As
promptly as practicable and in no event later than the close of business on
March 26, 1999, Purchaser shall either inform Seller in writing that the
Closing UNICARE Balance Sheet is acceptable, or object to the Closing UNICARE
Balance Sheet by delivering to Seller a written statement setting forth a
reasonably specific description by item of Purchaser's good faith objections
to the Closing UNICARE Balance Sheet (the "Statement of Objections"). Such
objections, if any, shall be limited to those items which, in Purchaser's
reasonable opinion, have not been prepared in accordance with the terms of
this Agreement.
If Seller shall fail to deliver the Closing UNICARE
Balance Sheet, the Closing Company Balance Sheet or the Reconciliation by the
close of business on November 13, 1998, Purchaser and Purchaser's independent
accountants shall be permitted to examine all books, records, work papers and
reconciliations in the possession of or prepared by Seller, the Company, the
Company Subsidiaries or PricewaterhouseCoopers LLP necessary to prepare the
Closing UNICARE Balance Sheet, the Closing Company Balance Sheet or the
Reconciliation, as the case may be, provided that the foregoing shall not
relieve Seller of its obligation to deliver the Closing UNICARE Balance
Sheet, the Closing Company Balance Sheet and the Reconciliation to Purchaser.
If Purchaser shall fail to deliver a Statement of
Objections before the close of business on March 26, 1999, the Closing
UNICARE Balance Sheet shall be deemed to have been accepted by Purchaser. In
the event that Purchaser shall object to the Closing UNICARE Balance Sheet as
provided above, Purchaser shall, within 30 days thereafter, engage a national
accounting firm mutually agreeable to both parties to resolve within 60 days
thereafter any unresolved objections of Purchaser and to make any adjustments
to the unresolved items on the Closing UNICARE Balance Sheet. In making its
determination with respect to whether any such adjustments are appropriate,
such accountant shall evaluate those items or amounts in the Closing UNICARE
Balance Sheet as to which Purchaser has objected and shall determine whether
such items have been prepared in accordance with the terms of this Agreement.
The fees of such firm shall be borne pro rata by Seller and Purchaser, based
upon the difference between their respective calculations and the final
calculation of the accounting firm. Seller and Purchaser and their
respective accountants shall each make readily available to such firm all
relevant books and records and work papers prepared by them relating to the
Closing UNICARE
Balance Sheet as may be requested by such firm to resolve the disputes. Such
firm's resolution of the dispute and its adjustments to the Closing UNICARE
Balance Sheet shall be conclusive and binding upon the parties.
(b) ADJUSTMENT TO INITIAL PURCHASE PRICE. Upon the later to
occur of (i) acceptance or deemed acceptance of the Closing UNICARE Balance
Sheet or (ii) the resolution of Purchaser's objections in connection
therewith, Seller shall pay to Purchaser the amount, if any, by which the
Adjusted Initial Purchase Price exceeds the Closing Purchase Price, plus
simple interest thereon at a rate of 6% per annum from September 1, 1998 to
the date of payment, or, conversely, Purchaser shall pay to Seller the
amount, if any, by which the Closing Purchase Price exceeds the Adjusted
Initial Purchase Price, plus simple interest thereon at a rate of 6% per
annum from September 1, 1998 to the date of payment. The applicable amount
shall be paid by wire transfer of immediately available funds to an account
or accounts designated by the appropriate party within five business days
after such determination, acceptance or deemed acceptance. For purposes of
this Section 2.2.2(b), "Adjusted Initial Purchase Price" shall mean the
Initial Purchase Price PLUS $8,631,000.
2. Concurrent with the execution of this Amendment, Seller shall pay to
Purchaser the amount described in Exhibit A. The parties will act in good
faith in determining the amounts set forth in Exhibit A, and any difference
between the amounts set forth in Exhibit A and the amounts ultimately
determined to be correct with respect to the items in Exhibit A shall be
promptly remitted to the party to which it is owed with simple interest
thereon at the rate of 6% per annum from September 1, 1998 to the date of
payment, except as otherwise noted in Exhibit A.
3. All capitalized terms used in this Amendment shall, unless otherwise
indicated, have the meanings set forth in the Agreement.
4. Except as amended by this Amendment, the terms and conditions of the
Agreement shall remain unchanged and the Agreement shall remain in full force
and effect between the parties.
5. This Amendment may be executed by facsimile and/or in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
above written.
PURCHASER
FREMONT INDEMNITY COMPANY
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
SELLER
WELLPOINT HEALTH NETWORKS INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
EXHIBIT A
Amount Due
Fremont
(WellPoint)
Due From Affiliates to UNICARE per
PriceWaterhouseCoopers Audited Company Balance Sheet 16,986,485
Income Taxes Payable to WellPoint per
PriceWaterhouseCoopers Audited Company Balance Sheet (37,000)
Purchase Price Due WellPoint Based on PriceWaterhouseCoopers
Audited Closing UNICARE Balance sheet and Schedule 2.2.1(b) (8,630,925)
Final August Payroll and Vacation Accrual Paid by WellPoint (792,409)*
Integrated Product Premium Reimbursement (267,263)*
Severance paid by WellPoint to be Reimbursed by Fremont per Letter dated
September 1, 1998 from Xxxxxx X. Xxxxxx to Xxxxxxx Xxxxxxx (249,814)*
Stay Bonuses Paid by Fremont to be Reimbursed by WellPoint 247,881*
Escheat Liability Paid by WellPoint to be Reimbursed by Fremont (78,691)*
Administrative Services by WellPoint to be Reimbursed by Fremont (10,000)
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Net Amount Due to Fremont Before Interest and Space Charges 7,168,264 7,168,264
Times Interest Rate 6%
Times Number of Days From September 1, 1998 to Payment Date 154
Divided by 365 Day Year 365
----------
Interest Due as of Payment Date 181,465 181,465
---------
Net Amount Due to Fremont Before Space Charges 7,348,729
Space Charges Due to WellPoint for September 1, 1998 thru
December 31, 1998 (317,696)**
Telecommunications, PC Support, Postage, Office Supplies,
and Photocopy Charges Reimbursement Due to WellPoint
For September 1, 1998 thru December 31, 1998 (300,000)**
---------
Payment Made by Seller to Purchaser in Satisfaction of the
Amounts Set Forth In This Exhibit A 6,732,033
---------
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*Amounts shown are to be agreed upon by Seller and Purchaser. Seller and
Purchaser shall act in good faith to come to agreement on the amounts. Any
difference between the amounts presented above and the final agreed upon
amount shall be remitted to the party to which it is owed with simple
interest thereon at the rate of 6% per annum from September 1, 1998 to the
date of payment.
** Amounts shown are to be agreed upon by Seller and Purchaser. Seller and
Purchaser shall act in good faith to come to agreement on the amounts.
