STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made this __ day of June, 1999 by and
between UNITED WISCONSIN SERVICES, INC. ("UWS") and HEALTH CARE SERVICE
CORPORATION, a Mutual Legal Reserve Company doing business as Blue Cross Blue
Shield of Illinois ("HCSC").
RECITALS
A. HCSC is the owner of 10,000 shares of the issued and outstanding
capital stock of Third Coast Holding Company, an Illinois corporation
("HOLDING"), $1.00 par value per share (the "SHARES"), constituting 100% of
the issued and outstanding Shares.
B. Holding, through its wholly owned subsidiaries, Third Coast
Insurance Company, an Illinois corporation ("THIRD COAST INSURANCE") and
Third Coast Insurance Services Company, an Illinois corporation ("THIRD COAST
SERVICES"), engages in the workers compensation insurance business in
Illinois, including without limitation managed care, management and
administrative services relating thereto.
C. UWS, through its wholly owned subsidiaries United Wisconsin
Insurance Company, a Wisconsin corporation ("UNITED WISCONSIN") and United
Heartland, Inc., a Wisconsin corporation ("UNITED HEARTLAND"), engages in the
workers compensation insurance business in Wisconsin and other states,
including without limitation managed care, management and administrative
services relating thereto.
D. As a result of its years of experience in the workers'
compensation insurance business, UWS has previously acquired or independently
developed valuable expertise and know-how, including registered and
unregistered copyrighted computer software and computer systems.
E. HCSC, UWS, United Wisconsin and United Heartland have formed or
will form [Managing General Agent], an Illinois corporation (the "MGA"),
pursuant to the terms of that certain Joint Venture and Shareholders
Agreement (the "JOINT VENTURE AGREEMENT") dated as of May 3, 1999, by and
among HCSC, UWS, United Wisconsin and United Heartland.
F. It is the intention of the parties hereto that the MGA will enter
into and compete in the market for offering workers compensation insurance in
the State of Illinois, including without limitation managed care, management
and administrative services relating thereto.
G. It is the intention of the parties hereto that, under and
pursuant to the terms and conditions of the Joint Venture Agreement and the
various documents contemplated thereby and executed in connection therewith
(together, the "ANCILLARY AGREEMENTS"), from and after the closing thereon
all of the efforts of the parties hereto insofar as offering workers
compensation insurance in the State of Illinois is concerned will be
conducted by and through the MGA and various subsidiaries of UWS, and Third
Coast Insurance and Third Coast Services will no longer remain active as
insurers or insurance service providers for newly written policies of workers
compensation insurance sold in the State of Illinois.
H. The parties hereto acknowledge and agree that UWS's and HCSC's
transitioning of the Third Coast Companies' business of writing new or
renewal policies of workers compensation insurance to the MGA is a valuable
contribution to the MGA and such transitioning will cause the owners of the
MGA to receive a substantial and material benefit therefrom.
I. The parties acknowledge that it is a condition of HCSC's
willingness to enter into the Joint Venture Agreement and the Ancillary
Agreements that UWS purchase 50% of the common stock of Holding owned by HCSC
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and with the intention to be legally bound,
the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 INCORPORATION OF RECITALS. Each of the
Recitals above is hereby incorporated into and made a part of this Agreement.
1.2 CERTAIN DEFINITIONS. Each of the following
terms used herein shall have the meanings given to them as hereinafter set
forth:
"ACQUISITION STOCK" shall mean shares of preferred or common stock of
UWS that will be issued to HCSC in consideration for the Purchased Shares
unless payment is made in cash or by promissory note of UWS.
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person.
"AGREEMENT" shall mean this Stock Purchase Agreement between HCSC and
UWS.
"BUSINESS" shall mean the worker's compensation insurance business and
third party administrative services business conducted by Holding and the
Operating Subsidiaries.
"BUSINESS DAY" shall mean any day other than a Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required to be
closed for business in Chicago, Illinois.
"CLOSING" shall have the meaning ascribed to such term in Section 2.3
of this Agreement.
"CLOSING DATE" shall have the meaning ascribed to such term in Section
2.3 of this Agreement.
"DOI" shall mean the Illinois Department of Insurance or any successor
regulatory body formed for the purpose of regulating workers compensation
insurers selling insurance in the State of Illinois.
"FAIR MARKET VALUE" shall have the meaning ascribed to such term in
Section 2.2(b) of this Agreement.
"GAAP" shall mean generally accepted accounting principles, applied
consistently.
"GOVERNMENTAL BODY" means any court, government (federal, state, local
or foreign), department, commission, board, bureau, agency, official or other
regulatory, administrative or governmental authority or instrumentality,
including the Illinois Department of Insurance.
"HCSC" shall mean Health Care Service Corporation, A Mutual Legal
Reserve Company doing business as Blue Cross Blue Shield of Illinois.
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"HOLDING" shall mean Third Coast Holding Company, an Illinois
corporation.
"JOINT VENTURE AGREEMENT" shall have the meaning given to it in the
Recitals hereto.
"JOINT VENTURE CLOSING" shall be the closing on the transactions
contemplated under the Joint Venture Agreement.
"JOINT VENTURE CLOSING DATE" shall be the date on which the Joint
Venture Closing shall have occurred, which shall in no event be later than
September 24, 1999.
"LAW" shall mean any federal, state, local or other governmental law,
rule or regulation of any kind, and the rules and regulations promulgated
thereunder.
"KNOWLEDGE" shall mean actual knowledge of a party after making due
inquiry, which in the case of HCSC and the Third Coast Companies shall mean
inquiry by HCSC of officers of the Third Coast Companies. If a party fails to
make inquiry, knowledge shall include constructive knowledge of such facts as
would have been learned had such due inquiry been made.
"OPERATING SUBSIDIARIES" shall mean Third Coast Insurance and Third
Coast Services.
"PERSON" shall mean and includes a natural person, a corporation, an
association, a partnership, a limited liability company, a trust, a joint
venture, an unincorporated organization, a business, any other legal entity
or a Governmental Body.
"PURCHASED SHARES" shall mean 5,000 shares of common stock of Holding,
par value $1.00 per share, representing 50% of the issued and outstanding
Shares of Holding and being the Shares purchased by UWS from HCSC under this
Agreement.
"RELATED PARTY" shall mean (i) Holding, (ii) any Operating Subsidiary,
(iii) any Affiliate of Holding or any Operating Subsidiary, (iv) any officer
or director of any Person identified in clauses (i)-(iii) preceding, and (v)
any spouse, sibling, ancestor, or lineal descendant of any natural Person
identified in any one of the preceding clauses.
"SAP" shall mean statutory accounting principles, applied consistently.
"SHARES" shall have the meaning ascribed to such term in the recitals
to this Agreement.
"SURPLUS LOANS" shall mean the surplus loans made by HCSC to Holding to
support the operations of the Third Coast Companies.
"SURPLUS NOTES" shall mean those promissory notes of Third Coast
Companies evidencing the Surplus Loans.
"THIRD COAST COMPANIES" shall mean collectively, Holding, Third Coast
Insurance and Third Coast Services. A "Third Coast Company" shall mean any of
the Third Coast Companies.
"THIRD COAST INSURANCE" shall mean Third Coast Insurance Company, an
Illinois domestic stock insurance company, which is a wholly-owned subsidiary
of Holding.
"THIRD COAST SERVICES" shall mean Third Coast Insurance Services
Company, an Illinois corporation, which is a wholly-owned subsidiary of
Holding.
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"UWS" shall mean United Wisconsin Services, Inc., a Wisconsin
corporation.
ARTICLE II
PURCHASE OF SHARES
2.1 AGREEMENT TO PURCHASE STOCK. UWS does hereby agree
and commit to purchase on the Closing Date, subject only to fulfillment of
those conditions to purchase set forth in Section 6.1 hereof and no others,
the Purchased Shares and does hereby agree to make payment for such Shares in
accordance with the terms of Section 2.2 below. Immediately upon consummation
of such purchase, UWS shall contribute the Purchased Shares to the capital of
the MGA and HCSC shall contribute the remaining Shares owned by it to the
capital of the MGA.
2.2 DETERMINATION AND PAYMENT OF PURCHASE PRICE.
(a) PURCHASE PRICE AMOUNT.
(i) Within the 60 day period prior to the
Closing Date, HCSC will cause to be prepared and delivered concurrently to
HCSC and UWS a balance sheet of the Third Coast Companies as of the date
thereof (the "ESTIMATED CLOSING BALANCE SHEET"). The Estimated Closing
Balance Sheet shall serve as the basis for determining the adjusted book
value of the Third Coast Companies as of the date thereof (the "ESTIMATED
ADJUSTED BOOK VALUE"), which shall be set forth on the Estimated Closing
Balance Sheet (or an attachment thereto), along with a description of the
calculation used to derive the Estimated Adjusted Book Value. The Estimated
Closing Balance Sheet shall be prepared contemplating two alternative
scenarios. The first scenario shall assume that the DOI WILL NOT PERMIT the
Surplus Loans to be repaid by Third Coast Insurance prior to Closing. Under
this scenario, on the day prior to the Closing Date the Surplus Loans shall
be converted to equity and the Surplus Notes canceled for purposes of
calculating the Estimated Adjusted Book Value. The alternative scenario shall
assume that the DOI WILL PERMIT Third Coast to repay all or part of the
Surplus Loans prior to Closing and that the Surplus Notes will be reduced by
the amount of such repayment. Under this scenario, only the then-unpaid
portion of the Surplus Loans will be converted to equity on the day prior to
the Closing Date for purposes of calculating the Estimated Adjusted Book
Value. The Purchase Price for the Purchased Shares, as such amount shall be
finally adjusted in accordance with this Section 2.2 (a) ("PURCHASE PRICE")
shall be 50% of the Estimated Adjusted Book Value as determined under one of
the two scenarios, such choice depending on whether or not the DOI has
permitted the repayment of the Surplus Notes. The Estimated Closing Balance
Sheet shall be prepared in accordance with statutory accounting principles on
a basis consistent with past practices ("SAP"). The fees and expenses
attributable to preparation of the Estimated Closing Balance Sheet will be
paid by HCSC.
(ii) As promptly as practicable after the Closing
Date (but in no event later than 120 days after the Closing Date), HCSC and
UWS will cause an accounting firm acceptable to both (the "ACCOUNTANT") to
conduct a valuation of the Third Coast Companies and to prepare and deliver
concurrently to HCSC and UWS an audited balance sheet of the Third Coast
Companies as of the Closing Date (the "CLOSING BALANCE Sheet"). The Closing
Balance Sheet shall set forth the adjusted book value of the Third Coast
Companies as of the Closing Date (the "ADJUSTED BOOK VALUE") and shall
reflect the treatment actually accorded to the Surplus Loans and Surplus
Notes as authorized by the DOI. The Closing Balance Sheet shall be prepared
in accordance with SAP. The fees and expenses of the Accountant will be
shared equally by HCSC and UWS.
(iii) HCSC and UWS shall each have the ability to
challenge the determination of the Accountant as set forth herein. Either
HCSC or UWS may claim that the Closing Balance Sheet was not prepared in
accordance with the requirements of Section 2.2(a)(ii), and shall deliver to
the other party a detailed statement describing the basis for any such claim
within fifteen (15) days after receiving the Closing Balance Sheet. A party's
failure to deliver such statement within such 15 day period shall make the
Accountant's determination final as against such party. HCSC and UWS will use
reasonable efforts to resolve
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any such claims themselves. If they do not obtain a final resolution within
thirty (30) days after first receiving the Closing Balance Sheet, however,
HCSC and UWS will select another accounting firm mutually acceptable to them
to resolve any remaining such claims. If HCSC and UWS are unable to agree on
the choice of an accounting firm, they will select a nationally-recognized
accounting firm by lot (after excluding any such firm which has provided
services to HCSC, UWS or others affiliated with HCSC or UWS) (the
"ARBITRATING ACCOUNTANT"). Upon submission to the Arbitrating Accountant for
resolution, HCSC and UWS shall indicate in writing its position on each
disputed matter. The Arbitrating Accountant shall choose one of the two
positions on each disputed matter no later than sixty (60) days after first
receiving the Closing Balance Sheet and such position will be conclusive and
binding upon HCSC and UWS with respect to that disputed matter. The proposed
Closing Balance Sheet and the Closing Adjusted Book Value will be revised as
appropriate to reflect the resolution of any claims pursuant to this Section
2.2(b). The term "FINAL CLOSING BALANCE SHEET" means the Closing Balance
Sheet, together with any revisions thereto pursuant to this Section 2.2 (b).
The term "FINAL ADJUSTED BOOK VALUE" means the Closing Adjusted Book Value,
together with any revisions thereto pursuant to this Section 2.2(b). HCSC and
UWS shall each be responsible for one-half of the fees and expenses of the
Arbitrating Accountant.
(iv) HCSC will make the work papers and back-up
materials used in preparing the Closing Balance Sheet, and any books, records
and financial staff of the Third Coast Companies available to UWS and its
accountants and other representatives and to the Arbitrating Accountant
resolving any claim concerning the Closing Balance Sheet at reasonable times
and upon reasonable notice at any time during (a) the preparation of the
Closing Balance Sheet, (b) the review by HCSC and UWS of the Closing Balance
Sheet, and (c) the resolution by HCSC and UWS of any objections thereto.
(v) The Purchase Price will be adjusted if the
Final Adjusted Book Value of the Company is greater or less than the
Estimated Adjusted Book Value (using the scenario reflecting the treatment
actually accorded the Surplus Notes and Surplus Loans as authorized by the
DOI). If the Final Adjusted Book Value is greater than the Estimated Adjusted
Book Value, then the Purchase Price will be increased by 50% of the amount of
such excess. If the Final Adjusted Book Value is less than the Estimated
Adjusted Book Value, then the Purchase Price will be decreased by 50% of the
amount of such deficiency.
(vi) Any adjustment to the Purchase Price made in
accordance with subsection (a)(v) above shall be made in the same form of
consideration as was paid to HCSC at Closing. If the consideration selected
is cash, the party to whom an amount is owed by virtue of a Purchase Price
adjustment shall be paid by the other by wire transfer of immediately
available funds in an amount equal to the amount owed within five (5)
business days following the determination of the Final Adjusted Book Value.
If the consideration selected is Acquisition Stock and the Final Adjusted
Book Value is greater than the Estimated Adjusted Book Value, UWS shall
deliver to HCSC a certificate(s) for a number of shares of Acquisition Stock
having a Fair Market Value (calculated as of the Closing Date) equal to 50%
of the amount of such excess. If the consideration selected is Acquisition
Stock and the Final Adjusted Book Value is less than the Estimated Adjusted
Book Value, HCSC shall tender to UWS the certificate(s) representing the
Acquisition Stock received by HCSC at Closing and UWS shall immediately
tender a new certificate(s) for the appropriate number of shares after giving
effect to the adjustment of the Purchase Price made based on the Final
Closing Balance Sheet. Any adjustment to the number of shares to be received
by HCSC shall be made within five (5) business days following receipt of the
Final Closing Balance Sheet. If the consideration selected is a note, a new
note in a principal account reflecting such adjustment will be substituted
within five (5) business days following receipt of the Final Closing Balance
Sheet.
(b) PAYMENT OF PURCHASE PRICE. The Purchase Price shall
be paid to HCSC by UWS at the Closing in one of the following currencies. The
selection of which currency shall be used shall be made by UWS. The terms of
such currency shall be agreed upon by the parties pursuant to Article VII.
(i) cash or cash equivalents;
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(ii) a promissory note of UWS containing terms
agreed to by the parties;
(iii) preferred stock of UWS in an amount equal to
the Purchase Price determined by the Fair Market Value of such shares as of
the date such payment is made; or
(iv) common stock of UWS in an amount equal to
the Purchase Price determined by Fair Market Value of such shares as of the
date such payment is made.
"FAIR MARKET VALUE" shall mean (1) with respect to preferred stock of
UWS, the price agreed to by HCSC and UWS as the price at which a willing
buyer and a willing seller would agree to sell the preferred stock in an
arms-length transaction as of the Closing Date. If the parties are unable to
reach an agreement on the Fair Market Value on or prior to the Closing, they
shall select a neutral, nationally recognized auditing firm to conduct a
valuation, which valuation shall be completed within 45 days of the Closing
Date. The cost of such valuation shall be divided equally between the
parties; and (2) with respect to the common stock of UWS, the average of the
closing trading prices of such stock on the New York Stock Exchange for the
ten trading days immediately preceding the date such payment is made.
2.3 CLOSING. The Closing with respect to the
transactions provided for in this Agreement (the "CLOSING") shall take place
at the offices of HCSC at 000 Xxxx Xxxxxxxx Xxxxxx Xxxxxxx, Xxxxxxxx during
the first 10 Business Days of the calendar year 2000, such date to be chosen
by HCSC (the "CLOSING Date"). The Closing shall be effective as of December
31, 1999.
2.4 LIABILITIES RETAINED BY HCSC. HCSC shall retain and
be responsible for all liabilities of the Third Coast Companies occurring
prior to the Closing Date and all actions and events occurring prior to the
Closing Date that could result in liabilities to the Third Coast Companies,
including claims payable under policies of Third Coast Insurance in force on
and prior to the Closing Date (collectively, the "Retained Liabilities").
Such claims payable shall be paid from the reserves of Third Coast Insurance
established for that purpose and reflected on the Interim Balance Sheet and
the Final Closing Balance Sheet. Any liabilities that are in addition to
those reserved for on the Interim Balance Sheet or the Final Closing Balance
Sheet will be the financial responsibility of HCSC. Such claims shall be
administered and a final settlement made of such claims as provided in
Section 5.7.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HCSC
The schedules attached hereto are hereby incorporated by reference.
HCSC represents and warrants to UWS that:
3.1 ORGANIZATION AND STANDING. HCSC (i) is a Mutual
Legal Reserve Company duly organized, validly existing and in good standing
under the laws of the State of Illinois; (ii) has the corporate power and
authority to own its property and assets and to transact the business in
which it is engaged or presently proposes to engage, including the
transactions contemplated by this Agreement. Each Third Coast Company (x) is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Illinois; (y) has the corporate power and authority to
own its property and assets and to transact the business in which it is
engaged or presently proposes to engage; and (z) has duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
every jurisdiction in which it owns or leases real property or in which the
nature of its business requires it to be so qualified.
3.2 SUBSIDIARIES. Holding's only subsidiaries are Third
Coast Insurance and Third Coast Services. Neither Third Coast Insurance nor
Third Coast Services has any subsidiaries.
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3.3 CAPITALIZATION. On the date hereof, (a) the
authorized capital stock of Holding consists of 10,000 shares of Common
Stock, $1.00 par value; (b) the authorized capital stock of Third Coast
Insurance consists of 10,000,000 shares of Common Stock, $1.00 par value; and
(c) the authorized capital stock of Third Coast Services consists of 10,000
shares of Common Stock, $1.00 par value. Such Shares are issued and
outstanding and held of record as set forth on SCHEDULE 3.3 and all such
Shares have been validly issued and are fully paid and nonassessable. There
are no other outstanding shares of capital stock of any Third Coast Company
or any subscriptions, options, warrants, calls, rights (including, without
limitation, preemptive rights) or other agreements or commitments of any
nature relating to any capital stock of any Third Coast Company other than
the rights created by this Agreement.
3.4 DUE AUTHORIZATION; VALID AND BINDING AGREEMENT. All
corporate action on the part of HCSC necessary for the authorization,
execution, delivery and performance of all obligations of HCSC under this
Agreement and for the sale and delivery of the Purchased Shares has been
taken prior to the execution and delivery hereof. This Agreement constitutes
the legal, valid and binding obligation of HCSC enforceable against HCSC in
accordance with its terms except as such enforcement may be limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting creditors' rights or by general principles of equity limiting the
availability of equitable remedies.
3.5 VALIDITY. The Purchased Shares, when sold and
delivered to UWS in accordance with the terms of this Agreement, shall be
duly and validly issued, fully paid and nonassessable.
3.6 COMPLIANCE WITH OTHER INSTRUMENTS. No Third Coast
Company is in material violation of any provision of its Articles of
Incorporation or By-Laws in effect as of the date hereof, or of any provision
of any mortgage, indenture, agreement, instrument or contract to which it is
a party or by which any of its properties or assets is bound (collectively,
the "MATERIAL CONTRACTS"), or of any provision of any federal, state or local
judgment, writ, decree, order, statute, rule or governmental regulation
applicable to it. The execution, delivery and performance of this Agreement
will not result in any such violation or be in a conflict with or constitute
a default under any such provision or any Material Contract.
3.7 INTELLECTUAL PROPERTY RIGHTS. SCHEDULE 3.7
identifies all of the trademark and service xxxx rights, applications and
registrations, trade names, fictitious names, service marks, logos and brand
names, copyrights, copyright applications, letters patent, patent
applications and licenses of any of the foregoing owned or used by any Third
Coast Company in or applicable to the Business (the "INTELLECTUAL Property").
SCHEDULE 3.7 separately identifies all Intellectual Property under license.
Except as set forth in Schedule 3.7, the Intellectual Property is valid and
not the subject of any interference, opposition, reexamination or
cancellation. To the knowledge of HCSC, no Person is infringing upon nor has
any Person misappropriated any Intellectual Property. No Third Coast Company
is infringing upon the intellectual property rights of any other Person.
3.8 GOVERNMENTAL AUTHORIZATIONS. Each Third Coast
Company possesses all governmental, regulatory and administrative licenses,
permits, approvals and other authorizations as are necessary to enter into
this Agreement and to conduct its business and operations. Each Third Coast
Company is in compliance with the terms and conditions of all such licenses,
permits, approvals and authorizations. No proceeding is pending or, to the
knowledge of HCSC, threatened against any Third Coast Company, an adverse
consequence of which would be the revocation, cancellation or suspension of
any such licenses, permits, approvals and authorizations nor does HCSC have
any knowledge of any facts that would provide the basis of any such
proceeding. Neither the execution of this Agreement or the agreements
contemplated hereby nor the consummation of the transactions contemplated
hereby or thereby will result in the revocation, or an adverse change in the
terms or conditions, of any such license, permit, approval or authorization.
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3.9 LITIGATION. Except for claims litigation in the
ordinary course of the Third Coast Companies' business and except as set
forth on SCHEDULE 3.9, there is no litigation, claim, proceeding or
investment pending, or, to the knowledge of HCSC, threatened against or
relating to any Third Coast Company, its business or the transactions
contemplated hereby. SCHEDULE 3.9 discloses, with respect to each item
described thereon, the name or title of the action (and parties or potential
parties thereto) and a description of the nature of the action or claim.
Except as so described, HCSC knows of no state of facts or circumstances
which reasonably could be expected to ripen into any litigation, proceeding
or investigation or adversely affect the Third Coast Companies' business or
prospects. Except as described on SCHEDULE 3.9, there is no outstanding
order, decree or stipulation issued by any federal, state or local authority
to which any Third Coast Company is a party or subject.
3.10 COMPLIANCE WITH LAW. The conduct of the business of
each Third Coast Company does not violate, nor is any such Company in default
under, any law, rule, regulation, code, guideline, order, arbitration award,
judgment, decree, restriction or condition.
3.11. ENVIRONMENTAL CONCERNS. Each Third Coast Company is
and has been in compliance with all applicable environmental, health, safety
and noise pollution laws, rules and regulations and with all laws, rules and
regulations regarding the generation, production, storage, treatment,
labeling, transportation or disposition of infectious, hazardous or other
wastes or toxic substances ("ENVIRONMENTAL LAWS"). Each Third Coast Company
has timely filed all reports and notices required to be filed by it, has
obtained all required approvals and permits and has generated and maintained
all required data, documentation and records required under the Environmental
Laws. The Third Coast Companies have not, nor has, to the knowledge of HCSC
any other person or entity, caused or permitted hazardous substances to be
stored, discharged or released, deposited, treated, recycled, leaked, spilled
or disposed of on, under or at any real property occupied by any Third Coast
Company.
3.12 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE
3.12 are the following financial statements, including in each case all notes
thereto, all of which are complete and correct, have been prepared from the
books and records of the Third Coast Companies and (in the case of the GAAP
financial statements only) in accordance with GAAP and fairly present the
financial condition of the Third Coast Companies as of their respective dates
and the results of its operations for the periods covered thereby:
(a) statutory balance sheets of the Third Coast
Companies as of the end of their two most recently completed fiscal years and
audited GAAP balance sheets of the Third Coast Companies as of December 31,
1997 and statements of income, changes in shareholders' equity and cash flows
of the Third Coast Companies for each of the years then ended; and
(b) the most recently prepared monthly balance
sheet and the related statement of income, changes in shareholders' equity
and cash flows for such period (the "INTERIM BALANCE SHEET"). The financial
statements referred to in paragraphs (a) and (b) above are referred to as the
Financial Statements.
Such statements of income do not contain any items of
special or nonrecurring income or any other income not earned in the ordinary
course of business except as expressly specified therein, and the interim
financial statements include all adjustments, which consist only of normal
recurring accruals (the effect of which will not, individually or in the
aggregate, be materially adverse), necessary for such fair representation.
The Third Coast Companies' books of account, minute
books and stock records are complete and correct.
3.13 CONTINGENT AND UNDISCLOSED LIABILITIES. No Third
Coast Company has any debts, obligations or liabilities nor is it subject to
the imposition of any valid governmental or third-party claim
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arising from the conduct of its business or the ownership or use of its
assets on or prior to the date hereof, whether known or unknown, fixed or
contingent, of any nature whatsoever, except those: (a) reflected or reserved
against on the Financial Statements, (b) disclosed on SCHEDULE 3.13 or (c)
liabilities which have arisen in the ordinary course of business and
consistent with past practice from the date of the Financial Statements
through the date hereof and which are not, singly or in the aggregate,
materially adverse to such Third Coast Company.
3.14 TAXES.
(a) The federal and state corporate tax returns
of the Third Coast Companies have not been audited. There is no tax audit or
examination now pending or, to the knowledge of HCSC, threatened with respect
to any Third Coast Company. The Third Coast Companies have filed or have
properly filed for extensions for the filing of all federal, state and local
tax reports and returns required by any law, rule or regulation to be filed
by them (the "RETURNS").
(b) The Returns reflect all taxes due and
payable with respect to the periods covered thereby and there are no other
tax liabilities, deficiencies, interest or penalties payable or asserted with
respect to such periods and, to HCSC's knowledge, no circumstances exist
which, with the passage of time or the examination of the Returns by the
taxing authorities, would result in additional tax liability.
(c) Except with respect to the 1998 tax year,
there are no pending agreements, waivers or other arrangements providing for
an extension of time with respect to the filing of any tax return or the
payment of any tax, governmental charge (including interest, penalties or
excise taxes) or deficiency by the Third Coast Companies. There are no
actions, suits, proceedings, investigations or claims pending or, to HCSC's
knowledge, threatened against the Third Coast Companies with respect to
taxes, governmental charges or assessments, or any such matters under
discussion with any governmental authority or any claims for additional
taxes, charges or assessments asserted by such authority.
(d) The Third Coast Companies have withheld or
collected from each payment made to each of its employees the amount of all
taxes (including, but not limited to, state and federal income taxes, state
and federal employment taxes and FICA) required to be withheld or collected
therefrom and promptly remitted such amounts, or have remitted all past-due
amounts along with all penalties and interest assessed thereon, to the proper
taxing authorities and have filed all reports with respect thereto with the
proper taxing authorities.
3.15 PERFORMANCE OF CONTRACTS. No Third Coast Company is
in material default under, nor has any breached any provision of, any oral or
written contract, agreement, instrument, document, lease, license, permit,
indenture, insurance policy or other obligation to which it is a party (the
"COMPANY CONTRACTS"), and there is no oral modification or past practice
inconsistent in any material respect with the written terms of any of the
Company Contracts. All of the Company Contracts are currently in full force
and effect. To the knowledge of HCSC, the other parties to the Company
Contracts have complied with their obligations thereunder and are not in
breach thereof. The Third Coast Companies have performed each material term,
condition and covenant of each Company Contract required to be performed by
them on or prior to the date hereof and HCSC knows of no state of facts
which, with the giving of notice or the passing of time or both, would give
rise to any default under the Company Contracts.
3.16 BUSINESS CHANGES. Since the last day of the period
covered by the Interim Balance Sheet (the "INTERIM BALANCE SHEET DATE") and
except as set forth on SCHEDULE 3.16 there has not been:
(a) any material (i) adverse change in the
assets or the financial or other condition, operations, or business prospects
of the Third Coast Companies, (ii) damage, destruction or loss (whether or
not covered by insurance) affecting the assets or (iii) transaction outside
the ordinary course of
9
business affecting the Third Coast Companies, including, without limitation,
any adverse change in the Third Coast Companies' revenues, costs, backlog or
relations with its employees, consultants, agents, customers or suppliers;
(b) any (i) sale, lease, transfer, assignment,
abandonment or other disposition of any operating or intangible property or
other assets used or usable in the Third Coast Companies' business except for
dispositions in the ordinary course of business, (ii) cancellation or
compromise of any material debt or claim or (iii) waiver or release of any
right of substantial value;
(c) any indebtedness incurred by the Third Coast
Companies for money borrowed;
(d) any mortgage, pledge or creation of any
lien, charge, security interest or other encumbrance on any of the assets;
(e) any payment of dividends or other
distributions declared or made to the Third Coast Companies' shareholders or
upon or in respect of any of their shares of capital stock, or any redemption
or obligation to redeem by the Third Coast Companies any of their shares of
capital stock or other securities;
(f) any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable or paid or
oral or written agreement or promise to pay, conditionally or otherwise, any
bonus, extra compensation, pension or severance or vacation pay, to any
shareholder, director, officer, employee, consultant or agent of any Third
Coast Company.
3.17 EMPLOYEE BENEFIT PLANS. Except as set forth on
SCHEDULE 3.17, the Third Coast Companies do not have any union contract,
collective bargaining agreement, employment contract, deferred compensation
agreement or bonus, incentive, profit-sharing, pension, retirement or other
employee benefit plan (as that term is defined by the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (collectively the "PLANS")
currently in force and effect, or any informal understanding with respect to
any of the foregoing. The Third Coast Companies do not maintain and have not
ever maintained or contributed to any funded employee pension plan (as that
term is defined in ERISA). All Plans which are subject to ERISA comply with
ERISA and have been administered (a) in strict compliance with ERISA and the
Internal Revenue Code of 1986, as amended (the "CODE") as to filing when due
all materials required to be filed, and (b) in material compliance with ERISA
and the Code in all other respects. With respect to each of the Plans, the
Third Coast Companies do not have any material liability for any failure to
comply with ERISA or the Code or for any action or failure to act in
connection with the administration of the Plans. No Plan has engaged in any
prohibited transaction in violation of ERISA or any prohibited transaction
within the meaning of the Code. There are no material controversies or
employment related claim or allegation pending or, to the knowledge of HCSC,
currently threatened between any Third Coast Company and its employees.
3.18 REAL PROPERTY. No Third Coast Company owns any
parcel of real estate, buildings, fixtures or improvements. SCHEDULE 3.18 to
this Agreement sets forth (a) a true and complete list and description of
each parcel of real estate, buildings, fixtures and improvements (the "REAL
PROPERTY") leased by any Third Coast Company and (b) a true, correct and
complete copy of each lease, contract, option, agreement or enforceable right
or obligation relating to or affecting, the Real Property to which a Third
Coast Company is a party. All Real Property leased by the Third Coast
Companies is leased under valid and subsisting leases and there exists no
event of default on the part of the Third Coast Companies under any such
leases or, to HCSC's knowledge, any event of default on the part of the
landlords under any such leases.
10
3.19 CONDITION OF REAL PROPERTY. Except as set forth on
SCHEDULE 3.19 to this Agreement, the Third Coast Companies have received no
notice (a) of any structural or nonstructural defects in any of the buildings
or other improvements situated on the Real Property or (b) that any building
systems, structures, fixtures and improvements, leased or used by the Company
are not in all material respects in good condition and working order
(reasonable wear and tear excepted) or adequate in quality and quantity for
the current normal operation of the Third Coast Companies' business.
3.20 TRANSACTIONS WITH CERTAIN PERSONS. Except as set
forth on SCHEDULE 3.20, no Third Coast Company owes any amount to, or has any
contract with or commitment to, HCSC or its directors, officers, employees,
consultants or agents (other than compensation for current services not yet
due and payable and reimbursement of expenses arising in the ordinary course
of business), and no such Person owes any amount to any Third Coast Company.
3.21 INSURANCE. SCHEDULE 3.21 lists all insurance
policies owned by the Company insuring against all liabilities, hazards and
risks. All premiums on policies due to the date hereof have been paid, and no
notice has been received nor has HCSC any reason to believe that any such
insurance is in default, will be canceled or not renewed.
3.22 DISCLOSURE. This Agreement (including the Schedules
hereto) and any certificate, document, financial information or projection
furnished by or on behalf of HCSC to UWS or any agent or representative of
UWS in connection herewith, taken as a whole, does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The parties
acknowledge that, in connection with the transitioning of the Business from
the Third Coast Companies to the Joint Venture, material changes are expected
to occur to the Business from and after the Joint Venture Closing Date. Such
changes attributable to the parties' performance under the Joint Venture
Agreement shall not form the basis of any claim that the foregoing
representations and warranties are untrue or misleading. With the exception
of such changes, there are no facts presently known to, or anticipated by
HCSC that materially and adversely affects or in the future may (so far as
HCSC can reasonably foresee) materially and adversely affect the Third Coast
Companies' business, which have not been set forth in this Agreement or
otherwise disclosed to UWS (including in the Schedules hereto).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UWS
UWS represents and warrants to HCSC as follows:
4.1 ORGANIZATION; GOOD STANDING; POWER. UWS is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Wisconsin and has all requisite corporate power and authority to own,
lease and operate its properties, to carry on its business as now being
conducted and to enter into this Agreement and perform its obligations
hereunder.
4.2 AUTHORITY RELATIVE TO AGREEMENT. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby by UWS
will have been duly and effectively authorized and ratified by all necessary
corporate action by UWS on or prior to the Closing Date. This Agreement has
been duly executed by UWS and is the valid, legally binding obligation of UWS
enforceable in accordance with its terms, except as the same may be limited
or otherwise affected by applicable bankruptcy, insolvency or other laws
affecting creditors' rights or contractual obligations generally or by
general principles of equity.
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4.3 EFFECT OF AGREEMENT. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby will not (i) require the consent, approval or authorization of any
person, corporation, partnership, joint venture or other business association
or other Person (except those consents, approvals, or authorizations which
have been obtained or will be obtained prior to the Closing); (ii) violate,
with or without the giving of notice or the passage of time, or both, any
provisions of law or statute or any rule, regulation, order, award, judgment
or decree of any court or Governmental Body applicable to UWS; or (iii)
conflict with or result in a breach or termination of any provision of, or
constitute a default under, any indenture, corporate charter, bylaw,
mortgage, deed of trust, lease, contract, agreement or other instrument or
any order, judgment, award, decree, statute, ordinance, regulation or any
other restriction of any kind or character, to which UWS is a party, or by
which UWS or any of its assets or properties may be bound.
4.4 FINANCIAL ABILITY. UWS has the financial ability to discharge
all of its obligations under this Agreement.
4.5 THIRD PARTY CONSENTS. No material approval, authorization,
notice, consent or other action by or filing with any Governmental Body is
required for the execution, delivery and performance of this Agreement by UWS
and the consummation of the transactions contemplated hereby.
4.6 UWS'S KNOWLEDGE OF HOLDINGS' REPRESENTATIONS AND WARRANTIES.
UWS has no knowledge of any items which call into question the accuracy or
truthfulness of the representations and warranties of HCSC herein, the breach
of which would form the basis of a right to terminate hereunder.
ARTICLE V
CERTAIN COVENANTS PENDING CLOSING
5.1 ACCESS TO BOOKS AND RECORDS. From and after the date hereof
and until the Closing Date, unless UWS shall otherwise consent in writing,
Holding and each other Third Coast Company shall give to UWS and to UWS
employees and representatives (including accountants, actuaries, attorneys,
environmental consultants and engineers) access during normal business hours
to all of the properties, books, tax returns, contracts, commitments,
records, officers, personnel and accountants (including independent public
accountants) of the Third Coast Companies and shall furnish to UWS all such
documents and copies of documents and all information with respect to the
properties, liabilities and affairs of the Third Coast Companies as UWS may
reasonably request.
5.2 CERTAIN TAX MATTERS. HCSC and UWS shall each provide the
other with such assistance as may reasonably be requested by any of them in
connection with the preparation of any tax return, any audit or examination
by any taxing authority (a "TAX AUDIT"), or any judicial or administrative
proceedings relating to taxes, and each will retain and provide the other
with any records or information that may be relevant to such tax return, Tax
Audit, proceeding or determination. Such assistance shall include making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder and shall
include providing copies of any relevant tax returns and supporting work
schedules. The party requesting assistance hereunder shall reimburse the
other only for extraordinary expenses incurred in providing such assistance.
Without limiting the foregoing, UWS and HCSC agree to retain, until the
appropriate statutes of limitation (including any extensions) expire, copies
of all tax returns, supporting work schedules and other records or
information that may be relevant to such tax returns of the Third Coast
Companies for all taxable periods prior to the Closing Date, inclusive, and
to refrain from destroying or otherwise disposing of such records without
first providing the other with a reasonable opportunity to review and copy
such records.
5.3 PUBLICITY. HCSC and UWS shall not issue any press release or
otherwise make any announcements to the public or the employees of any Third
Coast Company with respect to this Agreement
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without the prior written consent of the other, except as required by Law.
This Section shall expire on the 10th day after the Closing Date.
5.4 CHANGES IN CORPORATE GOVERNANCE DOCUMENTS. On or prior to the
Closing Date, each of the Third Coast Companies shall have amended and
restated its Articles of Incorporation and By Laws in a form agreed to by the
parties to eliminate provisions that are inconsistent with their being wholly
owned subsidiaries of the MGA and to include provisions reflecting the
governance provisions contained in the Joint Venture Agreement.
5.5 REPAYMENT OF SURPLUS NOTES. HCSC and the Third Coast
Companies shall be permitted, at any time prior to the Closing Date, to cause
the Surplus Loans to be repaid from the surplus of Third Coast Insurance so
long as such repayment is made with the approval of the DOI and otherwise in
accordance with applicable laws. Additionally, any other surplus of Third
Coast Insurance, whether or not corresponding to any Surplus Note, that is
not required to support payment of claims under policies in force at the
Closing Date may be repaid to HCSC so long as such repayment is made with the
approval of the DOI and otherwise in accordance with applicable laws. The
parties shall each use their best efforts to obtain permission from the DOI
to authorize such repayment. The parties acknowledge that the effect of such
repayment will be to reduce the adjusted book value of the Third Coast
Companies by the amount of any such repayment and the Purchase Price will be
reduced by 50% of such amount.
5.6 HSR ACT FILINGS. Each party shall to the extent legally
required, in cooperation with the other party, file or cause to be filed any
report or notification that may be required to be filed by it under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as amended (the "HSR
ACT"), with the Federal Trade Commission and the Antitrust Division of the
Department of Justice, and shall furnish to the others all such information
in its possession as may be necessary for the completion of the reports or
notifications to be filed by others. Prior to making any communication,
written or oral, with the Federal Trade Commission, the Antitrust Division of
the Department of Justice or any other governmental agency or authority or
members of their respective staffs with respect to this Agreement or the
transactions contemplated hereby, each party shall consult with the other
parties with respect thereto. HCSC and UWS shall share all filing costs
equally.
5.7 ADMINISTRATION AND SATISFACTION OF CLAIMS RUN-OFF.
Concurrently with the Joint Venture Closing, the parties shall enter into an
Administrative Services Agreement, pursuant to which the Joint Venture shall
agree to administer on behalf of the Third Coast Companies all claims
relating to policies of workers compensation insurance theretofore written by
the Third Coast Companies (the "PRIOR POLICIES"). It is anticipated that the
claim reserves of Third Coast Insurance in existence as of the Closing Date
will be sufficient to settle any claims made in respect of the Prior Policies
during the three-year period following the Closing (the "RUN-OFF PERIOD").
However, in the event that claims incurred in respect of the Prior Policies
during the Run-Off Period exceed such claim reserves, HCSC in accordance with
Section 2.4 shall cause such claims in excess of the claims reserve to be
paid at its expense. At the end of the Run-Off Period, the MGA shall engage
an actuarial firm to conduct a valuation of the remaining claims under Prior
Policies (the "Future Claims Value"). In the event that the Future Claims
Value exceeds the then remaining claim reserves HCSC shall reimburse the
Joint Venture for the difference. If the Future Claims Value is less than the
then remaining claims reserve, HCSC shall be entitled to receive from the
Joint Venture such difference; PROVIDED, HOWEVER, that HCSC shall continue to
remain liable for all liabilities of the Third Coast Companies in accordance
with Section 2.4.
5.8 UNPAID AND ACCRUED TAXES. The amount of liability of the
Third Coast Companies for unpaid taxes for all periods ending on or before
the Closing Date (and for any period beginning before and ending after the
Closing Date to the extent allocable to the portion of such period beginning
before and ending on the Closing Date) and the amount of deferred taxes from
events occurring before the Closing Date shall not, in the aggregate, exceed
the amount of the liability accruals for taxes and deferred taxes as such
accruals are reflected on the Closing Balance Sheet.
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ARTICLE VI
CLOSING CONDITIONS AND DELIVERIES
6.1 CONDITIONS PRECEDENT TO OBLIGATION OF UWS. The obligation of
UWS to proceed with the Closing under this Agreement is subject to the
fulfillment prior to or at Closing of the following conditions (any one or
more of which may be waived in whole or in part by UWS at UWS's sole option):
(a) Each of the representations and warranties of HCSC contained
in this Agreement except those set forth in Section 3.15 shall be true and
correct in all material respects on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made
on, as of and with reference to the Closing Date except as modified by
transactions permitted hereunder and under the Joint Venture Agreement. HCSC
shall have performed in all respects all of the covenants and complied with
all of the provisions required by this Agreement to be performed or complied
with by it at or before the Closing.
(b) No statute, regulation or final order of any Governmental Body
shall be in effect that restrains or prohibits the transactions contemplated
hereby, and there shall not have been any instituted, threatened or finally
adjudicated action or proceeding by or before any Governmental Body that
shall have concluded that the transactions contemplated hereby are unlawful
or which award monetary or other relief by reason of the consummation of such
transactions.
(c) HCSC shall have delivered a certificate of its President or
any Vice President, dated the Closing Date, in such detail as UWS shall
request, certifying to the fulfillment of the conditions set forth in
subparagraphs (a) and (b) of this SECTION 6.1. Such certificate shall
constitute a representation and warranty of HCSC with regard to the matters
therein for purposes of this Agreement.
(d) UWS shall have received the other documents referred to in
SECTION 6.3 and intended to be delivered to UWS. All agreements,
certificates, opinions and other documents delivered by HCSC to UWS hereunder
shall be in form and substance satisfactory to counsel for UWS, in the
exercise of such counsel's reasonable professional judgment.
(e) The Board of Directors of UWS shall have approved the
transactions contemplated herein.
(f) All applicable waiting periods under the HSR Act shall have
expired.
(g) The Joint Venture Closing shall have occurred.
(h) The directors and officers of the Third Coast Companies shall
have resigned.
6.2 CONDITIONS PRECEDENT TO OBLIGATION OF HCSC. The obligation of
HCSC to proceed with the Closing under this Agreement is subject to the
fulfillment prior to or at Closing of the following conditions (any one or
more of which may be waived in whole or in part by HCSC at HCSC's sole
option):
(a) Each of the representations and warranties of UWS contained in
this Agreement shall be true and correct in all material respects on and as
of the Closing Date, with the same force and effect as though such
representations and warranties had been made on, as of and with reference to
the Closing Date. UWS shall have performed all of the covenants and complied
in all respects with all of the provisions required by this Agreement to be
performed or complied with by it at or before the Closing.
(b) No statute, regulation or final order of any Governmental Body
shall be in effect that restrains or prohibits the transactions contemplated
hereby, and there shall not have been any finally adjudicated action or
proceeding by or before any Governmental Body that shall have concluded that
the transactions contemplated hereby are unlawful or which award monetary or
other relief by reason of the consummation of such transactions.
(c) UWS shall have delivered a certificate of its President or any
Vice President, dated the Closing Date, in such detail as HCSC shall request,
certifying to the fulfillment of the conditions set forth in
14
subparagraphs (a) and (b) of this SECTION 6.2. Such certificate shall
constitute a representation and warranty of UWS with regard to the matters
therein for purposes of this Agreement.
(d) HCSC shall also have received the other documents referred to
in SECTION 6.3 and intended to be delivered to HCSC. All agreements,
certificates, opinions and other documents delivered by UWS to HCSC hereunder
shall be in form and substance satisfactory to counsel for UWS in the
exercise of such counsels reasonable professional judgment.
(e) All applicable waiting periods under the HSR Act shall have
expired.
(f) The Joint Venture Closing shall have occurred.
6.3 CLOSING DELIVERIES. At the Closing hereof, the parties hereto
shall make the following deliveries:
(a) HCSC shall deliver to UWS a certificate evidencing the
Purchased Shares.
(b) UWS shall deliver the cash, notes or share certificates
representing the Acquisition Stock contemplated under Section 2.2 hereof.
(c) HCSC and UWS shall have delivered the certificates
contemplated in Sections 6.1(c) and 6.2(c), respectively.
6.4 TERMINATION. This Agreement may not be terminated for any
reason whatsoever, EXCEPT at any time prior to Closing, this Agreement may be
terminated: (i) by written agreement of UWS and HCSC; (ii) by UWS, if any of
the conditions specified in SECTION 6.1 hereof shall not have been fulfilled
by December 31, 2000 and shall not have been waived by UWS; or (iii) by HCSC,
if (a) HCSC and UWS have not executed the Addendum contemplated under Article
VII within the time frame specified in such Article or (b) any of the
conditions specified in SECTION 6.2 hereof shall not have been fulfilled by
December 31, 2000 and shall not have been waived by HCSC. In the event of
termination of this Agreement by either UWS, on one hand, or HCSC, on the
other hand, pursuant to clause (ii) or (iii) of the immediately preceding
sentence, UWS, on the one hand, and HCSC, on the other hand, shall be liable
to the other for any breach hereof by such party, which breach led to such
termination. UWS and HCSC shall also be entitled to seek any other remedy to
which it may be entitled at law or in equity in the event of such termination
(which remedies shall include injunctive relief and specific performance).
6.5 POST-CLOSING UNDERTAKING. Each party shall take all such
steps following the Closing as may be necessary to cause the then-current
directors and officers of the Third Coast Companies to resign and to cause
the MGA to take all steps necessary to appoint and elect new officers and
directors of each such Third Coast Company to serve as officers and directors
from and after the Closing Date.
6.6 GOOD FAITH. Each party hereto agrees that such party shall
act in good faith and shall use its best efforts to satisfy each of the
conditions to closing listed in Article VI hereof that are applicable to such
party in order to effect a timely closing of the transactions contemplated by
this Agreement.
ARTICLE VII
ADDENDUM
HCSC and UWS shall negotiate in good faith and shall have executed an
addendum ("ADDENDUM") to this Stock Purchase Agreement on or before the date
that is 10 days prior to the Joint Venture Closing Date. Such Addendum shall
include, among other things, the agreement of the parties as to the form of
consideration to be paid by UWS in exchange for the Shares of Holding
purchased hereunder. In the event that such consideration is to be comprised
of Acquisition Stock, the Addendum will also set forth the parties' agreement
as to any rights and preferences to be accorded to any preferred stock (in
the event that preferred stock is used), appropriate conversion rights,
registration rights (including the form and timing of any registration
15
statement and whether any registered offering must be underwritten), Rule 144
sale rights, lock-up provisions, transfer restrictions, listing requirements,
indemnifications and other terms and conditions to which the parties shall
agree. In the event that such consideration is to consist of notes, the
Addendum will set forth, among other things, a payment and maturity schedule,
interest rate, prepayment rights and other terms and conditions to which the
parties shall agree. Unless the form of consideration shall consist solely of
cash or cash equivalents, the Addendum will also contain additional customary
representations and warranties of UWS.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties, obligations, covenants and agreements made by
the parties in this Agreement, or in any Schedule, Exhibit, certificate or
other document delivered pursuant hereto, shall survive the Closing and shall
continue for a period of one year following the termination of the Joint
Venture, except for those contained in Section 3.14 (taxes) and Section 3.10
(compliance with law), which continue until expiration of applicable statutes
of limitations (including extensions thereof), and except for those contained
in Sections 2.4 (retained liabilities, 3.1 and 4.1 (corporate organization),
3.3 (capitalization) and 3.4 and 4.2 (authorization), which shall continue
indefinitely.
8.2 GENERAL INDEMNIFICATION. HCSC shall indemnify UWS and the MGA
and UWS shall indemnify HCSC and the MGA as provided in this Section 8. The
remedies provided in this Section 8 shall be cumulative and shall not
preclude the assertion by either party hereto of any other rights or the
seeking of any other remedies against the other party hereto.
8.3 INDEMNIFICATION COVENANTS. Subject to the provisions of this
section 8, from and after the Closing:
(a) BY HCSC. HCSC shall indemnify UWS and the
MGA for and defend and hold UWS and the MGA harmless from and against any
demands, suits, orders, proceedings, claims, actions, causes of action,
assessments, losses, damages, liabilities, fees, fines, forfeitures, costs
and expenses, including, without limitation, interest, penalties and
reasonable attorneys' fees (collectively "DAMAGES"), sustained or incurred by
UWS or the MGA as a result of (i) any breach, inaccuracy or nonfulfillment of
any representation, warranty or covenant of HCSC contained in or made
pursuant to this Agreement or in any Schedule, Exhibit, certificate or other
document delivered by HCSC to UWS in connection with the transactions
contemplated hereby and (ii) the Retained Liabilities.
(b) BY UWS. UWS shall indemnify HCSC and the
MGA for and defend and hold HCSC and the MGA harmless from and against any
Damages sustained or incurred by HCSC or the MGA as a result of any breach,
inaccuracy or nonfulfillment of any representation, warranty or covenant of
UWS contained in or made pursuant to this Agreement or in any Schedule,
Exhibit, certificate or other document delivered by UWS to HCSC in connection
with the transactions contemplated hereby.
(c) PROCEDURES. The party seeking
indemnification (the "INDEMNIFIED PARTY") shall give the party from whom
indemnification is sought (the "INDEMNIFYING PARTY") written notice of any
claim, demand, assessment, action, suit or proceeding to which the indemnity
set forth in this Agreement applies. If the document evidencing such claim or
demand is a court pleading, the Indemnified Party shall give such notice
within 10 days of receipt of such pleading, and otherwise shall give such
notice within 30 days of the date it receives notice of such claim. If the
Indemnified Party's request for indemnification arises from the claim of a
third party, the written notice shall permit the Indemnifying Party to assume
the control of
16
any such claim, or any litigation resulting from such claim. Failure by the
Indemnifying Party to notify the Indemnified Party of its election to defend
a complaint by a third party within five days of notice shall be a waiver by
the Indemnifying Party of its right to respond to such complaint and, within
20 days after notice thereof, shall be a waiver by the Indemnifying Party of
its right to assume control of the defense of such action. Notwithstanding
the Indemnifying Party's assumption of the defense of such third-party claim
or demand, the Indemnified Party shall have the right to participate in the
defense of such third party claim or demand at its own expense. The
Indemnified Party shall furnish the Indemnifying Party, in reasonable detail,
all information the Indemnified Party may have with respect to any such
third-party claim and shall make available to the Indemnifying Party and its
representatives all records and other similar materials which are reasonably
required in the defense of such third-party claim and shall otherwise
cooperate with and assist the Indemnifying Party in the defense of such
third-party claim. If the Indemnifying Party does not assume control of the
defense of any such third-party claim or litigation resulting therefrom, the
Indemnified Party may defend against such claim or litigation in such manner
as it may reasonably deem appropriate.
17
(d) PAYMENT OF CLAIMS. In the event that HCSC
is required to compensate UWS for any Damages incurred by UWS, such payment
may be made, at HCSC's election, in cash or in the same form of consideration
as was used by UWS to purchase the Purchased Shares at the Closing.
8.4 ATTORNEYS' FEES. It after the Closing, UWS or HCSC seeks
arbitration or institutes any judicial action or proceeding to recover
Damages pursuant to this section 8 or to otherwise enforce any provision of
this Agreement, the party in whose favor final judgment shall be entered
shall be entitled to receive from the other party such amount as the
arbitrator or court may determine to be reasonable.
ARTICLE IX
TAX MATTERS
9.1 TAX SHARING AGREEMENTS. Any tax sharing agreement between
HCSC and any of the Third Coast Companies shall be terminated as of the
Closing Date and will have no further effect for any taxable year (whether
the current year, a future year, or a past year).
9.2 TAXES OF OTHER PERSONS. HCSC agrees to forever indemnify UWS
from and against the entirety of any adverse consequences UWS may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
any liability of any of the Third Coast Companies for taxes of any person
other than any of The Third Coast Companies (i) under Treas. Reg. Section
1.1502-6 (or any similar provision of the state, local or foreign law), (ii)
as a transferee or successor, (iii) by contract, or (iv) otherwise.
9.3 RETURNS FOR PERIODS THROUGH THE CLOSING DATE. HCSC will
include the income of the Third Coast Companies (including any deferred
income triggered into income by Reg. Section 1.1502-13 and Reg. Section
1.1502-14 and any excess loss accounts taken into income under Reg. Treas.
Section 1.1502-19) on the HCSC consolidated federal income tax returns for
all periods through the Closing Date and pay any federal income taxes
attributable to such income. The Third Coast Companies will furnish tax
information to HCSC for inclusion in HCSC's federal consolidated income tax
return for the period which includes the Closing Date, in accordance with
Holding's past custom and practice. HCSC will allow UWS an opportunity to
review and comment upon such tax returns (including any amended returns) to
the extent that they relate to the Third Coast Companies. HCSC will take no
position on such returns that relate to the Third Coast Companies that would
adversely affect the Third Coast Companies after the Closing Date. The books
of the Third Coast Companies will be closed as of the end of the Closing
Date. The income of the Third Coast Companies prior to and including the
Closing Date will be apportioned to HCSC. The income of the Third Coast
Companies following the Closing Date will be apportioned to the MGA.
9.4 AUDITS. HCSC will forever indemnify and hold UWS harmless
from and against any matters adversely affecting the Third Coast Companies
after the Closing Date due to the settlement of any audit of HCSC.
ARTICLE X
GENERAL PROVISIONS
10.1 FURTHER ASSURANCES. The parties hereto shall cooperate with
each other to any reasonable extent and shall execute and deliver such
instruments and documents and take all such action as may reasonably be
necessary or desirable to carry out the purposes and intent of this Agreement.
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10.2 NOTICES. All offers and notices provided for or permitted
herein shall be in writing and shall be delivered personally or sent by
United States certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
(a) If to HCSC:
Health Care Service Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn.: Xxxxxxx Xxxxx
with a copy to: Health Care Service Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn.: Xxxx Xxxxx, Xx., Esq.
with a copy to: Doepken Keevican & Xxxxx
USX Tower, 58th Floor
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn.: Xxxxx X. Xxxxxxx, Esq.
(c) If to UWS:
United Wisconsin Services, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn.: Xxxxxx Xxxxx
with a copy to: Xxxxxxx Xxxx & Xxxxxxxxx LLP
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn.: Xxxxxxxx X. Xxxxxx, Esq.
or to such other address as any party hereto may designate for itself from
time to time in a written notice served upon the other parties hereto in
accordance herewith. Any notice sent by mail as provided above shall be
deemed delivered on the second (2nd) business day next following the postmark
date which it bears.
10.3 PUBLIC DISCLOSURE. Except as otherwise may be required or by
the rules and regulations of the Securities and Exchange Commission or the
New York Stock Exchange, the parties hereto shall jointly agree upon the
content of any disclosure in any disclosure documents filed by either party
with the United States Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, which filing(s) disclose the
existence of this Agreement and the relationship herein created. The parties
also may make additional announcements in public disclosure with respect to
such agreements, provided that they jointly agree in writing in advance of
making such announcement or public disclosure on the form and content of such
announcement or public disclosure. The parties hereto further agree that any
consent required by such party in connection with any public disclosure to be
made pursuant to this Section 8.3 shall not be unreasonably withheld.
10.4 WAIVER. Failure to insist upon strict compliance with any of
the terms or conditions hereof shall not be deemed a waiver of such term or
condition, nor shall any waiver or relinquishment of any right or remedy
hereunder at any one or more times be deemed a waiver or relinquishment of
such right or remedy at any other time or times.
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10.5 SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof, and any provision hereof which is adjudicated to be
invalid or unenforceable shall be severed from this Agreement.
10.6 BENEFIT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that neither party hereto shall have
any right to assign any of its rights hereunder or to delegate any of its
duties hereunder without the express written consent of the other party
hereto.
10.7 PARAGRAPH HEADINGS. Paragraph headings contained herein have
been inserted for convenience of reference only, and this Agreement shall not
be construed or interpreted by reference to such paragraph headings.
10.8 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter
hereof, and all prior agreements, understandings and negotiations are merged
herein. This Agreement may not be modified or rescinded except pursuant to a
written instrument signed by the party against whom enforcement is sought.
10.9 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original document, but all
such counterparts taken together shall constitute but one and the same
document.
10.10 GOVERNING LAW; VENUE. This Agreement and the rights and
obligations of the parties hereto shall be governed by and construed in
accordance with the laws of the State of Illinois.
[Signatures Appear on Next Page]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HEALTH CARE SERVICE CORPORATION, A Mutual
Legal Reserve Company d/b/a Blue Cross and
Blue Shield of Illinois
By:
-----------------------------------------
Title:
---------------------------------
UNITED WISCONSIN SERVICES, INC., a Wisconsin
corporation
By:
-----------------------------------------
Title:
---------------------------------
ADDENDUM TO STOCK PURCHASE AGREEMENT
THIS ADDENDUM TO STOCK PURCHASE AGREEMENT (this "Addendum") is made
this 18th day of June, 1999 by and between UNITED WISCONSIN SERVICES, INC.
("UWS"), UNITED WISCONSIN INSURANCE COMPANY, a Wisconsin corporation ("UWIC")
and HEALTH CARE SERVICE CORPORATION, a Mutual Legal Reserve Company doing
business as Blue Cross Blue Shield of Illinois ("HCSC").
RECITALS
A. UWS and HCSC have entered into a certain Stock Purchase Agreement
(the "STOCK PURCHASE AGREEMENT"), dated as of June 4, 1999, pursuant to which
HCSC has agreed to sell to UWS, upon the fulfillment of certain conditions
set forth therein, shares constituting 50% of the common stock of Third Coast
Holding Company, an Illinois corporation ("Holding").
B. The Stock Purchase Agreement, in Article VII thereof,
contemplated the execution prior to the Joint Venture Closing Date, of an
Addendum thereto, pursuant to which the parties would resolve certain issues,
including without limitation the choice of consideration to be paid by UWS in
exchange for the shares of Holding purchased thereunder.
C. Notwithstanding the addition of UWIC as a party hereto, this
Addendum is the Addendum referred to in Article VII of the Stock Purchase
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and with the intention to be legally bound,
the parties do hereby agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, defined terms used
herein shall have the same meanings given thereto in the Stock Purchase
Agreement.
2. PARTY TO RECEIVE AND PAY FOR PURCHASED SHARES. UWS does hereby
assign the right to receive the Purchased Shares from HCSC to UWIC and does
further delegate the duty to make payment to HCSC for such Purchased Shares
to UWIC, all in accordance with the terms of the Stock Purchase Agreement.
UWIC does hereby agree to receive such Purchase Shares and to assume all
payment responsibilities. HCSC hereby consents to such assignment, delegation
and assumption.
3. CHOICE OF CONSIDERATION. UWIC shall pay the Purchase Price for
the Purchased Shares in cash. Payment shall be made by wire transfer to an
account designated by HCSC prior to closing to receive such wire transfer.
4. INCORPORATION BY REFERENCE. Each of the provisions set forth in
Article X of the Stock Purchase Agreement is incorporated by reference and
made a part hereof as if fully set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HEALTH CARE SERVICE CORPORATION, A Mutual
Legal Reserve Company d/b/a Blue Cross and
Blue Shield of Illinois
By:
---------------------------------------
Title:
--------------------------------
UNITED WISCONSIN SERVICES, INC., a
Wisconsin corporation
By:
---------------------------------------
Title:
--------------------------------
UNITED WISCONSIN INSURANCE COMPANY, a
Wisconsin corporation
By:
---------------------------------------
Title:
--------------------------------
